SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended March 31,
1996 Commission File No. 1-9114 MYLAN LABORATORIES INC. (Exact name of registrant as specified in its charter)
Pennsylvania 25-1211621
(State or other jurisdiction of incorporation or organization) (IRS Employer
Identification No.)
130 Seventh Street
1030 Century Building
Pittsburgh, Pennsylvania 15222
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 412-232-0100
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
Common Stock, par value $.50 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x/ No
Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K.[ ]
The aggregate market value of voting stock held by persons other than Directors and Officers of the registrant computed
by reference to the closing price of such stock as of May 31, 1996:
$2,240,336,455
The number of shares of Common Stock of the registrant outstanding as of
May 31, 1996:
121,878,074
Documents incorporated by reference into this Report are:
Annual Report to Shareholders for year ended March 31, 1996.......................... Parts I and II,
Items 1, 5-8
Proxy Statement for 1996 Annual Meeting of Shareholders.............................. Part III, Items 10-13
PART I
ITEM 1. Business
Mylan Laboratories Inc., a Pennsylvania corporation incorporated in 1970,
and its subsidiaries (herein referred to collectively as the "Company") are
engaged in the development, manufacturing and distribution of pharmaceutical
products for resale by others. References herein to fiscal 1996, 1995 and 1994
mean the fiscal years ended March 31, 1996, 1995 and 1994, respectively.
Through its subsidiary, Mylan Pharmaceuticals Inc., the Company is
recognized as one of the leaders in the generic pharmaceutical industry.
Pharmaceutical products initially sold on an exclusive basis are known in the
industry as proprietary or branded products. Generic drugs are therapeutically
equivalent to their brand name counterparts and are generally sold at prices
significantly less than branded products. Accordingly, generics provide a safe,
effective and cost efficient alternative to users of these products.
The Company manufactures substantially all of its oral dose products in
either its Mylan Pharmaceuticals subsidiary's Morgantown, West Virginia facility
or its subsidiary Mylan Inc.'s facility in Caguas, Puerto Rico. To facilitate
timely delivery of products to customers in all fifty states the Company
operates distribution centers in Greensboro, North Carolina and Reno, Nevada.
Due to the non-exclusive nature of generic products, the generic industry
is comprised of numerous competitors including manufacturers who market their
products under their own name, distributors who market products manufactured by
others and brand name companies, who in recent years market their products under
both the brand name and as the generic substitute. This diversity provides
significant price competition within the generic pharmaceutical industry which
generally results in decreasing prices of generic products over time to those
who supply such products to the retail market.
The Company has entered into strategic alliances with several branded
pharmaceutical companies. These alliances through distribution and licensing
agreements provide the Company with additional products to further broaden the
Company's product line. In addition, the Company has entered into an alliance
with VivoRx, Inc. a biotechnology company developing pancreatic islet cell
implant technology for the management of diabetes. VivoRx has successfully
implanted three patients with human islets and has recently had U.S.Food and
Drug Administration ("FDA") acceptance of an Investigational New Drug
Application for the use of porcine (pancreas) islets in future implants. The
early proof of principal has already been demonstrated in two patients in New
Zealand who received porcine islet implants in May of this year. The Company
continues to examine other alliances as a way to grow and react in the rapidly
changing health care arena.
In June 1989, the Company acquired a 50% interest in Somerset
Pharmaceuticals, Inc. ("Somerset"). Pursuant to a license agreement with a
Hungarian pharmaceutical company, Somerset has exclusive marketing rights to the
product Eldepryl(R) in the United States and certain other countries. Commercial
shipments of the product by Somerset commenced in late August 1989.
Under the Orphan Drug Act, Somerset had exclusivity relating to marketing
the chemical compound Eldepryl(R) for use as a treatment for late stage
Parkinson's disease through June 6, 1996. There has been no generic competition
to date; however, with the onset of competition, Somerset's contribution to the
Company's net earnings will be adversely affected. Somerset is actively involved
in research projects regarding additional uses of this and other chemical
compounds. As a result of one project, Somerset recently received FDA clearance
to market Eldepryl in a new easy-to-identify capsule. As new projects continue
through the development process the Company expects related expenses to
escalate.
In October 1991, a wholly-owned subsidiary of the Company merged with Dow
Hickam Pharmaceuticals, Inc. ("Hickam"), an established branded pharmaceutical
company located in Sugar Land, Texas. Hickam currently manufactures and/or
markets specialty pharmaceutical products and devices used principally as wound
care treatments through its nation-wide sales force.
On February 25, 1993, the Company acquired substantially all of the net
assets of Bertek, Inc. ("Bertek"). Bertek, headquartered in St. Albans, Vermont
is a manufacturer of transdermal drug delivery systems and also has operations
in laminating, coatings and label manufacturing. In addition Bertek provides
components, using internally developed technology for transdermal patches
marketed by other companies. Bertek is actively involved in development projects
to provide new transdermal products.
On February 28, 1996, a wholly-owned subsidiary of the Company acquired
100% of the outstanding stock of UDL Laboratories, Inc. ("UDL"). UDL is the
premier supplier of unit dose generic pharmaceuticals to the institutional and
long-term care markets. UDL has its corporate headquarters in Rockford, Illinois
and maintains manufacturing, research and development and distribution
facilities in Rockford as well as Largo, Florida.
On June 14, 1996, the Company executed a series of agreements with American
Home Products Corporation ("AHP") relating to the products Maxzide(R) and
Maxzide-25MG (R). In general these agreements will terminate the existing
license agreements between the Company and Lederle Laboratories which had
previously marketed the products. Subject to receiving antitrust clearance,
Maxzide(R) and Maxzide-25MG(R) will be marketed by a subsidiary of the Company.
Under the terms of the agreement, the Company shall pay to AHP specified
amounts over a five year period commencing at the effective date. In addition
the Company shall pay to AHP a royalty predicated on sales for use of certain
trademarks during a five year period with specified minimum annual royalty
payments. At the end of such period all royalty obligations will cease and
ownership of the trademarks will be transferred to the Company.
The companies have agreed that AHP will retain marketing rights in certain
foreign countries under a modified International Supply Agreement with the
Company. Additionally, the companies have agreed that for a three year period
the Company shall pay AHP certain amounts predicated on the gross profit
realized by the Company on its sales of a generic Dyazide(R) product to
unrelated parties. Previously, the license agreements with AHP prohibited the
Company from marketing a triamterene and hydrochlorothiazide product. In
connection with these agreements, the Company and AHP agreed to terminate
certain litigation. See Item 3.
Products
The information on the Company's product line set forth on pages 21, 29, 33
and 37 of the Annual Report to Shareholders for the year ended March 31, 1996 is
incorporated herein by reference. All pharmaceutical products presently
manufactured by the Company have been previously developed and marketed by other
firms with the exception of Maxzide(R), Maxzide (R)-25MG and Cystagon TM.
The Company is required to secure and maintain approval from the FDA for
the products and dosage forms which it manufactures. The number of products and
dosage forms for which the Company is an approved manufacturer has expanded in
recent years. See "New Product Approvals".
During fiscal 1996, 1995 and 1994 approximately $38,913,000, $30,533,000
and $21,648,000, respectively, were expensed by the Company for the development
of formulations and procedures for products which it desires to produce, use or
sell. The Company's research and development efforts are conducted primarily to
qualify the Company to manufacture ethical pharmaceuticals under FDA standards
and approval. Recently this has included increased spending for transdermal
delivery system technology and innovator compounds including pancreatic islet
cell implant technology. As these products continue to move through the
development process expenses related to their development will continue to
increase.
New Product Approvals
During fiscal 1996, four approvals were received from the FDA. Two of which
were received in the last weeks of the year and had very little effect on net
sales or gross margins for the year. In June 1996, the Company received FDA
approval for triamterene and hydrochlorothiazide, the generic version of Smith
Kline Beecham's Dyazide(R). The Company presently has requests for approval
pending before the FDA representing sixteen products of varying strengths. In
addition the Company has five Investigational New Drug applications filed with
the FDA for new innovator compounds.
Customers and Markets
The Company sells its products to proprietary and ethical pharmaceutical
wholesalers and distributors, drug store chains, drug manufacturers and public
and governmental agencies. No single customer represented more than 10% of net
sales in 1996, 1995 or 1994.
A majority of the Company's products are marketed to food and drug store
chains and to pharmaceutical distributors and wholesalers, who in turn market to
retailers, managed care entities, hospitals and government agencies. Certain
other products are marketed to institutional accounts who in turn obtain the
products from pharmaceutical distributors and wholesalers. The Company's sales
activities involve limited public promotion of its products. Approximately 162
employees of the Company are engaged full-time in selling products and servicing
customers.
Competition
The Company sells to various markets and classes of customers. With respect
to each of the various products it sells, the Company believes it is subject to
active competition from numerous firms. The four primary means of competition
are services, quality of products, approval for manufacture by the FDA and
price. The competition experienced by the Company varies among the markets and
classes of customers. The Company has experienced additional competition from
brand-name competitors who have entered the generic pharmaceutical industry by
creating generic subsidiaries, purchasing generic companies or licensing their
products prior to or as their product's patents expire.
Product Liability
Product liability suits by consumers represent a continuing risk to firms
in the pharmaceutical industry. The Company strives to minimize such risks by
stringent quality control procedures. Although the Company carries insurance, it
believes that no reasonable amount of insurance can fully protect it against all
such risks because of the potential liability inherent in the business of
producing pharmaceuticals for human consumption.
Raw Materials
The chemical ingredients and other materials and supplies used in the
Company's pharmaceutical manufacturing operations are generally available and
purchased from many different foreign and domestic suppliers. However, some
products may have only one source approved by the FDA for certain pharmaceutical
ingredients used in their manufacturing process. If this material was no longer
available, qualifying a new supplier could delay the manufacturing of such
products. During fiscal 1995 there was a limited supply of raw materials to all
generic manufacturers of cimetidine a product which had a significant
contribution to the Company's net sales and gross profit for the year. In 1996
this same raw material was readily available and led to severe pricing pressures
resulting in a decline in gross profit on cimetidine.
With regards to foreign suppliers, recent and pending regulatory action may
make obtaining raw materials prior to patent expiration increasingly difficult.
This could delay the Company's ability to develop, manufacture and obtain FDA
approval to market certain new products.
Regulation
The Company's operations are subject to regulation under the Federal Food,
Drug and Cosmetic Act, pursuant to which government standards as to "good
manufacturing practice", product content, purity, labeling, effectiveness and
recordkeeping (among other things) must be observed. In this regard, the FDA has
extensive regulatory powers over the activities of pharmaceutical manufacturers.
The Company is also subject to inspection and regulation under other
federal and state legislation relating to drugs, narcotics and alcohol. Many of
its suppliers and customers, as well as the drug industry in general, are
subject to the same or similar governmental regulations.
The President signed into law the Uruguay Round Agreements Act ("URAA") in
December 1994. URAA which took effect on June 8, 1995 implemented the General
Agreement of Tariffs and Trade ("GATT"). One change in U.S. law required by GATT
is the amendment of patent law to reflect a patent term of 20 years from the
date of filing the application instead of the current term of 17 years from the
date of issuance. URAA extended the requirement by allowing the application of
this provision to all patents in force on June 8, 1995.
Congress recognized the potential harm in this requirement and provided
that a potential competitor who has already made a "substantial investment" in a
competing product could make, use and sell its product after the expiration of
the original patent period provided that they pay the patentee "equitable
remuneration" through the extended patent period. However, the FDA has taken the
position that it cannot approve an Abbreviated New Drug Application ("ANDA"),
which certifies the date of patent expiration, until the expiration of the
extended patent period. The extension of patent protection may delay the launch
of future products by the Company.
The Company, other generic drug manufacturers and concerned citizens groups
are continuing their efforts to convince Congress to pass legislation which
would allow the FDA to approve applications on the passage of the original
expiration date.
It is impossible for the Company to predict the extent to which its
operations will be affected under the regulations discussed above or any new
regulations which may be adopted by regulatory agencies.
Employees
The Company employs approximately 1,733 persons, approximately 800 of whom
serve in clerical, sales and management capacities. The remainder are engaged in
production and maintenance activities.
The production and maintenance employees at the Company's manufacturing
facilities in Morgantown, West Virginia, are represented by the Oil, Chemical
and Atomic Workers International Union (AFL-CIO) and its Local Union 8-957 under
a contract which expires April 5, 1998.
Backlog
At March 31, 1996, the uncompleted portions of the Company's backlog of
orders was approximately $9,747,000 as compared to approximately $20,979,000 at
March 31, 1995 and $12,543,000 at March 31, 1994. Because of the relatively
short lead time required in filling orders for its products, the Company does
not believe these interim backlog amounts bear a significant relation to sales
or income for any full twelve-month period.
ITEM 2. Properties
The Company operates from various facilities in the United States and
Puerto Rico having an aggregate of approximately 1,164,000 square feet.
Mylan Pharmaceuticals owns production, warehouse, laboratory and office
facilities in four buildings in Morgantown, West Virginia containing
approximately 440,000 square feet. Mylan Pharmaceuticals operates two
distribution centers, one in Greensboro, North Carolina containing approximately
64,000 square feet which it owns and one in Reno, Nevada containing
approximately 25,000 square feet under a lease expiring in 1997. Currently under
construction in Morgantown, West Virginia is a 27,000 square foot manufacturing
addition.
Mylan Inc. owns a production and office facility in Caguas, Puerto Rico
containing approximately 115,000 square feet and a production facility in Cidra,
Puerto Rico containing approximately 32,000 square feet.
Dow Hickam Pharmaceuticals, Inc. owns production, warehouse and office
facilities in two buildings in Sugar Land, Texas containing approximately 70,000
square feet. Hickam also operates a filling and packaging facility in Sugar
Land, Texas containing approximately 15,000 square feet under a lease expiring
in 1996.
Bertek owns production, warehouse, laboratory and office facilities in five
buildings in Swanton and St. Albans, Vermont containing approximately 178,000
square feet. Bertek also operates a coating and extrusion facility in St. Albans
containing approximately 71,000 square feet under a lease expiring in 2015.
UDL owns production, laboratory and office facilities in two buildings in
Rockford, Illinois and Largo, Florida containing approximately 92,000 square
feet. UDL also has distribution facilities at both locations containing
approximately 61,000 square feet under leases expiring in 1996 and 2004.
The Company's production equipment includes that equipment necessary to
produce and package tablet, capsule, aerosol, transdermal and powder dosage
forms. The Company maintains six analytical testing laboratories for quality
control.
The Company's facilities are operated primarily on a two shift basis.
Properties and equipment are well maintained and adequate for present
operations.
The Company's corporate offices, containing approximately 7,200 square
feet, are located at 130 Seventh Street, 1030 Century Building, Pittsburgh,
Pennsylvania, and are occupied under a lease expiring in 2000.
ITEM 3. Legal Proceedings
In 1990, the Company filed a complaint against American Cyanamid Company
("Cyanamid") claiming, among other things, that Cyanamid had underpaid the
Company under a marketing agreement relating to Mylan's Maxzide(R) and
Maxzide-25MG(r) products. Cyanamid counterclaimed against the Company alleging
fraudulent inducement and breach of contract relating to the agreement and
against the Company's former chairman alleging defamation.
During 1994, the jury in this lawsuit ruled in favor of Cyanamid on the
Company's complaint and in favor of the Company on Cyanamid's counterclaims, and
the judge dismissed the defamation counterclaim. No money damages were awarded
to either party. Both parties appealed and the Court of Appeals for the Fourth
Circuit affirmed the jury's action in all respects. However, the judge's
decision to dismiss the defamation counterclaim was reversed. On June 14, 1996,
in connection with negotiating a series of agreements relating to Maxzide(R) and
Maxzide-25MG(R) as described in Item 1, the parties agreed to terminate this
litigation, including the defamation counterclaim.
On November 24, 1992, Hoechst Marion Roussel Inc. ("HMR") (formerly known
as Marion Merrell Dow) and Tanabe Seiyaku Co. LTD ("Tanabe") filed suit in
Federal District Court for the Western District of Pennsylvania against the
Company and its wholly-owned subsidiary Mylan Pharmaceuticals claiming
infringement of Tanabe's patent for the manufacture of diltiazem. On September
29, 1995, the Company entered into a settlement agreement which releases all
parties from any further actions and suits as it relates to the manufacture of
diltiazem. In consideration for such settlement HMR and Tanabe agreed to
reimburse defense costs incurred by the Company.
On September 7, 1994, Upsher-Smith Laboratories filed suit in Minnesota
State Court against the Company and its wholly-owned subsidiary, Mylan
Pharmaceuticals Inc. The suit alleges breach of contract, breach of implied
contract, detrimental reliance and promissory estoppel with respect to the sale
and distribution of cimetidine. The suit claims damages in excess of
$13,000,000. A trial date has been set for July, 1996. The Company believes this
lawsuit is without merit and intends to vigorously defend its position.
During 1996, Bertek was involved in an arbitration matter unrelated to the
pharmaceutical business. On May 2, 1996, the arbitration panel issued a decision
against Bertek for approximately $4,000,000. No accrual for loss has been made
as of March 31, 1996. The Company has appealed this matter and believes the
ultimate resolution of this matter will not have a material effect on the
financial statements of the Company.
While it is not feasible to predict the ultimate outcome of such
proceedings it is the opinion of management that the outcome of these suits will
have no material adverse effect on the Company's operation, financial position,
or liquidity.
ITEM 4. Submission of Matters to a Vote of Security Holders
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
The names, ages and positions of the Company's executive officers are as
follows:
Milan Puskar 61 Chairman, Chief Executive Officer
and President
Dana G. Barnett 55 Executive Vice President
Louis J. DeBone 50 Vice President-Operations
Roger L. Foster 49 Vice President-General Counsel
Roderick P. Jackson 56 Senior Vice President
Joseph J. Krivulka 44 Vice President
Dr. John P. O'Donnell 50 Vice President-Research and
Quality Control
Patricia Sunseri 56 Vice President-Investor and
Public Relations
C.B. Todd 62 Senior Vice President
Robert W. Smiley 74 Secretary
Mr. Puskar was employed by the manufacturing subsidiary of the Company from
1961 to 1972 and served in various positions, including Secretary-Treasurer,
Executive Vice President and a member of the Board of Directors. From 1972 to
1975, Mr. Puskar served as Vice President and General Manager of the Cincinnati
division of ICN Pharmaceuticals Inc. In addition, he has served as a partner in
several pharmaceutical firms in foreign countries and is currently a director of
VivoRx, Inc., Santa Monica, California and Duquesne University, Pittsburgh,
Pennsylvania. Mr. Puskar has served as President of the Company since 1976 and
as Vice Chairman of the Board since 1980. He was elected Chairman of the Board
and C.E.O. on November 9, 1993.
Mr. Barnett was employed by the Company in 1966. Since that time he has
held various management positions with the manufacturing subsidiary of the
Company. His responsibilities have covered production, quality control and
product development. Mr. Barnett became Vice President in 1974, Senior Vice
President in 1978 and Executive Vice President in 1987. He was elected President
and Chief Executive Officer of Somerset Pharmaceuticals, Inc., a joint-venture
subsidiary of the Company in June 1991. In August of 1995 he was elevated to
Chairman and Chief Executive Officer of Somerset Pharmaceuticals, Inc.
Mr. DeBone has been employed by the Company since September, 1987. Prior to
assuming his present position in November, 1991 as Vice President-Operations he
served as Vice President-Quality Control. He was previously employed with the
Company from March, 1976 until June, 1986 and served as Director of
Manufacturing.
Mr. Foster has been employed by the Company since May, 1984. Prior to
assuming his present position in June, 1995 as Vice President-General Counsel he
served as Director of Legal Services and as Director of Governmental Affairs.
Mr. Jackson has been employed by the Company since April, 1986. Prior to
assuming his present position in October, 1992 as Senior Vice President he
served as Vice President-Marketing and Sales.
Mr. Krivulka has been employed by the Company since March, 1990. Prior to
assuming his present position in April, 1992 as Vice President he served as
Assistant to the President. Since April of 1993, he also serves as President of
Bertek, Inc., a subsidiary of the Company. From 1989 to 1990 he was employed by
Janssen Pharmaceutica, a division of Johnson & Johnson, as Executive Director of
Business Unit Management.
Dr. John O'Donnell has been employed by the Company since 1983. Prior to
assuming his present position in November, 1991 as Vice President-Research and
Quality Control, he served as Vice President-Research and Product Development
and as Director of Chemistry and Product Development.
Mrs. Sunseri has been employed by the Company since 1984. Prior to assuming
her present position in October, 1989 as Vice President-Investor & Public
Relations, she served as Director of Investor Relations.
Mr. Todd has been employed by the Company since 1970. Prior to assuming his
present position in October, 1987 as Senior Vice President, Mr. Todd served as
Vice President-Quality Control. He also serves as President of Mylan
Pharmaceuticals Inc., a subsidiary of the Company.
Mr. Smiley has been Secretary of the Company for approximately twenty-one
years and on December 12, 1975, he was elected to the Board of Directors. His
principal occupation is and for approximately forty-two years has been an
attorney-at-law in Pittsburgh, Pennsylvania. He was a partner in the law firm of
Smiley, McGinty and Steger, general counsel to the Company. Since October 1,
1992, Mr. Smiley has been associated with the law firm of Doepken Keevican &
Weiss Professional Corporation.
There is no family relationship between any of the above executive
officers. Officers of the Company serve at the pleasure of the Board of
Directors.
PART II
ITEM 5. Market for Registrant's Common Equity and
Related Stockholder Matters
The information required by item 5 is hereby incorporated by reference to
pp. 44 and 64 of the accompanying Annual Report to Shareholders for the year
ended March 31, 1996.
ITEM 6. Selected Financial Data
The information required by item 6 is hereby incorporated by reference to
p. 44 of the accompanying Annual Report to Shareholders for the year ended March
31, 1996.
ITEM 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations
The information required by item 7 is hereby incorporated by reference to
pp. 45-49 of the accompanying Annual Report to Shareholders for the year ended
March 31, 1996.
ITEM 8. Financial Statements and Supplementary Data
The information required by item 8 is hereby incorporated by reference to
pp. 50-64 of the accompanying Annual Report to Shareholders for the year ended
March 31, 1996.
ITEM 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
Not applicable.
PART III
ITEM 10. Directors and Executive Officers of the Registrant
The information as to directors required by item 10 is hereby incorporated
by reference to pp. 1-3 of the Company's 1996 Proxy Statement. Information
concerning executive officers is provided in Part I of this report under the
caption "Executive Officers of the Registrant".
ITEM 11. Executive Compensation
The information required by item 11 is hereby incorporated by reference to
pp. 3-9 of the Company's 1996 Proxy Statement.
ITEM 12. Security Ownership of Certain
Beneficial Owners and Management
The information required by item 12 is hereby incorporated by reference to
p. 10 of the Company's 1996 Proxy Statement.
ITEM 13. Certain Relationships and Related Transactions
Not applicable.
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1.List of Financial Statements
Page
Number
-------
INCLUDED IN ANNUAL REPORT TO SHAREHOLDERS:
Consolidated Balance Sheets................................ 50-51
Consolidated Statements of Earnings........................ 52
Consolidated Statements of Shareholders' Equity............ 53
Consolidated Statements of Cash Flows...................... 54-55
Notes to Consolidated Financial Statements................. 56-63
Independent Auditors' Report............................... 64
2. Financial Statement Schedules
The information required by this item is incorporated herein by
reference to Exhibit 99. All other schedules have been omitted
because they are not required.
3. Exhibits
(3)(a) Amended and Restated Articles of Incorporation of the registrant,
filed as Exhibit (3)(a) to Form 10-Q for quarter ended June 30, 1992
and incorporated herein by reference.
(b) By-laws of the registrant, as amended to date, filed as Exhibit 3(b)
to Form 10-Q for the quarter ended June 30, 1992 and incorporated
herein by reference.
(10)(a) 1986 Incentive Stock Option Plan, as amended to date, filed as
Exhibit 10(b) to Form 10-K for fiscal year ended March 31, 1993 and
incorporated herein by reference.
(b) "Salary Continuation Plan" with Milan Puskar, Dana G. Barnett and C.B.
Todd each dated as of January 27, 1995 and filed as Exhibit 10(b) to
Form 10-K for fiscal year ended March 31, 1995 and incorporated herein
by reference.
(c) "Salary Continuation Plan" with Roderick P. Jackson and Louis J.
DeBone each dated March 14, 1995 and filed as Exhibit 10(c) to Form
10-K for fiscal year ended March 31, 1995 and incorporated herein by
reference.
(d) Employment contract with Milan Puskar dated April 28, 1983, as amended
to date, filed as Exhibit 10(e) to Form 10-K for fiscal year ended
March 31, 1993 and incorporated herein by reference.
(e) Split Dollar Life Insurance Arrangement with McKnight Irrevocable
Trust filed as Exhibit 10(g) to Form 10-K for fiscal year ended March
31, 1994 and incorporated herein by reference.
(f) 1992 Nonemployee Director Stock Option Plan filed as Exhibit 10(g) to
Form 10-K for fiscal year ended March 31, 1993 and incorporated herein
by reference.
(g) "Service Benefit Agreement" with Laurence S. DeLynn, John C. Gaisford,
M.D., Richard A. Graciano and Robert W. Smiley, Esq. each dated
January 27, 1995 and filed as Exhibit 10(g) to Form 10-K for fiscal
year ended March 31, 1995 and incorporated herein by reference.
(h) Split Dollar Life Insurance Arrangement with Milan Puskar Irrevocable
Trust, filed herewith.
SPLIT-DOLLAR AGREEMENT
THIS AGREEMENT is entered into by and between MYLAN LABORATORIES INC., a
Pennsylvania corporation (hereinafter called the "Corporation"),
A
N
D
JOHANNA PUSKAR PRATT, or her successors, as Trustee of the Milan Puskar
Irrevocable Trust Agreement dated as of February 13, 1995 (hereinafter called
the "Trustee").
W I T N E S S E T H T H A T:
WHEREAS, Milan Puskar is a valuable employee of the Corporation; and
WHEREAS, the Trustee has applied for and owns the life insurance policies
on the life of Milan Puskar which are listed on Schedule "A" attached hereto
(the"Policies"); and
WHEREAS, the Corporation desires to assist in paying the premiums on the
Policies; and
WHEREAS, the parties desire to create a split-dollar arrangement to provide
for the payment of premiums on the Policies and to assure that the amount of
premiums paid by the Corporation with respect to the Policies will be repaid to
the Corporation at the death of Milan Puskar, if not earlier; and
WHEREAS, the repayment of premiums paid by the Corporation with respect to
the Policies will be secured by a collateral assignment of the Policies to the
Corporation.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the Corporation and the Trustee hereby agree as follows:
1. Policies. The Policies which are subject to this Agreement are listed on
Schedule "A" attached hereto. Any additional insurance contracts on the life of
Milan Puskar which become subject to this Agreement shall be listed on Schedule
"A" as they become subject to this Agreement.
2. Ownership of Policies. The Trustee shall have custody of the Policies
subject to this Agreement and shall be the sole and exclusive owner of the
Policies, subject, however, to the right of the Corporation to borrow against
the Policies as set forth in paragraph 10 or to the return of any funds advanced
by it for payment of the premiums or other amounts paid with respect to the
Policies upon the death of Milan Puskar or the termination of this Agreement.
Except as to the security interest specifically granted to the Corporation
herein, the Trustee retains all incidents of ownership in the Policies,
including the right to borrow or withdraw against the Policies. The Trustee's
right to borrow shall be limited to an amount equal to the maximum loan value
reduced by an amount equal to the cumulative premiums on the Policies paid by
the
1
Corporation hereunder. The Trustee's right to withdraw from the Policies'
cash values shall likewise be reduced by an amount equal to the cumulative
premiums on the Policies paid by the Corporation hereunder. Milan Puskar shall
not have any rights, powers or incidents of ownership in the Policies.
3. Beneficiary. The Trustee has designated the Trust as the beneficiary of
the proceeds of the Policies.
4. Dividend Options. The Trustee may elect and continue in force such
dividend options, if any, as are provided under the Policies and accordingly
therewith the dividends may be used by the Trustee in such manner as the Trustee
deems appropriate, such as to purchase paid up additions, to purchase additional
term insurance, or to reduce premiums.
5. Payment of Premiums. The premiums on the Policies shall be paid in the
following manner:
(a) The Trustee shall have the option with respect to each calendar
year or portion thereof that this Agreement is in effect to contribute that
portion of the premiums under the Policies equal to the lesser of (i) the
rate established by the Internal Revenue Service for the cost of pure life
insurance protection (P.S. 58 cost) from time to time, or (ii) the rate, if
any, established by the respective insurance company for one-year term life
insurance available to all standard risks in the amount of the respective
Policies, less cash value, at Milan Puskar's then attained age.
(b) The Corporation shall pay the balance, representing the excess, if
any, of the annual premium over any portion that may be paid by Trustee
under (a) above, plus the annual interest due on any Policy loans made by
the Corporation.
(c) For administrative convenience, the Trustee shall remit any
contribution toward the premiums to the Corporation, and the Corporation
shall be responsible for making the total combined premium payments to the
respective insurance company.
(d) The Corporation shall cease making premium payments whenever the
Trustee so determines. Once the Trustee has terminated the Corporation's
obligations hereunder, the Trustee shall be solely responsible for paying
premiums due under the Policies.
6. Security Interest. In consideration of the premium payments to be made
by the Corporation, and to assure the repayment of such payments, the Trustee
grants to the Corporation, with collateral assignment, a security interest in
the Policies. The Corporation's security interest in the Policies at any time
shall be an amount equal to its net "Premium Payments." "Premium Payments" as
used in this Agreement means the aggregate amount of premium payments paid with
respect to the Policies by the Corporation under this Agreement, less any amount
received by the Corporation in reimbursement of such payments. The outstanding
balances on any Policy loans made by the Corporation shall be considered
reimbursement of such
2
payments. The Trustee agrees to execute and deliver to the Corporation, at
the time of the first premium payment on the Policies, a collateral assignment
of the Policies.
7. Policy Proceeds. If the Policies mature as death claims while this
Agreement remains in effect, the Corporation shall immediately be paid an amount
equal to the then balance of its "Premium Payments." Such payment shall be
considered a return of capital to the Corporation and a termination of this
Agreement. The balance of such proceeds shall be retained by the beneficiary
designated by the Trustee in the manner and in the amount provided under the
terms of the Policies.
8. Termination. This Agreement shall terminate upon the happening of any of
the following events:
(a) The Trustee may terminate this Agreement while no premium under
the Policies is overdue by giving notice to the Corporation. The effective
date of such termination shall be the date of giving notice.
(b) By mutual consent of the parties hereto or by release of the
Corporation's security interest under paragraph 6 hereof.
(c) Bankruptcy, insolvency or dissolution of the Corporation.
(d) Surrender of the Policies by the Trustee.
9. Repayment of Premium Payments. If this Agreement is terminated under
paragraph 8 above, the Trustee shall obtain release of the Corporation's
security interest in the Policies by paying to the Corporation a sum equal to
the amount of the "Premium Payments" made by the Corporation as of that date.
The Corporation agrees (solely for purposes of facilitating such termination and
repayment of its premium payments secured by said policies) that the Trustee may
borrow or withdraw from the Policies cash values in amounts in excess of the
amounts specified in paragraph 2 above. If the Trustee fails to pay the
Corporation a sum equal to the "Premium Payments" within sixty (60) days of the
date of the termination of this Agreement pursuant to paragraph 8 above, the
Trustee shall execute any and all instruments that may be required to vest
ownership of the Policies in the Corporation. Thereafter, the Trustee shall have
no further interest in the Policies; the Corporation shall be deemed to have
received a sum equal to the"Premium Payments" and no additional sum will be due
it; and the Corporation will have the option to maintain the Policies at its
sole discretion.
10. Corporation's Rights. If the Trustee sells, assigns, surrenders, makes
withdrawals or otherwise terminates the Policies at any time this Agreement is
in effect, the Corporation shall have the immediate right to repayment of its
"Premium Payments" from the Trustee. The Corporation shall have the right to
borrow from the Policies and to pledge or assign the Policies as security for
loans or advances, but only up to the "Premium Payments" less the amount of any
loans theretofore obtained by the Corporation.
11. Assignment. Subject to paragraph 10 above, neither party shall have the
right to assign its interests hereunder without the written consent of the other
party.
3
12. Further Assurances. The parties hereto agree to execute any documents
which may be necessary or proper to carry out the purpose and the intent of this
Agreement.
13. Amendment. This Agreement may not be amended or modified except by a
written instrument signed by the parties hereto.
14. Responsibility of Insurance Company. The parties hereto agree that any
insurance company shall be fully discharged by payment of the death benefit to
the beneficiaries designated in the Policies, subject to the terms and
conditions of the Policies; provided, however, that the insurance company shall
first comply with the terms specified in the collateral assignment as described
in paragraph 6 above. No insurance company shall be considered a party to this
Agreement; therefore, a copy of this Agreement need not be filed with any such
company. Nothing in this Agreement nor in any modifications, amendments or
supplements hereto shall in any way be construed to enlarge, change, vary or in
any way affect the obligations of any insurance company as expressly provided by
the Policies.
15. Binding Effect. This Agreement shall be binding upon the parties hereto
and their successors, assigns, executors, or administrators and beneficiaries.
16. Notices. All notices required by this Agreement shall be in writing and
sent by certified or registered mail to the then current or last known address
of each party hereto.
17. Governing Law. This Agreement shall be subject to and construed
according to the laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the _____ day of ___________________, 1995.
ATTEST: CORPORATION:
MYLAN LABORATORIES INC.
___________________________________ By:____________________________________
Robert W. Smiley, Esq., Secretary Clarence B. Todd, Senior Vice-President
WITNESS: TRUSTEE:
___________________________________ _______________________________________
Johanna Puskar Pratt
4
SCHEDULE "A"
To Split-Dollar Agreement dated as of
_______________, 1995 Between Mylan Laboratories, Inc.
and Johanna Puskar Pratt, Trustee
- - -------------------------------------------------------------------------------
Company Policy Number Face Amount
The Guardian Life Insurance
Company of America 3800280 $9,000,000
The Guardian Life Insurance
Company of America 3794316 $9,000,000
(13) Fiscal 1996 Annual Report to the Shareholders (only those portions
which are incorporated in this Report by reference are being filed
herewith).
MYLAN LABORATORIES INC.
1996 Annual Report to Shareholders
Description of Business
Mylan Laboratories Inc. and its subsidiaries are engaged in the development,
licensing, manufacturing, and marketing of numerous generic and proprietary
finished pharmaceutical and wound care products. These products include solid
oral dosage forms, as well as suspensions, liquids, injectables and
transdermals, many of which are packaged in specialized systems.
Table of Contents
1 Introduction
2 Letter to Shareholders
4 Company History
8 Mylan Laboratories Incorporated
16 Mylan Pharmaceuticals Incorporated
22 Mylan Incorporated
26 Dow Hickam Pharmaceuticals Incorporated
30 Bertek Incorporated
34 UDL Laboratories Incorporated
38 Somerset Pharmaceuticals, Incorporated
42 Financial Highlights
44 Selected Financial Data
45 Management's Discussion
50 Consolidated Balance Sheets
52 Consolidated Statements of Earnings
53 Consolidated Statements of Shareholders' Equity
54 Consolidated Statements of Cash Flows
56 Notes to Consolidated Financial Statements
64 Independent Auditors' Report
64 Market Prices
65 MylanProduct Guide
69 Shareholder Information
69 Directors and Officers
Research
is the life-blood of any company. It is the catalyst by which a company grows
and lack of it can cause stagnation or even failure. Mylan is a research driv
en company dedicated to excellence. As we continue our evolution into a
fully integrated pharmaceutical company, we have tar-
geted compounds to meet unmet needs.we are aggressively developing products
that will effectively treat serious disorders and diseases that are not
addressed by pharmaceuticals presently on the market. Our R & D budget is not
based on a percentage of sales but on accomplishing goals. We do not waste
money, but we spend whatever is necessary to do it right.to meet our objective
of focusing upon therapies that make a difference in terms of human and economic
value. We believe that by advancing science, we can enhance life!
1
To Our Shareholders
Fiscal 1996 has been a very tough year. The industry has been suffering
from a lack of significant FDA approvals and Mylan is no exception.
Consequently, although total units shipped has increased 17% compared with last
year, dollar sales have not kept pace due to the resulting pricing pressure. It
is Mylan's policy to aggressively protect its market share by keeping its
customers price competitive whenever necessary. We have done so throughout this
difficult period and will continue to do so as long as necessary.
We did receive four approvals from the FDA this past fiscal year,
increasing our product line to 83 different compounds covering 22 therapeutic
categories.
Seventeen ANDAs (generic drugs) are presently submitted to the Food and
Drug Administration for approval with over 40 more in various stages of
development. Additionally, we are sourcing raw material for more than 30 other
generic products.
Along with that, we are working on seven innovator products and have
already filed INDs (Investigational New Drugs) on five of them with the other
two to be filed by the end of June.
Also during this past fiscal year, we announced our alliance with and
investment in VivoRx, Inc., a California based biotechnology company developing
pancreatic islet cell implant technology for the management of diabetes. This is
an exciting project with the prospect of improving the quality of life for
millions of insulin dependent Americans. It is also consistent with our
objective of focusing upon therapies that meet unmet needs, and make a
difference in terms of human and economic value.
During this fiscal year, Mylan has paid a total of $17,502,000 in cash
dividends to its share- holders, and shareholders' equity has grown from
$482,728,000 last year to $616,441,000 for this fiscal year. A 28% increase!
Although competition in the generic field is tough and pricing pressures
are severe at the moment, the industry continues to grow. Mylan is planning and
building for the future and has positioned itself to remain a leader in this
industry.
Most sincerely,
Milan Puskar
Chairman, CEO and President
3
1960s
(picture)
Parke-Davis was the first major drug company to purchase Mylan's finished
goods in 1969.
(picture)
Mylan began in 1961 as a privately owned company founded by our Chairman,
CEO and President, Milan Puskar, and an associate in White Sulphur Springs, West
Virginia. Initially the company did not manufacture products, but operated as a
distributor buying finished goods and reselling them to pharmacies, doctors, and
etc.
1961
(picture)
Mylan began manufacturing vitamins in 1965, and in 1966 received approval
to start manufacturing Penicillin G tablets. Production was expanded in 1968
with the FDA approval of Tetracycline.
(picture)
Morgantown
White Sulphur
Springs
Princeton
In 1963 Mylan relocated to Princeton, West Virginia and then in 1965 to its
present location in Morgantown.
4
1970s
(pictures)
Mylan experienced unbelievable growth after the present management team
took over on May 13, 1976, and the company soon became eligible to be traded on
the National-Over-the-Counter (NASDAQ) Market as MYLN.
NASDAQ
February 15, 1973, the first shares of stock were traded on the
Over-the-Counter Market, and Mylan became a public company.
Mylan continued to expand its list of approved products with the addition
of Ethromycin in 1971 and Ampicillin in 1973. The list of major drug companies
purchasing product under private label also continued to increase.
1980s
(pictures)
On April 14, 1986, Mylan became a member of the Big Board, The New York
Stock Exchange, and its symbol became MYL.
Mylan's former Chairman and CEO, Roy McKnight testified before the House
Oversight and Investigations Committee regarding improprieties at the FDA,
prompting an investigation of the generic drug industry exposing cheating,
bribery and payoffs.
November 1988, Mylan announced the joint-venture purchase of Somerset
Pharmaceuticals. Somerset received FDA approval in 1989 for EldeprylRegistration
Mark, an extremely effective treatment for late stage Parkinson's disease.
Mylan introduced its first proprietary product, MaxzideRegistration Mark,
an antihypertensive in 1984. In 1988, after three years of clinical testing,
Mylan received approval on half strength MaxzideRegistration Mark-25. Both were
licensed to Lederle Laboratories for distribution.
In 1987 Mylan opened a second manufacturing facility in Caguas, Puerto
Rico, followed by the opening of its first distribution center in Greensboro,
North Carolina in 1988.
5
1990s
(pictures)
Mylan merged with Dow B. Hickam Pharmaceuticals, a high quality branded
pharma ceutical company with a highly skilled and aggressive marketing force on
October 30, 1991.
Bertek, Inc., an important manufacturer and innovator of state-of-the-art
tran sdermal drug delivery systems was acquired on February 15, 1993.
November 6, 1993, Mylan's former Chairman and CEO Roy McKnight died
suddenly of a heart attack. The company co-founder Milan Puskar was named
Chairman and CEO on November 9, 1993.
In 1991 the Company also opened its second distribution facility in Reno,
Nevada.
Cidra, Puerto Rico became the site of Mylan's third generic manufacturing
facility with its opening in October 1994.
1996
(pictures)
Mylan announced a 3 for 2 stock split August 15, 1995, the Company's ninth
split since July 1979, increasing Mylan's shares to 120,019,618 from 275,000 at
the Initial Public Offering twenty-three years ago.
February 28, 1996, Mylan acquired UDL Laboratories Inc., the premier
supplier of unit dose generic pharmaceuticals to the institutional and long-term
care marketplace.
6
Company History
The success of any company is not achieved by any one particular event but
is the result of a series of occurrences throughout its history. It is a
combination of the management team, the employees and the corporate philosophy
that make or break a company. Mylan is the proof of that principle! We have
grown from a tiny, single location, West Virginia company to a present day,
financially strong, multi-location industry leader listed on the New York Stock
Exchange. Mylan's code of ethics and its corporate philosophy that 'If we can't
do it right, we don't do it at all,' combined with the integrity of its
employees provides the foundation upon which this company is built. Mylan's
'family' of employees whose dedication to their work and pride in the company
have been the backbone of this remarkable story. From maintenance to management
it has been a blend of ideas, hard work and mutual respect, and it continues to
be the key to Mylan's ongoing success and growth!
With its blend of quality generics and innovator
products, Mylan has grown into a fully integrated
pharmaceutical firm, ranking among America's top 1,000 growth companies.
"Our commitment to excellence has given us a firm hold on the present as a
leader in the pharmaceutical industry and combined with the talent,
integrity and dedication of our family of employees, we have a strong
foothold on the future." Left to Right: Rod Jackson, Senior Vice President;
Dr. John O'Donnell, Vice President - Research and Quality Control; Patricia
Sunseri, Vice President - Investor and Public Relations; Roger Foster, Vice
President and General Counsel; Lou DeBone, Vice President - Operations.
|- Mylan Pharmaceuticals Inc.
|
|- Mylan Inc.
|
Mylan Laboratories Inc. |- Dow Hickam Pharmaceuticals Inc
the mylan formula |
for success has always ----------------> |- Bertek, Inc.
been multi-faceted |
|- UDL Laboratories Inc.
. |
|- Somerset Pharmaceuticals, Inc.
The twelve months of Fiscal 1996 have been filled with changes and challenges.
We have continued to see consolidation in our industry.we have participated
in that consolidation by acquiring UDL Laboratories, the premier supplier of
unit dose pharmaceuticals to the institutional and long-term care markets. This
enables Mylan to better position itself in the retail, institutional and managed
care markets.
We have seen increased pricing pressure.the industry has been suffering
from a lack of significant FDA approvals, and Mylan is no exception.
Consequently, even though units shipped has increased 17% over last year, dollar
sales have not kept pace due to the resulting pricing pressure. It is Mylan's
policy to aggressively protect its market share by keeping customers price
competitive whenever necessary. We have done so throughout this difficult period
and will continue to do so as long as necessary.
Mylan continues to increase its market share.for the twelve month period
ending December 31, 1995, Mylan was ranked first among all pharmaceutical
companies, branded or generic, in the number of prescriptions dispensed
according
Mylan Laboratories Inc. 9
to the IMS National Prescription Audit. Fifty-six percent of Mylan's products
rank number one and 71% rank number one or number two. We are very proud of the
Mylan team of employees who have made this possible. From the moment a product
becomes an idea in Mylan's mind, to the moment it gets approved and becomes a
part of our product line, it is the creativity, dedication and production of all
of our people, from maintenance to management, that allows us to enjoy this
continued growth!
To maintain our ongoing success and long-term growth, and to continue our
transition into a fully integrated pharmaceutical company, Mylan is developing
innovator products, as well as, generic products. Presently, there are seven of
these compounds in our pipeline: an anti-fungal, a wound care product, a topical
anesthetic, a migraine product, a gastrointestinal product, a burn product, and
a product for treatment of the On/Off phenomenon associated with Parkinson's
disease.
(picture)
July 7, 1995.enjoying life with our Cystinosis 'kids'.on the beach at the Mylan
sponsored picnic in La Jolla, California. Mylan's Orphan Drug
'CystagonRegistration Mark' helps to control this rare genetic disorder known as
Cystinosis for over 400 known victims worldwide.
Mylan Laboratories Inc. 10
Investigational New Drug Application s (INDs) have been filed on five of these
compounds and the other two will be filed by the end of June. Clinical trials
will begin in July on the wound care product and the topical anesthetic.
Mylan has developed its own 'Sustained Release' technology and on March 25,
1996 we announced approval for Verapamil ER 240 MG tablets, our first sustained
release product. We have approximately ten more of these types of products in
development. Presently, we are constructing a 27,000 square foot bead facility
which we hope to have completed by the end of the year.
In September of 1995 we announced our alliance with and investment in
VivoRx, Inc., a California-based biotechnology company that is developing
pancreatic islet cell implant technology for the management of diabetes. Three
patients have been successfully implanted and our first patient has now
successfully undergone his third implant with results similar to his first two,
thus providing "Proof of Principle" to this important technology. VivoRx has now
amended their original IND to permit the use of human 'proliferated' or cloned
cells, in addition, another IND will be filed for the use of porcine (pancreas)
islets and the first of these implants are planned for this year.
Diabetes is a staggering disease in terms of both human and economic tolls.
By working with VivoRx, Mylan will be helping to meet the unmet need for a
long-term diabetes control therapy and helping to
Mylan Laboratories Inc. 11
improve the quality of life for the estimated 1.4 million insulin-dependent
diabetics in the United States who could potentially benefit from the treatment.
Our VivoRx investment is consistent with the Mylan objective to focus upon
therapies to treat or cure devastating illnesses. To serve this mission, we have
been and continue to be a research driven company. It is with great anticipation
that we look forward to moving into our new 150,000 square foot R & D facility
this summer. We have more than doubled our R & D staff over the past two years
and with the opening of this facility, will increase it.
We have also quietly supported significant research at The Parkinson's
Institute in California. Dr. William Langston, its founder and president and a
leader in Parkinson's research, was the first to describe MPTP as the causative
agent for illicit drug users' development of Parkinson's like diseases several
years ago.
We have supported research at the Institute, searching for biological
markers to use in screening compounds for the potential use in treatment of
Parkinson's. Our 'Parkinson's Man in a Box' funding will provide The Parkinson's
Institute the use of materials to include DNA containing tissues of brain and
blood from deceased Parkinson's patients to assist in finding cures or treatment
for future Parkinson's victims. No other model exists for this type of screening
of compounds. We find this research very significant in
(picture)
Milan Puskar, Chairman, CEO and President, Mylan Laboratories Inc. Dr.
Patrick Soon-Shiong, President and CEO, VivoRx, Inc.
Mylan Laboratories Inc. 12
helping to treat or cure this devastating illness.
Once again throughout the year Mylan has been featured in many
publications and heralded by some as one of the best companies in the United
States. Business Week's 1996 issue of America's 1000 Most Valuable Companies
ranked Mylan among its elite as did Forbes in its April 22, 1996 issue of The
Forbes 500. The October 10, 1995 issue of Financial World reflected Mylan as one
of America's 100 Best Growth Companies. Executive Report magazine ranks Mylan as
number two on their list of Top Ten Performers in the Pittsburgh area.
Better Investing magazine, a publication put out by NAIC.National
Association of Investors Corporation.lists the 100 most popular and widely held
stocks between investment clubs and their members nationwide, and we are proud
to say we rank 38th by number of clubs and 26th by number of shares for 1996. We
take this as a great compliment since our shareholders are very important to us!
We are well aware that growth in shareholders' equity is paramount to our
investors. This year shareholder equity has grown to $616.4 million from $482.7
million last year. A 28% increase!
(picture)
Mylan continues to receive recognition in major publications
Mylan Laboratories Inc. 13
Mylan has also received the silver award for its workplace wellness
programs, which are designed to emphasize good health habits to our employees.
It is the goal of the company to help our employees enjoy a better quality of
life and extend their life expectancy by encouraging exercise and healthy diet.
Once again we tip our hats to our board of directors whose dedication to
the common good of this company, its employees and its shareholders are the
criteria by which they make their decision. We thank all of our board members
for their input and guidance.
And hats off to our entire family of Mylan employees whose integrity and
hard work continues to be the key ingredient in Mylan's success. They are truly
our greatest asset.
(picture)
Mylan has grown to a multi-location industry leader with state-of-the-art
research and development laboratories as well as manufacturing and packaging
facilities in West Virginia, Puerto Rico, Texas, Vermont, Illinois and Florida:
distribution centers in North Carolina and Nevada, and corporate headquarters in
Pittsburgh, Pennsylvania.
(picture)
"Workplace Wellness Award"
Mylan Laboratories Inc. 14
Mylan Laboratories Inc. Board of Directors
(picture)
Left to right front: Milan Puskar; Dana G. Barnett
Left to right rear: C. B. Todd; Laurence S. DeLynn; Robert W. Smiley, Esq.;
John C. Gaisford, M.D.; Richard A. Graciano
Mylan Pharmaceuticals Inc.
5 billion TABLETS AND CAPSULES PRODUCED IN FISCAL 1996
(picture)
In the background is one of the construction projects Mylan has underway.a
150,000 square foot state-of-the-art research facility scheduled for completion
this summer. This facility is another sign of Mylan's total commitment to the
future. It will provide the resources necessary to carry out the company's
aggressive product development program. C. B. Todd - President, Mylan
Pharmaceuticals Inc.
Mylan's total commitment to quality can be witnessed at its manufacturing
plant in Morgantown, West Virginia.the generic arm of the corporate family.
Incoming raw materials are inspected using a scanning electron microscope
and a particle size analyzer to ensure
consistency and quality. This is one of the many quality checks performed
at Mylan Pharmaceuticals even though it is not mandated by the FDA.
The raw materials that pass quality control specifications are then blended
according to the master formula sheet, which is part of the FDA approval and
must be strictly followed. In fact, the FDA makes thousands of inspections each
year to make sure that manufacturers are meeting the master formula sheets
specifications exactly.
Mylan Pharmaceuticals Inc. 17
(picture)
Granulating and blending the raw materials into finished capsules and
tablets is done in climate-controlled rooms known as "clean rooms" because the
air is cleaned to remove dust or powder. As with all other manufacturing steps
at Mylan, only one lot or batch of materials is allowed to be present in a room.
This gives Mylan the highest level of quality control possible.
Using sophisticated state-of-the-art equipment, we are able to manufacture
over seventy-five separate generic drugs. To track all of these different
products, computers with video cameras and bar code readers are used to make
sure that each product always has the correct label.
At every manufacturing phase, Mylan's quality control managers have the
authority to stop production if a product is not meeting Mylan's standards. As a
final quality check, Mylan gives every capsule and tablet 100 percent visual
inspection.
In the pharmaceutical industry, long-term success is based on reputation.
Mylan's success and leadership in providing safe, effective and low-cost generic
drugs is founded on its reputation for both quality and integrity. We care about
our customers and our suppliers because they are an important part of our
success. Producing
Mylan Pharmaceuticals Inc. 18
high quality products is our way of showing our appreciation.
During this past year, Amerisource rewarded us with the "1995
Manufacturer Partner of the Year Award" for our 'superior performance in all
areas.'
Another great honor was bestowed upon Mylan when the retail pharmacists
did their 1995 survey and rated manufacturers. Mylan was ranked the number one
generic company in its commitment to pharmacy, its product quality and its
commitment to research.
We are proud to be on this '1995 Corporate Honor Roll' and even prouder
to be ranked number one in these categories.
Your company has received four new approvals this year from the Food and
Drug Administration, which further expands our ever growing line of products.
Presently we have submitted 17 different chemical entities to the FDA for
approval, representing 27 different strengths. We have more than forty
additional generic products in development.
We are proud to be a leader in the generic industry. Our commitment to
quality, and the integrity of our employees will keep us there. We look forward
to the challenges of the new year.
(picture)
Mylan Pharmaceuticals Inc., Morgantown, West Virginia
(picture)
Industry awards for outstanding performance
Mylan Pharmaceuticals Inc. 19
Dr. Thomas Clark, Mylan's Medical Director, founded Clinical and
Pharmacologic Research, Inc. (CPR) in 1982.
Mylan Pharmaceuticals contracts CPR as a dedicated Phase I Unit and
research organization. The Phase I Unit and administrative offices of CPR are
located in Morgantown, West Virginia near the campus of West Virginia
University. The Phase I Unit has operated for approximately fourteen years and
has been involved in bioequivalence and clinical studies. West Virginia
University is an excellent source of healthy, young research subjects.
The facility has bed space for sixty subjects, the laboratory is
equipped to process research studies running simultaneously. The unit includes a
security system with camera monitoring. Emergency support is present during
study conduct with rapid access to physicians. The unit is located within
minutes of both Monongalia General and Ruby Memorial Hospitals.
Clinical and Pharmacologic Research has composed its own
Institutional Review Board (IRB) as an integral part of the research process.
The CPR-IRB consists of
(picture)
Tom Clark, M.D. on site at CPR
20 Mylan Pharmaceuticals Inc.
highly qualified medical and lay individuals from the
Morgantown community and operates under the appropriate federal regulations.
A new state-of-the-art research facility is planned for late 1996. The
new facility will have bed space for 104 research subjects. The facility will be
divided into four quadrants which will allow four studies to be conducted
independently at the same time. Two large laboratories located adjacent to the
blood collection areas will enable each study to be assigned a specific
processing area.
Mylan Pharmaceuticals Generic Product Line
Generic Name Trade Name
Analgesics
Indomethacin ...................... Indocin Registration Mark
Propoxyphene HCL .................. Darvon Registration Mark
Propoxyphene ...................... Darvon Registration Mark
Compound .......................... Compound-65
Propoxyphene HCL &
Acetaminophen ..................... Wygesic Registration Mark
Propoxyphene
Napsylate & ...................... Darvocet-
Acetaminophen .................... N Registration Mark 100
Antiangina
Atenolol ......................... Tenormin Registration Mark
Nadolol .......................... Corgard Registration Mark
Nitroglycerin Transdermal
System (Patch) ................... Transderm
Nitro Registration Mark
Verapamil HCL .................... Isoptin Registration Mark
Antianxiety
Alprazolam XanaxRegistration Mark
Diazepam ........................ Valium Registration Mark
Lorazepam ....................... Ativan Registration Mark
Perphenazine &
Amitriptyline HCL ............... Triavil Registration Mark
Antibiotics
Amoxicillin Trihydrate Amoxil Registration Mark
Ampicillin Trihydrate .......... Polycillin Registration Mark
Cefaclor ....................... Ceclor Registration Mark
Cephalexin Keflex Registration Mark
Doxycycline Hyclate ............ Vibramycin Registration Mark
Doxycycline Hyclate ............ Vibra-tabs Registration Mark
Erythromycin
Ethylsuccinate ................. E.E.S. 400 Registration Mark
Erythromycin ................... Erythrocin Registration Mark
Stearate ....................... Stearate
Penicillin V Potassium V-Cillin-K Registration Mark
Tetracycline HCL .............. Achromycin V Registration Mark
Sumycin Registration Mark
Antidepressant
Amitriptyline HCL ............... Elavil Registration Mark
Chlordiazepoxide &
Amitriptyline HCL Limbitrol Registration Mark
Doxepin HCL ..................... Sinequan Registration Mark
Maprotiline HCL ................. Ludiomil Registration Mark
Nortriptyline HCL ............... Pamelor Registration Mark
Antidiabetic
Chlorpropamide Diabinese Registration Mark
Glipizide ...................... Glucotrol Registration Mark
Tolazamide Tolinase Registration Mark
Tolbutamide .................... Orinase Registration Mark
Antidiarrheal
Diphenoxylate HCL&
Atropine Sulfate Lomotil Registration Mark
Loperamide HCL Imodium Registration Mark
Antigout
Allopurinol .................... Zyloprim Registration Mark
Antihypertensive
Amiloride HCL &
Hydrochlorothiazide ........... Moduretic Registration Mark
* Captopril Capoten Registration Mark
Clonidine HCL ................. Catapres Registration Mark
Clonidine HCL &
Chlorthalidone Combipres Registration Mark
Methyldopa Aldomet Registration Mark
Methyldopa &
Hydrochlorothiazide ........... Aldoril Registration Mark
* Indapamide Lozol Registration Mark
Metoprolol Tartrate ........... Lopressor Registration Mark
Prazosin HCL ................. . Minipress Registration Mark
Propranolol HCL .............. Inderal Registration Mark
Propranolol HCL &
Hydrochlorothiazide .......... Inderide Registration Mark
Antihypolipidemic
Gemfibrozil ................... LopidRegistration Mark
Anti-Inflammatory
Fenoprofen Calcium Nalfon Registration Mark
Flurbiprofen ...................... Ansaid Registration Mark
Ibuprofen ......................... Motrin Registration Mark
RufenRegistration Mark
Meclofenamate Sodium .............. Meclomen Registration Mark
Naproxen .......................... Naprosyn Registration Mark
Naproxen Sodium ................... Anaprox Registration Mark
Piroxicam ......................... Feldene Registration Mark
Sulindac .......................... Clinoril Registration Mark
Tolmetin Sodium ................... Tolectin Registration Mark
Tolmetin Sodium ................... Tolectin Registration Mark 600
Antineoplastic
Methotrexate ...................... Methotrexate Registration Mark
Rheumatrex Registration Mark
Antipsychotic
Fluphenazine HCL ................. Prolixin Registration Mark
Haloperidol ...................... Haldol Registration Mark
Thioridazine HCL ................. Mellaril Registration Mark
Thiothixene ...................... Navane Registration Mark
Anxiolytic
Clorazepate Dipotassium .......... Tranxene Registration Mark
Beta Blocker
* Acebutolol Sectral Registration Mark
Atenolol and
Chlorthalidone .................. Tenoretic Registration Mark
Pindolol ........................ Visken Registration Mark
Timolol Maleate ................. Blocadren Registration Mark
Bronchial Dilator
Albuterol ...................... Proventil Registration Mark
Ventolin Registration Mark
Calcium Channel
Blocker
Diltiazem HCL ................. Cardizem Registration Mark
* Verapamil HCL ER Isoptin Registration Mark SR
Diuretics
Bumetanide Bumex Registration Mark
Chlorothiazide Diuril Registration Mark
Chlorthalidone Hygroton Registration Mark
Furosemide Lasix Registration Mark
Methyclothiazide ......... Enduron Registration Mark
Reserpine &
Chlorothiazide ............... Diupres Registration Mark
Spironolactone Aldactone Registration Mark
Spironolactone &
Hydrochlorothiazide .......... Aldactazide Registration Mark
Hypnotic Agent
Flurazepam HCL Dalmane Registration Mark
Temazepam .................... Restoril Registration Mark
H2 Antagonist
Cimetidine Tagamet Registration Mark
Muscle Relaxant
Cyclobenzaprine HCL .......... Flexeril Registration Mark
Uricosuric
Probenecid Benemid Registration Mark
* Indicates fiscal 1996 approval
(picture)
"Mylan selected Puerto Rico because of the good people we have down
here.high-quality, well-trained, dedicated people who are proud of their work
and their company." Carlos Machin - President and General Manager of Puerto Rico
Operations
Facing the Challenge of Meeting Market Demand
Mylan Inc.
Mylan broke ground for its first manufacturing facility in Caguas, Puerto
Rico on October 8, 1986, and less than one year later, that 60,000 square foot
plant was completed and ready for production.
The success of this operation has been so outstanding that we have doubled
the size of the Caguas facility and purchased a second plant in the town of
Cidra.
Puerto Rico is only about a third the size of the state of Vermont, yet it
is home to one of the greatest concentrations of pharmaceutical manufacturing
capabilities in the world.
Overall, the island boasts more than 70 individual manufacturing and
processing plants, representing nearly every major pharmaceutical company in the
world.
The majority of manufacturers have established plants in Puerto Rico to
take advantage of the island's exceptional work force and favorable tax
structure. But Mylan is doing more than merely taking advantage of a good thing.
Mylan Inc. 23
With its fully equipped facilities at Caguas and Cidra, Mylan has seized
the initiative to push manufacturing technology to the limit, and create a new
standard of excellence for quality and integrity in pharmaceutical production.
At the Caguas plant, our state-of-the-art manufacturing facilities produce
a wide range of Mylan generics, as well as Somerset's proprietary
anti-Parkinson's drug EldeprylRegistration Mark. Over one billion tablets and
capsules were produced in this facility during Fiscal 1996. Since it became
operational in 1987, the Caguas facility has achieved an excellent record for
both product approval and regulatory compliance. Recently the quality control
lab was expanded which provides added analytical capacity.
At its nearby Cidra facility, Mylan has created highly advanced
capabilities for handling pharmaceutical products with special handling and
manufacturing safety requirements. These capabilities permit Mylan to
manufacture Cidra's principal product, Methotrexate. The unique demands of these
Mylan Inc. 24
products - including expert application of specialized manufacturing equipment,
strict adherence to rigid procedures, and constant use of sophisticated
protective gear - create daily challenges which must be met and overcome.
But Cidra's dedicated staff has proven equal to the task.
With enormous energy and commitment, they are facing the immediate
challenge of satisfying market demand for Mylan products today.and laying the
foundation for Mylan's entry into significant new market segments tomorrow.
Carlos Machin, President and General Manager of Mylan's Puerto Rico
operations commented: "The philosophy of Mylan is quality and integrity.the
entire Mylan family is built around this, and Puerto Rico is no exception. Our
employees are extremely proud of the quality we turn out, of our relationship
with the community and with Puerto Rico. We have been a landmark in Puerto Rico,
not only for the level of production.but for quality and integrity. We are
extremely proud to be part of the Mylan family."
(picture)
Visual inspection is part of Mylan's quality control excellence.
Mylan Inc. 25
Mylan
Dow Hickam Pharmaceuticals Inc.
12 unique and innovative products to meet customers' needs
(picture)
"The health care industry is constantly evolving and with managed care emerging
as the fastest growing segment of this industry, we are on the threshold of a
very exciting era. With the combination of Hickam, Bertek and UDL into the Mylan
family of companies, Mylan is uniquely positioned to provide quality products
and services from one source and enables the Company to be a 'standout' in this
industry." William W. Richardson - President, Dow Hickam Pharmaceuticals Inc.
Dow Hickam Pharmaceuticals Inc. of Sugar Land, Texas was acquired by Mylan
Laboratories Inc. in October 1991 and has become a vital part of a corporation
well positioned to take advantage of the ever changing health care industry.
Dow Hickam specializes in the manufacturing and marketing of wound and burn
care pharmaceutical products and medical devices for use in hospitals, nursing
homes, and home health care. However, Hickam is much more than a wound care
company. They have built stronger alliances with their distributors and with key
corporate health care providers and expanded their physician call base to
include plastic surgeons and dermatologists as dermatology is a focused market
in their future.
During fiscal 1996 the Company added Flexdermtrademark, a hydrogel polymer
wound dressing that provides a moist environment for wound healing. This new
product complements Hickam's current line and meets its strategic focus of
Dow Hickam Pharmaceuticals Inc. 27
acquiring unique and innovative products for the institutional
marketplace.
With a highly experienced sales force of approximately 80 people, Hickam
has a strong presence in the institutional and alternate care marketplace which
also enables them to reach the nation's 42 most populated states, covering 97%
of the hospital and nursing home patients in the United States.
The number of sales regions was increased from seven to nine to support the
Company's expanding product line and growth into the managed care marketplace.
The additional coverage gives Hickam the opportunity to grow the sales force
when additional products are acquired or developed and has enabled Hickam field
managers to form stronger relationships with corporate accounts, national and
regional buying groups, and managed care companies.
Hickam continues to grow within the managed care marketplace. The recent
acquisition of UDL Laboratories Inc. now enables the Company to provide its
managed
Dow Hickam Pharmaceuticals Inc. 28
care customers with specialty packaged generic products. The Hickam sales force
continues to promote the "Mylan Managed Health Care Program" to its
institutional pharmacy customers, as well as to all facets of the ever expanding
managed care customer base.
The Mylan family of companies is in a unique and quite envious position.
Few companies have the strength of the Mylan and UDL line of quality generic
products, coupled with the manpower of Hickam's national sales force and the
Bertek line of pharmaceutical labels and forms.
This union of Mylan, Hickam, Bertek and UDL is extremely effective in
providing quality products and services from one source and truly makes Mylan a
'standout' in America's health care industry.
Dow Hickam Pharmaceuticals Inc. Product Line
Granulex Registration Mark
A topical aerosol spray used for management of Stage I-IV pressure ulcers.
Proderm Registration Mark
A non-prescription topical aerosol spray used for management of Stage I and II
pressure ulcers.
QUICK Registration Mark
A topical cleanser for urine or fecal incontinence.
SorbsanRegistration Mark
A highly absorbent calcium alginate wound dressing for use in the management of
exuding wounds.
FlexzanRegistration Mark
An ultra-thin, highly conformable, semiocclusive polyurethane foam adhesive
wound dressing.
Flexdermtrademark
A hydrogel polymer wound dressing that provides a moist environment for optimal
wound healing.
SulfamylonRegistration MarkCream
A topical antibacterial cream used in the treatment of burn wounds.
BiobraneRegistration Mark
An adherent biosynthetic temporary wound dressing used in the management of burn
wound and donor sites.
"Bertek's capabilities as a leading manufacturer in transdermal drug delivery
systems technology as well as coating, laminating, extrusion and labeling
operations make it a strategic fit into the Mylan family and enables Mylan to be
in the forefront of the ever changing health care market." Joseph J.
Krivulka - President, Bertek, Inc.
Mylan
Bertek, Inc.
Mylan is Actively Involved in R&D Projects Using Bertek Technology
Bertek, Incorporated, headquartered in St. Albans and Swanton Vermont, is a
leading manufacturer of transdermal drug delivery systems with coating,
laminating, extrusion and labeling operations.
Bertek was acquired by Mylan in February 1993 and the acquisition provided
Mylan with five worldwide and seven domestic patents for transdermal drug
delivery technology, wound care, and other related products to enhance the
generic and branded divisions of Mylan. Bertek also provides Mylan with the
third component of the "Mylan Managed Health Care Program," with their
innovative specialty, and computer generated forms and labels.
Bertek has unique state-of-the-art technologies for producing coatings,
laminates and finished pharmaceutical products to be used for transdermal
administration of drugs to patients. Patches produced with these technologies
are also used in wound care therapy. Transdermal osmotic absorption has become a
significant advance in drug delivery, and transdermal drug delivery systems
increase patient compliance while reducing the risk of missed medication, and in
many products
Bertek Incorporated 31
reduce side effects. Each day, new methods and applications for transdermal
therapeutic systems evolve, and Bertek has helped pioneer that growth. By
combining their extensive R & D and pharmacology capabilities with comprehensive
GMP manufacturing, including clean room coating and laminating of the finished
patch and all its components, Bertek is the complete source from the initial
concept through final manufacturing.
Bertek currently provides components using internally developed technology
for transdermal patches marketed by other companies under contract. They are the
world leaders in the manufacturing of soft laminated cards, with a client base
including Blue Cross and Blue Shield and numerous staff model Health Maintenance
Organizations. And in addition, they are the complete suppliers of the computer
generated labels and package inserts used by Mylan's generic and proprietary
pharmaceutical divisions.
Mylan is actively involved in research and development projects using
Bertek technology to provide new products for marketing by its subsidiaries
including, but not limited to, developing generics in patch formulations, new
chemical entities and line extensions of existing drugs.
The teaming of Bertek and Mylan Pharmaceuticals to develop generics in
patch formulations has to date, led to the filing of three ANDAs for
Nitroglycerin Transdermal Systems with the FDA, and a commitment to file future
ANDAs. Additionally, Bertek has two IND filings scheduled for Fiscal 1997.
Bertek is collaborating exclusively with Somerset Pharmaceuticals in the
development of an EldeprylRegistration Mark patch. Presently, a Phase III
clinical trial using the EldeprylRegistration Mark patch is being conducted for
Senile Dementia of the Alzheimer's type, with additional clinical trials planned
for the future.
The strategic fit of Bertek and Mylan will enable Mylan to be in the
forefront of the ever changing health care market in 1996 and beyond.
Bertek, Incorporated 32
Bertek, Inc. Product Line
Transdermal Drug Delivery Systems
Bertek's Medical Products Division, a leader in Transdermal Drug Delivery
Systems, represents a unique integration of R &D and the manufacturing know-how
and full integration of production facilities to make raw materials and finished
patches.
Wound Care Products
Bertek now stands as an established leader in the design, development and
manufacture of both critical component materials and custom-designed products
for use in wound management.
The MEDIFILMRegistration Mark SERIES of extruded, controlled high moisture vap
or permeable films offers a complete range of design flexibility for use in
wound and I.V. site dressings, ulcer dressings, burn dressings, surgical drape
and ostomy barrier applications.
Health Care Products and Materials
Surgical Incise Drape
Prolonged surgical procedures require the use of securely adhered incise drape
films with a high degree of breathability to eliminate the possibility of
perspiration-induced channeling and contamination of the wound site.
Films &Laminates for Ostomy Care &Skin Barriers
Bertek has developed a family of soft, conformable urethane and copolyester skin
barrier films specifically for ostomy care.
GMPand ISO 9002 Converting and Labeling
As a printer of pharmaceutical labels, Bertek has established full capabilitie s
for designing labels from typesetting to finished artwork in-house in compliance
with ISO 9002 certification for pharmaceutical labels and package inserts.
Mylan
UDL Laboratories Inc.
over 1 billion doses packaged per year
(picture)
Low-cost, alternative dosing forms are an invaluable care management tool for
today's provider.and UDL is meeting that need with a full range of unit dose
pharmaceutical products. Michael K. Reicher - President, UDL Laboratories Inc.
Thousands of health care providers around the nation already know UDL
Laboratories is a leader in unit dose multi-source pharmaceuticals. They have
come to expect certain things from us.like reliable supply, reasonable costs and
dependable service as well as convenience and personal attention.
In virtually every health care delivery setting, providers are doing their best
to maintain a delicate balance between quality of care and cost of delivery. At
UDL , we believe that balance is the very definition of the word value, and
helping deliver value to both providers and patients is our first
responsibility.
Clearly, our extensive formulary of multi-source options is one way UDL
delivers value. Another way is the large network of group purchasing
organizations with whom we have contract awards.
However, the cost of delivery is more than the cost of a drug. Professional time
spent logging, tracking, and preparing medications is expensive. So is time
spent on the floor or at the bedside rechecking and administering. And most
costly of all is an error.any error.in delivering medication to the patient.
UDL Laboratories Inc. 35
That's why UDL places such great emphasis on developing well-designed,
time-saving, and convenient packaging for our products. We believe the extra
effort adds value.by helping providers deliver drug therapy at low cost and with
confidence.
In our industry, service must be impeccably dependable.no excuses, no
exceptions.
UDL has developed one of the most dependable distribution systems in the
industry utilizing the prime vendor drug wholesaler network.because reliable
supply is so critical to providers. After all, even the best therapy is useless
if it is not available when the patient needs it.
UDL's aggressive R & D efforts are fueled by an increasing demand for new
and easy-to-use drug therapies. Current developments include new ANDAs in
progress as well as ongoing enhancements to our existing product mix. Committed
to innovation, UDL continues to meet provider and patient demands with unique
concentrations and delivery systems designed to meet the dispensing
requirements.
We take our commitment to research and development very seriously. In a
single year, our analytical chemists perform many stability tests on potential
new UDL products, including liquid-dose forms, and unit dose forms of oral
solids. Our aggressive R & D program is responsible
UDL Laboratories Inc. 36
for a continually expanding formulary.
But the lab is not the only source of new ideas and products at UDL. We
work closely with some of the most creative, demanding product analysts in the
industrythe health care professionals who use our products.
We have earned the reputation of being a highly-motivated,
customer-oriented organization. We recruit knowledgeable professional and
motivated staff, provide continuous training and skill-building opportunities
and offer an environment that challenges people to deliver their best. At UDL,
offering personal attention is simply standard operating procedure.
UDL Laboratories Inc. Product Line
Oral Solids:
UDL provides a reliable source for a broad range of generic pharmaceuticals. In
fact, we offer more generic pharmaceuticals in unit-dose form than any other
single source, over 375 in all.
Oral Liquids:
UDL manufactures its line of unit-dose liquids in a range of convenient dose
sizes.from 2.5 ml to 30 ml. Our innovative liquid package is designed using the
finest materials and advanced packaging technology, to produce a package that
offers secure storage, easy handling and easy opening and administration.
Emergi-script:
Emergi-script is a formulary of the most commonly dispensed generic
pharmaceuticals, pre-packaged for easy dispensing in convenient 24-hour
supplies. The easy-to-handle dose packs are clearly labeled with the drug name
and dosage and, as appropriate, include drug-specific warning labels and
child-resistant packaging for non-penicillin products.
Bingo Card:
The 'Bingo Card' is compliance packaging for nursing homes. Each dose is
individually identified with product name, lot number, expiration date and
drug-specific bar code. There is an ample patient information area and
drug-specific identification to help reduce medication errors.
(picture)
One of the most exciting chapters in the Mylan book has been the 50% ownership
of Somerset Pharmaceuticals. Somerset owns the rights to EldeprylRegistration
Mark, a drug used in the treatment of Parkinson's disease. Like Mylan, Somerset
is dedicated to extensive research and development looking for ways to provide a
better quality of life to victims of Parkinson's disease and other disease
states. Dana G. Barnett - Chairman and CEO, Somerset Pharmaceuticals
Mylan
directing development efforts to extending product lines
Somerset Pharmaceuticals Inc.
Mylan acquired 50% ownership of Somerset in June 1989. In the same month,
Somerset secured FDA approval to market a new medication for the treatment of
Parkinson's disease, called EldeprylRegistration Mark tablets (selegiline
hydrochloride). Today, more than 7 5,000 patients receive EldeprylRegistration
Mark. Subsequent to its 1989 launch, net profits from the sales of
EldeprylRegistration Mark have increased each year.
In late 1991, Somerset realigned its business goals and elected to
significantly expand its research and development programs especially in the
areas of neurologic and psychiatric treatment research programs. Significant
increases in resources dedicated to these programs have occurred each year since
1992. In 1995, Somerset allocated resources equivalent to approximately 16% of
net sales to fund these research efforts.
Somerset Pharmaceuticals Inc. 39
Somerset is pursuing several additions to the EldeprylRegistration Mark
marketplace. On May 15, 1996, FDA approved Somerset's NDA for a capsule
formulation for EldeprylRegistration Mark. EldeprylRegistration Mark capsules
have completely replaced EldeprylRegistration Mark tablets and Somerset will no
longer manufacture or market the tablet formulation. Somerset is pursuing
several line extensions to complement the sales of EldeprylRegistration Mark
capsules.
Somerset is conducting an extensive research program with a Selegiline
Transdermal System (STS) for which it owns several U.S. and worldwide patents.
Somerset has completed Phase I and II trials and pivotal cl inical trials are
presently ongoing in Alzheimer's disease, Parkinson's disease andMajor
Depression.
As a part of its expanded research and development efforts, Somerset
relocated to Tampa, Florida in 1992. The Company purchased a 24,000 square foot
building which soon became "home" to a state-of-the-art research and development
laboratory equipped with the latest analytical equipment and high-tech
processing equipment. Additional development capabilities in Somerset's
laboratory include the design, formulation,
Somerset Pharmaceuticals Inc. 40
and production of pilot quantities of liquids, tablets, capsules, ointments
and creams.
Somerset's marketing efforts have also intensified over the last several
years. Somerset is committed to providing both pharmacological agents for the
treatment of Parkinson's disease and other neurologic disease states and also to
educating physicians, pharmacists and patients on the safest and most effective
use of these medications. As part of a comprehensive patient education program,
Somerset launched two innovative programs this past year to accomplish these
goals. Also, in January of 1996, Somerset signed a new marketing agreement with
CoCensys, Inc. to co-promote and market EldeprylRegistration Mark in the United
States. The experienced CoCensys sales force made them the logical choice to
help Somerset grow the EldeprylRegistration Mark market. Somerset and their
previous co-marketing partner, Sandoz, mutually agreed to discontinue their
co-marketing agreement in March 1996.
Success with the above marketing and research and development efforts will
allow Somerset to continue to contribute to Mylan's future.
(picture)
Somerset Pharmaceuticals, Tampa, Florida
Somerset Pharmaceuticals, Inc. 41
Financial Highlights
MYLAN LABORATORIES INC.
MYLAN LABORATORIES INC.
March 31 1996 1995
------------ ------------
Net sales ............... $392,860,000 $396,120,000
Net earnings ............ $102,325,000 $120,869,000
Earnings per share .... $ .86 $ 1.02
Working capital ........ $330,733,000 $275,032,000
Current ratio 7.8 to 1 5.9 to 1
Total assets .......... $692,009,000 $546,201,000
Shareholders' equity .. $616,441,000 $482,728,000
Book value per share .. $ 5.16 $ 4.06
42
Financial Highlights
MYLAN LABORATORIES INC.
Net Earnings Shareholders' Equity Net Sales
(in millions) (in Millions) (in Millions)
FY
- - ----- -------- -------------------- --------------
92 40.1 203.5 131.9
93 70.6 296.0 212.0
94 73.1 380.0 251.8
95 120.9 482.7 396.1
96 102.3 616.4 392.9
43
Selected Financial Data
MYLAN LABORATORIES INC.
Year ended March 31 ...... 1996 1995 1994 1993 1992 1991 1990
Net sales ................ $392,860 $396,120 $251,773 $ 211,964 $ 131,936 $ 104,524 $ 107,435
Net earnings ............. $102,325 $120,869 $ 73,067 $ 70,621 $ 40,114 $ 32,952 $ 26,573
Earnings per share ....... $ .86 $ 1.02 $ .62 $ .61 $ .35 .29 $ .23
Shares used in computation 119,530 118,963 118,423 115,651 114,726 114,552 114,339
At year end
Working capital .......... $330,733 $275,032 $191,647 $ 154,000 $ 102,105 $ 81,571 $ 65,393
Total assets ............. $692,009 $546,201 $403,325 $ 351,105 $ 226,720 $ 186,955 $ 156,911
Long-term obligations .... $ 18,002 $ 7,122 $ 4,609 $ 5,125 $ 3,600 $ 3,398 $ 2,705
Shareholders' equity ..... $616,441 $482,728 $379,969 $ 295,972 $ 203,452 $ 167,531 $ 141,262
Book value per share ..... $ 5.16 $ 4.06 $ 3.21 $ 2.56 $ 1.77 $ 1.46 $ 1.24
- - -------------------------------------------------------------------------------------------------------------
Numbers in thousands except per share amounts.
From June of 1985 through June of 1990 the Company paid a semi-annual cash
dividend of $.033 per share per year. From June of 1990 through July of 1992 the
Company had a quarterly dividend program totaling $.067 per share per year. From
October of 1992 to July of 1993 the Company had a quarterly dividend program
totaling $.08 per share per year. From October of 1993 to July of 1994 the
Company had a quarterly dividend program totaling $.107 per share per year. From
October of 1994 to July of 1995 the Company had a quarterly dividend program
totaling $.133 per share per year. Since October of 1995 the Company had a
quarterly dividend program totaling $.16 per share per year. In addition, the
Company paid a special one-time dividend of $.067 per share on January 13, 1995.
The above nancial data gives retroactive effect to the October 30, 1991
business combination of Mylan Laboratories Inc. and Dow Hickam Pharmaceuticals
Inc., the two-for-one stock split effective August 1, 1992 and the three-for-two
stock split effective August 15, 1995.
44
Management's Discussion and Analysis of Results of Operations
and Financial Position
MYLAN LABORATORIES INC.
Overview
After six years of record breaking net sales and net earnings, culminating
with the extraordinary results of fiscal 1995, fiscal 1996 was destined to be a
year of challenge. The highly competitive nature of the generic pharmaceutical
industry took its toll via significant pricing pressure which masked a 17%
increase in generic unit volume realized during the year. Additionally, the
regulatory environment which helped to provide eleven new products in fiscal
1995 and eight in fiscal 1994 provided only four new product approvals during
fiscal 1996, two of which were received in the final weeks of the fiscal year
thus having a nominal impact on the results of operations.
The Company took steps early during fiscal 1996 to control spending and
focus resources to specific targeted areas. As a result, Selling and
Administrative expenses decreased by 3% from the prior year levels and Research
and Development expenses increased by 27%. In light of all of these factors the
Company is very proud to have once again posted net earnings in excess of
$100,000,000.
The Company's history of success has given it a firm hold as a leader in
the generic industry. To protect its leadership role in this constantly evolving
industry the Company, during fiscal 1996, acquired UDL Laboratories, (UDL) the
premier supplier of unit dose generic pharmaceuticals to the institutional and
long-term care markets. While this transaction was consummated in late February
and accordingly had a minimal effect on current year earnings, it enables the
Company to better position itself in the retail, institutional and managed care
markets. Despite the amortization expense which will result from this
transaction, the Company believes that the acquisition of UDL will enhance net
earnings in fiscal 1997.
With total assets approaching $700 million and net worth of $616 million
the Company is financially capable of maintaining its leadership role in the
generic industry while at the same time exploring exciting long-term growth
opportunities for the Company and its shareholders. These opportunities exist in
the form of ongoing research and development projects relating to new drug
delivery systems and the development of products which satisfy unmet needs in
the medical community.
Internally the Company has continued to expand its research and development
capabilities through the construction of a 150,000 square foot state-of-the-art
research facility scheduled for completion in the late summer of 1996. This
facility will provide the resources necessary to carry ou t the Company's
aggressive generic product development program and to accelera te efforts on
sustained release technology and innovator compounds.
In addition to its internal efforts the Company continues to look
externally for innovative products and technologies representing long-term
growth opportunities. During fiscal 1996 these efforts included the signing of
several licensing agreements and an equity investment and funding agreement with
VivoRx, a California based research company involved in cell implant technology
for the management of diabetes.
Despite the competitive pressures inherent in the generic pharmaceutical
industry, the Company remains fully committed to maintaining its leadership role
in that industry by providing quality products and exemplary service to its
customers. In addition, the Company believes that shareholder value can be
maximized by continuing the Company's effort to become a fully integrated
pharmaceutical company capable of satisfying unmet needs in the medical
community. The Company stands equally committed to that end.
45
Results of Operations
Net Sales and Gross Margins
The following table outlines net sales, gross margins and the corresponding
change from the previous year: (dollars in millions)
Year ended Net Sales Gross Margin Gross Margin as
March 31, DollarsChange Dollars Change % of Net Sales
- - ---------- -------------- -------- ------ --------------
1996 $ 392.9 -1% $ 195.2 -14% 50%
1995 396.1 57% 226.5 80% 57%
1994 251.8 19% 126.1 3% 50%
The changes in net sales, gross margins and gross margin as a percent of
net sales are indicative of the highly competitive nature of the generic
pharmaceutical industry and the Company's history of obtaining new product
approvals. Generic products generally yield higher gross margins as a percent of
sales in the short-term period after introduction, and are subject to, sometimes
severe, price deterioration as other competitors enter the market.
With respect to the Company's generic product line, the Company added four
products in fiscal 1993 which accounted for $50.8 million in net sales in fiscal
1993, eight products in fiscal 1994 which accounted for $25.8 million in net
sales in fiscal 1994, eleven products in fiscal 1995 which accounted for $151.5
million in net sales in fiscal 1995 and four products in fiscal 1996 which
accounted for $10.3 million in net sales in fiscal 1996. Two of the four
products added in fiscal 1996 were approved in the last weeks of the fiscal year
and accordingly had very little effect on net sales or gross margins for the
year. Other variables including total market size and number of competitors
affect the net sales and gross margins for new product approvals.
Total unit volume of generic product shipments increased by 17% in fiscal
1996, 19% in fiscal 1995 and 24% in fiscal 1994 over the respective previous
years. The remainder of the change in net sales is primarily due to price
variations and to a lesser degree product mix. In addition to new generic
products the changes in net sales and gross margins from 1993 to 1994 were
affected by sales from Bertek (acquired in February 1993) which generally
provide lower gross margin rates than the remainder of the Company's product
lines.
On February 28, 1996 the Company acquired UDL Laboratories, which provides
specially packaged generic pharmaceutical products to institutional and
long-term care markets. Net sales by UDL are reflected in the fiscal 1996
amounts only for the one month period subsequent to the acquisition and were not
significant to the Company's total net sales. UDLpurchases a majority of its
product from other pharmaceutical manufacturers, including the Company.
Accordingly gross margin as a percent of net sales for its products are
generally lower than that recognized by the manufacturer.
Due to the competitive nature of the generic pharmaceutical industry, net
sales and gross margin percentages recognized in prior years are not necessarily
indicative of the results to be expected in future periods.
46
Research and Development
Research and Development expenses were $38,913,000 in fiscal 1996
representing a 27% increase over the prior year's $30,533,000. Fiscal 1994
expenditures amounted to $21,648,000. These amounts represent 10% of the
corresponding net sales in fiscal 1996, 8% in fiscal 1995 and 9% in fiscal 1994.
Expenditures relating to transdermal delivery system technology were $6,400,000,
$5,600,000 and $5,200,000, respectively, for each of the last three years.
Expenditures relating to innovative compounds were approximately $14,500,000,
$8,600,000 and $3,500,000, respectively. The remainder of research and
development expenditures in each of the three years represent costs associated
with generic related projects.
Selling and Administrative
Selling and administrative expenses were $56,073,000 in fiscal 1996,
$58,035,000 in fiscal 1995 and $49,173,000 in fiscal 1994 which represent 14%,
15% and 20% of corresponding net sales. In 1994, $3,229,000 of expense was
recognized resulting from the death of Mr. McKnight, the former Chairman and
Chief Executive Officer of the Company. Other changes from 1994 to 1995 and from
1995 to 1996 are attributable in large part to compensation and related
expenses, selling and marketing expenses associated with new products including
sales commissions, and legal and professional fees associated with various court
actions to which the Company has been involved.
In connection with the acquisition of UDL the Company will recognize in
future years amortization of goodwill and other intangible assets. Most of this
amortization expense, which will amount to approximately $3,000,000 in fiscal
1997, will be charged to selling and administrative expenses. Additionally, the
nature of UDL's business normally results in higher selling and promotion
expenses as a percentage of net sales than the Company has historically
recorded.
Equity in Earnings of Somerset
Somerset's contribution to the Company's pretax earnings (in thousands) and net
earnings per share are as follows:
1996 1995 1994
------------------ ------------------ -------------------
Net Net Net
Quarter Pre tax Earnings Pretax Earnings Pretax Earnings
Ended Earnings Per Share Earnings Per Share Earnings Per Share
- - -------- -------- -------- -------- --------- -------- ---------
6/30 $ 5,571 $ .04 $ 5,348 $ .04 $ 5,682 $ .04
9/30 6,138 .05 6,141 .05 5,727 .05
12/31 7,905 .06 8,330 .06 6,841 .05
3/31 5,354 .04 5,587 .04 5,346 .04
Fiscal Year $ 24,968 $ .19 $ 25,406 $ .19 $ 23,596 $ .18
47
Under the Orphan Drug Act, Somerset has exclusivity relating to marketing
the chemical compound EldeprylRegistration Mark for use as a treatment for late
stage Parkinson's disease through June of 1996. While Somerset is actively
addressing strategies to protect its revenue and earnings which result solely
from the sale of this product, the Company anticipates generic competition at
some time during fiscal 1997. Somerset's contribution to the Company's net
earnings will be adversely affected upon generic competition on
EldeprylRegistration Mark.
Other Income
Other income, derived principally from investment earnings was $16,612,000
in fiscal 1996, $7,958,000 in fiscal 1995 and $8,148,000 in fiscal 1994. The
1994 amount includes $3,375,000 resulting from legal settlements. Other changes
are indicative of market fluctuations affecting the yields on investments and
changes in assets available for investments.
Income Taxes
The effective tax rates for 1996, 1995 and 1994 were 27.8%, 29.5% and 16.1%
respectively. The 1994 effective tax rate was reduced by 5% as a result of
recording the cumulative effects of changes in financial reporting requirements
and changes in the Federal tax code.
The Company recognized tax credits which reduced the effective tax rates by
approximately 6% in 1996, 5% in 1995 and 8% in 1994. The tax credits result
principally from operations in Puerto Rico and also from credits for increasing
research and development activities. Changes in the Federal tax code enacted in
1993 reduced tax credits otherwise available for operating in Puerto Rico by 40%
in fiscal 1995 and 45% in fiscal 1996 with additional 5% reductions to occur in
each of the next three fiscal years.
In addition, recent tax rulings may reduce the amount of tax credits
otherwise available to the Company for increasing research and development
activities. In those tax rulings and in an ongoing audit of the Company's tax
returns for the fiscal years 1992 through 1995, the Internal Revenue Service has
taken the position that expenditures for research activities relating to the
development of generic pharmaceutical products, do not qualify for inclusion in
determining the credit for increased research and experimental activities. The
Company intends to vigorously defend its position for inclusion. Final
resolution of this matter and other matters being addressed in relation to the
audit of the Company's tax returns may result in an increase in the effective
tax rate in future years.
48
Liquidity and Capital Resources
The Company's balance sheet remains strong with total assets increasing by
27% to $692,009,000 as of March 31, 1996. Working capital of $330,733,000 at
March 31, 1996 represents a 20% increase over the balance a year ago. The ratio
of current assets to current liabilities was 7.8 to 1 at March 31, 1996 versus
5.9 to 1 on March 31, 1995. The balance sheet improvements are indicative of
continued strong operations and the acquisition of UDLby the issuance of common
stock.
Net cash provided by operating activities was $75,570,000 in fiscal 19 96,
down sharply from the fiscal 1995 amount of $136,531,000. The decrease resulted
principally from higher tax payments in fiscal 1996, $50,665,000 versus
$35,822,000 in fiscal 1995, and from increase d operating expenses without a
corresponding increase in net sales due to price deterioration. The sharp
increase in operating cash flows from $35,633,000 in 1994 to $136,531,000 in
1995 was indicative of sales growth in excess of the increase in operating
expenses resulting from the successful introduction of eleven new products
during fiscal 1995.
The Company's cash investment in property, plant and equipment was
$31,419,000 in fiscal 1996, $17,485,000 in 1995 and $20,164,000 in 1994. Major
investments included expansion and relocation of the Company's Greensboro
distribution center, expansion and renovation of the facilities in Puerto Rico
and Vermont, acquisition and replacement of aircraft previously leased by the
Company and ongoing construction including a 150,000 square foot research
facility and a 27,000 square foot sustained release manufacturin g facility. All
of these capital expenditures were made with the general funds of the Company
without incurring bank financing.
Changes in the balances of marketable securities relate principally to the
timing of maturities. Cash used to increase intangible and other assets includes
payments to entities with which the Company is jointly developing new products.
Payments on long-term obligations in fiscal 1996 relate to obligations
assumed in connection with the acquisition of UDL. In 1994 these payments
represented a final settlement with the Estate of Roy McKnight in connection
with Mr. McKnight's salary continuation agreement.
The Company paid cash dividends of $.15 per share in 1996 totalling
$17,502,000, $.19 per share in fiscal 1995 totaling $22,208,000 including a
special one time dividend of $.07 per share, and $.09 per share in fiscal 1994
totaling $11,026,000.
49
Consolidated Balance Sheets
MYLAN LABORATORIES INC.
March 31
1996 1995
------------ -----------
Assets
Current assets $176,980,000 $127,280,000
Cash and cash equivalents
Marketable securities 12,460,000 52,575,000
Accounts receivable 71,997,000 58,343,000
Inventories 100,616,000 78,205,000
Deferred income tax benefit 11,560,000 10,545,000
Other current assets 5,715,000 4,435,000
----------- -----------
Total current assets 379,328,000 331,383,000
Property, plant and equipment -
net of accumulated depreciation 121,793,000 92,299,000
Deferred income tax benefit, non-current - 1,043,000
Marketable securities, non-current 20,803,000 21,958,000
Intangible assets - net of
accumulated amortization 74,601,000 28,518,000
Other assets 69,147,000 48,945,000
Investment in and advances to Somerset 26,337,000 22,055,000
------------ ------------
Total assets $692,009,000 $546,201,000
See notes to consolidated financial statements
50
Consolidated Balance Sheets
MYLAN LABORATORIES INC.
March 31
1996 1995
Liabilities and shareholders' equity
Current liabilities
Trade accounts payable $ 14,039,000 $ 10,466,000
Current portion of long-term debt 1,400,000 -
Income taxes payable 10,096,000 24,019,000
Other current liabilities 18,185,000 17,890,000
Cash dividend payable 4,875,000 3,976,000
------------- -------------
Total current liabilities 48,595,000 56,351,000
Long-term obligations 18,002,000 7,122,000
Deferred income tax liability 8,971,000 -
Shareholders' equity
Preferred stock, par value $.50 per share,
authorized 5,000,000 shares,
issued and outstanding none - -
Common stock, par value $.50 per share, authorized 300,000,000 shares, issued
122,524,789 at March 31, 1996 and
79,972,248 at March 31, 1995 61,262,000 39,986,000
Additional paid-in capital 85,996,000 57,577,000
Retained earnings 470,136,000 386,212,000
Unrealized gain on investments 1,575,000 1,374,000
------------ -------------
618,969,000 485,149,000
Less treasury stock at cost 694,950 shares at
March 31, 1996 and 476,523
shares at March 31, 1995 2,528,000 2,421,000
Net Worth 616,441,000 482,728,000
------------- -------------
Total liabilities and shareholders' equity $ 692,009,000 $ 546,201,000
51
Consolidated Statements of Earnings
MYLAN LABORATORIES INC.
Year ended March 31 1996 1995 1994
------------ ------------ ------------
Net sales $392,860,000 $396,120,000 $251,773,000
Cost and expenses
Cost of sales 197,697,000 169,590,000 125,631,000
Research and development 38,913,000 30,533,000 21,648,000
Selling and administrative 56,073,000 58,035,000 49,173,000
----------- ----------- -----------
292,683,000 258,158,000 196,452,000
Equity in earnings 24,968,000 25,406,000 23,596,000
Other income 16,612,000 7,958,000 8,148,000
Earnings before income taxes 141,757,000 171,326,000 87,065,000
Income taxes 39,432,000 50,457,000 13,998,000
Net earnings $102,325,000 $120,869,000 $ 73,067,000
Earnings per share $ .86 $ 1.02 $ .62
------------ ------------ ------------
Weighted average 119,530,000 118,963,000 118,423,000
See notes to consolidated financial statements .
52
Consolidated Statements of Shareholders' Equity
MYLAN LABORATORIES INC.
Common Stock Common Stock Additional Retained Unrealized Gain
Shares Amount Paid-In Capital Earnings on Investments
------------ ------------ --------------- -------- ---------------
March 31, 1993 78,615,453 $ 39,309,000 $ 29,866,000 $227,139,000 $ -
Stock options exercised 347,747 173,000 4,447,000 - -
Cash dividend $.10 per share - - - (11,849,000) -
Bertek acquisit 734,095 367,000 19,959,000 - -
Net earnings - - - 73,067,000 -
- - ----------------------------------------------------------------------------------------------------------------------------------
March 31, 1994 79,697,295 $ 39,849,000 $ 54,272,000 $288,357,000 $ -
Stock options exercised 274,953 137,000 3,305,000 - -
Cash dividend $.19 per share - - - (23,014,000) -
Net earnings - - - 120,869,000
Change in unrealized gain on investments - - - - 1,374,000
- - ----------------------------------------------------------------------------------------------------------------------------------
March 31, 1995 79,972,248 $ 39,986,000 $ 57,577,000 $386,212,000 $ 1,374,000
Stock options exercised 206,708 104,000 3,013,000 - -
Cash dividend $.15 per share - - - (18,401,000) -
Net earnings - - - 102,325,000 -
Stock split (3 for 2) 40,008,219 20,004,000 (20,010,000) - -
UDL acquisition 2,337,614 1,168,000 45,326,000 - -
Change in unrealized gain on investments - - - - 201,000
- - ----------------------------------------------------------------------------------------------------------------------------------
March 31, 1996 122,524,789 $ 61,262,000 $ 85,996,000 $470,136,000 $ 1,575,000
- - ----------------------------------------------------------------------------------------------------------------------------------
See notes to consolidated nancial statements.
53
Consolidated Statements of Cash Flows
MYLAN LABORATORIES INC.
Year Ended March 31 1996 1995 1994
--------------- ------------- --------------
Cash Flows From Operating Activities
Net Earnings $ 102,325,000 $120,869,000 $ 73,067,000
Adjustments To Reconcile Net Earnings
To Net Cash Provided From Operating Activities:
Depreciation And Amortization 13,450,000 12,700,000 11,154,000
Deferred Income Tax Benefit 1,236,000 (10,427,000) (656,000)
Equity In Earnings Of Somerset (24,968,000) (25,406,000) (23,596,000)
Cash Received From Somerset 20,686,000 21,114,000 20,676,000
Allowances On Accounts Receivable (4,141,000) 11,327,000 451,000
Other Noncash Expenses 516,000 1,925,000 3,741,000
Changes In Operating Assets And Liabilities:
Accounts Receivable (4,013,000) (14,240,000) (23,485,000)
Inventories (11,148,000) (19,590,000) (12,002,000)
Trade Accounts Payable (2,463,000) 3,410,000 207,000
Income Taxes Payable (12,468,000) 25,060,000 (11,111,000)
Other Operating Assets And Liabilities (3,442,000) 9,789,000 (2,813,000)
- - -----------------------------------------------------------------------------------------------------------------------------
Net Cash Provided From Operating Activities 75,570,000 136,531,000 35,633,000
Cash Flows From Investing Activities
Additions To Property, Plant And Equipment (31,419,000) (17,485,000) (20,164,000)
Increase In Intangible And Other Assets (16,970,000) (8,238,000) (15,147,000)
Purchase Of Investment Securities (27,169,000) (58,491,000) (12,925,000)
Proceeds From Investment Securities 68,753,000 25,482,000 4,800,000
Acquisitions Net Of Cash Acquired (520,000) (6,432,000) -
- - ----------------------------------------------------------------------------------------------------------------------------
Net Cash Used In Investing Activities (7,325,000) (65,164,000) (43,436,000)
See Notes To Consolidated Nancial Statements
54
Consolidated Statements of Cash Flows
MYLAN LABORATORIES INC.
Year ended March 31 1996 1995 1994
-------------- -------------- --------------
Cash flows from financing activities
Payments on long-term obligations $ (2,879,000) $ (451,000) $ (4,320,000)
Cash dividend paid (17,502,000) (22,208,000) (11,026,000)
Payments on acquisition obligation - - (977,000)
Proceeds from exercise of stock options 1,836,000 3,046,000 1,406,000
- - --------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (18,545,000) (19,613,000) (14,917,000)
Net increase (decrease) in cash and cash equivalents 49,700,000 51,754,000 (22,720,000)
Cash and cash equivalents-beginning of year 127,280,000 75,526,000 98,246,000
-------------------------------------------------------------------------------------------------------------
Cash and cash equivalents-end of year $ 176,980,000 $ 127,280,000 $ 75,526,000
For purposes of presentation in the statements of cash flows, cash,
overnight deposits and money market funds and marketable securities with
original maturities of less than three months have been classified as cash and
cash equivalents. The carrying value of these items approximates fair value.
Cash payments for interest were $22,000 in 1996, $25,000 in 1995 and
$30,000 in 1994. Cash payments for income taxes were $50,665,000 in 1996,
$35,822,000 in 1995 and $27,055,000 in 1994.
During fiscal 1996 the Company acquired all of the outstanding stock of UDL
(see note B). The purchase price of approximately $47,500,000 was satisfied
through the issuance of the Company's common stock.
Certain stock option transactions result in a reduction of income taxes
payable and a corresponding increase in additional paid-in capital. The amounts
for the years ended March 31, 1996, 1995 and 1994 were $1,155,000, $396,000 and
$1,040,000 respectively.
During fiscal 1996 the Company declared a 3 for 2 stock split effected in
the form of a stock dividend (see note M).
In consideration for the exercise of stock options the Company received and
recorded into treasury stock 10,166 shares valued at $209,000 in fiscal 1996,
659 shares valued at $14,000 in fiscal 1995 and 75,658 shares valued at
$2,174,000 in fiscal 1994.
55
Notes to Consolidated Financial Statements
MYLAN LABORATORIES INC.
A
Summary of Significant Accounting Policies
1. Nature of Operations and Principles of Consolidation
The consolidated financial statements include the accounts of Mylan
Laboratories Inc. ("the Company") and its wholly-owned subsidiaries. All
intercompany accounts and transactions have been eliminated in consolidation.
The Company is engaged in the development, manufacture and distribution of
pharmaceutical products for resale by others. The principal markets for these
products are proprietary and ethical pharmaceutical wholesalers and
distributors, drug store chains, drug manufacturers and public and governmenta l
agencies.
2. Marketable Securities
Effective April 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115 ("SFAS No. 115"), "Accounting for Certain
Investments in Debt and Equity Securities." Under this Statement, the Company's
investments classified as "available for sale" are recorded at current market
value with offsetting adjustments to shareholders' equity, net of income taxes.
The adoption of SFAS No. 115 did not have a material impact on the financial
position of the Company.
3. Accounts Receivable and Revenue Recognition
The Company recognizes revenue from product sales upon shipment to
customers. Provisions for discounts, rebates, returns and other adjustments are
provided for in the same period as the related sales are recorded. Accounts
receivable are presented net of such provisions which amounted to $12,559,000 at
March 31, 1996 and $14,777,000 at March 31, 1995.
4. Inventories
Inventories are stated at the lower of cost (principally, first-in,
first-out) or market.
5. Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is provided
in amounts sufficient to relate cost of depreciable assets to operations over
the estimated service lives, principally on a straight-line basis.
6. Research and Development
Research and development expenses are charged to operations as incurred.
7. Income Taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No.
109"). Deferred income taxes reflect the tax consequences on future years of
events that have already been recognized by the Company in the financial
statements or tax returns.
8. Earnings per Share
Earnings per share of common stock are based on the weighted average number
of shares outstanding during each year. The effect on earnings per share
resulting from the assumed exercise of outstanding stock options is not
material.
9. Accounting Standards
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 121 ("SFAS No. 121"), "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of." This standard is
effective for fiscal years beginning after December 15, 1995. Management
believes the application of this new accounting standard will not have a
material impact on the Company's consolidated financial statements.
56
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 123 ("SFAS No. 123"), "Accounting for Stock-Based
Compensation." This standard is effective for fiscal years beginning after
December 15, 1995. Pursuant to the new standard, the Company is not required to
adopt such standard and may continue to account for these transactions under its
current method in accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees." The Company anticipates that it will
disclose the impact of stock-based compensation in its footnotes and will not
include such impact on its recorded earnings.
10. Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosures of contingent assets and liabilities at the date of the financial
statements, as well as the reported amounts of income and expenses during the
reporting period.
11. Reclassification
Certain prior year amounts have been reclassified to conform to the 1996
presentation.
Business Combinations
UDL Laboratories, Inc.
On February 28, 1996 a wholly-owned subsidiary of the Company acquired 100%
of the outstanding stock of UDLLaboratories, Inc. ("UDL"). UDL is the premier
supplier of unit dose generic pharmaceuticals to the institutional and long-term
care markets. UDL has its corporate headquarters in Rockford, Illinois and
maintains manufacturing, research and development and distribution facilities in
Rockford as well as Largo, Florida.
The business combination has been accounted for under the purchase method
of accounting. Payment of approximately $47,500,000 was made through the
issuance of 2,337,614 shares of newly registered common stock of the Company.
Goodwill of approximately $29,038,000 resulting from the acquisition is being
amortized on a straight-line basis over a 20 year period.
The results of UDL's operations have been included in the Company's
Consolidated Statement of Earnings from the date of acquisition. Unaudited
proforma information assuming the acquisition had occurred on April 1, 1994 is
as follows: (in thousands except per share data)
Year ended March 31, 1996 1995
-------- --------
Net sales $441,637 $437,383
Net earnings 99,330 115,685
Earnings per share .82 .95
American Triumvirate Insurance Company
On December 21, 1994 the Company acquired the 50% interest it did not
previously own in American Triumvirate Insurance Company ("ATIC") located in
Burlington, Vermont. The business combination has been accounted for under the
purchase method of accounting. The Company paid $8,166,000 which equaled 50% of
net book value of ATIC as of December 31, 1994.
Inventories
Inventories consist of the following components: (in thousands)
March 31, 1996 1995
-------- --------
Raw materials $42,983 $29,795
Work in process 19,804 17,539
Finished goods 37,829 30,871
-------- --------
$100,616 $78,205
57
Property, Plant and Equipment
Property, plant and equipment consists of the following components:
(in thousands)
March 31, 1996 1995
-------- --------
Land and land improvements $6,734 $5,767
Buildings and improvements 51,390 48,674
Machinery and equipment 95,112 69,626
Construction in progress 20,209 8,532
173,445 132,599
Less accumulated depreciation 51,652 40,300
-------- --------
$121,793 $92,299
Investment in and Advances to Somerset
The Company owns 50% of all the outstanding common stock of Somerset
Pharmaceuticals Inc. (Somerset) and uses the equity method of accounting for its
investment.
Equity in Earnings of Somerset includes the Company's 50% portion of
Somerset's net earnings through March 31, and expense for amortization of
intangible assets resulting from the acquisition of Somerset. Such intangible
assets are amortized over a 15 year period. Amortization expense amounted to
$924,000 in 1996, 1995, and 1994. Additionally, the Company's charges to
Somerset for management services and product development activities are included
in Equity in Earnings of Somerset. These charges have been recorded by Somerset
as a reduction of its net earnings.
Condensed audited balance sheet information of Somerset is as
follows: (in thousands)
December 31, 1995 1994 1993
--------- --------- ---------
Current assets $ 43,993 $ 48,770 $ 35,248
Non-current assets 7,127 6,380 6,165
Current liabilities 17,057 29,211 23,417
Payable to owners 2,075 2,318 2,063
Other liabilities 63 292 458
Condensed audited income statement
information of Somerset is as
follows: (in thousands)
Year ended December 31, 1995 1994 1993
---------- --------- ---------
Net sales $ 107,365 $ 124,566 $ 58,825
Costs and expenses 42,812 59,557 55,825
Income taxes 20,200 20,900 21,408
Net earnings $ 44,353 $ 44,109 $ 41,765
The above information represents 100% of Somerset's operations of which the
Company has a 50% interest.
Under the Orphan Drug Act, Somerset has exclusivity relating to marketing
the chemical compound EldeprylRegistration Mark for use as a treatment for late
stage Parkinson's disease through June of 1996.
Marketable Securities
Effective April 1, 1994 the Company adopted SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." This Standard changes the
manner in which certain investments are valued and affects the way in which
unrealized gains and losses are recognized for financial reporting purposes. The
Company has classified its portfolio of marketable securities as "available for
sale." Such securities are recorded at market value with unrealized gains and
losses being recognized as a separate component of shareholders' equity, net of
income taxes.
58
The amortized cost and estimated market values at March 31, 1996 and
1995 are as follows: (in thousands)
Gross Gross
Amortized Unrealized Unrealized Market
March 31, 1996 Cost Gains Losses Value
--------- ---------- ---------- --------
Debt securities:
U.S. Government obligations $ 6,008 $ 330 $ 81 $ 6,257
Municipal obligations 18,764 172 42 18,894
Corporate bonds 1,461 41 15 1,487
Certificates of deposit 300 - - 300
Total debt securities 26,533 543 138 26,938
Equity securities 4,312 2,237 224 6,325
Total securities $ 30,845 $2,780 $ 362 $ 33,263
Gross Gross
Amortized Unrealized Unrealized Market
March 31, 1995 Cost Gains Losses Value
--------- ---------- ---------- --------
Debt securities:
U.S. Government obligations $ 17,083 $ 262 $ 22 $ 17,323
Municipal obligations 33,047 95 10 33,132
Corporate bonds 3,090 69 75 3,084
Certificates of deposit 15,804 - - 15,804
Total debt securities 69,024 426 107 69,343
Equity securities 3,400 1,868 78 5,190
Total securities $ 72,424 $2,294 $ 185 $ 74,533
Maturities of debt securities at market value at March 31, 1996 are as follows:
(in thousands) Mature in one year or less $ 6,135 Mature after one year through
five years 10,213 Mature after five years 10,590
Total $ 26,938
Proceeds from sales of marketable securities were $27,667,000 and
$5,068,000 during 1996 and 1995. Gross gains of $617,000 and $14,000 and gross
losses of $39,000 and $142,000 were realized on those sales during 1996 and
1995. The cost of investments sold is determined by the specific identification
method.
Intangible Assets
Intangible assets are stated net of accumulated amortization of $17,441,000
and $13,874,000 at March 31, 1996 and 1995 respectively. Amortization is
provided for on a straight-line basis over periods ranging from 10 to 17 years
for patents and technology, 20 years for goodwill and 2 to 20 years for other
intangible assets.
Values assigned to patents and technology and goodwill were $20,550,00 0
and $31,218,000 at March 31, 1996 and $20,945,000 and $2,441,000 at March 31,
1995 respectively. The remaining amounts consist principally of values assigned
to customer lists, licenses and agreements.
Other Assets
Other assets consist of the following components: (in thousands)
March 31, 1996 1995
--------- ---------
Pooled asset funds $ 7,611 $ 14,587
Cash surrender value 19,477 16,377
Other investments 32,059 17,981
--------- ---------
$ 69,147 $ 48,945
Pooled asset funds include the Company's interest in various limited
partnership funds which consist of common and preferred stocks, bonds, and money
market funds. Earnings on these investments included under the caption "Other
Income" amounted to $3,888,000 in 1996, $829,000 in 1995 and $402,000 in 1994.
At March 31, 1996 and 1995 the carrying amounts of these investments
approximated fair value.
59
Cash Surrender Value represents insurance policies on certain officers and
key employees and the value of a split dollar life insurance arrangement with
the estate of the former Chairman and Chief Executive Officer of the Company.
Other investments are comprised principally of investments in non-publicly
traded companies with which the Company is jointly developing new products. Such
investments are accounted for under the cost method.
Prior to December 21, 1994 the Company's interest in ATIC was accounted for
using the equity method of accounting (see note B). Earnings from this
investment included under the caption "Other Income" amounted to $454,000 in
1995 prior to acquisition.
Other Current Liabilities
Other current liabilities includes payroll and employee benefit plan
accruals which amounted to $8,561,000 and $6,103,000, accruals for Medicaid
Reimbursements of $3,217,000 and $3,640,000 at March 31, 1996 and 1995 and
deferred revenue related to a distribution agreement (see note K) of $3,500,000
at March 31, 1995.
Long-Term Obligations
Long-term obligations include accruals for post-retirement compensation
pursuant to agreements with certain key employees and directors. Under these
agreements, benefits are to be paid over periods of 10 to 15 years commencing at
retirement.
In connection with the acquisition of UDL (see note B) the Company assumed
$7,900,000 of 10.5% senior promissory notes. Future principal payments on these
notes are in amounts ranging from $1,000,000 to $2,000,000 per year through
2002. The above notes include various covenants, none of which are presently
significant to the Company. The Company has an unsecured line of credit with a
bank totaling $30,000,000. There were no borrowings outstanding on the line of
credit at March 31, 1996 and 1995.
Distribution Agreement
On October 10, 1994, the Company entered into a distribution agreement with
STC Pharmaceuticals, Inc. (STC), a wholly-owned subsidiary of Eli Lilly and
Company (Lilly). Under the terms of the agreement the Company is distributing a
generic form of Lilly's oral antibiotic CeclorRegistration Mark on behalf of
STC. The Company is being paid a fixed monthly fee for distributing the product.
Upon certain events as defined in the agreement, but no later than November,
1996, the fixed monthly fee will convert to a variable amount predicated upon
STC's net sales of the product.
Income Taxes
Income taxes consist of the following components: (in thousands)
Year ended March 31, 1996 1995 1994
Federal
Current $ 30,490 $ 48,851 $ 11,888
Deferred 1,323 (8,111) 61
31,813 40,740 11,949
State
Current 7,706 12,033 2,766
Deferred (87) (2,316) (717)
7,619 9,717 2,049
Income taxes $ 39,432 $ 50,457 $ 13,998
Pre-tax earnings $141,757 $171,326 $ 87,065
Effective tax rate 27.8% 29.5% 16.1%
Effective April 1, 1993 the Company adopted SFAS No. 109, "Accounting
for Income Taxes." The cumulative effect of adopting this Standard resulted in
an increase in net earnings of $1,124,000 or $.01 per share in the 1994
Consolidated Statement of Earnings. There was no cash flow impact.
60
This Standard requires an asset and liability approach to accounting for
income taxes. Deferred income tax assets and liabilities reflect the future tax
consequences of events that have already been recognized in the financial
statements or tax returns. Changes in enacted tax rates or laws will result in
adjustments to the recorded tax assets or liabilities in the period that the tax
law is enacted.
Temporary differences and carryforwards which give rise to the deferred
income tax assets and liabilities are as follows: (in thousands)
March 31, 1996 1995
--------- ---------
Deferred Tax Assets:
Employee benefits $ 3,624 $ 2,758
Deferred revenue - 1,881
Asset allowances 4,749 5,785
Inventory 7,064 5,378
Investments 1,963 634
Other 517 -
Total Deferred Tax Assets 17,917 16,436
Deferred Tax Liabilities:
Property 4,544 2,642
Purchased intangibles 8,191
Investments 2,593 2,206
Total Deferred Tax Liabilities 15,328 4,848
Deferred Tax Assets - Net $ 2,589 $ 11,588
Classification in the Consolidated Balance Sheet:
Deferred Income Tax Benefit - Current $ 11,560 $ 10,545
Deferred Income Tax Benefit - Non-Current - 1,043
Deferred Income Tax Liability - Non-Current (8,971) -
--------- ---------
Deferred Tax Assets - Net $ 2,589 $ 11,588
A reconciliation of the statutory tax rate to the effective tax rate
is as follows:
Year Ended March 31, 1996 1995 1994
----- ------ ------
Statutory tax rate 35.0% 35.0% 35.0%
State income taxes-net 5.0% 4.2% 1.7%
Tax exempt earnings-
primarily dividend exclusion (6.6%) (4.8%) (7.7%)
Tax credits (5.8%) (4.9%) (7.6%)
SFAS 109 - - (1.3%)
Changes in tax code - - (3.7%)
Other items 0.2% - (0.3%)
----- ----- -------
Effective tax rate 27.8% 29.5% 16.1%
Tax credits result principally from operations in Puerto Rico.
State income taxes include provisions for tollgate tax resulting from the
future repatriation of funds from Puerto Rico to the United States. Such
provisions have been made to the minimum extent provided under Puerto Rican tax
law based on the Company's intent to reinvest Puerto Rican source earnings in
qualifying investments within Puerto Rico.
In August of 1993, President Clinton signed into law the Omnibus Budget
Reconciliation Act of 1993 ("the Act"). The Act has several provisions which
effect the Company's income tax expense including a change in the Federal
corporate tax rate and significant changes relating to tax credits for
operations inPuerto Rico. As a direct result of the changes in the tax code, the
Company reassessed its position on the filing alternatives available under the
tax code. Based on the new tax code provisions, the Company made a decision
which resulted in a reduction of income tax expense of $3,225,000. This amount
represents management's estimate of the cumulative effect of this change.
61
Common Stock
During fiscal year 1996 the Company declared a 3 for 2 stock split effected
in the form of a stock dividend. The par value of the new shares issued totaled
$20,004,000 and has been transferred from additional paid-in capital to the
common stock account. Per share amounts and stock options have been adjusted for
the stock split.
Commitments
The Company has entered into various contractual agreements, principally
licensing arrangements, whereby the Company has obtained, in exchange for
funding of drug development activities, rights to manufacture and/or distribute
certain drugs, which are presently in various stages of development. In the
event that all projects are successful, payments totalling $29,600,000 are
expected to be made over the next five years. Approximately eighty-five percent
of this total is due upon the filing of an Abbreviated New Drug Application or
New Drug Application with the Food and Drug Administration (FDA) or upon
approval from the FDA and the subsequent launch of the product.
Stock Option Plans
On December 1, 1986 the Board of Directors adopted the "Mylan Laboratories
Inc. 1986 Incentive Stock Option Plan" ("the Plan") which was approved by the
shareholders on June 24, 1987. A total of 9,000,000 shares of the Company's
common stock are reserved for issuance upon exercise of stock options. Options,
which may be granted at not less than fair market value on the date of the grant
may be exercised within ten years from the date of grant. As of March 31, 1996
options for 4,873,200 shares have been granted pursuant to the Plan.
On June 23, 1992 the Board of Directors adopted the "1992 Nonemployee
Director Stock Option Plan" (the "Directors' Plan") subject to shareholder
approval, which was obtained on April 7, 1993. A total of 600,000 shares of the
Company's common stock are reserved for issuance upon exercise of stock options
which may be granted at not less than fair market value on the date of grant.
Shares are granted, based on a formula as described in the Directors' Plan, upon
the nonemployee director's initial and subsequent election to the Board of
Directors. Options may be exercised within ten years from the date of grant. As
of March 31, 1996, 261,000 shares have been granted pursuant to the Directors'
Plan.
As of March 31, 1996 options for 1,934,900 shares are exercisable under all
plans at option prices ranging from $2.83 to $20.42 per share.
A summary of the activity resulting from all plans adjusted for the stock
split is as follows:
Number of shares Option price
under option per share
------------- -------------
Outstanding
April 1, 1993 3,180,374 $ 2.75-12.00
Options granted 9,000 17.42-18.75
Options exercised (521,621) 2.75-12.00
Options cancelled or surrendered (10,312) 10.67
Outstanding
March 31, 1994 2,657,441 $ 2.83-18.75
Options granted 444,000 10.58-14.67
Options exercised (412,430) 2.75-12.00
Options cancelled or surrendered (33,000) 4.83-12.00
Outstanding
March 31, 1995 2,656,011 $ 2.83-18.75
Options granted 345,000 18.50-20.42
Options exercised (229,142) 2.83-12.00
Options cancelled or surrendered (51,855) 3.65-12.00
Outstanding
March 31, 1996 2,720,014 $ 2.83-20.42
62
Profit Sharing and 401(k) Plans
The Company has a noncontributory trusteed profit sharing plan covering
essentially all employees who are not covered by 401(k) plans, a profit sharing
plan with a 401(k) provision covering all employees of Bertek and UDL and 401(k)
plans covering Dow Hickam Pharmaceuticals Inc. (Hickam) and all bargaining unit
employees.
Contributions to the profit sharing plans are made at the discretion of the
Board of Directors. Contributions to the Hickam and UDL plans are based upon a
formula matching the employee salary deferral. Contributions to the bargaining
unit plan are based upon the union agreement. Total contributions to all plans
for the years ended March 31, 1996, 1995 and 1994 were $2,959,000, $3,060,000
and $2,300,000 respectively.
Related Party Transactions
Pursuant to a salary continuation agreement between Mr. McKnight, former
Chairman and Chief Executive Officer, and the Company, a one-time payment of
$4,306,000 was made on March 31, 1994 of which $2,861,000 was expensed during
1994. The Company also purchased aircraft, which it previously leased on a
flight by flight basis, from the estate of Mr. McKnight for $5,900,000.
Legal Matters
The Company is involved in various legal proceedings that are considered
normal to its business. While it is not feasible to predict the ultimate outco
me of such proceedings it is the opinion of management that the outcome will
have no material adverse effect on the Company's operations or financial
position.
During 1996 Bertek was involved in an arbitration matter unrelated to the
pharmaceutical business. On May 2, 1996 the arbitration panel issued a decision
against Bertek for approximately $4,000,000. No accrual for loss has been made
as of March 31, 1996. The Company has appealed this matter and believes the
ultimate resolution of this matter will not have a material effect on the
financial statements of the Company.
The Company is a defendant in a suit filed by a marketing company alle ging
breach of contract related to the sale and distribution of one of the Com pany's
generic pharmaceutical products. The suit claims damages in excess of
$13,000,000. No accrual for loss has been made as of March 31, 1996. A trial
date has been set for July 10, 1996. The ultimate outcome of this matter is
uncertain; however, the Company will continue to vigorously defend its position
on this matter.
During fiscal 1994 the Company settled certain legal matters relating to
the Company's suit filed under the Federal Antitrust Laws and the Racketeer
Influence and Corrupt Organization Act (RICO), receiving approximately
$3,375,000. Additionally during fiscal 1994 the jury in the Company's lawsuit
against American Cyanamid ruled in favor of Cyanamid on the Company's claims and
in favor of the Company on Cyanamid's counterclaims. No money damages were
awarded to either party. The U.S. Court of Appeals for the Fourth Circuit upheld
the jury verdicts on all claims.
63
Independent Auditors' Report
MYLAN LABORATORIES INC.
Board of Directors and Shareholders
Mylan Laboratories Inc.
Pittsburgh, Pennsylvania
We have audited the accompanying consolidated balance sheets of Mylan
Laboratories Inc. and subsidiaries as of March 31, 1996 and 1995, and the
related consolidated statements of earnings, shareholders' equity, and cash
flows for each of the three years in the period ended March 31, 1996, appearing
on pages 50 through 63. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overal l financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Mylan Laboratories Inc. and
subsidiaries as of March 31, 1996 and 1995, and the results of their operations
and their cash flows for each of the three years in the period ended March 31,
1996, in conformity with generally accepted accounting principles.
Pittsburgh, Pennsylvania
May 2, 1996
Market Prices
Fiscal 1996 High Low
First Quarter 21 3/8 18 3/4
Second Quarter 23 3/4 18 3/8
Third Quarter 24 3/8 18 5/8
Fourth Quarter 22 7/8 18 7/8
Fiscal 1995 High Low
First Quarter 15 3/8 10 1/2
Second Quarter 18 1/4 13 5/8
Third Quarter 19 7/8 16 3/8
Fourth Quarter 22 1/2 16 1/2
New York Stock Exchange Symbol: MYL
On April 30, 1996 the Company had
approximately 106,022 shareholders.
Quarterly
Financial Data
(Amounts in thousands,
except per share amounts)
1st Quarter 1996 1995
Net sales $109,192 $ 85,146
Gross profit 58,564 52,150
Net earnings 33,167 27,130
Earnings per share .28 .23
- - -----------------------------------------
2nd Quarter
Net sales $ 97,715 $ 96,013
Gross profit 52,856 55,791
Net earnings 29,476 28,658
Earnings per share .25 .24
- - -----------------------------------------
3rd Quarter
Net sales $ 91,319 $104,271
Gross profit 43,699 57,569
Net earnings 21,924 31,839
Earnings per share .18 .27
- - -----------------------------------------
4th Quarter
Net sales $ 94,634 $110,690
Gross profit 40,044 61,020
Net earnings 17,758 33,242
Earnings per share .15 .28
- - -----------------------------------------
Year
Net sales $392,860 $396,120
Gross profit 195,163 226,530
Net earnings 102,325 120,869
Earnings per share .86 1.02
- - -----------------------------------------
64
- - -------------------------------------------
400 mg
200 mg
ACEBUTOLOL HYDROCHLORIDE
Capsules
Compare to:SectralRegistration Mark*
*REGISTERED TRADEMARK OF
WYETH-AYERST LABORATORIES
- - -----------------------------------------
10 mg 25 mg
50 mg 75 mg
100 mg 150 mg
AMITRIPTYLINE HYDROCHLORIDE
Tablets, USP
Compare to:ElavilRegistration Mark* *REGISTERED TRADEMARK OF ZENECA INC.
- - -------------------------------------------
0.5 mg 1 mg 2 mg
BUMETANIDE Tablets, USP
Compare to:BumexRegistration Mark*
*REGISTERED TRADEMARK OF ROCHE LABORATORIES
- - ----------------------------------------------
2 mg 4 mg
ALBUTEROL Tablets,USP
Compare to:ProventilRegistration Mark*/VentolinRegistration Mark**
*REGISTERED TRADEMARK OF SCHERING CORPORATION
**REGISTERED TRADEMARK OF ALLEN &HANBURYS
- - --------------------------------------------------------------------
12.5 mg 25 mg 50 mg 100 mg CAPTOPRIL Tablets, USP Compare to:CapotenRegistration
Mark* *REGISTERED TRADEMARK OF BRISTOL-MYERS SQUIBB CO.
- - -------------------------------------------------------------
500 mg
250 mg
AMOXICILLIN TRIHYDRATE
Capsules, USP
Compare to:AmoxilRegistration Mark*
*REGISTERED TRADEMARK OF
SMITHKLINE BEECHAM PHARMACEUTICALS
- - ------------------------------------------------------------
500 mg
250 mg
CEFACLOR Capsules, USP
Compare to:CeclorRegistration Mark*
*REGISTERED TRADEMARK OF ELI LILLY AND COMPANY
- - -------------------------------------------------------------------
100 mg 300 mg
ALLOPURINOL Tablets, USP Compare to:ZyloprimRegistration Mark* *REGISTERED
TRADEMARK OF BURROUGHS WELLCOME CO.
- - -------------------------------------------------------------------
250 mg 500 mg
AMPICILLIN TRIHYDRATE
Capsules, USP
Compare to:PolycillinRegistration Mark*
*REGISTERED TRADEMARK OF APOTHECON
- - ------------------------------------------------------------------
0.25 mg 0.5 mg 1 mg 2 mg
ALPRAZOLAM Tablets, USP
Compare to:XanaxRegistration Mark*
*REGISTERED TRADEMARK OF THE UPJOHN COMPANY
- - -------------------------------------------------------------------
125 mg/5 mL187 mg/5 mL
75 mL and 150 mL 50 mL and 100 mL
250 mg/5 mL375 mg/5 mL
75 mL and 150 mL 50 mL and 100 mL
(not actual size)
CEFACLOR
Powders for Oral Suspension, USP
Compare to:CeclorRegistration Mark*
*REGISTERED TRADEMARK OF ELI LILLY AND COMPANY
- - --------------------------------------------------------------------
5 mg/50 mg
AMILORIDE HYDROCHLORIDE and
HYDROCHLOROTHIAZIDE
Tablets, USP
Compare to:ModureticRegistration Mark* *REGISTERED TRADEMARK OF MERCK &CO., INC.
- - ---------------------------------------------------------------------
50 mg 100 mg
ATENOLOL Tablets
Compare to:TenorminRegistration Mark*
*REGISTERED TRADEMARK OF ZENECA INC.
- - --------------------------------------------------------------------
50 mg/25 mg 100 mg/25 mg ATENOLOL and CHLORTHALIDONE Tablets Compare
to:TenoreticRegistration Mark* *REGISTERED TRADEMARK OF ZENECA INC.
- - --------------------------------------------------------------------
MYLAN PHARMACEUTICALS
Product Identification Guide
- - -------------------------------------------------------------------
250 mg 500 mg
CEPHALEXIN Capsules, USP
Compare to:KeflexRegistration Mark*
*REGISTERED TRADEMARK OF ELI LILLY AND COMPANY
- - --------------------------------------------------------------------
25 mg 50 mg
CHLORTHALIDONE Tablets, USP Compare to:HygrotonRegistration Mark* *REGISTERED
TRADEMARK OF RHoNE-POULENC RORER PHARMACEUTICALS INC.
- - ----------------------------------------------------------------------
10 mg
CYCLOBENZAPRINE HYDROCHLORIDE
Tablets, USP
Compare to:FlexerilRegistration Mark* *REGISTERED TRADEMARK OF MERCK &CO., INC.
- - ---------------------------------------------------------------------
2 mg 5 mg 10 mg
DIAZEPAM Tablets, USP Compare to:ValiumRegistration Mark* *REGISTERED TRADEMARK
OF ROCHE PRODUCTS INC.
- - ---------------------------------------------------------------------
200 mg 300 mg
400 mg 800 mg
CIMETIDINE Tablets, USP
Compare to:TagametRegistration Mark*
*REGISTERED TRADEMARK OF
SMITHKLINE BEECHAM PHARMACEUTICALS
- - ----------------------------------------------------------------------
125 mg/5 mL 250 mg/5 mL
100 mL and 200 mL 100 mL and 200 mL
(not actual size)
CEPHALEXIN
Powders for Oral Suspension, USP
Compare to:KeflexRegistration Mark*
*REGISTERED TRADEMARK OF ELI LILLY AND COMPANY
- - ------------------------------------------------------------------------
30 mg 60 mg
90 mg 120 mg
DILTIAZEM HYDROCHLORIDE
Tablets, USP
Compare to:CardizemRegistration Mark* *REGISTERED TRADEMARK OF MARION MERRELL
DOW INC.
- - -----------------------------------------------------------------------
5 mg/12.5 mg 10 mg/25 mg
CHLORDIAZEPOXIDE and
AMITRIPTYLINE HYDROCHLORIDE
Tablets, USP
Compare to:LimbitrolRegistration Mark*
*REGISTERED TRADEMARK OF ROCHE PRODUCTS INC.
- - -----------------------------------------------------------------------
0.1 mg 0.2 mg 0.3 mg
CLONIDINE HYDROCHLORIDE
Tablets, USP
Compare to:CatapresRegistration Mark* *REGISTERED TRADEMARK OF BOEHRINGER
INGELHEIM PHARMACEUTICALS, INC.
- - -----------------------------------------------------------------------
2.5 mg/0.025 mg
DIPHENOXYLATE HYDROCHLORIDE and ATROPINE SULFATE Tablets, USP Compare
to:LomotilRegistration Mark* *REGISTERED TRADEMARK OF G.D. SEARLE &CO.
- - ------------------------------------------------------------------------
0.1 mg/15 mg 0.3 mg/15 mg 0.2 mg/15 mg CLONIDINE HYDROCHLORIDE and
CHLORTHALIDONE Tablets, USP Compare to:CombipresRegistration Mark* *REGISTERED
TRADEMARK OF BOEHRINGER INGELHEIM PHARMACEUTICALS, INC.
- - ------------------------------------------------------------------------
250 mg 500 mg
CHLOROTHIAZIDE Tablets, USP Compare to:DiurilRegistration Mark* *REGISTERED
TRADEMARK OF MERCK & CO., INC.
- - ------------------------------------------------------------------------
10 mg 25 mg
50 mg 75 mg
100 mg
DOXEPIN HYDROCHLORIDE
Capsules, USP
Compare to:SinequanRegistration Mark*
*REGISTERED TRADEMARK OF ROERIG
- - ----------------------------------------------------------------------
3.75 mg 7.5 mg 15 mg
CLORAZEPATE DIPOTASSIUM Tablets
Compare to:TranxeneRegistration Mark*
*REGISTERED TRADEMARK OF ABBOTT LABORATORIES
- - -----------------------------------------------------------------------
100 mg 250 mg
CHLORPROPAMIDE Tablets, USP
Compare to:DiabineseRegistration Mark*
*REGISTERED TRADEMARK OF PFIZER LABS DIVISION
- - -----------------------------------------------------------------------
50 mg 100 mg
DOXYCYCLINE HYCLATE
Capsules, USP
Compare to:VibramycinRegistration Mark*
*REGISTERED TRADEMARK OF PFIZER LABS DIVISION
- - ------------------------------------------------------------------------
50 mg 100 mg
MECLOFENAMATE SODIUM
Capsules, USP
Compare to:MeclomenRegistration Mark*
*REGISTERED TRADEMARK OF PARKE-DAVIS
- - -------------------------------------------------------------------------
15 mg 30 mg
FLURAZEPAM HYDROCHLORIDE
Capsules, USP
Compare to:DalmaneRegistration Mark*
*REGISTERED TRADEMARK OF ROCHE PRODUCTS INC.
- - --------------------------------------------------------------------------
250 mg 375 mg 500 mg
NAPROXEN Tablets, USP
Compare to:NaprosynRegistration Mark*
*REGISTERED TRADEMARK OF SYNTEX LABORATORIES, INC.
- - -------------------------------------------------------------------------
400 mg 600 mg
800 mg
IBUPROFENTablets, USP
Compare to:MotrinRegistration Mark*/RufenRegistration Mark** *REGISTERED
TRADEMARK OF THE UPJOHN COMPANY **REGISTERED TRADEMARK OF BOOTS PHARMACEUTICALS,
INC.
- - -------------------------------------------------------------------------
2.5 mg
METHOTREXATE Tablets, USP
Compare to:Methotrexate Tablets/RheumatrexRegistration Mark*
*REGISTERED TRADEMARK OF LEDERLE LABORATORIES
- - --------------------------------------------------------------------------
100 mg
DOXYCYCLINE HYCLATE
Tablets, USP
Compare to:Vibra-tabsRegistration Mark*
*REGISTERED TRADEMARK OF PFIZER LABS DIVISION
- - --------------------------------------------------------------------------
50 mg 100 mg
FLURBIPROFEN Tablets, USP
Compare to:AnsaidRegistration Mark*
*REGISTERED TRADEMARK OF THE UPJOHN COMPANY
- - --------------------------------------------------------------------------
275 mg 550 mg
NAPROXEN SODIUM Tablets, USP
Compare to:AnaproxRegistration Mark*
*REGISTERED TRADEMARK OF SYNTEX LABORATORIES, INC.
- - ---------------------------------------------------------------------------
2.5 mg
INDAPAMIDE Tablets, USP
Compare to:LozolRegistration Mark*
*REGISTERED TRADEMARK OF
RHoNE-POULENC RORER PHARMACEUTICALS
- - --------------------------------------------------------------------------
5 mg
METHYCLOTHIAZIDE Tablets, USP
Compare to:EnduronRegistration Mark*
*REGISTERED TRADEMARK OF ABBOTT LABORATORIES
- - -------------------------------------------------------------------------
400 mg
ERYTHROMYCIN ETHYLSUCCINATE
Tablets, USP
Compare to:E.E.S. 400Registration Mark*
*REGISTERED TRADEMARK OF ABBOTT LABORATORIES
- - --------------------------------------------------------------------------
20 mg 40 mg 80 mg FUROSEMIDE Tablets, USP Compare to:LasixRegistration
Mark* *REGISTERED TRADEMARK OF HOECHST-ROUSSEL PHARMACEUTICALS INC.
- - --------------------------------------------------------------------------
0.4 mg/hr
(not actual size)
Also available in
0.2 mg/hr and 0.6 mg/hr
NITROGLYCERIN TRANSDERMAL
SYSTEM (Patch)
Compare to:Transderm NitroRegistration Mark*
*REGISTERED TRADEMARK OF SUMMIT PHARMACEUTICALS
- - --------------------------------------------------------------------------
25 mg 50 mg
INDOMETHACIN Capsules, USP Compare to:IndocinRegistration Mark* *REGISTERED
TRADEMARK OF MERCK &CO., INC.
- - -------------------------------------------------------------------------
250 mg 500 mg
ERYTHROMYCIN STEARATE
Tablets, USP
Compare to:ErythrocinRegistration Mark* Stearate
*REGISTERED TRADEMARK OF ABBOTT LABORATORIES
- - -------------------------------------------------------------------------
250 mg 500 mg
METHYLDOPA Tablets, USP Compare to:AldometRegistration Mark* *REGISTERED
TRADEMARK OF MERCK &CO., INC.
- - -------------------------------------------------------------------------
600 mg
GEMFIBROZIL Tablets, USP
Compare to:LopidRegistration Mark*
*REGISTERED TRADEMARK OF PARKE-DAVIS
- - --------------------------------------------------------------------------
250 mg/
15 mg
250 mg/25 mg
METHYLDOPA and HYDROCHLOROTHIAZIDE Tablets, USP Compare to:AldorilRegistration
Mark* *REGISTERED TRADEMARK OF MERCK &CO., INC.
- - ----------------------------------------------------------------------
2 mg
LOPERAMIDE HYDROCHLORIDE
Capsules, USP
Compare to:ImodiumRegistration Mark*
*REGISTERED TRADEMARK OF JANSSEN PHARMACEUTICA INC.
- - -------------------------------------------------------------------------
10 mg 25 mg
50 mg 75 mg
NORTRIPTYLINE HYDROCHLORIDE
Capsules, USP
Compare to:PamelorRegistration Mark*
*REGISTERED TRADEMARK OF
SANDOZ PHARMACEUTICALS CORPORATION
- - -------------------------------------------------------------------------
5 mg 10 mg
GLIPIZIDE Tablets
Compare to:GlucotrolRegistration Mark*
*REGISTERED TRADEMARK OF PRATT PHARMACEUTICALS DIVISION
- - -------------------------------------------------------------------------
600 mg
FENOPROFEN CALCIUM Tablets, USP
Compare to:NalfonRegistration Mark*
*REGISTERED TRADEMARK OF DISTA PRODUCTS COMPANY
- - -------------------------------------------------------------------------
0.5 mg 1 mg 2 mg
LORAZEPAM Tablets, USP
Compare to:AtivanRegistration Mark*
*REGISTERED TRADEMARK OF WYETH-AYERST LABORATORIES
- - ---------------------------------------------------------------------------
50 100
mg mg
METOPROLOLTARTRATE Tablets, USP
Compare to:LopressorRegistration Mark*
*REGISTERED TRADEMARK OF GEIGY PHARMACEUTICALS
- - ---------------------------------------------------------------------------
0.5 mg1 mg 2 mg5 mg
HALOPERIDOL Tablets, USP
Compare to:HaldolRegistration Mark*
*REGISTERED TRADEMARK OF MCNEIL PHARMACEUTICAL
- - --------------------------------------------------------------------------
1 mg 2.5 mg
5 mg 10 mg
FLUPHENAZINE HYDROCHLORIDE
Tablets, USP
Compare to:ProlixinRegistration Mark*
*REGISTERED TRADEMARK OF APOTHECON
- - -----------------------------------------------------------------------------
25 mg50 mg 75 mg
MAPROTILINE HYDROCHLORIDE
Tablets, USP
Compare to:LudiomilRegistration Mark*
*REGISTERED TRADEMARK OF CIBA PHARMACEUTICAL COMPANY
- - ----------------------------------------------------------------------------
20 mg 40 mg 80 mg
NADOLOL Tablets, USP
Compare to:CorgardRegistration Mark*
*REGISTERED TRADEMARK OF BRISTOL LABORATORIES
- - --------------------------------------------------------------------------
500 mg
TOLBUTAMIDE Tablets, USP
Compare to:OrinaseRegistration Mark*
*REGISTERED TRADEMARK OF THE UPJOHN COMPANY
- - --------------------------------------------------------------------------
40 mg/ 80 mg/
25 mg 25 mg
PROPRANOLOL HYDROCHLORIDE and
HYDROCHLOROTHIAZIDE Tablets, USP
Compare to:InderideRegistration Mark*
*REGISTERED TRADEMARK OF WYETH-AYERST LABORATORIES
- - ---------------------------------------------------------------------------
250 mg 500 mg
250 mg 500 mg
PENICILLIN V POTASSIUM
Tablets, USP
Compare to:V-Cillin KRegistration Mark*
*REGISTERED TRADEMARK OF ELI LILLY &COMPANY
- - ---------------------------------------------------------------------
250 mg
500 mg
TETRACYCLINE HYDROCHLORIDE
Capsules, USP
Compare to:Achromycin VRegistration Mark*/SumycinRegistration Mark**
*REGISTERED TRADEMARK OF LEDERLE LABORATORIES
**REGISTERED TRADEMARK OF APOTHECON
- - -------------------------------------------------------------------------
500 mg
PROBENECIDTablets, USP
Compare to:BenemidRegistration Mark* *REGISTERED TRADEMARK OF MERCK &CO., INC.
- - -------------------------------------------------------------------------------
0.125 mg/ 0.125 mg/
250 mg 500 mg
RESERPINE and CHLOROTHIAZIDE
Tablets, USP
Compare to:DiupresRegistration Mark* *REGISTERED TRADEMARK OF MERCK &CO., INC.
- - --------------------------------------------------------------------------
65 mg
PROPOXYPHENE COMPOUND
Capsules, USP
Compare to:DarvonRegistration Mark* Compound-65
*REGISTERED TRADEMARK OF ELI LILLY AND COMPANY
- - -----------------------------------------------------------------------------
400 mg
TOLMETIN SODIUM Capsules, USP
Compare to:TolectinRegistration Mark* DS
*REGISTERED TRADEMARK OF MCNEIL PHARMACEUTICAL
- - -------------------------------------------------------------------------
10 mg 25 mg
50 mg 100 mg
THIORIDAZINE HYDROCHLORIDE
Tablets, USP
Compare to:MellarilRegistration Mark*
*REGISTERED TRADEMARK OF
SANDOZ PHARMACEUTICALS CORPORATION
- - ---------------------------------------------------------------------------
2 mg/10 mg 2 mg/25 mg
4 mg/10 mg 4 mg/25 mg
4 mg/50 mg
PERPHENAZINE and AMITRIPTYLINE
HYDROCHLORIDE Tablets, USP Compare to:TriavilRegistration Mark* *REGISTERED
TRADEMARK OF MERCK &CO., INC.
- - ------------------------------------------------------------------------
65 mg
PROPOXYPHENE HYDROCHLORIDE
Capsules, USP
Compare to:DarvonRegistration Mark*
*REGISTERED TRADEMARK OF ELI LILLY AND COMPANY
- - --------------------------------------------------------------------------
600 mg
TOLMETIN SODIUM Tablets, USP
Compare to:TolectinRegistration Mark* 600
*REGISTERED TRADEMARK OF MCNEIL PHARMACEUTICAL
- - -------------------------------------------------------------------------
25 mg
SPIRONOLACTONE Tablets, USP
Compare to:AldactoneRegistration Mark*
*REGISTERED TRADEMARK OF G. D. SEARLE &CO.
- - ------------------------------------------------------------------------
25 mg/25 mg
SPIRONOLACTONE and
HYDROCHLOROTHIAZIDE Tablets, USP Compare to:AldactazideRegistration Mark*
*REGISTERED TRADEMARK OF G.D. SEARLE &CO.
- - ------------------------------------------------------------------------
65 mg/650 mg
PROPOXYPHENE HYDROCHLORIDE
and ACETAMINOPHEN Tablets, USP
Compare to:WygesicRegistration Mark*
*REGISTERED TRADEMARK OF WYETH-AYERST LABORATORIES
- - ------------------------------------------------------------------------
240 mg
VERAPAMIL HYDROCHLORIDE EXTENDED-RELEASE Tablets Compare to:Isoptin
SRRegistration Mark* *REGISTERED TRADEMARK OF KNOLL PHARMACEUTICALS
- - -----------------------------------------------------------------------
1 mg 2 mg
5 mg 10 mg
THIOTHIXENE Capsules, USP
Compare to:NavaneRegistration Mark*
*REGISTERED TRADEMARK OFROERIG
- - --------------------------------------------------------------------
5 mg 10 mg
PINDOLOL Tablets, USP
Compare to:ViskenRegistration Mark*
*REGISTERED TRADEMARK OF
SANDOZ PHARMACEUTICALS CORPORATION
- - ----------------------------------------------------------------------
150 200
mg mg
SULINDACTablets, USP Compare to:ClinorilRegistration Mark* *REGISTERED TRADEMARK
OF MERCK &CO., INC.
- - -----------------------------------------------------------------------
100 mg/650 mg 100mg/650 mg
PROPOXYPHENE NAPSYLATE and
ACETAMINOPHEN Tablets, USP
Compare to:Darvocet-NRegistration Mark* 100
*REGISTERED TRADEMARK OF ELI LILLY AND COMPANY
- - -----------------------------------------------------------------------
80 mg 120 mg
VERAPAMIL HYDROCHLORIDE
Tablets, USP
Compare to:IsoptinRegistration Mark*
*REGISTERED TRADEMARK OF KNOLL PHARMACEUTICALS
- - ----------------------------------------------------------------------
5 mg10 mg 20 mg
TIMOLOL MALEATE Tablets, USP
Compare to:BlocadrenRegistration Mark* *REGISTERED TRADEMARK OF MERCK &CO., INC.
- - ----------------------------------------------------------------------
1 mg 2 mg
5 mg
PRAZOSIN HYDROCHLORIDE
Capsules, USP
Compare to:MinipressRegistration Mark*
*REGISTERED TRADEMARK OF PFIZER LABS DIVISION
- - ----------------------------------------------------------------------
10 mg 20 mg
40 mg 80 mg
PROPRANOLOL HYDROCHLORIDE
Tablets, USP
Compare to:InderalRegistration Mark*
*REGISTERED TRADEMARK OF WYETH-AYERST LABORATORIES
- - -----------------------------------------------------------------------
10 mg 20 mg
PIROXICAM Capsules, USP
Compare to:FeldeneRegistration Mark*
*REGISTERED TRADEMARK OF PRATT PHARMACEUTICALS DIVISION
- - ------------------------------------------------------------------------
15 mg 30 mg
TEMAZEPAMCapsules, USP
Compare to:RestorilRegistration Mark*
*REGISTERED TRADEMARK OF
SANDOZ PHARMACEUTICALS CORPORATION
- - ------------------------------------------------------------------------
250 500
mg mg
TOLAZAMIDE Tablets, USP
Compare to:TolinaseRegistration Mark*
*REGISTERED TRADEMARK OF THE UPJOHN COMPANY
- - --------------------------------------------------------------------------
Mylan Pharmaceuticals Inc.
781 Chestnut Ridge Road
Morgantown, WV 26504-4310
Full prescribing information
available upon request. To order, contact your wholesaler or distributor,
or call 1-800-RX-MYLAN
for more information.
Potency on reverse side.
Copy Rights1996 Mylan Pharmaceuticals Inc. This reference guide is designed
to assist in the identification of Mylan products. It contains actual size,
full-color product reproductions, except where noted.
Mylan Laboratories Inc.
Mylan Laboratories Inc.
1030 Century Building
130 Seventh Street
Pittsburgh, Pennsylvania 15222
1996
Annual report to shareholders
Notice of Annual Meeting
The annual meeting of shareholders of the Company will be held on Thursday,
July 25, 1996 at 10:30 AM at the Lakeview Resort &Conference Center, Morgantown,
West Virginia. A formal notice together with a proxy statement and form of proxy
will be mailed to shareholders entitled to vote in advance of the meeting.
Shareholder Information
A copy of the Mylan Laboratories Inc. Annual Report to the Securities and
Exchange Commission on Form 10-K is available to shareholders on request. For a
copy of Form 10-K, please write to:
Mylan Laboratories Inc.
1030 Century Building
130 Seventh Street
Pittsburgh, Pennsylvania 15222
Shareholder Contact
Patricia Sunseri
(412) 232-0100
Directors
Milan Puskar
Chairman of the Board, C.E.O. and President of the Company
Dana G. Barnett
Executive Vice President of the Company
Laurence S. DeLynn
Retail Consultant
Morgantown, West Virginia
John C. Gaisford, M.D.
Director of Burn Research
West Penn Hospital
Pittsburgh, Pennsylvania
Richard A. Graciano
Associate/Partner
Graciano Enterprises
Pittsburgh, Pennsylvania
Robert W. Smiley, Esq.
Doepken Keevican & Weiss
Attorneys-At-Law
Pittsburgh, Pennsylvania
C. B. Todd
Senior Vice President
of the Company
Officers
Milan Puskar
Chairman, C.E.O. and President
Dana G. Barnett
Executive Vice President
Louis J. DeBone
Vice President-Operations
Roger L. Foster
Vice President and General Counsel
Roderick P. Jackson
Senior Vice President
Joseph J. Krivulka
Vice President
Dr. John P. O'Donnell
Vice President-
Research and Quality Control
Robert W. Smiley, Esq.
Secretary
Patricia Sunseri
Vice President-
Investor and Public Relations
C. B. Todd
Senior Vice President
Corporate Directory
Mylan Laboratories Inc.
1030 Century Building
130 Seventh Street
Pittsburgh, Pennsylvania 15222
(412) 232-0100
Registrar and Transfer Agent
American Stock Transfer &
Trust Company
New York, New York
Certied Public Accountants
Deloitte &Touche LLP
Pittsburgh, Pennsylvania
Financial Consultants
PDA Associates, Inc.
Ironia, New Jersey
Securities Traded
New York Stock Exchange
Mylan Laboratories Inc.
Common Stock Symbol: MYL
Design:John Brady Design Consultants Inc., Pittsburgh, Pennsylvania
69
(21) Subsidiaries of the registrant, filed herewith.
(23) Consents of Independent Auditors, filed herewith.
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
33-65916 and 33-65918 of Mylan Laboratories Inc. on Form S-8 of our report dated
May 2, 1996, incorporated by reference in this Annual Report on Form 10-K of
Mylan Laboratories Inc. for the year ended March 31, 1996.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
June 24, 1996
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
33-65916 and 33-65918 of Mylan Laboratories Inc. on Form S-8 of our report dated
February 2, 1996 relating to the consolidated financial statements of Somerset
Pharmaceuticals, Inc. and subsidiaries for each of the three years in the period
ended December 31, 1995, included in the Annual Report on Form 10-K of Mylan
Laboratories Inc. for the year ended March 31, 1996.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
June 24, 1996
(27) Financial Data Schedule, filed herewith.
(99) Consolidated financial statements of Somerset Pharmaceuticalseuticals,
Inc. for Years ended December 31, 1995, 1994 and 1993, filed
herewith., Inc. for Years ended December 31, 1995, 1994 and 1993,
filed herewith.
SOMERSET PHARMACEUTICALS, INC. AND SUBSIDIARIES
Consolidated Financial Statements for the
Years Ended December 31, 1995, 1994 and 1993, and
Independent Auditors' Report
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Somerset Pharmaceuticals, Inc.:
We have audited the accompanying consolidated balance sheets of Somerset
Pharmaceuticals, Inc. and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Somerset Pharmaceuticals, Inc.
and subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.
February 2, 1996
SOMERSET PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
ASSETS 1995 1994 LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
CURRENT ASSETS: CURRENT LIABILITIES:
Cash and cash equivalents $ 21,315,000 $ 17,529,000 Accounts payable $ 1,512,000 $ 292,000
Investment securities 180,000 3,338,000 Accrued marketi 11,000,000
Accounts receivable (net of allowance Royalty payable 5,850,000
for doubtful accounts of $100,000) 13,875,000 20,653,000 Medicaid payable 1,004,000 837,000
lnventories 6,551,000 5,293,000 Other accrued expenses 1,479,000 1,996,000
Prepaid expenses and other current assets 2,072,000 1,957,000 Accrued research and
development 1,921,000 1,901,000
Income taxes payable 4,390,000 5,017,000
Total current assets 43,993,000 48,770,000 Amounts due to related parties 2,075,000 2,318,000
Total current liabilities 17,057,000 29,211,000
PROPERTY AND EQUIPMENT - Net 5,496,000 4,266,000 DEFERRED REVENUE 63,000 292,000
STOCKHOLDERS' EQUITY:
Common stock, $01 par value;
INTANGIBLE ASSETS - Net 1,451,000 1,644,000 13,719 shares authorized, 11,297
shares issued -- --
Retained eamings 34,452,000 26,099,000
Less treasury stock, 644 shares
at cost (452,000) (452,000)
OTHER ASSETS 180,000 470,000 Total stockholders' equity 34,000,000 25,647,000
------------ ------------ ------------ ----------
$ 51,120,000 $ 55,150,000 $ 51,120,000 $ 55,150,000
============ ============ ============ ============
See notes to consolidated financial statements
SOMERSET PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31,1995,1994 AND 1993
1995 1994 1993
NET SALES $107,365,000 $124,566,000 $118,998,000
------------ ------------ ------------
COSTS AND EXPENSES:
Cost of sales 13,617,000 16,399,000 13,991,000
Marketing 4,862,000 23,457,000 25,826,000
Research and development 17,904,000 10,424,000 9,134,000
Administrative 8,601,000 9,845,000 8,005,000
------------ ------------ ------------
44,984,000 60,125,000 56,956,000
------------ ------------ ------------
62,381,000 64,441,000 62,042,000
OTHER INCOME 2,172,000 568,000 1,131,000
------------ ------------ ------------
INCOME BEFORE INCOME TAXES 64,553,000 65,009,000 63,173,000
PROVISION FOR INCOME TAXES 20,200,000 20,900,000 21,408,000
------------ ------------ ------------
NET INCOME $ 44,353,000 $ 44,109,000 $ 41,765,000
============ ============ ============
See notes to consolidated financial statements
SOMERSET PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31,1995,1994 AND 1993
Common Stock Treasury Stock Retained Stockholders'
Shares Amount Shares Amount Earnings Equity
BALANCE, DECEMBER 31, 1992 11,297 $-- 644 $(452,000) $ 2,640,000 $ 2,188,000
Accretion of the carrying value of the
redeemable preferred stock -- -- -- -- (15,000) (15,000)
Net income -- -- 41,765,000 41,765,000
Dividends -- -- -- -- (26,400,000) (26,400,000)
------- -------- -------- -------- ------------ ------------
BALANCE, DECEMBER31, 1993 11,297 -- 644 (452,000) 17,990,000 17,538,000
Net income -- -- -- -- 44,109,000 44,109,000
Dividends -- -- -- -- (36,000,000) (36,000,000)
------- -------- -------- -------- ------------ ------------
BALANCE, DECEMBER 31, 1994 11,297 -- 644 (452,000) 26,099,000 25,647,000
Net income -- -- -- -- 44,353,000 44,353,000
Dividends -- -- -- -- (36,000,000) (36,000,000)
------- -------- -------- -------- ------------ ------------
BALANCE, DECEMBER 31, 1995 11,297 $-- 644 $(452,000) $ 34,452,000 $ 34,000,000
======= ======== ======== ========= ============ ============
See notes to consolidated financial statements
SOMERSET PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,1995,1994 AND 1993
1995 1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 44,353,000 $ 44,109,000 $ 41,765,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 847,000 587,000 285,000
Deferred tax expense (benefit) 283,000 862,000 (800,000)
Deferred revenue (229,000) (166,000) (167,000)
Changes in operating assets and liabilities:
Accounts receivable 6,778,000 (4,558,000) (1,872,000)
Inventories (1,258,000) (1,473,000) (1,578,000)
Prepaid expenses and other current assets (398,000) (375,000) 352,000
Accounts payable 1,220,000 87,000 (227,000)
Royalty payable (1,174,000) 1,070,000 190,000
Accrued marketing costs (11,000,000) 1,900,000 1,386,000
Accrued research and development 20,000 (145,000) 981,000
Other accrued expenses (350,000) 763,000 201,000
Income taxes payable (627,000) 2,117,000 570,000
Amounts due to related parties (243,000) 255,000 278,000
------------ ------------ -----------
Net cash provided by operating activities 38,222,000 45,033,000 41,364,000
------------ ------------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease in investment securities 3,158,000 132,000 2,006,000
Purchase of property and equipment (1,884,000) (1,898,000) (2,690,000)
Decrease (increase) in other assets 290,000 234,000 (268,000)
------------ ------------- -----------
Net cash provided by (used in) investing activities 1,564,000 (1,532,000) (952,000)
------------ ------------- -----------
(Continued)
SOMERSET PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,1995,1994 AND 1993
- - ---------------------------------------------------------------------------------------------
1995 1994 1993
CASH FLOWS FROM FINANCING ACTIVITIES:
Redemption of preferred stock $ -- $ -- $ (1,149,000)
Dividends paid on preferred stock -- -- (176,000)
Dividends paid on common stock (36,000,000) (36,000,000) (35,200,000)
Net (decrease) increase in note payable - -- (253,000) 253,000
------------- ------------- -------------
Net cash used in financing activities (36,000,000) (36,253,000) (36,272,000)
------------- ------------- -------------
NET INCREASE IN CASH AND CASH
EQUIVALENTS 3,786,000 7,248,000 4,140,000
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 17,529,000 10,281,000 6,141,000
------------ ------------ ------------
CASH AND CASH EQUIVALENTS,
END OF YEAR $ 21,315,000 $ 17,529,000 $ 10,281,000
============ ============ ============
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION -
Cash paid during the year for:
Interest $ -- $ 7,000 $ 5,000
============ ============ ============
Income taxes $ 22,074,000 $ 17,683,000 $ 21,259,000
============ ============ ============
See notes to consolidated financial statements.
SOMERSET PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
- - ---------------------------------------------------------------------------
1. PRINCIPLES OF CONSOLIDATION AND OPERATIONS
The consolidated financial statements include the accounts of Somerset
Pharmaceuticals, Inc. (the "Company") and its wholly owned subsidiaries,
Somerset Pharmaceuticals Holding Company and Somerset Caribe, Inc. The
Company is jointly owned by Mylan Laboratories, Inc. and Watson
Pharmaceuticals, Inc., with each owning 50% of the outstanding common stock
of the Company. All significant intercompany accounts and transactions have
been eliminated in consolidation. The Company, incorporated in February
1986, is engaged in the development, testing and marketing of drugs to be
used in the treatment of various human disorders. Currently, the Company
manufactures (at its plant in Puerto Rico), markets and sells Eldepryl,
which is used as a treatment for Parkinson's Disease. The Company has
exclusivity relating to the chemical compound Eldepryl, for use as a
treatment for late stage Parkinson's Disease through June of 1996.
The Company is party to an exclusive 14-year agreement (through November
22, 2003) with Chinoin Pharmaceutical Company ("Chinoin") of Budapest,
Hungary under which Eldepryl and other new potential drugs resulting from
Chinoin research are made available for licensing by the Company. The
license agreement requires the Company to pay royalties equal to 7% of net
sales of Eldepryl including sub-license revenues. The Company incurred
royalty expense of approximately $8,473,000, $9,983,000 and $8,383,000 for
the years ended December 31, 1995, 1994 and 1993, respectively.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Cash and Cash Equivalents -The Company generally considers debt
instruments purchased with a maturity of three months or less and
investments in money market accounts to be cash equivalents.
b. Investment Securities - Effective January 1, 1994, the Company
adopted Statement of Financial Accounting Standards ("SFAS") No.
115, "Accounting for Certain Investments in Debt and Equity
Securities." The effect of adopting SFAS No. 115 on the Company's
financial statements was not material. Gross proceeds from sales
and maturities of investments approximated $4,898,000 and $70,000
in 1995, and $797,000 and $750,000 in 1994, respectively, and
realized gains or losses were not material. At December 31, 1995
and 1994, the investment securities were available-for-sale, and
there were no material unrealized gains or losses.
c. Inventories - Inventories are stated at the lower-of-cost or
market, with cost determined on a first-in, first-out basis.
d. Property and Equipment -Property and equipment are stated at
cost. Depreciation is provided over the estimated useful lives of
the assets by the straight-line method. Estimated useful lives
are five to seven years for machinery and equipment and furniture
and fixtures and 35 years for the building.
e. Intangible Assets -Intangible assets are amortized on a
straight-line basis over 14 years.
f. Research and Development -Research and development costs are
expensed as incurred.
g. Concentration of Credit Risk - The Company's product is sold
throughout the United States. The Company performs ongoing credit
evaluation of its customers financial condition and generally
requires no collateral from its customers.
h. Use of Estimates in the Preparation of Financial Statements - The
preparation of financial statements in conformity with generally
accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets
and liabilities at the date of the financial statements, as well
as the reported amounts of income and expenses during the
reporting period.
3. INVENTORY
Inventory consists of the following at December 31, 1995 and 1994:
1995 1994
Raw material $ 5,091,000 $ 4,686,000
Work in process 163,000 375,000
Finished goods 1,297,000 232,000
-------------- -------------
Total $ 6,551,000 $ 5,293,000
============== ==============
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December31, 1995 and 1994:
1995 1994
Land $ 300,000 $ 300,000
Building 2,255,000 2,067,000
Machinery and equipment 4,048,000 2,410,000
Furniture and fixtures 146,000 87,000
---------- -----------
6,749,000 4,864,000
Less accumulated depreciation 1,253,000 598,000
Property and equipment - net $ 5,496,000 $ 4,266,000
----------- -----------
5. SUB-LICENSE OF RIGHTS
On February 9, 1988, the Company granted a sub-license to its exclusive
right and license to use its technology to Draxis Health Inc. (formerly
Deprenyl Research Limited) to commercialize certain drugs in Canada for 15
years. The Company receives a royalty of 11% of Draxis Health Inc.'s net
sales over the license period.
Royalty income, less related royalty expense to Chinoin, included in other
income for the years ended December 31, 1995, 1994 and 1993 was
approximately $197,000, $199,000 and $357,000, respectively.
6. INTANGIBLE ASSETS
Intangible assets primarily represent the cost of a modification to the
terms of the Chinoin Agreement, less accumulated amortization of $1,254,000
and $1,061,000 at December 31, 1995 and 1994, respectively.
7. CO-PROMOTIONAL AGREEMENT
Effective October 1, 1990, the Company entered into an agreement with
Sandoz Pharmaceuticals Corporation ("Sandoz") to co-promote the product
Eldepryl. Under the terms of the agreement, the Company is required to make
certain payments to Sandoz in the event sales of Eldepryl exceed certain
predefined minimums. The agreement requires Sandoz, among other things, to
expend, at a minimum, a predetermined amount for advertising during each
year of the agreement. Once the predetermined levels of sales are exceeded,
the Company is required to pay Sandoz for advertising expenditures made on
behalf of the Company. After Sandoz's advertising expenses are reimbursed,
any additional amounts are shared by Sandoz and the Company based upon the
terms of the agreement.
In December 1994, the Company amended its co-promotional agreement with
Sandoz. The amended agreement eliminated certain residual period payments
to Sandoz, shortened the term to March 31, 1996, eliminated certain sales
force detail requirements and requires certain payments to be made to the
Company if a predetermined level of sales is not achieved.
During 1995 the Company entered into an agreement with CoCensys, Inc. for
the promotion of Elderpryl. The agreement is effective January 1, 1996 and
has an initial term of two years and is renewable annually thereafter.
Under the terms of the agreement, the Company will compensate CoCensys,
Inc. based on a predetermined formula that considers both the number of new
prescriptions written and the net sales dollars in each quarter.
During 1995, 1994 and 1993, the Company expensed $5,304,000, $22,360,000
and $24,260,000, respectively, pursuant to the agreement. Additionally,
certain co-promotional fees paid by Sandoz at the commencement of the
agreement are being recognized ratably by the Company during the term of
the agreement (six years, expiring on March 31, 1996), and certain costs
associated with the procurement, negotiation and execution of the agreement
by the owners of the Company are being incurred by the Company in
approximately the same amount.
8. INCOME TAXES
The income tax provision consists of the following for the years
ended December 31, 1995, 1994 and 1993:
1995 1994 1993
Current tax expense:
Federal $ 15,625,000 $ 15,025,000 $ 17,938,000
State 4,177,000 4,899,000 4,124,000
Foreign 115,000 114,000 146,000
19,917,000 20,038,000 22,208,000
Deferred tax expense (benefit):
Federal 256,000 754,000 (700,000)
State 27,000 108,000 (100,000)
283,000 862,000 (800,000)
Total provision for income taxes $ 20,200,000 $ 20,900,000 $ 21,408,000
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The tax effects of
significant items comprising the Company's deferred taxes (which are included in
"Other Assets" in the balance sheet) as of December 31, 1995 and 1994 are as
follows:
1995 1994
Deferred tax assets:
Deferred revenue $ 23,000 $ 110,000
Deferred compensation 122,000 228,000
Chargeback allowance 148,000 152,000
Other 37,000 42,000
330,000 532,000
Deferred tax liabilities - excess of tax amortization
over reporting amortization 246,000 165,000
Net deferred tax assets $ 84,000 $ 367,000
The statutory federal income tax rate is reconciled to the effective tax
rate as follows for the years ended December 31, 1995, 1994 and 1993:
1995 1994 1993
Tax at statutory rate 35.0% 35.0% 35.0%
State income tax (net of federal benefit) 2.8 3.5 4.1
Tax credits (9.4) (9.9) (7.2)
Tollgate tax 3.9 3.9 2.0
Other (1.0) (.4) --
Effective tax rate 31.3% 32.1% 33.9%
Tax credits result principally from operations in Puerto Rico.
9. RELATED PARTY TRANSACTIONS
The Company incurs expenses for ongoing management services and over a six
year period for specific services related to the procurement, negotiation and
execution of the original co-promotion agreement by the owners of the Company.
The Company also incurs other expenses from one or both of its owners as
detailed below for the years ended December 31, 1995, 1994 and 1993:
1995 1994 1993
Management fees $ 5,370,000 $ 6,228,000 $ 5,950,000
Research and development -- 1,020,000 835,000
Inventory handling and
distribution fees 415,000 650,000 750,000
Rent - equipment and facilities 1,416,000 1,065,000 647,000
Product liability insurance -- 618,000 675,000
Purchase of raw materials 450,000 -- --
10. SIGNIFICANT CUSTOMERS
The Company had sales to certain customers which individually exceeded 10%
of sales. In 1995 sales to four major customers were $23,986,000, $23,467,000,
$15,733,000 and $13,111,000, respectively. In 1994 sales to three major
customers were of $30,090,000, $23,479,000 and $17,991,000, respectively. In
1993 sales to three customers were $28,993,000, $27,181,000 and $16,974,000,
respectively.
11. EMPLOYEE BENEFIT PLANS
The Company has a defined contribution profit sharing plan covering
substantially all employees. Contributions are made at the discretion of the
Board of Directors. Additionally, during 1994, the Company initiated a deferred
compensation plan for certain key employees. Contributions are based on
profitability levels for the year. During 1995, 1994 and 1993, the Company
recorded expense of $83,000, $755,000 and $100,000 for these plans,
respectively.
------------------------------
(b) Reports on Form 8-K
The Company was not required to file a report on Form 8-K during the quarter
ended March 31, 1996.
SIGNATURES
Pursuant to the requirements of section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: June 21, 1996
by /s/ Milan Puskar
-----------------------------------------------
Milan Puskar
Chairman, Chief Executive Officer and President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ Milan Puskar June 26, 1996 /s/ Dana G. Barnett June 26, 1996
- - ----------------------------- ---------------------------
Milan Puskar Dana G. Barnett
Chairman, Chief Executive Executive Vice President
Officer and President and Director.
/s/ Laurence S. DeLynn June 26, 1996 /s/ Robert W. Smiley June 26, 1996
- - ----------------------------- ---------------------------
Laurence S. DeLynn Robert W. Smiley
Director Secretary and Director
/s/ Richard A. Graciano June 26, 1996 /s/ John C. Gaisford, M.D. June 26, 1996
- - ----------------------------- ---------------------------
Richard A. Graciano John C. Gaisford, M.D.
Director Director
/s/ C.B. Todd June 26, 1996 /s/ Frank A. DeGeorge June 26, 1996
- - ----------------------------- ---------------------------
C.B. Todd Frank A. DeGeorge
Senior Vice President Director of Corporate Finance as
and Director Chief Accounting Officer
EXHIBIT 22
Subsidiaries
Name State of Incorporation
- - ------------------------------------- -----------------------
Milan Holding, Inc. .................. Delaware
Mylan Inc. ........................... Delaware
Mylan Pharmaceuticals Inc. ........... West Virginia
Dow Hickam Pharmaceuticals, Inc. ..... Texas
Bertek, Inc. ......................... West Virginia
American Triumvirate Insurance Company Vermont
Roderick Corporation ................. Delaware
UDL Laboratories, Inc. ............... Illinois