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, 1997 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, 1997:
$1,786,969,654
The number of shares of Common Stock of the registrant outstanding as of May 31, 1997:
122,065,081
Documents incorporated by reference into this Report are:
Annual Report to Shareholders for year ended March 31, 1997....................................... Parts I and II,
Items 1, 5-8
Proxy Statement for 1997 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, licensing, manufacturing, marketing and
distribution of generic and proprietary pharmaceutical and wound care products.
References herein to fiscal 1997, 1996 and 1995 mean the fiscal years ended
March 31, 1997, 1996 and 1995, 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' Morgantown, West Virginia facility or 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 product
development and licensing agreements, whereby the Company has obtained in
exchange for funding of drug development activities, rights to manufacture
and/or distribute additional pharmaceutical products.
The Company entered into an alliance with VivoRx, Inc. a biotechnology
company developing encapsulated pancreatic islet cell implant technology for the
management of diabetes. VivoRx has successfully implanted three patients with
human islets in the United States and two patients with porcine (pancreas)
islets in New Zealand. Rejection of the implant is a major hurdle to overcome in
all types of implant operations. Due to its unique encapsulation technology, the
one patient in New Zealand who was not already taking immunosuppressant drugs
has not rejected the porcine islets implant. In addition, VivoRx has amended its
previously accepted Investigational New Drug (IND) application with the FDA for
the use of porcine islets to permit the use of proliferated human islet cells.
These proliferated human islets have already been implanted in one patient in
the United States with the same progress profile as the original transplant
patients. VivoRx expects to begin Phase I/II clinical trials by the end of this
calendar 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 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.
Somerset's marketing exclusivity relating to the chemical compound
Eldepryl(R) for use as a treatment for late stage Parkinson's disease expired on
June 6, 1996. In May 1996, Somerset received FDA approval to market an
easy-to-identify capsule which was launched immediately by Somerset. In August
1996, the FDA granted approval to several companies to market a generic tablet
form of Eldepryl(R). Following this action, Somerset filed suit against the FDA
seeking injunctive and declaratory relief relating to these approvals. On June
18, 1997, the Court dismissed Somerset's suit.
Somerset is actively involved in research projects regarding additional
uses of this and other chemical compounds. The impact of generic competition and
increased research and development expenditures by Somerset relating to these
research projects will continue to adversely affect Somerset's contribution to
the Company's net earnings.
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. Through an internal
restructuring Hickam now operates as a division of Bertek Pharmaceuticals Inc.,
which is dedicated to manufacturing and marketing specialty pharmaceutical
products and devices used principally as wound care treatments. Bertek
Pharmaceuticals Inc. will operate as the branded pharmaceutical division of the
Company with its foundation built on selling the antihypertensive drug
Maxzide(R) and Maxzide-25MG(R) ("Maxzide(R)") and the nitroglycerin transdermal
patch Nitrek(TM). Maxzide(R) is manufactured by Mylan Inc. in Caguas, Puerto
Rico while Nitrek(TM) is manufactured by Bertek, Inc. ("Bertek") in St. Albans,
Vermont.
On February 25, 1993, the Company acquired substantially all of the net
assets of Bertek. Bertek, headquartered in St. Albans, Vermont, is principally a
manufacturer of transdermal drug delivery systems. In August 1996, Bertek
received its first Abbreviated New Drug Application ("ANDA") approval, to market
a nitroglycerin transdermal patch. Bertek is actively involved in other
development projects to provide new transdermal products. In addition, Bertek
provides components using internally developed technology for transdermal
patches marketed by other companies. In February 1997, Bertek sold certain
assets related to its custom label and printing operations which were unrelated
to the Company's core pharmaceutical business.
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 and research and development 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 Maxzide(R) products.
These agreements were subject to regulatory approval which was received on
August 2, 1996. Since 1984 these products, which were developed and manufactured
by the Company, were marketed by AHP's Lederle Laboratories Division under a
worldwide license arrangement.
Under the terms of the new agreements, the Company is now marketing the
products in the United States. AHP retained marketing rights in a few select
foreign countries and will continue to purchase product from the Company. AHP
also retains ownership of certain trademarks and tradedress which have been
licensed to the Company for a period of five years. At the end of the five year
period, ownership of these intangibles will be transferred to the Company. In
connection with the new agreements, both parties agreed to terminate all legal
actions between the companies relating to Maxzide(R).
In connection with the transaction, the Company also began selling a
generic version of Dyazide(R). The previous license arrangement with AHP
prevented the Company from marketing this product.
Products
The information on the Company's product line set forth on pages 47-58
of the accompanying Annual Report to Shareholders for the year ended March 31,
1997 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) 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 1997, 1996 and 1995 approximately $42,633,000,
$38,913,000 and $30,533,000 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, extended release 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 and Applications
During fiscal 1997, nine approvals were received from the FDA. The
Company presently has requests for approval pending before the FDA representing
twenty-five products of varying strengths with an additional four products being
approved subsequent to March 31, 1997. The Company has five IND applications
filed with the FDA for new innovator compounds and in late fiscal 1997 the
Company filed a New Drug Application for its wound care product, Sulfamylon.
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. Although no single customer
represented more than 10% of net sales in 1997, 1996 or 1995, four customers in
1997 represented 36% of net sales.
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
168 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.
In addition to the increase in the number of competitors, the
consolidation of the Company's customers through mergers and acquisitions along
with the emergence of large buying groups representing independent pharmacies
and health maintenance organizations has led to severe price deterioration for
the Company's generic products. While the Company has actually increased unit
volume of its generic products through specialized marketing programs this has
not fully offset the price declines the Company has experienced.
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 such a material were no
longer available, qualifying a new supplier could delay the manufacturing of
such products.
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 Agreements on Tariffs and Trade ("GATT"). One change in U.S. law
required by GATT is the amendment of patent law to permit owners to choose a
patent term of 20 years from the date of filing the application or 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 had 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 ANDA, which certifies the date of patent
expiration, until the expiration of the extended patent period. The extension of
patent protection has and will delay the launch of future products by the
Company.
Prior to receiving FDA approval, the Company is increasingly facing
more lawsuits relating to intellectual property rights. While these suits,
instituted by branded pharmaceutical companies, rarely result in findings of
infringement or monetary settlements, they significantly delay the FDA approval
process. The Company expects the branded pharmaceutical companies to continue
such tactics since it is a very cost effective way to delay generic competition
and the subsequent cost savings for the consumer.
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 1,750 persons, approximately 820 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, 1997, the uncompleted portions of the Company's backlog of
orders was approximately $10,410,000 as compared to approximately $9,747,000 at
March 31, 1996 and $20,979,000 at March 31, 1995. 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 relationship 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 1,100,000 square feet.
Mylan Pharmaceuticals Inc. owns production, warehouse, laboratory and
office facilities in three buildings in Morgantown, West Virginia containing
approximately 435,000 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 38,000 square feet under a lease expiring in 2002. Currently under
construction in Greensboro, North Carolina is a 150,000 square foot distribution
center.
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.
Bertek Pharmaceuticals, Inc. owns production, warehouse and office
facilities in two buildings in Sugar Land, Texas containing approximately 70,000
square feet.
Bertek owns production, warehouse, laboratory and office facilities in
three buildings in Swanton and St. Albans, Vermont containing approximately
118,000 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, warehouse and office facilities in
three buildings in Rockford, Illinois and Largo, Florida containing
approximately 123,000 square feet. UDL also leases a warehouse facility in
Rockford containing approximately 30,000 square feet under a lease expiring in
1999.
The Company's production equipment includes that equipment necessary to
produce and package tablet, capsule, aerosol, liquid, suspensions, transdermal
and powder dosage forms. The Company maintains six analytical testing
laboratories for quality control.
The Company's production 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
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. The Company has appealed
this matter and believes the ultimate resolution of this matter will not exceed
the amount accrued.
The Company is involved in various other legal proceedings that are
considered normal to its business. 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
operations, 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 62 Chairman, Chief Executive Officer and
President
Dana G. Barnett 56 Executive Vice President
Louis J. DeBone 51 Vice President-Operations
Roger L. Foster 50 Vice President-General Counsel
Roderick P. Jackson 57 Senior Vice President
Dr. John P. O'Donnell 51 Vice President-Research and
Quality Control
Patricia Sunseri 57 Vice President-Investor and
Public Relations
C.B. Todd 63 Senior Vice President
Robert W. Smiley 75 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 from 1980 to 1993. He was
elected Chairman of the Board and Chief Executive Officer 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 1995, he was elevated to
Chairman and Chief Executive Officer of Somerset Pharmaceuticals, Inc.
Mr. DeBone has been employed by the Company since 1987. Prior to
assuming his present position in 1991 as Vice President-Operations, he served as
Vice President-Quality Control. Since February 1997, he also serves as President
of Bertek Inc., a subsidiary of the Company. He was previously employed with the
Company from 1976 until 1986 and served as Director of Manufacturing.
Mr. Foster has been employed by the Company since 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 1986. Prior to
assuming his present position in 1992 as Senior Vice President, he served as
Vice President-Marketing and Sales.
Dr. John O'Donnell has been employed by the Company since 1983. Prior
to assuming his present position in 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 served as a Director of the Company since April 1997,
as the Vice President of Investor and Public Relations of the Company since 1989
and as the Director of Investor Relations of the Company from 1984 to 1989. She
also serves as a director of AW Computer Systems, Inc. (a computer hardware and
software company).
Mr. Todd has been employed by the Company since 1970. Prior to assuming
his present position in 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. 20 and 43 of the accompanying Annual Report to Shareholders for the year
ended March 31, 1997.
ITEM 6. Selected Financial Data
The information required by item 6 is hereby incorporated by reference
to p. 20 of the accompanying Annual Report to Shareholders for the year ended
March 31, 1997.
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. 21-25 of the accompanying Annual Report to Shareholders for the year
ended March 31, 1997.
ITEM 7A. Quantitative and Qualitative Disclosures
About Market Risk
Not applicable.
ITEM 8. Financial Statements and Supplementary Data
The information required by item 8 is hereby incorporated by reference
to pp. 26-43 of the accompanying Annual Report to Shareholders for the year
ended March 31, 1997.
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 1997 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. 3,6,8 and 9 of the Company's 1997 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 1997 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......................... 26-27
Consolidated Statements of Earnings................. 28
Consolidated Statements of Shareholders' Equity..... 29
Consolidated Statements of Cash Flows............... 30-31
Notes to Consolidated Financial Statements.......... 32-41
Independent Auditors' Report........................ 42
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.
(4)(a) Rights Agreement dated as of August 22, 1996, between
the Company and American Stock Transfer & Trust Co.,
filed as Exhibit 4.1 to Form 8-K dated August 30, 1996.
(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. 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 and filed as Exhibit 10(h) to
Form 10-K for the fiscal year ended March 31, 1996 and
incorporated herein by reference.
(i) Split Dollar Life Insurance Arrangement with the Todd
Family Irrevocable Trust dated November 11, 1996, filed
herewith.
SPLIT-DOLLAR AGREEMENT
THIS AGREEMENT (the "Agreement") is entered into by and between MYLAN
LABORATORIES INC., a Pennsylvania corporation (hereinafter referred to as the
"Corporation"),
A
N
D
ERIK LIEBERMAN, or his successors (hereinafter referred to as the "Trustee"), as
the Trustee of THE TODD FAMILY IRREVOCABLE TRUST dated as of ____________, 1996
(hereinafter referred to as the "Trust").
W I T N E S S E T H T H A T
WHEREAS, CLARENCE B. TODD is a valuable employee of the Corporation;
and
WHEREAS, the Trustee has applied for and owns the life insurance
policies on the join lives of CLARENCE B. TODD and his wife, MARY LOU TODD,
which are listed on schedule "A" attached hereto and made a part hereof
(hereinafter referred to as 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 the survivor of CLARENCE B. TODD and
his wife, MARY LOU TODD, 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 contract on the
joint lives of CLARENCE B. TODD and his wife, MARY LOU TODD, which become
subject to this Agreement shall be listed on Schedule "A" as such contracts
become subject to this Agreement.
2. Ownership of Policies. The Trustee shall have custody of the
Policies subject to this Agreement and shall be 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 the survivor of CLARENCE B. TODD and his wife, MARY
LOU TODD, 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, however, shall be
limited to an amount equal to the maximum loan value reduced by an amount equal
to the cumulative amount of the premiums on the Policies paid by the Corporation
hereunder. The Trustee's right to withdraw from the Policies' cash values shall
likewise be reduced by an amount equal to the cumulative amount of premiums on
the Policies paid by the Corporation hereunder. CLARENCE B. TODD and/or his
wife, MARY LOU TODD, shall not have any rights, powers or incidents of ownership
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 proceed 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 the premiums.
5. Payment of Premiums. The premiums on the policy 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 (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
CLARENCE B. TODD and MARY LOU TODD'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 of any Policy loans made by the Corporation
shall be considered reimbursement of such 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 of 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 interest hereunder without the written consent of
the other party.
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 by 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.
[signatures on the following page]
IN WITNESS WHEREOF, parties hereto have executed the
Agreement as of the ___________ day of _________________________, 1996
CORPORATION:
MYLAN LABORATORIES INC.
________________________________ By_________________________
Robert W. Smiley, Esq., Secretary Milan Puskar, CEO, President
Chairman of the Board
[CORPORATE SEAL]
WITNESS: TRUSTEE
_______________________________ _______________________(SEAL)
ERIK LIEBERMAN, Trustee
SCHEDULE "A"
To Split-Dollar Agreement dated as of
_____________________, 1996 Between MYLAN LABORATORIES
INC.
and ERIK LIEBERMAN, Trustee
- - ------------------------------------------------------------------------
Company Policy Number Face Amount
- - ------------ --------------- -------------
Guardian Life Insurance 3834739 $6,000,000.00
Company of America
Guardian Life Insurance 3732138 $6,000,000.00
Company of America
(j) Split Dollar Life Insurance Arrangement with the Dana
G. Barnett Irrevocable Family Trust dated October 22,
1996, filed herewith.
SPLIT-DOLLAR AGREEMENT
THIS AGREEMENT (the "Agreement") is entered into by and between MYLAN
LABORATORIES INC., a Pennsylvania corporation (hereinafter referred to as the
ACorporation@),
A
N
D
ERIK LIEBERMAN, or his successors (hereinafter referred to as the "Trustee"), as
the Trustee of THE DANA G. BARNETT IRREVOCABLE FAMILY TRUST dated as of October
22, 1996 (hereinafter referred to as the "Trust").
W I T N E S S E T H T H A T
WHEREAS, DANA G. BARNETT is a valuable employee of the Corporation; and
WHEREAS, the Trustee has applied for and owns the life insurance
policies on the life of DANA G. BARNETT which are listed on schedule "A"
attached hereto and made a part hereof (hereinafter referred to as 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 DANA G. BARNETT, 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 contract on the
life of DANA G. BARNETT which become subject to this Agreement shall be listed
on Schedule "A" as such contracts become subject to this Agreement.
2. Ownership of Policies. The Trustee shall have custody of the
Policies subject to this Agreement and shall be 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 DANA G. BARNETT 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, however,
shall be limited to an amount equal to the maximum loan value reduced by an
amount equal to the cumulative amount of the premiums on the Policies paid by
the Corporation hereunder. The Trustee's right to withdraw from the Policies'
cash values shall likewise be reduced by an amount equal to the cumulative
amount of premiums on the Policies paid by the Corporation hereunder. DANA G.
BARNETT 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 proceed 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 the premiums.
5. Payment of Premiums. The premiums on the policy 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 (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 DANA G. BARNETT'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 of any Policy loans
made by the Corporation shall be considered reimbursement of such 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 of 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 interest hereunder without the written consent of
the other party.
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 by 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.
[signatures on the following page]
IN WITNESS WHEREOF, parties hereto have executed the Agreement as of
the ___________ day of _________________________, 1996
CORPORATION:
MYLAN LABORATORIES INC.
________________________________ By ____________________________
Robert W. Smiley, Esq., Secretary Milan Puskar, CEO, President
Chairman of the Board
[CORPORATE SEAL]
WITNESS: TRUSTEE
_______________________________ _______________________(SEAL)
ERIC LIEBERMAN, Trustee
SCHEDULE "A"
To Split-Dollar Agreement dated as of
_____________________, 1996 Between MYLAN LABORATORIES
INC.
and ERIK LIEBERMAN, Trustee
- - ------------------------------------------------------------------------
Company Policy Number Face Amount
- - ----------- -------------- -------------
Guardian Life Insurance 3832137 $6.000,000.00
Company of America
Guardian Life Insurance 3833624 $6,000,000.00
Company of America
(k) "Salary Continuation Plan" with Patricia Sunseri dated
March 14, 1995, filed herewith.
RETIREMENT BENEFIT AGREEMENT
This Retirement Benefit Agreement (the "Agreement") is entered into on
this 14th day of March, 1995 (the "Effective Date") by and between:
Mylan Laboratories Inc., a
Pennsylvania Corporation,
with offices located at 781
Chestnut Ridge Road,
Morgantown, WV 26505
(hereinafter referred to as
"Mylan" or "Company").
and
Patricia A. Sunseri, an
employee of Mylan who
resides at 244 Klein Road,
Glenshaw, PA 15116
(hereinafter referred to as
"Employee" or "Sunseri").
WHEREAS the Company and Employee, in recognition of Employee 's long
and valuable contribution to the success of the Company, entered into a Salary
Continuation Agreement on April 1, 1989; and
WHEREAS Employee continues to perform valuable services for the
Company; and
WHEREAS in recognition of her continuing service to Mylan, the Company
wishes to provide Employee with financial assistance with respect to certain
Contingencies, in addition to that provided for in said April 1, 1989 Agreement;
and
WHEREAS the Company and Employee wish to RESCIND, and to REPLACE said
Salary Continuation Agreement with this Agreement;
WITNESSETH THEREFORE that in consideration of the additional benefits
provided for hereunder, the premises and covenants set forth herein, and other
good and valuable consideration, the sufficiency of which is hereby
acknowledged, the Company and Employee, intending to be legally bound, agree as
follows:
1
I. DEFINITIONS
Whenever used in the Agreement the following terms shall be defined as
follows:
(a) "Advisor" or "Advisors" shall mean with respect to Employee any
person including lawyers, accountants, estate planners and others, with whom he
may wish to review and discuss the matters set forth herein.
(b) "Agreement" shall mean this Retirement Benefit Agreement which is
entered into on the 14th day of March, 1995.
(c) "At-Will" shall mean with respect to the period of Sunseri's
employment with Mylan, that the Company is under no obligation to continue to
employ Sunseri for any period of time, and can terminate her employment at any
time without notice, subject to certain statutory and regulatory requirements;
and that Employee is under no obligation to remain employed by the Company, and
can terminate her employment with Mylan at any time, without notice.
(d) "Change of Control" shall mean:
(1) The acquisition (other than from the Company) by any person,
entity or "group", within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934 (the "Exchange Act"), excluding, for this
purpose, the Company or its subsidiaries, or any employee benefit plan of the
Company or its subsidiaries which acquires beneficial ownership of voting
securities of the Company (within the meaning of Rule 13d-3 promulgated under
the Exchange Act), or legal ownership of 20% or more of either the then
outstanding shares of common stock or the combined voting power of the Company's
then outstanding voting securities entitled to vote generally in the election of
directors; or
(2) Individuals who, as of the date hereof, constitute the Board
(as of the date hereof the "Incumbent Board") cease for any reason to constitute
at least a majority of the Board, provided that any person becoming a director
subsequent to the date hereof whose election, or nomination for election, by the
Company's shareholders was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election of the
Directors of the Company, as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Exchange Act) shall be, for purposes of this
Agreement, considered as though such person were a member of the Incumbent
Board; or
(3) Approval by the shareholders of the Company of a
reorganization, merger, consolidation, or other action with respect to which
persons who were the shareholders of the Company immediately prior to such
reorganization, merger or consolidation, or other action do not, immediately
thereafter, own more than 50% of the combined voting power entitled to vote
generally in the election of directors of the reorganized, merged or
consolidated company's then outstanding voting securities, or of the sale of all
or substantially all of the assets of the Company.
2
(e) "Contingency" shall mean Retirement or death.
(f) "Mylan" or "Company" shall mean Mylan Laboratories Inc., its
subsidiaries and affiliates.
(g) "Net Present Value" ("NPV") shall mean the present value at any
given time of the benefit to be paid, discounted at seven percent (7%) per
annum.
(h) "Party" or "Parties" shall mean the Company or Employee, or both
the Company and Employee depending upon which term is required by the context in
which it is used.
(i) "Retire" or "Retirement" shall mean the day and date on which
Sunseri's employment with the Company is terminated by either Party for any
reason other than death of the Employee.
(j) "Successor" shall mean any person, partnership, limited
partnership, joint- venture, corporation, trust or any other entity or
organization who, subsequent to the Effective Date, comes into possession of or
acquires, either directly or indirectly, all or substantially all of the
Company's business, assets or voting stock, or the right to direct the business
activities and practices of the Company. B
II. RESCISSION OF PRIOR AGREEMENT
The Salary Continuation Agreement entered into by the Parties on April
1, 1989 and any and all other agreements, express or implied, which may have
been entered into by them prior to the execution of this Agreement, including by
way of example and not of limitation, any agreement which addresses or is
related to salary continuation, deferred compensation, employment, or similar
matters (excluding agreements related to stock options) are hereby RESCINDED by
the mutual consent of the Parties hereto upon execution of this Agreement.
THEREFORE THE PARTIES ACKNOWLEDGE THAT ANY RIGHTS AND
OBLIGATIONS SET FORTH IN ANY SUCH AGREEMENT, WHETHER
EXPRESS OR IMPLIED, ARE FOREVER WAIVED, NULL AND VOID, AND
UNENFORCEABLE AT LAW OR IN EQUITY.
3
III. RETIREMENT
3.1 Upon her Retirement from the Company, and if he is eligible to
receive payments as provided for elsewhere herein, Employee shall receive an
annual retirement benefit equal to the amount set forth below.
3.2 Should Employee Retire after the Effective Date but on or before
March 31, 1996 he shall receive thirty six thousand dollars ($36,000.00) each
year for ten (10) years.
3.3 Should Employee Retire after March 31, 1996 but on or before March
31, 1997 he shall receive seventy thousand dollars ($70,000.00) each year for
ten (10) years.
3.4 Should Employee Retire after March 31, 1997 but on or before March
31, 1998 he shall receive eighty thousand dollars ($80,000.00) each year for ten
(10) years.
3.5 Should Employee Retire after March 31, 1998 but on or before March
31, 1999 he shall receive ninety thousand dollars ($90,000.00) each year for ten
(10) years.
3.6 Should Employee Retire after March 31, 1999 he shall receive one
hundred thousand dollars ($100,000.00) each year for ten (10) years.
3.7 Should Employee become unable to perform the material and
substantial duties of her position prior to March 31, 1999, he shall receive,
pursuant to ss. 4.1, one hundred thousand dollars ($100,000.00) each year for
ten (10) years in lieu of any benefit specified in Sections 3.2 through 3.6
hereof.
3.8 The Company shall pay the amount due hereunder in equal or
substantially equal monthly installments. The first of any such payments shall
be made on the first day of the month following the month in which Employee
Retires, and each subsequent payment shall be made on the first day of each
successive month until Mylan's obligations with respect to such payments have
been satisfied.
3.9 However, upon the written request of the Employee, Mylan may pay
to Employee the NPV of any amount, or of the balance of any such amount, to
which he is entitled hereunder in a lump-sum payment. If the Company grants the
request for a lump sum payment, said payment shall be paid within thirty (30)
days of the date of Employee's request.
IV. CAPACITY TO PERFORM DUTIES
4.1 The certification of a licensed physician selected by the Company
as to Employee's inability to perform the material and substantial duties of her
position shall be conclusive with respect to her status regarding the
application of ss. 3.7 hereof.
4
V. DEATH BENEFIT
5.1 The Company shall maintain for Employee's benefit during her
employment with the Company life insurance policies in the aggregate amount of
one million two hundred fifty thousand dollars ($1,250,000.00).
5.2 If the Employee's death occurs after Retirement, but before having
received the entire benefit provided for under Article III hereof, the balance
of the payments due thereunder shall be paid to Employee's beneficiary in a
lump-sum payment equal to the NPV of the remaining payments.
VI. EFFECT OF CHANGE OF CONTROL
6.1 Upon a Change of Control Sunseri shall receive, in lieu of the
annual payments provided for under Article III, the NPV of One Hundred Thousand
Dollars ($100,000.00) per year for ten (10) years; provided Sunseri is employed
by the Company at or immediately prior to the Change of Control.
6.2 If a Change of Control occurs after her retirement, but before
having received the entire benefit provided for under Article III hereof, the
balance of the payments due thereunder shall be paid to Employee in a lump-sum
payment equal to the NPV of the remaining payments.
VII. SUCCESSORSHIP
This Agreement in its entirety shall be binding upon and enforceable
against the Company and its Successors.
VIII. NO DUPLICATION OF PAYMENTS
Notwithstanding anything to the contrary which may be set forth
elsewhere herein, under no circumstances is Employee or her beneficiary entitled
to take benefits under more than any one article included in this Agreement.
IX. EMPLOYEE CONDUCT WITH RESPECT TO COMPETITORS
9.1 Employee agrees that he will not, without the prior written
consent of the Company, directly or indirectly, whether as an employee, officer,
director, independent contractor, consultant, stockholder, partner or otherwise,
engage in or assist others to engage in or have any interest in any business
which competes with the Company in any geographic area in which the Company
markets or has marketed its products during the year preceding termination of
Sunseri's employment for the greater of:
5
(a) the period during which Employee receives monthly payments under
this Agreement; or
(b) three (3) years following her receipt of a lump-sum payment
hereunder.
9.2 Notwithstanding anything to the contrary set forth elsewhere
herein, stock ownership in a competing business shall not be a breach of this
Agreement, provided such stock is traded on a national exchange.
9.3 The Parties agree and acknowledge that the time, scope and
geographic area and other provisions of this Agreement have been specifically
negotiated by the Parties, and Employee specifically hereby agrees that such
time, scope and geographic area and other provisions are reasonable under these
circumstances. Employee further agrees that if, despite the express agreement of
the Parties to this Agreement, a court should hold any portion of this Agreement
unenforceable for any reason, the maximum restrictions of time, scope and
geographic area reasonable under the circumstances, as determined by the court,
will be substituted for the restrictions herein which such court may find to be
unreasonable or unenforceable.
9.4 The Parties acknowledge that the breach of ss. 10.1 will be such
that the Company will not have an adequate remedy at law because the rights of
the Company under this Agreement are of a specialized and unique character, and
that immediate and irreparable damage will result to the Company if Employee
breaches her obligations under ss. 10.1. The Company may, in addition to any
other remedies and damages available, seek an injunction in the courts of the
State of West Virginia and the United States District Court for the Northern
District of West Virginia to restrain any such breach. Employee represents and
warrants that her expertise and capabilities are such that her obligations under
ss. 10.1 will not prevent her from earning a living.
X. CONSULTING SERVICES
10.1 During the five (5) year period beginning on the day following
Employee's Retirement he shall, at the request of the Company, act in the
capacity of a consultant for the Company, performing such services as may be
consistent with those performed by her during her Employee's employment. These
services may be designated by the President of the Company, or her authorized
representative, and shall be reasonable in scope duration and frequency.
10.2 The Company shall pay the Employee for such consulting services
an hourly rate to be determined by the Parties at such time, but not less than
one hundred fifty dollars ($150.00) per hour, payable monthly.
10.3 In addition to the foregoing, the Company shall reimburse the
Employee monthly for any and all out-of-pocket expenses incurred by the Employee
directly for the benefit of the business of the Company.
6
XI. ELIGIBILITY FOR PAYMENT
11.1 Any and all payments due hereunder, may be denied if not already
begun, or terminated if they have begun, if in the Company's sole judgment
Employee is either not eligible for such payments, or once such payments have
begun is found to be or found to have been ineligible.
11.2 Employee shall not be eligible for any payments hereunder if the
Company, in its sole discretion, finds that during or subsequent to her
employment with the Company he:
(a) breaches, or has breached any term, provision or obligation
enumerated herein;
(b) committed any act by commission or omission which materially and
substantially adversely affects the Company's business or reputation; or
(c) is convicted of any violation of the Federal Food, Drug and
Cosmetic Act, or the violation of any other statute of material relevance to the
Company's business.
11.3 Should Employee be paid any benefits hereunder and thereafter be
found ineligible, or to have been ineligible, he must return to the Company that
portion of the benefit paid to her for the period of her ineligibility.
XII. RIGHT TO CONFER
12.1 Employee shall have the right, but not the obligation to:
(a) Confer with any Advisor of her choice prior to signing
the Agreement; and
(b) Provide her Advisors with a true and complete copy of
the Agreement, and any other pertinent documents
which may be of assistance to her Advisors.
12.2 Should Employee decline the right to confer with her Advisors
prior to executing this Agreement he shall execute an acknowledgement of same
which shall then be incorporated herein by reference. (See Exhibit A)
XIII. NO PROMISE OF CONTINUED EMPLOYMENT
13.1 Employee acknowledges her employment with the Company is AT-WILL.
13.2 Nothing set forth herein shall constitute or be construed as a
contract of employment except in so far as provided for under ss. 13.1 hereof.
7
XIV. RESTRICTION OF ALIENABILITY
Benefits payable to the Employee or beneficiary shall not be subject
to assignment, transfer, attachment, execution, garnishment, sequestration, or
any other seizure under any legal or equitable process, whether on account of
the Employee's or beneficiary's act or by operation of the law.
XV. CONTRACT ADMINISTRATOR
The Director of Taxation and Accounting of the Company, or other
officer of Mylan designated by the Executive Committee of the Company is hereby
named the Contract Administrator for purposes of assuring compliance with the
terms and conditions set forth herein.
XVI. MODIFICATION
This Agreement may not be changed, amended or otherwise modified other
than by a written statement; Provided, such statement is signed by both Parties,
expresses their intent to change the Agreement, and specifically describes such
changes.
XVII. HEADINGS
Except when referenced in the body of this Agreement article headings
are set forth herein for the purpose of convenience only. Such headings shall
not be considered or otherwise referred to when any question or issue arises
with respect to the application or interpretation of any term or condition set
forth herein.
XVIII. COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of
which is to be considered an original, and taken together as one and the same
document.
XIX. GOVERNING LAW
Any an all actions between the Parties regarding the interpretation or
application of any term or provision set forth herein shall be governed by and
interpreted in accordance with the substantive laws, and not the law of
conflicts, of the State of West Virginia. The Company and Employee each do
hereby respectively consent and agree that the courts of the State of West
Virginia shall have jurisdiction, and venue shall properly lie with the courts
of the State of West Virginia, with respect to any and all actions brought
hereunder.
8
XX. SINGULAR OR PLURAL
The singular form of any noun or pronoun shall include the plural when
the context in which such word is used is such that it is apparent the singular
is intended to include the plural and vice versa.
XXI. ASSIGNMENT
The Agreement may not be assigned by either Party, without the written
authorization of the other Party. A Successor shall not be considered an
assignee for purposes of this Article.
XXII. ENTIRE AGREEMENT
The terms and conditions set forth herein contain the entire agreement
between the Company and Employee, and supersede any and all prior agreements or
understandings (whether express or implied) between the Parties with respect to
the matters set forth herein.
XXIII. SURVIVAL
Articles I, II, IX, X, XI, XIX, and XXIII shall survive any expiration
or termination of this Agreement.
XXIV. TERM
The term of this Agreement shall begin on the Effective Date and shall
end on the date on which Mylan makes the last payment to which it is obligated
hereunder.
IN WITNESS of their agreement to the terms and conditions set forth
herein the Company and Employee have caused the following signatures to be
affixed hereto:
MYLAN LABORATORIES INC. PATRICIA A. SUNSERI
BY:________________________ BY:________________________
TITLE:_____________________ DATE:______________________
DATE:______________________
9
EXHIBIT A
ACKNOWLEDGEMENT
I, Patricia A. Sunseri, hereby acknowledge and understand that I have
been given the opportunity to review and discuss the terms of the Agreement with
an Advisor of my choice prior to signing the Agreement. I have decided that it
is not necessary for me to discuss this matter with an Advisor, and therefore I
decline the opportunity to do so.
No one has discouraged me or otherwise attempted to influence me with
regard to my decision to decline the opportunity to discuss this matter with my
Advisors. My refusal of this offer is entirely my own and is made without any
reservation or conditions whatsoever.
WITNESSED BY:
__________________ DATE:_________ BY:__________________ DATE:________
__________________ DATE:_________
(13) Fiscal 1997 Annual Report to the Shareholders (only
those portions which are incorporated in this Report by
reference are being filed herewith).
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
6 Competitive
10 Committed
14 Diversified
18 Financial Highlights
20 Selected Financial Data
21 Management's Discussion
26 Consolidated Balance Sheets
28 Consolidated Statements of Earnings
29 Consolidated Statements of Shareholders' Equity
30 Consolidated Statements of Cash Flows
32 Notes to Consolidated Financial Statements
42 Independent Auditors' Report
43 Market Information
44 Board of Directors
45 Management
46 Corporate Structure
47 Product Guide
59 Shareholder Information
59 Officers
future
Building for the
Mylan Laboratories Inc. launched a new branded products division, Bertek
Pharmaceuticals Inc., which operates as a wholly owned subsidiary. Traditionally
known as a generic drug giant, Mylan sells branded products through Bertek
Pharmaceuticals Inc. The addition of a division dedicated to branded products is
consistent with the Company's mission of operating as a fully integrated
pharmaceutical company.
Through an internal restructuring, a sizable sales force was created for
Bertek Pharmaceuticals, which will be dedicated to selling branded products. The
Bertek Pharmaceuticals sales force currently consists of 85 salespeople and 10
field sales managers, in addition to a dedicated managed-health care team.
The foundation of Bertek Pharmaceuticals is built on two key product lines,
MAXZIDE (R) and NITREK (TM). Mylan now has exclusive rights to MAXZIDER(R), a
popular antihypertensive, in name and shape, as well as patent and formula.
MAXZIDE (R), the first proprietary product developed by Mylan, had been licensed
to American Home Products for marketing.
NITREK (TM), a nitroglycerin transdermal patch for the prevention of
angina, was launched on January 2, 1997. The translucent NITREK (TM) patch is a
smaller, less visible patch. Since it covers less surface area, it may reduce
skin irritation, a common side effect of nitroglycerin patches.
Bertek Pharmaceuticals expects to continue its presence in the branded
products market by adding other proprietary offerings to its line.
To my fellow shareholders,
Fiscal 1997 has been a very challenging year. It has been difficult for the
company and for the shareholders.
Despite difficult industry conditions, our company remained profitable,
achieved the highest sales level in its history, and further fortified its
leadership position.
During the fiscal year we have received 15 product approvals from the FDA,
12 that we are currently shipping and three whose patents have not yet expired.
In spite of these positive accomplishments, our earnings have trailed. How
can that happen? Let me give you a few of the reasons.
There has been extreme pricing pressure in the generic industry for the
past 18 months and it continues into the present. Mylan has built its market
share steadily over the years and according to the IMS National Prescription
Audit, Mylan consistently ranks number one or two among all pharmaceutical
companies, branded or generic, in the number of prescriptions dispensed. We are
aggressively protecting our market share by ke eping our customers price
competitive and we will continue to do so for as long as necessary.
But pricing is not the only problem we have had to deal with throughout
this year. The litigation being perpetuated within the generic industry is
unbelievable. These are lawsuits designed to keep Mylan and other generic
companies from going to market with products.
Today it is almost as expensive to litigate our rights to sell a generic
product as it is to develop that drug.
Another stumbling block has been the General Agreement on Tariffs and Trade
(GATT) legislation which greatly disadvantages generic companies and allows
major drug companies patent extensions and enables them to unjustly earn
billions of dollars. In fact, an independent study done in June of 1996 showed
that this legislation will cost American taxpayers and consumers more than $6
billion.
All of these conditions: lawsuits, patent issues, the GATT legislation,
'bundling' of approvals by the FDA and pricing pressure are some of the
roadblocks we have had to deal with this past year, and we are continuing to
deal with them. We have seen doom and gloom before. We survived and prospered.
We survived because we knew what it took to succeed, and we kept our focus. We
have the same strength today!
We have focused on several things:
We have developed an extremely aggressive R & D program which includes
generic products and proprietary products. We have built a 150,000 square foot
research center, added more state-of-the-art equipment and hired the additional
scientific personnel needed to carry out this plan. With this commitment we now
have 26 Abbreviated New Drug Applications (ANDAs) filed with the FDA waiting for
approval. These drugs represent over $4 billion in sales. Our goal for this year
is to submit an additional 25 ANDAs.
We have increased production capability and added a specialized facility
for our sustained release technology. This patented technology gives us
additional opportunities for first approvals.
The proprietary products in our pipeline are part of our future. Of the six
drugs in development, one has already been submitted and the other five are in
various stages of clinical trials.
We have formed alliances and signed licensing agreements to acquire
compounds and products to further strengthen our position in the marketplace.
We signed an agreement with American Home Products to regain full control
over MAXZIDE (R), our first proprietary product which we developed over 12 years
ago.
We formed "Bertek Pharmaceuticals Inc.," our branded products division
whose detail sales force is calling on physicians to introduce Mylan's
proprietary products.
In every facet of our operations, we will continue to use innovation to
gain and hold our competitive advantage.
Our company is moving through a period of great change perhaps the greatest
in our history. This change brings with it enormous management challenges and
equally significant opportunities to build shareholder value. With the continued
dedication and hard work of our extraordinary people throughout the
organization, we are determined to ensure that Mylan leads this change and
remains the best, most competitive health care company in our industry.
Sincerely,
Milan Puskar
Chairman of the Board, C.E.O. and President
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 history. It is a combination of
the management team, the employees, and the corporate philosophy. Mylan's code
of ethics, and its philosophy, that "if we can't do it right, we don't do it at
all," is evident by the Mylan family of employees whose dedications, hard work
and integrity has provided the foundation upon which this company was
established in 1961, and it continues to be the backbone, as Mylan builds for
the future.
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.
Parke-Davis was the first major drug company to purchase Mylan's finished goods
in 1969.
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.
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.
Morgantown
February 15, 1973, the first shares of stock were traded on the
Over-the-Counter Market, and Mylan became a public company.
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.
White Sulphur
Springs
Princeton
In 1963 Mylan relocated to Princeton, West Virginia and then in 1965 to its
present location in Morgantown.
Mylan merged with Dow B. Hickam Pharmaceuticals, a high quality branded
pharmaceutical company with a highly skilled and aggressive marketing force on
October 30, 1991.
On April 14, 1986, Mylan became a member of the Big Board, The New York Stock
Exchange, and its symbol became MYL.
February 28, 1996, Mylan acquired UDL Laboratories, Inc., the premier supplier
of unit dose generic pharmaceuticals to the institutional and long-term care
marketplace.
Bertek, Inc., an important manufacturer and innovator of state-ofthe-art
transdermal drug delivery systems was acquired on February 15, 1993.
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 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.
November 1988, Mylan announced the joint venture purchase of Somerset
Pharmaceuticals. Somerset received FDA approval in 1989 for Eldepryl (R), an
extremely effective treatment for late stage Parkinson's disease.
Cidra, Puerto Rico became the site of Mylan's third generic manufacturing
facility with its opening in October 1994.
In 1991 the Company also opened its second distribution facility in Reno,
Nevada.
Mylan introduced its first proprietary product, MAXZIDE (R), an
antihypertensive in 1984. In 1988, after three years of clinical testing, Mylan
received approval on half strength MAXZIDE (R)-25MG. Both were licensed to
Lederle Laboratories for distribution.
Bertek Pharmaceuticals Inc., the branded products division of Mylan
Laboratories, launched NITREK (TM)in 1997. NITREK (TM) is Mylan's first branded
generic nitroglycerin transd ermal product, for the treatment of angina. NITREK
(TM)was jointly developed by Mylan Pharmaceuticals and Bertek, Inc.
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.
Can Mylan be competitive
Yes.
In the race to be the best, the teamwork of Mylan's family of employees
gives the Company the competitive edge.
Mylan competes on many fronts. Traditionally, Mylan has been viewed as only
a generic drug company, but in fact, we are a growing, changing, multi-faceted
company with a presence throughout the pharmaceutical industry.
With the heightened concern about health care costs and the constant
changes in the health care markets, Mylan must make certain that its marketing
efforts keep pace with marketplace change. Accordingly, we aggressively protect
our market share by keeping our customers price competitive. We continually
strive to control costs throughout the company in order to remain competitive in
this new environment.
Mylan has some of the most efficient manufacturing facilities in the
industry which allows us to keep production costs to a minimum. We pride
ourselves on not only having state-of-the-art plants, but also having the most
current production equipment and dedicated employees who take great pride in
their work and their company. It is our conviction that Mylan's most important
advantage is the quality and integrity of our people and their capabilities.
Many times people follow Mylan's lead and imitate our style, but it would be
extremely difficult, if not impossible, to duplicate the performance, capability
and dedication of our people. They are truly our competitive edge.
Another advantage for Mylan is our ability to produce very large batches of
product at one time.instead of manufacturing several smaller batches.saving
manufacturing and inspection hours and keeping production costs to a minimum.
We continue to be a market leader in the number of generic products and
strengths. Currently we have 88 products representing 224 strengths, covering 24
therapeutic categories.
We have 26 Abbreviated New Drug Applications (ANDAs) or generic products,
submitted to the FDA with another 25 compounds targeted for submission this
year. There are many more compounds in various stages of development.
Additionally, to continue to grow the Company and increase shareholder
value, Mylan is developing proprietary drugs. Currently we have six of these
compounds in our pipeline. These are products that will have exclusivity and
will not be subjected to the constantly increasing competition that the generic
industry has been experiencing.
Mylan has two distribution centers, one in Greensboro, North Carolina and a
second in Reno, Nevada. For efficiency, product is shipped to these centers when
manufacturing is completed and all shipments to customers are made from the
closest center, resulting in Mylan having the fastest delivery service in the
entire industry. The efficiency of this distribution system creates an advantage
for Mylan and its customers, giving Mylan another competitive edge.
Mylan has built its market share steadily over the years. According to the
IMS National Prescription Audit, Mylan consistently ranks first or second among
all pharmaceutical companies, branded or generic, in the number of prescriptions
dispensed.
In no other industry have the market dynamics changed as dramatically as
they have in the health care field. With the heightened concern about health
care costs, the opportunities for an innovative company producing a wide range
of reasonably priced, high quality products is endless.
Mylan is focused on these opportunities. We have used quality, service and
delivery to build our large distribution network and have become a dominant
player in the marketplace and it is our intention to be an even stronger
presence in the future. Is Mylan competitive? Absolutely!
Is Mylan committed? YES
Mylan's bridge from being only a generic company to becoming a fully
integrated pharmaceutical company is built upon our commitment to researching &
developing proprietary products that meet unmet needs.
We are committed to maintaining our present position of leadership in the
industry while continuing our growth into a fully integrated pharmaceutical
company.
Mylan's mission is clear. We are committed to maintaining our present
position of leadership in the industry while continuing our growth into a fully
integrated pharmaceutical company.
Of course, the key to our company's long-term performance remains research
and development. Our dollar investment in R & D has grown steadily over the
years, and this fiscal year represented approximately 10% of our sales for a
total of $43 million. This investment, along with our accelerated R & D program,
comprises our commitment to developing new products that maximize the value of
our existing products.
But even more important than the size of this investment is the strategy
behind it. We are focusing our efforts on products that meet unmet needs. We are
pioneers who develop new market opportunities. We look to innovator products as
a source of growth and do not pursue "me-too" drugs except as a generic. Our
main areas of concentration are neurology and dermatology = two exciting markets
which represent several billions of dollars in sales. We are targeting these
markets with significant new product research and a restructured, more potent
sales and distribution system. Currently, we have new products in our pipeline
that represent significant improvements over present modalities of treatment in
these fields.
Mylan is a research driven company. That has been our traditional strength.
Accordingly, we have more than tripled our R & D staff over the past four years.
We anticipate further growth now that we completed a new 150,000 square foot
research and development center in Morgantown,West Virginia.
Our present pipeline is the most aggressive in Mylan's history. We have 26
ANDAs filed with the FDA, representing well over $4 billion in current sales.
Our goal is to submit two ANDAs per month, and we feel confident that our new
state-of-the-art facility will enable us to meet this aggressive schedule. The
25 products that we have targeted for submission this year exceed $3 billion in
current sales.
In addition to these 25 new generic products, we have approximately 30 more
in various stages of development and a like amount being sourced for raw
material.
We have developed our own 'Sustained Release' technology which is housed in
a new 27,000 square foot bead facility. This gives us an entree into a major new
market with products like Verapamil HCL ER and Diltiazem HCL ER, our first two
approved products of this type. We have approximately 10 more of these products
in development representing an additional $3 billion in sales.
As a fully integrated pharmaceutical company, Mylan has gone beyond
generics to add a range of innovator drugs to its portfolio. We currently have
six of these products in our pipeline.
We filed the New Drug Application (NDA) on our burn product, Sulfamylon, at
the end of fiscal 1997, and barring any problems, we are anticipating a six
month review of this orphan drug. The product is used to control bacterial
colonization and prevents infectious graft loss in burn patients. Exclusivity
will be seven years from date of approval.
Sertaconazole, our antifungal used for the treatment of Tinea Pedis & Tinea
Cruris is in Phase II-III clinicals. We would hope to have this filed by the
year 2000 and under GATT regulations, this compound would have exclusivity
through the year 2011.
Our wound product, which is an adjunctive therapy to promote wound healing,
is in Phase II. We expect to receive three years exclusivity upon approval of
this product which we hope to file by 1999.
Our topical anesthetic is in Phase III clinicals and our goal is to file on
this product in 1998. It will also receive three years exclusivity upon
approval.
Dotarizine, which is for the prevention of migraine headaches, is in Phase
II clinicals. This is an excellent product and according to what we have been
advised, is the only product being studied for the prevention of migraines. All
others under development are for the treatment of migraines. Our goal is to file
on this product by 2001 and we will have exclusivity under GATT regulations
until 2008.
Apomorphine, which is used in the treatment of the "on/off" or "freeze"
phenomenon associated with late stage Parkinson's disease is in Phase II-III
clinicals. This, too, is a badly needed product because people who suffer from
this affiction are literally house bound. They are afraid to go anywhere because
they could "freeze" and be that way for two or three hours. With this product,
they could inject themselves or be injected by their caretaker and immediately
be "released". Our goal is to file this NDA in 1998 and the product will have
seven years Orphan Drug exclusivity.
Our alliance with VivoRx, Inc., a California based biotech company, is one
of the most exciting projects we have ever been involved in. VivoRx has
developed a breakthrough treatment for the most drastic form of diabetes. Under
the leadership of Dr. Patrick Soon-Shiong, VivoRx is developing a new way to
manage Type 1 Diabetes through pancreatic islet cell implants. Instead of
injecting insulin, patients can produce their own insulin through the implanted
pancreatic islet cells. This avoids the dosage problems that make it difficult
to treat diabetes with daily injections. Through cell implants, the body makes
insulin as needed in the exact amount it requires.
Three patients have been successfully implanted and their progress profiles
are excellent.
Supplying cells in sufficient numbers is one of the challenges
of this procedure, and VivoRx has amended its original Investigational New Drug
(IND) to permit use of human "proliferated" cells. They have already used these
proliferated cells in one patient, whose progress profile is the same as the
original transplant patients.
VivoRx has now been approved to do Phase I-II clinical trials of
encapsulated porcine islet cells in humans and will begin those clinicals by the
end of this calendar year.
The alliance between Mylan and VivoRx is a major step in helping to control
diabetes. This is a devastating disease that accounts for one out of every seven
health care dollars spent in the U.S. Insulin-dependent diabetics alone who
could potentially benefit the most from this technology number 1.4 million in
the U.S. They account for medical expenditures in excess of $10 billion each
year.
Our VivoRx investment is consistent with the Mylan objective of focusing
upon therapies that make a difference in terms of human and economic value.
Is Mylan committed? Completely!
Can Mylan be diversified? Yes
Mylan's diversity in product and technology, and its dedicated family of
employees all work together like the gears of a fine tuned machine to make Mylan
a leader in the industry.
Mylan is a company on the move. Several years ago we developed a business
plan which directed our resources toward a long-term strategy for growth. We
know where we are going and how we want to get there. We are pushing every
growth lever we can to enhance short and long-term prospects.
Our strategy combines enhanced R & D, a diversified product portfolio, and
a reconfigured business through targeted acquisitions and alliances. These goals
provide opportunities to increase our product lines, expand our market presence
and improve our profitability.
The innovator products we have in development coupled with our strong
generic pipeline speaks to Mylan's R & D commitment, while the variety of
product lines speak to our diversification. We have moved beyond the solid
dosage form tablets and capsules which has previously been the bulk of our
product line.
In 1991, we implemented the first steps of our growth plan for the future
by acquiring Dow Hickam Pharmaceuticals, which provided us with two immediate
advantages. First, it is an excellent and very successful wound care company
with solid contacts with physicians, hospitals and long-term care facilities.
markets we had targeted for future growth.
Secondly, it had a first-class and sizeable sales force.something we didn't
have but would definitely need to be able to launch the proprietary products we
were beginning to work on.
Our next acquisition occurred in 1993, when we added Bertek, Inc. to our
family of companies. Bertek, Inc. is a leading manufacturer of transdermal drug
delivery systems. It has unique, state-of-the-art technologies for producing
coatings, laminates and finished pharmaceutical products for transdermal
administration of drugs to patients.
The nitroglycerin patches developed by our Bertek division are smaller and
less visible than traditional types, and since they cover less area, they can
reduce skin irritation, which can be a side effect. We received our first patch
approval on August 30, 1996 and have filed two more ANDAs with the FDA for this
type of product. We have several more compounds in development using the patch
technology.
Our Bertek division has collaborated with Somerset Pharmaceuticals to
produce an EldeprylRegistration Mark patch. Mylan has 50% ownership of Somerset
Pharmaceuticals, which owns the rights to EldeprylRegistration Mark. Currently,
Somerset is in Phase III clinical trials using the patch for treatment of
Alzheimer's disease. Results of the study should be available in the first half
of 1998.
The joint venture purchase of Somerset Pharmaceuticals has proven to be a
special asset to Mylan. Eldepryl (R), in capsule form, is taken by thousands of
patients as an extremely effective treatment of late-stage Parkinson's disease.
In today's health care market, packaging and delivery of drugs can be
almost as important as the drugs themselves. The growth of managed care has
created significant demand for reliable supply, reasonable costs and dependable
service. Mylan is meeting that need through its newest subsidiary, UDL
Laboratories. UDL is the premiere supplier of unit dose multi-source
pharmaceuticals to the institutional and long-term care markets.
Through UDL, Mylan has strengthened its position in the retail,
institutional and managed care markets.
UDL packages more than one billion doses per year. It has contract awards
with a large network of group purchasing organizations. UDL offers over 450 line
items in unit dose form. more than any other single source. It also manufactures
a line of unit dose liquids in a range of sizes. These and other UDL systems
offer doses that are accurately measured, precisely marked and conveniently
packaged. This all adds up to high quality and reduced cost.two essentials in
today's medical marketplace.
Licensing of compounds and products is one of the strategies Mylan is using
to expand its product and pipeline.
Dotarizine and Sertaconazole were licensed from Ferrer Internacional S.A.
of Barcelona, Spain. Both compounds are currently in clinicals.
Generic injectable drugs, a non-narcotic prescription pain product and the
Q-Pen auto-injector delivery system were all licensed from Meridian Medical
Technologies.
A unique technology for a controlled release product from ANDA SR, a
division of ANDRx Corporation.
A sterile, semipermeable bilaminate wound dressing as well as an
ultra-thin, highly flexible, film based wound dressing, both for the Hickam
product line, licensed from Polymedica Industries, Inc.
A topical anesthetic, which is currently in clinicals, licensed from Smith
& Nephew Ltd. of Great Britain.
An exclusive license with Phytogen International LLC of Canada to introduce
generic Taxol (R) into the United States.
An exciting alliance with VivoRx, Inc., the California based biotechnology
company working on a breakthrough treatment for Type 1 Diabetes.
Mylan has also entered into agreements with Eli Lilly and Company for
generic versions of CeclorRegistration Mark, DarvonRegistration Mark and
DarvonRegistration Mark Compound-65, as well as other products.
Through acquisitions and alliances, Mylan is expanding its product mix and
extending its reach in marketing, sales, packaging and distribution. We are
exploiting synergies to lower cost, improve efficiency, maximize quality and
diversify products.
We are confident in Mylan's growth strategy of enhanced R & D, product
diversification and strategic acquisitions and alliances. We have a successful
past, a firm hold on the present and a strong foothold in the future.
Is Mylan diversified? Definitely!
Financial Highlights
MYLAN LABORATORIES INC.
- - ----------------------------------------------
Net Earnings (in millions)
------ ------ ------ ------ ------
70.6 73.1 120.9 102.3 63.1
Shareholders' Equity (in millions)
FY 93 94 95 96 97
----- ----- ----- ----- -----
296.0 380.0 482.7 616.4 659.7
Net Sales (in millions)
FY 93 94 95 96 97
----- ----- ----- ----- -----
212.0 251.8 396.1 392.9 440.2
Notice of Annual Meeting
- - -----------------------------------
The annual meeting of shareholders of the Company will be held on Thursday, July
24, 1997 at 10:00 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 Internet
http://www.mylan.com
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, 1997 and 1996, and the
related consolidated statements of earnings, shareholders' equity, and cash
flows for each of the three years in the period ended March 31, 1997, appearing
on pages 26 through 41. 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 Mylan Laboratories Inc. and
subsidiaries as of March 31, 1997 and 1996, and the results of their operations
and their cash flows for each of the three years in the period ended March 31,
1997, in conformity with generally accepted accounting principles. Pittsburgh,
Pennsylvania April 30, 1997
Information card Insert
I would like more information on:
______Dividend Reinvestment and Stock Purchase Program
______Shareholder Rights Plan
Name
Address
City State Zip Code
Phone
MYLAN Laboratories Inc.
Building for the Future
Mylan Laboratories Inc.
1030 Century Building
130 Seventh Street
Pittsburgh, Pennsylvania 15222
1997 Annual Report to Shareholders
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
Robert W. Smiley, Esq.
Doepken Keevican & Weiss
Attorneys-At-Law
Pittsburgh, Pennsylvania
Patricia A. Sunseri
Vice President-
Investor and Public Relations
of the Company
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, Esq.
Vice President and
General Counsel
Roderick P. Jackson
Senior Vice President
Dr. John P. O'Donnell
Vice President-
Research and Quality Control
Robert W. Smiley, Esq.
Secretary
Patricia A. 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
MYLAN LABORATORIES INC. BOARD OF DIRECTORS
Robert W. Smiley, Esq.
Doepken Keevican & Weiss
Attorneys-At-Law
Pittsburgh, Pennsylvania
Dana G. Barnett
Executive Vice President
of the Company
44
Milan Puskar
Chairman of the Board, C.E.O. and President
of the Company
Laurence S. DeLynn
Retail Consultant
Morgantown, West Virginia
C. B. Todd
Senior Vice President
of the Company
Patricia A. Sunseri
Vice President
Investor and Public Relations
of the Company
John C. Gaisford, M.D.
Director of Burn Research
West Penn Hospital
Pittsburgh, Pennsylvania
MYLAN LABORATORIES INC. MANAGEMENT
45
Dr. John P. O'Donnell
Vice President
Research and
Quality Control
Roderick P. Jackson
Senior Vice President
Carlos Machin
President and
General Manager
Mylan Inc.
Louis J. DeBone
Vice President
Operations
Thomas Clark, M.D.
Medical Director
Roger L. Foster, Esq.
Vice President and
General Counsel
William W. Richardson
President
Bertek Pharmaceuticals Inc.
Michael K. Reicher
President
UDL Laboratories, Inc.
consolidated balance sheets
MYLAN LABORATORIES INC.
March 31 1997 1996
Assets
Current assets
Cash and cash equivalents $126,156,000 $176,980,000
Marketable securities 13,876,000 12,460,000
Accounts receivable 115,303,000 71,997,000
Inventories 100,890,000 100,616,000
Deferred income tax benefit 13,532,000 11,560,000
Other current assets 9,263,000 5,715,000
Total current assets 379,020,000 379,328,000
Property, plant and equipment - net of
accumulated depreciation 135,829,000 121,793,000
Marketable securities, non-current 23,668,000 20,803,000
Intangible assets - net of accumulated
amortization 137,062,000 74,601,000
Other assets 76,888,000 69,147,000
Investment in and advances to Somerset 25,113,000 26,337,000
Total assets $777,580,000 $692,009,000
See notes to consolidated financial statements.
26
consolidated balance sheets
MYLAN LABORATORIES INC.
March 31 1997 1996
Liabilities and shareholders' equity
Current liabilities
Trade accounts payable $18,039,000 $14,039,000
Current portion of long-term debt 17,453,000 1,400,000
Income taxes payable 13,795,000 10,096,000
Other current liabilities 24,566,000 18,185,000
Cash dividend payable 4,893,000 4,875,000
Total current liabilities 78,746,000 48,595,000
Long-term obligations 32,593,000 18,002,000
Deferred income tax liability 6,501,000 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
122,814,956 at March 31, 1997 and
122,524,789 at March 31, 1996 61,407,000 61,262,000
Additional paid-in capital 89,262,000 85,996,000
Retained earnings 513,750,000 470,136,000
Unrealized(loss)/gain on marketable securities (947,000) 1,575,000
663,472,000 618,969,000
Less treasury stock at cost = 752,950
shares at March 31, 1997 and 694,950
shares at March 31, 1996 3,732,000 2,528,000
Net Worth 659,740,000 616,441,000
Total liabilities and shareholders' equity $777,580,000 $692,009,000
27
CONSOLIDATED STATEMENTS OF EARNINGS
MYLAN LABORATORIES INC.
Year ended March 31
1997 1996 1995
Net sales $440,192,000 $392,860,000 $396,120,000
Cost and expenses
Cost of sales 259,666,000 197,697,000 169,590,000
Research and development 42,633,000 38,913,000 30,533,000
Selling and administrative 79,948,000 56,073,000 58,035,000
382,247,000 292,683,000 258,158,000
Equity in earnings of Somerset 18,814,000 24,968,000 25,406,000
Other income 10,436,000 16,612,000 7,958,000
Earnings before income taxes 87,195,000 141,757,000 171,326,000
Income taxes 24,068,000 39,432,000 50,457,000
Net earnings $63,127,000 $102,325,000 $120,869,000
Earnings per share $ .52 $ .86 $ 1.02
Weighted average common shares 121,926,000 119,530,000 118,963,000
See notes to consolidated financial statements.
28
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
MYLAN LABORATORIES INC.
Unrealized Gain/
Common Stock Common Stock Additional Retained (Loss) on
Shares Amount Paid-In Capital Earnings Marketable Securities
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 -
Unrealized gain on marketable securities - - - - 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 3,103,000 - -
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 - -
Unrealized gain on marketable securities - - - - 201,000
March 31, 1996 122,524,789 $ 61,262,000 $ 85,996,000 $470,136,000 $ 1,575,000
Stock options exercised 290,167 145,000 3,266,000 - -
Cash dividend $.16 per share - - - (19,513,000) -
Net earnings - - - 63,127,000 -
Unrealized loss on marketable securities - - - - (2,522,000)
March 31, 1997 122,814,956 $ 61,407,000 $ 89,262,000 $513,750,000 $ 947,000)
See notes to consolidated financial statements.
29
CONSOLIDATED STATEMENTS OF CASH FLOWS
MYLAN LABORATORIES INC.
Year ended March 31 1997 1996 1995
Cash flows from operating activities
Net earnings $ 63,127,000 $102,325,000 $120,869,000
Adjustments to reconcile net earnings to net cash
provided from operatingactivities:
Depreciation and amortization 17,347,000 13,450,000 12,700,000
Deferred income tax benefit 47,000 1,236,000 (10,427,000)
Equity in earnings of Somerset (18,814,000) (24,968,000) (25,406,000)
Cash received from Somerset 20,038,000 20,686,000 21,114,000
Allowances on accounts receivable 2,422,000 (4,141,000) 11,327,000
Loss on sale of assets 1,171,000 - -
Other noncash expenses 290,000 516,000 1,925,000
Changes in operating assets and liabilities:
Accounts receivable (45,198,000) (4,013,000) (14,240,000)
Inventories (1,495,000) (11,148,000) (19,590,000)
Trade accounts payable 4,000,000 (2,463,000) 3,410,000
Income taxes payable 773,000 (12,468,000) 25,060,000
Other operating assets and liabilities 2,829,000 (3,442,000) 9,789,000
Net cash provided from operating activities 46,537,000 75,570,000 136,531,000
Cash flows from investing activities
Additions to property, plant and equipment (26,854,000) (31,419,000) (17,485,000)
Increase in intangible and other assets (30,674,000) (16,970,000) (8,238,000)
Purchase of investment securities (23,221,000) (27,169,000) (58,491,000)
Proceeds from investment securities 18,060,000 68,753,000 25,482,000
Proceeds from sale of assets 3,500,000 - -
Acquisitions net of cash acquired - (520,000) (6,432,000)
Net cash used in investing activities (59,189,000) (7,325,000) (65,164,000)
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
MYLAN LABORATORIES INC.
Year ended March 31 1997 1996 1995
Cash flows from financing activitieS
Payments on long-term obligations $(19,788,000) $ (2,879,000) $ (451,000)
Cash dividends paid (19,491,000) (17,502,000) (22,208,000)
Proceeds from exercise of stock options 1,107,000 1,836,000 3,046,000
Net cash used in financing activities (38,172,000) (18,545,000) (19,613,000)
Net (decrease) increase in cash and cash equivalents (50,824,000) 49,700,000 51,754,000
Cash and cash equivalents-beginning of year 176,980,000 127,280,000 75,526,000
Cash and cash equivalents-end of year $126,156,000 $176,980,000 $127,280,000
31
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 $1,977,000 in 1997, $22,000 in 1996, $25,000 in
1995. Cash payments for income taxes were $23,245,000 in 1997, $50,665,000 in
1996, and $35,822,000 in 1995. 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.
During fiscal 1997 in connection with the MAXZIDE(R) agreements the Company
recorded intangible assets and long-term obligations of $49,666,000 in excess of
amounts paid to AHP at closing. 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, 1997, 1996, and 1995
were $205,000, $1,155,000 and $396,000. During fiscal 1996 the Company declared
a 3 for 2 stock split effected in the form of a stock dividend (see note L). In
consideration for the exercise of stock options, the Company received and
recorded into treasury stock 53,333 shares valued at $900,000 in fiscal 1997,
10,166 shares valued at $209,000 in fiscal 1996 and 659 shares valued at $14,000
in fiscal 1995.
FINANCIAL HIGHLIGHTS
MYLAN LABORATORIES INC.
March 31 1997 1996
Net sales $440,192,000 $392,860,000
Net earnings $ 63,127,000 $102,325,000
Earnings per share $ .52 $ .86
Working capital $300,274,000 $330,733,000
Current ratio 4.8 to 1 7.8 to 1
Total assets $777,580,000 $692,009,000
Shareholders' equity $659,740,000 $616,441,000
Book value per share $ 5.41 $ 5.16
19
SELECTED FINANCIAL DATA
MYLAN LABORATORIES INC.
Year ended March 31 1997 1996 1995 1994 1993 1992 1991
Net sales $440,192 $392,860 $396,120 $251,773 $211,964 $131,936 $104,524
Net earnings $ 63,127 $102,325 $120,869 $ 73,067 $ 70,621 $ 40,114 $ 32,952
Earnings per share $ .52 $ .86 $ 1.02 $ .62 $ .61 $ .35 $ .29
Shares used in computation 121,926 119,530 118,963 118,423 115,651 114,726 114,552
At year end
Working capital $300,274 $330,733 $275,032 $191,647 $154,000 $102,105 $ 81,571
Total assets $777,580 $692,009 $546,201 $403,325 $351,105 $226,720 $186,955
Long-term obligations $ 32,593 $ 18,002 $ 7,122 $ 4,609 $ 5,125 $ 3,600 $ 3,398
Shareholders' equity $659,740 $616,441 $482,728 $379,969 $295,972 $203,452 $167,531
Book value per share $ 5.41 $ 5.16 $ 4.06 $ 3.21 $ 2.56 $ 1.77 $ 1.46
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 has 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.
20
Management's Discussion and Analysis of Results of Operations and Financial
Position MYLAN LABORATORIES INC.
Overview Despite several positive steps taken by Mylan Laboratories Inc.
("the Company") in fiscal 1996 and fiscal 1997, the highly competitive nature of
the generic pharmaceutical industry and an increasingly difficult regulatory
environment took their tolls on fiscal 1997 operations. Net earnings in fiscal
1997 were $63.1 million compared to $102.3 million in fiscal 1996 and $120.9
million in fiscal 1995. The Company estimates that price deterioration in the
generic market reduced net earnings by approximately $75 million in fiscal 1997
and $55 million in fiscal 1996. While the generic industry has always been
competitive, the Company has never witnessed so strong an impact as has been
realized over the past two years. In addition to price deterioration on the
existing generic product line, the Company has received few significant new
product approvals in the past two years. Historically, new product approvals
have been the Company's primary means of offsetting pricing pressure. In fiscal
1996 only four products were added to the Company's generic line and while nine
products were added in fiscal 1997, the most promising addition, glyburide, had
to be withdrawn from the market when the U.S. Food and Drug Administration
("FDA") changed the approval to a tentative approval as a result of patent
related issues. Patent related lawsuits by branded pharmaceutical companies,
such as that filed with respect to glyburide, are becoming increasingly common.
While such suits rarely result in findings of infringement, they delay the FDA
approval process while issues such as patent validity and potential infringement
are resolved by the courts. The Company believes that branded pharmaceutical
companies are likely to continue such tactics given the magnitude of the current
market for several branded products scheduled to lose patent exclusivity in the
near future. The Company's strategy for maximizing shareholder value given the
volatility in the generic industry was initiated some years ago. The strategy
includes a commitment to maintaining its leadership role in the generic industry
by broadening both generic product line and customer base. Additionally, the
Company is equally committed to becoming a fully integrated pharmaceutical
company capable of satisfying unmet needs in the medical community. Throughout
fiscal 1996 and 1997 the Company has taken several steps towards meeting these
objectives. Through the Company's generic distribution network, the volume of
generic shipments, excluding unit dose shipments, increased by 18% in fiscal
1997 to approximately 6.7 billion units. Fiscal 1996 experienced a similar
growth rate over the previous year. This growth is indicative of the Company's
proven ability to consistently produce high quality, cost effective product to
meet customers increasing demand. In February of 1996, the Company acquired UDL
Laboratories, Inc. ("UDL"), the premier supplier of unit dose generic
pharmaceuticals to the institutional and long-term care markets. While full
integration of this subsidiary remains to be accomplished, net sales, gross
profit and net earnings were all favorably impacted in fiscal 1997 as a result
of this acquisition. More importantly, the acquisition provides a critical link
for the Company to the ever growing managed care segment of the generic
industry. In August of 1996, the Company received FDA approval to market the
Bertek, Inc. nitroglycerin transdermal patch. The Company acquired Bertek, Inc.
in February of 1993 based on the transdermal technology available there and the
possibilities for future development of alternative delivery system
pharmaceutical products. The approval of the nitroglycerin patch immediately
improved profits for the Company as this patch replaced a product previously
marketed by the Company which was purchased from another manufacturer. In
addition, due to the favorable attributes of the Bertek, Inc. patch, total sales
of nitroglycerin patch products virtually doubled in fiscal 1997.
In August of 1996, the Company terminated its license arrangement with
Lederle Laboratories ("Lederle") relating to MAXZIDE (R) and MAXZIDE (R)-25MG
and began direct marketing and sales of these products through its Bertek
Pharmaceuticals Inc. subsidiary (formerly Dow Hickam Pharmaceuticals Inc.).
Since 1984, the Company, which developed MAXZIDE (R) and MAXZIDE (R)-25MG, had
been manufacturing these products for sale exclusively to Lederle, which
marketed the products using the Lederle name. As a result of the termination of
the license arrangement with Lederle, the Company's sales revenue relating to
MAXZIDE (R)and MAXZIDE (R)-25MG increased by nearly 100% in fiscal 1997 and
gross profits resulting from these sales nearly tripled. In addition, as a
result of the agreement, the Company was also able to begin marketing generic
versions of the MAXZIDE (R) products and a generic version of Dyazide(R). The
Company had not been able to market these generic products under the terms of
the Lederle license agreement. While the addition of MAXZIDE (R) and MAXZIDE
(R)-25MG had an immediate favorable impact on fiscal 1997 earnings, it also has
provided the basis for the establishment of Bertek Pharmaceuticals Inc. as a
recognizable name in the branded pharmaceutical industry. It is upon this
platform that the Company plans to launch several branded products in the near
and extended future.
Results of Operations Net Sales and Gross Margin
The following table outlines net sales, gross margin and the corresponding
change from the previous year: (dollars in millions)
Year Ended Net Sales Gross Margin Gross Margin
March 31, Dollars Change Dollars Change as % of Sales
1997 $440.2 12% $ 180.5 - 8% 41%
1996 392.9 - 1% 195.2 - 14% 50%
1995 396.1 57% 226.5 80% 57%
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 eleven products in
fiscal 1995 which accounted for $151.5 million in net sales in fiscal 1995, four
products in fiscal 1996 which accounted for $10.3 million in net sales in fiscal
1996 and nine products in fiscal 1997 which accounted for $34.1 million in net
sales in fiscal 1997. Several variables including timing of the approval, total
market size and the number of competitors affect the net sales and gross margins
for new product approvals. Severe price deterioration in the generic industry
has taken place in the last two years. The primary causes of the deterioration
relate to the consolidation of the Company's customers through mergers and
acquisitions, the emergence of large buying groups which represent many
independent pharmacies and increased competition by brand-name competitors who
have entered the generic industry by creating generic subsidiaries, purchasing
generic companies or by licensing their products prior to or as their product' s
patents expire. The Company estimates that price deterioration resulted in lost
net sales and gross profits of approximately $104 million in fiscal 1997 and $77
million in fiscal 1996. Total unit volume of generic product shipments,
excluding unit dose shipments, increased by 18% in fiscal 1997, 17% in fiscal
1996 and 19% in fiscal 1995 over the respective preceding years. The higher
level of volumes create manufacturing efficiencies which were realized in both
fiscal 1996 and fiscal 1997. The impact of manufacturing efficiencies and higher
volumes, however, were overshadowed by the impact of price deterioration in both
years.
Fiscal 1997 net sales and gross margin were favorably impacted by the
acquisition of UDL in February of 1996 and the termination of the Company's
license agreement with Lederle Laboratories relating to MAXZIDE (R) and MAXZIDE
(R)-25MG in August of 1996. Sales of unit dose products by UDL were
approximately $68.1 million in fiscal 1997 compared to $5.1 million for the one
month period after acquisition in fiscal 1996. These sales generally provide
lower gross margins as a percentage of net sales than the remainder of the
Company's generic product line, as many of the UDL products are purchased from
other manufacturers. Sales of branded MAXZIDE (R) products were $19.7 million in
fiscal 1997 compared to $10.0 million in fiscal 1996 under the license
arrangement with Lederle. 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 years. Research and Development Research and development expenses were
$42.6 million in fiscal 1997, $38.9 million in fiscal 1996 and $30.5 million in
fiscal 1995. These amounts represent approximately 10% of net sales in fiscal
1997 and 1996 and 8% of net sales in fiscal 1995. The following table outlines
the approximate allocation of research and development expenditures: (dollars in
millions)
Year ended March 31 1997 1996 1995
Generic related projects $ 20.5 $18.0 $ 16.3
Innovative compound projects 16.1 14.5 8.6
Transdermal patch projects 6.0 6.4 5.6
During fiscal 1997 the Company completed construction of a 150,000 square
foot facility in Morgantown, West Virginia, which houses the Company's state of
the art research and development facility. This facility provides the Company
with the ability to perform research and development of both innovative and
generic compounds including sustained release compounds.
Selling and Administrative
Selling and administrative expenses were $79.9 million in fiscal 1997,
$56.1 million in fiscal 1996 and $58.0 million in fiscal 1995. Approximately $12
million of the increase from fiscal 1996 to fiscal 1997 is attributable to UDL,
including amortization expense of approximately $3.0 million which resulted from
the acquisition of UDL in February of 1996. In fiscal 1997 the Company incurred
approximately $4.5 million in incremental marketing, promotions and interest
expense related to MAXZIDE (R) products. Also in fiscal 1997, the Company
recorded provisions for certain legal matters as well as bad debt expense
relating to the Foxmeyer bankruptcy, which aggregated approximately $8.0
million.
Equity in Earnings of Somerset
Somerset's contribution to the Company's pretax earnings (in thousands) and
net earnings per share are as follows:
1997 1996 1995
Net Net Net
Quarter Pretax Earnings Pretax Earnings Pretax Earnings
Ended Earnings Per Share Earnings Per Share Earnings Per Share
6/30 $ 5,043 $ .04 $ 5,571 $ .04 $ 5,348 $ .04
9/30 5,002 .04 6,138 .05 6,141 .05
12/31 4,462 .03 7,905 .06 8,330 .06
3/31 4,307 .03 5,354 .04 5,587 .04
Fiscal Year $18,814 $ .14 $24,968 $ .19 $25,406 $ .19
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 of 1996. In late May of 1996 Somerset received
FDA approval to market an easy to identify capsule which was launched
immediately by Somerset. In August of 1996 the FDA approved three companies to
market a generic tablet form of Eldepryl (R). Somerset filed a complaint against
the FDA requesting injunctive and declaratory relief and a review of agency
action, and simultaneously requested a temporary restraining order in connection
with these approvals. The courts denied Somerset's request for a temporary
restraining order and the ruling regarding injunctive relief is pending. The
impact of generic competition, increased legal fees and increased research and
development expenditures by Somerset relating to alternative indications for
Eldepryl (R) and the development of other compounds by Somerset, will continue
to adversely affect Somerset's contribution to the Company's net earnings until
such new indications or compounds are approved for commercialization.
Other Income
Other income, derived principally from investment earnings, was $10.4
million in fiscal 1997, $16.6 million in fiscal 1996 and $8.0 million in fiscal
1995. The fiscal 1997 amount includes a $1.2 million loss incurred by the
Company in connection with the sale of certain assets relating to the custom
label and printing operations of Bertek, Inc. which were sold in February of
1997. Other year to year changes result from changes in the levels of assets
available for investment and investment market conditions. Income Taxes The
effective tax rates for fiscal years 1997 and 1996 were 28% and for fiscal 1995
was 30%. The Company recognizes a benefit from tax credits which reduce the
effective tax rates by 6% in fiscal 1997, 6% in fiscal 1996 and 5% in fiscal
1995. These tax credits result principally from operations in Puerto Rico and
also from credits for increasing research and experimental 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, 45% in fiscal 1996 and 50%
in fiscal 1997, with additional 5% reductions to occur in each of the next two
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 fiscal years 1992 through 1995, the Internal Revenue
Service ("the 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. Also in connection with the audit of the Company's tax
returns, the Service has challenged the Company's position with regards to the
extent of tax credits resulting from operating in Puerto Rico. The Company is
confident that it can reach a negotiated settlement with the Service which will
not have a material adverse effect on its financial position, results of
operations or cash flows. In the event, however, that a satisfactory negotiated
settlement cannot be reached, the Company is prepared to vigorously defend its
tax filing positions. Final resolution of these matters may result in an
increase in the effective tax rate in future years.
Liquidity and Capital Resources
The Company's balance sheet remains strong with total assets of $777.6
million at March 31, 1997 compared to $692.0 million at March 31, 1996.
Principally, as a result of the MAXZIDE (R) transaction in August of 1996,
working capital decreased from $330.7 million at March 31, 1996 to $300.3
million at March 31, 1997, and the ratio of current assets to current
liabilities also dropped from 7.8 to 1 to 4.8 to 1. Net cash provided from
operating activities was $46.5 million in fiscal 1997, $75.6 million in fiscal
1996 and $136.5 million in fiscal 1995. The downward trend corresponds to the
Company's operations for the three years and is also impacted by the timing of
income tax payments and collections of accounts receivable. The Company's net
investment in property, plant and equipment was $26.9 million in fiscal 1997,
$31.4 million in fiscal 1996 and $17.5 million in fiscal 1995. Major investments
included expansion and relocation of the Company's Greensboro distribution
center, expansion and renovation of facilities in Puerto Rico, Vermont and
Florida, replacement of an aircraft, and construction of two facilities in
Morgantown, one a 150,000 square foot research and office facility and also a
27,000 square foot sustained release manufacturing facility. All of these
capital expenditures were made with the general funds of the Company and 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 and in fiscal 1997, the initial payment to American Home
Products in connection with the MAXZIDE (R) products. Payments on long-term
obligations include obligations assumed in connection with the acquisition of
UDL and in fiscal 1997, installment payments in connection with the MAXZIDE (R)
products. The Company paid cash dividends of $.16 per share in fiscal 1997
totaling $19.5 million, $.15 per share in fiscal 1996, totaling $17.5 million
and $.19 per share in fiscal 1995, totaling $22.2 million including a special
one time cash dividend of $.07 per share. In March of 1997, the Company's Board
of Directors authorized the repurchase of up to 5 million shares of the
Company's outstanding common stock. The Company intends to purchase shares
throughout fiscal 1998 and believes that this use of cash will not have an
adverse affect on the Company's operations.
OTHER MATTERS
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128, "Earnings per Share." This standard is effective
for financial statements for years ending after December 15, 1997. Management
believes the application of this standard will not have a material impact on the
Company's computation of earnings per share.
Mylan Pharmaceuticals Inc.
250 mg 500 mg
CEFACLOR Capsules, USP
Compare to:Ceclor (R)*
*REGISTERED TRADEMARK OF ELI LILLY AND COMPANY
200 mg 400 mg
ACEBUTOLOL
HYDROCHLORIDE Capsules
Compare to:Sectral (R)*
*REGISTERED TRADEMARK OF
WYETH-AYERST LABORATORIES
10 mg 25 mg 50 mg
75 mg 100 mg 150 mg
AMITRIPTYLINE HYDROCHLORIDE
Tablets, USP
Compare to:Elavil (R)*
*REGISTERED TRADEMARK OF ZENECA PHARMACEUTICALS
250 mg 500 mg
CHLOROTHIAZIDE Tablets, USP
Compare to:Diuril (R)*
*REGISTERED TRADEMARK OF MERCK & CO., INC.
250 mg/5 mL 375 mg/5 mL
(Not actual size)
Also available in 125 mg/5 mL and 187 mg/5 mL
CEFACLOR
Powders for Oral Suspension, USP
Compare to:Ceclor (R)*
*REGISTERED TRADEMARK OF ELI LILLY AND COMPANY
2 mg 4 mg
ALBUTEROL Tablets,USP
Compare to:Proventil(R)*/Ventolin (R)**
*REGISTERED TRADEMARK OF SCHERING CORPORATION
**REGISTERED TRADEMARK OF GLAXO WELLCOME INC.
100 mg 250 mg
CHLORPROPAMIDE Tablets, USP
Compare to:Diabinese(R)*
*REGISTERED TRADEMARK OF PFIZER INC.
50 mg 100 mg
ATENOLOL Tablets
Compare to:TenorminRegistration Mark*
*REGISTERED TRADEMARK OF ZENECA PHARMACEUTICALS
25 mg 50 mg
CHLORTHALIDONE Tablets, USP
Compare to:Hygroton(R)*
*REGISTERED TRADEMARK OF RHoNE-POULENC RORER PHARMACEUTICALS INC.
100 mg 300 mg
ALLOPURINOL Tablets, USP
Compare to:Zyloprim(R)*
*REGISTERED TRADEMARK OF GLAXO WELLCOME INC.
50 mg/25 mg 100 mg/25 mg
ATENOLOL and
CHLORTHALIDONE Tablets
Compare to:Tenoretic(R)*
*REGISTERED TRADEMARK OF ZENECA PHARMACEUTICALS
250 mg 500 mg
CEPHALEXIN Capsules, USP
Compare to:Keflex(R)*
*REGISTERED TRADEMARK OF ELI LILLY AND COMPANY
200 mg 300 mg
400 mg 800 mg
CIMETIDINE Tablets, USP
Compare to:Tagamet(R)*
*REGISTERED TRADEMARK OF
SMITHKLINE BEECHAM PHARMACEUTICALS
0.25 mg 0.5 mg 1 mg 2 mg
ALPRAZOLAM Tablets, USP
Compare to:Xanax(R)*
*REGISTERED TRADEMARK OF PHARMACIA & UPJOHN COMPANY
0.5 mg 1 mg 2 mg
BUMETANIDE Tablets, USP
Compare to:Bumex(R)*
*REGISTERED TRADEMARK OF ROCHE PHARMACEUTICALS
5 mg/12.5 mg 10 mg/25 mg
CHLORDIAZEPOXIDE and
AMITRIPTYLINE HYDROCHLORIDE
Tablets, USP
Compare to:Limbitrol(R)*
*REGISTERED TRADEMARK OF ROCHE PRODUCTS INC.
5 mg/50 mg
AMILORIDE HYDROCHLORIDE and
HYDROCHLOROTHIAZIDE
Tablets, USP
Compare to:Moduretic(R)*
*REGISTERED TRADEMARK OF MERCK &CO., INC.
12.5 mg 25 mg 50 mg 100 mg
CAPTOPRIL Tablets, USP
Compare to:Capoten (R)*
*REGISTERED TRADEMARK OF BRISTOL-MYERS SQUIBB COMPANY
0.1 mg 0.2 mg 0.3 mg
CLONIDINE HYDROCHLORIDE
Tablets, USP
Compare to:Catapres (R)*
*REGISTERED TRADEMARK OF BOEHRINGER
INGELHEIM PHARMACEUTICALS, INC.
2.5 mg/0.025 mg
DIPHENOXYLATE HYDROCHLORIDE
and ATROPINE SULFATE Tablets, USP
Compare to:Lomotil(R)*
*REGISTERED TRADEMARK OF G.D. SEARLE &CO.
0.1 mg/ 0.2 mg/ 0.3 mg/
15 mg 15 mg 15 mg
CLONIDINE HYDROCHLORIDE and
CHLORTHALIDONE Tablets, USP
Compare to:Combipres(R)*
*REGISTERED TRADEMARK OF BOEHRINGER INGELHEIM PHARMACEUTICALS, INC.
0.5 mg 1 mg 2 mg 5 mg
HALOPERIDOL Tablets, USP
Compare to:Haldol(R)*
*REGISTERED TRADEMARK OF MCNEIL PHARMACEUTICAL
50 mg 100 mg
FLURBIPROFEN Tablets, USP
Compare to:Ansaid(R)*
*REGISTERED TRADEMARK OF PHARMACIA & UPJOHN COMPANY
250 mg 500 mg
ERYTHROMYCIN STEARATE
Tablets, USP
Compare to:Erythrocin(R)* Stearate
*REGISTERED TRADEMARK OF ABBOTT LABORATORIES
10 mg 25 mg
50 mg 75 mg
100 mg
DOXEPIN HYDROCHLORIDE
Capsules, USP
Compare to:Sinequan(R)*
*REGISTERED TRADEMARK OF PFIZER INC.
400 mg 600 mg
800 mg
IBUPROFENTablets, USP
Compare to:Motrin(R)*/Rufen(R)**
*REGISTERED TRADEMARK OF PHARMACIA & UPJOHN COMPANY
**REGISTERED TRADEMARK OF KNOLL LABORATORIES
20 mg 40 mg 80 mg
FUROSEMIDE Tablets, USP
Compare to:Lasix(R)*
*REGISTERED TRADEMARK OF HOECHST MARION ROUSSEL
3.75 mg 7.5 mg 15 mg
CLORAZEPATE DIPOTASSIUM Tablets
Compare to:Tranxene(R)*
*REGISTERED TRADEMARK OF ABBOTT LABORATORIES
600 mg
FENOPROFEN CALCIUM Tablets, USP
Compare to:Nalfon(R)*
*REGISTERED TRADEMARK OF DISTA PRODUCTS COMPANY
1 mg 2.5 mg
5 mg 10 mg
FLUPHENAZINE HYDROCHLORIDE
Tablets, USP
Compare to:Prolixin(R)*
*REGISTERED TRADEMARK OF APOTHECON
600 mg
GEMFIBROZIL Tablets, USP
Compare to:Lopid(R)*
*REGISTERED TRADEMARK OF PARKE-DAVIS
10 mg
CYCLOBENZAPRINE HYDROCHLORIDE
Tablets, USP
Compare to:Flexeril(R)*
*REGISTERED TRADEMARK OF MERCK &CO., INC.
50 mg 100 mg
DOXYCYCLINE HYCLATE
Capsules, USP
Compare to:Vibramycin(R)*
*REGISTERED TRADEMARK OF PFIZER INC.
1.25 mg 2.5 mg
INDAPAMIDE Tablets, USP
Compare to:Lozol(R)*
*REGISTERED TRADEMARK OF RHoNE-POULENC RORER PHARMACEUTICALS INC.
5 mg 10 mg
GLIPIZIDE Tablets
Compare to:Glucotrol(R)*
*REGISTERED TRADEMARK OF PFIZER INC.
2 mg 5 mg 10 mg
DIAZEPAM Tablets, USP
Compare to:Valium(R)*
*REGISTERED TRADEMARK OF ROCHE PRODUCTS INC.
25 mg 50 mg
INDOMETHACIN Capsules, USP
Compare to:Indocin (R)*
*REGISTERED TRADEMARK OF MERCK &CO., INC.
100 mg
DOXYCYCLINE HYCLATE
Tablets, USP
Compare to:Vibra-tabs(R)*
*REGISTERED TRADEMARK OF PFIZER INC.
15 mg 30 mg
FLURAZEPAM HYDROCHLORIDE
Capsules, USP
Compare to:Dalmane(R)*
*REGISTERED TRADEMARK OF ROCHE PRODUCTS INC.
30 mg 60 mg
90 mg 120 mg
DILTIAZEM HYDROCHLORIDE
Tablets, USP
Compare to:Cardizem(R)*
*REGISTERED TRADEMARK OF HOECHST MARION ROUSSEL
1.0 mg
2.0 mg
GUANFACINE HCl Tablets, USP
Compare to:Tenex(R)*
*REGISTERED TRADEMARK OF A. H. ROBINS COMPANY, INC.
50 mg 75 mg
KETOPROFEN Capsules
Compare to:Orudis(R)*
*REGISTERED TRADEMARK OF WYETH-AYERST LABORATORIES
400 mg
ERYTHROMYCIN ETHYLSUCCINATE
Tablets, USP
Compare to:E.E.S. 400(R)*
*REGISTERED TRADEMARK OF ABBOTT LABORATORIES
10 mg 25 mg
50 mg 75 mg
NORTRIPTYLINE HYDROCHLORIDE
Capsules, USP
Compare to:Pamelor(R)*
*REGISTERED TRADEMARK OF SANDOZ PHARMACEUTICALS CORPORATION
2 mg
LOPERAMIDE HYDROCHLORIDE
Capsules, USP
Compare to:Imodium(R)*
*REGISTERED TRADEMARK OF JANSSEN PHARMACEUTICA INC.
250 mg 375 mg 500 mg
NAPROXEN Tablets, USP
Compare to:Naprosyn(R)*
*REGISTERED TRADEMARK OF ROCHE PHARMACEUTICALS
5 mg
METHYCLOTHIAZIDE Tablets, USP
Compare to:Enduron(R)*
*REGISTERED TRADEMARK OF ABBOTT LABORATORIES
1 mg 2 mg
5 mg
PRAZOSIN HYDROCHLORIDE
Capsules, USP
Compare to:Minipress(R)*
*REGISTERED TRADEMARK OF PFIZER INC.
0.5 mg 1 mg 2 mg
LORAZEPAM Tablets, USP
Compare to:Ativan(R)*
*REGISTERED TRADEMARK OF WYETH-AYERST LABORATORIES
250 mg 500 mg
METHYLDOPA Tablets, USP
Compare to:Aldomet(R)*
*REGISTERED TRADEMARK OF MERCK &CO., INC.
275 mg 550 mg
NAPROXEN SODIUM Tablets, USP
Compare to:Anaprox(R)*
*REGISTERED TRADEMARK OF ROCHE PHARMACEUTICALS
500 mg
PROBENECIDTablets, USP
Compare to:Benemid(R)*
*REGISTERED TRADEMARK OF MERCK &CO., INC.
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:Triavil(R)*
*REGISTERED TRADEMARK OF MERCK &CO., INC.
250 mg/15 mg 250 mg/25 mg
METHYLDOPA and HYDROCHLOROTHIAZIDE
Tablets, USP
Compare to:Aldoril(R)*
*REGISTERED TRADEMARK OF MERCK &CO., INC.
25 mg50 mg 75 mg
MAPROTILINE HYDROCHLORIDE
Tablets, USP
Compare to:Ludiomil(R)*
*REGISTERED TRADEMARK OF CIBAGENEVA PHARMACEUTICALS
20 mg 30 mg
NICARDIPINE Capsules, USP
Compare to:Cardene(R)*
*REGISTERED TRADEMARK OF ROCHE PHARMACEUTICALS
5 mg 10 mg
PROCHLORPERAZINE MALEATE
Tablets, USP
Compare to:Compazine(R)*
*REGISTERED TRADEMARK OF SMITHKLINE BEECHAM PHARMACEUTICALS
50 mg 100 mg
MECLOFENAMATE SODIUM
Capsules, USP
Compare to:Meclomen(R)*
*REGISTERED TRADEMARK OF PARKE-DAVIS
50 mg 100 mg
METOPROLOLTARTRATE Tablets, USP
Compare to:Lopressor(R)*
*REGISTERED TRADEMARK OF CIBAGENEVA PHARMACEUTICALS
65 mg
PROPOXYPHENE COMPOUND
Capsules, USP
Compare to:Darvon(R)* Compound-65
*REGISTERED TRADEMARK OF ELI LILLY AND COMPANY
5 mg 10 mg
PINDOLOL Tablets, USP
Compare to:Visken(R)*
*REGISTERED TRADEMARK OF SANDOZ PHARMACEUTICALS CORPORATION
0.2 mg/hr
(Not actual size)
Also available in 0.4 mg/hr and 0.6 mg/hr
NITROGLYCERIN TRANSDERMAL SYSTEM (Patches)
Compare to:Transderm Nitro(R)*
*REGISTERED TRADEMARK OF SUMMIT PHARMACEUTICALS
2.5 mg
METHOTREXATE Tablets, USP
Compare to:Methotrexate Tablets/Rheumatrex(R)*
*REGISTERED TRADEMARK OF LEDERLE LABORATORIES
20 mg 40 mg 80 mg
NADOLOL Tablets, USP
Compare to:Corgard(R)*
*REGISTERED TRADEMARK OF BRISTOL-MYERS SQUIBB COMPANY
10 mg 20 mg
PIROXICAM Capsules, USP
Compare to:Feldene(R)*
*REGISTERED TRADEMARK OF PFIZER INC.
65 mg
PROPOXYPHENE HYDROCHLORIDE
Capsules, USP
Compare to:Darvon(R)*
*REGISTERED TRADEMARK OF ELI LILLY AND COMPANY
0.125 mg/250 mg 0.125 mg/500 mg
RESERPINE and CHLOROTHIAZIDE
Tablets, USP
Compare to:Diupres(R)*
*REGISTERED TRADEMARK OF MERCK &CO., INC.
250 mg 500 mg
TETRACYCLINE HYDROCHLORIDE
Capsules, USP
Compare to:Achromycin V(R)*/Sumycin(R)**
*REGISTERED TRADEMARK OF LEDERLE LABORATORIES
**REGISTERED TRADEMARK OF APOTHECON
65 mg/650 mg
PROPOXYPHENE HYDROCHLORIDE
and ACETAMINOPHEN Tablets, USP
Compare to:Wygesic(R)*
*REGISTERED TRADEMARK OF WYETH-AYERST LABORATORIES
80 mg 120 mg
VERAPAMIL HYDROCHLORIDE
Tablets, USP
Compare to:Isoptin(R)*
*REGISTERED TRADEMARK OF KNOLL LABORATORIES
500 mg
TOLBUTAMIDE Tablets, USP
Compare to:Orinase(R)*
*REGISTERED TRADEMARK OF PHARMACIA & UPJOHN COMPANY
120 MG
240 mg
VERAPAMIL HYDROCHLORIDE
EXTENDED-RELEASE Tablets
Compare to:Isoptin(R) SR*
*REGISTERED TRADEMARK OF KNOLL PHARMACEUTICALS
10 mg 25 mg 50 mg 100 mg
THIORIDAZINE HYDROCHLORIDE
Tablets, USP
Compare to:Mellaril(R)*
*REGISTERED TRADEMARK OF
SANDOZ PHARMACEUTICALS CORPORATION
400 mg
TOLMETIN SODIUM Capsules, USP
Compare to:Tolectin(R)* DS
*REGISTERED TRADEMARK OF MCNEIL PHARMACEUTICAL
100 mg/650 mg 100mg/650 mg
PROPOXYPHENE NAPSYLATE and
ACETAMINOPHEN Tablets, USP
Compare to:Darvocet-N(R)* 100
*REGISTERED TRADEMARK OF ELI LILLY AND COMPANY
25 mg
SPIRONOLACTONE Tablets, USP
Compare to:Aldactone(R)*
*REGISTERED TRADEMARK OF G. D. SEARLE &CO.
10 mg 20 mg
40 mg 80 mg
PROPRANOLOL HYDROCHLORIDE
Tablets, USP
Compare to:Inderal(R)*
*REGISTERED TRADEMARK OF WYETH-AYERST LABORATORIES
1 mg 2 mg
5 mg 10 mg
THIOTHIXENE Capsules, USP
Compare to:Navane(R)*
*REGISTERED TRADEMARK OF PFIZER INC.
600 mg
TOLMETIN SODIUM Tablets, USP
Compare to:Tolectin(R)* 600
*REGISTERED TRADEMARK OF MCNEIL PHARMACEUTICAL
25 mg/25 mg
SPIRONOLACTONE and
HYDROCHLOROTHIAZIDE Tablets, USP
Compare to:Aldactazide(R)*
*REGISTERED TRADEMARK OF G.D. SEARLE &CO.
37.5 mg/25 mg
TRIAMTERENE and
HYDROCHLOROTHIAZIDE
Capsules, USP
Compare to:Dyazide(R)*
*REGISTERED TRADEMARK OF SMITHKLINE BEECHAM PHARMACEUTICALS
150 mg 200 mg
SULINDACTablets, USP
Compare to:Clinoril(R)*
*REGISTERED TRADEMARK OF MERCK &CO., INC.
5 mg 10 mg 20 mg
TIMOLOL MALEATE Tablets, USP
Compare to:Blocadren(R)*
*REGISTERED TRADEMARK OF MERCK &CO., INC.
40 mg/25 mg 80 mg/25 mg
PROPRANOLOL HYDROCHLORIDE and
HYDROCHLOROTHIAZIDE Tablets, USP
Compare to:Inderide(R)*
*REGISTERED TRADEMARK OF WYETH-AYERST LABORATORIES
15 mg 30 mg
TEMAZEPAMCapsules, USP
Compare to:Restoril(R)*
*REGISTERED TRADEMARK OF
SANDOZ PHARMACEUTICALS CORPORATION
37.5 mg/25 mg 75 mg/50 mg
TRIAMTERENE and
HYDROCHLOROTHIAZIDE Tablets, USP
Compare to:Maxzide(R)*-25 mg/Maxzide(R)*
*REGISTERED TRADEMARK OF
AMERICAN CYANAMID CO.
250 mg 500 mg
TOLAZAMIDE Tablets, USP
Compare to:Tolinase(R)*
*REGISTERED TRADEMARK OF PHARMACIA & 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 Rights1997 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 Pharmaceuticals Inc.
Generic Product Line
Generic Name Trade Name
Analgesic
Indomethacin Indocin(R)
Propoxyphene HCL Darvon(R)
Propoxyphene Darvon(R)
Compound Compound-65
Propoxyphene HCL & Acetaminophen Wygesic(R)
Propoxyphene Napsylate & Acetaminophen Darvocet-N(R) 100
Antiangina
Atenolol Tenormin(R)
Nadolol Corgard(R)
*Nitroglycerin Transdermal System (Patch)Transderm Nitro(R)
Verapamil HCL Isoptin(R)
Antianxiety
Alprazolam Xanax(R)
Diazepam Valium(R)
Lorazepam Ativan(R)
Perphenazine & Amitriptyline HCL Triavil(R)
Antibiotic
Cefaclor Ceclor(R)
Cephalexin Keflex(R)
Doxycycline Hyclate Vibramycin(R)
Doxycycline Hyclate Vibra-tabs(R)
Erythromycin Ethylsuccinate E.E.S. 400(R)
Erythromycin Stearate Erythrocin(R)Stearate
Tetracycline HCL Achromycin V(R)Sumycin(R)
Antidepressant
Amitriptyline HCL Elavil(R)
Chlordiazepoxide & Amitriptyline HCL Limbitrol(R)
Doxepin HCL Sinequan(R)
Maprotiline HCL Ludiomil(R)
Nortriptyline HCL Pamelor(R)
Antidiabetic
Chlorpropamide Diabinese(R)
Glipizide Glucotrol(R)
Tolazamide Tolinase(R)
Tolbutamide Orinase(R)
Antidiarrheal
Diphenoxylate HCL& Atropine Sulfate Lomotil(R)
Loperamide HCL Imodium(R)
Generic Name Trade Name
Antiemetic
*Prochlorperazine Maleate Compazine(R)
Antigout
Allopurinol Zyloprim(R)
Antihypertensive
Amiloride HCL & Hydrochlorothiazide Moduretic(R)
Captopril Capoten(R)
Clonidine HCL Catapres(R)
Clonidine HCL & Chlorthalidone Combipres(R)
*Guanfacine Tenex(R)
*Indapamide Lozol(R)
Methyldopa Aldomet(R)
Methyldopa & Hydrochlorothiazide Aldoril(R)
Metoprolol Tartrate Lopressor(R)
Prazosin HCL Minipress(R)
Propranolol HCL Inderal(R)
Propranolol HCL & Hydrochlorothiazide Inderide(R)
*Triamterene and Hydrochlorothiazide Dyazide(R)
*Triamterene and Hydrochlorothiazide MAXZIDE(R)-25MG MAXZIDE(R)
Antilipemic
Gemfibrozil Lopid(R)
Anti-Inflammatory
Fenoprofen Calcium Nalfon(R)
Flurbiprofen Ansaid(R)
Ibuprofen Motrin(R)
Rufen(R)
*Ketoprofen Orudis(R)
Meclofenamate Sodium Meclomen(R)
Naproxen Naprosyn(R)
Naproxen Sodium Anaprox(R)
Piroxicam Feldene(R)
Sulindac Clinoril(R)
Tolmetin Sodium Tolectin(R)DS
Tolmetin Sodium Tolectin(R) 600
Antineoplastic
Methotrexate Methotrexate(R)
Rheumatrex(R)
Antipsychotic
Fluphenazine HCL Prolixin(R)
Haloperidol Haldol(R)
Thioridazine HCL Mellaril(R)
Thiothixene Navane(R)
Generic Name Trade Name
Anxiolytic
Clorazepate Dipotassium Tranxene(R)
Beta Blocker
Acebutolol HCL Sectral(R)
Pindolol Visken(R)
Timolol Maleate Blocadren(R)
Beta Blocker with Diuretic
Atenolol and Chlorthalidone Tenoretic(R)
Bronchial Dilator
Albuterol Proventil(R)
Ventolin(R)
Calcium Channel Blocker
Diltiazem HCL Cardizem(R)
*Nicardipine Cardene(R)
*Verapamil HCL ER Isoptin(R)SR
Diuretic
Bumetanide Bumex(R)
Chlorothiazide Diuril(R)
Chlorthalidone Hygroton(R)
Furosemide Lasix(R)
Methyclothiazide Enduron(R)
Reserpine & Chlorothiazide Diupres(R)
Spironolactone Aldactone(R)
Spironolactone & Hydrochlorothiazide Aldactazide(R)
Hypnotic Agent
Flurazepam HCL Dalmane(R)
Temazepam Restoril(R)
H2 Antagonist
Cimetidine Tagamet(R)
Muscle Relaxant
Cyclobenzaprine HCL Flexeril(R)
Uricosuric
Probenecid Benemid(R)
* Indicates scal 1997 introduction
MARKET INFORMATION
QUARTERLY FINANCIAL DATA
(Amounts in thousands, 1st 2nd 3rd 4th
except per share data) Quarter Quarter Quarter Quarter Year
Fiscal 1997
Net sales $ 98,543 $108,981 $113,981 $118,687 $440,192
Gross profit 42,764 45,145 47,252 45,365 180,526
Net earnings 14,011 17,348 18,081 13,687 63,127
Earnings per share .12 .14 .15 .11 .52
Fiscal 1996
Net sales $109,192 $ 97,715 $ 91,319 $ 94,634 $392,860
Gross profit 58,564 52,856 43,699 40,044 195,163
Net earnings 33,167 29,476 21,924 17,758 102,325
Earnings per share .28 .25 .18 .15 .86
The Company provides certain wholesalers with price adjustment credits
based on their sales under recently implemented marketing programs. During the
latter part of calendar 1996, the volume of sales by these wholesalers exceeded
the Company's estimates and resulted in the Company recording increased
provisions for price adjustment credits for such sales in the fourth quarter of
fiscal 1997. The Company estimates that increased provisions relating to prior
quarters' sales reduced fourth quarter net earnings by approximately $4.0
million.
The fourth quarter of fiscal 1997 also includes a pre-tax charge of
approximately $1.2 million, approximately $800,000 after taxes, resulting from
the sale of certain assets relating to the Company's custom label and printing
operations in Vermont. These operations were acquired in connection with the
acquisition of Bertek, Inc. and did not contribute to the Company's strategic
objectives.
MARKET PRICES
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
Fiscal 1997
High 215/8 171/2 171/2 181/4
Low 161/4 141/4 14 143/8
Fiscal 1996
High 213/8 233/4 243/8 227/8
Low 183/4 183/8 185/8 187/8
New York Stock Exchange Symbol: MYL
On April 30, 1997 the Company had approximately 98,964 shareholders.
STOCK SPLITS
Split Date Amount Split Price Presplit Price
July 20, 1979 5/4 103/4 131/2
Nov. 13, 1981 2/1 131/2 271/8
June 30, 1983 2/1 161/4 321/2
March 1, 1984 3/2 14 21
July 31, 1984 3/2 197/8 293/4
Feb. 15, 1985 2/1 177/8 353/4
Aug. 1, 1986 3/2 14 21
Aug. 1, 1992 2/1 213/4 431/2
Aug. 15, 1995 3/2 21 311/2
43
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 governmental agencies within the United States.
2. MARKETABLE SECURITIES The Company accounts for investments in marketable
securities in accordance with Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities." The
Company's investments are classified as "available for sale" and, accordingly,
are recorded at current market value with offsetting adjustments to
shareholders' equity, net of income taxes.
3. ACCOUNTS RECEIVABLE AND REVENUE RECOGNITION The Company recognizes
revenue from product sales upon shipment to customers. Provisions for estimated
discounts, rebates, price adjustments, 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 $14,631,000 at
March 31, 1997 and $12,559,000 at March 31, 1996.
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." 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 (see note A.10).
9. CONCENTRATIONS OF CREDIT RISK Financial instruments that potentially
subject the Company to credit risk consist principally of interest-bearing
investments and trade receivables. The Company performs ongoing credit
evaluations of its customers and generally does not require collateral. No
single customer represented more than 10% of net sales in 1997, 1996 or 1995.
The Company invests its excess cash in deposits with major banks and other high
quality short-term liquid money market instruments (commercial paper, government
and government agency notes and bills, etc.). These investments generally mature
within twelve months.
10. accounting standards The Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings per Share." This
standard is effective for financial statements for years ending after December
15, 1997. Management believes the application of this standard will not have a
material impact on the Company's computation of earnings per share. Effective
April 1, 1996, the Company adopted the provisions of Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of." This statement requires
that long-lived assets and certain identifiable intangible assets be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The recognition and
measurement of impairment losses for long-liv ed assets under the new statement
is consistent with the Company's past practice. Since adoption, no significant
impairment losses have been recognized.
11. 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.
Actual results could differ from those estimates.
12. RECLASSIFICATION Certain prior year amounts have been reclassified to
conform to the 1997 presentation.
BUSINESS AND PRODUCT ACQUISITIONS
UDL LABORATORIES, INC. 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 and research and development
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
MAXZIDE(R) AND MAXZIDE(R)-25MG 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(R)-25MG ("MAXZIDE"). These agreements
were subject to regulatory approval which was received on August 2, 1996. Since
1984 these products, which were developed and manufactured by the Company, were
marketed by AHP's Lederle Laboratories Division under a worldwide license
arrangement.
Under the terms of the new agreements the Company is now marketing the
products in the United States. AHP retained marketing rights in a few select
foreign countries and will continue to purchase product from the Company. AHP
also retains ownership of certain trademarks and tradedress which have been
licensed to the Company for a period of five years. At the end of the five year
period ownership of these intangibles will be transferred to the Company. In
connection with the new agreements both parties agreed to terminate all legal
actions between the companies relating to MAXZIDE(R).
As a result of the transaction the Company has recorded an intangible
asset of approximately $69,666,000 which represents the present value of the
minimum payments due to AHP (see note J). The Company will recognize expense of
approximately $2,800,000 annually through the amortization of this intangible
asset over the estimated useful life of the asset. Additionally, the Company
will recognize interest expense on the outstanding obligation to AHP. From
consummation of the transaction through March 31, 1997 the Company recognized
$3,912,000 in amortization and interest expense.
In connection with the transaction, the Company also began selling a
generic version of DyazideRegistration Mark. The previous license arrangement
with AHP prevented the Company from marketing this product. The Company has
agreed to pay to AHP certain amounts predicated upon the gross profits realized
by the Company resulting from the sales of this generic product for a period of
three years.
INVENTORIES
Inventories consist of the following components: (in thousands)
March 31, 1997 1996
Raw materials $51,796 $42,983
Work in process 20,843 19,804
Finished goods 28,251 37,829
$100,890 $100,616
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following components: (in
thousands)
March 31, Useful Lives 1997 1996
Land and land improvements - $6,734 $6,734
Buildings and improvements 20 - 40 66,530 51,390
Machinery and equipment 5 - 10 104,566 95,112
Construction in progress - 19,636 20,209
197,466 173,445
Less accumulated depreciation 61,637 51,652
$135,829 $121,793
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 1997, 1996, and 1995. 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, 1996 1995 1994
Current assets $45,871 $43,993 $48,770
Non-current assets 7,006 7,127 6,380
Current liabilities 19,075 17,057 29,211
Payable to owners 1,621 2,075 2,318
Other liabilities - 63 292
Condensed audited income statement information of Somerset is as
follows: (in thousands)
Year ended December 31, 1996 1995 1994
Net sales $101,512 $107,365 $124,566
Cost and expenses 46,895 42,812 59,557
Income taxes 18,815 20,200 20,900
Net earnings $ 35,802 $44,353 $44,109
The above information represents 100% of Somerset's operations of which
the Company has a 50% interest.
Somerset's marketing exclusivity for Eldepryl(R) under the Orphan Drug Act
expired on June 6, 1996. In August 1996, the U.S. Food and Drug Administration
("FDA") granted approval to several companies to market a generic tablet form of
EldeprylRegistration Mark. Somerset has filed suit in connection with these
approvals and the matter is pending in Federal District Court.
In March 1997, Somerset was notified by the Internal Revenue Service that
it had initiated a challenge related to issues concerning Somerset's Code
Section 936 credit for tax years 1993 through 1995. Management of Somerset
believes it has appropriately claimed the Code
Section 936 credit and intends to vigorously defend this matter. In the
event Somerset is unsuccessful in its defense of this matter, Somerset would be
subject to approximately $9,000,000 of additional income tax and interest
charges that have not been accrued as of March 31, 1997.
MARKETABLE SECURITIES The amortized cost and estimated market
values at March 31, 1997 and 1996 are as follows: (in thousands)
Gross Gross
Amortized Unrealized Unrealized Market
March 31, 1997 Cost Gains Losses Value
Debt securities:
U.S. Government obligations $ 4,871 $ 5 $ 99 $ 4,777
Municipal obligations 22,629 123 47 22,705
Corporate bonds 2,407 11 36 2,382
Total debt securities 29,907 139 182 29,864
Equity securities 9,095 1,112 2,527 7,680
Total securities $ 39,002 $ 1,251 $ 2,709 $ 37,544
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
Maturities of debt securities at market value at March 31, 1997 are as
follows: (in thousands)
Mature in one year or less $ 6,196
Mature after one year through five years 12,731
Mature after five years 10,937
$ 29,864
Proceeds from sales of marketable securities were $11,369,000, $27,667,000
and $5,068,000 during 1997, 1996 and 1995. Gross gains of $565,000, $617,000 and
$14,000 and gross losses of $271,000, $39,000 and $142,000 were realized on
those sales during 1997, 1996 and 1995. The cost of investments sold is
determined by the specific identification method.
INTANGIBLE ASSETS
Intangible assets consist of the following components: (in thousands)
March 31, Useful Lives 1997 1996
Patents and technologies 10 - 20 $27,165 $26,972
License fees and agreements 2 - 12 7,587 7,587
MAXZIDERegistration Mark intangibles 25 69,666 -
Goodwill 20 - 40 31,732 31,768
Other 5 - 20 25,715 25,715
161,865 92,042
Less accumulated amortization 24,803 17,441
$137,062 $74,601
The MAXZIDE(R)intangibles relate to trademark, tradedress and marketing
rights acquired in the transaction described in note B. The balance in Other
consists principally of non-compete agreements, an assembled workforce, customer
lists and contracts. Amortization is provided for on a straight-line basis.
OTHER ASSETS Other assets consist of the following components: (in thousands)
March 31, 1997 1996
Pooled asset funds $18,795 $17,611
Cash surrender value 23,342 19,477
Other investments 34,751 32,059
$76,888 $69,147
Pooled asset funds includes 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 $1,184,000 in 1997, $3,888,000 in 1996, and $829,000 in
1995. At March 31, 1997 and 1996 the carrying amounts of these investments
approximated their
fair value.
Cash surrender value represents insurance policies on certain officers and
key employees and the value of split dollar life insurance agreements with
certain current and former executive officers of the Company.
Other investments are comprised principally of investments in non-publicly
traded equity securities. Such investments are accounted for under the cost
method.
OTHER CURRENT LIABILITIES Other current liabilities includes payroll and
employee benefit plan accruals which amounted to $10,300,000 and $8,561,000 and
accruals for Medicaid Reimbur sements of $3,821,000 and $3,217,000 at March 31,
1997 and 1996.
LONG-TERM OBLIGATIONS Long-term obligations includes accruals for
post-retirement compensation pursuant to agreements with certain key employees
and directors of approximately $9,805,000 and $9,362,000 at March 31, 1997 and
1996. Under these agreements, benefits are to be paid over periods of 10 to 15
years commencing at retirement.
The Company's obligation on the 10.5% senior promissory notes assumed with
the acquisition of UDL is $6,500,000 and $7,900,000 at March 31, 1997 and 1996.
Future principal payments on these notes are in amounts ranging from $1,000,000
to $2,000,000 per year through 2002. At March 31, 1997 and 1996, the Company was
in compliance with all of its debt covenants.
At March 31, 1997, the net present value of the Company's outstanding
obligation relating to MAXZIDE(R) is $31,836,000 (see note B). Required payments
are as follows: 1998-$15,000,000, 1999-$6,000,000 and 2000-$5,000,000. In
addition, the Company will make minimum annual royalty payments of $2,000,000
through 2001.
INCOME TAXES
Income taxes consist of the following components: (in thousands)
Year ended March 31 1997 1996 1995
Federal
Current $19,176 $ 30,490 $ 48,851
Deferred 68 1,323 (8,111)
19,244 31,813 40,740
State
Current 4,845 7,706 12,033
Deferred (21) (87) (2,316)
4,824 7,619 9,717
Income taxes $24,068 $ 39,432 $ 50,457
Pre-tax earnings $87,195 $141,757 $171,326
Effective tax rate 27.6% 27.8% 29.5%
The Company uses the 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 asset 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, 1997 1996
Deferred Tax Assets:
Employee benefits $3,785 $ 3,624
Intangible assets 5,455 1,824
Asset allowances 3,775 4,749
Inventory 8,369 7,064
Investments 2,660 1,963
Other 940 517
Total Deferred Tax Assets 24,984 19,741
Deferred Tax Liabilities:
Plant and equipment 8,127 6,368
Intangible assets 7,621 8,191
Investments 2,205 2,593
Total Deferred Tax Liabilities 17,953 17,152
Deferred Tax Assets - Net $7,031 $ 2,589
Classification in the Consolidated Balance Sheet:
Deferred Income Tax Benefit - Current $13,532 $ 11,560
Deferred Income Tax Liability - Non-Current (6,501) (8,971)
Deferred Tax Assets - Net $7,031 $ 2,589
A reconciliation of the statutory tax rate to the effective tax rate is
as follows:
Year Ended March 31, 1997 1996 1995
Statutory tax rate 35.0% 35.0% 35.0%
State income taxes-net 4.8% 5.0% 4.2%
Tax exempt earnings-
primarily dividends (6.4%) (6.6%) (4.8%)
Tax credits (5.9%) (5.8%) (4.9%)
Other items 0.1% 0.2% -
Effective tax rate 27.6% 27.8% 29.5%
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.
The Company's federal tax returns have been audited by the Internal
Revenue Service through fiscal 1991. Tax returns for fiscal years 1992 through
1995 are currently under review. The Company does not believe that final
settlement of the years subject to review will have a materially adverse effect
on its financial position, results of operations or cash flows.
COMMON STOCK On August 23, 1996, the Company's Board of Directors adopted a
Shareholder Rights Plan ("the Rights Plan"). A dividend distribution was made to
Shareholders of record on September 5, 1996, of a Preferred Share Purchase Right
("the Right") on each outstanding share of the Company's common stock. The
Rights Plan was adopted to provide the Company's Directors with sufficient time
to assess and evaluate any takeover bid, and explore and develop a reasonable
response. The Company is entitled to redeem the Rights at $.001 per Right at any
time prior to ten days after the time any person acquires 15% or more of the
Company's common stock. The Rights will expire on September 5, 2006 unless
previously redeemed or exercised. 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 totaling
$25,750,000 would be made over the next five years. Approximately 90% of this
total is due upon the filing of an Abbreviated New Drug Application or New Drug
Application with the FDA or upon approval from the FDA and the subsequent launch
of the product. In addition, under the Company's license agreement with VivoRx,
Inc. the Company continues to fund research and development expenditures related
to pancreatic islet cell implant technology for the treatment of diabetes. This
funding is at the discretion of the Company.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values of cash and cash equivalents, accounts receivable (net of
provisions) and trade accounts payable approximates their fair value due to the
short-term maturity of these instruments. Current and non-current marketable
securities are recorded at fair value based on quoted market prices. The
carrying value of long-term obligations approximates their fair value based on
discounted future cash flows using interest rates currently available to the
Company.
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. The Plan expired on
December 1, 1996. Options, which were 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. Options granted have the following vesting schedule: 25% two years from
the date of grant, 25% at the end of year three and the remaining 50% at the end
of year four. Through the plan expiration date options for 5,008,400 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") which was approved by the
shareholders 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, 1997, 267,000 shares have been granted pursuant to the Directors'
Plan.
A summary of the activity resulting from all plans adjusted for the stock
split is as follows:
Number of shares Weighted average exercise
under option price per share
Outstanding
April 1, 1994 2,657,441 $ 10.21
Options granted 444,000 10.64
Options exercised (412,430) 7.38
Options cancelled or surrendered (33,000) 10.31
Outstanding
March 31, 1995 2,656,011 $ 10.72
Options granted 345,000 18.53
Options exercised (229,142) 8.96
Options cancelled or surrendered (51,855) 10.50
Outstanding
March 31, 1996 2,720,014 $ 11.87
Options granted 217,000 14.75
Options exercised (290,167) 11.05
Options cancelled or surrendere (75,970) 15.70
Outstanding
March 31, 1997 2,570,877 $ 12.10
Options outstanding Options exercisable
Weighted Weighted Weighted
Range of average average average
exercise remaining exercise exercise
price per Number contractual price per Number of price
share of shares life(years) share shares per share
$2.83-$4.67 235,949 2.90 $ 4.12 235,949 $ 4.12
$10.58-$20.42 2,334,928 6.29 $ 12.90 1,595,112 $ 12.09
2,570,877 1,831,061
At March 31, 1997, options were exercisable for 1,831,061 shares at a
weighted average exercise price of $11.06 per share. The corresponding amounts
were 1,833,658 shares at $10.92 per share at March 31, 1996 and 1,865,201 shares
at $10.61 per share at March 31, 1995.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123 ("SFAS No. 123"), "Accounting for
Stock-Based Compensation." In accordance with the provisions of SFAS No. 123,
the Company will continue to apply the provisions of Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" and, accordingly,
does not recognize compensation costs for its existing stock option plans. If
the Company had elected to recognize compensat ion costs based on the
alternative fair value method prescribed by SFAS No. 123, the effect on net
earnings and earnings per share would have been immaterial. 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, Inc. and
UDL and 401(k) plans covering Bertek Pharmaceuticals Inc. (formerly Dow Hickam
Pharmaceuticals) and all bargaining unit employees.
Contributions to the profit sharing plans are made at the discretion of
the Board of Directors. Contributions to the Bertek Pharmaceuticals Inc. and UDL
plan are based upon a formula matching the employees 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, 1997, 1996 and
1995 were $3,620,000, $2,959,000 and $3,060,000.
CONTINGENCIES The Company is involved in various legal proceedings that are
considered norma l to its business. The majority of these proceedings involve
intellectual property rights related to products under development. These
proceeding are initiated and resolved prior to receiving final FDA approval for
new products. While it is not feasible to predict the ultimate outcome 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, Inc. was involved in an arbitration matter
unrelated to the pharmaceutical business. On May 2, 1996 the arbitration
panel issued a decision against Bertek, Inc. for approximately $4,000,000.
The Company has appealed this matter and believes the ultimate resolution of
this matter will not exceed the amount accrued.
Approximately 26% of the Company's workforce is covered by a collective
bargaining agreement which will expire on April 5, 1998.
OTHER MATTERS
On April 5, 1997, the Company's Board of Directors authorized a Stock Repurchase
Program under which the Company may repurchase up to five million shares of its
outstanding common stock. The purchases will be made on the open market or in
privately negotiated transactions using currently available funds. Repurchased
shares will be held in treasury and available for general corporate purposes.
This diagram of Mylan's corporate structure reflects the Company's growth and
diversity.
Mylan Laboratories Inc.
Bertek Pharmaceuticals Inc.
Branded Products Division
Mylan Pharmaceuticals Inc.
Generic Division
UDL Laboratories, Inc.
Packaging Technology
46
Dow Hickam Pharmaceuticals Inc.
Wound & Burn Care Division
Bertek, Inc.
Transdermal Technology
Distribution Centers
Nationwide Distribution Centers
Mylan Inc.
Puerto Rico Manufacturing Facilities
Greensboro, NC
Reno, NV
Caguas, PR
Cidra, PR
Mylan Laboratories, Inc.
Product Guide
MAXZIDE(R)& MAXZIDE(R)-25MG Maxzide(R)
(triamterene and hydrochlorothiazide) combines triamterene, a
potassium-sparing diuretic, with the natriuetic agent, hydrochlorothiazide.
MAXZIDE(R) is indicated for the treatment of hypertension. It can
be used alone or in combination with other agents such as beta-blockers and
calcium channel blockers. It offers an excellent safety profile while providing
optimal potassium and magnesium conservation. MAXZIDE(R) is
manufactured by a proprietary parallel granulated process to insure unsurpassed
bioavailability. Its patented bow tie shape and uniquely colored tablet helps
provide both patient recognition and compliance.
Bertek Pharmaceuticals Inc.
NITREK(TM)
NITREK(TM) is a nitroglycerin transdermal system indicated for the
prevention of angina pectoris due to coronary artery disease. NITREK(TM) is
available in 0.2mg/hr, 0.4mg/hr and 0.6mg/hr dosage strengths to suit individual
patient needs. It is a small translucent patch and provides minimal skin
irritation as a result of its specially formulated adhesive and smaller surface
area and can be worn comfortably and confidently by patients of all ages.
Somerset Pharmaceuticals, Inc.
Eldepryl(R)
Eldepryl(R)(selegiline hydrochloride) delays deterioration of
signs and symptoms in patients with mild to moderate Parkinson's disease.
Eldepryl(R)is indicated as an adjunct in the management of
Parkinson's disease in patients being treated with Sinemet(R)
(levodopa/carbidopa).
*Mylan acquired 50% ownership of Somerset
in 1989.
Cystagon(R) Capsules 50mg & 150mg Cystagon(R)
(cysteamine bitartrate) capsules for oral administration are indicated for the
management of nephropathic cystinosis in children and adults. Nephropathic
cystinosis is a rare inherited disorder characterized by the build up of cystine
in organs, such as kidneys. Cystinosis affects approximately 200 patients in the
United States, and therefore it is distributed exclusively in the U.S. by
Chronimed, a division of Orphan Medical.
Mylan Laboratories Inc.
Orphan Drug Product
Sorbsan(R)
Sorbsan(R) is a unique calcium alginate dressing which transforms
into a highly absorbent, readily conformable, easy-to-use hydrophilic sodium
alginate gel. Indicated for use on all wet wounds, such as pressure ulcers, leg
ulcers, surgical wounds, etc. Sorbsan(R) is virtually painless
upon application and removal, and is easily changed by medical professionals and
patients alike.
Flexzan(R)
Flexzan(R) is a sterile, ultra-thin, highly conformable, semi-oc
clusive polyurethane foam adhesive dressing. It is indicated for wounds such as
skin tears, early stage pressure ulcers, minor abrasions, and dermatologic and
plastic surgery procedures.
Dow Hickam Pharmaceuticals Inc.
Flexderm(R)
Flexderm(R)is a sterile hydrogel sheet dressing that provides a
barrier to exogenous contamination while providing cooling, pain relieving
protection. It absorbs exudate yet does not adhere to the wound bed upon
removal, thereby providing an optimal wound healing environment.
Proderm(R)
Proderm(R) is a non-prescription topical wound spray which
stimulates the capillary beds of chronic wounds to help prevent the
deterioration of Stage I ulcers to deeper stages.
Hydrocol(TM)
Hydrocol(TM) is a family of sterile hydrocolloid wound dressings
formulated to provide a moist environment conducive to wound healing. The
Hydrocol(TM)line includes Hydrocol(TM), Hydrocol(TM) Sacral
and Hydrocol(TM)Thin.
The hydrocolloid dressing material interacts with the wound exudate to form a
soft gel that helps create and maintain an optimal moist wound-healing
environment. Hydrocol(TM)dressings are waterproof and will remain in place
during showering.
Sulfamylon(R)Cream
Sulfamylon(R) Cream is a soft, white, non-staining, water miscible
broad spectrum topical antimicrobial cream. Sulfamylon(R) is
indicated for use as adjunctive antimicrobial burn therapy of patients with
partial or full-thickness burns.
Biobrane(R)
Biobrane(R) is an adherent, flexible, virtually painless temporary
wound dressing intended for one-time application to donor sites, and clean,
debrided or excised superficial and medium depth partial-thickness wounds.
Granulex(R)
Granulex(R) is an aerosol topical vasculatory stimulant used as an
aid in the management of pressure ulcers. Topical application stimulates the
capillary beds of chronic wounds and helps prevent the deterioration of Stage I
ulcers to deeper stages. Granulex(R) contains trypsin, a mild
debriding agent, which helps keep the wound site free of necrotic tissue once
debrided.
Institutional Market Leadership UDL Laboratories manufactures, repackages
and markets multisource and single-source pharmaceutical products in unit dose
form to the institutional marketplace. More than 6,000 hospitals in the U.S. are
customers. They count on UDL for its broad line of products (over 450 line
items), its provider-focused, patient-centered packaging and product
innovations, and its outstanding reputation for customer service. The basic oral
solid unit dose package is shown.
Haloperidol
UDL is also a leader and innovator in liquid unit dose products. Haloperidol
is an example. In the institutional environment, liquid psychotropic drugs are
most often dispensed in highly concentrated solutions and measured with a
calibrated dropper. With some of these products, a drop too little or too much
can be a significant problem for patients. UDL has pioneered a non-concentrated
solution in unit dose form that offers dosage accuracy, ease of administration
and labor savings.
UDL Laboratories, Inc.
Emergi-Script
Emergi-Script is a UDL packaging innovation developed in conjunction with a
panel of hospital pharmacists to serve the short term prescription needs of
emergency room and ambulatory care center patients. As a complete system with a
formulary of the more commonly dispensed medications, each Emergi-Script package
contains a 24-hour starter supply of drug that doesn't require pharmacy labor to
prepare. And, patients can get the drug they need without having to find an
all-night pharmacy to fill a prescription.
Robot Ready
Technology advances are contributing to inventory management efficiency, labor
savings and reduction of medication errors. And UDL is helping lead the way with
its ROBOTREADY packaging, an exclusive line of the more commonly dispensed
medications. The line is used in the leading edge RxOBOT system offered by AHI,
a subsidiary of McKesson Corp., which is already installed in over 70 major
institutions. Bar coding, a UDL first in unit dose packaging several years ago,
makes it work.
Bingo
In some environments, individual unit dose packaging is not the preferred
dispensing system. Extended care facilities and nursing homes are a good
example. UDL's unique prepackaged "Bingo" card system is designed to meet this
need. It minimizes pharmacist labor time, has an ample area for recording
patient and drug information that can help reduce medication errors and features
a nurse-friendly push-through backing.
Control-A-Dose Sometimes, UDL's contribution goes beyond drug packaging
itself and extends to include record-keeping and administrative aids as integral
components for controlling and dispensing drugs in serving the needs of both
nursing professionals and hospital pharmaci sts. Control-A-Dose packaging is an
example; the envelope serves as both carrier for the drug card and a convenient
way to maintain essential records.
(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 April 30, 1997, incorporated by reference in this Annual report on form
10-K of Mylan laboratories Inc. for the year ended March 31, 1997.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
June 20, 1997
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 6, 1997 (except for Note 12, as to which the date is March 7,
1997) relating to the consolidated financial statements of Somerset
Pharmaceuticals, Inc. and subsidiaries for each of the three years in the period
ended December 31, 1996, included in the Annual Report on Form 10-K of Mylan
Laboratories Inc. for the year ended March 31, 1997.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
June 20, 1997
(27) Financial Data Schedule, filed herewith.
(99) Consolidated financial statements of Somerset
Pharmaceuticals, Inc. for Years ended December 31,
1996, 1995 and 1994, filed herewith.
SOMERSET PHARMACEUTICALS, INC. AND SUBSIDIARIES
Consolidated Financial Statements
for the Years Ended December 31, 1996, 1995 and 1994,
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, 1996 and 1995, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended December 31, 1996 (incorporated
herein and not included separately). 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, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996 in conformity with generally accepted accounting principles.
February 6, 1997, except for Note 12,
as to which the date is March 7, 1997
SOMERSET PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
- - -----------------------------------------------------------------------------------------------------------------------------------
ASSETS 1996 1995 LIABILITIES AND STOCKHOLDERS' 1996 1995
EQUITY
CURRENT ASSETS: CURRENT LIABILITIES:
Cash and cash equivalents $ 33,477,000 $ 21,315,000 Accounts payable $ 651,000 $ 1,512,000
Investment securities 1,008,000 180,000 Royalty payable 1,626,000 4,676,000
Accounts receivable (net of allowance
for doubtful accounts of $100,000) Medicaid payable 1,039,000 1,004,000
6,172,000 13,875,000 Other accrued expenses 2,034,000
849,000
Inventories 1,704,000 6,551,000 Accrued research and development 4,578,000 1,921,000
Prepaid expenses and
other current assets 3,510,000 2,072,000 Income taxes payable 6,032,000 4,390,000
---------- -----------
Accrued compensation 1,494,000
630,000
Total current assets 45,871,000 43,993,000 Amounts due to related parties 1,621,000 2,075,000
----------- -----------
Total current liabilities 19,075,000 17,057,000
PROPERTY AND EQUIPMENT - Net 4,891,000 5,496,000 DEFERRED REVENUE - 63,000
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value;
INTANGIBLE ASSETS - Net 1,259,000 1,451,000 13,719 shares authorized,
11,297 shares issued - -
Retained earnings 34,254,000 34,452,000
Less treasury stock,
644 shares at cost (452,000) (452,000)
---------- ----------
OTHER ASSETS 856,000 180,000 Total stockholders' equity 33,802,000 34,000,000
------------- --------- ------------ ------------
$ 52,877,000 $ 51,120,000 $ 52,877,000 $ 51,120,000
============ ============ ============ ===========
See notes to consolidated financial statements.
SOMERSET PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
- - -------------------------------------------------------------------------------------------
1996 1995 1994
NET SALES $ 101,512,000 $ 107,365,000 $ 124,566,000
--------------- --------------- ---------------
COSTS AND EXPENSES:
Cost of sales 12,672,000 13,617,000 16,399,000
Marketing 6,263,000 4,862,000 23,457,000
Research and development 20,118,000 17,904,000 10,424,000
Administrative 9,574,000 8,601,000 9,845,000
--------------- --------------- ---------------
48,627,000 44,984,000 60,125,000
--------------- --------------- ---------------
52,885,000 62,381,000 64,441,000
OTHER INCOME - NET 1,732,000 2,172,000 568,000
--------------- --------------- ---------------
INCOME BEFORE INCOME TAXES 54,617,000 64,553,000 65,009,000
PROVISION FOR INCOME TAXES 18,815,000 20,200,000 20,900,000
--------------- --------------- ---------------
NET INCOME $ 35,802,000 $ 44,353,000 $ 44,109,000
=============== =============== ===============
See notes to consolidated financial statements.
SOMERSET PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
- - ------------------------------------------------------------------------------------------------------------------------------------
Common Stock Treasury Stock Retained Stockholders'
Shares Amount Shares Amount Earnings Equity
BALANCE, DECEMBER 31, 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
Net income - - - - 35,802,000 35,802,000
Dividends - - - - (36,000,000) (36,000,000)
---------- -------- -------- ------------- ------------- -------------
BALANCE, DECEMBER 31, 1996 11,297 $ - 644 $ (452,000) $ 34,254,000 $33,802,000
========== ========== ======== ============= ============= ============
-
See notes to consolidated financial statements.
SOMERSET PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
- - ------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 35,802,000 $ 44,353,000 $ 44,109,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,048,000 847,000 587,000
Deferred tax expense (benefit) (736,000) 283,000 862,000
Deferred revenue (63,000) (229,000) (166,000)
Changes in operating assets and liabilities:
Accounts receivable 7,703,000 6,778,000 (4,558,000)
Inventories 4,847,000 (1,258,000) (1,473,000)
Prepaid expenses and other current assets (1,438,000) (398,000) (375,000)
Accounts payable (861,000) 1,220,000 87,000
Royalty payable (3,050,000) (1,174,000) 1,070,000
Accrued marketing costs - (11,000,000) 1,900,000
Accrued research and development 2,657,000 20,000 (145,000)
Other accrued expenses 2,084,000 (350,000) 763,000
Income taxes payable 1,642,000 (627,000) 2,117,000
Amounts due to related parties (454,000) (243,000) 255,000
----------- ------------ -----------
Net cash provided by operating activities 49,181,000 38,222,000 45,033,000
----------- ------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) decrease in investment securities (828,000) 3,158,000 132,000
Purchase of property and equipment (251,000) (1,884,000) (1,898,000)
Decrease in other assets 60,000 290,000 234,000
----------- ------------ -----------
Net cash (used in) provided by investing activities (1,019,000) 1,564,000 (1,532,000)
------------ ------------ -----------
(Continued)
SOMERSET PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
- - -------------------------------------------------------------------------------------------------------------------
1996 1995 1994
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid on common stock $ (36,000,000) $ (36,000,000) $ (36,000,000)
Net decrease in note payable - - (253,000)
--------------- --------------- ---------------
Net cash used in financing activities (36,000,000) (36,000,000) (36,253,000)
--------------- --------------------- --------------
NET INCREASE IN CASH AND CASH
EQUIVALENTS 12,162,000 3,786,000 7,248,000
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 21,315,000 17,529,000 10,281,000
-------------- -------------- -------------
CASH AND CASH EQUIVALENTS,
END OF YEAR $ 33,477,000 $ 21,315,000 $ 17,529,000
============== ============== ===============
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ - $ - $ 7,000
============== ============== ===============
Income taxes $ 20,409,000 $ 22,074,000 $ 17,683,000
============== ============== ===============
See notes to consolidated financial statements.
SOMERSET PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
- - --------------------------------------------------------------------------------
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 facility in
Puerto Rico), markets and sells Eldepryl, which is used as a treatment for
Parkinson's Disease. The Company had exclusivity relating to the chemical
compound Eldepryl for use as a treatment for late stage Parkinson's Disease
through June of 1996. In May 1996, the Company received approval from the Food
and Drug Administration for Eldepryl capsules and withdrew the tablet form from
the marketplace. Competitors entered the marketplace with a generic version of
the tablet in August 1996. The loss of exclusivity and the introduction of
competitive products could have a material impact on the Company's future
operating results.
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 required the
Company to pay royalties equal to 7% of net sales of Eldepryl including
sub-license revenues. During 1996, the license agreement was amended to reduce
the Eldepryl royalties to 3.5% of net sales subsequent to May 31, 1996. The
Company incurred royalty expense of approximately $5,917,000, $8,473,000 and
$9,983,000 for the years ended December 31, 1996, 1995 and 1994, respectively.
The license agreement also requires the Company to purchase the main raw
material used in the manufacture of Eldepryl from Chinoin through 1999.
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 - The Company accounts for investment
securities in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 115, "Accounting for Certain Investments
in Debt and Equity Securities." At December 31, 1996 and 1995,
the investment securities were available-for-sale, and there were
no material unrealized gains or losses. There were no sales or
maturities of investments in 1996. Proceeds from sales and
maturities of investments were $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 in either year. The gain or
loss on sale is based on the specific identification method.
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 principally to distributors and
wholesalers in the pharmaceutical industry. 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.
i. New Accounting Standard - The Company adopted SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" during 1996. The adoption
of this standard did not have a material impact on the financial
statements.
3. INVENTORIES
Inventory consists of the following at December 31, 1996 and 1995:
1996 1995
Raw material $ 1,083,000 $ 5,091,000
Work in process 373,000 163,000
Finished goods 248,000 1,297,000
----------- -----------
Total $ 1,704,000 $ 6,551,000
=========== ===========
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31, 1996 and 1995:
1996 1995
Land $ 300,000 $ 300,000
Building 2,255,000 2,255,000
Machinery and equipment 4,281,000 4,048,000
Furniture and fixtures 153,000 146,000
----------- ------------
6,899,000 6,749,000
Less accumulated depreciation 2,098,000 1,253,000
----------- ------------
Property and equipment - net $ 4,891,000 $ 5,496,000
=========== ============
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, net of related royalty expense payable to Chinoin, included in
other income for the years ended December 31, 1996, 1995 and 1994 was
approximately $175,000, $197,000 and $199,000, respectively.
6. INTANGIBLE ASSETS
Intangible assets primarily represent the cost of a modification to the terms of
the Chinoin Agreement, less accumulated amortization of $1,446,000 and
$1,254,000 at December 31, 1996 and 1995, 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 was required to make certain payments to
Sandoz in the event sales of Eldepryl exceed certain predefined minimums. The
agreement required 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 were exceeded, the Company was required to pay
Sandoz for advertising expenditures made on behalf of the Company. After
Sandoz's advertising expenses were reimbursed, any additional amounts were
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 required certain payments to be made to the Company if a
predetermined level of sales was not achieved.
During1995 the Company entered into an agreement with CoCensys, Inc.
("CoCensys") for the promotion of Elderpryl. The agreement was effective January
1, 1996 and had an initial term of two years. Under the terms of the original
agreement, the Company would have compensated CoCensys, based on a predetermined
formula that considered both the number of new prescriptions written and the net
sales dollars achieved in each quarter. During 1996, the agreement was modified
with respect to term, new prescriptions and detail calls. The Company and
CoCensys are currently regotiating a new agreement.
During1996, 1995 and 1994, the Company expensed (net of any payments required to
be made to the Company by Sandoz) $1,230,000, $5,304,000 and $22,360,000,
respectively, pursuant to the agreements. Additionally, certain co-promotional
fees paid by Sandoz at the commencement of the 1990 agreement were 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, negotiating
and execution of the agreement by the owners of the Company were 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, 1996, 1995 and 1994:
1996 1995 1994
Current tax expense:
Federal $ 15,257,000 $ 15,625,000 $ 15,025,000
State 4,194,000 4,177,000 4,899,000
Foreign 100,000 115,000 114,000
------------- ------------- --------------
19,551,000 19,917,000 20,038,000
------------- ------------- --------------
Deferred tax expense (benefit):
Federal (669,000) 256,000 754,000
State (67,000) 27,000 108,000
------------- ------------- --------------
(736,000) 283,000 862,000
------------- ------------- --------------
Total provision for income taxes $ 18,815,000 $ 20,200,000 $20,900,000
============= ============= =============
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, 1996 and 1995 are as
follows:
1996 1995
Deferred tax assets:
Deferred compensation $ 557,000 $ 122,000
Inventory valuation allowance 230,000 -
Chargeback allowance 216,000 148,000
Other 37,000 60,000
------------ ------------
1,040,000 300,000
Deferred tax liabilities - different
methods of accounting between
financial and income tax reporting
for amortization 220,000 246,000
Net deferred tax assets $ 820,000 $ 84,000
============= =============
The statutory federal income tax rate is reconciled to the effective tax rate as
follows for the years ended December 31, 1996, 1995 and 1994:
1996 1995 1994
Tax at statutory rate 35.0% 35.0% 35.0%
State income tax (net of federal benefit) 3.6 2.8 3.5
Tax credits (9.5) (9.4) (9.9)
Tollgate tax 4.0 3.9 3.9
Other 1.3 (1.0) (.4)
Effective tax rate 34.4% 31.3% 32.1%
Tax credits result principally from operations in Puerto Rico. See Note 12.
9. RELATED PARTY TRANSACTIONS
The Company incurs expenses for ongoing management services and over a six year
period (which ended March 31, 1996) 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 has other transactions with one or
both of its owners as detailed below for the years ended December 31, 1996, 1995
and 1994:
1996 1995 1994
Management fees $ 5,076,000 $ 5,370,000 $ 6,228,000
Research and development 1,250,000 - 1,020,000
Inventory handling
and distribution fees 519,000 415,000 650,000
Rent - equipment
and facilities 1,217,000 1,416,000 1,065,000
Product liability insurance - - 618,000
Purchase of raw materials - 450,000 -
10. SIGNIFICANT CUSTOMERS
The Company had sales to certain customers which individually exceeded 10% of
sales. In 1996 sales to three major customers were $23,200,000, $21,259,000 and
$18,692,000, respectively. In 1995 sales to four major customers were of
$23,986,000, $23,467,000, $15,733,000 and $13,111,000, respectively. In 1994
sales to three customers were $30,090,000, $23,479,000 and $17,991,000,
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. During 1996, 1995 and 1994, the
Company recorded expense of $954,000, $83,000 and $755,000 for these plans,
respectively.
12. SUBSEQUENT EVENT
In connection with an examination of the Company's Federal tax returns for the
three years ended December 31, 1995, representatives of the Internal Revenue
Service (the "Service"), on March 7, 1997, have reviewed with the Company a
draft "Notice of Proposed Adjustments" that contains a proposed adjustment to
the Company's use of tax credits under Internal Revenue Code section 936.
Under the proposed adjustment, the Company could be subject to approximately $9
million of additional income tax and interest charges that have not been accrued
as of December 31, 1996.
Management believes that the Company has met all of the requirements to qualify
for the tax credits available under Internal Revenue Code section 936, and
intends to vigorously defend its position on this matter.
(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, 1997.
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 20, 1997
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 20, 1997 /S/ DANA G. BARNETT June 20, 1997
Milan Puskar Dana G. Barnett
Chairman, Chief Executive Officer and Executive Vice President and Director
President
/S/ LAURENCE S. DELYNN June 20, 1997 /S/ ROBERT W. SMILEY June 20, 1997
Laurence S. DeLynn Robert W. Smiley
Director Secretary and Director
/S/ PATRICIA A. SUNSERI June 20, 1997 /S/ JOHN C. GAISFORD, M.D.June 20, 1997
Patricia A. Sunseri John C. Gaisford, M.D.
Vice President and Director Director
/S/ C.B. TODD June 20, 1997 /S/ FRANK A. DEGEORGE June 20, 1997
C.B. Todd Frank A. DeGeorge
Senior Vice President and Director Director of Corporate Finance as
Chief Accounting Officer
EXHIBIT 21
Subsidiaries
Name State of Incorporation
- - ------------------------ ----------------------------
Milan Holding, Inc. Delaware
Mylan Inc. Delaware
Mylan Pharmaceuticals Inc. West Virginia
Bertek Pharmaceuticals, Inc. Texas
Bertek, Inc. West Virginia
American Triumvirate Insurance Company Vermont
Roderick Corporation Delaware
UDL Laboratories, Inc. Illinois
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-27
<SEQUENCE>2
<DESCRIPTION>FDS --
<FLAWED>
<TEXT>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<ARTICLE> 5
<LEGEND>
Financial Data Schedule
Mylan Laboratories Inc. and Subsidiaries
Article 5 of Regulation S-X
The schedule contains summary financial information extracted from the
Consolidated Balance Sheets at March 31, 1997 and the Consolidated Statement of
Earnings for the twelve months ended March 31, 1997 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000069499
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 126,156,000
<SECURITIES> 13,876,000
<RECEIVABLES> 129,934,000
<ALLOWANCES> 14,631,000
<INVENTORY> 100,890,000
<CURRENT-ASSETS> 379,020,000
<PP&E> 197,467,000
<DEPRECIATION> 61,638,000
<TOTAL-ASSETS> 777,580,000
<CURRENT-LIABILITIES> 78,746,000
<BONDS> 0
<PREFERRED-MANDATORY> 0
<PREFERRED> 0
<COMMON> 61,407,000
<OTHER-SE> 598,333,000
<TOTAL-LIABILITY-AND-EQUITY> 777,580,000
<SALES> 440,192,000
<TOTAL-REVENUES> 440,192,000
<CGS> 259,666,000
<TOTAL-COSTS> 259,666,000
<OTHER-EXPENSES> 122,581,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,927,000
<INCOME-PRETAX> 87,195,000
<INCOME-TAX> 24,068,000
<INCOME-CONTINUING> 63,127,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 63,127,000
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