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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended March 31,
1996 Commission File No. 1-9114 MYLAN LABORATORIES INC. (Exact name of registrant as specified in its charter)
Pennsylvania 25-1211621
(State or other jurisdiction of incorporation or organization) (IRS Employer
Identification No.)
130 Seventh Street
1030 Century Building
Pittsburgh, Pennsylvania 15222
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 412-232-0100
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
Common Stock, par value $.50 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x/ No
Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K.[ ]
The aggregate market value of voting stock held by persons other than Directors and Officers of the registrant computed
by reference to the closing price of such stock as of May 31, 1996:
$2,240,336,455
The number of shares of Common Stock of the registrant outstanding as of
May 31, 1996:
121,878,074
Documents incorporated by reference into this Report are:
Annual Report to Shareholders for year ended March 31, 1996.......................... Parts I and II,
Items 1, 5-8
Proxy Statement for 1996 Annual Meeting of Shareholders.............................. Part III, Items 10-13
PART I
ITEM 1. Business
Mylan Laboratories Inc., a Pennsylvania corporation incorporated in 1970,
and its subsidiaries (herein referred to collectively as the "Company") are
engaged in the development, manufacturing and distribution of pharmaceutical
products for resale by others. References herein to fiscal 1996, 1995 and 1994
mean the fiscal years ended March 31, 1996, 1995 and 1994, respectively.
Through its subsidiary, Mylan Pharmaceuticals Inc., the Company is
recognized as one of the leaders in the generic pharmaceutical industry.
Pharmaceutical products initially sold on an exclusive basis are known in the
industry as proprietary or branded products. Generic drugs are therapeutically
equivalent to their brand name counterparts and are generally sold at prices
significantly less than branded products. Accordingly, generics provide a safe,
effective and cost efficient alternative to users of these products.
The Company manufactures substantially all of its oral dose products in
either its Mylan Pharmaceuticals subsidiary's Morgantown, West Virginia facility
or its subsidiary Mylan Inc.'s facility in Caguas, Puerto Rico. To facilitate
timely delivery of products to customers in all fifty states the Company
operates distribution centers in Greensboro, North Carolina and Reno, Nevada.
Due to the non-exclusive nature of generic products, the generic industry
is comprised of numerous competitors including manufacturers who market their
products under their own name, distributors who market products manufactured by
others and brand name companies, who in recent years market their products under
both the brand name and as the generic substitute. This diversity provides
significant price competition within the generic pharmaceutical industry which
generally results in decreasing prices of generic products over time to those
who supply such products to the retail market.
The Company has entered into strategic alliances with several branded
pharmaceutical companies. These alliances through distribution and licensing
agreements provide the Company with additional products to further broaden the
Company's product line. In addition, the Company has entered into an alliance
with VivoRx, Inc. a biotechnology company developing pancreatic islet cell
implant technology for the management of diabetes. VivoRx has successfully
implanted three patients with human islets and has recently had U.S.Food and
Drug Administration ("FDA") acceptance of an Investigational New Drug
Application for the use of porcine (pancreas) islets in future implants. The
early proof of principal has already been demonstrated in two patients in New
Zealand who received porcine islet implants in May of this year. The Company
continues to examine other alliances as a way to grow and react in the rapidly
changing health care arena.
In June 1989, the Company acquired a 50% interest in Somerset
Pharmaceuticals, Inc. ("Somerset"). Pursuant to a license agreement with a
Hungarian pharmaceutical company, Somerset has exclusive marketing rights to the
product Eldepryl(R) in the United States and certain other countries. Commercial
shipments of the product by Somerset commenced in late August 1989.
Under the Orphan Drug Act, Somerset had exclusivity relating to marketing
the chemical compound Eldepryl(R) for use as a treatment for late stage
Parkinson's disease through June 6, 1996. There has been no generic competition
to date; however, with the onset of competition, Somerset's contribution to the
Company's net earnings will be adversely affected. Somerset is actively involved
in research projects regarding additional uses of this and other chemical
compounds. As a result of one project, Somerset recently received FDA clearance
to market Eldepryl in a new easy-to-identify capsule. As new projects continue
through the development process the Company expects related expenses to
escalate.
In October 1991, a wholly-owned subsidiary of the Company merged with Dow
Hickam Pharmaceuticals, Inc. ("Hickam"), an established branded pharmaceutical
company located in Sugar Land, Texas. Hickam currently manufactures and/or
markets specialty pharmaceutical products and devices used principally as wound
care treatments through its nation-wide sales force.
On February 25, 1993, the Company acquired substantially all of the net
assets of Bertek, Inc. ("Bertek"). Bertek, headquartered in St. Albans, Vermont
is a manufacturer of transdermal drug delivery systems and also has operations
in laminating, coatings and label manufacturing. In addition Bertek provides
components, using internally developed technology for transdermal patches
marketed by other companies. Bertek is actively involved in development projects
to provide new transdermal products.
On February 28, 1996, a wholly-owned subsidiary of the Company acquired
100% of the outstanding stock of UDL Laboratories, Inc. ("UDL"). UDL is the
premier supplier of unit dose generic pharmaceuticals to the institutional and
long-term care markets. UDL has its corporate headquarters in Rockford, Illinois
and maintains manufacturing, research and development and distribution
facilities in Rockford as well as Largo, Florida.
On June 14, 1996, the Company executed a series of agreements with American
Home Products Corporation ("AHP") relating to the products Maxzide(R) and
Maxzide-25MG (R). In general these agreements will terminate the existing
license agreements between the Company and Lederle Laboratories which had
previously marketed the products. Subject to receiving antitrust clearance,
Maxzide(R) and Maxzide-25MG(R) will be marketed by a subsidiary of the Company.
Under the terms of the agreement, the Company shall pay to AHP specified
amounts over a five year period commencing at the effective date. In addition
the Company shall pay to AHP a royalty predicated on sales for use of certain
trademarks during a five year period with specified minimum annual royalty
payments. At the end of such period all royalty obligations will cease and
ownership of the trademarks will be transferred to the Company.
The companies have agreed that AHP will retain marketing rights in certain
foreign countries under a modified International Supply Agreement with the
Company. Additionally, the companies have agreed that for a three year period
the Company shall pay AHP certain amounts predicated on the gross profit
realized by the Company on its sales of a generic Dyazide(R) product to
unrelated parties. Previously, the license agreements with AHP prohibited the
Company from marketing a triamterene and hydrochlorothiazide product. In
connection with these agreements, the Company and AHP agreed to terminate
certain litigation. See Item 3.
Products
The information on the Company's product line set forth on pages 21, 29, 33
and 37 of the Annual Report to Shareholders for the year ended March 31, 1996 is
incorporated herein by reference. All pharmaceutical products presently
manufactured by the Company have been previously developed and marketed by other
firms with the exception of Maxzide(R), Maxzide (R)-25MG and Cystagon TM.
The Company is required to secure and maintain approval from the FDA for
the products and dosage forms which it manufactures. The number of products and
dosage forms for which the Company is an approved manufacturer has expanded in
recent years. See "New Product Approvals".
During fiscal 1996, 1995 and 1994 approximately $38,913,000, $30,533,000
and $21,648,000, respectively, were expensed by the Company for the development
of formulations and procedures for products which it desires to produce, use or
sell. The Company's research and development efforts are conducted primarily to
qualify the Company to manufacture ethical pharmaceuticals under FDA standards
and approval. Recently this has included increased spending for transdermal
delivery system technology and innovator compounds including pancreatic islet
cell implant technology. As these products continue to move through the
development process expenses related to their development will continue to
increase.
New Product Approvals
During fiscal 1996, four approvals were received from the FDA. Two of which
were received in the last weeks of the year and had very little effect on net
sales or gross margins for the year. In June 1996, the Company received FDA
approval for triamterene and hydrochlorothiazide, the generic version of Smith
Kline Beecham's Dyazide(R). The Company presently has requests for approval
pending before the FDA representing sixteen products of varying strengths. In
addition the Company has five Investigational New Drug applications filed with
the FDA for new innovator compounds.
Customers and Markets
The Company sells its products to proprietary and ethical pharmaceutical
wholesalers and distributors, drug store chains, drug manufacturers and public
and governmental agencies. No single customer represented more than 10% of net
sales in 1996, 1995 or 1994.
A majority of the Company's products are marketed to food and drug store
chains and to pharmaceutical distributors and wholesalers, who in turn market to
retailers, managed care entities, hospitals and government agencies. Certain
other products are marketed to institutional accounts who in turn obtain the
products from pharmaceutical distributors and wholesalers. The Company's sales
activities involve limited public promotion of its products. Approximately 162
employees of the Company are engaged full-time in selling products and servicing
customers.
Competition
The Company sells to various markets and classes of customers. With respect
to each of the various products it sells, the Company believes it is subject to
active competition from numerous firms. The four primary means of competition
are services, quality of products, approval for manufacture by the FDA and
price. The competition experienced by the Company varies among the markets and
classes of customers. The Company has experienced additional competition from
brand-name competitors who have entered the generic pharmaceutical industry by
creating generic subsidiaries, purchasing generic companies or licensing their
products prior to or as their product's patents expire.
Product Liability
Product liability suits by consumers represent a continuing risk to firms
in the pharmaceutical industry. The Company strives to minimize such risks by
stringent quality control procedures. Although the Company carries insurance, it
believes that no reasonable amount of insurance can fully protect it against all
such risks because of the potential liability inherent in the business of
producing pharmaceuticals for human consumption.
Raw Materials
The chemical ingredients and other materials and supplies used in the
Company's pharmaceutical manufacturing operations are generally available and
purchased from many different foreign and domestic suppliers. However, some
products may have only one source approved by the FDA for certain pharmaceutical
ingredients used in their manufacturing process. If this material was no longer
available, qualifying a new supplier could delay the manufacturing of such
products. During fiscal 1995 there was a limited supply of raw materials to all
generic manufacturers of cimetidine a product which had a significant
contribution to the Company's net sales and gross profit for the year. In 1996
this same raw material was readily available and led to severe pricing pressures
resulting in a decline in gross profit on cimetidine.
With regards to foreign suppliers, recent and pending regulatory action may
make obtaining raw materials prior to patent expiration increasingly difficult.
This could delay the Company's ability to develop, manufacture and obtain FDA
approval to market certain new products.
Regulation
The Company's operations are subject to regulation under the Federal Food,
Drug and Cosmetic Act, pursuant to which government standards as to "good
manufacturing practice", product content, purity, labeling, effectiveness and
recordkeeping (among other things) must be observed. In this regard, the FDA has
extensive regulatory powers over the activities of pharmaceutical manufacturers.
The Company is also subject to inspection and regulation under other
federal and state legislation relating to drugs, narcotics and alcohol. Many of
its suppliers and customers, as well as the drug industry in general, are
subject to the same or similar governmental regulations.
The President signed into law the Uruguay Round Agreements Act ("URAA") in
December 1994. URAA which took effect on June 8, 1995 implemented the General
Agreement of Tariffs and Trade ("GATT"). One change in U.S. law required by GATT
is the amendment of patent law to reflect a patent term of 20 years from the
date of filing the application instead of the current term of 17 years from the
date of issuance. URAA extended the requirement by allowing the application of
this provision to all patents in force on June 8, 1995.
Congress recognized the potential harm in this requirement and provided
that a potential competitor who has already made a "substantial investment" in a
competing product could make, use and sell its product after the expiration of
the original patent period provided that they pay the patentee "equitable
remuneration" through the extended patent period. However, the FDA has taken the
position that it cannot approve an Abbreviated New Drug Application ("ANDA"),
which certifies the date of patent expiration, until the expiration of the
extended patent period. The extension of patent protection may delay the launch
of future products by the Company.
The Company, other generic drug manufacturers and concerned citizens groups
are continuing their efforts to convince Congress to pass legislation which
would allow the FDA to approve applications on the passage of the original
expiration date.
It is impossible for the Company to predict the extent to which its
operations will be affected under the regulations discussed above or any new
regulations which may be adopted by regulatory agencies.
Employees
The Company employs approximately 1,733 persons, approximately 800 of whom
serve in clerical, sales and management capacities. The remainder are engaged in
production and maintenance activities.
The production and maintenance employees at the Company's manufacturing
facilities in Morgantown, West Virginia, are represented by the Oil, Chemical
and Atomic Workers International Union (AFL-CIO) and its Local Union 8-957 under
a contract which expires April 5, 1998.
Backlog
At March 31, 1996, the uncompleted portions of the Company's backlog of
orders was approximately $9,747,000 as compared to approximately $20,979,000 at
March 31, 1995 and $12,543,000 at March 31, 1994. Because of the relatively
short lead time required in filling orders for its products, the Company does
not believe these interim backlog amounts bear a significant relation to sales
or income for any full twelve-month period.
ITEM 2. Properties
The Company operates from various facilities in the United States and
Puerto Rico having an aggregate of approximately 1,164,000 square feet.
Mylan Pharmaceuticals owns production, warehouse, laboratory and office
facilities in four buildings in Morgantown, West Virginia containing
approximately 440,000 square feet. Mylan Pharmaceuticals operates two
distribution centers, one in Greensboro, North Carolina containing approximately
64,000 square feet which it owns and one in Reno, Nevada containing
approximately 25,000 square feet under a lease expiring in 1997. Currently under
construction in Morgantown, West Virginia is a 27,000 square foot manufacturing
addition.
Mylan Inc. owns a production and office facility in Caguas, Puerto Rico
containing approximately 115,000 square feet and a production facility in Cidra,
Puerto Rico containing approximately 32,000 square feet.
Dow Hickam Pharmaceuticals, Inc. owns production, warehouse and office
facilities in two buildings in Sugar Land, Texas containing approximately 70,000
square feet. Hickam also operates a filling and packaging facility in Sugar
Land, Texas containing approximately 15,000 square feet under a lease expiring
in 1996.
Bertek owns production, warehouse, laboratory and office facilities in five
buildings in Swanton and St. Albans, Vermont containing approximately 178,000
square feet. Bertek also operates a coating and extrusion facility in St. Albans
containing approximately 71,000 square feet under a lease expiring in 2015.
UDL owns production, laboratory and office facilities in two buildings in
Rockford, Illinois and Largo, Florida containing approximately 92,000 square
feet. UDL also has distribution facilities at both locations containing
approximately 61,000 square feet under leases expiring in 1996 and 2004.
The Company's production equipment includes that equipment necessary to
produce and package tablet, capsule, aerosol, transdermal and powder dosage
forms. The Company maintains six analytical testing laboratories for quality
control.
The Company's facilities are operated primarily on a two shift basis.
Properties and equipment are well maintained and adequate for present
operations.
The Company's corporate offices, containing approximately 7,200 square
feet, are located at 130 Seventh Street, 1030 Century Building, Pittsburgh,
Pennsylvania, and are occupied under a lease expiring in 2000.
ITEM 3. Legal Proceedings
In 1990, the Company filed a complaint against American Cyanamid Company
("Cyanamid") claiming, among other things, that Cyanamid had underpaid the
Company under a marketing agreement relating to Mylan's Maxzide(R) and
Maxzide-25MG(r) products. Cyanamid counterclaimed against the Company alleging
fraudulent inducement and breach of contract relating to the agreement and
against the Company's former chairman alleging defamation.
During 1994, the jury in this lawsuit ruled in favor of Cyanamid on the
Company's complaint and in favor of the Company on Cyanamid's counterclaims, and
the judge dismissed the defamation counterclaim. No money damages were awarded
to either party. Both parties appealed and the Court of Appeals for the Fourth
Circuit affirmed the jury's action in all respects. However, the judge's
decision to dismiss the defamation counterclaim was reversed. On June 14, 1996,
in connection with negotiating a series of agreements relating to Maxzide(R) and
Maxzide-25MG(R) as described in Item 1, the parties agreed to terminate this
litigation, including the defamation counterclaim.
On November 24, 1992, Hoechst Marion Roussel Inc. ("HMR") (formerly known
as Marion Merrell Dow) and Tanabe Seiyaku Co. LTD ("Tanabe") filed suit in
Federal District Court for the Western District of Pennsylvania against the
Company and its wholly-owned subsidiary Mylan Pharmaceuticals claiming
infringement of Tanabe's patent for the manufacture of diltiazem. On September
29, 1995, the Company entered into a settlement agreement which releases all
parties from any further actions and suits as it relates to the manufacture of
diltiazem. In consideration for such settlement HMR and Tanabe agreed to
reimburse defense costs incurred by the Company.
On September 7, 1994, Upsher-Smith Laboratories filed suit in Minnesota
State Court against the Company and its wholly-owned subsidiary, Mylan
Pharmaceuticals Inc. The suit alleges breach of contract, breach of implied
contract, detrimental reliance and promissory estoppel with respect to the sale
and distribution of cimetidine. The suit claims damages in excess of
$13,000,000. A trial date has been set for July, 1996. The Company believes this
lawsuit is without merit and intends to vigorously defend its position.
During 1996, Bertek was involved in an arbitration matter unrelated to the
pharmaceutical business. On May 2, 1996, the arbitration panel issued a decision
against Bertek for approximately $4,000,000. No accrual for loss has been made
as of March 31, 1996. The Company has appealed this matter and believes the
ultimate resolution of this matter will not have a material effect on the
financial statements of the Company.
While it is not feasible to predict the ultimate outcome of such
proceedings it is the opinion of management that the outcome of these suits will
have no material adverse effect on the Company's operation, financial position,
or liquidity.
ITEM 4. Submission of Matters to a Vote of Security Holders
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
The names, ages and positions of the Company's executive officers are as
follows:
Milan Puskar 61 Chairman, Chief Executive Officer
and President
Dana G. Barnett 55 Executive Vice President
Louis J. DeBone 50 Vice President-Operations
Roger L. Foster 49 Vice President-General Counsel
Roderick P. Jackson 56 Senior Vice President
Joseph J. Krivulka 44 Vice President
Dr. John P. O'Donnell 50 Vice President-Research and
Quality Control
Patricia Sunseri 56 Vice President-Investor and
Public Relations
C.B. Todd 62 Senior Vice President
Robert W. Smiley 74 Secretary
Mr. Puskar was employed by the manufacturing subsidiary of the Company from
1961 to 1972 and served in various positions, including Secretary-Treasurer,
Executive Vice President and a member of the Board of Directors. From 1972 to
1975, Mr. Puskar served as Vice President and General Manager of the Cincinnati
division of ICN Pharmaceuticals Inc. In addition, he has served as a partner in
several pharmaceutical firms in foreign countries and is currently a director of
VivoRx, Inc., Santa Monica, California and Duquesne University, Pittsburgh,
Pennsylvania. Mr. Puskar has served as President of the Company since 1976 and
as Vice Chairman of the Board since 1980. He was elected Chairman of the Board
and C.E.O. on November 9, 1993.
Mr. Barnett was employed by the Company in 1966. Since that time he has
held various management positions with the manufacturing subsidiary of the
Company. His responsibilities have covered production, quality control and
product development. Mr. Barnett became Vice President in 1974, Senior Vice
President in 1978 and Executive Vice President in 1987. He was elected President
and Chief Executive Officer of Somerset Pharmaceuticals, Inc., a joint-venture
subsidiary of the Company in June 1991. In August of 1995 he was elevated to
Chairman and Chief Executive Officer of Somerset Pharmaceuticals, Inc.
Mr. DeBone has been employed by the Company since September, 1987. Prior to
assuming his present position in November, 1991 as Vice President-Operations he
served as Vice President-Quality Control. He was previously employed with the
Company from March, 1976 until June, 1986 and served as Director of
Manufacturing.
Mr. Foster has been employed by the Company since May, 1984. Prior to
assuming his present position in June, 1995 as Vice President-General Counsel he
served as Director of Legal Services and as Director of Governmental Affairs.
Mr. Jackson has been employed by the Company since April, 1986. Prior to
assuming his present position in October, 1992 as Senior Vice President he
served as Vice President-Marketing and Sales.
Mr. Krivulka has been employed by the Company since March, 1990. Prior to
assuming his present position in April, 1992 as Vice President he served as
Assistant to the President. Since April of 1993, he also serves as President of
Bertek, Inc., a subsidiary of the Company. From 1989 to 1990 he was employed by
Janssen Pharmaceutica, a division of Johnson & Johnson, as Executive Director of
Business Unit Management.
Dr. John O'Donnell has been employed by the Company since 1983. Prior to
assuming his present position in November, 1991 as Vice President-Research and
Quality Control, he served as Vice President-Research and Product Development
and as Director of Chemistry and Product Development.
Mrs. Sunseri has been employed by the Company since 1984. Prior to assuming
her present position in October, 1989 as Vice President-Investor & Public
Relations, she served as Director of Investor Relations.
Mr. Todd has been employed by the Company since 1970. Prior to assuming his
present position in October, 1987 as Senior Vice President, Mr. Todd served as
Vice President-Quality Control. He also serves as President of Mylan
Pharmaceuticals Inc., a subsidiary of the Company.
Mr. Smiley has been Secretary of the Company for approximately twenty-one
years and on December 12, 1975, he was elected to the Board of Directors. His
principal occupation is and for approximately forty-two years has been an
attorney-at-law in Pittsburgh, Pennsylvania. He was a partner in the law firm of
Smiley, McGinty and Steger, general counsel to the Company. Since October 1,
1992, Mr. Smiley has been associated with the law firm of Doepken Keevican &
Weiss Professional Corporation.
There is no family relationship between any of the above executive
officers. Officers of the Company serve at the pleasure of the Board of
Directors.
PART II
ITEM 5. Market for Registrant's Common Equity and
Related Stockholder Matters
The information required by item 5 is hereby incorporated by reference to
pp. 44 and 64 of the accompanying Annual Report to Shareholders for the year
ended March 31, 1996.
ITEM 6. Selected Financial Data
The information required by item 6 is hereby incorporated by reference to
p. 44 of the accompanying Annual Report to Shareholders for the year ended March
31, 1996.
ITEM 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations
The information required by item 7 is hereby incorporated by reference to
pp. 45-49 of the accompanying Annual Report to Shareholders for the year ended
March 31, 1996.
ITEM 8. Financial Statements and Supplementary Data
The information required by item 8 is hereby incorporated by reference to
pp. 50-64 of the accompanying Annual Report to Shareholders for the year ended
March 31, 1996.
ITEM 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
Not applicable.
PART III
ITEM 10. Directors and Executive Officers of the Registrant
The information as to directors required by item 10 is hereby incorporated
by reference to pp. 1-3 of the Company's 1996 Proxy Statement. Information
concerning executive officers is provided in Part I of this report under the
caption "Executive Officers of the Registrant".
ITEM 11. Executive Compensation
The information required by item 11 is hereby incorporated by reference to
pp. 3-9 of the Company's 1996 Proxy Statement.
ITEM 12. Security Ownership of Certain
Beneficial Owners and Management
The information required by item 12 is hereby incorporated by reference to
p. 10 of the Company's 1996 Proxy Statement.
ITEM 13. Certain Relationships and Related Transactions
Not applicable.
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1.List of Financial Statements
Page
Number
-------
INCLUDED IN ANNUAL REPORT TO SHAREHOLDERS:
Consolidated Balance Sheets................................ 50-51
Consolidated Statements of Earnings........................ 52
Consolidated Statements of Shareholders' Equity............ 53
Consolidated Statements of Cash Flows...................... 54-55
Notes to Consolidated Financial Statements................. 56-63
Independent Auditors' Report............................... 64
2. Financial Statement Schedules
The information required by this item is incorporated herein by
reference to Exhibit 99. All other schedules have been omitted
because they are not required.
3. Exhibits
(3)(a) Amended and Restated Articles of Incorporation of the registrant,
filed as Exhibit (3)(a) to Form 10-Q for quarter ended June 30, 1992
and incorporated herein by reference.
(b) By-laws of the registrant, as amended to date, filed as Exhibit 3(b)
to Form 10-Q for the quarter ended June 30, 1992 and incorporated
herein by reference.
(10)(a) 1986 Incentive Stock Option Plan, as amended to date, filed as
Exhibit 10(b) to Form 10-K for fiscal year ended March 31, 1993 and
incorporated herein by reference.
(b) "Salary Continuation Plan" with Milan Puskar, Dana G. Barnett and C.B.
Todd each dated as of January 27, 1995 and filed as Exhibit 10(b) to
Form 10-K for fiscal year ended March 31, 1995 and incorporated herein
by reference.
(c) "Salary Continuation Plan" with Roderick P. Jackson and Louis J.
DeBone each dated March 14, 1995 and filed as Exhibit 10(c) to Form
10-K for fiscal year ended March 31, 1995 and incorporated herein by
reference.
(d) Employment contract with Milan Puskar dated April 28, 1983, as amended
to date, filed as Exhibit 10(e) to Form 10-K for fiscal year ended
March 31, 1993 and incorporated herein by reference.
(e) Split Dollar Life Insurance Arrangement with McKnight Irrevocable
Trust filed as Exhibit 10(g) to Form 10-K for fiscal year ended March
31, 1994 and incorporated herein by reference.
(f) 1992 Nonemployee Director Stock Option Plan filed as Exhibit 10(g) to
Form 10-K for fiscal year ended March 31, 1993 and incorporated herein
by reference.
(g) "Service Benefit Agreement" with Laurence S. DeLynn, John C. Gaisford,
M.D., Richard A. Graciano and Robert W. Smiley, Esq. each dated
January 27, 1995 and filed as Exhibit 10(g) to Form 10-K for fiscal
year ended March 31, 1995 and incorporated herein by reference.
(h) Split Dollar Life Insurance Arrangement with Milan Puskar Irrevocable
Trust, filed herewith.
SPLIT-DOLLAR AGREEMENT
THIS AGREEMENT is entered into by and between MYLAN LABORATORIES INC., a
Pennsylvania corporation (hereinafter called the "Corporation"),
A
N
D
JOHANNA PUSKAR PRATT, or her successors, as Trustee of the Milan Puskar
Irrevocable Trust Agreement dated as of February 13, 1995 (hereinafter called
the "Trustee").
W I T N E S S E T H T H A T:
WHEREAS, Milan Puskar is a valuable employee of the Corporation; and
WHEREAS, the Trustee has applied for and owns the life insurance policies
on the life of Milan Puskar which are listed on Schedule "A" attached hereto
(the"Policies"); and
WHEREAS, the Corporation desires to assist in paying the premiums on the
Policies; and
WHEREAS, the parties desire to create a split-dollar arrangement to provide
for the payment of premiums on the Policies and to assure that the amount of
premiums paid by the Corporation with respect to the Policies will be repaid to
the Corporation at the death of Milan Puskar, if not earlier; and
WHEREAS, the repayment of premiums paid by the Corporation with respect to
the Policies will be secured by a collateral assignment of the Policies to the
Corporation.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the Corporation and the Trustee hereby agree as follows:
1. Policies. The Policies which are subject to this Agreement are listed on
Schedule "A" attached hereto. Any additional insurance contracts on the life of
Milan Puskar which become subject to this Agreement shall be listed on Schedule
"A" as they become subject to this Agreement.
2. Ownership of Policies. The Trustee shall have custody of the Policies
subject to this Agreement and shall be the sole and exclusive owner of the
Policies, subject, however, to the right of the Corporation to borrow against
the Policies as set forth in paragraph 10 or to the return of any funds advanced
by it for payment of the premiums or other amounts paid with respect to the
Policies upon the death of Milan Puskar or the termination of this Agreement.
Except as to the security interest specifically granted to the Corporation
herein, the Trustee retains all incidents of ownership in the Policies,
including the right to borrow or withdraw against the Policies. The Trustee's
right to borrow shall be limited to an amount equal to the maximum loan value
reduced by an amount equal to the cumulative premiums on the Policies paid by
the
1
Corporation hereunder. The Trustee's right to withdraw from the Policies'
cash values shall likewise be reduced by an amount equal to the cumulative
premiums on the Policies paid by the Corporation hereunder. Milan Puskar shall
not have any rights, powers or incidents of ownership in the Policies.
3. Beneficiary. The Trustee has designated the Trust as the beneficiary of
the proceeds of the Policies.
4. Dividend Options. The Trustee may elect and continue in force such
dividend options, if any, as are provided under the Policies and accordingly
therewith the dividends may be used by the Trustee in such manner as the Trustee
deems appropriate, such as to purchase paid up additions, to purchase additional
term insurance, or to reduce premiums.
5. Payment of Premiums. The premiums on the Policies shall be paid in the
following manner:
(a) The Trustee shall have the option with respect to each calendar
year or portion thereof that this Agreement is in effect to contribute that
portion of the premiums under the Policies equal to the lesser of (i) the
rate established by the Internal Revenue Service for the cost of pure life
insurance protection (P.S. 58 cost) from time to time, or (ii) the rate, if
any, established by the respective insurance company for one-year term life
insurance available to all standard risks in the amount of the respective
Policies, less cash value, at Milan Puskar's then attained age.
(b) The Corporation shall pay the balance, representing the excess, if
any, of the annual premium over any portion that may be paid by Trustee
under (a) above, plus the annual interest due on any Policy loans made by
the Corporation.
(c) For administrative convenience, the Trustee shall remit any
contribution toward the premiums to the Corporation, and the Corporation
shall be responsible for making the total combined premium payments to the
respective insurance company.
(d) The Corporation shall cease making premium payments whenever the
Trustee so determines. Once the Trustee has terminated the Corporation's
obligations hereunder, the Trustee shall be solely responsible for paying
premiums due under the Policies.
6. Security Interest. In consideration of the premium payments to be made
by the Corporation, and to assure the repayment of such payments, the Trustee
grants to the Corporation, with collateral assignment, a security interest in
the Policies. The Corporation's security interest in the Policies at any time
shall be an amount equal to its net "Premium Payments." "Premium Payments" as
used in this Agreement means the aggregate amount of premium payments paid with
respect to the Policies by the Corporation under this Agreement, less any amount
received by the Corporation in reimbursement of such payments. The outstanding
balances on any Policy loans made by the Corporation shall be considered
reimbursement of such
2
payments. The Trustee agrees to execute and deliver to the Corporation, at
the time of the first premium payment on the Policies, a collateral assignment
of the Policies.
7. Policy Proceeds. If the Policies mature as death claims while this
Agreement remains in effect, the Corporation shall immediately be paid an amount
equal to the then balance of its "Premium Payments." Such payment shall be
considered a return of capital to the Corporation and a termination of this
Agreement. The balance of such proceeds shall be retained by the beneficiary
designated by the Trustee in the manner and in the amount provided under the
terms of the Policies.
8. Termination. This Agreement shall terminate upon the happening of any of
the following events:
(a) The Trustee may terminate this Agreement while no premium under
the Policies is overdue by giving notice to the Corporation. The effective
date of such termination shall be the date of giving notice.
(b) By mutual consent of the parties hereto or by release of the
Corporation's security interest under paragraph 6 hereof.
(c) Bankruptcy, insolvency or dissolution of the Corporation.
(d) Surrender of the Policies by the Trustee.
9. Repayment of Premium Payments. If this Agreement is terminated under
paragraph 8 above, the Trustee shall obtain release of the Corporation's
security interest in the Policies by paying to the Corporation a sum equal to
the amount of the "Premium Payments" made by the Corporation as of that date.
The Corporation agrees (solely for purposes of facilitating such termination and
repayment of its premium payments secured by said policies) that the Trustee may
borrow or withdraw from the Policies cash values in amounts in excess of the
amounts specified in paragraph 2 above. If the Trustee fails to pay the
Corporation a sum equal to the "Premium Payments" within sixty (60) days of the
date of the termination of this Agreement pursuant to paragraph 8 above, the
Trustee shall execute any and all instruments that may be required to vest
ownership of the Policies in the Corporation. Thereafter, the Trustee shall have
no further interest in the Policies; the Corporation shall be deemed to have
received a sum equal to the"Premium Payments" and no additional sum will be due
it; and the Corporation will have the option to maintain the Policies at its
sole discretion.
10. Corporation's Rights. If the Trustee sells, assigns, surrenders, makes
withdrawals or otherwise terminates the Policies at any time this Agreement is
in effect, the Corporation shall have the immediate right to repayment of its
"Premium Payments" from the Trustee. The Corporation shall have the right to
borrow from the Policies and to pledge or assign the Policies as security for
loans or advances, but only up to the "Premium Payments" less the amount of any
loans theretofore obtained by the Corporation.
11. Assignment. Subject to paragraph 10 above, neither party shall have the
right to assign its interests hereunder without the written consent of the other
party.
3
12. Further Assurances. The parties hereto agree to execute any documents
which may be necessary or proper to carry out the purpose and the intent of this
Agreement.
13. Amendment. This Agreement may not be amended or modified except by a
written instrument signed by the parties hereto.
14. Responsibility of Insurance Company. The parties hereto agree that any
insurance company shall be fully discharged by payment of the death benefit to
the beneficiaries designated in the Policies, subject to the terms and
conditions of the Policies; provided, however, that the insurance company shall
first comply with the terms specified in the collateral assignment as described
in paragraph 6 above. No insurance company shall be considered a party to this
Agreement; therefore, a copy of this Agreement need not be filed with any such
company. Nothing in this Agreement nor in any modifications, amendments or
supplements hereto shall in any way be construed to enlarge, change, vary or in
any way affect the obligations of any insurance company as expressly provided by
the Policies.
15. Binding Effect. This Agreement shall be binding upon the parties hereto
and their successors, assigns, executors, or administrators and beneficiaries.
16. Notices. All notices required by this Agreement shall be in writing and
sent by certified or registered mail to the then current or last known address
of each party hereto.
17. Governing Law. This Agreement shall be subject to and construed
according to the laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the _____ day of ___________________, 1995.
ATTEST: CORPORATION:
MYLAN LABORATORIES INC.
___________________________________ By:____________________________________
Robert W. Smiley, Esq., Secretary Clarence B. Todd, Senior Vice-President
WITNESS: TRUSTEE:
___________________________________ _______________________________________
Johanna Puskar Pratt
4
SCHEDULE "A"
To Split-Dollar Agreement dated as of
_______________, 1995 Between Mylan Laboratories, Inc.
and Johanna Puskar Pratt, Trustee
- - -------------------------------------------------------------------------------
Company Policy Number Face Amount
The Guardian Life Insurance
Company of America 3800280 $9,000,000
The Guardian Life Insurance
Company of America 3794316 $9,000,000
(13) Fiscal 1996 Annual Report to the Shareholders (only those portions
which are incorporated in this Report by reference are being filed
herewith).
MYLAN LABORATORIES INC.
1996 Annual Report to Shareholders
Description of Business
Mylan Laboratories Inc. and its subsidiaries are engaged in the development,
licensing, manufacturing, and marketing of numerous generic and proprietary
finished pharmaceutical and wound care products. These products include solid
oral dosage forms, as well as suspensions, liquids, injectables and
transdermals, many of which are packaged in specialized systems.
Table of Contents
1 Introduction
2 Letter to Shareholders
4 Company History
8 Mylan Laboratories Incorporated
16 Mylan Pharmaceuticals Incorporated
22 Mylan Incorporated
26 Dow Hickam Pharmaceuticals Incorporated
30 Bertek Incorporated
34 UDL Laboratories Incorporated
38 Somerset Pharmaceuticals, Incorporated
42 Financial Highlights
44 Selected Financial Data
45 Management's Discussion
50 Consolidated Balance Sheets
52 Consolidated Statements of Earnings
53 Consolidated Statements of Shareholders' Equity
54 Consolidated Statements of Cash Flows
56 Notes to Consolidated Financial Statements
64 Independent Auditors' Report
64 Market Prices
65 MylanProduct Guide
69 Shareholder Information
69 Directors and Officers
Research
is the life-blood of any company. It is the catalyst by which a company grows
and lack of it can cause stagnation or even failure. Mylan is a research driv
en company dedicated to excellence. As we continue our evolution into a
fully integrated pharmaceutical company, we have tar-
geted compounds to meet unmet needs.we are aggressively developing products
that will effectively treat serious disorders and diseases that are not
addressed by pharmaceuticals presently on the market. Our R & D budget is not
based on a percentage of sales but on accomplishing goals. We do not waste
money, but we spend whatever is necessary to do it right.to meet our objective
of focusing upon therapies that make a difference in terms of human and economic
value. We believe that by advancing science, we can enhance life!
1
To Our Shareholders
Fiscal 1996 has been a very tough year. The industry has been suffering
from a lack of significant FDA approvals and Mylan is no exception.
Consequently, although total units shipped has increased 17% compared with last
year, dollar sales have not kept pace due to the resulting pricing pressure. It
is Mylan's policy to aggressively protect its market share by keeping its
customers price competitive whenever necessary. We have done so throughout this
difficult period and will continue to do so as long as necessary.
We did receive four approvals from the FDA this past fiscal year,
increasing our product line to 83 different compounds covering 22 therapeutic
categories.
Seventeen ANDAs (generic drugs) are presently submitted to the Food and
Drug Administration for approval with over 40 more in various stages of
development. Additionally, we are sourcing raw material for more than 30 other
generic products.
Along with that, we are working on seven innovator products and have
already filed INDs (Investigational New Drugs) on five of them with the other
two to be filed by the end of June.
Also during this past fiscal year, we announced our alliance with and
investment in VivoRx, Inc., a California based biotechnology company developing
pancreatic islet cell implant technology for the management of diabetes. This is
an exciting project with the prospect of improving the quality of life for
millions of insulin dependent Americans. It is also consistent with our
objective of focusing upon therapies that meet unmet needs, and make a
difference in terms of human and economic value.
During this fiscal year, Mylan has paid a total of $17,502,000 in cash
dividends to its share- holders, and shareholders' equity has grown from
$482,728,000 last year to $616,441,000 for this fiscal year. A 28% increase!
Although competition in the generic field is tough and pricing pressures
are severe at the moment, the industry continues to grow. Mylan is planning and
building for the future and has positioned itself to remain a leader in this
industry.
Most sincerely,
Milan Puskar
Chairman, CEO and President
3
1960s
(picture)
Parke-Davis was the first major drug company to purchase Mylan's finished
goods in 1969.
(picture)
Mylan began in 1961 as a privately owned company founded by our Chairman,
CEO and President, Milan Puskar, and an associate in White Sulphur Springs, West
Virginia. Initially the company did not manufacture products, but operated as a
distributor buying finished goods and reselling them to pharmacies, doctors, and
etc.
1961
(picture)
Mylan began manufacturing vitamins in 1965, and in 1966 received approval
to start manufacturing Penicillin G tablets. Production was expanded in 1968
with the FDA approval of Tetracycline.
(picture)
Morgantown
White Sulphur
Springs
Princeton
In 1963 Mylan relocated to Princeton, West Virginia and then in 1965 to its
present location in Morgantown.
4
1970s
(pictures)
Mylan experienced unbelievable growth after the present management team
took over on May 13, 1976, and the company soon became eligible to be traded on
the National-Over-the-Counter (NASDAQ) Market as MYLN.
NASDAQ
February 15, 1973, the first shares of stock were traded on the
Over-the-Counter Market, and Mylan became a public company.
Mylan continued to expand its list of approved products with the addition
of Ethromycin in 1971 and Ampicillin in 1973. The list of major drug companies
purchasing product under private label also continued to increase.
1980s
(pictures)
On April 14, 1986, Mylan became a member of the Big Board, The New York
Stock Exchange, and its symbol became MYL.
Mylan's former Chairman and CEO, Roy McKnight testified before the House
Oversight and Investigations Committee regarding improprieties at the FDA,
prompting an investigation of the generic drug industry exposing cheating,
bribery and payoffs.
November 1988, Mylan announced the joint-venture purchase of Somerset
Pharmaceuticals. Somerset received FDA approval in 1989 for EldeprylRegistration
Mark, an extremely effective treatment for late stage Parkinson's disease.
Mylan introduced its first proprietary product, MaxzideRegistration Mark,
an antihypertensive in 1984. In 1988, after three years of clinical testing,
Mylan received approval on half strength MaxzideRegistration Mark-25. Both were
licensed to Lederle Laboratories for distribution.
In 1987 Mylan opened a second manufacturing facility in Caguas, Puerto
Rico, followed by the opening of its first distribution center in Greensboro,
North Carolina in 1988.
5
1990s
(pictures)
Mylan merged with Dow B. Hickam Pharmaceuticals, a high quality branded
pharma ceutical company with a highly skilled and aggressive marketing force on
October 30, 1991.
Bertek, Inc., an important manufacturer and innovator of state-of-the-art
tran sdermal drug delivery systems was acquired on February 15, 1993.
November 6, 1993, Mylan's former Chairman and CEO Roy McKnight died
suddenly of a heart attack. The company co-founder Milan Puskar was named
Chairman and CEO on November 9, 1993.
In 1991 the Company also opened its second distribution facility in Reno,
Nevada.
Cidra, Puerto Rico became the site of Mylan's third generic manufacturing
facility with its opening in October 1994.
1996
(pictures)
Mylan announced a 3 for 2 stock split August 15, 1995, the Company's ninth
split since July 1979, increasing Mylan's shares to 120,019,618 from 275,000 at
the Initial Public Offering twenty-three years ago.
February 28, 1996, Mylan acquired UDL Laboratories Inc., the premier
supplier of unit dose generic pharmaceuticals to the institutional and long-term
care marketplace.
6
Company History
The success of any company is not achieved by any one particular event but
is the result of a series of occurrences throughout its history. It is a
combination of the management team, the employees and the corporate philosophy
that make or break a company. Mylan is the proof of that principle! We have
grown from a tiny, single location, West Virginia company to a present day,
financially strong, multi-location industry leader listed on the New York Stock
Exchange. Mylan's code of ethics and its corporate philosophy that 'If we can't
do it right, we don't do it at all,' combined with the integrity of its
employees provides the foundation upon which this company is built. Mylan's
'family' of employees whose dedication to their work and pride in the company
have been the backbone of this remarkable story. From maintenance to management
it has been a blend of ideas, hard work and mutual respect, and it continues to
be the key to Mylan's ongoing success and growth!
With its blend of quality generics and innovator
products, Mylan has grown into a fully integrated
pharmaceutical firm, ranking among America's top 1,000 growth companies.
"Our commitment to excellence has given us a firm hold on the present as a
leader in the pharmaceutical industry and combined with the talent,
integrity and dedication of our family of employees, we have a strong
foothold on the future." Left to Right: Rod Jackson, Senior Vice President;
Dr. John O'Donnell, Vice President - Research and Quality Control; Patricia
Sunseri, Vice President - Investor and Public Relations; Roger Foster, Vice
President and General Counsel; Lou DeBone, Vice President - Operations.
|- Mylan Pharmaceuticals Inc.
|
|- Mylan Inc.
|
Mylan Laboratories Inc. |- Dow Hickam Pharmaceuticals Inc
the mylan formula |
for success has always ----------------> |- Bertek, Inc.
been multi-faceted |
|- UDL Laboratories Inc.
. |
|- Somerset Pharmaceuticals, Inc.
The twelve months of Fiscal 1996 have been filled with changes and challenges.
We have continued to see consolidation in our industry.we have participated
in that consolidation by acquiring UDL Laboratories, the premier supplier of
unit dose pharmaceuticals to the institutional and long-term care markets. This
enables Mylan to better position itself in the retail, institutional and managed
care markets.
We have seen increased pricing pressure.the industry has been suffering
from a lack of significant FDA approvals, and Mylan is no exception.
Consequently, even though units shipped has increased 17% over last year, dollar
sales have not kept pace due to the resulting pricing pressure. It is Mylan's
policy to aggressively protect its market share by keeping customers price
competitive whenever necessary. We have done so throughout this difficult period
and will continue to do so as long as necessary.
Mylan continues to increase its market share.for the twelve month period
ending December 31, 1995, Mylan was ranked first among all pharmaceutical
companies, branded or generic, in the number of prescriptions dispensed
according
Mylan Laboratories Inc. 9
to the IMS National Prescription Audit. Fifty-six percent of Mylan's products
rank number one and 71% rank number one or number two. We are very proud of the
Mylan team of employees who have made this possible. From the moment a product
becomes an idea in Mylan's mind, to the moment it gets approved and becomes a
part of our product line, it is the creativity, dedication and production of all
of our people, from maintenance to management, that allows us to enjoy this
continued growth!
To maintain our ongoing success and long-term growth, and to continue our
transition into a fully integrated pharmaceutical company, Mylan is developing
innovator products, as well as, generic products. Presently, there are seven of
these compounds in our pipeline: an anti-fungal, a wound care product, a topical
anesthetic, a migraine product, a gastrointestinal product, a burn product, and
a product for treatment of the On/Off phenomenon associated with Parkinson's
disease.
(picture)
July 7, 1995.enjoying life with our Cystinosis 'kids'.on the beach at the Mylan
sponsored picnic in La Jolla, California. Mylan's Orphan Drug
'CystagonRegistration Mark' helps to control this rare genetic disorder known as
Cystinosis for over 400 known victims worldwide.
Mylan Laboratories Inc. 10
Investigational New Drug Application s (INDs) have been filed on five of these
compounds and the other two will be filed by the end of June. Clinical trials
will begin in July on the wound care product and the topical anesthetic.
Mylan has developed its own 'Sustained Release' technology and on March 25,
1996 we announced approval for Verapamil ER 240 MG tablets, our first sustained
release product. We have approximately ten more of these types of products in
development. Presently, we are constructing a 27,000 square foot bead facility
which we hope to have completed by the end of the year.
In September of 1995 we announced our alliance with and investment in
VivoRx, Inc., a California-based biotechnology company that is developing
pancreatic islet cell implant technology for the management of diabetes. Three
patients have been successfully implanted and our first patient has now
successfully undergone his third implant with results similar to his first two,
thus providing "Proof of Principle" to this important technology. VivoRx has now
amended their original IND to permit the use of human 'proliferated' or cloned
cells, in addition, another IND will be filed for the use of porcine (pancreas)
islets and the first of these implants are planned for this year.
Diabetes is a staggering disease in terms of both human and economic tolls.
By working with VivoRx, Mylan will be helping to meet the unmet need for a
long-term diabetes control therapy and helping to
Mylan Laboratories Inc. 11
improve the quality of life for the estimated 1.4 million insulin-dependent
diabetics in the United States who could potentially benefit from the treatment.
Our VivoRx investment is consistent with the Mylan objective to focus upon
therapies to treat or cure devastating illnesses. To serve this mission, we have
been and continue to be a research driven company. It is with great anticipation
that we look forward to moving into our new 150,000 square foot R & D facility
this summer. We have more than doubled our R & D staff over the past two years
and with the opening of this facility, will increase it.
We have also quietly supported significant research at The Parkinson's
Institute in California. Dr. William Langston, its founder and president and a
leader in Parkinson's research, was the first to describe MPTP as the causative
agent for illicit drug users' development of Parkinson's like diseases several
years ago.
We have supported research at the Institute, searching for biological
markers to use in screening compounds for the potential use in treatment of
Parkinson's. Our 'Parkinson's Man in a Box' funding will provide The Parkinson's
Institute the use of materials to include DNA containing tissues of brain and
blood from deceased Parkinson's patients to assist in finding cures or treatment
for future Parkinson's victims. No other model exists for this type of screening
of compounds. We find this research very significant in
(picture)
Milan Puskar, Chairman, CEO and President, Mylan Laboratories Inc. Dr.
Patrick Soon-Shiong, President and CEO, VivoRx, Inc.
Mylan Laboratories Inc. 12
helping to treat or cure this devastating illness.
Once again throughout the year Mylan has been featured in many
publications and heralded by some as one of the best companies in the United
States. Business Week's 1996 issue of America's 1000 Most Valuable Companies
ranked Mylan among its elite as did Forbes in its April 22, 1996 issue of The
Forbes 500. The October 10, 1995 issue of Financial World reflected Mylan as one
of America's 100 Best Growth Companies. Executive Report magazine ranks Mylan as
number two on their list of Top Ten Performers in the Pittsburgh area.
Better Investing magazine, a publication put out by NAIC.National
Association of Investors Corporation.lists the 100 most popular and widely held
stocks between investment clubs and their members nationwide, and we are proud
to say we rank 38th by number of clubs and 26th by number of shares for 1996. We
take this as a great compliment since our shareholders are very important to us!
We are well aware that growth in shareholders' equity is paramount to our
investors. This year shareholder equity has grown to $616.4 million from $482.7
million last year. A 28% increase!
(picture)
Mylan continues to receive recognition in major publications
Mylan Laboratories Inc. 13
Mylan has also received the silver award for its workplace wellness
programs, which are designed to emphasize good health habits to our employees.
It is the goal of the company to help our employees enjoy a better quality of
life and extend their life expectancy by encouraging exercise and healthy diet.
Once again we tip our hats to our board of directors whose dedication to
the common good of this company, its employees and its shareholders are the
criteria by which they make their decision. We thank all of our board members
for their input and guidance.
And hats off to our entire family of Mylan employees whose integrity and
hard work continues to be the key ingredient in Mylan's success. They are truly
our greatest asset.
(picture)
Mylan has grown to a multi-location industry leader with state-of-the-art
research and development laboratories as well as manufacturing and packaging
facilities in West Virginia, Puerto Rico, Texas, Vermont, Illinois and Florida:
distribution centers in North Carolina and Nevada, and corporate headquarters in
Pittsburgh, Pennsylvania.
(picture)
"Workplace Wellness Award"
Mylan Laboratories Inc. 14
Mylan Laboratories Inc. Board of Directors
(picture)
Left to right front: Milan Puskar; Dana G. Barnett
Left to right rear: C. B. Todd; Laurence S. DeLynn; Robert W. Smiley, Esq.;
John C. Gaisford, M.D.; Richard A. Graciano
Mylan Pharmaceuticals Inc.
5 billion TABLETS AND CAPSULES PRODUCED IN FISCAL 1996
(picture)
In the background is one of the construction projects Mylan has underway.a
150,000 square foot state-of-the-art research facility scheduled for completion
this summer. This facility is another sign of Mylan's total commitment to the
future. It will provide the resources necessary to carry out the company's
aggressive product development program. C. B. Todd - President, Mylan
Pharmaceuticals Inc.
Mylan's total commitment to quality can be witnessed at its manufacturing
plant in Morgantown, West Virginia.the generic arm of the corporate family.
Incoming raw materials are inspected using a scanning electron microscope
and a particle size analyzer to ensure
consistency and quality. This is one of the many quality checks performed
at Mylan Pharmaceuticals even though it is not mandated by the FDA.
The raw materials that pass quality control specifications are then blended
according to the master formula sheet, which is part of the FDA approval and
must be strictly followed. In fact, the FDA makes thousands of inspections each
year to make sure that manufacturers are meeting the master formula sheets
specifications exactly.
Mylan Pharmaceuticals Inc. 17
(picture)
Granulating and blending the raw materials into finished capsules and
tablets is done in climate-controlled rooms known as "clean rooms" because the
air is cleaned to remove dust or powder. As with all other manufacturing steps
at Mylan, only one lot or batch of materials is allowed to be present in a room.
This gives Mylan the highest level of quality control possible.
Using sophisticated state-of-the-art equipment, we are able to manufacture
over seventy-five separate generic drugs. To track all of these different
products, computers with video cameras and bar code readers are used to make
sure that each product always has the correct label.
At every manufacturing phase, Mylan's quality control managers have the
authority to stop production if a product is not meeting Mylan's standards. As a
final quality check, Mylan gives every capsule and tablet 100 percent visual
inspection.
In the pharmaceutical industry, long-term success is based on reputation.
Mylan's success and leadership in providing safe, effective and low-cost generic
drugs is founded on its reputation for both quality and integrity. We care about
our customers and our suppliers because they are an important part of our
success. Producing
Mylan Pharmaceuticals Inc. 18
high quality products is our way of showing our appreciation.
During this past year, Amerisource rewarded us with the "1995
Manufacturer Partner of the Year Award" for our 'superior performance in all
areas.'
Another great honor was bestowed upon Mylan when the retail pharmacists
did their 1995 survey and rated manufacturers. Mylan was ranked the number one
generic company in its commitment to pharmacy, its product quality and its
commitment to research.
We are proud to be on this '1995 Corporate Honor Roll' and even prouder
to be ranked number one in these categories.
Your company has received four new approvals this year from the Food and
Drug Administration, which further expands our ever growing line of products.
Presently we have submitted 17 different chemical entities to the FDA for
approval, representing 27 different strengths. We have more than forty
additional generic products in development.
We are proud to be a leader in the generic industry. Our commitment to
quality, and the integrity of our employees will keep us there. We look forward
to the challenges of the new year.
(picture)
Mylan Pharmaceuticals Inc., Morgantown, West Virginia
(picture)
Industry awards for outstanding performance
Mylan Pharmaceuticals Inc. 19
Dr. Thomas Clark, Mylan's Medical Director, founded Clinical and
Pharmacologic Research, Inc. (CPR) in 1982.
Mylan Pharmaceuticals contracts CPR as a dedicated Phase I Unit and
research organization. The Phase I Unit and administrative offices of CPR are
located in Morgantown, West Virginia near the campus of West Virginia
University. The Phase I Unit has operated for approximately fourteen years and
has been involved in bioequivalence and clinical studies. West Virginia
University is an excellent source of healthy, young research subjects.
The facility has bed space for sixty subjects, the laboratory is
equipped to process research studies running simultaneously. The unit includes a
security system with camera monitoring. Emergency support is present during
study conduct with rapid access to physicians. The unit is located within
minutes of both Monongalia General and Ruby Memorial Hospitals.
Clinical and Pharmacologic Research has composed its own
Institutional Review Board (IRB) as an integral part of the research process.
The CPR-IRB consists of
(picture)
Tom Clark, M.D. on site at CPR
20 Mylan Pharmaceuticals Inc.
highly qualified medical and lay individuals from the
Morgantown community and operates under the appropriate federal regulations.
A new state-of-the-art research facility is planned for late 1996. The
new facility will have bed space for 104 research subjects. The facility will be
divided into four quadrants which will allow four studies to be conducted
independently at the same time. Two large laboratories located adjacent to the
blood collection areas will enable each study to be assigned a specific
processing area.
Mylan Pharmaceuticals Generic Product Line
Generic Name Trade Name
Analgesics
Indomethacin ...................... Indocin Registration Mark
Propoxyphene HCL .................. Darvon Registration Mark
Propoxyphene ...................... Darvon Registration Mark
Compound .......................... Compound-65
Propoxyphene HCL &
Acetaminophen ..................... Wygesic Registration Mark
Propoxyphene
Napsylate & ...................... Darvocet-
Acetaminophen .................... N Registration Mark 100
Antiangina
Atenolol ......................... Tenormin Registration Mark
Nadolol .......................... Corgard Registration Mark
Nitroglycerin Transdermal
System (Patch) ................... Transderm
Nitro Registration Mark
Verapamil HCL .................... Isoptin Registration Mark
Antianxiety
Alprazolam XanaxRegistration Mark
Diazepam ........................ Valium Registration Mark
Lorazepam ....................... Ativan Registration Mark
Perphenazine &
Amitriptyline HCL ............... Triavil Registration Mark
Antibiotics
Amoxicillin Trihydrate Amoxil Registration Mark
Ampicillin Trihydrate .......... Polycillin Registration Mark
Cefaclor ....................... Ceclor Registration Mark
Cephalexin Keflex Registration Mark
Doxycycline Hyclate ............ Vibramycin Registration Mark
Doxycycline Hyclate ............ Vibra-tabs Registration Mark
Erythromycin
Ethylsuccinate ................. E.E.S. 400 Registration Mark
Erythromycin ................... Erythrocin Registration Mark
Stearate ....................... Stearate
Penicillin V Potassium V-Cillin-K Registration Mark
Tetracycline HCL .............. Achromycin V Registration Mark
Sumycin Registration Mark
Antidepressant
Amitriptyline HCL ............... Elavil Registration Mark
Chlordiazepoxide &
Amitriptyline HCL Limbitrol Registration Mark
Doxepin HCL ..................... Sinequan Registration Mark
Maprotiline HCL ................. Ludiomil Registration Mark
Nortriptyline HCL ............... Pamelor Registration Mark
Antidiabetic
Chlorpropamide Diabinese Registration Mark
Glipizide ...................... Glucotrol Registration Mark
Tolazamide Tolinase Registration Mark
Tolbutamide .................... Orinase Registration Mark
Antidiarrheal
Diphenoxylate HCL&
Atropine Sulfate Lomotil Registration Mark
Loperamide HCL Imodium Registration Mark
Antigout
Allopurinol .................... Zyloprim Registration Mark
Antihypertensive
Amiloride HCL &
Hydrochlorothiazide ........... Moduretic Registration Mark
* Captopril Capoten Registration Mark
Clonidine HCL ................. Catapres Registration Mark
Clonidine HCL &
Chlorthalidone Combipres Registration Mark
Methyldopa Aldomet Registration Mark
Methyldopa &
Hydrochlorothiazide ........... Aldoril Registration Mark
* Indapamide Lozol Registration Mark
Metoprolol Tartrate ........... Lopressor Registration Mark
Prazosin HCL ................. . Minipress Registration Mark
Propranolol HCL .............. Inderal Registration Mark
Propranolol HCL &
Hydrochlorothiazide .......... Inderide Registration Mark
Antihypolipidemic
Gemfibrozil ................... LopidRegistration Mark
Anti-Inflammatory
Fenoprofen Calcium Nalfon Registration Mark
Flurbiprofen ...................... Ansaid Registration Mark
Ibuprofen ......................... Motrin Registration Mark
RufenRegistration Mark
Meclofenamate Sodium .............. Meclomen Registration Mark
Naproxen .......................... Naprosyn Registration Mark
Naproxen Sodium ................... Anaprox Registration Mark
Piroxicam ......................... Feldene Registration Mark
Sulindac .......................... Clinoril Registration Mark
Tolmetin Sodium ................... Tolectin Registration Mark
Tolmetin Sodium ................... Tolectin Registration Mark 600
Antineoplastic
Methotrexate ...................... Methotrexate Registration Mark
Rheumatrex Registration Mark
Antipsychotic
Fluphenazine HCL ................. Prolixin Registration Mark
Haloperidol ...................... Haldol Registration Mark
Thioridazine HCL ................. Mellaril Registration Mark
Thiothixene ...................... Navane Registration Mark
Anxiolytic
Clorazepate Dipotassium .......... Tranxene Registration Mark
Beta Blocker
* Acebutolol Sectral Registration Mark
Atenolol and
Chlorthalidone .................. Tenoretic Registration Mark
Pindolol ........................ Visken Registration Mark
Timolol Maleate ................. Blocadren Registration Mark
Bronchial Dilator
Albuterol ...................... Proventil Registration Mark
Ventolin Registration Mark
Calcium Channel
Blocker
Diltiazem HCL ................. Cardizem Registration Mark
* Verapamil HCL ER Isoptin Registration Mark SR
Diuretics
Bumetanide Bumex Registration Mark
Chlorothiazide Diuril Registration Mark
Chlorthalidone Hygroton Registration Mark
Furosemide Lasix Registration Mark
Methyclothiazide ......... Enduron Registration Mark
Reserpine &
Chlorothiazide ............... Diupres Registration Mark
Spironolactone Aldactone Registration Mark
Spironolactone &
Hydrochlorothiazide .......... Aldactazide Registration Mark
Hypnotic Agent
Flurazepam HCL Dalmane Registration Mark
Temazepam .................... Restoril Registration Mark
H2 Antagonist
Cimetidine Tagamet Registration Mark
Muscle Relaxant
Cyclobenzaprine HCL .......... Flexeril Registration Mark
Uricosuric
Probenecid Benemid Registration Mark
* Indicates fiscal 1996 approval
(picture)
"Mylan selected Puerto Rico because of the good people we have down
here.high-quality, well-trained, dedicated people who are proud of their work
and their company." Carlos Machin - President and General Manager of Puerto Rico
Operations
Facing the Challenge of Meeting Market Demand
Mylan Inc.
Mylan broke ground for its first manufacturing facility in Caguas, Puerto
Rico on October 8, 1986, and less than one year later, that 60,000 square foot
plant was completed and ready for production.
The success of this operation has been so outstanding that we have doubled
the size of the Caguas facility and purchased a second plant in the town of
Cidra.
Puerto Rico is only about a third the size of the state of Vermont, yet it
is home to one of the greatest concentrations of pharmaceutical manufacturing
capabilities in the world.
Overall, the island boasts more than 70 individual manufacturing and
processing plants, representing nearly every major pharmaceutical company in the
world.
The majority of manufacturers have established plants in Puerto Rico to
take advantage of the island's exceptional work force and favorable tax
structure. But Mylan is doing more than merely taking advantage of a good thing.
Mylan Inc. 23
With its fully equipped facilities at Caguas and Cidra, Mylan has seized
the initiative to push manufacturing technology to the limit, and create a new
standard of excellence for quality and integrity in pharmaceutical production.
At the Caguas plant, our state-of-the-art manufacturing facilities produce
a wide range of Mylan generics, as well as Somerset's proprietary
anti-Parkinson's drug EldeprylRegistration Mark. Over one billion tablets and
capsules were produced in this facility during Fiscal 1996. Since it became
operational in 1987, the Caguas facility has achieved an excellent record for
both product approval and regulatory compliance. Recently the quality control
lab was expanded which provides added analytical capacity.
At its nearby Cidra facility, Mylan has created highly advanced
capabilities for handling pharmaceutical products with special handling and
manufacturing safety requirements. These capabilities permit Mylan to
manufacture Cidra's principal product, Methotrexate. The unique demands of these
Mylan Inc. 24
products - including expert application of specialized manufacturing equipment,
strict adherence to rigid procedures, and constant use of sophisticated
protective gear - create daily challenges which must be met and overcome.
But Cidra's dedicated staff has proven equal to the task.
With enormous energy and commitment, they are facing the immediate
challenge of satisfying market demand for Mylan products today.and laying the
foundation for Mylan's entry into significant new market segments tomorrow.
Carlos Machin, President and General Manager of Mylan's Puerto Rico
operations commented: "The philosophy of Mylan is quality and integrity.the
entire Mylan family is built around this, and Puerto Rico is no exception. Our
employees are extremely proud of the quality we turn out, of our relationship
with the community and with Puerto Rico. We have been a landmark in Puerto Rico,
not only for the level of production.but for quality and integrity. We are
extremely proud to be part of the Mylan family."
(picture)
Visual inspection is part of Mylan's quality control excellence.
Mylan Inc. 25
Mylan
Dow Hickam Pharmaceuticals Inc.
12 unique and innovative products to meet customers' needs
(picture)
"The health care industry is constantly evolving and with managed care emerging
as the fastest growing segment of this industry, we are on the threshold of a
very exciting era. With the combination of Hickam, Bertek and UDL into the Mylan
family of companies, Mylan is uniquely positioned to provide quality products
and services from one source and enables the Company to be a 'standout' in this
industry." William W. Richardson - President, Dow Hickam Pharmaceuticals Inc.
Dow Hickam Pharmaceuticals Inc. of Sugar Land, Texas was acquired by Mylan
Laboratories Inc. in October 1991 and has become a vital part of a corporation
well positioned to take advantage of the ever changing health care industry.
Dow Hickam specializes in the manufacturing and marketing of wound and burn
care pharmaceutical products and medical devices for use in hospitals, nursing
homes, and home health care. However, Hickam is much more than a wound care
company. They have built stronger alliances with their distributors and with key
corporate health care providers and expanded their physician call base to
include plastic surgeons and dermatologists as dermatology is a focused market
in their future.
During fiscal 1996 the Company added Flexdermtrademark, a hydrogel polymer
wound dressing that provides a moist environment for wound healing. This new
product complements Hickam's current line and meets its strategic focus of
Dow Hickam Pharmaceuticals Inc. 27
acquiring unique and innovative products for the institutional
marketplace.
With a highly experienced sales force of approximately 80 people, Hickam
has a strong presence in the institutional and alternate care marketplace which
also enables them to reach the nation's 42 most populated states, covering 97%
of the hospital and nursing home patients in the United States.
The number of sales regions was increased from seven to nine to support the
Company's expanding product line and growth into the managed care marketplace.
The additional coverage gives Hickam the opportunity to grow the sales force
when additional products are acquired or developed and has enabled Hickam field
managers to form stronger relationships with corporate accounts, national and
regional buying groups, and managed care companies.
Hickam continues to grow within the managed care marketplace. The recent
acquisition of UDL Laboratories Inc. now enables the Company to provide its
managed
Dow Hickam Pharmaceuticals Inc. 28
care customers with specialty packaged generic products. The Hickam sales force
continues to promote the "Mylan Managed Health Care Program" to its
institutional pharmacy customers, as well as to all facets of the ever expanding
managed care customer base.
The Mylan family of companies is in a unique and quite envious position.
Few companies have the strength of the Mylan and UDL line of quality generic
products, coupled with the manpower of Hickam's national sales force and the
Bertek line of pharmaceutical labels and forms.
This union of Mylan, Hickam, Bertek and UDL is extremely effective in
providing quality products and services from one source and truly makes Mylan a
'standout' in America's health care industry.
Dow Hickam Pharmaceuticals Inc. Product Line
Granulex Registration Mark
A topical aerosol spray used for management of Stage I-IV pressure ulcers.
Proderm Registration Mark
A non-prescription topical aerosol spray used for management of Stage I and II
pressure ulcers.
QUICK Registration Mark
A topical cleanser for urine or fecal incontinence.
SorbsanRegistration Mark
A highly absorbent calcium alginate wound dressing for use in the management of
exuding wounds.
FlexzanRegistration Mark
An ultra-thin, highly conformable, semiocclusive polyurethane foam adhesive
wound dressing.
Flexdermtrademark
A hydrogel polymer wound dressing that provides a moist environment for optimal
wound healing.
SulfamylonRegistration MarkCream
A topical antibacterial cream used in the treatment of burn wounds.
BiobraneRegistration Mark
An adherent biosynthetic temporary wound dressing used in the management of burn
wound and donor sites.
"Bertek's capabilities as a leading manufacturer in transdermal drug delivery
systems technology as well as coating, laminating, extrusion and labeling
operations make it a strategic fit into the Mylan family and enables Mylan to be
in the forefront of the ever changing health care market." Joseph J.
Krivulka - President, Bertek, Inc.
Mylan
Bertek, Inc.
Mylan is Actively Involved in R&D Projects Using Bertek Technology
Bertek, Incorporated, headquartered in St. Albans and Swanton Vermont, is a
leading manufacturer of transdermal drug delivery systems with coating,
laminating, extrusion and labeling operations.
Bertek was acquired by Mylan in February 1993 and the acquisition provided
Mylan with five worldwide and seven domestic patents for transdermal drug
delivery technology, wound care, and other related products to enhance the
generic and branded divisions of Mylan. Bertek also provides Mylan with the
third component of the "Mylan Managed Health Care Program," with their
innovative specialty, and computer generated forms and labels.
Bertek has unique state-of-the-art technologies for producing coatings,
laminates and finished pharmaceutical products to be used for transdermal
administration of drugs to patients. Patches produced with these technologies
are also used in wound care therapy. Transdermal osmotic absorption has become a
significant advance in drug delivery, and transdermal drug delivery systems
increase patient compliance while reducing the risk of missed medication, and in
many products
Bertek Incorporated 31
reduce side effects. Each day, new methods and applications for transdermal
therapeutic systems evolve, and Bertek has helped pioneer that growth. By
combining their extensive R & D and pharmacology capabilities with comprehensive
GMP manufacturing, including clean room coating and laminating of the finished
patch and all its components, Bertek is the complete source from the initial
concept through final manufacturing.
Bertek currently provides components using internally developed technology
for transdermal patches marketed by other companies under contract. They are the
world leaders in the manufacturing of soft laminated cards, with a client base
including Blue Cross and Blue Shield and numerous staff model Health Maintenance
Organizations. And in addition, they are the complete suppliers of the computer
generated labels and package inserts used by Mylan's generic and proprietary
pharmaceutical divisions.
Mylan is actively involved in research and development projects using
Bertek technology to provide new products for marketing by its subsidiaries
including, but not limited to, developing generics in patch formulations, new
chemical entities and line extensions of existing drugs.
The teaming of Bertek and Mylan Pharmaceuticals to develop generics in
patch formulations has to date, led to the filing of three ANDAs for
Nitroglycerin Transdermal Systems with the FDA, and a commitment to file future
ANDAs. Additionally, Bertek has two IND filings scheduled for Fiscal 1997.
Bertek is collaborating exclusively with Somerset Pharmaceuticals in the
development of an EldeprylRegistration Mark patch. Presently, a Phase III
clinical trial using the EldeprylRegistration Mark patch is being conducted for
Senile Dementia of the Alzheimer's type, with additional clinical trials planned
for the future.
The strategic fit of Bertek and Mylan will enable Mylan to be in the
forefront of the ever changing health care market in 1996 and beyond.
Bertek, Incorporated 32
Bertek, Inc. Product Line
Transdermal Drug Delivery Systems
Bertek's Medical Products Division, a leader in Transdermal Drug Delivery
Systems, represents a unique integration of R &D and the manufacturing know-how
and full integration of production facilities to make raw materials and finished
patches.
Wound Care Products
Bertek now stands as an established leader in the design, development and
manufacture of both critical component materials and custom-designed products
for use in wound management.
The MEDIFILMRegistration Mark SERIES of extruded, controlled high moisture vap
or permeable films offers a complete range of design flexibility for use in
wound and I.V. site dressings, ulcer dressings, burn dressings, surgical drape
and ostomy barrier applications.
Health Care Products and Materials
Surgical Incise Drape
Prolonged surgical procedures require the use of securely adhered incise drape
films with a high degree of breathability to eliminate the possibility of
perspiration-induced channeling and contamination of the wound site.
Films &Laminates for Ostomy Care &Skin Barriers
Bertek has developed a family of soft, conformable urethane and copolyester skin
barrier films specifically for ostomy care.
GMPand ISO 9002 Converting and Labeling
As a printer of pharmaceutical labels, Bertek has established full capabilitie s
for designing labels from typesetting to finished artwork in-house in compliance
with ISO 9002 certification for pharmaceutical labels and package inserts.
Mylan
UDL Laboratories Inc.
over 1 billion doses packaged per year
(picture)
Low-cost, alternative dosing forms are an invaluable care management tool for
today's provider.and UDL is meeting that need with a full range of unit dose
pharmaceutical products. Michael K. Reicher - President, UDL Laboratories Inc.
Thousands of health care providers around the nation already know UDL
Laboratories is a leader in unit dose multi-source pharmaceuticals. They have
come to expect certain things from us.like reliable supply, reasonable costs and
dependable service as well as convenience and personal attention.
In virtually every health care delivery setting, providers are doing their best
to maintain a delicate balance between quality of care and cost of delivery. At
UDL , we believe that balance is the very definition of the word value, and
helping deliver value to both providers and patients is our first
responsibility.
Clearly, our extensive formulary of multi-source options is one way UDL
delivers value. Another way is the large network of group purchasing
organizations with whom we have contract awards.
However, the cost of delivery is more than the cost of a drug. Professional time
spent logging, tracking, and preparing medications is expensive. So is time
spent on the floor or at the bedside rechecking and administering. And most
costly of all is an error.any error.in delivering medication to the patient.
UDL Laboratories Inc. 35
That's why UDL places such great emphasis on developing well-designed,
time-saving, and convenient packaging for our products. We believe the extra
effort adds value.by helping providers deliver drug therapy at low cost and with
confidence.
In our industry, service must be impeccably dependable.no excuses, no
exceptions.
UDL has developed one of the most dependable distribution systems in the
industry utilizing the prime vendor drug wholesaler network.because reliable
supply is so critical to providers. After all, even the best therapy is useless
if it is not available when the patient needs it.
UDL's aggressive R & D efforts are fueled by an increasing demand for new
and easy-to-use drug therapies. Current developments include new ANDAs in
progress as well as ongoing enhancements to our existing product mix. Committed
to innovation, UDL continues to meet provider and patient demands with unique
concentrations and delivery systems designed to meet the dispensing
requirements.
We take our commitment to research and development very seriously. In a
single year, our analytical chemists perform many stability tests on potential
new UDL products, including liquid-dose forms, and unit dose forms of oral
solids. Our aggressive R & D program is responsible
UDL Laboratories Inc. 36
for a continually expanding formulary.
But the lab is not the only source of new ideas and products at UDL. We
work closely with some of the most creative, demanding product analysts in the
industrythe health care professionals who use our products.
We have earned the reputation of being a highly-motivated,
customer-oriented organization. We recruit knowledgeable professional and
motivated staff, provide continuous training and skill-building opportunities
and offer an environment that challenges people to deliver their best. At UDL,
offering personal attention is simply standard operating procedure.
UDL Laboratories Inc. Product Line
Oral Solids:
UDL provides a reliable source for a broad range of generic pharmaceuticals. In
fact, we offer more generic pharmaceuticals in unit-dose form than any other
single source, over 375 in all.
Oral Liquids:
UDL manufactures its line of unit-dose liquids in a range of convenient dose
sizes.from 2.5 ml to 30 ml. Our innovative liquid package is designed using the
finest materials and advanced packaging technology, to produce a package that
offers secure storage, easy handling and easy opening and administration.
Emergi-script:
Emergi-script is a formulary of the most commonly dispensed generic
pharmaceuticals, pre-packaged for easy dispensing in convenient 24-hour
supplies. The easy-to-handle dose packs are clearly labeled with the drug name
and dosage and, as appropriate, include drug-specific warning labels and
child-resistant packaging for non-penicillin products.
Bingo Card:
The 'Bingo Card' is compliance packaging for nursing homes. Each dose is
individually identified with product name, lot number, expiration date and
drug-specific bar code. There is an ample patient information area and
drug-specific identification to help reduce medication errors.
(picture)
One of the most exciting chapters in the Mylan book has been the 50% ownership
of Somerset Pharmaceuticals. Somerset owns the rights to EldeprylRegistration
Mark, a drug used in the treatment of Parkinson's disease. Like Mylan, Somerset
is dedicated to extensive research and development looking for ways to provide a
better quality of life to victims of Parkinson's disease and other disease
states. Dana G. Barnett - Chairman and CEO, Somerset Pharmaceuticals
Mylan
directing development efforts to extending product lines
Somerset Pharmaceuticals Inc.
Mylan acquired 50% ownership of Somerset in June 1989. In the same month,
Somerset secured FDA approval to market a new medication for the treatment of
Parkinson's disease, called EldeprylRegistration Mark tablets (selegiline
hydrochloride). Today, more than 7 5,000 patients receive EldeprylRegistration
Mark. Subsequent to its 1989 launch, net profits from the sales of
EldeprylRegistration Mark have increased each year.
In late 1991, Somerset realigned its business goals and elected to
significantly expand its research and development programs especially in the
areas of neurologic and psychiatric treatment research programs. Significant
increases in resources dedicated to these programs have occurred each year since
1992. In 1995, Somerset allocated resources equivalent to approximately 16% of
net sales to fund these research efforts.
Somerset Pharmaceuticals Inc. 39
Somerset is pursuing several additions to the EldeprylRegistration Mark
marketplace. On May 15, 1996, FDA approved Somerset's NDA for a capsule
formulation for EldeprylRegistration Mark. EldeprylRegistration Mark capsules
have completely replaced EldeprylRegistration Mark tablets and Somerset will no
longer manufacture or market the tablet formulation. Somerset is pursuing
several line extensions to complement the sales of EldeprylRegistration Mark
capsules.
Somerset is conducting an extensive research program with a Selegiline
Transdermal System (STS) for which it owns several U.S. and worldwide patents.
Somerset has completed Phase I and II trials and pivotal cl inical trials are
presently ongoing in Alzheimer's disease, Parkinson's disease andMajor
Depression.
As a part of its expanded research and development efforts, Somerset
relocated to Tampa, Florida in 1992. The Company purchased a 24,000 square foot
building which soon became "home" to a state-of-the-art research and development
laboratory equipped with the latest analytical equipment and high-tech
processing equipment. Additional development capabilities in Somerset's
laboratory include the design, formulation,
Somerset Pharmaceuticals Inc. 40
and production of pilot quantities of liquids, tablets, capsules, ointments
and creams.
Somerset's marketing efforts have also intensified over the last several
years. Somerset is committed to providing both pharmacological agents for the
treatment of Parkinson's disease and other neurologic disease states and also to
educating physicians, pharmacists and patients on the safest and most effective
use of these medications. As part of a comprehensive patient education program,
Somerset launched two innovative programs this past year to accomplish these
goals. Also, in January of 1996, Somerset signed a new marketing agreement with
CoCensys, Inc. to co-promote and market EldeprylRegistration Mark in the United
States. The experienced CoCensys sales force made them the logical choice to
help Somerset grow the EldeprylRegistration Mark market. Somerset and their
previous co-marketing partner, Sandoz, mutually agreed to discontinue their
co-marketing agreement in March 1996.
Success with the above marketing and research and development efforts will
allow Somerset to continue to contribute to Mylan's future.
(picture)
Somerset Pharmaceuticals, Tampa, Florida
Somerset Pharmaceuticals, Inc. 41
Financial Highlights
MYLAN LABORATORIES INC.
MYLAN LABORATORIES INC.
March 31 1996 1995
------------ ------------
Net sales ............... $392,860,000 $396,120,000
Net earnings ............ $102,325,000 $120,869,000
Earnings per share .... $ .86 $ 1.02
Working capital ........ $330,733,000 $275,032,000
Current ratio 7.8 to 1 5.9 to 1
Total assets .......... $692,009,000 $546,201,000
Shareholders' equity .. $616,441,000 $482,728,000
Book value per share .. $ 5.16 $ 4.06
42
Financial Highlights
MYLAN LABORATORIES INC.
Net Earnings Shareholders' Equity Net Sales
(in millions) (in Millions) (in Millions)
FY
- - ----- -------- -------------------- --------------
92 40.1 203.5 131.9
93 70.6 296.0 212.0
94 73.1 380.0 251.8
95 120.9 482.7 396.1
96 102.3 616.4 392.9
43
Selected Financial Data
MYLAN LABORATORIES INC.
Year ended March 31 ...... 1996 1995 1994 1993 1992 1991 1990
Net sales ................ $392,860 $396,120 $251,773 $ 211,964 $ 131,936 $ 104,524 $ 107,435
Net earnings ............. $102,325 $120,869 $ 73,067 $ 70,621 $ 40,114 $ 32,952 $ 26,573
Earnings per share ....... $ .86 $ 1.02 $ .62 $ .61 $ .35 .29 $ .23
Shares used in computation 119,530 118,963 118,423 115,651 114,726 114,552 114,339
At year end
Working capital .......... $330,733 $275,032 $191,647 $ 154,000 $ 102,105 $ 81,571 $ 65,393
Total assets ............. $692,009 $546,201 $403,325 $ 351,105 $ 226,720 $ 186,955 $ 156,911
Long-term obligations .... $ 18,002 $ 7,122 $ 4,609 $ 5,125 $ 3,600 $ 3,398 $ 2,705
Shareholders' equity ..... $616,441 $482,728 $379,969 $ 295,972 $ 203,452 $ 167,531 $ 141,262
Book value per share ..... $ 5.16 $ 4.06 $ 3.21 $ 2.56 $ 1.77 $ 1.46 $ 1.24
- - -------------------------------------------------------------------------------------------------------------
Numbers in thousands except per share amounts.
From June of 1985 through June of 1990 the Company paid a semi-annual cash
dividend of $.033 per share per year. From June of 1990 through July of 1992 the
Company had a quarterly dividend program totaling $.067 per share per year. From
October of 1992 to July of 1993 the Company had a quarterly dividend program
totaling $.08 per share per year. From October of 1993 to July of 1994 the
Company had a quarterly dividend program totaling $.107 per share per year. From
October of 1994 to July of 1995 the Company had a quarterly dividend program
totaling $.133 per share per year. Since October of 1995 the Company had a
quarterly dividend program totaling $.16 per share per year. In addition, the
Company paid a special one-time dividend of $.067 per share on January 13, 1995.
The above nancial data gives retroactive effect to the October 30, 1991
business combination of Mylan Laboratories Inc. and Dow Hickam Pharmaceuticals
Inc., the two-for-one stock split effective August 1, 1992 and the three-for-two
stock split effective August 15, 1995.
44
Management's Discussion and Analysis of Results of Operations
and Financial Position
MYLAN LABORATORIES INC.
Overview
After six years of record breaking net sales and net earnings, culminating
with the extraordinary results of fiscal 1995, fiscal 1996 was destined to be a
year of challenge. The highly competitive nature of the generic pharmaceutical
industry took its toll via significant pricing pressure which masked a 17%
increase in generic unit volume realized during the year. Additionally, the
regulatory environment which helped to provide eleven new products in fiscal
1995 and eight in fiscal 1994 provided only four new product approvals during
fiscal 1996, two of which were received in the final weeks of the fiscal year
thus having a nominal impact on the results of operations.
The Company took steps early during fiscal 1996 to control spending and
focus resources to specific targeted areas. As a result, Selling and
Administrative expenses decreased by 3% from the prior year levels and Research
and Development expenses increased by 27%. In light of all of these factors the
Company is very proud to have once again posted net earnings in excess of
$100,000,000.
The Company's history of success has given it a firm hold as a leader in
the generic industry. To protect its leadership role in this constantly evolving
industry the Company, during fiscal 1996, acquired UDL Laboratories, (UDL) the
premier supplier of unit dose generic pharmaceuticals to the institutional and
long-term care markets. While this transaction was consummated in late February
and accordingly had a minimal effect on current year earnings, it enables the
Company to better position itself in the retail, institutional and managed care
markets. Despite the amortization expense which will result from this
transaction, the Company believes that the acquisition of UDL will enhance net
earnings in fiscal 1997.
With total assets approaching $700 million and net worth of $616 million
the Company is financially capable of maintaining its leadership role in the
generic industry while at the same time exploring exciting long-term growth
opportunities for the Company and its shareholders. These opportunities exist in
the form of ongoing research and development projects relating to new drug
delivery systems and the development of products which satisfy unmet needs in
the medical community.
Internally the Company has continued to expand its research and development
capabilities through the construction of a 150,000 square foot state-of-the-art
research facility scheduled for completion in the late summer of 1996. This
facility will provide the resources necessary to carry ou t the Company's
aggressive generic product development program and to accelera te efforts on
sustained release technology and innovator compounds.
In addition to its internal efforts the Company continues to look
externally for innovative products and technologies representing long-term
growth opportunities. During fiscal 1996 these efforts included the signing of
several licensing agreements and an equity investment and funding agreement with
VivoRx, a California based research company involved in cell implant technology
for the management of diabetes.
Despite the competitive pressures inherent in the generic pharmaceutical
industry, the Company remains fully committed to maintaining its leadership role
in that industry by providing quality products and exemplary service to its
customers. In addition, the Company believes that shareholder value can be
maximized by continuing the Company's effort to become a fully integrated
pharmaceutical company capable of satisfying unmet needs in the medical
community. The Company stands equally committed to that end.
45
Results of Operations
Net Sales and Gross Margins
The following table outlines net sales, gross margins and the corresponding
change from the previous year: (dollars in millions)
Year ended Net Sales Gross Margin Gross Margin as
March 31, DollarsChange Dollars Change % of Net Sales
- - ---------- -------------- -------- ------ --------------
1996 $ 392.9 -1% $ 195.2 -14% 50%
1995 396.1 57% 226.5 80% 57%
1994 251.8 19% 126.1 3% 50%
The changes in net sales, gross margins and gross margin as a percent of
net sales are indicative of the highly competitive nature of the generic
pharmaceutical industry and the Company's history of obtaining new product
approvals. Generic products generally yield higher gross margins as a percent of
sales in the short-term period after introduction, and are subject to, sometimes
severe, price deterioration as other competitors enter the market.
With respect to the Company's generic product line, the Company added four
products in fiscal 1993 which accounted for $50.8 million in net sales in fiscal
1993, eight products in fiscal 1994 which accounted for $25.8 million in net
sales in fiscal 1994, eleven products in fiscal 1995 which accounted for $151.5
million in net sales in fiscal 1995 and four products in fiscal 1996 which
accounted for $10.3 million in net sales in fiscal 1996. Two of the four
products added in fiscal 1996 were approved in the last weeks of the fiscal year
and accordingly had very little effect on net sales or gross margins for the
year. Other variables including total market size and number of competitors
affect the net sales and gross margins for new product approvals.
Total unit volume of generic product shipments increased by 17% in fiscal
1996, 19% in fiscal 1995 and 24% in fiscal 1994 over the respective previous
years. The remainder of the change in net sales is primarily due to price
variations and to a lesser degree product mix. In addition to new generic
products the changes in net sales and gross margins from 1993 to 1994 were
affected by sales from Bertek (acquired in February 1993) which generally
provide lower gross margin rates than the remainder of the Company's product
lines.
On February 28, 1996 the Company acquired UDL Laboratories, which provides
specially packaged generic pharmaceutical products to institutional and
long-term care markets. Net sales by UDL are reflected in the fiscal 1996
amounts only for the one month period subsequent to the acquisition and were not
significant to the Company's total net sales. UDLpurchases a majority of its
product from other pharmaceutical manufacturers, including the Company.
Accordingly gross margin as a percent of net sales for its products are
generally lower than that recognized by the manufacturer.
Due to the competitive nature of the generic pharmaceutical industry, net
sales and gross margin percentages recognized in prior years are not necessarily
indicative of the results to be expected in future periods.
46
Research and Development
Research and Development expenses were $38,913,000 in fiscal 1996
representing a 27% increase over the prior year's $30,533,000. Fiscal 1994
expenditures amounted to $21,648,000. These amounts represent 10% of the
corresponding net sales in fiscal 1996, 8% in fiscal 1995 and 9% in fiscal 1994.
Expenditures relating to transdermal delivery system technology were $6,400,000,
$5,600,000 and $5,200,000, respectively, for each of the last three years.
Expenditures relating to innovative compounds were approximately $14,500,000,
$8,600,000 and $3,500,000, respectively. The remainder of research and
development expenditures in each of the three years represent costs associated
with generic related projects.
Selling and Administrative
Selling and administrative expenses were $56,073,000 in fiscal 1996,
$58,035,000 in fiscal 1995 and $49,173,000 in fiscal 1994 which represent 14%,
15% and 20% of corresponding net sales. In 1994, $3,229,000 of expense was
recognized resulting from the death of Mr. McKnight, the former Chairman and
Chief Executive Officer of the Company. Other changes from 1994 to 1995 and from
1995 to 1996 are attributable in large part to compensation and related
expenses, selling and marketing expenses associated with new products including
sales commissions, and legal and professional fees associated with various court
actions to which the Company has been involved.
In connection with the acquisition of UDL the Company will recognize in
future years amortization of goodwill and other intangible assets. Most of this
amortization expense, which will amount to approximately $3,000,000 in fiscal
1997, will be charged to selling and administrative expenses. Additionally, the
nature of UDL's business normally results in higher selling and promotion
expenses as a percentage of net sales than the Company has historically
recorded.
Equity in Earnings of Somerset
Somerset's contribution to the Company's pretax earnings (in thousands) and net
earnings per share are as follows:
1996 1995 1994
------------------ ------------------ -------------------
Net Net Net
Quarter Pre tax Earnings Pretax Earnings Pretax Earnings
Ended Earnings Per Share Earnings Per Share Earnings Per Share
- - -------- -------- -------- -------- --------- -------- ---------
6/30 $ 5,571 $ .04 $ 5,348 $ .04 $ 5,682 $ .04
9/30 6,138 .05 6,141 .05 5,727 .05
12/31 7,905 .06 8,330 .06 6,841 .05
3/31 5,354 .04 5,587 .04 5,346 .04