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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, 1997 Commission File No. 1-9114
MYLAN LABORATORIES INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 25-1211621
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)
130 Seventh Street
1030 Century Building
Pittsburgh, Pennsylvania 15222
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 412-232-0100
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
Common Stock, par value $.50 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No
Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.[ ]
The aggregate market value of voting stock held by persons other than Directors and Officers of the registrant computed by
reference to the closing price of such stock as of May 31, 1997:
$1,786,969,654
The number of shares of Common Stock of the registrant outstanding as of May 31, 1997:
122,065,081
Documents incorporated by reference into this Report are:
Annual Report to Shareholders for year ended March 31, 1997....................................... Parts I and II,
Items 1, 5-8
Proxy Statement for 1997 Annual Meeting of Shareholders........................................... Part III, Items 10-13
PART I
ITEM 1. Business
Mylan Laboratories Inc., a Pennsylvania corporation incorporated in
1970, and its subsidiaries (herein referred to collectively as the "Company"),
are engaged in the development, licensing, manufacturing, marketing and
distribution of generic and proprietary pharmaceutical and wound care products.
References herein to fiscal 1997, 1996 and 1995 mean the fiscal years ended
March 31, 1997, 1996 and 1995, respectively.
Through its subsidiary, Mylan Pharmaceuticals Inc., the Company is
recognized as one of the leaders in the generic pharmaceutical industry.
Pharmaceutical products initially sold on an exclusive basis are known in the
industry as proprietary or branded products. Generic drugs are therapeutically
equivalent to their brand name counterparts and are generally sold at prices
significantly less than branded products. Accordingly, generics provide a safe,
effective and cost efficient alternative to users of these products.
The Company manufactures substantially all of its oral dose products in
either its Mylan Pharmaceuticals' Morgantown, West Virginia facility or Mylan
Inc.'s facility in Caguas, Puerto Rico. To facilitate timely delivery of
products to customers in all fifty states the Company operates distribution
centers in Greensboro, North Carolina and Reno, Nevada.
Due to the non-exclusive nature of generic products, the generic
industry is comprised of numerous competitors, including manufacturers who
market their products under their own name, distributors who market products
manufactured by others and brand name companies who in recent years market their
products under both the brand name and as the generic substitute. This diversity
provides significant price competition within the generic pharmaceutical
industry which generally results in decreasing prices of generic products over
time to those who supply such products to the retail market.
The Company has entered into strategic alliances with several branded
pharmaceutical companies. These alliances through distribution and licensing
agreements provide the Company with additional products to further broaden the
Company's product line. In addition, the Company has entered into product
development and licensing agreements, whereby the Company has obtained in
exchange for funding of drug development activities, rights to manufacture
and/or distribute additional pharmaceutical products.
The Company entered into an alliance with VivoRx, Inc. a biotechnology
company developing encapsulated pancreatic islet cell implant technology for the
management of diabetes. VivoRx has successfully implanted three patients with
human islets in the United States and two patients with porcine (pancreas)
islets in New Zealand. Rejection of the implant is a major hurdle to overcome in
all types of implant operations. Due to its unique encapsulation technology, the
one patient in New Zealand who was not already taking immunosuppressant drugs
has not rejected the porcine islets implant. In addition, VivoRx has amended its
previously accepted Investigational New Drug (IND) application with the FDA for
the use of porcine islets to permit the use of proliferated human islet cells.
These proliferated human islets have already been implanted in one patient in
the United States with the same progress profile as the original transplant
patients. VivoRx expects to begin Phase I/II clinical trials by the end of this
calendar year. The Company continues to examine other alliances as a way to grow
and react in the rapidly changing health care arena.
In June 1989, the Company acquired a 50% interest in Somerset
Pharmaceuticals, Inc. ("Somerset"). Pursuant to a license agreement with a
Hungarian pharmaceutical company, Somerset has exclusive rights to the product
Eldepryl(R) in the United States and certain other countries. Commercial
shipments of the product by Somerset commenced in late August 1989.
Somerset's marketing exclusivity relating to the chemical compound
Eldepryl(R) for use as a treatment for late stage Parkinson's disease expired on
June 6, 1996. In May 1996, Somerset received FDA approval to market an
easy-to-identify capsule which was launched immediately by Somerset. In August
1996, the FDA granted approval to several companies to market a generic tablet
form of Eldepryl(R). Following this action, Somerset filed suit against the FDA
seeking injunctive and declaratory relief relating to these approvals. On June
18, 1997, the Court dismissed Somerset's suit.
Somerset is actively involved in research projects regarding additional
uses of this and other chemical compounds. The impact of generic competition and
increased research and development expenditures by Somerset relating to these
research projects will continue to adversely affect Somerset's contribution to
the Company's net earnings.
In October 1991, a wholly-owned subsidiary of the Company merged with
Dow Hickam Pharmaceuticals, Inc. ("Hickam"), an established branded
pharmaceutical company located in Sugar Land, Texas. Through an internal
restructuring Hickam now operates as a division of Bertek Pharmaceuticals Inc.,
which is dedicated to manufacturing and marketing specialty pharmaceutical
products and devices used principally as wound care treatments. Bertek
Pharmaceuticals Inc. will operate as the branded pharmaceutical division of the
Company with its foundation built on selling the antihypertensive drug
Maxzide(R) and Maxzide-25MG(R) ("Maxzide(R)") and the nitroglycerin transdermal
patch Nitrek(TM). Maxzide(R) is manufactured by Mylan Inc. in Caguas, Puerto
Rico while Nitrek(TM) is manufactured by Bertek, Inc. ("Bertek") in St. Albans,
Vermont.
On February 25, 1993, the Company acquired substantially all of the net
assets of Bertek. Bertek, headquartered in St. Albans, Vermont, is principally a
manufacturer of transdermal drug delivery systems. In August 1996, Bertek
received its first Abbreviated New Drug Application ("ANDA") approval, to market
a nitroglycerin transdermal patch. Bertek is actively involved in other
development projects to provide new transdermal products. In addition, Bertek
provides components using internally developed technology for transdermal
patches marketed by other companies. In February 1997, Bertek sold certain
assets related to its custom label and printing operations which were unrelated
to the Company's core pharmaceutical business.
On February 28, 1996, a wholly-owned subsidiary of the Company acquired
100% of the outstanding stock of UDL Laboratories, Inc. ("UDL"). UDL is the
premier supplier of unit dose generic pharmaceuticals to the institutional and
long-term care markets. UDL has its corporate headquarters in Rockford, Illinois
and maintains manufacturing and research and development facilities in Rockford
as well as Largo, Florida.
On June 14, 1996, the Company executed a series of agreements with
American Home Products Corporation ("AHP") relating to the Maxzide(R) products.
These agreements were subject to regulatory approval which was received on
August 2, 1996. Since 1984 these products, which were developed and manufactured
by the Company, were marketed by AHP's Lederle Laboratories Division under a
worldwide license arrangement.
Under the terms of the new agreements, the Company is now marketing the
products in the United States. AHP retained marketing rights in a few select
foreign countries and will continue to purchase product from the Company. AHP
also retains ownership of certain trademarks and tradedress which have been
licensed to the Company for a period of five years. At the end of the five year
period, ownership of these intangibles will be transferred to the Company. In
connection with the new agreements, both parties agreed to terminate all legal
actions between the companies relating to Maxzide(R).
In connection with the transaction, the Company also began selling a
generic version of Dyazide(R). The previous license arrangement with AHP
prevented the Company from marketing this product.
Products
The information on the Company's product line set forth on pages 47-58
of the accompanying Annual Report to Shareholders for the year ended March 31,
1997 is incorporated herein by reference. All pharmaceutical products presently
manufactured by the Company have been previously developed and marketed by other
firms with the exception of Maxzide(R) and Cystagon(TM).
The Company is required to secure and maintain approval from the FDA
for the products and dosage forms which it manufactures. The number of products
and dosage forms for which the Company is an approved manufacturer has expanded
in recent years.
See "New Product Approvals".
During fiscal 1997, 1996 and 1995 approximately $42,633,000,
$38,913,000 and $30,533,000 were expensed by the Company for the development of
formulations and procedures for products which it desires to produce, use or
sell. The Company's research and development efforts are conducted primarily to
qualify the Company to manufacture ethical pharmaceuticals under FDA standards
and approval. Recently this has included increased spending for transdermal
delivery system technology, extended release technology and innovator compounds
including pancreatic islet cell implant technology. As these products continue
to move through the development process expenses related to their development
will continue to increase.
New Product Approvals and Applications
During fiscal 1997, nine approvals were received from the FDA. The
Company presently has requests for approval pending before the FDA representing
twenty-five products of varying strengths with an additional four products being
approved subsequent to March 31, 1997. The Company has five IND applications
filed with the FDA for new innovator compounds and in late fiscal 1997 the
Company filed a New Drug Application for its wound care product, Sulfamylon.
Customers and Markets
The Company sells its products to proprietary and ethical
pharmaceutical wholesalers and distributors, drug store chains, drug
manufacturers and public and governmental agencies. Although no single customer
represented more than 10% of net sales in 1997, 1996 or 1995, four customers in
1997 represented 36% of net sales.
A majority of the Company's products are marketed to food and drug
store chains and to pharmaceutical distributors and wholesalers, who in turn
market to retailers, managed care entities, hospitals and government agencies.
Certain other products are marketed to institutional accounts who in turn obtain
the products from pharmaceutical distributors and wholesalers. The Company's
sales activities involve limited public promotion of its products. Approximately
168 employees of the Company are engaged full-time in selling products and
servicing customers.
Competition
The Company sells to various markets and classes of customers. With
respect to each of the various products it sells, the Company believes it is
subject to active competition from numerous firms. The four primary means of
competition are services, quality of products, approval for manufacture by the
FDA and price. The competition experienced by the Company varies among the
markets and classes of customers. The Company has experienced additional
competition from brand-name competitors who have entered the generic
pharmaceutical industry by creating generic subsidiaries, purchasing generic
companies or licensing their products prior to or as their product's patents
expire.
In addition to the increase in the number of competitors, the
consolidation of the Company's customers through mergers and acquisitions along
with the emergence of large buying groups representing independent pharmacies
and health maintenance organizations has led to severe price deterioration for
the Company's generic products. While the Company has actually increased unit
volume of its generic products through specialized marketing programs this has
not fully offset the price declines the Company has experienced.
Product Liability
Product liability suits by consumers represent a continuing risk to
firms in the pharmaceutical industry. The Company strives to minimize such risks
by stringent quality control procedures. Although the Company carries insurance,
it believes that no reasonable amount of insurance can fully protect it against
all such risks because of the potential liability inherent in the business of
producing pharmaceuticals for human consumption.
Raw Materials
The chemical ingredients and other materials and supplies used in the
Company's pharmaceutical manufacturing operations are generally available and
purchased from many different foreign and domestic suppliers. However, some
products may have only one source approved by the FDA for certain pharmaceutical
ingredients used in their manufacturing process. If such a material were no
longer available, qualifying a new supplier could delay the manufacturing of
such products.
With regards to foreign suppliers, recent and pending regulatory action
may make obtaining raw materials prior to patent expiration increasingly
difficult. This could delay the Company's ability to develop, manufacture and
obtain FDA approval to market certain new products.
Regulation
The Company's operations are subject to regulation under the Federal
Food, Drug and Cosmetic Act, pursuant to which government standards as to "good
manufacturing practice", product content, purity, labeling, effectiveness and
recordkeeping (among other things) must be observed. In this regard, the FDA has
extensive regulatory powers over the activities of pharmaceutical manufacturers.
The Company is also subject to inspection and regulation under other
federal and state legislation relating to drugs, narcotics and alcohol. Many of
its suppliers and customers, as well as the drug industry in general, are
subject to the same or similar governmental regulations.
The President signed into law the Uruguay Round Agreements Act ("URAA")
in December 1994. URAA, which took effect on June 8, 1995, implemented the
General Agreements on Tariffs and Trade ("GATT"). One change in U.S. law
required by GATT is the amendment of patent law to permit owners to choose a
patent term of 20 years from the date of filing the application or 17 years from
the date of issuance. URAA extended the requirement by allowing the application
of this provision to all patents in force on June 8, 1995.
Congress recognized the potential harm in this requirement and provided
that a potential competitor who had already made a "substantial investment" in a
competing product could make, use and sell its product after the expiration of
the original patent period provided that they pay the patentee "equitable
remuneration" through the extended patent period. However, the FDA has taken the
position that it cannot approve an ANDA, which certifies the date of patent
expiration, until the expiration of the extended patent period. The extension of
patent protection has and will delay the launch of future products by the
Company.
Prior to receiving FDA approval, the Company is increasingly facing
more lawsuits relating to intellectual property rights. While these suits,
instituted by branded pharmaceutical companies, rarely result in findings of
infringement or monetary settlements, they significantly delay the FDA approval
process. The Company expects the branded pharmaceutical companies to continue
such tactics since it is a very cost effective way to delay generic competition
and the subsequent cost savings for the consumer.
It is impossible for the Company to predict the extent to which its
operations will be affected under the regulations discussed above or any new
regulations which may be adopted by regulatory agencies.
Employees
The Company employs approximately 1,750 persons, approximately 820 of
whom serve in clerical, sales and management capacities. The remainder are
engaged in production and maintenance activities.
The production and maintenance employees at the Company's manufacturing
facilities in Morgantown, West Virginia, are represented by the Oil, Chemical
and Atomic Workers International Union (AFL-CIO) and its Local Union 8-957 under
a contract which expires April 5, 1998.
Backlog
At March 31, 1997, the uncompleted portions of the Company's backlog of
orders was approximately $10,410,000 as compared to approximately $9,747,000 at
March 31, 1996 and $20,979,000 at March 31, 1995. Because of the relatively
short lead time required in filling orders for its products, the Company does
not believe these interim backlog amounts bear a significant relationship to
sales or income for any full twelve-month period.
ITEM 2. Properties
The Company operates from various facilities in the United States and
Puerto Rico having an aggregate of approximately 1,100,000 square feet.
Mylan Pharmaceuticals Inc. owns production, warehouse, laboratory and
office facilities in three buildings in Morgantown, West Virginia containing
approximately 435,000 square feet. Mylan Pharmaceuticals operates two
distribution centers, one in Greensboro, North Carolina containing approximately
64,000 square feet which it owns and one in Reno, Nevada containing
approximately 38,000 square feet under a lease expiring in 2002. Currently under
construction in Greensboro, North Carolina is a 150,000 square foot distribution
center.
Mylan Inc. owns a production and office facility in Caguas, Puerto Rico
containing approximately 115,000 square feet and a production facility in Cidra,
Puerto Rico containing approximately 32,000 square feet.
Bertek Pharmaceuticals, Inc. owns production, warehouse and office
facilities in two buildings in Sugar Land, Texas containing approximately 70,000
square feet.
Bertek owns production, warehouse, laboratory and office facilities in
three buildings in Swanton and St. Albans, Vermont containing approximately
118,000 square feet. Bertek also operates a coating and extrusion facility in
St. Albans containing approximately 71,000 square feet under a lease expiring in
2015.
UDL owns production, laboratory, warehouse and office facilities in
three buildings in Rockford, Illinois and Largo, Florida containing
approximately 123,000 square feet. UDL also leases a warehouse facility in
Rockford containing approximately 30,000 square feet under a lease expiring in
1999.
The Company's production equipment includes that equipment necessary to
produce and package tablet, capsule, aerosol, liquid, suspensions, transdermal
and powder dosage forms. The Company maintains six analytical testing
laboratories for quality control.
The Company's production facilities are operated primarily on a two
shift basis. Properties and equipment are well maintained and adequate for
present operations.
The Company's corporate offices, containing approximately 7,200 square
feet, are located at 130 Seventh Street, 1030 Century Building, Pittsburgh,
Pennsylvania, and are occupied under a lease expiring in 2000.
ITEM 3. Legal Proceedings
During 1996, Bertek was involved in an arbitration matter unrelated to
the pharmaceutical business. On May 2, 1996, the arbitration panel issued a
decision against Bertek for approximately $4,000,000. The Company has appealed
this matter and believes the ultimate resolution of this matter will not exceed
the amount accrued.
The Company is involved in various other legal proceedings that are
considered normal to its business. While it is not feasible to predict the
ultimate outcome of such proceedings, it is the opinion of management that the
outcome of these suits will have no material adverse effect on the Company's
operations, financial position, or liquidity.
ITEM 4. Submission of Matters to a Vote of Security Holders
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
The names, ages and positions of the Company's executive officers are as
follows:
Milan Puskar 62 Chairman, Chief Executive Officer and
President
Dana G. Barnett 56 Executive Vice President
Louis J. DeBone 51 Vice President-Operations
Roger L. Foster 50 Vice President-General Counsel
Roderick P. Jackson 57 Senior Vice President
Dr. John P. O'Donnell 51 Vice President-Research and
Quality Control
Patricia Sunseri 57 Vice President-Investor and
Public Relations
C.B. Todd 63 Senior Vice President
Robert W. Smiley 75 Secretary
Mr. Puskar was employed by the manufacturing subsidiary of the Company
from 1961 to 1972 and served in various positions, including
Secretary-Treasurer, Executive Vice President and a member of the Board of
Directors. From 1972 to 1975, Mr. Puskar served as Vice President and General
Manager of the Cincinnati division of ICN Pharmaceuticals Inc. In addition, he
has served as a partner in several pharmaceutical firms in foreign countries and
is currently a director of VivoRx, Inc., Santa Monica, California and Duquesne
University, Pittsburgh, Pennsylvania. Mr. Puskar has served as President of the
Company since 1976 and as Vice Chairman of the Board from 1980 to 1993. He was
elected Chairman of the Board and Chief Executive Officer on November 9, 1993.
Mr. Barnett was employed by the Company in 1966. Since that time he has
held various management positions with the manufacturing subsidiary of the
Company. His responsibilities have covered production, quality control and
product development. Mr. Barnett became Vice President in 1974, Senior Vice
President in 1978 and Executive Vice President in 1987. He was elected President
and Chief Executive Officer of Somerset Pharmaceuticals, Inc., a joint-venture
subsidiary of the Company, in June 1991. In August 1995, he was elevated to
Chairman and Chief Executive Officer of Somerset Pharmaceuticals, Inc.
Mr. DeBone has been employed by the Company since 1987. Prior to
assuming his present position in 1991 as Vice President-Operations, he served as
Vice President-Quality Control. Since February 1997, he also serves as President
of Bertek Inc., a subsidiary of the Company. He was previously employed with the
Company from 1976 until 1986 and served as Director of Manufacturing.
Mr. Foster has been employed by the Company since 1984. Prior to
assuming his present position in June 1995 as Vice President-General Counsel, he
served as Director of Legal Services and as Director of Governmental Affairs.
Mr. Jackson has been employed by the Company since 1986. Prior to
assuming his present position in 1992 as Senior Vice President, he served as
Vice President-Marketing and Sales.
Dr. John O'Donnell has been employed by the Company since 1983. Prior
to assuming his present position in 1991 as Vice President-Research and Quality
Control, he served as Vice President-Research and Product Development and as
Director of Chemistry and Product Development.
Mrs. Sunseri has served as a Director of the Company since April 1997,
as the Vice President of Investor and Public Relations of the Company since 1989
and as the Director of Investor Relations of the Company from 1984 to 1989. She
also serves as a director of AW Computer Systems, Inc. (a computer hardware and
software company).
Mr. Todd has been employed by the Company since 1970. Prior to assuming
his present position in 1987 as Senior Vice President, Mr. Todd served as Vice
President- Quality Control. He also serves as President of Mylan Pharmaceuticals
Inc., a subsidiary of the Company.
Mr. Smiley has been Secretary of the Company for approximately
twenty-one years and on December 12, 1975, he was elected to the Board of
Directors. His principal occupation is, and for approximately forty-two years
has been an attorney-at-law in Pittsburgh, Pennsylvania. He was a partner in the
law firm of Smiley, McGinty and Steger, general counsel to the Company. Since
October 1, 1992, Mr. Smiley has been associated with the law firm of Doepken
Keevican & Weiss Professional Corporation.
There is no family relationship between any of the above executive
officers. Officers of the Company serve at the pleasure of the Board of
Directors.
PART II
ITEM 5. Market for Registrant's Common Equity and
Related Stockholder Matters
The information required by item 5 is hereby incorporated by reference
to pp. 20 and 43 of the accompanying Annual Report to Shareholders for the year
ended March 31, 1997.
ITEM 6. Selected Financial Data
The information required by item 6 is hereby incorporated by reference
to p. 20 of the accompanying Annual Report to Shareholders for the year ended
March 31, 1997.
ITEM 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations
The information required by item 7 is hereby incorporated by reference
to pp. 21-25 of the accompanying Annual Report to Shareholders for the year
ended March 31, 1997.
ITEM 7A. Quantitative and Qualitative Disclosures
About Market Risk
Not applicable.
ITEM 8. Financial Statements and Supplementary Data
The information required by item 8 is hereby incorporated by reference
to pp. 26-43 of the accompanying Annual Report to Shareholders for the year
ended March 31, 1997.
ITEM 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
Not applicable.
PART III
ITEM 10. Directors and Executive Officers of the Registrant
The information as to directors required by item 10 is hereby
incorporated by reference to pp. 1-3 of the Company's 1997 Proxy Statement.
Information concerning executive officers is provided in Part I of this report
under the caption "Executive Officers of the Registrant".
ITEM 11. Executive Compensation
The information required by item 11 is hereby incorporated by reference
to pp. 3,6,8 and 9 of the Company's 1997 Proxy Statement.
ITEM 12. Security Ownership of Certain
Beneficial Owners and Management
The information required by item 12 is hereby incorporated by reference
to p. 10 of the Company's 1997 Proxy Statement.
ITEM 13. Certain Relationships and Related Transactions
Not applicable.
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. List of Financial Statements
Page
Number
INCLUDED IN ANNUAL REPORT TO SHAREHOLDERS:
Consolidated Balance Sheets......................... 26-27
Consolidated Statements of Earnings................. 28
Consolidated Statements of Shareholders' Equity..... 29
Consolidated Statements of Cash Flows............... 30-31
Notes to Consolidated Financial Statements.......... 32-41
Independent Auditors' Report........................ 42
2. Financial Statement Schedules
The information required by this item is incorporated herein by
reference to Exhibit 99. All other schedules have been omitted because
they are not required.
3. Exhibits
(3)(a) Amended and Restated Articles of Incorporation of the
registrant, filed as Exhibit (3)(a) to Form 10-Q for
quarter ended June 30, 1992 and incorporated herein by
reference.
(b) By-laws of the registrant, as amended to date, filed as
Exhibit 3(b) to Form 10-Q for the quarter ended June 30,
1992 and incorporated herein by reference.
(4)(a) Rights Agreement dated as of August 22, 1996, between
the Company and American Stock Transfer & Trust Co.,
filed as Exhibit 4.1 to Form 8-K dated August 30, 1996.
(10)(a) 1986 Incentive Stock Option Plan, as amended to date,
filed as Exhibit 10(b) to Form 10-K for fiscal year
ended March 31, 1993 and incorporated herein by
reference.
(b) "Salary Continuation Plan" with Milan Puskar, Dana G.
Barnett and C.B. Todd each dated as of January 27, 1995
and filed as Exhibit 10(b) to Form 10-K for fiscal year
ended March 31, 1995 and incorporated herein by
reference.
(c) "Salary Continuation Plan" with Roderick P. Jackson and
Louis J. DeBone each dated March 14, 1995 and filed as
Exhibit 10(c) to Form 10-K for fiscal year ended March
31, 1995 and incorporated herein by reference.
(d) Employment contract with Milan Puskar dated April 28,
1983, as amended to date, filed as Exhibit 10(e) to Form
10-K for fiscal year ended March 31, 1993 and
incorporated herein by reference.
(e) Split Dollar Life Insurance Arrangement with McKnight
Irrevocable Trust filed as Exhibit 10(g) to Form 10-K
for fiscal year ended March 31, 1994 and incorporated
herein by reference.
(f) 1992 Nonemployee Director Stock Option Plan filed as
Exhibit 10(g) to Form 10-K for fiscal year ended March
31, 1993 and incorporated herein by reference.
(g) "Service Benefit Agreement" with Laurence S. DeLynn,
John C. Gaisford, M.D. and Robert W. Smiley, Esq. each
dated January 27, 1995 and filed as Exhibit 10(g) to
Form 10-K for fiscal year ended March 31, 1995 and
incorporated herein by reference.
(h) Split Dollar Life Insurance Arrangement with Milan
Puskar Irrevocable Trust and filed as Exhibit 10(h) to
Form 10-K for the fiscal year ended March 31, 1996 and
incorporated herein by reference.
(i) Split Dollar Life Insurance Arrangement with the Todd
Family Irrevocable Trust dated November 11, 1996, filed
herewith.
SPLIT-DOLLAR AGREEMENT
THIS AGREEMENT (the "Agreement") is entered into by and between MYLAN
LABORATORIES INC., a Pennsylvania corporation (hereinafter referred to as the
"Corporation"),
A
N
D
ERIK LIEBERMAN, or his successors (hereinafter referred to as the "Trustee"), as
the Trustee of THE TODD FAMILY IRREVOCABLE TRUST dated as of ____________, 1996
(hereinafter referred to as the "Trust").
W I T N E S S E T H T H A T
WHEREAS, CLARENCE B. TODD is a valuable employee of the Corporation;
and
WHEREAS, the Trustee has applied for and owns the life insurance
policies on the join lives of CLARENCE B. TODD and his wife, MARY LOU TODD,
which are listed on schedule "A" attached hereto and made a part hereof
(hereinafter referred to as the "Policies"); and
WHEREAS, the Corporation desires to assist in paying the premiums on
the Policies; and
WHEREAS, the parties desire to create a split-dollar arrangement to
provide for the payment of premiums on the Policies and to assure that the
amount of premiums paid by the Corporation with respect to the Policies will be
repaid to the Corporation at the death of the survivor of CLARENCE B. TODD and
his wife, MARY LOU TODD, if not earlier; and
WHEREAS, the repayment of premiums paid by the corporation with respect
to the Policies will be secured by a collateral assignment of the Policies to
the Corporation.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the Corporation and the Trustee hereby agree as follows:
1. Policies. The Policies which are subject to this Agreement are
listed on Schedule "A" attached hereto. Any additional insurance contract on the
joint lives of CLARENCE B. TODD and his wife, MARY LOU TODD, which become
subject to this Agreement shall be listed on Schedule "A" as such contracts
become subject to this Agreement.
2. Ownership of Policies. The Trustee shall have custody of the
Policies subject to this Agreement and shall be sole and exclusive owner of the
Policies, subject, however, to the right of the Corporation to borrow against
the Policies as set forth in paragraph 10 or to the return of any funds advanced
by it for payment of the premiums or other amounts paid with respect to the
Policies upon the death of the survivor of CLARENCE B. TODD and his wife, MARY
LOU TODD, or the termination of this Agreement. Except as to the security
interest specifically granted to the Corporation herein, the Trustee retains all
incidents of ownership in the Policies, including the right to borrow or
withdraw against the Policies. The Trustee's right to borrow, however, shall be
limited to an amount equal to the maximum loan value reduced by an amount equal
to the cumulative amount of the premiums on the Policies paid by the Corporation
hereunder. The Trustee's right to withdraw from the Policies' cash values shall
likewise be reduced by an amount equal to the cumulative amount of premiums on
the Policies paid by the Corporation hereunder. CLARENCE B. TODD and/or his
wife, MARY LOU TODD, shall not have any rights, powers or incidents of ownership
shall not have any rights, powers or incidents of ownership in the Policies.
3. Beneficiary. The Trustee has designated the Trust as the
beneficiary of the proceed of the Policies.
4. Dividend Options. The Trustee may elect and continue in force such
dividend options, if any, as are provided under the Policies and accordingly
therewith the dividends may be used by the Trustee in such manner as the Trustee
deems appropriate, such as to purchase paid up additions, to purchase additional
term insurance, or to reduce the premiums.
5. Payment of Premiums. The premiums on the policy shall be paid in
the following manner:
(a) The Trustee shall have the option with respect to
each calendar year or portion thereof that this Agreement is in effect
to contribute that portion of the premiums under the Policies equal to
the lesser of (i) the rate established by the Internal Revenue Service
for the cost of pure life insurance (P.S. 58 cost) from time to time,
or (ii) the rate, if any, established by the respective insurance
company for one-year term life insurance available to all standard
risks in the amount of the respective Policies, less cash value, at
CLARENCE B. TODD and MARY LOU TODD's then attained age.
(b) The Corporation shall pay the balance,
representing the excess if any, of the annual premium over any portion
that may be paid by Trustee under (a) above, plus the annual interest
due on any Policy loans made by the Corporation.
(c) For administrative convenience, the Trustee shall
remit any contribution toward the premiums to the Corporation, and the
Corporation shall be responsible for making the total combined premium
payments to the respective insurance company.
(d) The Corporation shall cease making premium
payments whenever the Trustee so determines. Once the Trustee has
terminated the Corporation's obligations hereunder, the Trustee shall
be solely responsible for paying premiums due under the Policies.
6. Security Interest. In consideration of the premium payments to be
made by the Corporation, and to assure the repayment of such payments, the
Trustee grants to the Corporation, with collateral assignment, a security
interest in the Policies. The Corporation's security interest in the Policies at
any time shall be an amount equal to its net "Premium Payments." "Premium
Payments" as used in this Agreement means the aggregate amount of premium
payments paid with respect to the Policies by the Corporation under this
Agreement, less any amount received by the Corporation in reimbursement of such
payments. The outstanding balances of any Policy loans made by the Corporation
shall be considered reimbursement of such payments. The Trustee agrees to
execute and deliver to the Corporation, at the time of the first premium payment
on the Policies, a collateral assignment of the Policies.
7. Policy Proceeds. If the Policies mature as death claims while this
Agreement remains in effect, the Corporation shall immediately be paid an amount
equal to the then balance of its "Premium Payments." Such payment shall be
considered a return of capital to the Corporation and a termination of this
Agreement. The balance of such proceeds shall be retained by the beneficiary
designated by the Trustee in the manner and in the amount provided under the
terms of the Policies.
8. Termination. This Agreement shall terminate upon the happening of
any of the following events:
(a) The Trustee may terminate this Agreement while no
premium under the Policies is overdue by giving notice to the
Corporation. The effective date of such termination shall be the date
of giving notice.
(b) By mutual consent of the parties hereto or by
release of the Corporation's security interest under paragraph 6
hereof.
(c) Bankruptcy, insolvency or dissolution of the
Corporation.
(d) Surrender of the Policies by the Trustee.
9. Repayment of Premium Payments. If this Agreement is terminated
under paragraph 8 above, the Trustee shall obtain release of the Corporation's
security interest in the Policies by paying to the Corporation a sum equal to
the amount of the "Premium Payments" made by the Corporation as of that date.
The Corporation agrees
(solely for purposes of facilitating such termination and repayment of its
premium payments secured by said policies) that the Trustee may borrow or
withdraw from the Policies cash values in amounts in excess of the amounts
specified in paragraph 2 above. If the Trustee fails to pay the Corporation a
sum equal to the "Premium Payments" within sixty (60) days of the date of the
termination of this Agreement pursuant to paragraph 8 above, the Trustee shall
execute any and all instruments that may be required to vest ownership of the
Policies in the Corporation. Thereafter, the Trustee shall have no further
interest in the Policies; the Corporation shall be deemed to have received a sum
equal to the "Premium Payments" and no additional sum will be due it; and the
Corporation will have the option to maintain the Policies at its sole
discretion.
10. Corporation's Rights. If the Trustee sells, assigns, surrenders,
makes withdrawals or otherwise terminates the Policies at any time this
Agreement is in effect, the Corporation shall have the immediate right to
repayment of its "Premium Payments" from the Trustee. The Corporation shall have
the right to borrow from the Policies and to pledge of assign the Policies as
security for loans or advances, but only up to the "Premium Payments" less the
amount of any loans theretofore obtained by the Corporation.
11. Assignment. Subject to paragraph 10 above, neither party shall
have the right to assign its interest hereunder without the written consent of
the other party.
12. Further Assurances. The parties hereto agree to execute any
documents which may be necessary or proper to carry out the purpose and the
intent of this Agreement.
13. Amendment. This Agreement may not be amended or modified except by
a written instrument signed by the parties hereto.
14. Responsibility of Insurance Company. The parties hereto agree that
any insurance company shall by fully discharged by payment of the death benefit
to the beneficiaries designated in the Policies, subject to the terms and
conditions of the Policies; provided, however, that the insurance company shall
first comply with the terms specified in the collateral assignment as described
in paragraph 6 above. No insurance company shall be considered a party to this
Agreement; therefore, a copy of this Agreement need not be filed with any such
company. Nothing in this Agreement nor in any modifications, amendments or
supplements hereto shall in any way be construed to enlarge, change, vary or in
any way affect the obligations of any insurance company as expressly provided by
the Policies.
15. Binding Effect. This Agreement shall be binding upon the parties
hereto and their successors, assigns, executors, or administrators and
beneficiaries.
16. Notices. All notices required by this Agreement shall be in
writing and sent by certified or registered mail to the then current or last
known address of each party hereto.
17. Governing Law. This Agreement shall be subject to and construed
according to the laws of the Commonwealth of Pennsylvania.
[signatures on the following page]
IN WITNESS WHEREOF, parties hereto have executed the
Agreement as of the ___________ day of _________________________, 1996
CORPORATION:
MYLAN LABORATORIES INC.
________________________________ By_________________________
Robert W. Smiley, Esq., Secretary Milan Puskar, CEO, President
Chairman of the Board
[CORPORATE SEAL]
WITNESS: TRUSTEE
_______________________________ _______________________(SEAL)
ERIK LIEBERMAN, Trustee
SCHEDULE "A"
To Split-Dollar Agreement dated as of
_____________________, 1996 Between MYLAN LABORATORIES
INC.
and ERIK LIEBERMAN, Trustee
- - ------------------------------------------------------------------------
Company Policy Number Face Amount
- - ------------ --------------- -------------
Guardian Life Insurance 3834739 $6,000,000.00
Company of America
Guardian Life Insurance 3732138 $6,000,000.00
Company of America
(j) Split Dollar Life Insurance Arrangement with the Dana
G. Barnett Irrevocable Family Trust dated October 22,
1996, filed herewith.
SPLIT-DOLLAR AGREEMENT
THIS AGREEMENT (the "Agreement") is entered into by and between MYLAN
LABORATORIES INC., a Pennsylvania corporation (hereinafter referred to as the
ACorporation@),
A
N
D
ERIK LIEBERMAN, or his successors (hereinafter referred to as the "Trustee"), as
the Trustee of THE DANA G. BARNETT IRREVOCABLE FAMILY TRUST dated as of October
22, 1996 (hereinafter referred to as the "Trust").
W I T N E S S E T H T H A T
WHEREAS, DANA G. BARNETT is a valuable employee of the Corporation; and
WHEREAS, the Trustee has applied for and owns the life insurance
policies on the life of DANA G. BARNETT which are listed on schedule "A"
attached hereto and made a part hereof (hereinafter referred to as the
"Policies"); and
WHEREAS, the Corporation desires to assist in paying the premiums on
the Policies; and
WHEREAS, the parties desire to create a split-dollar arrangement to
provide for the payment of premiums on the Policies and to assure that the
amount of premiums paid by the Corporation with respect to the Policies will be
repaid to the Corporation at the death of DANA G. BARNETT, if not earlier; and
WHEREAS, the repayment of premiums paid by the corporation with respect
to the Policies will be secured by a collateral assignment of the Policies to
the Corporation.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the Corporation and the Trustee hereby agree as follows:
1. Policies. The Policies which are subject to this Agreement are
listed on Schedule "A" attached hereto. Any additional insurance contract on the
life of DANA G. BARNETT which become subject to this Agreement shall be listed
on Schedule "A" as such contracts become subject to this Agreement.
2. Ownership of Policies. The Trustee shall have custody of the
Policies subject to this Agreement and shall be sole and exclusive owner of the
Policies, subject, however, to the right of the Corporation to borrow against
the Policies as set forth in paragraph 10 or to the return of any funds advanced
by it for payment of the premiums or other amounts paid with respect to the
Policies upon the death of DANA G. BARNETT or the termination of this Agreement.
Except as to the
security interest specifically granted to the Corporation herein, the Trustee
retains all incidents of ownership in the Policies, including the right to
borrow or withdraw against the Policies. The Trustee's right to borrow, however,
shall be limited to an amount equal to the maximum loan value reduced by an
amount equal to the cumulative amount of the premiums on the Policies paid by
the Corporation hereunder. The Trustee's right to withdraw from the Policies'
cash values shall likewise be reduced by an amount equal to the cumulative
amount of premiums on the Policies paid by the Corporation hereunder. DANA G.
BARNETT shall not have any rights, powers or incidents of ownership in the
Policies.
3. Beneficiary. The Trustee has designated the Trust as the
beneficiary of the proceed of the Policies.
4. Dividend Options. The Trustee may elect and continue in force such
dividend options, if any, as are provided under the Policies and accordingly
therewith the dividends may be used by the Trustee in such manner as the Trustee
deems appropriate, such as to purchase paid up additions, to purchase additional
term insurance, or to reduce the premiums.
5. Payment of Premiums. The premiums on the policy shall be paid in
the following manner:
(a) The Trustee shall have the option with respect to each
calendar year or portion thereof that this Agreement is in effect to
contribute that portion of the premiums under the Policies equal to the
lesser of (i) the rate established by the Internal Revenue Service for the
cost of pure life insurance (P.S. 58 cost) from time to time, or (ii) the
rate, if any, established by the respective insurance company for one-year
term life insurance available to all standard risks in the amount of the
respective Policies, less cash value, at DANA G. BARNETT's then attained
age.
(b) The Corporation shall pay the balance, representing the
excess if any, of the annual premium over any portion that may be paid by
Trustee under (a) above, plus the annual interest due on any Policy loans
made by the Corporation.
(c) For administrative convenience, the Trustee shall remit
any contribution toward the premiums to the Corporation, and the
Corporation shall be responsible for making the total combined premium
payments to the respective insurance company.
(d) The Corporation shall cease making premium payments
whenever the Trustee so determines. Once the Trustee has terminated the
Corporation's obligations hereunder, the Trustee shall be solely
responsible for paying premiums due under the Policies.
6. Security Interest. In consideration of the premium payments to be
made by the Corporation, and to assure the repayment of such payments, the
Trustee grants to the Corporation, with collateral assignment, a security
interest in the Policies. The Corporation's security interest
in the Policies at any time shall be an amount equal to its net "Premium
Payments." "Premium Payments " as used in this Agreement means the aggregate
amount of premium payments paid with respect to the Policies by the Corporation
under this Agreement, less any amount received by the Corporation in
reimbursement of such payments. The outstanding balances of any Policy loans
made by the Corporation shall be considered reimbursement of such payments. The
Trustee agrees to execute and deliver to the Corporation, at the time of the
first premium payment on the Policies, a collateral assignment of the Policies.
7. Policy Proceeds. If the Policies mature as death claims while this
Agreement remains in effect, the Corporation shall immediately be paid an amount
equal to the then balance of its "Premium Payments." Such payment shall be
considered a return of capital to the Corporation and a termination of this
Agreement. The balance of such proceeds shall be retained by the beneficiary
designated by the Trustee in the manner and in the amount provided under the
terms of the Policies.
8. Termination. This Agreement shall terminate upon the happening of
any of the following events:
(a) The Trustee may terminate this Agreement while no premium
under the Policies is overdue by giving notice to the Corporation. The
effective date of such termination shall be the date of giving notice.
(b) By mutual consent of the parties hereto or by release of
the Corporation's security interest under paragraph 6 hereof.
(c) Bankruptcy, insolvency or dissolution of the Corporation.
(d) Surrender of the Policies by the Trustee.
9. Repayment of Premium Payments. If this Agreement is terminated
under paragraph 8 above, the Trustee shall obtain release of the Corporation's
security interest in the Policies by paying to the Corporation a sum equal to
the amount of the "Premium Payments" made by the Corporation as of that date.
The Corporation agrees (solely for purposes of facilitating such termination and
repayment of its premium payments secured by said policies) that the Trustee may
borrow or withdraw from the Policies cash values in amounts in excess of the
amounts specified in paragraph 2 above. If the Trustee fails to pay the
Corporation a sum equal to the "Premium Payments" within sixty (60) days of the
date of the termination of this Agreement pursuant to paragraph 8 above, the
Trustee shall execute any and all instruments that may be required to vest
ownership of the Policies in the Corporation. Thereafter, the Trustee shall have
no further interest in the Policies; the Corporation shall be deemed to have
received a sum equal to the "Premium Payments" and no additional sum will be due
it; and the Corporation will have the option to maintain the Policies at its
sole discretion.
10. Corporation's Rights. If the Trustee sells, assigns, surrenders,
makes withdrawals or otherwise terminates the Policies at any time this
Agreement is in effect, the
Corporation shall have the immediate right to repayment of its "Premium
Payments" from the Trustee. The Corporation shall have the right to borrow from
the Policies and to pledge of assign the Policies as security for loans or
advances, but only up to the "Premium Payments" less the amount of any loans
theretofore obtained by the Corporation.
11. Assignment. Subject to paragraph 10 above, neither party shall
have the right to assign its interest hereunder without the written consent of
the other party.
12. Further Assurances. The parties hereto agree to execute any
documents which may be necessary or proper to carry out the purpose and the
intent of this Agreement.
13. Amendment. This Agreement may not be amended or modified except by
a written instrument signed by the parties hereto.
14. Responsibility of Insurance Company. The parties hereto agree that
any insurance company shall by fully discharged by payment of the death benefit
to the beneficiaries designated in the Policies, subject to the terms and
conditions of the Policies; provided, however, that the insurance company shall
first comply with the terms specified in the collateral assignment as described
in paragraph 6 above. No insurance company shall be considered a party to this
Agreement; therefore, a copy of this Agreement need not be filed with any such
company. Nothing in this Agreement nor in any modifications, amendments or
supplements hereto shall in any way be construed to enlarge, change, vary or in
any way affect the obligations of any insurance company as expressly provided by
the Policies.
15. Binding Effect. This Agreement shall be binding upon the parties
hereto and their successors, assigns, executors, or administrators and
beneficiaries.
16. Notices. All notices required by this Agreement shall be in
writing and sent by certified or registered mail to the then current or last
known address of each party hereto.
17. Governing Law. This Agreement shall be subject to and construed
according to the laws of the Commonwealth of Pennsylvania.
[signatures on the following page]
IN WITNESS WHEREOF, parties hereto have executed the Agreement as of
the ___________ day of _________________________, 1996
CORPORATION:
MYLAN LABORATORIES INC.
________________________________ By ____________________________
Robert W. Smiley, Esq., Secretary Milan Puskar, CEO, President
Chairman of the Board
[CORPORATE SEAL]
WITNESS: TRUSTEE
_______________________________ _______________________(SEAL)
ERIC LIEBERMAN, Trustee
SCHEDULE "A"
To Split-Dollar Agreement dated as of
_____________________, 1996 Between MYLAN LABORATORIES
INC.
and ERIK LIEBERMAN, Trustee
- - ------------------------------------------------------------------------
Company Policy Number Face Amount
- - ----------- -------------- -------------
Guardian Life Insurance 3832137 $6.000,000.00
Company of America
Guardian Life Insurance 3833624 $6,000,000.00
Company of America
(k) "Salary Continuation Plan" with Patricia Sunseri dated
March 14, 1995, filed herewith.
RETIREMENT BENEFIT AGREEMENT
This Retirement Benefit Agreement (the "Agreement") is entered into on
this 14th day of March, 1995 (the "Effective Date") by and between:
Mylan Laboratories Inc., a
Pennsylvania Corporation,
with offices located at 781
Chestnut Ridge Road,
Morgantown, WV 26505
(hereinafter referred to as
"Mylan" or "Company").
and
Patricia A. Sunseri, an
employee of Mylan who
resides at 244 Klein Road,
Glenshaw, PA 15116
(hereinafter referred to as
"Employee" or "Sunseri").
WHEREAS the Company and Employee, in recognition of Employee 's long
and valuable contribution to the success of the Company, entered into a Salary
Continuation Agreement on April 1, 1989; and
WHEREAS Employee continues to perform valuable services for the
Company; and
WHEREAS in recognition of her continuing service to Mylan, the Company
wishes to provide Employee with financial assistance with respect to certain
Contingencies, in addition to that provided for in said April 1, 1989 Agreement;
and
WHEREAS the Company and Employee wish to RESCIND, and to REPLACE said
Salary Continuation Agreement with this Agreement;
WITNESSETH THEREFORE that in consideration of the additional benefits
provided for hereunder, the premises and covenants set forth herein, and other
good and valuable consideration, the sufficiency of which is hereby
acknowledged, the Company and Employee, intending to be legally bound, agree as
follows:
1
I. DEFINITIONS
Whenever used in the Agreement the following terms shall be defined as
follows:
(a) "Advisor" or "Advisors" shall mean with respect to Employee any
person including lawyers, accountants, estate planners and others, with whom he
may wish to review and discuss the matters set forth herein.
(b) "Agreement" shall mean this Retirement Benefit Agreement which is
entered into on the 14th day of March, 1995.
(c) "At-Will" shall mean with respect to the period of Sunseri's
employment with Mylan, that the Company is under no obligation to continue to
employ Sunseri for any period of time, and can terminate her employment at any
time without notice, subject to certain statutory and regulatory requirements;
and that Employee is under no obligation to remain employed by the Company, and
can terminate her employment with Mylan at any time, without notice.
(d) "Change of Control" shall mean:
(1) The acquisition (other than from the Company) by any person,
entity or "group", within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934 (the "Exchange Act"), excluding, for this
purpose, the Company or its subsidiaries, or any employee benefit plan of the
Company or its subsidiaries which acquires beneficial ownership of voting
securities of the Company (within the meaning of Rule 13d-3 promulgated under
the Exchange Act), or legal ownership of 20% or more of either the then
outstanding shares of common stock or the combined voting power of the Company's
then outstanding voting securities entitled to vote generally in the election of
directors; or
(2) Individuals who, as of the date hereof, constitute the Board
(as of the date hereof the "Incumbent Board") cease for any reason to constitute
at least a majority of the Board, provided that any person becoming a director
subsequent to the date hereof whose election, or nomination for election, by the
Company's shareholders was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election of the
Directors of the Company, as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Exchange Act) shall be, for purposes of this
Agreement, considered as though such person were a member of the Incumbent
Board; or
(3) Approval by the shareholders of the Company of a
reorganization, merger, consolidation, or other action with respect to which
persons who were the shareholders of the Company immediately prior to such
reorganization, merger or consolidation, or other action do not, immediately
thereafter, own more than 50% of the combined voting power entitled to vote
generally in the election of directors of the reorganized, merged or
consolidated company's then outstanding voting securities, or of the sale of all
or substantially all of the assets of the Company.
2
(e) "Contingency" shall mean Retirement or death.
(f) "Mylan" or "Company" shall mean Mylan Laboratories Inc., its
subsidiaries and affiliates.
(g) "Net Present Value" ("NPV") shall mean the present value at any
given time of the benefit to be paid, discounted at seven percent (7%) per
annum.
(h) "Party" or "Parties" shall mean the Company or Employee, or both
the Company and Employee depending upon which term is required by the context in
which it is used.
(i) "Retire" or "Retirement" shall mean the day and date on which
Sunseri's employment with the Company is terminated by either Party for any
reason other than death of the Employee.
(j) "Successor" shall mean any person, partnership, limited
partnership, joint- venture, corporation, trust or any other entity or
organization who, subsequent to the Effective Date, comes into possession of or
acquires, either directly or indirectly, all or substantially all of the
Company's business, assets or voting stock, or the right to direct the business
activities and practices of the Company. B
II. RESCISSION OF PRIOR AGREEMENT
The Salary Continuation Agreement entered into by the Parties on April
1, 1989 and any and all other agreements, express or implied, which may have
been entered into by them prior to the execution of this Agreement, including by
way of example and not of limitation, any agreement which addresses or is
related to salary continuation, deferred compensation, employment, or similar
matters (excluding agreements related to stock options) are hereby RESCINDED by
the mutual consent of the Parties hereto upon execution of this Agreement.
THEREFORE THE PARTIES ACKNOWLEDGE THAT ANY RIGHTS AND
OBLIGATIONS SET FORTH IN ANY SUCH AGREEMENT, WHETHER
EXPRESS OR IMPLIED, ARE FOREVER WAIVED, NULL AND VOID, AND
UNENFORCEABLE AT LAW OR IN EQUITY.
3
III. RETIREMENT
3.1 Upon her Retirement from the Company, and if he is eligible to
receive payments as provided for elsewhere herein, Employee shall receive an
annual retirement benefit equal to the amount set forth below.
3.2 Should Employee Retire after the Effective Date but on or before
March 31, 1996 he shall receive thirty six thousand dollars ($36,000.00) each
year for ten (10) years.
3.3 Should Employee Retire after March 31, 1996 but on or before March
31, 1997 he shall receive seventy thousand dollars ($70,000.00) each year for
ten (10) years.
3.4 Should Employee Retire after March 31, 1997 but on or before March
31, 1998 he shall receive eighty thousand dollars ($80,000.00) each year for ten
(10) years.
3.5 Should Employee Retire after March 31, 1998 but on or before March
31, 1999 he shall receive ninety thousand dollars ($90,000.00) each year for ten
(10) years.
3.6 Should Employee Retire after March 31, 1999 he shall receive one
hundred thousand dollars ($100,000.00) each year for ten (10) years.
3.7 Should Employee become unable to perform the material and
substantial duties of her position prior to March 31, 1999, he shall receive,
pursuant to ss. 4.1, one hundred thousand dollars ($100,000.00) each year for
ten (10) years in lieu of any benefit specified in Sections 3.2 through 3.6
hereof.
3.8 The Company shall pay the amount due hereunder in equal or
substantially equal monthly installments. The first of any such payments shall
be made on the first day of the month following the month in which Employee
Retires, and each subsequent payment shall be made on the first day of each
successive month until Mylan's obligations with respect to such payments have
been satisfied.
3.9 However, upon the written request of the Employee, Mylan may pay
to Employee the NPV of any amount, or of the balance of any such amount, to
which he is entitled hereunder in a lump-sum payment. If the Company grants the
request for a lump sum payment, said payment shall be paid within thirty (30)
days of the date of Employee's request.
IV. CAPACITY TO PERFORM DUTIES
4.1 The certification of a licensed physician selected by the Company
as to Employee's inability to perform the material and substantial duties of her
position shall be conclusive with respect to her status regarding the
application of ss. 3.7 hereof.
4
V. DEATH BENEFIT
5.1 The Company shall maintain for Employee's benefit during her
employment with the Company life insurance policies in the aggregate amount of
one million two hundred fifty thousand dollars ($1,250,000.00).
5.2 If the Employee's death occurs after Retirement, but before having
received the entire benefit provided for under Article III hereof, the balance
of the payments due thereunder shall be paid to Employee's beneficiary in a
lump-sum payment equal to the NPV of the remaining payments.
VI. EFFECT OF CHANGE OF CONTROL
6.1 Upon a Change of Control Sunseri shall receive, in lieu of the
annual payments provided for under Article III, the NPV of One Hundred Thousand
Dollars ($100,000.00) per year for ten (10) years; provided Sunseri is employed
by the Company at or immediately prior to the Change of Control.
6.2 If a Change of Control occurs after her retirement, but before
having received the entire benefit provided for under Article III hereof, the
balance of the payments due thereunder shall be paid to Employee in a lump-sum
payment equal to the NPV of the remaining payments.
VII. SUCCESSORSHIP
This Agreement in its entirety shall be binding upon and enforceable
against the Company and its Successors.
VIII. NO DUPLICATION OF PAYMENTS
Notwithstanding anything to the contrary which may be set forth
elsewhere herein, under no circumstances is Employee or her beneficiary entitled
to take benefits under more than any one article included in this Agreement.
IX. EMPLOYEE CONDUCT WITH RESPECT TO COMPETITORS
9.1 Employee agrees that he will not, without the prior written
consent of the Company, directly or indirectly, whether as an employee, officer,
director, independent contractor, consultant, stockholder, partner or otherwise,
engage in or assist others to engage in or have any interest in any business
which competes with the Company in any geographic area in which the Company
markets or has marketed its products during the year preceding termination of
Sunseri's employment for the greater of:
5
(a) the period during which Employee receives monthly payments under
this Agreement; or
(b) three (3) years following her receipt of a lump-sum payment
hereunder.
9.2 Notwithstanding anything to the contrary set forth elsewhere
herein, stock ownership in a competing business shall not be a breach of this
Agreement, provided such stock is traded on a national exchange.
9.3 The Parties agree and acknowledge that the time, scope and
geographic area and other provisions of this Agreement have been specifically
negotiated by the Parties, and Employee specifically hereby agrees that such
time, scope and geographic area and other provisions are reasonable under these
circumstances. Employee further agrees that if, despite the express agreement of
the Parties to this Agreement, a court should hold any portion of this Agreement
unenforceable for any reason, the maximum restrictions of time, scope and
geographic area reasonable under the circumstances, as determined by the court,
will be substituted for the restrictions herein which such court may find to be
unreasonable or unenforceable.
9.4 The Parties acknowledge that the breach of ss. 10.1 will be such
that the Company will not have an adequate remedy at law because the rights of
the Company under this Agreement are of a specialized and unique character, and
that immediate and irreparable damage will result to the Company if Employee
breaches her obligations under ss. 10.1. The Company may, in addition to any
other remedies and damages available, seek an injunction in the courts of the
State of West Virginia and the United States District Court for the Northern
District of West Virginia to restrain any such breach. Employee represents and
warrants that her expertise and capabilities are such that her obligations under
ss. 10.1 will not prevent her from earning a living.
X. CONSULTING SERVICES
10.1 During the five (5) year period beginning on the day following
Employee's Retirement he shall, at the request of the Company, act in the
capacity of a consultant for the Company, performing such services as may be
consistent with those performed by her during her Employee's employment. These
services may be designated by the President of the Company, or her authorized
representative, and shall be reasonable in scope duration and frequency.
10.2 The Company shall pay the Employee for such consulting services
an hourly rate to be determined by the Parties at such time, but not less than
one hundred fifty dollars ($150.00) per hour, payable monthly.
10.3 In addition to the foregoing, the Company shall reimburse the
Employee monthly for any and all out-of-pocket expenses incurred by the Employee
directly for the benefit of the business of the Company.
6
XI. ELIGIBILITY FOR PAYMENT
11.1 Any and all payments due hereunder, may be denied if not already
begun, or terminated if they have begun, if in the Company's sole judgment
Employee is either not eligible for such payments, or once such payments have
begun is found to be or found to have been ineligible.
11.2 Employee shall not be eligible for any payments hereunder if the
Company, in its sole discretion, finds that during or subsequent to her
employment with the Company he:
(a) breaches, or has breached any term, provision or obligation
enumerated herein;
(b) committed any act by commission or omission which materially and
substantially adversely affects the Company's business or reputation; or
(c) is convicted of any violation of the Federal Food, Drug and
Cosmetic Act, or the violation of any other statute of material relevance to the
Company's business.
11.3 Should Employee be paid any benefits hereunder and thereafter be
found ineligible, or to have been ineligible, he must return to the Company that
portion of the benefit paid to her for the period of her ineligibility.
XII. RIGHT TO CONFER
12.1 Employee shall have the right, but not the obligation to:
(a) Confer with any Advisor of her choice prior to signing
the Agreement; and
(b) Provide her Advisors with a true and complete copy of
the Agreement, and any other pertinent documents
which may be of assistance to her Advisors.
12.2 Should Employee decline the right to confer with her Advisors
prior to executing this Agreement he shall execute an acknowledgement of same
which shall then be incorporated herein by reference. (See Exhibit A)
XIII. NO PROMISE OF CONTINUED EMPLOYMENT
13.1 Employee acknowledges her employment with the Company is AT-WILL.
13.2 Nothing set forth herein shall constitute or be construed as a
contract of employment except in so far as provided for under ss. 13.1 hereof.
7
XIV. RESTRICTION OF ALIENABILITY
Benefits payable to the Employee or beneficiary shall not be subject
to assignment, transfer, attachment, execution, garnishment, sequestration, or
any other seizure under any legal or equitable process, whether on account of
the Employee's or beneficiary's act or by operation of the law.
XV. CONTRACT ADMINISTRATOR
The Director of Taxation and Accounting of the Company, or other
officer of Mylan designated by the Executive Committee of the Company is hereby
named the Contract Administrator for purposes of assuring compliance with the
terms and conditions set forth herein.
XVI. MODIFICATION
This Agreement may not be changed, amended or otherwise modified other
than by a written statement; Provided, such statement is signed by both Parties,
expresses their intent to change the Agreement, and specifically describes such
changes.
XVII. HEADINGS
Except when referenced in the body of this Agreement article headings
are set forth herein for the purpose of convenience only. Such headings shall
not be considered or otherwise referred to when any question or issue arises
with respect to the application or interpretation of any term or condition set
forth herein.
XVIII. COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of
which is to be considered an original, and taken together as one and the same
document.
XIX. GOVERNING LAW
Any an all actions between the Parties regarding the interpretation or
application of any term or provision set forth herein shall be governed by and
interpreted in accordance with the substantive laws, and not the law of
conflicts, of the State of West Virginia. The Company and Employee each do
hereby respectively consent and agree that the courts of the State of West
Virginia shall have jurisdiction, and venue shall properly lie with the courts
of the State of West Virginia, with respect to any and all actions brought
hereunder.
8
XX. SINGULAR OR PLURAL
The singular form of any noun or pronoun shall include the plural when
the context in which such word is used is such that it is apparent the singular
is intended to include the plural and vice versa.
XXI. ASSIGNMENT
The Agreement may not be assigned by either Party, without the written
authorization of the other Party. A Successor shall not be considered an
assignee for purposes of this Article.
XXII. ENTIRE AGREEMENT
The terms and conditions set forth herein contain the entire agreement
between the Company and Employee, and supersede any and all prior agreements or
understandings (whether express or implied) between the Parties with respect to
the matters set forth herein.
XXIII. SURVIVAL
Articles I, II, IX, X, XI, XIX, and XXIII shall survive any expiration
or termination of this Agreement.
XXIV. TERM
The term of this Agreement shall begin on the Effective Date and shall
end on the date on which Mylan makes the last payment to which it is obligated
hereunder.
IN WITNESS of their agreement to the terms and conditions set forth
herein the Company and Employee have caused the following signatures to be
affixed hereto:
MYLAN LABORATORIES INC. PATRICIA A. SUNSERI
BY:________________________ BY:________________________
TITLE:_____________________ DATE:______________________
DATE:______________________
9
EXHIBIT A
ACKNOWLEDGEMENT
I, Patricia A. Sunseri, hereby acknowledge and understand that I have
been given the opportunity to review and discuss the terms of the Agreement with
an Advisor of my choice prior to signing the Agreement. I have decided that it
is not necessary for me to discuss this matter with an Advisor, and therefore I
decline the opportunity to do so.
No one has discouraged me or otherwise attempted to influence me with
regard to my decision to decline the opportunity to discuss this matter with my
Advisors. My refusal of this offer is entirely my own and is made without any
reservation or conditions whatsoever.
WITNESSED BY:
__________________ DATE:_________ BY:__________________ DATE:________
__________________ DATE:_________
(13) Fiscal 1997 Annual Report to the Shareholders (only
those portions which are incorporated in this Report by
reference are being filed herewith).
Description of Business
- - -------------------------------
Mylan Laboratories Inc. and its subsidiaries are engaged in the development,
licensing, manufacturing, and marketing of numerous generic and proprietary
finished pharmaceutical and wound care products. These products include solid
oral dosage forms, as well as suspensions, liquids, injectables and
transdermals, many of which are packaged in specialized systems.
Table of Contents
1 Introduction
2 Letter to Shareholders
4 Company History
6 Competitive
10 Committed
14 Diversified
18 Financial Highlights
20 Selected Financial Data
21 Management's Discussion
26 Consolidated Balance Sheets
28 Consolidated Statements of Earnings
29 Consolidated Statements of Shareholders' Equity
30 Consolidated Statements of Cash Flows
32 Notes to Consolidated Financial Statements
42 Independent Auditors' Report
43 Market Information
44 Board of Directors
45 Management
46 Corporate Structure
47 Product Guide
59 Shareholder Information
59 Officers
future
Building for the
Mylan Laboratories Inc. launched a new branded products division, Bertek
Pharmaceuticals Inc., which operates as a wholly owned subsidiary. Traditionally
known as a generic drug giant, Mylan sells branded products through Bertek
Pharmaceuticals Inc. The addition of a division dedicated to branded products is
consistent with the Company's mission of operating as a fully integrated
pharmaceutical company.
Through an internal restructuring, a sizable sales force was created for
Bertek Pharmaceuticals, which will be dedicated to selling branded products. The
Bertek Pharmaceuticals sales force currently consists of 85 salespeople and 10
field sales managers, in addition to a dedicated managed-health care team.
The foundation of Bertek Pharmaceuticals is built on two key product lines,
MAXZIDE (R) and NITREK (TM). Mylan now has exclusive rights to MAXZIDER(R), a
popular antihypertensive, in name and shape, as well as patent and formula.
MAXZIDE (R), the first proprietary product developed by Mylan, had been licensed
to American Home Products for marketing.
NITREK (TM), a nitroglycerin transdermal patch for the prevention of
angina, was launched on January 2, 1997. The translucent NITREK (TM) patch is a
smaller, less visible patch. Since it covers less surface area, it may reduce
skin irritation, a common side effect of nitroglycerin patches.
Bertek Pharmaceuticals expects to continue its presence in the branded
products market by adding other proprietary offerings to its line.
To my fellow shareholders,
Fiscal 1997 has been a very challenging year. It has been difficult for the
company and for the shareholders.
Despite difficult industry conditions, our company remained profitable,
achieved the highest sales level in its history, and further fortified its
leadership position.
During the fiscal year we have received 15 product approvals from the FDA,
12 that we are currently shipping and three whose patents have not yet expired.
In spite of these positive accomplishments, our earnings have trailed. How
can that happen? Let me give you a few of the reasons.
There has been extreme pricing pressure in the generic industry for the
past 18 months and it continues into the present. Mylan has built its market
share steadily over the years and according to the IMS National Prescription
Audit, Mylan consistently ranks number one or two among all pharmaceutical
companies, branded or generic, in the number of prescriptions dispensed. We are
aggressively protecting our market share by ke eping our customers price
competitive and we will continue to do so for as long as necessary.
But pricing is not the only problem we have had to deal with throughout
this year. The litigation being perpetuated within the generic industry is
unbelievable. These are lawsuits designed to keep Mylan and other generic
companies from going to market with products.
Today it is almost as expensive to litigate our rights to sell a generic
product as it is to develop that drug.
Another stumbling block has been the General Agreement on Tariffs and Trade
(GATT) legislation which greatly disadvantages generic companies and allows
major drug companies patent extensions and enables them to unjustly earn
billions of dollars. In fact, an independent study done in June of 1996 showed
that this legislation will cost American taxpayers and consumers more than $6
billion.
All of these conditions: lawsuits, patent issues, the GATT legislation,
'bundling' of approvals by the FDA and pricing pressure are some of the
roadblocks we have had to deal with this past year, and we are continuing to
deal with them. We have seen doom and gloom before. We survived and prospered.
We survived because we knew what it took to succeed, and we kept our focus. We
have the same strength today!
We have focused on several things:
We have developed an extremely aggressive R & D program which includes
generic products and proprietary products. We have built a 150,000 square foot
research center, added more state-of-the-art equipment and hired the additional
scientific personnel needed to carry out this plan. With this commitment we now
have 26 Abbreviated New Drug Applications (ANDAs) filed with the FDA waiting for
approval. These drugs represent over $4 billion in sales. Our goal for this year
is to submit an additional 25 ANDAs.
We have increased production capability and added a specialized facility
for our sustained release technology. This patented technology gives us
additional opportunities for first approvals.
The proprietary products in our pipeline are part of our future. Of the six
drugs in development, one has already been submitted and the other five are in
various stages of clinical trials.
We have formed alliances and signed licensing agreements to acquire
compounds and products to further strengthen our position in the marketplace.
We signed an agreement with American Home Products to regain full control
over MAXZIDE (R), our first proprietary product which we developed over 12 years
ago.
We formed "Bertek Pharmaceuticals Inc.," our branded products division
whose detail sales force is calling on physicians to introduce Mylan's
proprietary products.
In every facet of our operations, we will continue to use innovation to
gain and hold our competitive advantage.
Our company is moving through a period of great change perhaps the greatest
in our history. This change brings with it enormous management challenges and
equally significant opportunities to build shareholder value. With the continued
dedication and hard work of our extraordinary people throughout the
organization, we are determined to ensure that Mylan leads this change and
remains the best, most competitive health care company in our industry.
Sincerely,
Milan Puskar
Chairman of the Board, C.E.O. and President
Company History
The success of any company is not achieved by any one particular event but is
the result of a series of occurrences throughout history. It is a combination of
the management team, the employees, and the corporate philosophy. Mylan's code
of ethics, and its philosophy, that "if we can't do it right, we don't do it at
all," is evident by the Mylan family of employees whose dedications, hard work
and integrity has provided the foundation upon which this company was
established in 1961, and it continues to be the backbone, as Mylan builds for
the future.
Mylan continued to expand its list of approved products with the addition of
Ethromycin in 1971 and Ampicillin in 1973. The list of major drug companies
purchasing product under private label also continued to increase.
Parke-Davis was the first major drug company to purchase Mylan's finished goods
in 1969.
Mylan began in 1961 as a privately owned company founded by our Chairman, CEO
and President, Milan Puskar, and an associate in White Sulphur Springs, West
Virginia. Initially the company did not manufacture products, but operated as a
distributor buying finished goods and reselling them to pharmacies, doctors, and
etc.
Mylan experienced unbelievable growth after the present management team took
over on May 13, 1976, and the company soon became eligible to be traded on the
National-Over-the-Counter (NASDAQ) Market as MYLN.
Morgantown
February 15, 1973, the first shares of stock were traded on the
Over-the-Counter Market, and Mylan became a public company.
Mylan began manufacturing vitamins in 1965, and in 1966 received approval to
start manufacturing Penicillin G tablets. Production was expanded in 1968 with
the FDA approval of Tetracycline.
White Sulphur
Springs
Princeton
In 1963 Mylan relocated to Princeton, West Virginia and then in 1965 to its
present location in Morgantown.
Mylan merged with Dow B. Hickam Pharmaceuticals, a high quality branded
pharmaceutical company with a highly skilled and aggressive marketing force on
October 30, 1991.
On April 14, 1986, Mylan became a member of the Big Board, The New York Stock
Exchange, and its symbol became MYL.
February 28, 1996, Mylan acquired UDL Laboratories, Inc., the premier supplier
of unit dose generic pharmaceuticals to the institutional and long-term care
marketplace.
Bertek, Inc., an important manufacturer and innovator of state-ofthe-art
transdermal drug delivery systems was acquired on February 15, 1993.
Mylan's former Chairman and CEO, Roy McKnight testified before the House
Oversight and Investigations Committee regarding improprieties at the FDA,
prompting an investigation of the generic drug industry exposing cheating,
bribery and payoffs.
November 6, 1993, Mylan's former Chairman and CEO Roy McKnight died suddenly of
a heart attack. The company co-founder Milan Puskar was named Chairman and CEO
on November 9, 1993.
November 1988, Mylan announced the joint venture purchase of Somerset
Pharmaceuticals. Somerset received FDA approval in 1989 for Eldepryl (R), an
extremely effective treatment for late stage Parkinson's disease.
Cidra, Puerto Rico became the site of Mylan's third generic manufacturing
facility with its opening in October 1994.
In 1991 the Company also opened its second distribution facility in Reno,
Nevada.
Mylan introduced its first proprietary product, MAXZIDE (R), an
antihypertensive in 1984. In 1988, after three years of clinical testing, Mylan
received approval on half strength MAXZIDE (R)-25MG. Both were licensed to
Lederle Laboratories for distribution.
Bertek Pharmaceuticals Inc., the branded products division of Mylan
Laboratories, launched NITREK (TM)in 1997. NITREK (TM) is Mylan's first branded
generic nitroglycerin transd ermal product, for the treatment of angina. NITREK
(TM)was jointly developed by Mylan Pharmaceuticals and Bertek, Inc.
In 1987 Mylan opened a second manufacturing facility in Caguas, Puerto Rico,
followed by the opening of its first distribution center in Greensboro, North
Carolina in 1988.
Can Mylan be competitive
Yes.
In the race to be the best, the teamwork of Mylan's family of employees
gives the Company the competitive edge.
Mylan competes on many fronts. Traditionally, Mylan has been viewed as only
a generic drug company, but in fact, we are a growing, changing, multi-faceted
company with a presence throughout the pharmaceutical industry.
With the heightened concern about health care costs and the constant
changes in the health care markets, Mylan must make certain that its marketing
efforts keep pace with marketplace change. Accordingly, we aggressively protect
our market share by keeping our customers price competitive. We continually
strive to control costs throughout the company in order to remain competitive in
this new environment.
Mylan has some of the most efficient manufacturing facilities in the
industry which allows us to keep production costs to a minimum. We pride
ourselves on not only having state-of-the-art plants, but also having the most
current production equipment and dedicated employees who take great pride in
their work and their company. It is our conviction that Mylan's most important
advantage is the quality and integrity of our people and their capabilities.
Many times people follow Mylan's lead and imitate our style, but it would be
extremely difficult, if not impossible, to duplicate the performance, capability
and dedication of our people. They are truly our competitive edge.
Another advantage for Mylan is our ability to produce very large batches of
product at one time.instead of manufacturing several smaller batches.saving
manufacturing and inspection hours and keeping production costs to a minimum.
We continue to be a market leader in the number of generic products and
strengths. Currently we have 88 products representing 224 strengths, covering 24
therapeutic categories.
We have 26 Abbreviated New Drug Applications (ANDAs) or generic products,
submitted to the FDA with another 25 compounds targeted for submission this
year. There are many more compounds in various stages of development.
Additionally, to continue to grow the Company and increase shareholder
value, Mylan is developing proprietary drugs. Currently we have six of these
compounds in our pipeline. These are products that will have exclusivity and
will not be subjected to the constantly increasing competition that the generic
industry has been experiencing.
Mylan has two distribution centers, one in Greensboro, North Carolina and a
second in Reno, Nevada. For efficiency, product is shipped to these centers when
manufacturing is completed and all shipments to customers are made from the
closest center, resulting in Mylan having the fastest delivery service in the
entire industry. The efficiency of this distribution system creates an advantage
for Mylan and its customers, giving Mylan another competitive edge.
Mylan has built its market share steadily over the years. According to the
IMS National Prescription Audit, Mylan consistently ranks first or second among
all pharmaceutical companies, branded or generic, in the number of prescriptions
dispensed.
In no other industry have the market dynamics changed as dramatically as
they have in the health care field. With the heightened concern about health
care costs, the opportunities for an innovative company producing a wide range
of reasonably priced, high quality products is endless.
Mylan is focused on these opportunities. We have used quality, service and
delivery to build our large distribution network and have become a dominant
player in the marketplace and it is our intention to be an even stronger
presence in the future. Is Mylan competitive? Absolutely!
Is Mylan committed? YES
Mylan's bridge from being only a generic company to becoming a fully
integrated pharmaceutical company is built upon our commitment to researching &
developing proprietary products that meet unmet needs.
We are committed to maintaining our present position of leadership in the
industry while continuing our growth into a fully integrated pharmaceutical
company.
Mylan's mission is clear. We are committed to maintaining our present
position of leadership in the industry while continuing our growth into a fully
integrated pharmaceutical company.
Of course, the key to our company's long-term performance remains research
and development. Our dollar investment in R & D has grown steadily over the
years, and this fiscal year represented approximately 10% of our sales for a
total of $43 million. This investment, along with our accelerated R & D program,
comprises our commitment to developing new products that maximize the value of
our existing products.
But even more important than the size of this investment is the strategy
behind it. We are focusing our efforts on products that meet unmet needs. We are
pioneers who develop new market opportunities. We look to innovator products as
a source of growth and do not pursue "me-too" drugs except as a generic. Our
main areas of concentration are neurology and dermatology = two exciting markets
which represent several billions of dollars in sales. We are targeting these
markets with significant new product research and a restructured, more potent
sales and distribution system. Currently, we have new products in our pipeline
that represent significant improvements over present modalities of treatment in
these fields.
Mylan is a research driven company. That has been our traditional strength.
Accordingly, we have more than tripled our R & D staff over the past four years.
We anticipate further growth now that we completed a new 150,000 square foot
research and development center in Morgantown,West Virginia.
Our present pipeline is the most aggressive in Mylan's history. We have 26
ANDAs filed with the FDA, representing well over $4 billion in current sales.
Our goal is to submit two ANDAs per month, and we feel confident that our new
state-of-the-art facility will enable us to meet this aggressive schedule. The
25 products that we have targeted for submission this year exceed $3 billion in
current sales.
In addition to these 25 new generic products, we have approximately 30 more
in various stages of development and a like amount being sourced for raw
material.
We have developed our own 'Sustained Release' technology which is housed in
a new 27,000 square foot bead facility. This gives us an entree into a major new
market with products like Verapamil HCL ER and Diltiazem HCL ER, our first two
approved products of this type. We have approximately 10 more of these products
in development representing an additional $3 billion in sales.
As a fully integrated pharmaceutical company, Mylan has gone beyond
generics to add a range of innovator drugs to its portfolio. We currently have
six of these products in our pipeline.
We filed the New Drug Application (NDA) on our burn product, Sulfamylon, at
the end of fiscal 1997, and barring any problems, we are anticipating a six
month review of this orphan drug. The product is used to control bacterial
colonization and prevents infectious graft loss in burn patients. Exclusivity
will be seven years from date of approval.
Sertaconazole, our antifungal used for the treatment of Tinea Pedis & Tinea
Cruris is in Phase II-III clinicals. We would hope to have this filed by the
year 2000 and under GATT regulations, this compound would have exclusivity
through the year 2011.
Our wound product, which is an adjunctive therapy to promote wound healing,
is in Phase II. We expect to receive three years exclusivity upon approval of
this product which we hope to file by 1999.
Our topical anesthetic is in Phase III clinicals and our goal is to file on
this product in 1998. It will also receive three years exclusivity upon
approval.
Dotarizine, which is for the prevention of migraine headaches, is in Phase
II clinicals. This is an excellent product and according to what we have been
advised, is the only product being studied for the prevention of migraines. All
others under development are for the treatment of migraines. Our goal is to file
on this product by 2001 and we will have exclusivity under GATT regulations
until 2008.
Apomorphine, which is used in the treatment of the "on/off" or "freeze"
phenomenon associated with late stage Parkinson's disease is in Phase II-III
clinicals. This, too, is a badly needed product because people who suffer from
this affiction are literally house bound. They are afraid to go anywhere because
they could "freeze" and be that way for two or three hours. With this product,
they could inject themselves or be injected by their caretaker and immediately
be "released". Our goal is to file this NDA in 1998 and the product will have
seven years Orphan Drug exclusivity.
Our alliance with VivoRx, Inc., a California based biotech company, is one
of the most exciting projects we have ever been involved in. VivoRx has
developed a breakthrough treatment for the most drastic form of diabetes. Under
the leadership of Dr. Patrick Soon-Shiong, VivoRx is developing a new way to
manage Type 1 Diabetes through pancreatic islet cell implants. Instead of
injecting insulin, patients can produce their own insulin through the implanted
pancreatic islet cells. This avoids the dosage problems that make it difficult
to treat diabetes with daily injections. Through cell implants, the body makes
insulin as needed in the exact amount it requires.
Three patients have been successfully implanted and their progress profiles
are excellent.
Supplying cells in sufficient numbers is one of the challenges
of this procedure, and VivoRx has amended its original Investigational New Drug
(IND) to permit use of human "proliferated" cells. They have already used these
proliferated cells in one patient, whose progress profile is the same as the
original transplant patients.
VivoRx has now been approved to do Phase I-II clinical trials of
encapsulated porcine islet cells in humans and will begin those clinicals by the
end of this calendar year.
The alliance between Mylan and VivoRx is a major step in helping to control
diabetes. This is a devastating disease that accounts for one out of every seven
health care dollars spent in the U.S. Insulin-dependent diabetics alone who
could potentially benefit the most from this technology number 1.4 million in
the U.S. They account for medical expenditures in excess of $10 billion each
year.
Our VivoRx investment is consistent with the Mylan objective of focusing
upon therapies that make a difference in terms of human and economic value.
Is Mylan committed? Completely!
Can Mylan be diversified? Yes
Mylan's diversity in product and technology, and its dedicated family of
employees all work together like the gears of a fine tuned machine to make Mylan
a leader in the industry.
Mylan is a company on the move. Several years ago we developed a business
plan which directed our resources toward a long-term strategy for growth. We
know where we are going and how we want to get there. We are pushing every
growth lever we can to enhance short and long-term prospects.
Our strategy combines enhanced R & D, a diversified product portfolio, and
a reconfigured business through targeted acquisitions and alliances. These goals
provide opportunities to increase our product lines, expand our market presence
and improve our profitability.
The innovator products we have in development coupled with our strong
generic pipeline speaks to Mylan's R & D commitment, while the variety of
product lines speak to our diversification. We have moved beyond the solid
dosage form tablets and capsules which has previously been the bulk of our
product line.
In 1991, we implemented the first steps of our growth plan for the future
by acquiring Dow Hickam Pharmaceuticals, which provided us with two immediate
advantages. First, it is an excellent and very successful wound care company
with solid contacts with physicians, hospitals and long-term care facilities.
markets we had targeted for future growth.
Secondly, it had a first-class and sizeable sales force.something we didn't
have but would definitely need to be able to launch the proprietary products we
were beginning to work on.
Our next acquisition occurred in 1993, when we added Bertek, Inc. to our
family of companies. Bertek, Inc. is a leading manufacturer of transdermal drug
delivery systems. It has unique, state-of-the-art technologies for producing
coatings, laminates and finished pharmaceutical products for transdermal
administration of drugs to patients.
The nitroglycerin patches developed by our Bertek division are smaller and
less visible than traditional types, and since they cover less area, they can
reduce skin irritation, which can be a side effect. We received our first patch
approval on August 30, 1996 and have filed two more ANDAs with the FDA for this
type of product. We have several more compounds in development using the patch
technology.
Our Bertek division has collaborated with Somerset Pharmaceuticals to
produce an EldeprylRegistration Mark patch. Mylan has 50% ownership of Somerset
Pharmaceuticals, which owns the rights to EldeprylRegistration Mark. Currently,
Somerset is in Phase III clinical trials using the patch for treatment of
Alzheimer's disease. Results of the study should be available in the first half
of 1998.
The joint venture purchase of Somerset Pharmaceuticals has proven to be a
special asset to Mylan. Eldepryl (R), in capsule form, is taken by thousands of
patients as an extremely effective treatment of late-stage Parkinson's disease.
In today's health care market, packaging and delivery of drugs can be
almost as important as the drugs themselves. The growth of managed care has
created significant demand for reliable supply, reasonable costs and dependable
service. Mylan is meeting that need through its newest subsidiary, UDL
Laboratories. UDL is the premiere supplier of unit dose multi-source
pharmaceuticals to the institutional and long-term care markets.
Through UDL, Mylan has strengthened its position in the retail,
institutional and managed care markets.
UDL packages more than one billion doses per year. It has contract awards
with a large network of group purchasing organizations. UDL offers over 450 line
items in unit dose form. more than any other single source. It also manufactures
a line of unit dose liquids in a range of sizes. These and other UDL systems
offer doses that are accurately measured, precisely marked and conveniently
packaged. This all adds up to high quality and reduced cost.two essentials in
today's medical marketplace.
Licensing of compounds and products is one of the strategies Mylan is using
to expand its product and pipeline.
Dotarizine and Sertaconazole were licensed from Ferrer Internacional S.A.
of Barcelona, Spain. Both compounds are currently in clinicals.
Generic injectable drugs, a non-narcotic prescription pain product and the
Q-Pen auto-injector delivery system were all licensed from Meridian Medical
Technologies.
A unique technology for a controlled release product from ANDA SR, a
division of ANDRx Corporation.
A sterile, semipermeable bilaminate wound dressing as well as an
ultra-thin, highly flexible, film based wound dressing, both for the Hickam
product line, licensed from Polymedica Industries, Inc.
A topical anesthetic, which is currently in clinicals, licensed from Smith
& Nephew Ltd. of Great Britain.
An exclusive license with Phytogen International LLC of Canada to introduce
generic Taxol (R) into the United States.
An exciting alliance with VivoRx, Inc., the California based biotechnology
company working on a breakthrough treatment for Type 1 Diabetes.
Mylan has also entered into agreements with Eli Lilly and Company for
generic versions of CeclorRegistration Mark, DarvonRegistration Mark and
DarvonRegistration Mark Compound-65, as well as other products.
Through acquisitions and alliances, Mylan is expanding its product mix and
extending its reach in marketing, sales, packaging and distribution. We are
exploiting synergies to lower cost, improve efficiency, maximize quality and
diversify products.
We are confident in Mylan's growth strategy of enhanced R & D, product
diversification and strategic acquisitions and alliances. We have a successful
past, a firm hold on the present and a strong foothold in the future.
Is Mylan diversified? Definitely!
Financial Highlights
MYLAN LABORATORIES INC.
- - ----------------------------------------------
Net Earnings (in millions)
------ ------ ------ ------ ------
70.6 73.1 120.9 102.3 63.1
Shareholders' Equity (in millions)
FY 93 94 95 96 97
----- ----- ----- ----- -----
296.0 380.0 482.7 616.4 659.7
Net Sales (in millions)
FY 93 94 95 96 97
----- ----- ----- ----- -----
212.0 251.8 396.1 392.9 440.2
Notice of Annual Meeting
- - -----------------------------------
The annual meeting of shareholders of the Company will be held on Thursday, July
24, 1997 at 10:00 AM at the Lakeview Resort &Conference Center, Morgantown, West
Virginia. A formal notice together with a proxy statement and form of proxy will
be mailed to shareholders entitled to vote in advance of the meeting.
Shareholder Information A copy of the Mylan Laboratories Inc. Annual Report to
the Securities and Exchange Commission on Form 10-K is available to shareholders
on request. For a copy of Form 10-K, please write to: Mylan Laboratories Inc.
1030 Century Building 130 Seventh Street Pittsburgh, Pennsylvania 15222
Shareholder Contact Patricia Sunseri (412) 232-0100 Internet
http://www.mylan.com
INDEPENDENT AUDITORS' REPORT
MYLAN LABORATORIES INC.
Board of Directors and Shareholders
Mylan Laboratories Inc.
Pittsburgh, Pennsylvania
We have audited the accompanying consolidated balance sheets of Mylan
Laboratories Inc. and subsidiaries as of March 31, 1997 and 1996, and the
related consolidated statements of earnings, shareholders' equity, and cash
flows for each of the three years in the period ended March 31, 1997, appearing
on pages 26 through 41. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Mylan Laboratories Inc. and
subsidiaries as of March 31, 1997 and 1996, and the results of their operations
and their cash flows for each of the three years in the period ended March 31,
1997, in conformity with generally accepted accounting principles. Pittsburgh,
Pennsylvania April 30, 1997
Information card Insert
I would like more information on:
______Dividend Reinvestment and Stock Purchase Program
______Shareholder Rights Plan
Name
Address
City State Zip Code
Phone
MYLAN Laboratories Inc.
Building for the Future
Mylan Laboratories Inc.
1030 Century Building
130 Seventh Street
Pittsburgh, Pennsylvania 15222
1997 Annual Report to Shareholde