Mylan N.V. (MYL) Q2 2020 Earnings Call Transcript

Mylan N.V. (NASDAQ: MYL) Q2 2020 earnings call dated Aug. 06, 2020

Corporate Participants:

Melissa Trombetta — Head of Global Investor Relations

Heather Bresch — Chief Executive Officer and Director

Rajiv Malik — President and Director

Anthony Mauro — Chief Commercial Officer

Ken Parks — Chief Financial Officer

Robert J. Coury — Executive Chairman and Director

Analysts:

Chris Schott — JPMorgan — Analyst

Randall Stanicky — RBC Capital Markets — Analyst

Umer Raffat — Evercore — Analyst

Elliot Wilbur — Raymond James — Analyst

Gregg Gilbert — Truist Securities — Analyst

Jason Gerberry — Bank of America — Analyst

David Risinger — Morgan Stanley — Analyst

Ronny Gal — Bernstein — Analyst

Gary Nachman — BMO Capital Markets — Analyst

Kevin Caliendo — UBS — Analyst

Nathan Rich — Goldman Sachs — Analyst

Presentation:

Operator

Good morning. My name is Brandy, and I’ll be your conference operator today. At this time, I would like to welcome everyone to the Mylan’s Second Quarter 2020 Earnings Conference Call and Webcast. [Operator Instructions] Thank you.

I would now like to turn the call over to Melissa Trombetta, Head of Global Investor Relations. Please go ahead.

Melissa Trombetta — Head of Global Investor Relations

Thank you, Brandy. Good morning, everyone. Welcome to Mylan’s second quarter 2020 earnings conference call. Joining me today are Mylan’s Executive Chairman, Robert Coury; Chief Executive Officer, Heather Bresch; President, Rajiv Malik; Chief Commercial Officer, Tony Mauro; and Chief Financial Officer, Ken Parks.

During today’s call, we will be making forward-looking statements on a number of matters, including financial guidance for 2020 and the proposed transaction pursuant to which Mylan will combine with Pfizer, Inc.’s Upjohn business in a Reverse Morris Trust transaction to create a new company that will be named Viatris.

These forward-looking statements are subject to risks and uncertainties that could cause future results or events to differ materially from today’s projections. Please refer to the earnings release we furnished to the SEC on Form 8-K earlier today, as well as our supplemental earnings slides, all of which are posted on our website at investor.mylan.com for a fuller explanation of those risks and uncertainties and the limits applicable to forward-looking statements.

Mylan routinely posts information that may be important to investors on this website, and we use this website address as a means of disclosing material information to the public in a broad, non-exclusionary manner for purposes of SEC’s Regulation Fair Disclosure. In addition, we will be referring to certain actual and projected financial metrics of Mylan on an adjusted basis, which are non-GAAP financial measures. We will refer to these measures as adjusted and present them in order to supplement your understanding and assessment of our financial performance.

Non-GAAP measures should not be considered a substitute for or superior to financial measures calculated in accordance with GAAP. The most directly comparable GAAP measures as well as reconciliations of the non-GAAP measures to those GAAP measures are available in our second quarter 2020 earnings release and supplemental earnings slides as well as in the Investors section of our website. Please note that this call relates to Mylan’s second quarter 2020 earnings and we will be limited in what we can speak during Q&A regarding Viatris, and we will not be speaking about the Upjohn business.

Let me also remind you that the information discussed during the call, except for the participants’ questions, is the property of Mylan and cannot be recorded or rebroadcast without Mylan’s expressed written permission. An archived copy of today’s call will be available on our website and will remain available for a limited time.

With that, I’d like to turn the call over to Heather.

Heather Bresch — Chief Executive Officer and Director

Thank you, Melissa. Good morning and thank you for joining us on what could be Mylan’s last earnings call. While we know all good things must come to an end, the team is ready to turn the page and is looking forward to Viatris becoming a reality and a global leader in the health care sector. I’m going to start today by giving a brief overview of our performance to-date, COVID’s impact and updated guidance for the year. Rajiv and Tony will elaborate on the performance of our regions, key products as well as an integration planning update, and Ken will review the detailed financial results for Q2 and the first half of the year. Lastly, Robert will provide perspective on the progress we continue to make towards becoming Viatris.

Before we dive into results, I first would like to reiterate that Mylan remains committed to the health and safety of our employees, our patients and the global healthcare community at large. The COVID pandemic has forced all of us to acknowledge and grapple with difficult uncertainties, and our heartfelt sympathy goes out to all of those who have been directly impacted. At the same time, I continue to be inspired by our employees around the world, especially our essential workers who have allowed us to continue to deliver important medicines during these unprecedented times. Thanks to their efforts, our plants remain operational and our supply chain and customer service levels continue unabated. Additionally, we continue to leverage our resources and expertise in the fight against COVID-19 through potential prevention and treatment efforts.

Now, turning to our results. We believe our results from the first half of the year better represent the underlying performance of the business due to the fact that any COVID-19 related gains in Q1 were more than offset by the negative impact of the pandemic in Q2. During the first six months of the year, we delivered a solid performance that demonstrates the strong fundamentals of our business and our continued ability to actively and successfully manage through this time.

The favorable results for the first six months are in line with our expectations. We achieved $5.35 billion of total revenues, up 3% year-over-year on a constant currency basis and adjusted EBITDA of $1.63 billion, up 5% year-over-year. While we experienced a decrease in adjusted SG&A in the first six months of the year, partly due to COVID, our proactive business transformation efforts targeted at aligning investments with top-line returns represent a more important example of our ability to focus on not only maintaining our margins for 2020, but also continuing to drive sustainable long-term benefit for the business. On a year-to-date basis, our adjusted free cash flow is up 17% over the same period in 2019, and we expect sequential growth in the second part of the year, which speaks to the durable cash flow portfolio of our business.

Looking forward to the remainder of the year, we’re tightening our full-year guidance within the ranges of our original expectations for both adjusted EBITDA and total revenues. On adjusted EBITDA, we expect to be able to substantially maintain our original target for the full year while tightening the range to between $3.3 billion and $3.7 billion. And on revenue, we’re tightening our full-year range to between $11.5 billion and $12 billion.

Our outlook for the rest of the year includes some important data points. First, it’s clear that overall COVID-19 recovery efforts are occurring slower than anticipated and may continue at least through the end of this year. As a result, we expect that our total revenues, which absorbed a 2% net decline in the first half of the year, to have an overall similar negative impact of 2% in the second half of the year. And on EBITDA, while we are seeing savings in SG&A due to COVID, these are being partially offset by the previously announced delay in the implementation of the restructuring portion of our business transformation initiative, also due to COVID. With all of that said, it’s important to note that we do not anticipate significant change to overall demand in our underlying base business.

Before I turn the call over, and on behalf of themanagement team, I would like to take a minute and thank Ken for his service and partnership over the years. We wish him all the best in his next venture. I look forward to partnering closely with Paul Campbell, our Controller and Chief Accounting Officer, during this interim transition period.

With that, I’ll now turn the call over to Rajiv for further commentary.

Rajiv Malik — President and Director

Thank you, Heather, and good morning, everyone. I would like to extend a warm welcome to my fellow Mylan colleagues and future Viatris colleagues joining today’s call. As we continue to confront the COVID-19 pandemic, the health and safety of our workforce remains our number one priority. I would like to echo Heather’s remark and thank our front-line workers who are keeping our operations running. It is because of their efforts that we have been able to maintain supply continuity and strong customer service levels across the globe without any meaningful disruption during the first half of 2020. I would also like to thank our sales force who have provided continued support to meet the needs of healthcare professionals and the patients they serve.

We recognize the important role we play in fighting this pandemic and continue to seek opportunities to effectively deploy our resources and expertise. For example, during this quarter, we signed a global collaboration agreement with Gilead Sciences to commercialize remdesivir in 127 low and middle income countries. In less than 90 days of signing the agreement, we ramped up our science, production, received regulatory approval in India and started commercially supplying the product in that market, reflecting the strength of our scientific capabilities and global operations. We look forward to further expanding access to this critical medicine in other countries.

As I walk through our first half financial results, I’ll explain the impact of COVID-19 to our performance. We delivered $5.4 billion in total revenues in the first half of the year, which is a 3% constant currency growth versus the prior year. The durability and diversity of our portfolio and the strength of our underlying business allowed us to absorb a 2% negative revenue impact as a result of COVID-19.

For North America, our net sales were $2 billion in the first six months, which are up 3% on a constant currency basis compared to the same period last year. We continue to benefit from implementing of our business transformation program. In the US, this has helped us reshape our largely commodity oral solid portfolio to a more diversified portfolio of conflationary [Phonetic] biosimilar and brand products. Our two main product drivers this half are Wixela, a generic to ADVAIR, and Yupelri, our nebulize-once-daily LAMA. Regarding Wixela, we are excited that we have been able to grow our market share from 20% in the first half of 2019 to 33% in the first half of this year. Also Yupelri achieved a 92% share of nebulized LAMA market and a 16% share of long-acting nebulized market. Overall, COVID-19 had a very minimal net impact in the region.

In Europe, our net sales totaled $2 billion in the first half of the year. These results are up 7% on a constant currency basis compared to the same period last year due to the higher volumes of existing products and new launches. Similar to USA, we are realizing the benefits of applying a highly disciplined financial lens to our European business as a result of business transformation. We have not only right-sized our portfolio by eliminating certain negative contribution margin products, but also have focused our investments in selling and marketing. As a result of this, we have seen strong growth of our key brands such as Dymista, Brufen, EpiPen and Creon and continued sales growth of Hulio, our biosimilar to Humira. These growth drivers helped us absorb the negative 3% revenue impact to the European segment due to the COVID-19 as a result of lower demand of certain brand and OTC products.

In the rest of the world, our net sales totaled $1.3 billion for the first half of the year, which is a 3% decline on a constant currency basis compared to the same period last year. While our ARV business performed strongly, COVID-19 had a 3% negative revenue impact primarily due to slower than anticipated recovery in Brazil, Russia, China and some other emerging markets.

I am excited now to share some key pipeline updates. Our scientists, regulatory experts, the IP legal team working closely with our development partners, have made tremendous strides in advancing key programs. The scientific platform we have built is a diversified across dosage form delivery systems and therapeutic areas with a focus on moving up the science spectrum.

Our global biosimilar franchise is one of our key long-term growth opportunities. Tony will walk you through the commercial progress we have made over the last year in several of our key markets, while I will provide updates on our development programs. Before Tony and I provide our respective updates, I would like to acknowledge our strong partnership with Biocon Biologics to execute on our trial programs.

Beginning with Semglee, our insulin glargine, we received our FDA approval in June, and we are excited to launch it in the coming weeks and expand access for the millions of Americans living with diabetes, while also reducing the cost burden to the US healthcare system. Additionally, we have submitted to agency all necessity documentation to seek biosimilar interchangeability. Given the complexity in bringing this type of product to the market, we believe Semglee will have a long revenue stream with a slower ramp up.

Continuing with our commitment to developing more affordable insulin, we have progressed our Insulin Aspart program. Our BLA and marketing authorization for a biosimilar to NovoLog is now under review with FDA and the European health authorities. Our BLA for our biosimilar to Avastin is under review with FDA and is expected to be approved by the end of this year. Our marketing authorization remains under review with the European health authorities.

Our Phase 3 clinical trial for our biosimilar to EYLEA remain on track to support a BLA filing for the fourth quarter of 2021. Our biosimilar to Enbrel, Nepexto received European marketing authorization in June and is on track to launch in Germany this month, followed by additional European markets by the end of the year. Our biosimilar to Humira, Hulio received FDA approval last month. As per our patent license agreement with AbbVie, we’ll be able to launch Hulio in the US in July 2023.

Also, we confirmed in June that we are advancing our development program with Revance for a biosimilar to BOTOX. At this stage, we are in the process of scaling up, validating the characterization and performing pre-clinical work with a goal to start our clinical program, which has been pre-agreed with FDA. Our goal is to bring this product to the market by 2025.

I will now provide you an update on some other pipeline products beginning with dimethyl fumarate. In parallel with our significant US District Court in invalidating [Phonetic] Biogen’s Tecfidera 514 patent, we have been working closely with FDA to expedite and finalize the review of our ANDA. We believe agency is prioritizing their review to complete it before the target action date.

We continue to invest in our industry-leading infectious disease portfolio. Very recently, European Commission and DCGI in India granted marketing authorization for pretomanid, a novel compound developed by a non-profit TB Alliance for use in a new regimen for treating highly drug-resistant form of pulmonary tuberculosis. Mylan is proud to be a TB Alliance’s global commercialization partner for pretomanid as a part of this treatment.

Moving onto our respiratory portfolio, we remain on track to receive tentative approval from FDA for our first-to-file Generic Symbicort by end of this year. Our 30-month stay is March of ’21. Our glatiramer acetate once-a-month program is progressing well. We announced in June an additional investment in Mapi Pharma to support continued advancement on the Phase 3 clinical study to further strengthen our multiple sclerosis offering in US.

Since the approval of glatiramer acetate injection, we have been steadily strengthening our development pipeline of complex injectables. We currently have and does under active review at FDA for generics of Victoza, Invega Trinza, Invega Sustenna, Venofer, Injectafer and glucagon. We have a rich pipeline of long-acting and complex injectable products in development using multiple technologies such as depot gels, microspheres, liposomes and peptides.

In regards to our continued expansion into high-value product opportunities, we remain on track to initiate our Phase 2 clinical study by end of this year for our MR-107A01 [Phonetic] program, which is being developed as a non-narcotic oral analgesic for management of moderate-to-severe pain. We also remain on track to progress the development of MR-106A01 [Phonetic], which is a novel synthetic antimicrobial peptide that is being developed as a topical product for burn wound treatment. Our pipeline also includes a focus on key future growth markets like China. We are filing Dymista for approval this quarter and will initiate clinical programs for YUPELRI and PERFOROMIST later this year as we continue to explore more opportunities to expand our presence in China.

Lastly, while Robert will cover certain aspects of the Upjohn transaction, I would like to take a moment to share how excited I am about the progress we have made on integration planning. Over the last year, Mylan and Upjohn teams have been working together as we prepare for the deal close with a focus on a quality separation and integration. Everyone’s hard work is building a strong foundation for Viatris, and setting us up for success on day one and beyond. And we look forward to sharing the Viatris story more with analysts and investors over the coming months.

And with that, I will now turn the call over to Tony. Thanks.

Anthony Mauro — Chief Commercial Officer

Thank you, Rajiv, and good morning, everyone. First, I want to echo Heather and Rajiv’s sentiments that we are pleased with the overall performance of our business and are proud of the portfolio we have built that can withstand the short-term impacts we are experiencing in the current environment.

Before I get into our commercial performance for the quarter, I want to address our continued efforts to keep our sales force and customers safe and healthy in the midst of the COVID-19 pandemic. Since the beginning of this pandemic, we have equipped our sales team with virtual tools to allow them to provide the same level of service their customers are used to receiving. With these tools, we’ve been able to provide continued support and service to health care providers, including hosting more than 2,500 webinars and conducting more than 0.5 million video calls.

At the same time, our product service levels to customers across the markets remain strong and at the highest rates we’ve had in many years. We are incredibly grateful to our sales force and commercial teams for their strong performance, flexibility and continued dedication throughout the quarter and the COVID-19 pandemic, which have allowed us to continue setting new standards in health care and advance our mission.

We’ve begun to return some of our field force to face-to-face interactions while adhering to health officials’ guidelines. And we will continue to monitor market conditions in all regions in which we operate to ensure that we are bringing our sales force back to the field in a way that ensures their and our customers’ safety while meeting the needs of health care providers and patients around the world.

Turning to our commercial results for the quarter. Our ability to perform in what has continued to be a dynamic and challenging environment underscores the strength and resilience of our commercial platform. We are very proud of our first-half performance where I’ve seen positive growth in many of our key markets, including in North America, specifically with growth in two of our key respiratory products, Wixela, which had grown 62%, and YUPELRI, which has grown more than 600% in the first half of 2020 versus the prior year. We also had a positive growth in Europe, which helped offset rest-of-world business decline, largely due to more significant impact of COVID-19 in expansion and emerging markets.

Moving on to a vital part of our long-term strategy, I would now like to take a deep dive into our biosimilars business. We continue to be pleased with the initial growth and pockets of success in our global biosimilars franchise as we are approaching the $1 billion milestone and expected cumulative sales with 90% of this value coming over the last two years. We have built one of the largest and most diverse franchises in the industry, including products across multiple therapeutic categories.

As we have stated in the past, the biosimilars franchise is one with long-term growth opportunities, with more than 100 launches spanning across more than 60 unique markets across the world. As a result, I remain confident in our ability to continue to develop and globally commercialize our biosimilars franchise with the potential of becoming a cornerstone of our business over the long-term. We are seeing many positive signs in the markets, which I will expand upon.

Turning to highlights of our biosimilars business by region. We continue to expand our biosimilars franchise in the US, and we’re pleased to receive FDA approval this quarter for Semglee, a biosimilar to Lantus, and for Hulio, a biosimilar to Humira. As we have commented before, this is a long-term franchise strategy that will reap the rewards in the years to come. And although we know we have much work to do in these initial phases, we continue to be encouraged by the performance of products like Ogivri, a biosimilar to Herceptin, where our market share has more than tripled in the past three months to nearly 6%, as well as a renewed growth in Fulphila, a biosimilar to Neulasta, increasing our share to nearly 16% of the prefilled-syringe market in the US. In addition, Ogivri in Canada has captured 23% of the entire market and is the number one ranked biosimilar to trastuzumab in both value and volume.

In Europe, we continue to be encouraged by the opportunities that lie ahead in many of the markets. Our Ogivri has double-digit share in nine markets in the region and is advancing share in the critical markets like France and Sweden. Hulio has also found success in markets like Germany, France and Finland. In Germany, we are seeing more than 13% share of the entire market and share of the biosimilars market exceeding 20% for the first time. We have double-digit biosimilar share on Hulio in 10 markets in Europe. We see significant opportunities ahead and are projecting nearly 100% growth in the early stages of the biosimilars business in Europe in 2020 over the prior year.

For the Rest of World segment, we have seen more than 40% growth year-over-year and now offer biosimilar products in more than 40 countries. We have been very pleased with our performance in markets like Tunisia, Morocco and the Philippines, where we have retained a market leadership position for Hertraz, our biosimilar to Herceptin, as well as in Australia, where we are now the number one biosimilar to trastuzumab, representing 75% of the biosimilars market.

In closing, as we have mentioned, our biosimilars strategy has been and continues to be about developing and executing on this long-term global franchise, focusing on market relevance and global leadership as it relates to this extremely important area for patient access and payer savings around the world. We are beginning to see signs of our hard work and efforts materialize in the market and are pleased with the early trajectory of our biosimilars business. We remain confident that our experience, scientific capabilities and commercial platform position us to expand this business and be a leader in the biosimilar space.

With that, let me turn it over to Ken to discuss our financial results in more detail.

Ken Parks — Chief Financial Officer

Thanks, Tony, and good morning, everyone. As you’ve seen in our press release this morning and have heard throughout this call, our first-half 2020 results showcase Mylan’s ability to perform in a challenging environment and underscore the resiliency as well as the durability of the platform we’ve built over the last decade.

Embedded in our strong first half results was a more pronounced impact from COVID in the second quarter. Q2 revenues of $2.7 billion were 4% lower than the prior year and 2% lower on a constant currency basis. Consolidated revenues were negatively impacted approximately 5% as a result of the COVID pandemic. A portion of this was the reversal of the accelerated buying we saw at the end of the first quarter as customers and patients primarily in Europe began to react to the early signs of the ramp in the pandemic. As disclosed in our first quarter conference call, we estimated this accelerated buying to be approximately $50 million or 2% of first quarter sales.

As the pandemic continued to take hold globally, we saw second quarter revenues negatively impacted by lower retail pharmacy demand, lower patient hospital visits and a materially lower number of in-person meetings with prescribers and payers mostly in Europe and the Rest of World segments. That said, first half revenues were flat year-over-year and up approximately 3%, excluding the impact of currency exchange.

Pricing declines remained relatively consistent at down low to mid-single digits overall, and volumes of existing products grew 5%, including the negative impact of COVID. New product launch revenues contributed $163 million in the first half of the year, and we expect an additional $450 million of new product launches in the second half.

Moving to gross margins. In the second quarter, our adjusted gross margins remained strong at 54.3%. That’s up 50 basis points from the same period last year, reflecting higher gross profit from sales of existing products in North America, primarily driven by sales of Wixela as well as the contribution of new products. This impact was partially offset by lower gross margins on sales of existing products in the Rest of World segment, including China and other expansion markets.

From a segment profitability standpoint, North America increased 3% in the quarter, excluding cost associated with the Morgantown restructuring and remediation program. This increase reflects contributions from new product sales, higher volumes of sales from existing products, partially offset by impacts from lower pricing on existing products driven by changes in the competitive environment, including levothyroxine.

Europe segment profitability also expanded, up 28% in the quarter, partially driven by favorable product mix. Conversely, Rest of World segment profitability declined, down 22% mainly due to the negative impact of COVID-19 and lower pricing on existing products, primarily due to government pricing reductions in Japan. In addition, all segments benefited from lower selling and marketing costs, and both Europe and Rest of World segments’ profitability results were negatively impacted by foreign currency translation.

Second quarter adjusted R&D was down 4% compared to 2019 due to reprioritization of global programs as well as certain timing impacts in response to the pandemic. During the quarter, adjusted SG&A spending declined 11% year-over-year, reflecting lower than anticipated selling and marketing investments, lower travel and entertainment activities and lower legal expenses, primarily in response to the COVID pandemic, along with the ongoing active management of the business.

For Q2, we reported adjusted net earnings of $574 million and adjusted EBITDA of $879 million, an increase of 8% and 4% respectively. For the first six months of the year, adjusted net earnings and adjusted EBITDA grew a healthy 9% and 5% on revenues that grew 3% on a constant currency basis.

Turning to cash flow. For the first three months ended June 30th, 2020, adjusted free cash flow was $522 million, bringing first half adjusted free cash flow to $879 million, that’s up 17% and up $129 million over the same period in 2019. While we don’t presently see any negative liquidity trends related to the pandemic, we do continue to monitor those trends very closely. We expect adjusted free cash flow to increase in the second half of the year, in line with seasonally increasing profitability, coupled with ongoing realization of working capital velocity initiatives.

During the second quarter, we repaid EUR500 million of scheduled debt maturities and reduced our debt-to-adjusted EBITDA leverage ratio to 3.4 times, in line with our expectations and well below our covenant requirements. We continue to anticipate full year adjusted free cash flow generation consistent with 2019 levels, which will support achievement of our $1 billion debt repayment target for the full year. We expect our cash flow from operations along with our existing borrowing facilities, which provide liquidity up to $2.6 billion, will be more than sufficient to meet all possible liquidity needs in the near-term. As always, we remain fully committed to our investment-grade credit ratings and to further reducing leverage.

Finally, as you’ve heard earlier, we’re narrowing our full year 2020 guidance ranges. Revenues are now expected to be in the range of $11.5 billion to $12 billion, absorbing the ongoing headwinds from the COVID pandemic. And while we’re seeing savings in SG&A due to COVID, these savings are being partially offset by the delayed implementation of the restructuring portion of our business transformation plans, also due to COVID. As a result, we now expect full year adjusted EBITDA in the range of $3.3 billion to $3.7 billion, also tightening that previous range and raising the low end of the range. At the midpoint of this range, $3.5 billion, this implies slightly less than $1.9 billion of adjusted EBITDA for the second half of the year and, as usual, we expect the fourth quarter to contribute relatively more adjusted EBITDA than the third quarter.

We also continue to expect a full year adjusted effective tax rate between 18% and 19% and a full year average diluted share count between 516 million and 520 million shares, consistent with our earlier guidance.

Before I wrap up my comments, I must take a minute to express my sincere thanks for the honor to have had the opportunity to serve this company, its stakeholders and, most importantly, this team for the last four years. The unwavering dedication by all 35,000 employees to the company’s mission is truly unparalleled. While I’m extremely excited for my next opportunity, I will always be watching my Mylan and Viatris colleagues, cheering them on as they continue to reshape the global health care landscape, ensuring access to affordable medications for the world’s population.

With that, let me now turn the call over to Robert.

Robert J. Coury — Executive Chairman and Director

Thanks, Ken, and good morning. On behalf of the Board of Directors, we sincerely appreciate all your contributions and accomplishments for Mylan and do wish you all the best in the next phase of your career.

I would like to take a moment to offer my sincere gratitude to all the Mylan employees worldwide and their families for the remarkable resilience and determination as we continue to deliver on our mission of providing patients around the globe with continued access to needed medicines even though the global COVID-19 pandemic.

I also would like to welcome all of our future Upjohn colleagues listening to this call. I am proud of our management team’s leadership in always putting the safety of our colleagues around the world first. While focus on safety remains paramount, as you heard from Heather and the management team, what is also truly impressive is Mylan’s employees continues and how they just continue to deliver on the solid performance, and especially in the second quarter.

While the management team provided an update on the year-to-date, I would now like to turn my attention to where we stand with respect to our pending transaction with Pfizer’s Upjohn, and how I continue to see 2021 shaping up directionally, with official guidance to follow directly from Viatris’ management team following the close.

As many of you know, we held an extraordinary general meeting on June 30th for shareholders to vote on the Viatris transaction. We are extremely pleased with the overwhelming support we received, which was demonstrated by the fact that 99.6% of the shares voting were in favor of the transaction. With the approval of our shareholders, the only remaining external requirements to close the transaction are a few regulatory approvals, and we are still on track to close in the fourth quarter.

While we have continued to work towards closing, the Viatris management team recently began the process of meeting virtually with many of our top Mylan shareholders and covering sell-side analysts, as we previously promised. During these meetings, Michael, Rajiv, and Sanjeev not only demonstrated their cohesive alignment, passion and excitement to lead this great new organization, but they also conveyed their confidence in being able to deliver significant long-term value to shareholders.

We expect those conversations to continue as we expand our shareholder engagement activities, including with the Pfizer shareholders who will become Viatris shareholders, through the closing and beyond. I will soon be personally reaching out to the Pfizer shareholders to set up their own meet-and-greets with the future Viatris management team. With that said, I would like to sincerely thank all those who have participated in these meet-and-greet sessions to-date.

In addition to all the milestones achieved to-date as we look forward to closing, I would now like to lay out a number of key next steps of interest to the future Viatris investment community. Step one, first and foremost, is to close this transaction, which we are on track to do in the fourth quarter. Without speaking for Pfizer, I can certainly tell you that both organizations remain highly focused on bringing this transaction to a successful close.

Step two. It is for the Viatris Board of Directors to then immediately initiate our new business model focused on total shareholder return and a more shareholder-friendly capital allocation program beginning with the initiation of a meaningful and attractive dividend after the first full quarter following closing, while also rapidly beginning to pay down debt to meet our stated target of 2.5 times leverage ratio.

Step three. At the end of February or early March, when Viatris reports its fourth quarter earnings, you can expect the new Viatris management team to provide the opening guidance for Viatris’ first full quarter 2021, which I often refer to as the trough year, during a live Investor Day. It is expected that the guidance delivered will take all relevant country-specific headwinds into consideration. For example, and among others, China’s VBP, Japan Lyrica LOE, and any other potential headwinds that will be known at the time, including any effects as a result of the continuing COVID-19 pandemic.

Step four. Viatris’ management must demonstrate its ability to deliver consistent and transparent results in a predictable and measurable way at the same time while integrating both businesses and achieving our targets of at least $1 billion in synergies over the first four years of operations.

Step five. We will launch Viatris’ new global health care gateway, which will be the house of discipline responsible for all future capital investments to fuel Viatris’ future growth.

With that said, I will answer — I will try to answer any remaining questions of interest regarding Viatris during the Q&A session. But before I conclude, I would like to state that given Viatris’ vast global profile with now 70% of its business outside the United States and diverse global reach, as well as our commitment to total shareholder return and corporate social responsibility, we believe that Viatris will be perfectly situated to attract even a broader shareholder base around the world. Therefore, we intend to explore ways to unlock value beyond our current US-centric shareholder base by exploring additional potential listings on other international exchange trading platforms.

In closing, before turning the call over to the operator, I would like to conclude by underscoring how very excited we are to launch Viatris in its mission to empower people around the world to live healthier at every stage of life. As we anticipate this to be our last Mylan’s quarterly earnings call, and although Heather will remain with us until we close, I would also like to thank Heather in this forum. Heather, on behalf of our Board of Directors and all of our Mylan employees, for your exemplary true leadership and lasting contributions that you have made to Mylan, our industry and patients around the world, thank you.

And now, as we start the Q&A session, I would ask that you please limit yourself to one question in the spirit of time and respect for others on the call. I’ll now turn the call over to the operator.

Questions and Answers:

 

Operator

Thank you. [Operator Instructions] We will take our first question from the line of Chris Schott of JPMorgan.

Chris Schott — JPMorgan — Analyst

Great. Thanks so much for all the details today. I just want — just elaborating a little bit more on Viatris and capital deployment priorities beyond the dividend. I guess, can you give a little more color of how you think about deploying the cash flow of the company as we think about business developments? Kind of where should we think about those efforts being most focused? And as part of that, is BD and kind of partnerships that you’ve talked about the past, is that what we should think about as the primary drivers of growth of the business over time or do you think that the organic portfolio itself can generate growth once we get past that 2021 trough year? Thank you so much.

Robert J. Coury — Executive Chairman and Director

Thanks, Chris. I would say 100% both. I would say all the above. And especially, as what we’ve been producing out of our own organic R&D, you can definitely expect more of that. But equally, because of what we created, business development and attracting partners around the globe, all of that will reside in the global healthcare gateway.

I simply see the future of Viatris being represented on really two platforms. One, it will be the two 60-plus-year-old companies coming together and really executing on what that base business is. And then off to the right, I see the global healthcare gateway, the real engine, we call it the House of Discipline, because that’s where all capital investments will reside. And that’s where you will see all excess cash flow and capital being placed to compete, whether it’s the organic R&D, whether it’s business development, whether it’s collaborations or joint ventures, all of it will be competing in the global healthcare gateway.

I envision that the Street after — envision future conference calls with the new management team, I expect to report on the base platform, and I don’t really expect that to be very much. We will report the results, because we have very experienced management team that will execute, deliver on the numbers, but I do expect a great majority of time being spent with Michael, Rajiv, especially on the global healthcare gateway, for each new opportunity that we put inside there. And I really believe that’s how you’re going to be able to follow the company on a going-forward basis.

Next question?

Operator

Thank you. Your next question comes from Randall Stanicky of RBC Capital Markets.

Randall Stanicky — RBC Capital Markets — Analyst

Great. Thanks. Robert, the press is reporting that President Trump is going to announce an Executive Order today called Buy American to attract the US government to buy drugs from US factories. This has been in the press quite a bit recently. In fact, an opportunity for Mylan or Viatris, and how do you think about how that could impact the generic landscape? Thanks.

Robert J. Coury — Executive Chairman and Director

Heather?

Heather Bresch — Chief Executive Officer and Director

Yeah. Thanks, Randall. I guess, first, I’d say that it needs to be sustainable and not political. I think that certainly we would participate in something that is over the longer-term and sustainable for the US. I think, probably as you’re aware, the Buy American Act actually passed in 1933. So there has been a longstanding Act in place that over the years has applied to the pharmaceutical industry in such ways that truly has disincentivized manufacturing here in the United States. And I think there would need to be very significant structural changes into the market dynamics and pricing in the US healthcare system to incentivize API and/or drug manufacturing in this country.

Robert J. Coury — Executive Chairman and Director

But I’m going to only add — I really believe, Randall, because of what we created, I believe every single country is going to really focus inwardly on where they want their priorities. But as we stated in the past, there will be no one country or no one company that could ever really manufacture and develop all that they need to serve 100% of the population. What I envision Viatris being able to do is to serve as the — really the next natural secondary source that all countries are going to need. I do see a potential upside opportunity, just like we were approached on remdesivir, hydrochloroquine or any other needs that I see arise in the world. And it’s not just limited in the United States.

I think, Rajiv, you can comment about how the India government and other governments are approaching. So, I do think that having a global supply chain, especially in the healthcare industry, especially in pharmaceuticals, just given the global supplies we need, it’s not going to become unwounded, so to speak. There is going to be a big need for, I think, our global platform, and I do see some potential opportunity.

Randall Stanicky — RBC Capital Markets — Analyst

Great. Thank you.

Robert J. Coury — Executive Chairman and Director

Hey, Brandy, next question.

Operator

Thank you. Your next question comes from the line of Umer Raffat of Evercore.

Umer Raffat — Evercore — Analyst

Hi. Thanks so much for taking my question. I wanted to focus on Viatris, Robert, but the two parts, if I may. First, as we think about many of the licensing deals that are happening in China recently, I’ve tried to aggregate them and look through them. And the one thing that stands out is, Upjohn has not been landing any. And all of them are going to Chinese players. So, how should we be thinking about Viatris as a partner-of-choice in China going forward and do you think that could partially be because the deals are not done yet and maybe there is a bit of a standstill?

And secondly, Robert, I know you guys do extensive legal diligence, and one of the key sticking points in pro forma numbers is Lyrica Japan, and there is some element of mixed feedback coming up on the recent Japanese Patent Office ruling on whether the upheld claims do support exclusivity through 2022 or the claims that were not upheld, do they ensure that generics get in? I’d be very curious on your take on these. Thank you very much.

Robert J. Coury — Executive Chairman and Director

Thank you, Umer. First, on China, 100% I’m going to put on the deal hasn’t closed, 100%. But that doesn’t mean, just because you haven’t heard any noise, it doesn’t mean that we’re not at work, that I can tell you. And the reason why I’m so emphatic about the 100% because the last thing we need right now is for the China Upjohn — Pfizer Upjohn operation to take its eye off the ball. Because remember, they needed to finish separating Upjohn from Pfizer, and that work is coming along very, very well. They’re not actually quite complete, they’re almost done.

And then I think, the other thing that we’ve been focusing on in China is really what is the new business model going forward. I think the base that we’re going to be starting from — in China is quite enviable. And quite frankly, let me be clear, I think that we’re going to be able to compete, and I’m watching as well, I think it was a very observant comment that you have, because I’m watching as well, as some of the deals that are getting done with the Chinese nationalists. I think that Viatris is not going to be considered as a traditional multinational.

I think Viatris in China is being viewed as a Chinese nationalist entrepreneur as well. So I do think we represent a hybrid. I think we bring the multinational mindset. But I think we bring the entrepreneurial, very quick and nimble, boutique, Chinese entrepreneurial style, and I do think it’s going to have its advantages. So I’m quite excited about the opportunity in China. And I’ll be teaming up, as you know, with Michael doing actually a lot of the work in China and looking forward to reporting on more opportunities that we see as we go forward.

In terms of Lyrica, I think another very insightful question, and the way you parsed it I think is fair. So I’m going to try to be fair in response by telling you that I do think that it’s a complicated legal issue. I think it’s a complicated breakdown of the construction claims around the patent, and then I think it’s also complicated when you look at the momentum about where Japan has in the MWLH and kind of sort of what they’ve been thinking about. So, I’d rather not, like any other legal case, not try to handicap it, but what I do think to be fair to the Street, at least from my perspective, what I would say and what I would be strongly recommending the management to do, I think it would be wholly irresponsible in my opinion — in just my opinion, to include the Japan Lyrica numbers in, what I would call, the trough year in 2021. I think if we are successful with the Japan Lyrica and Japan, which I’m hopeful and confident, certainly I think we’ve come a long way. We could have had an outright loss. No, we didn’t get an outright win. I think that that the courts split the decision, and I think it’s only going to be a matter of time before we know. But the numbers that you should expect in 2021, what I think investors need to appreciate, unlike the United States, is we will not lose 100% of Lyrica in Japan. What will be included in the numbers is a certain percentage that we know we will hold onto just because of the way that marketplace works. So it’s actually a fairly nice base.

I wouldn’t take all the numbers on, but what we would do, assuming even if we have generic Lyrica as a win, I believe the responsible thing to do would be to separate what is all included in our base and anything excess that we get from generic Lyrica in Japan or that we get from Lyrica in Japan before it goes generics, I would ask investors to more look at it almost like how they used to model the 180-day exclusivity here in the United States. It’s going to be much more of a cash bolus. But I don’t think as a going concern that that should be included in our base business and also as part of our base — as we project pro forma on a going-forward basis. That’s what you can expect. I hope that was helpful, Umer.

Operator

Your next question comes from line of Elliot Wilbur of Raymond James.

Elliot Wilbur — Raymond James — Analyst

Thanks. Good morning, and thank you, Ken Parks. It seems like we just got to know one another, but very much appreciate your time and insight provided over the years. Question for, I guess, yourself, Robert, in today’s release, you talked about proceeding with the Upjohn transaction, absent the Meridian platform, which I always thought was a business that Mylan historically had coveted. It seems under-developed, under-capitalized with a lot of long-term potential kind of trapped in the Pfizer platform. So I’m sort of curious if you could provide some perspective on sort of why that is not going to be part of the combined entity going forward? Thanks.

Robert J. Coury — Executive Chairman and Director

I want to be sensitive. I don’t know, Elliot, how you might be parsing the two. Quite frankly, for quite some time, we’ve had — we’ve actually been in some pretty intense discussions with Pfizer. We actually believe that we reached the exact right place in terms of where we need to be. Meridian doesn’t have many other products, Meridian does serve some government contracts. I think where Meridian is at, staying with Pfizer is absolutely the proper place.

I do think that we will — I fully expect it, and you should all know that in the numbers that I was — the soft numbers I’ve been throwing out there directionally in 2021, I’ve always felt confident to include our business of EpiPen with Pfizer in those numbers. I fully expect that we are going to continue to work with Pfizer on hopefully improved formulations, which I believe is well underway. And I think that we’ll let the future talk about how and where we see our new formulations being developed, and let me leave it at that. But I’m very, very pleased, Elliot, that we will continue this relationship with Pfizer and continue to work with them on our new formulations for this very important product in order to serve the patient needs.

And Heather, do you have anything you want to add on to that?

Heather Bresch — Chief Executive Officer and Director

I think you said is that the partnership — to your point, it is an important product and partnership and will continue to be that, I think, for years to come. And I think Pfizer and us will both collectively bring our strength and expertise to the table around the product.

Ken Parks — Chief Financial Officer

And thanks for the nice comments, Elliot. I’m sure that our paths we will cross again.

Operator

Your next question comes the line of Gregg Gilbert of Trust Securities — or Truist Securities.

Gregg Gilbert — Truist Securities — Analyst

Thank you. I have 100 questions about Viatris, Rob. So I’ll keep this to Mylan. Rajiv, on Tecfidera, it sounds like you expect approval soon or ahead of your date. Can you confirm that you plan to launch without an appeal or launch immediately? And do you think this is going to be a meaningful opportunity despite the number of filers? And then, on glargine, just wanted to see if you could confirm whether you have confirmation from the FDA what is required for interchangeability? Thanks a lot.

Robert J. Coury — Executive Chairman and Director

Why don’t you handle this?

Rajiv Malik — President and Director

Thanks, Gregg. Second one is — I’ll start with the second one. Yes, we have a complete clarity and understanding with FDA that what they need from the interchangeability point of view, and that has been submitted.

Robert J. Coury — Executive Chairman and Director

Gregg, as you know, that would be considered a launch at risk. It’s always been our stated policy. Until we have all the data at the time and we’re ready to launch, that’s when the company will evaluate whether or not it will launch at risk. What I can point to, the estoppel hearing, I think that is up in New Jersey, I believe in the next week or so, I think it’s going to be a pretty pivotal decision. I think if they uphold the estoppel and take the decision that was handed down in West Virginia, look, I think there — I think it could be an opportunity and a pretty meaningful opportunity, or there could be plenty of generic players out there. I think we should first focus on what happens in New Jersey. And I think that should probably give you the answer that you will be looking for, Gregg. Thank you.

Operator

Your next question comes from line of Jason Gerberry of Bank of America.

Jason Gerberry — Bank of America — Analyst

Hey. Good morning, and thanks for taking the question. Just a follow-up on Gregg’s question for Rajiv. So, I’m curious, in the past, we heard you guys were kind of close to near some products like Axton or Restasis, and then a lot of time transpired. And so, curious confidence level, what are the key impediments to getting the Tecfidera approval from the respective read on the regulatory situation?

Anthony Mauro — Chief Commercial Officer

There is no comparison with what we had, between Copaxone and Tecfidera, there was a lot of complexity and and three repetitions [Phonetic] like there on Restasis as well as Copaxone. Jason, this one is — we had checked all the boxes and there was the facility issue, which has been cleared. And now it’s administrative work, which FDA is going through. And we’ve been pretty confident that we’ll be able to get it over the goal line very soon.

Robert J. Coury — Executive Chairman and Director

Next question, please.

Operator

Your next question comes from David Risinger of Morgan Stanley.

David Risinger — Morgan Stanley — Analyst

Yes. Thanks very much. So, I’m just hoping, Robert, that you could provide a little bit more color on how we should be thinking about the trough in 2021. So, is there any way to provide a framework for the stand-up company costs, as you stand up Upjohn within Mylan/Viatris, and also the Pfizer transition service agreement costs? Basically I’m just trying to understand how significant those are and how they will be reflected in the Viatris EBITDA in 2021? Thanks very much.

Robert J. Coury — Executive Chairman and Director

Thanks, David. Let me try to at least walk you through — let me start with the trough, and then let me walk you through what I envision the cadence to be over the next three to four years, and what I expect post the fourth year, years five, six and beyond. I think the numbers that we’re going give you are going to fully incorporate all the stand-up costs. Therefore, we’re going to take the numbers down low enough that will fully absorb all these costs that TSAs, MSAs, and any other stand-up costs that — in order to start Viatris off on the right foot.

When you think about those TSAs and MSAs, you should also note that we have all the incentive in the world to get off of those TSAs and MSAs as we continue to build out our own infrastructure. That is what we’re banking on, as you know, part of our upside as we see the cadence rolling forward.

You know, David, there has been a lot of questions. When we first announced the deal, people were concerned about whether or not this was a declining business. Today, we don’t hear anybody discussing about this as a declining business. Everybody wants to talk about how are we going to return back to growth. No one is talking about it’s a declining business because we quickly jumped in front as quickly as we could. We are not relying on 2020, we never did, because we believe that 2021 is going to represent the best, first starting point for Viatris as a brand-new company. We have all the opportunity in the world to reset these numbers, especially given our current market multiple to make sure that this new Viatris management team is set up for success quarter after quarter after quarter, not just to meet, but hopefully exceed.

And so, you should expect that that’s the way we’re thinking. And so, to get to 2021’s trough, we’ll take a quick look at a couple of years out and ensure that the numbers we start within 2021 take in all the headwinds that everybody has been discussing out of the baseline business, and even to Umer’s question around Japan’s Lyrica, you’re going to see we’re going to set that aside as well. Because anything that is not sustainable that doesn’t really have a strong tail to it, we don’t believe belongs in the base business. Those are temporary, and what we want to demonstrate is the durability and the sustainability of this new base platform when we pull this together.

And in that base platform, I think it will be a pleasantful surprise, we don’t see any one meaningful catalyst that will cause the type of volatility that I think that the Mylan investors have experienced, especially in North America. So we really have not just diversified, but de-risked our entire business model by really taking out all that noise and really addressing all the headwinds that we can envision right upfront. The cadence over the first three, four years what I think you should expect is, this is going to be an EBITDA, free cash flow and earnings growth story.

You know, David, earnings growth can come in many ways. In the first three to four years, what we were trying to convey, and I think what management was conveying in its meet-and-greets with you and some of our shareholders was, you should — you can get earnings growth by adding to your top-line. Or you can get earnings growth like we potentially see our ability to drive earnings growth, EBITDA growth, free cash flow growth by launching the pipeline that we already have and, most importantly, garnering the synergies over the first three to four years.

When you look at what we have to work with, I think that the Viatris shareholders should expect an extraordinarily stable top-line revenue business in the early years with growth in EBITDA, free cash flow and earnings. So you’re going to see an earnings growth story right away because the dividend or the synergies will allow us to do that. In the meantime, you’re going to also want to pay attention to what we load up in the global healthcare gateway and how we’re using — how we’re placing our capital investments in years one, two, three and four. And as the synergies roll off at the end of year four, you’re going to start to see where top-line growth that we’re going to be able to maintain earnings growth and EBITDA growth, free cash flow growth by what we add to that top-line. And that’s as simple as I can lay it out for you, and that’s exactly what management is signing up for. It’s exactly the road map that we put in all of our presentations.

And I do look forward for the new management team to really give you even more color once they have it — once they have a chance to close, they have a chance to get together and really dive deep into the new combined organization to deliver on exactly what I laid out for you, David.

David Risinger — Morgan Stanley — Analyst

Thank you.

Robert J. Coury — Executive Chairman and Director

Brandy, our next caller?

Operator

Your next question comes from the line of Ronny Gal of Bernstein.

Ronny Gal — Bernstein — Analyst

Good morning. And I want to thank Ken and Heather as well if this is indeed the last meeting for many years of support. Thank you both. The question I have is about the company as a standalone. Revenue for the first half of the year was $5.350 billion. So, if you just translate to the second half, it looks like you need an extra $800 million to meet the bottom of your guidance on the revenue side. Can you just kind of give us the elements of the crossover that how we get from here to there. And then I can throw one on, you’ve highlighted the biosimilar business, would you care to share with us kind of revenue this quarter from your global biosimilar business?

Ken Parks — Chief Financial Officer

So let me take the first part of that, Ronny, and thank you for the comments. I have enjoyed working with you as well. As we look at the first half to the second half, I think just take really two things into account. We are typically seasonally weighted to the second half of the year. EpiPen is a larger quarter in the third quarter, as well as many of our products in Europe, including Influvac, our bigger products in the third and then especially the fourth quarter. So you’ve got the typical seasonal step-up to get to that growth from the $5.3 billion to the higher number that you calculate to get to the midpoint. But then, I’ll also point out one of the comments in my scripted comments, which is, in the first half of the year, our new product launch revenues were about $163 million, and we’re expecting another $425 million to $430 million of that. So that’s also back-end weighted. Those are the largest variables in the move.

Ronny Gal — Bernstein — Analyst

Is it additional launches or just the same launches that already are in the market just continuing to expand?

Ken Parks — Chief Financial Officer

So part of it is continued expansion of those launches we did in the first half of the year, but we certainly have additional new launches in the second half of the year.

Anthony Mauro — Chief Commercial Officer

And Ronny, regarding the biosimilars, instead of quarter, I will tell you that this year, our approximate revenues from the biosimilars will be close to $0.5 billion.

Robert J. Coury — Executive Chairman and Director

Thank you. Next question, please.

Operator

Your next question comes the line of Gary Nachman of BMO Capital Markets.

Gary Nachman — BMO Capital Markets — Analyst

Hi. Good morning. Just to follow on that maybe broadly on the biosimilars, just provide some color on what you’ve been doing to continue to gain share in all those categories? How you’ve been evolving in those markets in terms of promotional efforts? And how has pricing been relative to your expectations? And then, maybe just for Robert, how much do you think Viatris is going to help with the effort in biosimilar since it’s so important to the growth story going forward? Thank you.

Anthony Mauro — Chief Commercial Officer

Thanks, Gary. I appreciate your acknowledgment on some of the biosimilars share gains we’ve seen. And I try to articulate, we view this not just as a US business but a long-term global franchise. And one where you’re seeing pockets of success in many markets, and each of those markets is unique and different. And one of the great things about our infrastructure, it allows you to compete both at a tender level, at a pharmacy level and at a physician level. And I think that your second question around Viatris and some of the infrastructure and additive natures of the businesses and the sales forces will have in the combined company, I do think it will help us. It will help us outside the US in many markets, expand upon this very, very important opportunity we have in biosimilars.

Robert J. Coury — Executive Chairman and Director

Rajiv, why don’t you add because, I mean, specifically to his question, we have already identified where those opportunities may be.

Rajiv Malik — President and Director

I would say, like there are three basic things you need for building a franchise, a portfolio which we have, a supply which we are continuing to work on and we have, and cost of goods. And then, Tony talked about the commercial channels, whether it’s the retail, hospital tenders, tenders or other avenues which are available. Now, Upjohn brings a lot of digital and other marketing assets, which will further strengthen our skill sets on that and, more importantly, the medical skill sets which we come along with that. And let’s not — we have tried to focus it always on the US, and I’m glad that we have started giving you a little bit color about what we are doing in the other markets. For example, the Rest of the World markets are growth markets, which will fall. We don’t have much competition over there, and we have a lot of demand for these products. For example, Ogivri, the market size in this market is about $1 billion, and so is Avastin. So this is how we — for us, it’s not a one product play, not a one market play, it’s a portfolio play for across multiple markets, and we believe we are very well positioned to leverage this platform for years to come.

Robert J. Coury — Executive Chairman and Director

And I think the only thing I would add, Gary, is — I mean, again, I think where we got off, I think, let’s just say it on the wrong foot. We have always planned — we’ve said this many, many times publicly. When we did our deal with Biocon and created something, I think, very, very special in which we were way behind when we first started in 2009, but not only did we catch up, we went way ahead. What we’ve planned for always was for more of a global launch in our biologics. Because back then, we did not see the pathway to a US biologics market. That happened rather quickly, and it happened over the last few years.

One of the things that we had and why we’re doing so well in other parts, ex-US, is because we’ve already had the proper infrastructure already in place, we were ready for those markets. To be very honest with you, I don’t believe we had the right commercial infrastructure as well as I believe we could have had in the United States. I’ve seen that when a company like Coherus can come in, nobody knows the name Coherus. Everybody knows the name of Amgen’s sales reps. Coherus is Amgen’s sales reps. So when you understand the market in the United States and understand the importance of that well-established relationship between those reps, the hospitals and — within that particular franchise in that food chain, I would say absolutely that was part. Because it’s not just the cost, it is about some of those relationships, and that’s an opportunity for us to improve going forward here in the United States. But I’m hoping now that when people look at our franchise, our global franchise, they’ll start to appreciate how well we’re doing ex-US as well.

Next question?

Operator

Your next question comes from the line of Kevin Caliendo of UBS.

Kevin Caliendo — UBS — Analyst

Hi. Thanks for taking my call. So, I had a question around the cash flows. In Morgantown, the remediation cost has been a drag on free cash flow versus the sort of the delta between GAAP and adjusted. So my question is, how much is still budgeted there, and do you think that you’ll start to see GAAP operating cash flow move closer to the adjusted cash flow going forward? And I guess, my endpoint here is, would the dividend policy for Viatris be based on adjusted free cash flows or GAAP free cash flows when you think about a percentage payout?

Ken Parks — Chief Financial Officer

Yeah. So, Kevin, this is Ken. Let me start out by answering part of it. And I’ll get Rajiv to weigh in as well on Morgantown. You’re absolutely correct that right now as we’re talking about adjusted free cash flows, we are adding back the cost as we’re going through the Morgantown remediation and restructuring program. But also, I’ll point out that there is also this bucket now called manufacturing variances. And the reason I call that out is because as we’ve continued to operate the factory in the COVID situation, that has generated some inefficiencies. So, as you asked the question about how far this goes out, we certainly, and consistent with what we told you in the first quarter, expect that while the warning letter has been lifted, we have some commitments to the FDA that will take remediation and restructuring to continue through periods of the balance of this year. As the COVID pandemic continues, we will also have manufacturing variances that will continue to occur as long as we’re operating in this environment.

With that, I’ll turn it over to Rajiv.

Rajiv Malik — President and Director

Yeah. Now, let me give you a little clarity over here, Kevin, also. Warning letter is lifted, but this bucket included some remediation cost, which was some commitments we still have for FDA to deliver. And then, it had restructuring costs related to Morgantown, including some manufacturing variances stopped. But as you said, we very recently on the last call, we said we have crossed everything related to restructuring because of the COVID. So that’s why we are carrying the cost for the time being over here. Now, as we go into the Viatris, I’m pretty sure we have already stated that we will be moving to the GAAP cash flow and not the adjusted cash flow. Sorry, you can confirm that.

Ken Parks — Chief Financial Officer

Yeah, that’s exactly right, Kevin. With everything that we’ve talked about and we’ve been very clear as we put together, the Viatris modeling, we made a point of saying that when Mylan forms together with Upjohn becomes Viatris, all the cash flow numbers will be GAAP cash flow numbers going forward at that point.

Kevin Caliendo — UBS — Analyst

Great. And so, the dividend policy will be based on that. Thank you.

Ken Parks — Chief Financial Officer

Yes.

Operator

Your final question comes from line of Nathan Rich of Goldman Sachs.

Nathan Rich — Goldman Sachs — Analyst

Great. Thanks for the question. Just wanted to follow-up on the top-line outlook for Viatris. Can you kind of help tie together kind of all the details that you gave on the pipeline and how we should be thinking about the cadence or contribution from new products in the first few years for Viatris? And then, just maybe a small follow-up to that. Can you talk about your commercialization plans for Semglee in the US now that you have approval? Thank you.

Robert J. Coury — Executive Chairman and Director

Let me just knock out the first one. We have not given official guidance, and I would — I’ve thrown out the soft numbers that I think that ought to be the proper starting point to consider. And we have not talked about how much of the pipeline rolls in. I do believe that when we come together on the Investor Day, we fully intend on breaking down. And Rajiv, I know when we started in — when we announced the transaction, we had approximately $3 billion to launch, and that was July of 2019. We’ve already began to launch a large portion of that portfolio. We also are continuing to load up into our research and development. So we’ll need to update those numbers and be more sustained when we get to you on Investor Day.

Ken Parks — Chief Financial Officer

And maybe to your second question, Nathan, around Semglee launch preparedness, certainly we are extremely excited to get ready to launch, you heard Rajiv mention, in the coming weeks. It’s a competitive market, one that I think we’ve stated it’s going to be a slow ramp, but we do see this is a very good long-term opportunity. The diabetes population, the demographics are growing, and this is one where you think of payer healthcare professional and pharmacy, that triangulation will be critical in long-term success. So we’re ready. But like I said, I think it will be a slow ramp in the initial phases of the launch.

Robert J. Coury — Executive Chairman and Director

Heather, you want to close?

Heather Bresch — Chief Executive Officer and Director

Thank you. And thank you, everyone, and I appreciate the comments. I think this wraps up my 60th quarterly conference call. So, thank you, and thank you, Robert, for your mention on behalf of the Board and the team. It’s been my pleasure. Thank you.

Operator

[Operator Closing Remarks]