Viatris Inc. (VTRS) Q4 2012 Earnings Report, Transcript and Summary

Kris King Heather Bresch - Chief Executive Officer, Director and Member of Science & Technology Committee Rajiv Malik - President and Director John D. Sheehan - Chief Financial Officer and Executive Vice President

Jami Rubin - Goldman Sachs Group Inc., Research Division Douglas D. Tsao - Barclays Capital, Research Division David Risinger - Morgan Stanley, Research Division Marc Goodman - UBS Investment Bank, Research Division Christopher T. Schott - JP Morgan Chase & Co, Research Division Gregory B. Gilbert - BofA Merrill Lynch, Research Division Jason M. Gerberry - Leerink Swann LLC, Research Division Ronny Gal Elliot Wilbur - Needham & Company, LLC, Research Division Gary Nachman - Susquehanna Financial Group, LLLP, Research Division Randall Stanicky - Canaccord Genuity, Research Division Michael Kallai Tong - Wells Fargo Securities, LLC, Research Division Ken Cacciatore - Cowen and Company, LLC, Research Division Timothy Chiang - CRT Capital Group LLC, Research Division Louise Alesandra Chen - Guggenheim Securities, LLC, Research Division David G. Buck - The Buckingham Research Group Incorporated

Welcome to Mylan's Fourth Quarter and Year-End 2012 Earnings Conference Call and Webcast. Hosting the call today from Mylan is Ms. Kris King, Vice President, Global Investor Relations. Today's call is being recorded and will be available for replay beginning February 28 at 8 a.m., Eastern Time. The dial-in number is (800) 585-8367 or (404) 537-3406 for international callers, with pin number 94045069. For those listening to the rebroadcast, the statements on today's call are as of February 27, 2013. [Operator Instructions] It is now my pleasure to turn the floor over to Kris King. You may begin.

Thank you, Paula. Good afternoon, everyone. Welcome to Mylan's Fourth Quarter and Year-End 2012 Earnings Call. Joining me for today's call are Mylan's Chief Executive Officer, Heather Bresch; President, Rajiv Malik; and Chief Financial Officer, John Sheehan. During today's call, including the Q&A, we will be making numerous forward-looking statements pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements often may be identified by the use of words such as may, will, could, should, would, project, believe, anticipate, expect, plan, estimate, guidance, trends, forecasts, potential, intend, continue, pursue and variations of these words or comparable words. Our forward-looking statements made today include, among others, statements relating to anticipated business levels; trends in some European countries; planned launches of and anticipated exclusivity periods for new products; our ability to achieve forecasted full year results while absorbing the impact of negative pricing pressures; expectations for capital expenditures; expectations for R&D, SG&A and other spending; our guidance range, future earnings, planned activities, anticipated growth and other expectations and targets for future periods. Because these statements are forward looking, they inherently involve risks and uncertainties, and, accordingly, our actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, the factors set forth under forward-looking statements in our recent press releases related to earnings and Agila, both dated February 27, 2013, as well as the risk factors set forth in our report on Form 10-Q for the period ended December 30, 2012, and in our other SEC filings. You can access our Form 10-Q and other SEC filings, including our press releases which we filed on Form 8-K, through the SEC website at www.sec.gov, and we strongly encourage you to do so. In addition, during this call, we will be referring to certain actual and projected financial metrics of Mylan on an adjusted basis, which are non-GAAP financial measures. It should be noted that non-GAAP measures, such as adjusted revenue, adjusted gross margin and adjusted diluted EPS, should be used only as a supplement to, not as a substitute for, or as a superior measure to measures of financial performance prepared in accordance with Generally Accepted Accounting Principles or GAAP. Please refer to today's earnings press release, which is available on our website, as well as on the SEC site, as it contains detailed reconciliations of the non-GAAP financial measures we use to our fourth quarter results prepared in accordance with GAAP. Before I turn the call over to Heather, let me also remind you that the material in the call, with the exception of the participant questions, is the property of Mylan and cannot be recorded or rebroadcast without Mylan's expressed written permission. With that, I'll now turn the call over to Heather.

Thank you, Kris, and good afternoon, everyone, and thanks for joining us. First, sorry for any inconvenience on our documents crossing. We just had a technical difficulty on our end. So hopefully, as you now have seen in our -- today's press releases, we have a lot of great news to cover with you. I'll begin by providing an overview of the Agila transaction. I'll then touch on highlights of our outstanding performance during '12 and provide guidance for 2013. I'll turn the call over to Rajiv, who will provide additional insight about Agila and what the transaction means for us. John will take you through our 2012 financial results, provide additional color on 2013 and discuss the transaction terms and financial impact of the Agila transaction. I'll make a few concluding comments, and then we'll open the line to take your questions. We're very excited to announce this afternoon that we've signed a definitive agreement to acquire Agila Specialties, the injectables business of Strides headquartered in Bangalore, India. We believe Agila is a truly unique asset in the very attractive injectable space and have agreed on a base purchase price of $1.6 billion in cash for this business. The addition of Agila to our existing injectables platform will create a new global leader in this fast-growing market segment and accelerate our progress toward becoming a top 3 player in injectables. This transaction will double our injectables business in the first full year following closing, significantly accelerate our path to bring our Institutional business into $1 billion franchise and is expected to fuel additional significant long-term growth well beyond $1 billion. We expect the acquisition to be accretive to our adjusted diluted earnings per share following closing, which is expected to occur in the fourth quarter of this year, subject…

Thank you, Heather. We are very excited about the acquisition of Agila and about the powerful injectables leader we are creating by combining Agila with our existing capabilities in this segment. As Heather already touched upon, Agila is an excellent strategic fit for Mylan, delivering on several of our strategic growth drivers and further positioning us to achieve our long-term target. As you will see over the next few slides, Agila will significantly expand Mylan's injectable portfolio pipeline, contracting capacity and technical capabilities. Through its broad geographic reach, Agila will accelerate achievement of Mylan's strategic goal to have critical mass in emerging markets. The transaction also strengthens our institutional channel presence worldwide and gives us a robust platform to leverage future opportunities from biogenerics and other high-value complex injectable products. Turning now to Slide 11. Let me give you a brief overview of this unique asset. As you may know, Agila is a global pure-play injectable platform operating in the liquid injectables, lyophilized injectables, pre-filled syringes, Minibag and ophthalmic. The business has a very broad product portfolio and pipeline, driven by a strong R&D, a proven regulatory track record and a differentiated high-quality manufacturing network. Currently, approximately 40% of Agila's revenues come from U.S., and we believe we can leverage our considerable presence in this market to maximize this business. More than 1/4 of company's revenue come from Brazil, a market that Mylan has been looking at for some time. The balance of Agila's revenue comes from Europe, Australia and other established and developing markets. I would like to note that Agila has a number of key partnerships, including with Pfizer, Sagent, Aspen and Apotex. However, the majority of Agila's business is unpartnered, especially in the key depths [ph] of the world market, such as Brazil. We look forward to…

Thank you, Rajiv, and good afternoon, everyone. Today, I'm going to be referring to financial metrics that have been prepared on an adjusted basis. These are non-GAAP financial measures, and I refer you back to Kris' comment at the beginning of today's call regarding our use of adjusted measures. At Mylan, we have made strong commitments to manage our business in a balanced way to meet and often exceed our financial objectives, and we did just that in 2012. Slide 17 shows you a comparison between our achieved results for 2012 and the original guidance that we announced on last year's fourth quarter call. From a top line perspective, our total revenues were near the low end of our guidance range of $6.8 billion to $7.2 billion. Absent the unfavorable effect of changes in foreign exchange rates, however, we would have reported sales closer to the midpoint of our range. Adjusted EBITDA was $1.9 billion compared to our original forecast of $1.75 billion to $1.95 billion, placing us near the top of our estimated range. And finally, our adjusted diluted EPS was $2.59, at the very top of our updated guidance. It should also be noted that the unfavorable shift in foreign exchange rates, which negatively impacted our sales, also had a net negative impact on our bottom line of approximately $0.05. As this slide also shows, our growth in earnings, both EBITDA and EPS, has exceeded our revenue growth, demonstrating the positive operating leverage of our business. The fourth quarter 2012 was a strong finish to what truly was Mylan's most successful year-to-date from a financial perspective. In addition to the results highlighted on this Slide 17, let me just call out each of our region's realized fourth quarter double-digit year-over-year constant currency revenue growth, including Europe, a positive…

Thank you, John. And just to close, Mylan's outstanding track record in the industry of leading by example. Over the past 5 years, we've built a global operating platform that we believe is unparalleled in terms of scale, diversity, flexibility and depth of expertise. Moreover, we have repeatedly demonstrated our ability to leverage this platform to develop and launch high-quality products, absorb headwinds, respond quickly to market opportunities around the world and meet or exceed our financial targets. With the addition of Agila, we continue to demonstrate our commitment to business diversification while growing our current platform at a double-digit rate and executing on our strategic growth drivers. We now look forward to applying our leadership in the injectables space just as we have done for oral solid dosage forms and transdermal products, by example. We're confident that with our diverse portfolio, our commitment to quality and our workforce, which is second to none, we will continue to deliver long-term growth and outstanding value to our shareholders. With that, I'd like to now turn the call over to the operator for questions.

[Operator Instructions] Our first question comes from the line of Jami Rubin of Goldman Sachs.

John, if you could just provide a little bit more financial color around the Agila business, how should we think about revenues, how should we think about EBITDA contribution. And Rajiv, you talked about the partnerships that are already in place. What is the proportion of revenues from Agila that are impacted by partnerships? And how do I think about that in terms of building my model? And then, John, if you could answer the question about your share buyback program. I know that you bought back $500 million in shares in 2012. Has this second buyback program that you announced last year, has that been used up yet? Have you actually bought back that $500 million or is that to be used sometime in 2013?

So I guess that was all 1 question, Jami. So I'll -- I think in my prepared remarks, I did indicate that the share buyback that we announced in November was completed. So that is done. With respect to the Agila business, that business has been growing at significant rates, and we expect it will continue to grow at significant rates. But I think the really important thing is not what it's been doing as a stand-alone part of Strides but what it's going to do combined with the Mylan platform. We have only just started to scratch the surface and the combined Mylan-Agila platform we see as accelerating our growth in the company overall but specifically in the injectables business. We'll get into more detail with respect to the financials of the business when we come to our Investor Day that's planned for August 1 of this year, Jami.

Can I just follow up, John?

Quickly.

Yes. Okay. I just -- I'm a little bit confused because during the quarter, you had $412 million diluted shares, which was no change from the third quarter despite the $500 million buyback. So I'm just curious...

We didn't announce the share repurchase program until mid-November, as you may recall. So obviously, on a weighted average basis, which is what GAAP requires, the share repurchase did not have any real impact in the fourth quarter.

So let me just -- first, maybe I'll tee up real quick, Jami. I think you asked about partnerships, I'll let Rajiv weigh in. I think what John's pointed out that, obviously, what the business has done and how they've done it on a stand-alone basis is certainly impressive from a growth trajectory perspective. But now, more importantly, it's strategically how we view this with -- for our current platform, as well as continuing with some of the partnerships, as well as now we think it provides us the avenue to even add additional strategic partnerships.

And as for this issue [ph], I think, currently, approximately 2/3 of business is partnered business and 1/3 is on stand-alone business. But going further, the ratio goes the other way around, like it will be -- in the next couple of years, it will be 2/3 on Mylan's business and 1/3 around partner business.

[Operator Instructions] Your next question comes from Douglas Tsao of Barclays.

Congratulations on the deal. I was just hoping you could perhaps provide some history in terms of how long you've been engaged in just looking at this asset. And, obviously, what other thing -- were you always focused on the injectables platform? Exclusively -- or because, obviously, you talked about making a strategic acquisition for some time. Have you always been focused on injectables? And was it, in particular, the Strides business?

Sure. So as -- I think as you just stated, we've been pretty vocal about the fact that -- especially in our Q3 call, stating that we've been very active. Our strong cash position and where we've accelerated our ability to pay down debt put us in a very attractive space to be looking at all kinds of assets. So while we have certainly been looking at things that would complement our current generics platform, obviously, injectables was something that, with our Bioniche acquisition, kind of got our foot in the door. And we have repeatedly said that critical mass around the injectables space was very important for us and we also saw as an important precursor for our global biologics platform. So we're looking and are still looking at lots of things to complement our current portfolio and companies in the Specialty division to other dosage forms and therapeutic categories. So that's how I would address your question. So we think, again, this is a great -- it's going to be a great asset and acquisition to really accelerate our growth initiatives.

Your next question comes from David Risinger of Morgan Stanley.

So just to follow up, I'll make a statement and then you can correct me if I'm wrong. But it seems like you're not providing the historical financials on the acquisition. If you can provide any color on the historical financials, that would be helpful. But then, separately, on the Specialty revenue growth for 2013, I think it's [indiscernible] but are you looking for 30% revenue growth for your Specialty segment in 2013?

So I think on the second one first, the chart does indicate that we expect the Specialty segment to grow 30% in 2013. That is correct, David. And I guess with respect to the financials, the Agila business has historically been a part of Strides, and there is some financial information out there with respect to the Agila business. But what's really important is what the business is going to be going forward. Because when you combine it with the global Mylan platform, that's where we see the real benefits and the growth accelerating from. And so -- and that's what we look forward to providing you with more details about in our Investor Day this coming August. And so I think that's probably the best way to focus on the business.

And I think just to add to that, I would say, similarly, as you look at -- when we did the Matrix acquisition, what we said back then is what we would be able to do when combined with that platform and what it would mean to Mylan. And I think you should think about this transaction very similarly since we see that kind of benefit coming across our entire global platform.

Your next question comes from Marc Goodman of UBS.

Yes. Can you give us some more color on your key businesses in Europe, France and Italy and the U.K.? I saw in the press release the growth rates. So can you just go into a little more detail in those markets? Like were you gaining market share? How did you grow so much volume versus price? Just give us a sense of were there are a lot of new product launches. Or what were the key there?

Sure. So as I've said in my remarks, we've seen generic utilization grow in every market that we serve in Europe. So I think, finally, governments have realized that just taking price cuts doesn't change behavior or give you sustainable health care containment -- cost containment. So I think what we're seeing is that more governments are putting incentives in place to increase generic utilization, to have a much more sustainable containment. And so we've seen certainly volume growth, market share growth in those key markets, you mentioned France, Italy, especially. And we absolutely see volume offsetting continued price erosion. I think that we'll continue and we certainly anticipate further price, but we absolutely see growth continuing. And like we said, the last 2 quarters boding very well for, hopefully, what the future holds for Europe.

Your next question comes from Chris Schott of JPMorgan. Christopher T. Schott - JP Morgan Chase & Co, Research Division: Just coming back to Agila, can you just talk about -- I understand you're not going to give us much on the financials historically, but when you talk about the benefit you could see from this combined business, when should we think of that really being visible in Mylan's P&L? Is it something that takes a year? Does it take 3 years? Does it take 5 years? [indiscernible] if you come back to the Matrix example, I think that did take some time to really start to show up and benefit Mylan's business. And the second question, if I could just maybe slip in, does your gross leverage calculation for year-end '13, does that include pro forma EBITDA from Agila? And if it does, can you at least give us that EBITDA number that was included in that calculation?

Okay. So I'll start with when we should see benefit: literally, within the first full year. I mean, as I said, it's going to double our current injectables business in the first full year after closing. So we see this as immediately being accretive. And as John noted that having significant growth rates exceeding ours, our CAGR growth rate. So I think we see immediate, accretive, and like I said, this is the first full year.

So with respect to the gross leverage ratio of 3.3x that I mentioned in my prepared remarks and was on the slide, that is pro forma, including the Agila transaction. The Agila transaction isn't expected to close until Q4. And therefore, when you consider that EBITDA that will be for 1 quarter or less in comparison to consolidated Mylan, it's not really adding a whole lot.

Your next question comes from Greg Gilbert of Bank of America.

And first, John, thanks for the color on the return profile of the acquisition going beyond just accretion. I appreciate that. I have a question for Rajiv on the Agila pipeline. Of those ANDAs that are pending from Agila, can you talk about roughly what split is already partnered versus unencumbered? And maybe another cut would be, how many of those molecules are sort of already genericized markets as opposed to ones where you might be approved upon generic market formation?

Yes. So as I said, that we have a pending -- and that's about 136 between Mylan and Agila. And if I just take Agila, 122, it's unencumbered. And that's for the next couple of years, if I just take '13 and '14 approvals and give you an idea about the ratio, about 30 ANDAs are unencumbered and about 19 are encumbered. So you take that ratio and you can use that ratio for the -- so out of 120, almost 75 ANDAs are unencumbered and about 45 ANDAs are encumbered.

And I think just, Greg, further to define the pipeline and paragraph 4 and stuff like that, as John said, we certainly -- come Investor Day, we'll be able to give a lot more color around the combination both from a financial, as well as the pipeline perspective and what we see, as we said, the acceleration of our own target around the injectables business and get some more transparency around that.

Yes. And just to add to that, a combined portfolio between Mylan and Agila will cover almost the 70% of a landscape, which is out there in the injectables space.

Your next question comes from Jason Gerberry of Leerink Swann.

Just to -- I guess the insulin analog deal, just curious, obviously, Pfizer kind of walked away from that asset. Just kind of curious what your thoughts are on development timeline associated with that program, specifically, Lanthis [ph], the most high value target there.

We did what Mylan exactly does. We did our own work. We did spend a lot of time with the Biocon team to understand the science and understand the depth of the science we still have already covered. And we believe very confident that these products can be further pursued and brought to the market. And based on that confidence, I think we had gone -- we cannot comment on why Pfizer walked away, but we made this call based on what we found in our due diligence process.

And maybe I will just add. If you think about our Advair opportunity, I think that if you think about what Pfizer is focused on and where their core strengths are, as we said, as they develop that device, and as I said, we've reaffirmed with the FDA our ability, our pathway to a substitutable generic Advair, it's where, as Rajiv said, where Mylan's core competencies kick in. And I would say you could think [ph] insulin around in that same way.

Your next question comes from Ronny Gal of Bernstein.

The first one is just a little bit far off from the cost issue. I'm getting my email flooded with email of people asking me. So what valuation basis you used to make this acquisition? So [indiscernible] certain numbers from you. You obviously had to do some sort of a financial analysis in your own mind based on some year, based on some projection to convince you that this is an asset you should buy. Can you just give us any idea about the framework and what kind of number did you get out of that? And second, regarding your R&D, I'm glad to see that you're raising it. The question is, are you raising it enough? If you're taking on an insulin project, you're developing a few biosimilars, you're clearly going to have some work to do with respiratory. Is this -- is $500 million going to be enough? Are you spending as much as you should to make the numbers next year? Or are you really funding all the projects you should? That is, is there more room to raise the R&D even further to accelerate some of those programs?

Do you want to start...

Yes, I'll start with your last question. Hopefully, what was able to come through when you look at our historical track record around R&D, and, obviously, our -- the growth in the -- what we have produced as a result over the last 5 years should hopefully show our ability to invest at the right levels and to the right products. And I think that as you look going out, obviously, as I'm sure you realize, the biologics and Advairs and so forth are multi-year projects. So I can assure you that we have -- as we look out to our $6 target in 2018, that certainly fully incorporates spending the right levels of R&D throughout those years to bring those products to the market.

So I think on your first question, Ronnie, first of all, Agila's business has been growing substantially and is projected to grow -- continue to grow significantly. And we did bottoms-up due diligence over a long period of time. And we looked at what we believe that asset can grow at. We also looked at what the asset can do in Mylan's hands. And I guess what I would say to you in the bottom line is that we paid what we believe is a very good price for and is comparable to other injectable transactions that have taken place.

Your next question comes from Elliot Wilbur of Needham & Company. Elliot Wilbur - Needham & Company, LLC, Research Division: Congratulations on the transaction as well. John, I guess -- I mean, there are numbers out there on the Agila business that have been published by Strides and granted they're not under U.S. GAAP, there maybe some things that you may not be able to recognize there. But based on the last results that were put out, that business was doing about $280 million in revenue, with $100 million in EBITDA on an annualized basis using 3Q numbers. And I think what is going to happen here is people are going to look at those numbers and say, "Wow, this transaction looks pretty expensive on a historical basis." But given what is going on in that business and what Strides has talked about historically, I mean, this is really a 2014 transaction. And I would assume that those numbers could potentially double by that period. So I just -- I think it's not really helping shareholders to not have some idea of what you guys were looking at in terms of the forward-looking numbers on the business. So maybe if you could just comment on the historically numbers at least and whether or not that's a reasonable base to start thinking about what could happen in 2014.

Look, Elliot, I acknowledge that there are -- that Strides, there is financial information. I indicated earlier in the call, there's financial information out there for Strides, and that Agila is the largest portion of Strides. And I think you're 100% right. It isn't what the business has done historically because it is growing at substantial rates, not just double digit but at very substantial rates and so is what the asset is going to do in 2014 that we were looking at. And we will lay out the financial information with respect to what this asset will do with -- when the Mylan -- as part of the Mylan global platform later this year in our Investor Day, which will still be well before the acquisition closes. And in response to a previous question, I did indicate that the acquisition price we paid is comparable with other injectable acquisitions.

And I think multiples as well.

And that's what I really meant by that, yes.

Your next question comes from the line of Gary Nachman of Susquehanna Financial Group.

How much overlap does Agila have with your portfolio? Any concerns from an FTC standpoint that some divestitures may be required? And what are the additional $250 million in payments tied to? If you can comment on that, that would be great.

Let me go ahead with the overlap first. It's very insignificant. We did have some divestitures, but they're very insignificant.

So with respect to the additional payments, it's subject to satisfaction of certain conditions by Strides before closing or shortly thereafter. However, to the extent that the $250 million or some part of it becomes payable, there would be additional EBITDA that would be associated with the -- with those additional payments that would come with the business. So it is -- the EBITDA and the additional payments would be tied to each other.

Your next question comes from the line of Randall Stanicky of Canaccord Genuity.

Just maybe a question. If you just confirm that the EBITDA margins are above your corp average? And Rajiv, I'd be interested to see, how much margin upside is there when that business moves from 2/3 partnered to 1/3 partnered?

Well, I mean, I'll start, I guess, just kind of at the more macro level. I think, obviously, when we look at vertical integration, again, just as you've seen, our margins constantly tick up year-after-year. I think you should expect, especially what we consider this to be, even a higher barrier to entry and the dynamics of the injectable market is in right now, but we certainly see those margins very attractively.

And, yes, I can confirm that the EBITDA margins of the Agila business are in excess of the average for Mylan.

Your next question comes from the line of Michael Tong of Wells Fargo.

John, I was wondering if you can clarify for me just 1 thing. When you talk about your gross leverage, it was 3.3x projected year-end 2013 based on pro forma EBITDA. And in response to Chris' question, you also said that the EBITDA contribution from Agila is relatively minor, but that's not pro forma. So can you clarify what EBITDA you're actually using to come up with the 3.3?

The EBITDA for Agila in relation to the $2 billion of EBITDA that Mylan has, the historical EBITDA of Agila is not that significant to be impacting the calculation.

Your next question comes from Ken Cacciatore of Cowen and Company.

Just a lot of numbers. I'm just trying to work through them. I just wanted to understand, for 2013, just looking at your guidance, is operating income expected to essentially be flat? And then I was just wondering, strategically, going forward, with this generic acquisition, are we -- should we be thinking now going forward a pivot towards brand? Is that where you want us to think about future acquisitions? Do you feel like you've done enough here in terms of doing a great job of consolidating in the generic industry?

So I'll start with your last question. I would say that there is still plenty of room in the generic space. Firstly, right now, the most important market in the United States. But I would say there's so many dosage forms and therapeutic categories that we don't have critical mass around. So I would assume that we're looking at anything that would continue to complement our current portfolio in that way. And, obviously, our Specialty division, as we've said, is something that we're continuing to invest in. So we're still going to be looking at acquisition opportunities across the whole spectrum of our business.

So I'll answer your question with respect to earnings growth by focusing you on EBITDA. We generated $1.892 billion of EBITDA in 2012, and our guidance range for 2013 is $1.9 billion to $2.1 billion. So there is definitely growth. And I really want to point out that, that is after growing our R&D by $80 million to $100 million year-over-year. So we are both growing this business and investing in the future through the higher R&D. And we really tried to bring that out in our prepared remarks.

Your next question comes from Tim Chiang of CRT Capital.

Heather, you gave some guidance figures for price erosion in the U.S. and EMEA. I'm particularly interested in the EMEA for 2013. Is there some sea change event that's going on in Europe at this point that gives you more comfort that price erosion is going to be in the single digits this year?

Yes. I think as I stated earlier, that what we see with the generic utilization increasing and not insignificantly in our markets, especially in France, that we see volumes helping to offset the pricing pressure. So, yes, we have single digit in there, but keep in mind that, that's with volume offsetting. So I think that we definitely have confidence and see this mix between volume and price with the utilization increases across Europe.

Your next question comes from Louise Chen of Guggenheim.

My question is on what your thoughts on the competitive dynamics and the generic injectable space with regards to pricing, the increased FDA scrutiny. And as some of these larger players come back to the market, what do you think your competitive advantages are relative to those other players?

I would say that we absolutely see that, that's part of the attractiveness in why the timing is so perfect, I think, for us to be able to establish a leadership position in this space at this time. I think as you see the discussions [ph] that have happened, as I said, over 45% of the drug shortages have been attributed to these quality and manufacturing issues, that there's just an opportunity for someone to step in with quality-reliable supply. And so I think as we establish ourselves, as we have in the solid oral dosage and many other market forms, as you're able to establish that reliability and supply is extremely important to customers. So while -- as we've said, there's certainly other large players in this arena that I'm sure will come and go and have their volatility, but that's why we see a huge opportunity for us to gain a leading position in this industry. And I would say that I absolutely believe that the GDUFA legislation that was passed last year will absolutely continue to bring much more scrutiny to these facilities that are supplying drugs [ph] into the U.S., and that will continue to [indiscernible] to our benefit.

Our last question comes from David Buck of Buckingham Research Group.

I'll try to be brief. First, for Heather or John, just on the revenue assumptions for this year, it looks like for generics to be up 3%, I think you're assuming down U.S. generic sales. And I just was curious whether you're assuming reported sales being up in Europe and reported sales being up in Asia Pacific with the current exchange rate on the yen having weakened. And then just a quick couple for Agila. Can you talk a little bit about, Rajiv, what level of scrutiny do you feel the Agila business has had in terms of FDA inspections? Is it similar frequency to what you expect to be seen from the U.S.-based companies? Or has it been less frequent? And then, John, I know you don't want to give numbers, but there's some guides out there. You said multiple is similar to previous transactions. Can you confirm it somewhere in the 13x to 15x EBITDA range? And that's it.

Yes. So I -- with respect to 2013 revenue growth, they -- I think I indicated in my prepared remarks that the North American business would -- the North American Generics business would grow in 2013, excluding the impact of Escitalopram, which, as you certainly know, was a very large launch in 2012. And, yes, I can confirm that the Asia Pacific and European businesses are growing in 2013.

And regarding the facilities, I think that's been one of the key area where we have spent a lot of time -- that's captured in my script. And these are some of the brand-new assets. All of these sites have gone through FDA -- 7 sites, out of -- 8 sites have gone through FDA approval. There have been -- some of these have been inspected multiple times. Quality, as with their very strong inspection track record, was one of the key area which impressed us. And more than that, every other day, because of the multinational partners, they have been instructed by various partners across the year. So, in fact, if I have to pick up the 1 differentiating area, this is their manufacturing asset diversified base and very strong capabilities are in this space.

And I guess just to answer your last question, David, with respect to the market comparables for other injectables acquisitions, I don't disagree about the 13x to 15x being the range -- a range of what those types of transactions have occurred at.

So thank you, everyone, and we'll look forward to talking to you soon.

Thank you.

Thank you. This does conclude today's teleconference. Please disconnect your lines at this time, and have a wonderful day.