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Q4 2018 Earnings Conference Call
Feb. 26, 2019 5:00 p.m. ET


Prepared Remarks:


Good afternoon. My name is Deidre, and I will be your conference operator today. At this time, I would like to welcome everyone to the Mylan fourth-quarter and full-year 2018 earnings conference call and webcast. [Operator instructions] I will now turn the call over to Melissa Trombetta, head of global investor relations.

Please go ahead.

Melissa Trombetta -- Head of Global Investor Relations

Thank you, Deidre. Good evening, everyone. Welcome to Mylan's fourth-quarter 2018 earnings conference call. Joining me for today's call are Mylan's 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 our financial guidance for 2019. These forward-looking statements are subject to risks and uncertainties that could cause further 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 further 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 the SEC's regulation fair disclosure, Reg FD.

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 fourth quarter earnings release and supplemental earnings slides, as well as on our website.

Let me also remind you that the information discussed during the call, except for the participant questions, is the property of Mylan and cannot be recorded or rebroadcast without Mylan's express 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

Thank you, Melissa. Good afternoon, everyone, and thank you for joining our call. First and foremost, I'd like to thank my colleagues around the globe. Mylan has made tremendous strides in 2018 in delivering on our mission to provide the world's seven billion people access to high-quality medicine, and all the credit goes to our hard-working and dedicated employees.

Together, we have launched biosimilars in key markets, progressed several scientific programs, overcome regulatory hurdles and continued to advocate for policies that break down barriers to access, just to name a few. We've also said many times before that Mylan's business model is built on diversification across our commercial, operational and scientific platforms, making us resilient but not immune to macro industry dynamics and changes within healthcare systems around the globe. Realizing this, we have focused on our investment and strategic execution, which have yielded a diverse and differentiated business platform. We believe with this diverse platform, we'll be able to continue to deliver superior returns over the long run.

Today, 64% of our total revenues come from outside the United States, and as far as our product mix, U.S. generics make up less than one third of our portfolio. With that said, even in light of the current industry environment and conditions, our results in 2018 were strong. Our 4% decline in total revenues and flat year over year adjusted EPS reflects solid execution for Europe and rest of world segment, helping to offset the volatility in our North America segment, where net sales were down 18% year over year, impacted largely by three factors: First, we experienced lower-than-expected uptake of our generic Copaxone even after reducing the price by more than 60%, which perfectly illustrates the current distorted financial incentives within the specialty pharmacy marketplace.

That said, we adapted and recalibrated and are now seeing improved pull-through of our glatiramer acetate. Second, approval of generic Advair did not occur in the time line we had anticipated, but the good news is we received it early in 2019. While we're also seeing misaligned financial incentives for complex products in the retail pharmacy space, we were able to acquire learnings from generic Copaxone and adopt a unique launch strategy with Wixela. I'm pleased to report that we've received a positive response thus far.

And lastly, we've rationalized the significant portion of our commodity generics business. After reflecting on the accomplishments of 2018, it's becoming more and more apparent that one of Mylan's greatest strength is the incredible agility it's created throughout the company. This clearly is one of the core strengths in executing against our strategy. Our strong execution and the results of our performance reflects our continued ability to adapt quickly and strategically to market conditions, while at the same time, we remain committed to being a leader for the generics industry and advocate for changes to the current structural issues in the U.S.

healthcare system that hinder access to generics. To that end, we are extremely encouraged by recent proposals by the administration and the CMS call letter that strive to ensure that generic and brand products are placed on proper preliminary tiers, incentivizing generic uptake, as well as creating a much-needed generic tier for specialty. We applaud these proposals and look forward to patients benefiting from the system the way that it was intended to encourage generics and biosimilars, one that allows innovation and competition to drive each other, which in turn creates further access to more affordable medicine. Looking ahead to 2019, we feel incredibly positive about our ability to deliver a strong financial performance.

Specifically, we expect to generate total revenues between 11 and a half billion and 12 and a half billion, which is mid-single-digit growth versus 2018. This guidance reflects top-line growth across all three of our geographic segments: North America, Europe and rest of world. And impressively, this growth includes more than $1 billion of new launches, nearly all of which have already been approved. Unlike 2018, this outlook reflects a return to new launches driven by complex and specialty products that we believe will more than offset price and volume erosion.

There's been a lot of discussion about whether or not the U.S. generics industry has stabilized. Value has certainly been extracted out of the U.S. marketplace and that value has affected companies differently depending on their portfolio.

From our perspective, the U.S. generics industry is made up of three important and distinct types of products: commodity, complex and specialty. This distinction is important because the level of investment, uptake and competitiveness vary significantly across these three groups and have shifted over time. As you can see in our earnings deck on Slide 10, Mylan's investments over the last decade are now being realized, and the evolution of our portfolio will deliver over the longer term.

We will continue to invest in specialty and complex products, and we see this trend continuing, which will require additional allocation of capital. As our U.S. portfolio has evolved and diversified, so too has our overall global portfolio. The product mix we have today reflected the fact that we don't believe in sacrificing investments for the long term and 2019 won't be any different.

We expect to deliver adjusted EPS in the range of 3 80 to 4 80, representing a year over year mid-single-digit decline at the midpoint, which reflects incremental R&D and sales and marketing investment to support current and future top-line growth. In addition, we're looking to generate adjusted free cash flows between 1.9 and 2.3 billion. Switching gears to beyond 2019. I'd like to take a minute to talk about the steps Mylan is taking to transition to a business model that we see predominantly being driven by organic growth.

Sustainability cannot be dependent on prior success alone but requires a company willing to reinvent themselves in order to further build upon that success while keeping pace with the ever-changing market dynamics. With that said, we are driving capital market discipline down into every segment of our business, distinguishing between value-creating and value-consuming assets. We formalized that work and have stood up a business transformation office that is putting a highly disciplined financial lens to unlock latent value from the assets we've integrated throughout the company. Through this rigorous process, we expect to deliver continued long-term growth and attractive shareholder return by maximizing new products, reallocating investments to drive share of economically profitable products, all while maintaining a competitive sourcing and manufacturing footprint.

We look forward to providing you with the full details of our business transformation road map at our investor day this fall. And with that, I'd like to turn the call over to Rajiv.

Rajiv Malik -- President

Thank you, Heather. To begin, I would like to provide an overview of our 2018 business results by region. In Europe, net sales totaled approximately $4.2 billion, representing mid-single-digit growth from prior year. The increase was a result of strong performance of our brands, including Creon, Dymista and Influvac, each with double-digit growth, new product sales and a favorable impact of foreign currency translation.

In the rest of the world segment, net sales totaled approximately $3 billion, an increase of 7% from the prior year, including headwinds in the foreign currency translation. This increase was primarily the result of new product sales across the region, strong performance of our ARV franchise areas, whereas Japan, Australia and China also showed strength on high volumes of existing products. Our business in North America had net sales of $4.1 billion, a decrease of 18% from the prior year. This was primarily impacted due to the lower-than-anticipated uptake of generic Copaxone and delayed approval of genetic Advair.

As part of our Morgantown remediation and restructuring activities and accelerated commoditization of oral solids, we discontinued almost 250 SKUs of highly commoditized oral solid products. North America benefited from some exciting launches of Fulphila, daptomycin and exclusive 180 days of Tadalafil and full-year impact of generic Copaxone. I will now address Morgantown plant. After the April 2018 inspection and receipt of a 483 form, the company took a comprehensive restructuring and remediation of the Morgantown plant to address the issues that had been identified.

Notwithstanding these efforts, the company received a warning letter related to the previously disclosed observations in the fourth quarter. The issues raised in the warning letter are being comprehensively addressed. The Morgantown plant continues to supply products for the U.S. market while we execute on and assess the restructuring and remediation activities.

No significant new product revenue is forecasted from the Morgantown plant in 2019. Also, we look at our business in North America. Only five of our top 50 gross margin-generating products are currently manufactured in Morgantown. We remain committed to maintaining the highest-quality manufacturing centers at our facilities around the world and to continuous improvement in a time of evolving industry dynamics and regulatory expectations.

Now I will focus on 2019 and our outlook for the year. 2019 will be a significant year from the new product launch perspective, and we are uniquely positioned to add approximately $1 billion in new product revenue. Almost all of our major products driving 2019 growth are either already launched or approved around the world. Also, no product is forecasted to make up more than approximately 3% of global revenues, including our EpiPen franchise.

In North America, we are incorporating all of our recent learnings, including the relatively slower uptake and conversion of more complex and specialty medicines and are adapting to accommodate the changing needs of the market. The high single-digit revenue growth we expect in North America is largely driven by complex and specialty and biologics, including a steady and continued uptake of generic Copaxone share; building further upon the successful launch of Fulphila in 2018 as we expand our biosimilars portfolio for the U.S.; extending our respiratory portfolio with the launch of our NCE Yupelri; and most importantly, a unique and patient-centric launch of Wixela Inhub, where we have a first-to-market opportunity. Also, the impact of volume loss due to portfolio rationalization of commodity products undertaken in 2018 will be largely behind us. To elaborate on Heather's comments on Slide 10, you can see a year over year decline in commodity product revenues as we evolve our business to benefit from the strength and anticipated growth of complex, specialty and biologics products.

In Europe, we see mid-single-digit revenue growth driven by a diverse mix of brands, generics and OTC portfolio. Focused selling and marketing investments on key brands like Dymista, Creon, Influvac and Betadine will continue to be an important driver. Some other key drivers of European growth will be continued uptake of generic Copaxone, biosimilars like Hulio, a biosimilar to Humira; and Ogivri, a biosimilar to Herceptin. In rest of the world, we see mid-single-digit revenue growth largely driven by double-digit growth in China and Brazil, while Australia, Japan and our ARV franchise will continue to perform steadily.

Biosimilar launches across the region will drive new product revenue, brands like Dona, Dymista and Elidel will be another key driver. I would now like to take a few minutes and share a summary of our key scientific and regulatory achievements. And before I begin, I would like to thank my Mylan colleagues for their contributions and persistence to bring these difficult to develop medicines to patients and acknowledge our close collaboration with our partners. These achievements have required years of hard work, patience, perseverance to bring these alternative options to patients who need these products.

A series of significant scientific achievements began just over a year ago, starting with the first approval of generic Copaxone 40 milligrams in U.S. and Europe. A number of biosimilar regulatory approvals around the world followed, including Fulphila, a biosimilar to Neulasta; Ogivri, a biosimilar to Herceptin; Semglee, a biosimilar to Lantus; Hulio, a biosimilar to Humira; and ABEVMy, a biosimilar to Avastin. We now have regulatory approval for these biosimilars in more than 65 countries around the world.

We also received FDA approval of an NCE for revefenacin of our Yupelri inhalation solution developed with our partner, Theravance. This product is the first once-daily nebulization treatment of patients with moderate to severe COPD who may benefit from or prefer nebulized LAMA treatment. We also continued to make advancements for Influvac, our seasonal flu vaccine primarily in Europe. In addition to our trivalent version, we have launched our quadrivalent version, Influvac Tetra, as well as obtained our first pediatric indication.

Also, we continue to expand this in other markets outside of Europe, such as Australia and Canada. And last but not the least, U.S. FDA approval of Wixela Inhub, the first generic of Advair Diskus. As we understand it, because of the significance of this complex generic, FDA took a few more months to conduct a very thorough secondary review and ensure the labeling was as appropriate as possible.

No scientific of significant regulatory issues were raised during this period. These scientific achievements have further differentiated us from our peers and set us up very nicely for growth of complex, specialty and biologics products. Moving to our pipeline. We, along with our partner, Revance, had an initial advisory meeting regarding our proposed biosimilar to BOTOX.

Based on agency's feedback, the companies believe that the 351(k) pathway for the development of the biosimilar to BOTOX is viable and provides the opportunity to develop and commercialize the first biosimilar to BOTOX. Our other key programs, including biosimilars such as IDA, Avastin, Humira, insulin analog and glatiramer acetate once-monthly remain on track. Given the evolution of the U.S. market and dynamics of the commodity generics, we also continue to evaluate our R&D program and resource allocation, and from here onwards, we'll further increase the emphasis on moving up the value chain with a focus on complex, specialty and biologics opportunities, the NCE and brand life cycle management strategies.

Finally, I would like to echo Heather's remarks about our focus this year on evaluating our value-creating and value-consuming assets. We have assembled a second to none portfolio and a pipeline with commercial assets across the world. And we are very excited to have another look into the businesses and operations so that we can leverage these assets to the maximum and are able to focus on value-creating assets. Now I will turn it over to Tony to elaborate on some of the details around our investment in our business segments.

Thank you.

Tony Mauro -- Chief Commercial Officer

Thank you, Rajiv, and good evening. I would like to reiterate the confidence you heard from Heather and Rajiv and the overall performance of our business in 2018. I am proud of the many achievements from the past year, including the scientific advancements you just heard about, which have positioned us well for long-term growth. In 2019, you will see our projected revenue growth in the mid-single digits, with 64% of our total revenue coming from outside of the U.S.

Driving this growth will be an acceleration of our global key brands across Europe and rest of world, complemented by a number of critical complex and specialty launches in the U.S. As we examine the evolution of our business and look ahead at what it will take to continue our success, we recognize the importance of valuing future potential. As such, we plan to incrementally increase our sales and marketing investments around our complex, specialty and global key brand products with the understanding that these products require added attention to achieve their full long-term potential. We are shifting our SG&A spend guidance to approximately 21 to 22% of sales, with the ultimate goal of advancing access for patients while driving profitable long-term growth.

I will now walk you through a few of the key drivers and efforts already under way, starting with North America, where we are expecting high single-digit revenue growth in 2019. Earlier this month, we launched Wixela Inhub, our generic Advair Diskus, at a price point of 70% below the brand's wholesale acquisition cost to ensure savings for patients, as well as payers and employers. With a sales force of 150 individuals, we have optimized our market share with our pharmacy partners and are pleased with the early conversion levels. In addition to providing a lower-cost alternative, we are committed to providing patients and healthcare providers with training and education to ensure a seamless transition.

The launch of our new chemical entity, Yupelri, is another exciting example of a product that requires a unique focus from a sales and marketing standpoint to help create new demand and address unmet needs for COPD patients. We are pleased to bring this important treatment to the market and anticipate Yupelri will change the paradigm in the COPD space as the first and only once-daily nebulized bronchodilator approved for the maintenance of COPD. Our sales force is actively calling on healthcare providers, and we are pleased with the initial response from physicians and our customers. We feel confident this trend will continue as we progress throughout 2019 and Yupelri meets its full market potential over the coming years.

Continuing with the U.S., our oncology and hospital teams have been focused on the successful launch of Fulphila, our first biosimilar in the U.S. and the first biosimilar to Neulasta. We are offering comprehensive patient resources, including a patient-focused call center, reimbursement support and a copay assistance program. Additionally, we have a dedicated sales team calling on healthcare providers in clinics and in hospitals.

As a result of these efforts, we are seeing an increase in weekly charge-backs and had over 15% of the pre-filled syringe market earlier this month. Lastly, we are pleased with the accelerated uptake of our glatiramer acetate 40 milligrams. Over the past months, we have had strategic discussions with our customers, resulting in further collaboration and subsequent changes and planned coverage, increasing utilization by 34% since the beginning of the year. We also continue to see an increase in the use of our outpatient-focused support services offered to our MS Advocate program, including in-home injection trainings with an experienced MS nurse and a 24/7 patient support center.

Our new prescriptions now have crossed the 35% market share threshold and we look forward to continued growth in the coming months. Turning to our European business. We project mid-single-digit revenue growth in 2019. We have been very pleased with the growth of our global key brands, specifically Creon, Influvac, Dymista and Brufen, which grew double digits, on average, in 2018.

For Influvac specifically, we are the market leader in Germany and France with greater than 50% market share in each country based on the most recent quarterly data. Additionally, we are pleased with the launch of TOBI Podhaler and TOBI solution following our acquisition last fall, and we'll utilize our existing commercial infrastructure to promote and grow this product. Looking ahead to 2019, we are forecasting, on average, a double-digit revenue growth on our key brands as we continue to further invest and leverage our commercial infrastructure of approximately 3,800 sales and marketing employees and focused efforts in key markets such as France, Germany, Italy, U.K. and Spain.

We had a milestone year for our biosimilars program and are excited to be launching Ogivri, our biosimilar to Herceptin, in many key markets like Germany and France, and we'll continue to launch in other countries throughout 2019. In addition to this, we remain encouraged about our generic glatiramer acetate 40 milligram in Europe. To date, we have launched in nine countries in this region, and we have plans for continued expansion and expect to more than double our sales in 2019. In the rest of world region, we are forecasting mid-single-digit revenue growth.

In Japan, through added sales and marketing resources, we expect double-digit growth in Amitiza and Creon sales. In China, additional resource investment will generate more than 70% sales growth for Sebivo and Elavil and greater than 20% growth for Dona. In Australia, we will focus on Dymista, projecting to nearly double sales in 2019. rest of world sales and marketing team, comprised of 2,800 individuals, is strong and dedicated to growing our business through concentrated efforts in countries through the region.

To conclude, we are excited about our anticipated global growth in 2019 and our enhanced investment to maximize long-term results for the future. Our teams around the world are focused and ready to continue executing on our growth initiatives. With that, I'll turn the call over to Ken.

Ken Parks -- Chief Financial Officer

Thank you, Tony, and good afternoon, everyone. I'll take a few minutes to provide a quick overview of our financial results for 2018. For the full year, both total revenues and constant currency revenues of $11.4 billion were 4% lower than the prior year. On a constant currency basis, net sales in Europe, which was up 1%, and rest of world, which was up 10%, helped to partially mitigate an 18% decline in North America.

Excluding approximately $258 million related to the Morgantown restructuring and remediation expenses, combined regional segment profitability declined 7% versus the prior year. Europe grew 1%, while rest of world grew 21%. These combined results helped to partially offset a 16% decline in North America, mostly due to lower volumes on existing products, including EpiPen, as well as pricing declines. On a full-year basis, we reported adjusted net earnings of $2.4 billion and adjusted EPS of $4.58, which is within our previously communicated guidance range.

Adjusted EPS versus the prior year primarily reflects benefits from ongoing integration activities and lower share count following the completion of our $1 billion share repurchase program in the beginning of the year, offset by the impact of the decline in our total revenues and increased sales and marketing investments. As a reminder, we did not achieve the targets of our blue team's six incentive program and there was, therefore, no payout under that program. Adjusted free cash flow for the 12 months ended December 31st 2018, totaled $2.7 billion. That's an increase of $86 million compared to the prior year and above the high end of our initial guidance range for 2018.

The year over year increase reflects ongoing improvements in working capital velocity, as well as lower capital expenditures. 2018 adjusted free cash flow conversion was healthy at approximately 115% of adjusted net earnings. That's another measure of the strength and durability of the cash flow generating capabilities of our business. During 2018, we repaid more than $630 million of debt, including a 500 million euro note that matured during the fourth quarter.

At the end of Q4 2018, our debt to adjusted EBITDA leverage ratio, as calculated under our credit agreements, was 3.8 times and was in compliance with our covenant requirements. On February 22 of this year, we entered into amendments to our credit agreements to extend the leverage ratio covenant of 4.25 times through the December 31, 2019 reporting period. These amendments provide us with additional financial flexibility as we manage our capital structure during 2019. This does not change, in any way, our commitment to our deleveraging strategy or our investment-grade credit rating.

This is simply a recognition by our banking group of the dynamic changes occurring within our industry. Even considering the additional investments in SG&A and R&D that we've discussed today, our capital deployment priority remains focused on deleveraging, as we've consistently communicated. We now intend to repay more than $1.1 billion of debt in 2019, including scheduled maturities in June and November. This represents an increase of approximately $500 million in debt repayment versus our previous target.

We remain fully committed to our investment-grade credit rating and to further reducing leverage as we work toward our long-term average debt to adjusted EBITDA leverage ratio target of approximately 3.0 times. We anticipate that we'll achieve this target through both continued debt repayment, as well as EBITDA expansion. Moving to 2019 at a high level. We expect total revenues in the range of 11 and a half billion to 12 and a half billion, which represents an increase of 5% at the midpoint versus full-year 2018.

Full-year adjusted EPS is expected to be in the range of $3.80 to $4.80. That's down 6% at the midpoint. And finally, we expect adjusted free cash flow in the range of 1.9 to $2.3 billion. As you heard from Rajiv, in our top-line outlook, we expect positive volume growth and a significant contribution from new product launches, including Wixela, coupled with the carryforward impact of generic Copaxone, Fulphila and Yupelri.

These are expected to more than offset the competitive market dynamics in the U.S. In 2019, we're expecting our adjusted gross margin percentage to be in the range of 53 to 54%, reflecting the benefit of new launches and increased volumes in addition to ongoing benefits from our Mylan integration activities. We also expect global pricing trends to continue to be relatively consistent with what we experienced in 2018. As you can see on the adjusted EPS bridge on Slide 14 in our supplemental earnings material that was posted on our website today, we're expecting a positive contribution from sales growth, driven by new product launches and volume from existing products, partially offset by pricing.

These benefits help fund incremental selling and marketing and G&A investments that support new product launches, as well as geographic expansion of our key global brands in Europe and the rest of world. In addition, we'll continue to invest in R&D to fund the long-term health of our business. Finally, we expect interest, tax shares and FX to have a slightly dilutive impact on adjusted EPS in 2019. The year over year increase in our adjusted effective tax rate is due primarily to the implementation of tax law changes in markets such as Sweden and Italy, as well as the full phasing-in of the tax law changes enacted in the United States at the end of 2017.

For 2019 adjusted free cash flow, we expect to generate between 1.9 billion to $2.3 billion, net of capital expenditures between 250 million and $400 million. The year over year decline versus 2018 is primarily driven by the increased investment in working capital required to support our top-line growth expectations in the year, as well as investing in our operational capabilities to support over $1 billion in revenue coming from new product launches. As always, we'll seek to make these investments as efficiently as possible and continue as we move through the year to look for opportunities to maximize our adjusted free cash flow. It's our ability to generate strong free cash flows supported by the durability of our portfolio and the strength of our balance sheet that provides us with financial flexibility to invest in the future of our business.

A quick comment on calendarization as you think about modeling. We expect both total revenues and adjusted EPS to be slightly more heavily weighted to the second half relative to 2018 due primarily to higher profitability and timing of new product launches. In addition, we expect Q1 to contribute slightly less adjusted EPS on a relative basis than the prior year. As we discussed in the last few quarters, we're continuing to evaluate metrics other than EPS that better reflect how we manage and measure the performance of our business.

As Heather and Rajiv both mentioned, we've created a formal business transformation office to evaluate value-creating, as well as value-consuming assets. This office will help shape our road map going forward and will include leveraging financial systems and generating additional metrics that will help us effectively track our performance against this road map as we move forward. We'll update you on our progress on this at our investor day this fall. Now with that, we'll open the call up for questions. 

Questions and Answers:


[Operator instructions] We'll take our first question from the line of Elliot Wilbur with Raymond James.

Elliot Wilbur -- Raymond James -- Analyst

Thanks. Good afternoon. A question for the team, I guess, with respect to the step-up or elevation in SG&A investment expected relative to historical ranges implies something on the order of 250 to $350 million of additional investment in absolute dollars. And outside of the color commentary you provided throughout the course of the -- your prepared comments, just wondering if you can go into a little bit more detail on what and where exactly these investments are.

And what do they enable you to do that you're not doing currently? And how do they enhance your long-term growth profile? I mean, did it set you up to bring in more assets, like presli and TOBI? I'm just not really sure how to kind of think about this in terms of sort of how it may change your strategy and some of the growth initiatives going forward.

Heather Bresch -- Chief Executive Officer

Sure, Elliot. I'll start and then anyone on the team that would like to also chime in. I think it's important you kind of teed it up yourself in your question when you said our historical ranges. I think that if I go back several years and look at our historical product portfolio, we have primarily generics, a large number of which were U.S.

generics. And as we pointed out on the chart, a large number of those generics were more of that commodity-based products. So, if you think about from an SG&A perspective, we had trended on the lower end because those types of products didn't require sales and marketing behind them. And obviously, that's kind of how the U.S.

generics industry works especially around those commodity-type products. I think that as our evolution from both the acquisitions from Abbott and Meda, which obviously, especially from a Europe and rest of world perspective, gave us a much larger portfolio around key brands, as well as OTC products, those require investment and ongoing investment. So, while there's certainly some that we're maintaining because we've had them on the market a while, there's others that we see a value in kind of reinvesting more in because some of these products in other companies' hands weren't getting the same level of investment that we are now seeing kind of fruitful returns from. And then I would say just our evolution in North America both from that commodity-type product into the specialty and complex, as you know, I think as Tony walked through the kind of services and everything that goes around these more complex products certainly cost more.

And then I think last but not least, when you look at things like our Yupelri launch and products that were -- for the first time, you're certainly investing and ramping up that before -- that investment before it's paying returns. So I would say that if I synthesize all of that, it's looking at our portfolio shift, which is certainly responsible for our cost infrastructure shift. I mean, when I look at us among our peers, I would still say that this 21 to 22% range is very much on the low end. It's certainly not up there with the typical specialties, which are in the high 20s.

I think that we believe that this 21, 22% range is kind of -- is our new step-up basis for the kind of investments that we see that, like I said, not just deliver the revenues for 2019 but certainly beyond because as we've seen especially with these complex products, much lower ramp, much longer tail. So, these are products that as we look at the different regions of the world, much different contribution but importantly all driving over the longer term, certainly nothing on a quarter-by-quarter basis. So, I appreciate the question because I think it really gives us an opportunity to make sure people are really looking at our portfolio correctly, both our diversification in the United States, as well as importantly our diversification across Europe and rest of world.

Tony Mauro -- Chief Commercial Officer

Thanks, Heather. And I just might add, Elliot, I think as Heather outlined, whether it's Yupelri in North America along with biologics, our global key brands in biologics in Europe and Amitiza and Sebivo in rest of world, it's about increasing our share of voice, capturing additional market growth and getting more physician touch points really. As we invest in these resources, not just from a marketing perspective but a selling and resource perspective, it's getting more with more. That's really the opportunity we see ahead of us.

Ken Parks -- Chief Financial Officer

And Elliot, I'll just add and maybe this is the last comment on this, but you've heard us talk not just on this call but the last couple of calls about identifying value creation assets, identifying those things that we want to do slightly differently with them. You can be assured that as we're looking at this incremental investment to support growth in certain products that we're putting very strong financial analysis around this. And that's been part of what's coming through this business transformation process, looking at not just what our product contributes at maybe a gross margin level but what does it take for us to support that product, whether it be in the launch phase or the life of the product. So, to add on to what Heather and Tony both said is you can be assured that we are putting financial disciplines around, looking at returns on these investments, whether it be in the area of people or marketing so we know what we're getting for the money that we do put out there.


And your next question comes from Ronny Gal with Bernstein.

Ronny Gal -- Bernstein Research -- Analyst

Good evening. Thank you for taking the questions. So just starting with the tax, is it fair to say that the new tax level you're describing is probably the go-forward tax level that we should expect from '19 going forward? And then I just want to ask a little bit about the strategic review. When I look at some of the struggles you had with the financial markets over time, some of that probably is resolvable with a private company.

I mean, I'm sure you consider the possibility. How do you think about it? And I'll stop there.

Ken Parks -- Chief Financial Officer

So Ronny, I'll take the tax question. Look, as I've called out in the comments, there were a couple of statutory changes that happened at the beginning of this year. And as you know, we've talked about the impact of the 2017 Tax Reform Act in the United States and said really what happened to us with all of that is we had a minor negative impact, whereas a lot of companies who were in the U.S. had a bigger, favorable impact moving their tax rate down.

The minor negative impact that affected us was really due to the minimum tax calculation that didn't fully come into play in 2018 but does come into play in 2019. So, to your question of is this the new rate for us, I think it's probably close to the new rate. We have a great tax team and a good group of people that are kind of always looking at opportunities to evaluate if we can do something slightly differently. But I think that tax rate is probably the right thing to think about for us today.

Heather Bresch -- Chief Executive Officer

Yes. And Ronny, as far as the strategic committee is concerned, so as I have said previously, the committee is looking at lots of things and everything. And as you should expect, as they put that note out there, it was a look at anything and everything that could unlock value. And while I don't want to speak for the committee, it is my understanding that I think they're nearing completion of the review.


And your next question comes from Chris Schott with JP Morgan.

Chris Schott -- J.P. Morgan -- Analyst

Great. Thanks very much. Just two quick ones here. First, we're seeing a wider range of earnings for the guidance than we've seen in the past.

Can you just elaborate a little bit more on what's behind this and maybe talk through some of the bigger swing factors in this year's guidance? And the second one, I just want to come back to the SG&A discussion. I guess, my question here is, will you be able to evaluate this year if these investments are having the impact you'd expect? Or is this a longer-term process that you'll be able to evaluate the spend? And the type of spend coming here, is this spend that you can kind of turn off and on quickly if you're seeing areas working or isn't working? Or should we think about this more about sales rep and headcount that maybe is a little harder to scale down if you're not seeing the return?

Heather Bresch -- Chief Executive Officer

OK. Chris, I'll start off and then let Ken or Tony chime in. So, I think the wider range, I think, is just reflective of the volatility that we've seen in the marketplace. And I think we're trying to be respectful of that volatility and take kind of everything in consideration.

As I said in my opening remarks, while we believe our platform has certainly proven to be more resilient, it's not immune. I mean, as we pointed out our 2018, we were at the lower end of that range, and we consider that to be very strong results in light of the fact that we didn't get an approval on Advair in the year and we had a much lower uptake on Copaxone. I think as you look at these opportunities, look, they're significant movers. They've got significant dollars attached to it.

So, I think we tried to take a very balanced and measured approach to how we are weighing all those things in the business to make sure we're kind of putting that right range out there that gives that right floor. And I think that as we look at the business really and I look at our year over year growth and continuing that revenue growth in all of our segments, it really just came down to making sure we provided those swings for the opportunities, the opportunities and risks that are always associated with this business around the globe and make sure that we're putting something in there that we think it counts for the right level of the assumptions now that we do have Advair approved and how we're thinking about that uptake. And like I said, what we see happening now with Copaxone, it may have taken longer than we wanted to, but as Tony pointed out, we're starting to see some better pull-through. So, it was really just trying to give, quite honestly, what I think many of you guys have asked us to be mindful of, which is the -- all the moving pieces and parts to this business and giving ourselves -- making sure we give ourselves that range and that latitude because of just that, all the moving pieces and parts.

As far as SG&A, I guess, I would just say look, as you would assume, Chris, those investments, you don't get a return on investment dollar for dollar in year one and depending where things are, if it's the new launch like Yupelri versus something like a Creon, where we continue to see growth in markets and -- or Influvac. So, we've got some of these global key brands, like I said, that while they've been in the portfolio for a while, we are seeing benefits of investments, and those are happening real time. So, I think it's a little bit of everything. There are things -- there's infrastructure we're putting in.

There are things that we think have a longer-term payoff, and there's also things that we're putting in place that will help us pull through the products we have coming in the pipeline because as you know, we have one of the largest complex product pipelines out there. And so, a lot of this groundwork will help us pull through what will be needed as far as services, our infrastructure around these products as we move forward with our portfolio.

Rajiv Malik -- President

Yes, I would only add to your last point about switch on, switch off. Yes, in some of the smaller countries, emerging countries, where we see there are limited, bigger opportunities, we have that ability to switch on, switch off some of those SG&A expenses just because of some -- using some of the contracted sources in those countries.

Ken Parks -- Chief Financial Officer

And Chris, look, I think, hopefully, you hear, as you're listening to all of this talk about the confidence in the business, that really what this comes down to is as we brought these businesses together and we're spending more and more time digging into what's going on in the business and what we have as far as assets, we're excited about the opportunities that we have. And so, as we think about investing, as we do anytime we invest, we're going to do it with discipline in thoughts and metrics and think about where the money is best, but we feel really good about the position that we have, the assets to invest in.

Tony Mauro -- Chief Commercial Officer

And maybe just to close it out, when we think about the SG&A investments we're making, very strategic from a headcount perspective but a good portion of the selling and marketing incremental growth we're seeing is going to be just ramping up the advertising and promotion of some of these key assets globally that do have some nimbleness in terms of future spend once we get it to a level we feel like it is grown appropriately.


And your next question comes from Gary Nachman with BMO Capital Markets.

Gary Nachman -- BMO Capital Markets -- Analyst

Hi, good afternoon. So, regarding the remediation at Morgantown, how far will that stretch into 2019? I want to understand better what still involved and how long it will persist. And then outside of the issues at Morgantown, have you seen stabilization in the U.S. generic market continue so far into 2019? What sort of base decline there are you assuming in the guidance?

Heather Bresch -- Chief Executive Officer

I'll start with the stability in the marketplace. As I pointed out in my opening remarks, I think it's very difficult to look at the U.S. generic market and paint it with one brush. I think we have said for a while that portfolios are very different, and so each company's intersection with what's happened in the marketplace is going to be very different.

There's no question that, I think, value has been extracted out of the U.S. marketplace. And I think we see that -- we've seen that daily over the course of the last several months, especially as you look at consolidation of what's happened with our customers, as well as just the ramp-up of approvals of that fifth, sixth, seventh, eighth generic or product set as we would characterize in that commodity bucket. So, for us, we have continued to see this mid-single-digit decline or erosion in the business.

And we believe that from our perspective, that is holding pretty steady. We think the driver for that for us, for Mylan is because as we look at the U.S. generics market, we believe there's three distinct buckets. There's the commodity bucket, specialty bucket and the complex bucket.

And each of those require a different level of investment, a different uptake, as well as different competitiveness in the marketplace itself. So, from our perspective, that is -- that diversification in the U.S. business has allowed us to absorb a lot of that volatility and, like I said, not be immune to it. And I think that as we look forward, we're kind of still seeing that mid-single-digit erosion.

I think the biggest difference for us is having the product -- new launches be able to offset that erosion, and that's really been historically what has meant success in this business. If your new product launches could offset your volume and price, well, that's what made this -- that's what has made this market and I don't think that's changed. It's just, I think, the hurdles for some of those approvals have become higher and there are obviously more significant launches. So, I -- that's perhaps a long-winded answer, but I think it's important that we're not just trying to characterize the entire U.S.

generic marketplace and all the players, like I said, with one brush.

Rajiv Malik -- President

Yes. And regarding Morgantown plant, Gary, as I stated earlier, we continue to execute and assess our restructuring and remediation activities at the site through this 2019. And of course, we are focused on meeting our commitments to FDA, as well as customers. Now as far as any negative financial impact on the business, I think we don't see that anymore as we go into 2019.

As I've mentioned, it's, I think, largely behind us. We continue to supply from Morgantown our key products. We continue -- as we said, there's no new big launches or no new launches. But still in 2019, from Morgantown and also from the materiality point of view, only five out of our top 50 North American products today come from Morgantown.


And your next question comes from Liav Abraham with Citi.

Liav Abraham -- Citi -- Analyst

Good afternoon. Just a couple of questions on new product revenues. Can you provide the new product revenues in 2019 total? And apologies if I don't understand this, but when you talk about $1 billion of new product launch revenues in 2019, is that $1 billion in total or an incremental $1 billion over 2018? And then any additional color you could provide on the breakdown of new product launch contribution in 2019 would be helpful either on a product basis or geographic basis.

Ken Parks -- Chief Financial Officer

So Liav, thanks for the question. Look, the $1 billion is the total incremental year over year benefit of new product launches, and it comes from a couple of places and I'll give you kind of a geographic order of magnitude. We had products that were launched in 2018 but haven't seen their full 12-month cycle yet. So the carryover benefit of those products is a part of the $1 billion that is new product launches until they hit their one-year mark.

So that's great because those products are in the market and we have a feel for how they're doing. Besides that, what I would tell you is that out of that $1 billion, call it somewhere around three quarters of it, is probably in North America, and the rest of it is split kind of evenly between Europe and rest of the world just to kind of give you order of magnitude pieces there. And then if you want to kind of understand a little bit about the North America piece, it will have a portion of that carryover component but it also is where we have Wixela obviously, and that's a significant contributor to new product launches in North America, which once again, approval behind us, launch is under way and we feel really good about the uptake on that. As far as contributions from these products, we've consistently said and we're not going to call out any one individually, but what we've said is these products have tended to contribute even with our partner arrangements at or above the Mylan average overall.


And your next question comes from Jason Gerberry with Bank of America.

Jason Gerberry -- Bank of America -- Analyst

Hey good evening. Thanks for taking my questions. I guess, just first question on biosimilars. So has the strategy on a product like Fulphila in the U.S.

fundamentally changed from last year or initially, maybe the expectation was that GPOs would have driven the pull-through on a product like this? And now the view is that you need a sales force much like the strategy of the Pfizers and Novartises of the world? And then also, can you comment just how to think about the generic Advair launch? Can you supply and tap the market? Do you expect pharmacies to really drive direct switch when you have unlimited Part D access?

Tony Mauro -- Chief Commercial Officer

So maybe just to touch, Jason, on Fulphila, I think -- well, first of all, we've had a very focused sales force on that product since launch. We're going to expand it because we've seen additional opportunities not just with this particular product in oncology but a whole breadth of products that we have today and in the future in oncology. So, I don't know that the strategy's changed tremendously about -- from that product perspective. We're seeing over 15% market share growth to the pre-filled syringe business.

We've been very selective on the customers we went after, and I think we feel very, very good about our performance to that launch and how it's going to flow into 2019. And you'd asked additionally about Advair.

Rajiv Malik -- President

Yes. And regarding Advair, we have a state-of-art, dedicated facility, which is up and running and producing and shipping the product today. And if opportunity comes, we have enough capacity to supply the market.

Tony Mauro -- Chief Commercial Officer

And maybe just commenting on your Med D comment. We know 50% of Advair's usage is in the Med D space. I can tell you from products like Glatiramer we launched, initially, we're being blocked out of Med D programs. With Wixela, out of the top 10 Med D plans, we have full parity and access on eight of 10 on -- at this moment, two weeks from launch.

So we feel very good about the initial ramp. We feel very confident about our capability from a supply and our pharmacy mix that we've got from a customer perspective, and we have high hopes moving forward.


And your last question comes from Umer Raffat with Evercore ISI.

Umer Raffat -- Evercore ISI -- Analyst

Hi. Thanks so much for taking my question. I had one for Ken and one for Heather if I may. Ken, there's a lot of feedback from Mylan investors on the low end of EBITDA guidance, especially also from debt investors.

So, my question to you is this. In 2019, the low end of revenue guidance is actually just about the same as 2018 actual revenues. So, in that context, why is the low end of EBITDA guidance so much lower than the actual 2018 EBITDA, especially considering SG&A should potentially be not as much if the revenues are not tracking toward the type of growth they should put up? And Heather, was just curious if you could add some color on a couple of recent departures on the chief legal officer and the head of Europe side.

Ken Parks -- Chief Financial Officer

So look, I'll start with the modeling question around SG&A and revenues and EBITDA. But look, it's -- right now, what we're targeting as we go into this year is SG&A at a rate of 20 to 21% -- 21 to 22%, I'm sorry. And as we do that that clearly is a level of investment on even the low-end revenues where you said they were the same as the low end of what we have this year, but it is an increased step-up investment. So that drives EBITDA a bit lower and it's very simply that.

So now to your point around as we move through the year, we'll certainly watch these investments and ensure we're getting back from them what we're expecting to get. And we may pull back a little bit on some of that investment. We may reallocate it somewhere else where we see it taking hold even stronger. But effectively, I'd say it's pretty straightforward math that same revenues with a slightly higher SG&A at either point on the range gives you lower EBITDA.

Heather Bresch -- Chief Executive Officer

Yes. And Umer, as far as departures, I'll guess I'll just start with saying I think as having, I'll say, the longest, which would, I think, fairly be accurate -- the longest tenured management team here in continuity, as you know, that's important to us, and we think it's absolutely been one of the important aspects of Mylan's success and executing on our strategy and quite honestly, what we have in front of us. As you know, yes, we've had a couple of departures starting with our chief legal officer. I think not only is he just going back to private practice in D.C.

but as we noted, we're going to continue having a relationship, an advisory capacity. So that's just kind in a normal course. And as far as others throughout the organization, I mean, as you can imagine, we've got over 30,000 employees and we have a lot of people coming and going. I think, certainly like I said, when you look at the top level of this executive management, we've been the longest tenured out there.

And that's very important and we built a lot of great bench strength under us. So, the exciting news is there continues to be great opportunities for our current employees, as well as we're always looking at balancing that with bringing in new talent and new perspective. So, I'm certainly more excited about the team we have and the opportunities to bring some new hires in. So, thank you.

Thank you for asking that.


[Operator signoff]

Duration: 66 minutes

Call Participants:

Melissa Trombetta -- Head of Global Investor Relations

Heather Bresch -- Chief Executive Officer

Rajiv Malik -- President

Tony Mauro -- Chief Commercial Officer

Ken Parks -- Chief Financial Officer

Elliot Wilbur -- Raymond James -- Analyst

Ronny Gal -- Bernstein Research -- Analyst

Chris Schott -- J.P. Morgan -- Analyst

Gary Nachman -- BMO Capital Markets -- Analyst

Liav Abraham -- Citi -- Analyst

Jason Gerberry -- Bank of America -- Analyst

Umer Raffat -- Evercore ISI -- Analyst

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