##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549
 FORM 10-K þ
Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Fiscal Year Ended March 31, 2005
 o
Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from  to Commission File No. 1-9114 MYLAN LABORATORIES INC.  Pennsylvania
    
    25-1211621(State of Incorporation)
    
    (IRS Employer Identification No.)
 1500 Corporate Drive, Canonsburg, Pennsylvania 15317
(724) 514-1800
(Address, including zip code, and telephone number, including area code, of principal executive offices) Securities registered pursuant to Section 12(b) of the Act: Title of Each Class:
    
    Name of Each Exchange on Which Registered:Common Stock, par value $0.50 per share
    
    New York Stock Exchange
 Securities registered
pursuant to Section 12(g) of the Act:  None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. o Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of
the Exchange Act).
Yes þ No o The aggregate market value of the outstanding common stock, other than shares held by persons who
may be deemed affiliates of the registrant, as of September 30, 2004, the last business day of the
registrants most recently completed second fiscal quarter, was approximately $4,705,144,650. The number of outstanding shares of common stock of the registrant as of May 11, 2005, was
269,342,141.




---



MYLAN LABORATORIES INC. INDEX TO FORM 10-K
For the Fiscal Year Ended March 31, 2005 PagePART IITEM 1. Business
    
    3Overview of Our Business
    
    3Generic Segment
    
    3Brand Segment
    
    4Product Development
    
    5Generic Product Development
    
    5Brand Product Development
    
    6Terminated Acquisition of King Pharmaceuticals
    
    7Patents, Trademarks and Licenses
    
    8Customers and Marketing
    
    8Competition
    
    8Product Liability
    
    8Raw Materials
    
    9Government Regulation
    
    9Seasonality
    
    10Environment
    
    10Employees
    
    10Backlog
    
    10Risk Factors
    
    10Securities Exchange Act Reports
    
    19ITEM 2. Properties
    
    19ITEM 3. Legal Proceedings
    
    20ITEM 4. Submission of Matters to a Vote of Security Holders
    
    22PART IIITEM 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
    
    23ITEM 6. Selected Financial Data
    
    24ITEM 7. Managements Discussion and Analysis of Results of Operations and Financial Condition
    
    25ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk
    
    37ITEM 8. Financial Statements and Supplementary Data
    
    38ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    63ITEM 9A. Controls and Procedures
    
    63PART IIIITEM 10. Directors and Executive Officers of the Registrant
    
    64ITEM 11. Executive Compensation
    
    64ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    64ITEM 13. Certain Relationships and Related Transactions
    
    64ITEM 14. Principal Accounting Fees and Services
    
    64PART IVITEM 15. Exhibits and Financial Statement Schedules
    
    64Signatures
    
    69Exhibit 10.4(B)Exhibit 10.4(C)Exhibit 21Exhibit 23Exhibit 31.1Exhibit 31.2Exhibit 32
  2




---



##### Table of Contents



PART I 
 ITEM 1. Business Mylan Laboratories Inc. (the Company or Mylan or we) is engaged in developing,
licensing, manufacturing, marketing and distributing generic and brand pharmaceutical products. The
Company was incorporated in Pennsylvania in 1970. References herein to a fiscal year shall mean the
fiscal year ended March 31. 
 Overview of Our Business We conduct business through our generic (Generic Segment) and brand (Brand Segment)
pharmaceutical operating segments. For fiscal 2005, the Generic Segment represented approximately
81% of net revenues, and the Brand Segment represented approximately 19% of net revenues. For both
fiscal 2004 and 2003, the Generic Segment represented approximately 80% of net revenues, and the
Brand Segment represented approximately 20% of net revenues. The financial information for our
operating segments required by this Item is provided in Note 13 to the Consolidated Financial
Statements under Part II, Item 8, of this Annual Report on Form 10-K. Prescription pharmaceutical products in the United States (U.S.) are generally marketed as
either brand or generic drugs. Brand products are marketed under brand names through marketing
programs that are designed to generate physician and consumer loyalty. Brand products generally are
patent protected, which provides a period of market exclusivity during which they are sold with
little or no competition. Additionally, brand products may benefit from other periods of
non-patent, market exclusivity. Exclusivity generally provides brand products with the ability to
maintain their profitability for relatively long periods of time. Brand products generally continue
to have a significant role in the market after the end of patent protection or other market
exclusivities due to physician and consumer loyalties. Generic pharmaceutical products are the chemical and therapeutic equivalents of reference
brand drugs. A reference brand drug is an approved drug product listed in the U.S. Food and Drug
Administration (FDA) publication entitled Approved Drug Products with Therapeutic Equivalence
Evaluations, popularly known as the Orange Book. The Drug Price Competition and Patent Term
Restoration Act of 1984 (Waxman-Hatch Act) provides that generic drugs may enter the market after
the approval of an Abbreviated New Drug Application (ANDA) and the expiration, invalidation or
circumvention of any patents on the corresponding brand drug, or the end of any other market
exclusivity periods related to the brand drug. Generic drugs are bioequivalent to their brand name
counterparts. Accordingly, generic products provide a safe, effective and cost efficient
alternative to users of these brand products. Growth in the generic pharmaceutical industry has
been driven by the increased market acceptance of generic drugs, as well as the number of brand
drugs for which patent terms and/or other market exclusivities have expired. 
 Generic Segment We are recognized as a leader in the generic pharmaceutical industry. The Generic Segment
consists of two principal business units, Mylan Pharmaceuticals Inc. (MPI) and UDL Laboratories,
Inc. (UDL), both of which are wholly owned subsidiaries of Mylan. MPI is our primary generic
pharmaceutical research, development, manufacturing, marketing and distribution subsidiary. MPIs
net revenues are derived primarily from the sale of solid oral dosage products. UDL packages and
markets generic products, either obtained from MPI or purchased from third parties, in unit dose
formats, for use primarily in hospitals and other institutions. The Generic Segment is augmented by
transdermal patch products which are developed and manufactured by Mylan Technologies Inc. (Mylan
Tech), a wholly owned subsidiary of Mylan. As discussed below, Mylan Tech is a component of our
Brand Segment. We obtain new generic products primarily through internal product development. Additionally,
we license or co-develop products through arrangements with other companies. New generic product
approvals are obtained from the FDA through the ANDA process, which requires us to demonstrate
bioequivalence to a reference brand product. Generic products are generally introduced to the
marketplace at the expiration of patent protection for the brand product or at the end of a period
of non-patent market exclusivity. However, if an ANDA applicant is first to file an ANDA containing
a certification of invalidity, non-infringement or unenforceability related to a patent listed in
the Orange Book with respect to a reference drug product, that generic equivalent may be able to
be marketed prior to the expiration of patent protection for the brand product. Such certification,
commonly referred to as a Paragraph IV certification, results in a period of generic marketing
exclusivity. This exclusivity, which under certain circumstances may be required to be shared with
other applicable ANDA sponsors with Paragraph IV certifications, lasts for 180 days during which
the FDA cannot grant final approval to other ANDA sponsors holding applications for the same
generic equivalent. 3




---



##### Table of Contents



An ever-increasing trend in the pharmaceutical industry involves the practice of so-called
authorized generics. This occurs when the patent or New Drug Application (NDA) holder sells
its brand product as a generic, often through a licensing agreement with a generic company or
through a subsidiary, at the same time other generic competition enters the market. This practice
has the most significant impact on a generic company who is entitled to the 180 day exclusivity
period described above or who would otherwise be the only company on the market with a generic
product being sold under an approved ANDA. This practice may effectively eliminate the 180 day
exclusivity period if launched at the beginning of the generic companys exclusivity period, and,
exclusivity aside, could significantly lower the price at which the generic company could
otherwise sell their product upon launch. During fiscal 2005, Mylan launched two products,
nitrofurantoin monohydrate/macrocrystals capsules, the generic equivalent of Procter & Gambles
Macrobid®, and a fentanyl transdermal system, the generic equivalent of Alza Corporations
Duragesic®, both of which were significantly negatively impacted by authorized generics. See Risk
Factors beginning on page 10 for further discussion of risks associated with our industry. We have attained a position of leadership in the generic industry through our ability to
obtain ANDA approvals, our uncompromising quality control and our devotion to customer service. We
continue to bolster our traditional solid oral dose products with unit dose, transdermal and
extended release products. We have entered into strategic alliances with several pharmaceutical
companies through product development, distribution and licensing agreements that provide us with
additional opportunities to broaden our product line. Mylan manufactures approximately 95% of all doses sold by our Generic Segment. Our product
portfolio consists of over 140 generic pharmaceutical products, including approximately 135 in
capsule or tablet form in an aggregate of approximately 360 dosage strengths, with 10 extended
release products in 19 dosage strengths of which three are transdermal patches in 12 dosage
strengths. In addition to those products manufactured by Mylan, we are marketing 63 generic
products in 108 dosage strengths under supply and distribution agreements with other pharmaceutical
companies. As of December 31, 2004, Mylan held the first or second market position in new and
refilled prescriptions dispensed among all pharmaceutical companies in the U.S. with respect to
approximately 70% of the generic pharmaceutical products we marketed, excluding unit-dose products. Approximately 17% of the Generic Segments net revenues in fiscal years 2005 and 2004 and 20%
of the Generic Segments net revenues in fiscal 2003 were contributed by calcium channel blockers,
primarily nifedipine. The future success of our Generic Segment is partially dependent upon continued increasing
market acceptance of generic products as substitutes for existing products. Additionally, we expect
that future growth of our Generic Segment will result from continuously launching new products,
including an emphasis on the development or acquisition of new products that may attain FDA first
to file status, as well as the pursuit of products that are difficult to formulate or for which the
active pharmaceutical ingredient is difficult to obtain. In addition, we intend to continue to seek
complementary strategic acquisitions of both companies and products. 
 Brand Segment The Brand Segment consists of two principal business units, Mylan Bertek Pharmaceuticals Inc.
(Mylan Bertek) and Mylan Tech, both of which are wholly owned subsidiaries of Mylan. Mylan
Berteks principal therapeutic areas of concentration include neurology, dermatology and
cardiology. The Brand Segment includes pharmaceutical products that have patent protection, have
achieved brand recognition in the marketplace or represent branded generic pharmaceutical products
that are responsive to promotional efforts. We expect that the growth of the Brand Segment will be driven through internal development of
unique and innovative products, product or business acquisitions and licensing arrangements.
Additionally, the growth of the Brand Segment will be impacted by our ability, through continued
marketing efforts, to increase prescriptions for our current products. Nebivolol, which we licensed in fiscal 2001, is a beta blocker for which we submitted an NDA
for the indication of hypertension in April 2004 and which was accepted for filing during the
second quarter of fiscal 2005. As a result of recent actions taken by the U.S. Patent and Trademark
Office, the nebivolol compound now has patent protection in the U.S. into 2020, which may be
extended under the terms of the Waxman-Hatch Act. During fiscal 2005, Mylan Bertek received FDA approval for ApokynTM (apomorphine
hydrochloride injection), as the first and only therapy in the U.S. for the acute, intermittent
treatment of hypomobility, off episodes associated with 4




---



##### Table of Contents



advanced Parkinsons disease. Apokyn, which has orphan drug status, was launched during the
second quarter of fiscal 2005. The Brand Segment sales force consists of approximately 190 sales representatives and managers
who promote our products to primary care physicians, dermatologists, neurologists, pharmacists,
managed care organizations, governmental agencies, independent pharmacies and chain drug stores. 
 Product Development Research and development efforts are conducted primarily to enable us to develop, manufacture
and market FDA approved pharmaceuticals in accordance with FDA regulations. Research and
development expenses were $87.9 million, $100.8 million and $86.7 million in fiscal 2005, 2004 and
2003, respectively. Our research and development strategy focuses on the following areas:  
    development of controlled-release technologies and the application of these technologies to reference products;
    development of NDA and ANDA transdermal and polymer film products;
    development of drugs technically difficult to formulate or manufacture because of either
unusual factors that affect their stability or bioequivalence or unusually stringent
regulatory requirements;
    development of drugs that target smaller, specialized or underserved markets;
    development of generic drugs that represent first to file opportunities;
    expansion of our existing solid oral dosage products with respect to additional dosage strengths;
    completion of additional preclinical and clinical studies for approved NDA products
required by the FDA, known as Phase IV commitments; and
    conducting of life cycle management studies intended to further define the profile of
products subject to pending or approved NDAs. All applications for FDA approval must contain information relating to product formulation,
raw material suppliers, stability, manufacturing processes, packaging, labeling and quality
control. Information to support the bioequivalence of generic drug products or the safety and
effectiveness of new drug products for their intended use is also required to be submitted. There
are generally two types of applications used for obtaining FDA approval of new products: New Drug Application (NDA).An NDA is filed when approval is sought to market a drug with
active ingredients that have not been previously approved by the FDA. NDAs are filed for our newly
developed brand products and, in certain instances, for a new dosage form, a new delivery system,
or a new indication for previously approved drugs. Abbreviated New Drug Application (ANDA).An ANDA is filed when approval is sought to market
a generic equivalent of a drug product previously approved under an NDA and listed in the FDAs
Orange Book or for a new dosage strength or a new delivery system for a drug previously approved
under an ANDA. One requirement for FDA approval of ANDAs and NDAs is that our manufacturing procedures and
operations conform to FDA requirements and guidelines, generally referred to as current Good
Manufacturing Practices (cGMP). The requirements for FDA approval encompass all aspects of the
production process, including validation and recordkeeping, and involve changing and evolving
standards. 
 Generic Product Development FDA approval of an ANDA is required before marketing a generic equivalent of a drug approved
under an NDA, or for a previously unapproved dosage strength or delivery system for a drug approved
under an ANDA. The ANDA approval process is generally less time-consuming and complex than the NDA
approval process. It does not require new preclinical and clinical studies because it relies on the
studies establishing safety and efficacy conducted for the drug previously approved through the NDA
process. The ANDA process does, however, require one or more bioequivalency studies to 5




---



##### Table of Contents



show that the ANDA drug is bioequivalent to the previously approved drug. Bioequivalence
compares the bioavailability of one drug product with that of another formulation containing the
same active ingredient. When established, bioequivalency confirms that the rate of absorption and
levels of concentration in the bloodstream of a formulation of the previously approved drug and the
generic drug are equivalent. Bioavailability indicates the rate and extent of absorption and levels
of concentration of a drug product in the bloodstream needed to produce the same therapeutic
effect. Supplemental ANDAs are required for approval of various types of changes to an approved
application, and these supplements may be under review for six months or more. In addition, certain
types of changes may only be approved once new bioequivalency studies are conducted or other
requirements are satisfied. During fiscal 2005, Mylan received 27 application approvals from the FDA, including 11 final
ANDA approvals, 11 tentative ANDA approvals and five supplemental ANDA approvals for new product
strengths. Over the past two fiscal years, the number of ANDA approvals has more than doubled.
This has been made possible by Mylans continued commitment to, and investment in, research and
development and legal costs in the form of patent challenges. As of March 31, 2005, Mylan had 42 original ANDAs and two supplemental ANDAs for new product
strengths pending FDA approval, which represent products with calendar year 2004 brand
sales of approximately $35 billion. Of these 44 applications, 18 have been granted tentative
approval/approvable status and represent approximately $19 billion in calendar year 2004 brand
sales. Because generic products have selling prices which are generally lower than their branded
counterparts, sales of generic products will not generate the same level of net revenues as sales
of an equivalent number of units of branded products. Over the next few years, patent protection on a large number of brand drugs is expected to
expire. These patent expirations should provide additional generic product opportunities. We intend
to concentrate our generic product development activities on brand products with significant U.S.
sales in specialized or growing markets, in areas that offer significant opportunities and other
competitive advantages. In addition, we intend to continue to focus our development efforts on
technically difficult-to-formulate products or products that require advanced manufacturing
technology. During fiscal 2006, we plan to invest in a significant number of bioequivalency studies
for development of generic products or dosage forms. 
 Brand Product Development The process required by the FDA before a previously unapproved pharmaceutical product may be
marketed in the U.S. generally involves the following:  
    laboratory and preclinical tests;
    submission of an Investigational New Drug application (IND), which must
become effective before clinical studies may begin;
    adequate and well-controlled human clinical studies to establish the safety and
efficacy of the proposed product for its intended use;
    submission of an NDA containing the results of the preclinical tests and
clinical studies establishing the safety and efficacy of the proposed product for its
intended use, as well as extensive data addressing such matters as manufacturing and
quality assurance;
    scale-up to commercial manufacturing; and
    FDA approval of an NDA. Preclinical tests include laboratory evaluation of the product, its chemistry, formulation and
stability, as well as toxicology studies to help define the pharmacological profile of the drug and
assess the potential safety and efficacy of the product. The results of these studies are submitted
to the FDA as part of the IND. They must demonstrate that the product delivers sufficient
quantities of the drug to the bloodstream or intended site of action to produce the desired
therapeutic results before human clinical trials may begin. These studies must also provide the
appropriate supportive safety information necessary for the FDA to determine whether the clinical
studies proposed to be conducted under the IND can safely proceed. The IND automatically becomes
effective 30 days after receipt by the FDA unless the FDA, during that 30- 6




---



##### Table of Contents



day period, raises concerns or questions about the conduct of the proposed trials as outlined
in the IND. In such cases, the IND sponsor and the FDA must resolve any outstanding concerns before
clinical trials may begin. In addition, an independent institutional review board must review and
approve any clinical study prior to initiation. Human clinical studies are typically conducted in three sequential phases, which may overlap:  
    Phase I: The drug is initially introduced into a relatively small number of
healthy human subjects or patients and is tested for safety, dosage tolerance, mechanism of
action, absorption, metabolism, distribution and excretion.
    Phase II: Studies are performed with a limited patient population to identify
possible adverse effects and safety risks, to assess the efficacy of the product for
specific targeted diseases or conditions, and to determine dosage tolerance and optimal
dosage.
    Phase III: When Phase II evaluations demonstrate that a dosage range of the
product is effective and has an acceptable safety profile, Phase III trials are undertaken
to evaluate further dosage and clinical efficacy and to test further for safety in an
expanded patient population at geographically dispersed clinical study sites. The results of the product development, preclinical studies and clinical studies are then
submitted to the FDA as part of the NDA. The NDA drug development and approval process could take
from three to more than ten years. Our brand product development continues to emphasize areas where we have an existing sales and
marketing presence, namely dermatology, cardiology and neurology. Additionally, pending ANDA submissions or products in development that upon FDA approval may
require significant promotional efforts, may be marketed by the Brand Segment. The Company owns a 50% interest in Somerset Pharmaceuticals, Inc. (Somerset), a joint
venture with Watson Pharmaceuticals, Inc. Currently, Somersets only marketed product is Eldepryl®,
a drug for the treatment of patients with late stage Parkinsons disease. In recent years, Somerset
has increased its research and development spending to develop additional indications for
selegiline, the active ingredient of Eldepryl, using a transdermal delivery system. In May 2001,
Somerset filed an NDA for EMSAMTM (selegiline transdermal delivery system), a
transdermal therapy for which it is seeking an indication for the treatment of major depressive
disorder. In December 2004, Somerset entered into an agreement with Bristol-Myers Squibb for the
commercialization and distribution of Somersets EMSAM. During fiscal 2004, Somerset received an
Approvable letter from the FDA with regard to the EMSAM NDA. As Somerset continues its research
and development activities, including working with the FDA to obtain approval for EMSAM, its
earnings may continue to be adversely affected. 
 Terminated Acquisition of King Pharmaceuticals On July 23, 2004, we entered into an Agreement and Plan of Merger (Agreement) to acquire
King Pharmaceuticals, Inc. (King) in a stock-for-stock transaction. On February 27, 2005, Mylan and King announced that the companies had
mutually agreed to terminate the Agreement. Following the termination of the Agreement, in the fourth quarter of fiscal 2005, Mylan
recorded expenses of approximately $18.3 million for costs directly related to the terminated
acquisition. An additional $4.6 million of expenses were incurred during fiscal 2005 consisting of
consulting costs related to the planned integration of the two companies. 7




---



##### Table of Contents



Patents, Trademarks and Licenses We own or license a number of patents in the U.S. and foreign countries covering certain
products, and have also developed brand names and trademarks for other products. Generally, the
brand pharmaceutical business relies upon patent protection to ensure market exclusivity for the
life of the patent. Following patent expiration, brand products often continue to have market
viability based upon the goodwill of the product name, which typically benefits from trademark
protection. We consider the overall protection of our patents, trademarks and license rights to be
of material value and act to prevent these rights from infringement; however, our business in the
Brand Segment is not dependent upon any single patent, trademark or license. 
 Customers and Marketing We market our generic products directly to wholesalers, distributors, retail pharmacy chains,
mail order pharmacies and group purchasing organizations within the U.S. We also market our generic
products indirectly to independent pharmacies, managed care organizations, hospitals, nursing
homes, pharmacy benefit management companies and government entities. These customers, called
indirect customers, purchase our products primarily through our wholesale customers.
Approximately 68 employees are engaged in servicing Generic Segment customers. Brand pharmaceutical products are marketed directly to health care professionals in order to
increase brand awareness and prescriptions written for the product. However, these products are
generally sold through the same channels and customers as generic products. Approximately 265
employees are engaged in marketing and selling the Brand Segments products, as well as servicing
Brand Segment customers. Consistent with industry practice, we have a return policy that allows our customers to return
product within a specified period prior to and subsequent to the expiration date. In addition to
returns, see the Application of Critical Accounting Policies section of our Managements
Discussion and Analysis of Results of Operations and Financial Condition for discussion of
additional revenue provisions. Sales of products to AmerisourceBergen Corporation, Cardinal Health, Inc. and McKesson
Corporation represented approximately 11%, 19% and 16%, respectively, of net revenues in fiscal
2005. Sales of products to Cardinal Health, Inc. and McKesson Corporation represented approximately
21% and 15%, respectively, of net revenues in fiscal 2004. Sales of products to AmerisourceBergen
Corporation, Cardinal Health, Inc. and McKesson Corporation represented approximately 20%, 16% and
14%, respectively, of net revenues in fiscal 2003. 
 Competition The pharmaceutical industry is very competitive. Our competitors vary depending upon
therapeutic and product categories. Primary competitors include the major manufacturers of brand
name and generic pharmaceuticals. The primary means of competition are innovation and development, timely FDA approval,
manufacturing capabilities, product quality, marketing, customer service, reputation and price. To
compete effectively on the basis of price and remain profitable, a generic drug manufacturer must
manufacture its products in a cost-effective manner. Our competitors include other generic
manufacturers, as well as brand companies that license their products to generic manufacturers
prior to or as relevant patents expire. No further regulatory approvals are required for a brand
manufacturer to sell its pharmaceutical products directly or through a third party to the generic
market, nor do such manufacturers face any other significant barriers to entry into such market. The pharmaceutical market is undergoing, and is expected to continue to undergo, rapid and
significant technological changes, and we expect competition to intensify as technological advances
are made. We intend to compete in this marketplace by developing or licensing brand pharmaceutical
products that are either patented or proprietary and that are primarily for indications having
relatively large patient populations or that have limited or inadequate treatments available and by
developing therapeutic equivalents to brand products that offer unique marketing opportunities. 
 Product Liability Product liability litigation represents an inherent risk to firms in the pharmaceutical
industry. We maintain commercial insurance to protect against and manage a portion of the risks
involved in conducting our business. The cost to obtain insurance coverage for pharmaceutical
product liability risks has significantly increased due to the commercial insurance 8




---



##### Table of Contents



industrys practices resulting in increased retentions and changes in the limits of insurance
coverage. In response to the rising cost of commercial insurance, Mylan reinstated the use of our
wholly owned captive insurance subsidiary to insure a portion of these risks including the first
$10.0 million. Mylan purchases commercial insurance in excess of this $10.0 million limit. 
 Raw Materials The active pharmaceutical ingredients and other materials and supplies used in our
pharmaceutical manufacturing operations are generally available and purchased from many different
foreign and domestic suppliers. However, in some cases, the raw materials used to manufacture
pharmaceutical products are only available from a single FDA-approved supplier. Even when more than
one supplier exists, we may choose, and in some cases have only chosen to list, one supplier in our
applications submitted to the FDA. Any change in a supplier not previously approved must then be
submitted through a formal approval process with the FDA. 
 Government Regulation All pharmaceutical manufacturers are subject to extensive, complex and evolving regulation by
the federal government, principally the FDA, and to a lesser extent, other federal and state
government agencies. The Federal Food, Drug and Cosmetic Act, the Controlled Substances Act, the
Waxman-Hatch Act, the Generic Drug Enforcement Act and other federal government statutes and
regulations govern or influence the testing, manufacturing, packaging, labeling, storing, record
keeping, safety, approval, advertising, promotion, sale and distribution of products. FDA approval is required before any new drug can be marketed. The FDA requires extensive
testing of new pharmaceutical products to demonstrate that such products are both safe and
effective in treating the indications for which approval is sought. Testing in humans may not be
commenced until after an IND exemption is granted by the FDA. An NDA or supplemental NDA must be
submitted to the FDA both for new drugs that have not been previously approved by the FDA and for
new combinations of, new indications for, or new delivery methods for previously approved drugs. FDA approval of an ANDA is required before a generic equivalent of an existing or referenced
brand drug can be marketed. The ANDA process is abbreviated in that the FDA waives the requirement
of conducting complete preclinical and clinical studies and, instead, relies on bioequivalence
studies. A sponsor of an NDA is required to identify in its application any patent that claims the drug
or a use of the drug, that is the subject of the application. Upon NDA approval, the FDA lists the
approved drug product and these patents in the Orange Book. Any applicant that files an ANDA
seeking approval of a generic equivalent version of a referenced brand drug before expiration of
the referenced patent(s) must certify to the FDA that the listed patent is either not infringed or
that it is invalid or unenforceable (a Paragraph IV certification). If the holder of the NDA sues
claiming infringement within 45 days of notification by the applicant, the FDA may not approve the
ANDA application until the earlier of a court decision favorable to the ANDA applicant has been
rendered or the expiration of 30 months. In addition to patent exclusivity, the holder of the NDA for the listed drug may be entitled
to a period of non-patent, market exclusivity, during which the FDA cannot approve an application
for a bioequivalent product. If the listed drug is a new chemical entity, the FDA may not accept an
ANDA for a bioequivalent product for up to five years following approval of the NDA for the new
chemical entity. If it is not a new chemical entity but the holder of the NDA conducted clinical
trials essential to approval of the NDA or a supplement thereto, the FDA may not approve an ANDA
for a bioequivalent product before expiration of three years. Certain other periods of exclusivity
may be available if the listed drug is indicated for treatment of a rare disease or is studied for
pediatric indications. Facilities, procedures, operations and/or testing of products are subject to periodic
inspection by the FDA, the Drug Enforcement Administration and other authorities. In addition, the
FDA conducts pre-approval and post-approval reviews and plant inspections to determine whether our
systems and processes are in compliance with cGMP and other FDA regulations. Certain suppliers are
subject to similar regulations and periodic inspections. Medicaid, Medicare and other reimbursement legislation or programs govern reimbursement levels
and require all pharmaceutical manufacturers to rebate a percentage of their revenues arising from
Medicaid-reimbursed drug sales to individual states. The required rebate is currently 11% of the
average manufacturers price for sales of Medicaid-reimbursed products marketed under ANDAs. Sales
of Medicaid-reimbursed products marketed under NDAs generally require manufacturers to rebate the
greater of approximately 15% of the average manufacturers price or the difference 9




---



##### Table of Contents



between the average net sales price and the lowest net sales price during a specific period.
We believe that federal or state governments may continue to enact measures aimed at reducing the
cost of drugs to the public. 
 Seasonality Our business is not materially affected by seasonal factors. 
 Environment We believe that our operations comply in all material respects with applicable laws and
regulations concerning the environment. While it is impossible to predict accurately the future
costs associated with environmental compliance and potential remediation activities, compliance
with environmental laws is not expected to require significant capital expenditures and has not
had, and is not expected to have, a material adverse effect on our earnings or competitive
position. 
 Employees We employ approximately 3,000 persons, approximately 1,080 of whom serve in clerical, sales
and management capacities. The remaining employees are engaged in production and maintenance
activities. The production and maintenance employees at our manufacturing facility in Morgantown, West
Virginia, are represented by the Paper, Allied-Industrial Chemical and Energy Workers International
Union (P.A.C.E.) (AFL-CIO) and its Local Union 5-957-AFL-CIO under a contract that expires on April
15, 2007. 
 Backlog At May 11, 2005, Generic Segment open orders were approximately $22.0 million and Brand
Segment open orders were approximately $6.0 million. Because of the relatively short lead time
required in filling orders for our products, we do not believe these backlog amounts bear a
significant relationship to sales or income for any full 12-month period. 
 Risk Factors The following risk factors could have a material adverse effect on our business, financial
position or results of operations and could cause the market value of our common stock to decline.
These risk factors may not include all of the important factors that could affect our business or
our industry or that could cause our future financial results to differ materially from historic or
expected results or cause the market price of our common stock to fluctuate or decline. OUR FUTURE REVENUE GROWTH AND PROFITABILITY ARE DEPENDENT UPON OUR ABILITY TO DEVELOP AND LICENSE,
OR OTHERWISE ACQUIRE, AND INTRODUCE NEW PRODUCTS ON A TIMELY BASIS IN RELATION TO OUR COMPETITORS
PRODUCT INTRODUCTIONS. OUR FAILURE TO DO SO SUCCESSFULLY COULD HAVE A MATERIAL ADVERSE EFFECT ON
OUR FINANCIAL POSITION AND RESULTS OF OPERATIONS AND COULD CAUSE THE MARKET VALUE OF OUR COMMON
STOCK TO DECLINE. Our future revenues and profitability will depend, to a significant extent, upon our ability
to successfully develop and license, or otherwise acquire, and commercialize new generic and patent
or statutorily protected (usually brand) pharmaceutical products in a timely manner. Product
development is inherently risky, especially for new drugs for which safety and efficacy have not
been established, and the market is not yet proven. Likewise, product licensing involves inherent
risks including uncertainties due to matters that may affect the achievement of milestones, as well
as the possibility of contractual disagreements with regard to terms such as license scope or
termination rights. The development and commercialization process, particularly with regard to new
drugs, also requires substantial time, effort and financial resources. We may not be successful in
commercializing any of the products that we are developing or licensing on a timely basis, if at
all, which could adversely affect our product introduction plans, financial position and results of
operations and could cause the market value of our common stock to decline. FDA approval is required before any prescription drug product, including generic drug
products, can be marketed. The process of obtaining FDA approval to manufacture and market new and
generic pharmaceutical products is rigorous, time-consuming, costly and largely unpredictable. We
may be unable to obtain requisite FDA approvals on a timely basis for new generic or brand products
that we may develop, license or otherwise acquire. Also, for products pending approval, we 10




---



##### Table of Contents



may obtain raw materials or produce batches of inventory to be used in efficacy and
bioequivalency testing, as well as in anticipation of the products launch. In the event that FDA
approval is denied or delayed we could be exposed to the risk of this inventory becoming obsolete.
The timing and cost of obtaining FDA approvals could adversely affect our product introduction
plans, financial position and results of operations and could cause the market value of our common
stock to decline. The ANDA approval process often results in the FDA granting final approval to a number of
ANDAs for a given product at the time a patent claim for a corresponding brand product or other
market exclusivity expires. This often forces us to face immediate competition when we introduce a
generic product into the market. Additionally, ANDA approvals often continue to be granted for a
given product subsequent to the initial launch of the generic product. These circumstances
generally result in significantly lower prices, as well as reduced margins, for generic products
compared to brand products. New generic market entrants generally cause continued price and margin
erosion over the generic product life cycle. The Waxman-Hatch Act provides for a period of 180 days of generic marketing exclusivity for
each ANDA applicant that is first to file an ANDA containing a certification of invalidity,
non-infringement or unenforceability related to a patent listed with respect to a reference drug
product, commonly referred to as a Paragraph IV certification. During this exclusivity period,
which under certain circumstances may be required to be shared with other applicable ANDA sponsors
with Paragraph IV certifications, the FDA cannot grant final approval to other ANDA sponsors
holding applications for the same generic equivalent. If an ANDA containing a Paragraph IV
certification is successful, it generally results in higher market share, net revenues and gross
margin for that applicant. Even if we obtain FDA approval for our generic drug products, if we are
not the first ANDA applicant to challenge a listed patent for such a product, we may lose
significant advantages to a competitor that filed its ANDA containing such a challenge. The same
would be true in situations where we are required to share our exclusivity period with other ANDA
sponsors with Paragraph IV certifications. Such situations could have a material adverse effect on
our ability to market that product profitably and on our financial position and results of
operations, and the market value of our common stock could decline. OUR APPROVED PRODUCTS MAY NOT ACHIEVE EXPECTED LEVELS OF MARKET ACCEPTANCE, WHICH COULD HAVE A
MATERIAL ADVERSE EFFECT ON OUR PROFITABILITY, FINANCIAL POSITION AND RESULTS OF OPERATIONS AND
COULD CAUSE THE MARKET VALUE OF OUR COMMON STOCK TO DECLINE. Even if we are able to obtain regulatory approvals for our new pharmaceutical products,
generic or brand, the success of those products is dependent upon market acceptance. Levels of
market acceptance for our new products could be impacted by several factors, including:  
    the availability of alternative products from our competitors;
    the price of our products relative to that of our competitors;
the timing of our market entry;
the ability to market our products effectively to the retail
level; and
the acceptance of our products by government and private formularies. Some of these factors are not within our control. Our new products may not achieve expected
levels of market acceptance. Additionally, continuing studies of the proper utilization, safety and
efficacy of pharmaceutical products are being conducted by the industry, government agencies and
others. Such studies, which increasingly employ sophisticated methods and techniques, can call into
question the utilization, safety and efficacy of previously marketed products. In some cases, these
studies have resulted, and may in the future result, in the discontinuance of product marketing.
These situations, should they occur, could have a material adverse effect on our profitability,
financial position and results of operations, and the market value of our common stock could
decline. A RELATIVELY SMALL GROUP OF PRODUCTS MAY REPRESENT A SIGNIFICANT PORTION OF OUR NET REVENUES OR NET
EARNINGS FROM TIME TO TIME. IF THE VOLUME OR PRICING OF ANY OF THESE PRODUCTS DECLINES, IT COULD
HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS AND
COULD CAUSE THE MARKET VALUE OF OUR COMMON STOCK TO DECLINE. 11




---



##### Table of Contents



Sales of a limited number of our products often represent a significant portion of our net
revenues and net earnings. If the volume or pricing of our largest selling products declines in the
future, our business, financial position and results of operations could be materially adversely
affected, and the market value of our common stock could decline. WE FACE VIGOROUS COMPETITION FROM OTHER PHARMACEUTICAL MANUFACTURERS THAT THREATENS THE COMMERCIAL
ACCEPTANCE AND PRICING OF OUR PRODUCTS, WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS,
FINANCIAL POSITION AND RESULTS OF OPERATIONS AND COULD CAUSE THE MARKET VALUE OF OUR COMMON STOCK
TO DECLINE. Our competitors may be able to develop products and processes competitive with or superior to
our own for many reasons, including that they may have:  
    proprietary processes or delivery systems;
    larger research and development and marketing staffs;
    larger production capabilities in a particular therapeutic area;
    more experience in preclinical testing and human clinical trials;
    more products; or
    more experience in developing new drugs and financial resources, particularly
with regard to brand manufacturers. Any of these factors and others could have a material adverse effect on our business,
financial position and results of operations and could cause the market value of our common stock
to decline. BECAUSE THE PHARMACEUTICAL INDUSTRY IS HEAVILY REGULATED, WE FACE SIGNIFICANT COSTS AND
UNCERTAINTIES ASSOCIATED WITH OUR EFFORTS TO COMPLY WITH APPLICABLE REGULATIONS. SHOULD WE FAIL TO
COMPLY WE COULD EXPERIENCE MATERIAL ADVERSE EFFECTS ON OUR BUSINESS, FINANCIAL POSITION AND RESULTS
OF OPERATIONS, AND THE MARKET VALUE OF OUR COMMON STOCK COULD DECLINE. The pharmaceutical industry is subject to regulation by various federal and state governmental
authorities. For instance, we must comply with FDA requirements with respect to the manufacture,
labeling, sale, distribution, marketing, advertising, promotion and development of pharmaceutical
products. Failure to comply with FDA and other governmental regulations can result in fines,
disgorgement, unanticipated compliance expenditures, recall or seizure of products, total or
partial suspension of production and/or distribution, suspension of the FDAs review of NDAs or
ANDAs, enforcement actions, injunctions and criminal prosecution. Under certain circumstances, the
FDA also has the authority to revoke previously granted drug approvals. Although we have internal
regulatory compliance programs and policies and have had a favorable compliance history, there is
no guarantee that these programs, as currently designed, will meet regulatory agency standards in
the future. Additionally, despite our efforts at compliance, there is no guarantee that we may not
be deemed to be deficient in some manner in the future. If we were deemed to be deficient in any
significant way, our business, financial position and results of operations could be materially
affected and the market value of our common stock could decline. In addition to the new drug approval process, the FDA also regulates the facilities and
operational procedures that we use to manufacture our products. We must register our facilities
with the FDA. All products manufactured in those facilities must be made in a manner consistent
with current good manufacturing practices (cGMP). Compliance with cGMP regulations requires
substantial expenditures of time, money and effort in such areas as production and quality control
to ensure full technical compliance. The FDA periodically inspects our manufacturing facilities for
compliance. FDA approval to manufacture a drug is site-specific. Failure to comply with cGMP
regulations at one of our manufacturing facilities could result in an enforcement action brought by
the FDA which could include withholding the approval of NDAs, ANDAs or other product applications
of that facility. If the FDA were to require one of our manufacturing facilities to cease or limit
production, our business could be adversely affected. Delay and cost in obtaining FDA approval to
manufacture at a different facility also could have a material adverse effect on our business,
financial position and results of operations and could cause the market value of our common stock
to decline. 12




---



##### Table of Contents



We are subject, as are generally all manufacturers, to various federal, state and local laws
regulating working conditions, as well as environmental protection laws and regulations, including
those governing the discharge of materials into the environment. Although we have not incurred
significant costs associated with complying with environmental provisions in the past, if changes
to such environmental laws and regulations are made in the future that require significant changes
in our operations or if we engage in the development and manufacturing of new products requiring
new or different environmental controls, we may be required to expend significant funds. Such
changes could have a material adverse effect on our business, financial position and results of
operations and could cause the market value of our common stock to decline. OUR REPORTING AND PAYMENT OBLIGATIONS UNDER THE MEDICAID REBATE PROGRAM AND OTHER GOVERNMENTAL
PRICING PROGRAMS ARE COMPLEX AND MAY INVOLVE SUBJECTIVE DECISIONS. ANY DETERMINATION OF FAILURE TO
COMPLY WITH THOSE OBLIGATIONS COULD SUBJECT US TO PENALTIES AND SANCTIONS WHICH COULD HAVE A
MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS, AND THE
MARKET VALUE OF OUR COMMON STOCK COULD DECLINE. As discussed elsewhere in this Form 10-K, we and other pharmaceutical companies are defendants
in a number of suits filed by state attorneys general and have been notified of an investigation by
the U.S. Department of Justice with respect to Medicaid reimbursement and rebates. Although the
regulations regarding reporting and payment obligations are complex, we believe we are properly and
accurately calculating and reporting the amounts owed in respect of Medicaid and other governmental
pricing programs; however, our calculations are subject to review and challenge by the applicable
governmental agencies, and it is possible that any such review could result in material changes. In
addition, because our processes for these calculations and the judgments involved in making these
calculations involve, and will continue to involve, subjective decisions, these calculations are
subject to the risk of errors. Any governmental agencies that have commenced, or may commence, an
investigation of the Company could impose, based on a claim of violation of fraud and false claims
laws or otherwise, civil and/or criminal sanctions, including fines, penalties and possible
exclusion from federal health care programs (including Medicaid and Medicare). Some of the
applicable laws may impose liability even in the absence of specific intent to defraud.
Furthermore, should there be ambiguity with regard to how to properly calculate and report payments
 and even in the absence of any such ambiguity  a governmental authority may take a position
contrary to a position we have taken, and may impose civil and/or criminal sanctions. Any such
penalties or sanctions could have a material adverse effect on our business, financial position and
results of operations and could cause the market value of our common stock to decline. WE EXPEND A SIGNIFICANT AMOUNT OF RESOURCES ON RESEARCH AND DEVELOPMENT EFFORTS THAT MAY NOT LEAD
TO SUCCESSFUL PRODUCT INTRODUCTIONS. FAILURE TO SUCCESSFULLY INTRODUCE PRODUCTS INTO THE MARKET
COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS,
AND THE MARKET VALUE OF OUR COMMON STOCK COULD DECLINE. Much of our development effort is focused on technically difficult-to-formulate products
and/or products that require advanced manufacturing technology. We conduct research and development
primarily to enable us to manufacture and market FDA-approved pharmaceuticals in accordance with
FDA regulations. Typically, research expenses related to the development of innovative compounds
and the filing of NDAs are significantly greater than those expenses associated with ANDAs. As we
continue to develop new products, our research expenses will likely increase. Because of the
inherent risk associated with research and development efforts in our industry, particularly with
respect to new drugs, our research and development expenditures may not result in the successful
introduction of FDA approved new pharmaceutical products. Also, after we submit an NDA or ANDA, the
FDA may request that we conduct additional studies and as a result, we may be unable to reasonably
determine the total research and development costs to develop a particular product. Finally, we
cannot be certain that any investment made in developing products will be recovered, even if we are
successful in commercialization. To the extent that we expend significant resources on research and
development efforts and are not able, ultimately, to introduce successful new products as a result
of those efforts, our business, financial position and results of operations may be materially
adversely affected, and the market value of our common stock could decline. A SIGNIFICANT PORTION OF OUR NET REVENUES ARE DERIVED FROM SALES TO A LIMITED NUMBER OF CUSTOMERS.
ANY SIGNIFICANT REDUCTION OF BUSINESS WITH ANY OF THESE CUSTOMERS COULD HAVE A MATERIAL ADVERSE
EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS, AND THE MARKET VALUE OF OUR
COMMON STOCK COULD DECLINE. 13




---



##### Table of Contents



A significant portion of our net revenues are derived from sales to a limited number of
customers. As such, a reduction in or loss of business with one customer, or if one customer were
to experience difficulty in paying us on a timely basis, our business, financial position and
results of operations could be materially adversely affected, and the market value of our common
stock could decline. THE USE OF LEGAL, REGULATORY AND LEGISLATIVE STRATEGIES BY COMPETITORS, BOTH BRAND AND GENERIC,
INCLUDING SO-CALLED AUTHORIZED GENERICS AND CITIZENS PETITIONS, AS WELL AS THE POTENTIAL IMPACT
OF PROPOSED LEGISLATION, MAY INCREASE OUR COSTS ASSOCIATED WITH THE INTRODUCTION OR MARKETING OF
OUR GENERIC PRODUCTS, COULD DELAY OR PREVENT SUCH INTRODUCTION AND/OR SIGNIFICANTLY REDUCE OUR
PROFIT POTENTIAL. THESE FACTORS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL
POSITION AND RESULTS OF OPERATIONS AND COULD CAUSE THE MARKET VALUE OF OUR COMMON STOCK TO DECLINE. Our competitors, both brand and generic, often pursue strategies to prevent or delay
competition from generic alternatives to brand products. These strategies include, but are not
limited to:  
    entering into agreements whereby other generic companies will begin to market a
so-called authorized generic, a generic equivalent of a branded product, at the same time
generic competition initially enters the market;
    filing citizens petitions with the FDA, including timing the filings so as to
thwart generic competition by causing delays of our product approvals;
    seeking to establish regulatory and legal obstacles that would make it more
difficult to demonstrate bioequivalence;
    initiating legislative efforts in various states to limit the substitution of
generic versions of brand pharmaceuticals;
    filing suits for patent infringement that automatically delay FDA approval of
many generic products;
    introducing next-generation products prior to the expiration of market
exclusivity for the reference product, which often materially reduces the demand for the
first generic product for which we seek FDA approval;
    obtaining extensions of market exclusivity by conducting clinical trials of
brand drugs in pediatric populations or by other potential methods as discussed below;
    persuading the FDA to withdraw the approval of brand name drugs for which the
patents are about to expire, thus allowing the brand name company to obtain new patented
products serving as substitutes for the products withdrawn; and
    seeking to obtain new patents on drugs for which patent protection is about to
expire. The Food and Drug Modernization Act of 1997 includes a pediatric exclusivity provision that
may provide an additional six months of market exclusivity for indications of new or currently
marketed drugs if certain agreed upon pediatric studies are completed by the applicant. Brand
companies are utilizing this provision to extend periods of market exclusivity. Some companies have lobbied Congress for amendments to the Waxman-Hatch legislation that would
give them additional advantages over generic competitors. For example, although the term of a
companys drug patent can be extended to reflect a portion of the time an NDA is under regulatory
review, some companies have proposed extending the patent term by a full year for each year spent
in clinical trials, rather than the one-half year that is currently permitted. If proposals like these were to become effective, our entry into the market and our ability to
generate revenues associated with new products may be delayed, reduced or eliminated, which could
have a material adverse effect on our business, financial position and results of operations and
could cause the market value of our common stock to decline. WE DEPEND ON THIRD-PARTY SUPPLIERS AND DISTRIBUTORS FOR THE RAW MATERIALS, PARTICULARLY THE
CHEMICAL COMPOUND(S) COMPRISING THE ACTIVE PHARMACEUTICAL INGREDIENT, THAT WE USE TO MANUFACTURE
OUR PRODUCTS, AS WELL AS CERTAIN FINISHED GOODS. A PROLONGED INTERRUPTION IN THE SUPPLY OF SUCH
PRODUCTS COULD HAVE A 14




---



##### Table of Contents



MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS, AND THE
MARKET VALUE OF OUR COMMON STOCK COULD DECLINE. We typically purchase the active pharmaceutical ingredient (i.e. the chemical compounds that
produce the desired therapeutic effect in our products), and other materials and supplies that we
use in our manufacturing operations, as well as certain finished products, from many different
foreign and domestic suppliers. Additionally, we maintain safety stocks in our raw materials inventory, and in certain cases
where we have listed only one supplier in our applications with the FDA, have received FDA approval
to use alternative suppliers should the need arise. However, there is no guarantee that we will
always have timely and sufficient access to a critical raw material or finished product. A
prolonged interruption in the supply of a single-sourced raw material, including the active
ingredient, or finished product could cause our financial position and results of operations to be
materially adversely affected, and the market value of our common stock could decline. In addition,
our manufacturing capabilities could be impacted by quality deficiencies in the products which our
suppliers provide, which could have a material adverse effect on our business, financial position
and results of operations, and the market value of our common stock could decline. WE USE SEVERAL MANUFACTURING FACILITIES TO MANUFACTURE OUR PRODUCTS. HOWEVER, A SIGNIFICANT NUMBER
OF OUR GENERIC PRODUCTS ARE PRODUCED AT ONE LOCATION. PRODUCTION AT THIS FACILITY COULD BE
INTERRUPTED, WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND
RESULTS OF OPERATIONS AND COULD CAUSE THE MARKET VALUE OF OUR COMMON STOCK TO DECLINE. Although we have other facilities, we produce a significant number of our generic products at
our largest manufacturing facility. A significant disruption at that facility, even on a short-term
basis, could impair our ability to produce and ship products to the market on a timely basis, which
could have a material adverse effect on our business, financial position and results of operations
and could cause the market value of our common stock to decline. WE MAY EXPERIENCE DECLINES IN THE SALES VOLUME AND PRICES OF OUR PRODUCTS AS THE RESULT OF THE
CONTINUING TREND TOWARD CONSOLIDATION OF CERTAIN CUSTOMER GROUPS, SUCH AS THE WHOLESALE DRUG
DISTRIBUTION AND RETAIL PHARMACY INDUSTRIES, AS WELL AS THE EMERGENCE OF LARGE BUYING GROUPS. THE
RESULT OF SUCH DEVELOPMENTS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL
POSITION AND RESULTS OF OPERATIONS AND COULD CAUSE THE MARKET VALUE OF OUR COMMON STOCK TO DECLINE. We make a significant amount of our sales to a relatively small number of drug wholesalers and
retail drug chains. These customers represent an essential part of the distribution chain of
generic pharmaceutical products. Drug wholesalers and retail drug chains have undergone, and are
continuing to undergo, significant consolidation. This consolidation may result in these groups
gaining additional purchasing leverage and consequently increasing the product pricing pressures
facing our business. Additionally, the emergence of large buying groups representing independent
retail pharmacies and the prevalence and influence of managed care organizations and similar
institutions potentially enable those groups to attempt to extract price discounts on our products.
The result of these developments may have a material adverse effect on our business, financial
position and results of operations and could cause the market value of our common stock to decline. WE MAY BE UNABLE TO PROTECT OUR INTELLECTUAL AND OTHER PROPRIETARY PROPERTY IN AN EFFECTIVE MANNER,
WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND RESULTS OF
OPERATIONS AND COULD CAUSE THE MARKET VALUE OF OUR COMMON STOCK TO DECLINE. Although our brand products may have patent protection, this may not prevent other companies
from developing functionally equivalent products or from challenging the validity or enforceability
of our patents. If our patents are found to be non-infringed, invalid or not enforceable, we could
experience an adverse effect on our ability to commercially promote patented products. We could be
required to enforce our patent or other intellectual property rights through litigation, which can
be protracted and involve significant expense and an inherently uncertain outcome. Any negative
outcome could have a material adverse effect on our business, financial position and results of
operations and could cause the market value of our common stock to decline. OUR COMPETITORS OR OTHER THIRD PARTIES MAY ALLEGE THAT WE ARE INFRINGING THEIR INTELLECTUAL
PROPERTY, FORCING US TO EXPEND SUBSTANTIAL RESOURCES IN RESULTING 15




---



##### Table of Contents



LITIGATION, THE OUTCOME OF WHICH IS UNCERTAIN. ANY UNFAVORABLE OUTCOME OF SUCH LITIGATION COULD
HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS AND
COULD CAUSE THE MARKET VALUE OF OUR COMMON STOCK TO DECLINE. Companies that produce brand pharmaceutical products routinely bring litigation against ANDA
applicants that seek FDA approval to manufacture and market generic forms of their branded
products. These companies allege patent infringement or other violations of intellectual property
rights as the basis for filing suit against an ANDA applicant. Likewise, patent holders may bring
patent infringement suits against companies that are currently marketing and selling their approved
generic products. Litigation often involves significant expense and can delay or prevent
introduction or sale of our generic products. There may also be situations where the Company uses its business judgment and decides to
market and sell products, notwithstanding the fact that allegations of patent infringement(s) by
our competitors have not been finally resolved by the courts. The risk involved in doing so can be
substantial because the remedies available to the owner of a patent for infringement include, among
other things, damages measured by the profits lost by the patent owner and not by the profits
earned by the infringer. In the case of a willful infringement, the definition of which is unclear,
such damages may be trebled. Moreover, because of the discount pricing typically involved with
bioequivalent products, patented brand products generally realize a substantially higher profit
margin than bioequivalent products. An adverse decision in a case such as this or in other similar
litigation could have a material adverse effect on our business, financial position and results of
operations and could cause the market value of our common stock to decline. WE MAY EXPERIENCE REDUCTIONS IN THE LEVELS OF REIMBURSEMENT FOR PHARMACEUTICAL PRODUCTS BY
GOVERNMENTAL AUTHORITIES, HMOS OR OTHER THIRD-PARTY PAYERS. ANY SUCH REDUCTIONS COULD HAVE A
MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS AND COULD
CAUSE THE MARKET VALUE OF OUR COMMON STOCK TO DECLINE. Various governmental authorities and private health insurers and other organizations, such as
HMOs, provide reimbursement to consumers for the cost of certain pharmaceutical products. Demand
for our products depends in part on the extent to which such reimbursement is available.
Third-party payers increasingly challenge the pricing of pharmaceutical products. This trend and
other trends toward the growth of HMOs, managed health care and legislative health care reform
create significant uncertainties regarding the future levels of reimbursement for pharmaceutical
products. Further, any reimbursement may be reduced in the future, perhaps to the point that market
demand for our products declines. Such a decline could have a material adverse effect on our
business, financial position and results of operations and could cause the market value of our
common stock to decline. LEGISLATIVE OR REGULATORY PROGRAMS THAT MAY INFLUENCE PRICES OF PRESCRIPTION DRUGS COULD HAVE A
MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS AND COULD
CAUSE THE MARKET VALUE OF OUR COMMON STOCK TO DECLINE. Current or future federal or state laws and regulations may influence the prices of drugs and,
therefore, could adversely affect the prices that we receive for our products. Programs in
existence in certain states seek to set prices of all drugs sold within those states through the
regulation and administration of the sale of prescription drugs. Expansion of these programs, in
particular, state Medicaid programs, or changes required in the way in which Medicaid rebates are
calculated under such programs, could adversely affect the price we receive for our products and
could have a material adverse effect on our business, financial position and results of operations
and could cause the market value of our common stock to decline. WE ARE INVOLVED IN VARIOUS LEGAL PROCEEDINGS AND CERTAIN GOVERNMENT INQUIRIES AND MAY EXPERIENCE
UNFAVORABLE OUTCOMES OF SUCH PROCEEDINGS OR INQUIRIES, WHICH COULD HAVE A MATERIAL ADVERSE EFFECT
ON OUR BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS AND COULD CAUSE THE MARKET VALUE OF
OUR COMMON STOCK TO DECLINE. We are involved in various legal proceedings and certain government inquiries, including, but
not limited to, patent infringement, product liability, breach of contract and claims involving
Medicaid and Medicare reimbursements, some of which are described in our periodic reports and
involve claims for, or the possibility of fines and penalties involving, 16




---



##### Table of Contents



substantial amounts of money or for other relief. If any of these legal proceedings or
inquiries were to result in an adverse outcome, the impact could have a material adverse effect on
our business, financial position and results of operations and could cause the market value of our
common stock to decline. With respect to product liability, the Company maintains commercial insurance to protect
against and manage a portion of the risks involved in conducting its business. Although we carry
insurance, we believe that no reasonable amount of insurance can fully protect against all such
risks because of the potential liability inherent in the business of producing pharmaceuticals for
human consumption. To the extent that a loss occurs, depending on the nature of the loss and the
level of insurance coverage maintained, it could have a material adverse effect on our business,
financial position and results of operations and could cause the market value of our common stock
to decline. WE ENTER INTO VARIOUS AGREEMENTS IN THE NORMAL COURSE OF BUSINESS WHICH PERIODICALLY INCORPORATE
PROVISIONS WHEREBY WE INDEMNIFY THE OTHER PARTY TO THE AGREEMENT. IN THE EVENT THAT WE WOULD HAVE
TO PERFORM UNDER THESE INDEMNIFICATION PROVISIONS, IT COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR
BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS AND COULD CAUSE THE MARKET VALUE OF OUR
COMMON STOCK TO DECLINE. In the normal course of business, we periodically enter into employment, legal settlement, and
other agreements which incorporate indemnification provisions. We maintain insurance coverage which
we believe will effectively mitigate our obligations under these indemnification provisions.
However, should our obligation under an indemnification provision exceed our coverage or should
coverage be denied, our business, financial position and results of operations could be materially
affected and the market value of our common stock could decline. OUR ACQUISITION STRATEGIES IN GENERAL INVOLVE A NUMBER OF INHERENT RISKS. THESE RISKS COULD CAUSE A
MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS AND COULD
CAUSE A DECLINE IN THE MARKET VALUE OF OUR COMMON STOCK. We continually seek to expand our product line through complementary or strategic acquisitions
of other companies, products and assets, and through joint ventures, licensing agreements or other
arrangements. Acquisitions, joint ventures and other business combinations involve various inherent
risks, such as assessing accurately the values, strengths, weaknesses, contingent and other
liabilities, regulatory compliance and potential profitability of acquisition or other transaction
candidates. Other inherent risks include the potential loss of key personnel of an acquired
business, our inability to achieve identified financial and operating synergies anticipated to
result from an acquisition or other transaction and unanticipated changes in business and economic
conditions affecting an acquisition or other transaction. International acquisitions, and other
transactions, could also be affected by export controls, exchange rate fluctuations, domestic and
foreign political conditions and the deterioration in domestic and foreign economic conditions. We may be unable to realize synergies or other benefits expected to result from acquisitions,
joint ventures and other transactions or investments we may undertake, or be unable to generate
additional revenue to offset any unanticipated inability to realize these expected synergies or
benefits. Realization of the anticipated benefits of acquisitions or other transactions could take
longer than expected, and implementation difficulties, market factors and the deterioration in
domestic and global economic conditions could alter the anticipated benefits of any such
transactions. These factors could cause a material adverse effect on our business, financial
position and results of operations and could cause a decline in the market value of our common
stock. OUR FUTURE SUCCESS IS HIGHLY DEPENDENT ON OUR CONTINUED ABILITY TO ATTRACT AND RETAIN KEY
PERSONNEL. ANY FAILURE TO ATTRACT AND RETAIN KEY PERSONNEL COULD HAVE A MATERIAL ADVERSE EFFECT ON
OUR BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS AND COULD CAUSE THE MARKET VALUE OF OUR
COMMON STOCK TO DECLINE. Because our success is largely dependent on the scientific nature of our business, it is
imperative that we attract and retain qualified personnel in order to develop new products and
compete effectively. If we fail to attract and retain key scientific, technical or management
personnel, our business could be affected adversely. Additionally, while we have employment
agreements with certain key employees in place, their employment for the duration of the agreement
is not guaranteed. If we are unsuccessful in retaining all of our key employees, it could have a
material adverse effect on our business, financial position and results of operations and could
cause the market value of our common stock to decline. 17




---



##### Table of Contents



RECENT DECISIONS BY THE FDA, CURRENT BRAND TACTICS AND OTHER FACTORS BEYOND OUR CONTROL HAVE PLACED
OUR GENERICS BUSINESS UNDER INCREASING PRESSURE, WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR
BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS AND COULD CAUSE THE MARKET VALUE OF OUR
COMMON STOCK TO DECLINE. If recent FDA rulings should stand, which rulings we believe are contrary to multiple sections
of the Federal Food, Drug, and Cosmetic Act and the Administrative Procedures Act, the FDAs
published regulations and the legal precedent on point, then our business and the generic industry
as a whole could be materially adversely affected. While we remain in an intense battle with regard
to these recent decisions as well as current brand tactics that undermine Congressional intent, we
cannot guarantee that we will prevail. If we are not successful, our business, financial position
and results of operations could suffer and the market value of our common stock could decline. WE HAVE BEGUN THE IMPLEMENTATION OF AN ENTERPRISE RESOURCE PLANNING SYSTEM. AS WITH ANY
IMPLEMENTATION OF A SIGNIFICANT NEW SYSTEM, DIFFICULTIES ENCOUNTERED COULD RESULT IN BUSINESS
INTERRUPTIONS, AND COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND
RESULTS OF OPERATIONS AND COULD CAUSE THE MARKET VALUE OF OUR COMMON STOCK TO DECLINE. We have begun the implementation of an enterprise resource planning (ERP) system to enhance
operating efficiencies and provide more effective management of our business operations.
Implementations of ERP systems and related software carry risks such as cost overruns, project
delays and business interruptions and delays. If we experience a material business interruption as
a result of our ERP implementation, it could have a material adverse effect on our business,
financial position and results of operations and could cause the market value of our common stock
to decline. WE MUST MAINTAIN ADEQUATE INTERNAL CONTROLS AND BE ABLE, ON AN ANNUAL BASIS, TO PROVIDE AN
ASSERTION AS TO THE EFFECTIVENESS OF SUCH CONTROLS. FAILURE TO MAINTAIN ADEQUATE INTERNAL CONTROLS
OR TO IMPLEMENT NEW OR IMPROVED CONTROLS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS,
FINANCIAL POSITION AND RESULTS OF OPERATIONS AND COULD CAUSE THE MARKET VALUE OF OUR COMMON STOCK
TO DECLINE. Effective internal controls are necessary for the Company to provide reasonable assurance with
respect to its financial reports. We are spending a substantial amount of management time and
resources to comply with changing laws, regulations and standards relating to corporate governance
and public disclosure, including the Sarbanes-Oxley Act of 2002, new Securities and Exchange
Commission (SEC) regulations and the New York Stock Exchange rules. In particular, Section 404 of
the Sarbanes-Oxley Act of 2002 requires managements annual review and evaluation of our internal
control systems, and attestations as to the effectiveness of these systems by our independent
public accounting firm. If we fail to maintain the adequacy of our internal controls, we may not be
able to ensure that we can conclude on an ongoing basis that we have effective internal control
over financial reporting. Additionally, internal control over financial reporting may not prevent
or detect misstatements because of its inherent limitations, including the possibility of human
error, the circumvention or overriding of controls, or fraud. Therefore, even effective internal
controls can provide only reasonable assurance with respect to the preparation and fair
presentation of financial statements. In addition, projections of any evaluation of effectiveness
of internal control over financial reporting to future periods are subject to the risk that the
control may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate. If the Company fails to maintain the adequacy of
its internal controls, including any failure to implement required new or improved controls, this
could have a material adverse effect on our business, financial position and results of operations,
and the market value of our common stock could decline. THERE ARE INHERENT UNCERTAINTIES INVOLVED IN ESTIMATES, JUDGMENTS AND ASSUMPTIONS USED IN THE
PREPARATION OF FINANCIAL STATEMENTS IN ACCORDANCE WITH GAAP. ANY
FUTURE CHANGES IN ESTIMATES, JUDGEMENTS
AND ASSUMPTIONS USED OR NECESSARY REVISIONS TO PRIOR ESTIMATES,
JUDGMENTS OR ASSUMPTIONS COULD LEAD TO A RESTATEMENT WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND
RESULTS OF OPERATIONS AND COULD CAUSE THE MARKET VALUE OF OUR COMMON STOCK TO DECLINE. The consolidated and condensed consolidated financial statements included in the periodic
reports we file with the SEC are prepared in accordance with accounting principles generally
accepted in the United States of America (GAAP). The preparation of financial statements in
accordance with GAAP involves making estimates, judgments and assumptions that affect reported
amounts of assets (including intangible assets), liabilities, revenues, expenses and income.
Estimates, 18




---



##### Table of Contents



judgments and assumptions are
inherently subject to change in the future and any necessary
revisions to prior estimates, judgements or assumptions could lead to
a restatement. Any such changes
could result in corresponding changes to the amounts of assets (including goodwill and other
intangible assets), liabilities, revenues, expenses and income. Any such changes could have a
material adverse effect on our business, financial position and results of operations and could
cause the market value of our common stock to decline. 
 Securities Exchange Act Reports The Company maintains an Internet website at the following address: www.mylan.com. We make
available on or through our Internet website certain reports and amendments to those reports that
we file with the SEC in accordance with the Securities Exchange Act of 1934. These include our
annual reports on Form 10-K, our quarterly reports on Form 10-Q and our current reports on Form
8-K. We make this information available on our website free of charge as soon as reasonably
practicable after we electronically file the information with, or furnish it to, the SEC. The
contents of our website are not incorporated by reference in this Annual Report on Form 10-K and
shall not be deemed filed under the Securities Exchange Act of 1934. 
 ITEM 2. Properties We maintain various facilities in the U.S. and Puerto Rico. These facilities are used for
research and development, manufacturing, warehousing, distribution and administrative functions and
consist of both owned and leased properties. The following summarizes the properties used to conduct our operations: Primary Segment
    
    Location
    
    Status
    
    Primary UseGeneric:
    
    North Carolina
    
    Owned
    
    DistributionWarehousingWest Virginia
    
    Owned
    
    ManufacturingWarehousingResearch and DevelopmentAdministrativeLeased
    
    WarehousingAdministrativeIllinois
    
    Owned
    
    ManufacturingWarehousingAdministrativeLeased
    
    WarehousingPuerto Rico
    
    Owned
    
    ManufacturingWarehousingAdministrativeBrand:
    
    North Carolina
    
    Leased
    
    AdministrativeTexas
    
    Owned
    
    ManufacturingWarehousingVermont
    
    Owned
    
    ManufacturingResearch and DevelopmentAdministrativeWarehousingCorporate/Other:
    
    Pennsylvania
    
    Owned
    
    Administrative
 All facilities are in good operating condition. The machinery and equipment are well
maintained, and the facilities are suitable for their intended purposes and have capacities
adequate for current operations. 19




---



##### Table of Contents



ITEM 3. Legal Proceedings Legal Proceedings While it is not possible to determine with any degree of certainty the ultimate outcome of the
following legal proceedings, the Company believes that it has meritorious defenses with respect to
the claims asserted against it and intends to vigorously defend its position. An adverse outcome in
any of these proceedings could have a material adverse effect on the Companys financial position
and results of operations. Omeprazole In fiscal 2001, Mylan Pharmaceuticals Inc. (MPI), a wholly-owned subsidiary of Mylan
Laboratories Inc. (Mylan Labs), filed an Abbreviated New Drug Application (ANDA) seeking
approval from the Food and Drug Administration (FDA) to manufacture, market and sell omeprazole
delayed-release capsules, and made Paragraph IV certifications to several patents owned by
AstraZeneca PLC (AstraZeneca) that were listed in the FDAs Orange Book. On September 8, 2000,
AstraZeneca filed suit against MPI and Mylan Labs in the U.S. District Court for the Southern
District of New York alleging infringement of several of AstraZenecas patents. MPI filed multiple
motions for summary judgment as to all claims of infringement, and the summary judgment motions
remain pending. On May 29, 2003, the FDA approved MPIs ANDA for the 10 mg and 20 mg strengths of
omeprazole delayed-release capsules and, on August 4, 2003, Mylan Labs announced that MPI had
commenced the sale of omeprazole 10 mg and 20 mg delayed-release capsules. AstraZeneca then amended
the pending lawsuit to assert claims against Mylan Labs and MPI, and filed a separate lawsuit
against MPIs supplier, Esteve Quimica S.A. (Esteve), for unspecified money damages and a finding
of willful infringement which could result in treble damages, injunctive relief, attorneys fees,
costs of litigation and such further relief as the court deems just and proper. In November 2002, MPI filed suit in the U.S. District Court for the District of Delaware
against Kremers Urban Development Company (KUDCo) and several other companies affiliated with
Schwarz Pharma AG (the Schwarz Pharma Group) alleging KUDCo and the Schwarz Pharma Group are
infringing U.S. patent 5,626,875 (the 875 Patent) in connection with KUDCos manufacture and
sale of omeprazole capsules in the U.S. KUDCo and the Schwarz Pharma Group asserted defenses and
counterclaims in that action alleging the inventors listed on the 875 Patent are not the actual
inventors of the invention described therein, and further seeking money damages alleging the
infringement action was not proper. On August 7, 2003, KUDCo and an individual filed a lawsuit
against MPI and Esteve in the U.S. District Court for the District of Columbia asserting claims
that were not asserted in the Delaware action. During the first quarter of fiscal 2005, a
settlement was agreed to with respect to the cases involving MPI, KUDCo and the Schwarz Pharma
Group, and these lawsuits have been dismissed, with prejudice. Under the settlement, MPI received a
payment of $37.5 million, a portion of which represented the reimbursement of legal expenses. Lorazepam and Clorazepate The Company previously reported final court approval in the first quarter of fiscal 2004 of a
settlement of a direct purchaser class action related to the sale of lorazepam and clorazepate,
which settlement did not include several related cases. Trial on the last remaining case began on
May 3, 2005, involving an action brought by a group of health insurers who opted out of previous
class action settlements. These plaintiffs are seeking to recover
approximately $12.0 million in
damages, plus possible trebling and attorneys fees. Pricing and Medicaid Litigation On September 26, 2003, the Commonwealth of Massachusetts sued Mylan Labs and 12 other generic
drug companies alleging unlawful manipulation of reimbursements under the Massachusetts Medicaid
program. The lawsuit identified three drug products sold by MPI, and sought equitable relief,
attorneys fees, cost of litigation and monetary damages in unspecified sums. The court has
dismissed the complaint, without prejudice, and granted Massachusetts leave to amend. On June 26, 2003, UDL Laboratories, Inc. (UDL) and MPI received requests from the U.S. House
of Representatives Energy and Commerce Committee requesting information about certain drug products
sold by UDL and MPI, in connection with the Committees investigation into pharmaceutical
reimbursement and rebates under Medicaid. UDL and MPI are cooperating with this inquiry and
provided information in response to the Committees requests in 2003. Several states Attorneys
General (AGs) have also sent letters to MPI, UDL and Mylan Bertek Pharmaceuticals Inc. (Mylan
Bertek), a wholly-owned subsidiary of Mylan Labs, demanding that those companies retain documents
relating to Medicaid 20




---



##### Table of Contents



reimbursement and rebate calculations pending the outcome of unspecified investigations by
those AGs into such matters. In addition, in July 2004, Mylan Labs received subpoenas from the AGs
of California and Florida in connection with civil investigations purportedly related to price
reporting and marketing practices regarding various drugs. Mylan is cooperating with each of these
investigations and has begun producing information in response to the subpoenas. On August 4, 2004, the City of New York filed a civil lawsuit against 44 pharmaceutical
companies, including Mylan Labs, in the U.S. District Court for the Southern District of New York
alleging violations of federal and state Medicaid laws, Medicaid and common law fraud, breach of
contract, other New York statutes and regulations, and unjust enrichment, and on January 26, 2005,
the plaintiff filed an amended complaint naming MPI and UDL as defendants. The case has been
transferred to the AWP multi-district litigation proceedings pending in the U.S. District Court for
the District of Massachusetts for pretrial proceedings. A similar suit was filed by the
Commonwealth of Kentucky on November 4, 2004, against Mylan Labs, MPI and approximately 40 other
pharmaceutical companies in the Franklin County Circuit Court alleging violations of the Kentucky
Consumer Protection Act, the Kentucky Medicaid Fraud Statute, the Kentucky False Advertising
Statute, fraud and negligent misrepresentation relating to reporting of average wholesale prices
(AWP). In addition, on December 6, 2004, the State of Wisconsin sued Mylan Labs, MPI and
approximately 35 other pharmaceutical companies in the Circuit Court for Dane County, Wisconsin
alleging violations of Wisconsin false advertising, price reporting and fraud statutes and, the
Wisconsin Trusts and Monopolies Act, and also asserting a claim for unjust enrichment. Nassau
County, New York filed a similar complaint in the U.S. District Court for the Eastern District of
New York on November 24, 2004 containing federal and state claims against numerous pharmaceutical
companies including Mylan Labs, MPI and UDL. On January 26, 2005, the Counties of Rockland, Suffolk
and Westchester filed amended complaints in the U.S. District Court for the District of
Massachusetts against approximately 50 pharmaceutical companies, including Mylan Labs, MPI and UDL,
alleging violations of federal and state Medicaid laws, Medicaid and common law fraud, breach of
contract, other New York statutes and regulations and unjust enrichment. Onondaga County, New York
filed a substantially similar complaint in the U.S. District Court for the Northern District of New
York in January 2005. In addition to the case filed by Onondaga County, New York, Mylan Labs, MPI
and UDL have been named as defendants along with several dozen other drug manufacturers in lawsuits
filed by 22 other counties in the State of New York in March 2005 and April 2005, asserting
substantially similar claims to those asserted by Onondaga County. On January 26, 2005, the State
of Alabama filed suit against 79 pharmaceutical companies, including Mylan Labs, MPI and UDL, in
the Circuit Court of Montgomery County, Alabama, alleging that Alabama has been defrauded by false
reporting of AWP, WAC and direct prices and asserts claims for fraud, wantonness and unjust
enrichment, seeking compensatory and punitive damages and injunctive relief. In each case, the
plaintiff seeks money damages and civil penalties in unspecified amounts and declaratory and
injunctive relief, and in each matter Mylan Labs and its subsidiaries have not yet been required to
respond to the complaint or the amended complaint, as applicable. The Company intends to defend
these actions vigorously. By letter dated January 12, 2005, MPI was notified by the U.S. Department of Justice of an
investigation concerning MPIs calculations of Medicaid drug rebates. To the best of MPIs
information, the investigation is in its early stages. MPI is collecting information requested by
the government and is cooperating fully with the governments investigation. Shareholder Litigation On November 22, 2004, an individual purporting to be a Mylan Labs shareholder, filed a civil
action in the Court of Common Pleas of Allegheny County, Pennsylvania, against Mylan Labs and all
members of its Board of Directors alleging that the Board members had breached their fiduciary
duties by approving the planned acquisition of King Pharmaceuticals, Inc. (King) and by declining
to dismantle the Companys anti-takeover defenses to permit an auction of the Company to Carl Icahn
or other potential buyers of the Company, and also alleging that certain transactions between the
Company and its directors (or their relatives or companies with which they were formerly
affiliated) may have been wasteful. On November 23, 2004, a substantially identical complaint was
filed in the same court by another purported Mylan Labs shareholder. The actions are styled as
shareholder derivative suits on behalf of Mylan Labs and class actions on behalf of all Mylan Labs
shareholders, and have been consolidated by the court under the caption In re Mylan Laboratories
Inc. Shareholder Litigation. Mylan Labs and its directors filed preliminary objections seeking
dismissal of the complaints. On January 19, 2005, the plaintiffs amended their complaints to add
Bear Stearns & Co., Inc., Goldman Sachs & Co., Richard C. Perry, Perry Corp., American Stock
Transfer & Trust Company, and John Does 1-100 as additional defendants, and to add claims
regarding trading activity by the additional defendants and the implications on Mylan Labs
shareholder rights agreement. The plaintiffs are seeking injunctive and declaratory relief and
undisclosed damages. Mylan Labs and its directors have not yet been required to respond to the
amended complaint. 21




---



##### Table of Contents



On December 10, 2004, High River Limited Partnership (High River), an entity controlled by
Carl Icahn, filed suit in the U.S. District Court for the Middle District of Pennsylvania against
Mylan Labs, its Vice Chairman and Chief Executive Officer Robert J. Coury, Richard C. Perry, Perry
Corp. and John Does 1-100, asserting against the Company a claim for violation of federal
securities laws and against the Company and Mr. Coury a claim for alleged breaches of Pennsylvania
statutory and common law, in connection with SEC filings and other public statements concerning the
planned King acquisition. The complaint also asserts claims under the federal securities laws and
Pennsylvania corporate law concerning a possible shareholder vote relating to the proposed merger.
On January 27, 2005, the court granted a motion by defendants Perry Corp. and Mr. Perry to transfer
the case to the U.S. District Court for the Southern District of New York. Mylan Labs, Mr. Coury
and the other defendants have filed motions to dismiss the complaint in its entirety, which motions
are currently pending before the court. On February 22, 2005, High River filed a complaint naming Mylan Labs and its directors in the
U.S. District Court for the Middle District of Pennsylvania challenging the validity under
Pennsylvania law of amendments to the provisions of the Companys bylaws requiring shareholders to
provide advance notice of nominations of directors for election at Mylan Labs annual meeting of
shareholders. Icahns High River sought a temporary restraining order (TRO) in an attempt to
block implementation of the advance notice bylaw. The Court denied High Rivers motion for a TRO,
and High River voluntarily withdrew the case without prejudice. On March 24, 2005, High River
filed another complaint in the same court naming the same defendants and seeking substantially the
same relief. Mylan has moved to dismiss the new action. Other Litigation The Company is involved in various other legal proceedings that are considered normal to its
business. While it is not feasible to predict the ultimate outcome of such other proceedings, the
Company believes that the ultimate outcome of such other proceedings will not have a material
adverse effect on its financial position or results of operations. 
 ITEM 4. Submission of Matters to a Vote of Security Holders None. 22




---



##### Table of Contents



PART II 
 ITEM 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities Our common stock is traded on the New York Stock Exchange under the symbol MYL. The
following table sets forth the quarterly high and low sales prices for our common stock for the
periods indicated: Fiscal 2005
    
    High
    
    
    LowFirst quarter
    
    $
    24.95
    
    
    $
    19.80Second quarter
    
    
    20.65
    
    
    
    14.24Third quarter
    
    
    20.00
    
    
    
    16.24Fourth quarter
    
    
    18.19
    
    
    
    15.50
 Fiscal 2004
    
    High
    
    
    LowFirst quarter
    
    $
    23.82
    
    
    $
    17.07Second quarter
    
    
    27.10
    
    
    
    20.61Third quarter
    
    
    28.53
    
    
    
    20.00Fourth quarter
    
    
    26.35
    
    
    
    21.95
 As of May 11, 2005, there were approximately 160,500 holders of record of our common stock,
including those held in street or nominee name. In the third quarter of fiscal 2003, the Company increased the quarterly cash dividend rate to
2.22 cents per share. In the third quarter of fiscal 2004, the
Company's Board of Directors voted again to increase the
quarterly dividend by 35% to 3.0 cents per share. We currently expect to continue the practice of
paying regular cash dividends. Information regarding the Companys equity compensation plans is incorporated by reference
into Item 12 in Part III of this Form 10-K. 23




---



##### Table of Contents



ITEM 6. Selected Financial Data The selected consolidated financial data set forth below should be read in conjunction with
Managements Discussion and Analysis of Results of Operations and Financial Condition and the
Consolidated Financial Statements and related Notes to Consolidated Financial Statements included
elsewhere in this Annual Report on Form 10-K. (in thousands, except per share data) Fiscal year ended March 31,
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001Statements of Earnings:Total revenues
    
    $
    1,253,374
    
    
    $
    1,374,617
    
    
    $
    1,269,192
    
    
    $
    1,104,050
    
    
    $
    846,696Cost of sales
    
    
    629,834
    
    
    
    612,149
    
    
    
    597,756
    
    
    
    480,111
    
    
    
    464,521Gross profit
    
    
    623,540
    
    
    
    762,468
    
    
    
    671,436
    
    
    
    623,939
    
    
    
    382,175Operating expenses:Research and development
    
    
    87,881
    
    
    
    100,813
    
    
    
    86,748
    
    
    
    58,847
    
    
    
    64,385Selling and administrative
    
    
    259,478
    
    
    
    201,612
    
    
    
    173,070
    
    
    
    169,913
    
    
    
    151,212Litigation settlements, net
    
    
    (25,990
    )
    
    
    (34,758
    )
    
    
    (2,370
    )
    
    
    
    
    
    
    147,000Earnings from operations
    
    
    302,171
    
    
    
    494,801
    
    
    
    413,988
    
    
    
    395,179
    
    
    
    19,578Other income, net
    
    
    10,076
    
    
    
    17,807
    
    
    
    12,525
    
    
    
    13,144
    
    
    
    38,435Earnings before income taxes
    
    
    312,247
    
    
    
    512,608
    
    
    
    426,513
    
    
    
    408,323
    
    
    
    58,013Provision for income taxes
    
    
    108,655
    
    
    
    177,999
    
    
    
    154,160
    
    
    
    148,072
    
    
    
    20,885Net earnings
    
    $
    203,592
    
    
    $
    334,609
    
    
    $
    272,353
    
    
    $
    260,251
    
    
    $
    37,128
 March 31,
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001Selected balance sheet data:Total assets
    
    $
    2,135,673
    
    
    $
    1,885,061
    
    
    $
    1,745,223
    
    
    $
    1,619,880
    
    
    $
    1,472,500Working capital
    
    
    1,282,945
    
    
    
    1,144,073
    
    
    
    962,440
    
    
    
    891,598
    
    
    
    589,955Long-term obligations
    
    
    19,325
    
    
    
    19,130
    
    
    
    19,943
    
    
    
    23,883
    
    
    
    25,263Total shareholders equity
    
    
    1,845,936
    
    
    
    1,659,788
    
    
    
    1,446,332
    
    
    
    1,402,239
    
    
    
    1,132,536Per common share data:Net earningsBasic
    
    $
    0.76
    
    
    $
    1.24
    
    
    $
    0.98
    
    
    $
    0.92
    
    
    $
    0.13Diluted
    
    $
    0.74
    
    
    $
    1.21
    
    
    $
    0.96
    
    
    $
    0.91
    
    
    $
    0.13Shareholders equity  diluted
    
    $
    6.75
    
    
    $
    6.01
    
    
    $
    5.12
    
    
    $
    4.89
    
    
    $
    3.97Cash dividends declared and paid
    
    $
    0.12
    
    
    $
    0.10
    
    
    $
    0.08
    
    
    $
    0.07
    
    
    $
    0.07Weighted average common shares
outstanding:Basic
    
    
    268,985
    
    
    
    268,931
    
    
    
    278,789
    
    
    
    282,432
    
    
    
    283,023Diluted
    
    
    273,621
    
    
    
    276,318
    
    
    
    282,330
    
    
    
    286,578
    
    
    
    285,186
 In fiscal years 2005, 2004 and 2003, we settled various outstanding legal matters for a net
gain of $25,990, $34,758 and $2,370, respectively. In fiscal 2001, we reached a tentative
settlement with the Federal Trade Commission, States Attorneys General and certain private parties
with regard to lawsuits filed against the Company relating to lorazepam and clorazepate in the
amount of $147,000. This settlement was approved by the court and made final in February 2002. 24




---



##### Table of Contents



ITEM 7. Managements Discussion and Analysis of Results of Operations and Financial Condition The following discussion and analysis, as well as other sections in this Annual Report, should
be read in conjunction with the Consolidated Financial Statements and related Notes to Consolidated
Financial Statements included elsewhere in this report. All references to fiscal years shall mean
the twelve-month period ended March 31. This discussion and analysis may contain forward-looking statements. These statements are
made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. Such forward-looking statements may include, without limitation, statements about the
Companys market opportunities, strategies, competition and expected activities and expenditures,
and at times may be identified by the use of words such as may, will, could, should,
would, project, believe, anticipate, expect, plan, estimate, forecast, potential,
intend, continue and variations of these words or comparable words. Forward-looking statements
inherently involve risks and uncertainties. Accordingly, actual results may differ materially from
those expressed or implied by these forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, the risks described under Risk
Factors in Item 1. The Company undertakes no obligation to update any forward-looking statements
for revisions or changes after the date of this Form 10-K. Overview Mylan Laboratories Inc. and its subsidiaries (the Company, Mylan or we) develop,
license, manufacture, market and distribute generic and brand pharmaceutical products. Fiscal
year 2005 net revenues topped $1.0 billion for the fourth consecutive year at $1.25 billion. Our
Generic Segment also achieved $1.0 billion in net revenues for the third consecutive year,
realizing sales of $1.01 billion. Our Brand Segment recorded net revenues of $240.9 million. For fiscal 2004, total revenues were $1.37 billion, comprised of Generic Segment net revenues
of $1.10 billion and Brand Segment revenues of $278.5 million. Year over year, this represents a
decrease of 9% in total revenues, 8% in the Generic Segment and 14% in the Brand Segment. The decrease in revenues during fiscal 2005 is due in part to the absence of a significant new
product launch until the fourth quarter of fiscal 2005. In January 2005, Mylan launched its
fentanyl transdermal system (fentanyl), the generic equivalent of Alza Corporations Duragesic®.
Conversely, in the prior year, omeprazole was launched in August 2003 and contributed significantly
to revenue for the final eight months of fiscal 2004. In total, Mylan realized $134.6 million in
revenue from products launched in fiscal 2004, compared to $87.3 million from products launched
during fiscal 2005. Consolidated gross profit for fiscal 2005 was $623.5 million compared to $762.5 million in the
prior year, a decrease of 18%, while gross margins decreased from 55.5% to 49.7%. Operating income
decreased by 39% to $302.2 million in fiscal 2005, compared to $494.8 million in fiscal 2004.
These decreases were realized by both the Generic and the Brand Segments. For the Generic Segment, gross profit decreased by 18% to $489.8 million and gross margins
decreased from 54.8% to 48.4%. Generic Segment operating income decreased by 24% to $386.2
million. Brand Segment gross profit for fiscal 2005 was $133.8 million, a decrease of 18%, and
gross margins decreased to 55.5% from 58.2%. Brand Segment operating income decreased by 24% to
$35.4 million. Net earnings for fiscal 2005 were $203.6 million compared to $334.6 million in fiscal 2004, a
decrease of 39%. Earnings per diluted share decreased from $1.21 in fiscal 2004 to $0.74 in fiscal
2005. A more thorough discussion of operating results by segment is provided under the heading
Results of Operations. Other factors which impacted the results of fiscal 2005 were:  
    Termination of King Acquisition On July 23, 2004, we entered into an Agreement and Plan
of Merger (Agreement) to acquire King Pharmaceuticals, Inc. (King) in a stock-for-stock
transaction. On February 27, 2005, Mylan and King announced that the companies had mutually
agreed to terminate the Agreement. Following the termination of the Agreement, in the fourth quarter of fiscal 2005, Mylan
recorded expenses in the amount of approximately $18.3 million for costs directly related to
the terminated acquisition. An additional $4.6 million of expenses were incurred during
fiscal 2005 consisting of consulting costs related to the planned integration of the two
companies. In all, these expenses reduced diluted earnings per share for fiscal 2005 by
approximately $0.06. 25




---



##### Table of Contents




    Competition on omeprazole subsequent to launch During the past year, additional generic
competition has entered the omeprazole market. In general, additional generic competition
usually results in lower pricing and volume. Competition caused significantly lower pricing
on omeprazole sales compared to the prior year, during which the product was launched.
However, we achieved higher volumes due primarily to expanding our customer base which
helped to partially offset the impact of the unfavorable pricing. In addition to other
generics, Mylan faced competition on omeprazole from an over-the-counter product and other
competing branded products.
    Competition on carbidopa/levodopa For the past several years, Mylan had been the only
generic market entrant for carbidopa/levodopa. During fiscal 2005, however, several
additional generic competitors launched their bioequivalent version of carbidopa/levodopa.
Similar to omeprazole, this additional competition has had negative implications on pricing
as well as volume related to carbidopa/levodopa sales.
    Unexpected delay of fentanyl launch In the third quarter of fiscal 2004, Mylan received
final approval from the Food & Drug Administration (FDA) for fentanyl. Mylan was,
therefore, prepared to launch this product upon patent expiration in July 2004. However, the
FDA in June 2004, rescinded Mylans final Abbreviated New Drug Application (ANDA)
approval. The actions of the FDA prevented Mylan from launching fentanyl in July 2004, which
was expected to contribute significantly to fiscal 2005 net revenues and net earnings. On
January 28, 2005, the FDA granted Mylan final approval for fentanyl, following the denial of
the pending citizens petitions. Mylan launched the product immediately after receiving this
approval. However, the pre-marketing of fentanyl by certain competitors, who represented
that they would be in the market at market formation, despite not having a tentative or
final approval from the FDA, coupled with strategies used by the authorized generic, caused
what the Company believes was irrational pricing of fentanyl at market formation, thereby
significantly reducing the revenue and profit which Mylan believes it could have earned from
sales of this product. Mylan believes that there could be further price erosion as
additional competitors enter the fentanyl market. 26




---



##### Table of Contents




    Authorized generics In addition to the impact that authorized generics had on sales of
fentanyl as discussed above, in late March 2004, Mylan launched nitrofurantoin
monohydrate/macrocrystals capsules, the generic equivalent of Procter & Gambles Macrobid®.
As the first company to file a Paragraph IV certification, Mylan was entitled to a 180-day
period of market exclusivity. However, Procter & Gamble entered into an agreement with
another generic company to market Macrobid as an authorized generic which was launched
immediately after the launch of Mylans product, effectively eliminating Mylans 180-day
exclusivity period and significantly reducing the profit potential of this product to Mylan.
Mylan has since filed a lawsuit against Procter & Gamble and its generic partner, on the
grounds that this practice violates the law and undermines the Waxman-Hatch legislation
which provides an incentive and various rights to a company that successfully challenges
patents. Mylan also filed a citizens petition with the FDA with respect to this issue.
    Regulatory action surrounding launch of levothyroxine sodium Mylan submitted an ANDA
for levothyroxine sodium as a bioequivalent generic product to Jones Pharma Inc.s Levoxyl®
and believed it held first-to-file status which, upon approval, would have given Mylan a
6-month period of marketing exclusivity. In addition, Mylan was the only applicant to
submit an ANDA to market a generic equivalent of Abbott Laboratories Synthroid®. However,
due to the approval of supplemental NDAs for other previously marketed levothyroxine sodium
products demonstrating bioequivalence to Synthroid and Levoxyl, the FDA allowed competing
companies to market their levothyroxine sodium products as generic equivalents to Synthroid
and Levoxyl prior to Mylans approvals, effectively eliminating Mylans 6-month exclusivity
period. We believe that this resulted in the loss of significant potential market share for
Mylans product. Despite the negative impact of competition, including authorized generics, on certain products
during fiscal 2005, as well as decisions of the FDA and the courts, fiscal 2005 did contain many
significant positive developments. In addition to Mylans launch of fentanyl which, through mid-April 2005, had captured
approximately 60% of the generic market, and over 40% of the total market for this product, the
following occurred during the year:  
    Acceptance for filing of nebivolol NDA During the second quarter of fiscal 2005,
Mylan announced that the FDA accepted for filing its brand subsidiarys New Drug Application
(NDA) for nebivolol, for which the Company is seeking approval for use in the management
of hypertension.
    Launch of Apokyn During the second quarter of fiscal 2005, Mylan launched Apokyn,
which has been approved for the acute, intermittent treatment of hypomobility, off
episodes associated with advanced Parkinsons disease. Apokyn, which has orphan drug status,
has been studied as an adjunct to other medications.
    EMSAM In December 2004, Somerset Pharmaceuticals, Inc. (Somerset), in which Mylan
owns a 50% equity interest, entered into an agreement with Bristol-Myers Squibb for the
commercialization and distribution of Somersets EMSAM (selegiline transdermal system).
Somerset received an Approvable letter from the FDA for EMSAM in February 2004, and if
approved by the FDA, EMSAM would be the first transdermal treatment for major depressive
disorder. 27




---



##### Table of Contents



Results of Operations The following table presents the results of operations for each of our business segments at March
31: Fiscal(in thousands)
    
    2005
    
    
    2004
    
    
    2003Consolidated:Total revenues
    
    $
    1,253,374
    
    
    $
    1,374,617
    
    
    $
    1,269,192Gross profit
    
    
    623,540
    
    
    
    762,468
    
    
    
    671,436Research and development
    
    
    87,881
    
    
    
    100,813
    
    
    
    86,748Selling and marketing
    
    
    79,838
    
    
    
    74,625
    
    
    
    65,625General and administrative
    
    
    179,640
    
    
    
    126,987
    
    
    
    107,445Litigation settlements, net
    
    
    (25,990
    )
    
    
    (34,758
    )
    
    
    (2,370
    )Earnings from operations
    
    
    302,171
    
    
    
    494,801
    
    
    
    413,988Other income, net
    
    
    10,076
    
    
    
    17,807
    
    
    
    12,525Pretax earnings
    
    
    312,247
    
    
    
    512,608
    
    
    
    426,513Generic Segment:Total revenues
    
    
    1,012,503
    
    
    
    1,096,128
    
    
    
    1,012,617Gross profit
    
    
    489,755
    
    
    
    600,280
    
    
    
    531,106Research and development
    
    
    68,858
    
    
    
    59,066
    
    
    
    44,562Selling and marketing
    
    
    12,353
    
    
    
    11,707
    
    
    
    11,160General and administrative
    
    
    22,345
    
    
    
    18,686
    
    
    
    21,341Earnings from operations
    
    
    386,199
    
    
    
    510,821
    
    
    
    454,043Brand Segment:Total revenues
    
    
    240,871
    
    
    
    278,489
    
    
    
    256,575Gross profit
    
    
    133,785
    
    
    
    162,188
    
    
    
    140,330Research and development
    
    
    19,023
    
    
    
    41,747
    
    
    
    42,186Selling and marketing
    
    
    67,485
    
    
    
    62,918
    
    
    
    54,465General and administrative
    
    
    11,898
    
    
    
    11,002
    
    
    
    10,997Earnings from operations
    
    
    35,379
    
    
    
    46,521
    
    
    
    32,682Corporate/Other:General and administrative
    
    
    145,397
    
    
    
    97,299
    
    
    
    75,107Litigation settlements, net
    
    
    (25,990
    )
    
    
    (34,758
    )
    
    
    (2,370
    )Other income, net
    
    
    10,076
    
    
    
    17,807
    
    
    
    12,525
 Segment net revenues represent revenues from unrelated third parties. For the Generic and Brand
Segments, earnings from operations represent segment gross profit less direct research and
development, selling and marketing, and general and administrative expenses. Corporate/Other
includes certain general and administrative expenses, such as legal expenditures, litigation
settlements and non-operating income and expense. 28




---



##### Table of Contents



Fiscal 2005 Compared to Fiscal 2004 Revenues and Gross Profit Revenues for fiscal 2005 were $1.25 billion compared to $1.37 billion for fiscal 2004, a
decrease of $121.2 million or 9%. In arriving at net revenues, gross revenues are reduced by
provisions for estimates, including discounts, customer performance and promotions, price
adjustments, returns and chargebacks. See the section titled Application of Critical Accounting
Policies in this Item 7, for a thorough discussion of our methodology with respect to such
provisions. For the fiscal year ended March 31, 2005, the most significant amounts charged against
gross revenues were for chargebacks in the amount of $892.6 million and customer performance and
promotions in the amount of $195.1 million. For fiscal 2004, chargebacks of $797.1 million and
customer performance and promotions of $163.8 million were charged against gross revenues. The
increase in the amounts charged against gross revenues for chargebacks in the current year is
primarily the result of pricing pressures on certain products in the Companys portfolio, most
notably omeprazole, carbidopa/levodopa and Amnesteem, as well as a shift in amounts purchased by
customers that are entitled to chargeback credits. Customer performance and promotions include
direct rebates as well as promotional programs. The increase in the amounts charged against gross
revenues for customer performance and promotions is primarily due to increased gross revenues (from
which direct rebates are calculated) and promotions offered to customers in connection with the
launch of fentanyl. The decrease in revenues during fiscal 2005 was realized by both the Generic Segment and the
Brand Segment. Generic Segment net revenues totaled $1.01 billion for fiscal 2005 compared to
$1.10 billion in fiscal 2004, a decrease of $83.6 million or 8%. For the Brand Segment revenues
decreased $37.6 million or 14% from $278.5 million in fiscal 2004 to $240.9 million in fiscal 2005. Within the Generic Segment, the decrease in revenues was primarily the result of continued
pricing pressure, including the effect of additional competition, on the Companys product
portfolio. Omeprazole, which was launched during the second quarter of fiscal 2004, experienced
significantly lower pricing as a direct result of additional generic competition. Increased
competition also resulted in unfavorable pricing on carbidopa/levodopa, as well as loss of market
share. As is the case in the generic industry, the entrance into the market of other generic
competition generally has a negative impact on the volume and pricing of the affected products. In
the near term, it is likely that unfavorable pricing will continue to impact certain products in
the Companys portfolio. Additionally, net revenues were impacted by certain customers who
decreased their level of purchases in order to reduce the amount of Mylans inventory that they
maintain on their shelves. Partially offsetting the impact of the items discussed above were increased overall volume and
revenues from new products. Despite the additional competition experienced in the current year,
omeprazole sales volume increased due primarily to expanding the customer base and capitalizing on
a higher generic conversion rate. Also, Mylan was able to establish its position as market leader,
based on omeprazole prescriptions dispensed. On an overall basis, Generic volume shipped for the
year increased nearly 6% to 11.4 billion doses compared with the prior year. New products launched subsequent to March 31, 2004, contributed net revenues of $87.3 million
in the current fiscal year, due largely to the launch of fentanyl in January 2005. Revenues for the Brand Segment were also significantly impacted by pricing pressures as a
result of additional competition. During fiscal 2005, Amnesteem and Digitek® were the two products
most affected. Fiscal 2004 Brand Segment revenues include $13.9 million from the sale of the U.S. and
Canadian rights for sertaconazole nitrate 2% cream (sertaconazole). Excluding the sertaconazole
sale and revenue from new products, volume for the Brand Segment was consistent year over year. Consolidated gross profit for fiscal 2005 was $623.5 million, or 49.7% of revenues, compared
to $762.5 million, or 55.5% of revenues in fiscal 2004. For the Generic Segment, gross profit for
fiscal 2005 decreased by $110.5 million to $489.8 million from $600.3 million in fiscal 2004, and
decreased as a percentage of revenues from 54.8% to 48.4%. The decrease in Generic Segment gross
margin is primarily the result of price erosion brought about by additional generic competition on
the Companys portfolio, primarily omeprazole and carbidopa/levodopa. Brand Segment gross profit for fiscal 2005 decreased $28.4 million to $133.8 million from
$162.2 million in fiscal 2004 and decreased as a percentage of revenues from 58.2% to 55.5%.
Excluding the sertaconazole sale, Brand Segment margins were essentially unchanged. 29




---



##### Table of Contents



Research and Development Research and development (R&D) expense for fiscal 2005 was $87.9 million compared to $100.8
million in fiscal 2004, which represents a decrease of $12.9 million or 13%. Brand Segment R&D
expense decreased by $22.7 million or 54% to $19.0 million in fiscal 2005 from $41.7 million in
fiscal 2004. This decrease was partially offset by an increase of $9.8 million or 17% to $68.9
million from $59.1 million in R&D expense in the Generic Segment. The decrease in Brand Segment R&D expense is due to the completion, in late fiscal 2004, of
clinical studies related to nebivolol, a product for the treatment of hypertension. The NDA for
nebivolol was submitted to the FDA on April 30, 2004, and accepted for filing by the FDA on June
29, 2004. As clinical development programs for other products and life cycle management studies
are initiated, it is expected that Brand Segment R&D expenses will increase in future periods. The increase in Generic Segment R&D expense is due equally to an increase in payroll and
payroll related costs and the cost of ongoing generic studies. The increase in generic studies is
the result of both a higher number of subjects per study and an increase in the related raw
material costs. The Companys continued commitment to, and investment in, R&D activities has
resulted in a robust ANDA pipeline, with 44 applications pending before the FDA, and 27 ANDA
approvals in fiscal 2005, more than double the number from just two years ago. Selling and Marketing Selling and marketing expense for fiscal 2005 was $79.8 million compared to $74.6 million in
fiscal 2004, an increase of $5.2 million or 7%. This increase was driven by the Brand Segment for
which selling and marketing expense increased by $4.6 million or 7% to $67.5 million. This
increase was primarily the result of costs incurred with respect to nebivolol and costs associated
with the fiscal 2005 launch of Apokyn. General and Administrative General and administrative (G&A) expense was $179.6 million in fiscal 2005, an increase of
$52.7 million or 41% from $127.0 million in fiscal 2004. The majority of the increase, or $48.1
million, is the result of higher Corporate expenses. The Generic Segment, which increased by $3.7
million from fiscal 2004, accounted for the remainder of the increase in G&A expense. Included in Corporate G&A expense for fiscal 2005 is approximately $18.3 million of costs
directly related to the terminated King acquisition and an additional $4.6 million of consulting
expenses related to the planned integration of the two companies. The remainder of the increase in
G&A expense is due to numerous factors, the most significant of which is payroll and payroll
related costs which increased by approximately $9.8 million. Additionally, consulting expenses
increased as a result of the Companys implementation of an enterprise resource planning (ERP)
system, and legal expenses increased as a result of new and ongoing litigation related to patent
challenges and other product related matters. Legal challenges continue to be an integral part of
the Companys strategy and its ability to continue to deliver new generic products to the market. Litigation Settlements Net gains of $26.0 million were recorded in fiscal 2005 with respect to the settlement of
various lawsuits. In June 2004, Mylan received $37.5 million in settlement of certain patent
litigation claims involving omeprazole. A portion of this settlement represented reimbursement of
legal fees and expenses related to the litigation. Partially offsetting this gain, Mylan agreed,
also in June 2004, to a $9.0 million settlement resolving all pending litigation with respect to
paclitaxel. Net gains of $34.8 million, also from the settlement of various lawsuits, were recorded in
fiscal 2004. Of this, $12.5 million was related to a favorable settlement reached with respect to
the marketing and manufacturing of Zagam®, and $10.2 million was related to a favorable settlement
reached with respect to mirtazapine. The remainder of the settlement primarily relates to future
payments to be made to Mylan totaling $10.0 million from Mylans co-defendants in the lorazepam and
clorazepate litigation. Other Income, Net Other income, net of other expenses, was $10.1 million in fiscal 2005 compared to $17.8
million in fiscal 2004. This decrease of $7.7 million is primarily the result of lower realized
gains on the sale of marketable securities in fiscal 2005 and 30




---



##### Table of Contents



a $5.0 million gain on the sale of an office building recorded in fiscal 2004, partially
offset by less of a loss recorded in fiscal 2005 on our investment in Somerset. We own a 50% equity interest in Somerset and account for this investment using the equity
method of accounting. The recorded loss in Somerset for fiscal 2005 was $3.3 million compared to a
loss of $7.1 million in fiscal 2004. The investment in Somerset was reduced to zero during fiscal
2005. As such, in accordance with Accounting Principles Board (APB) Opinion No. 18, The Equity
Method of Accounting for Investments in Common Stock, the Company has temporarily ceased recording
losses on this investment. Somerset is engaged in the manufacturing and marketing of Eldepryl® (selegiline), its sole
commercial product, which is used for the treatment of patients with late-stage Parkinsons
disease. During fiscal 2004, Somerset received an Approvable letter from the FDA with regard to
EMSAM (selegiline transdermal system), the transdermal therapy for which it is seeking an
indication for the treatment of major depressive disorder. As Somerset continues its research and
development activities, including working with the FDA to obtain approval for EMSAM, its earnings
may continue to be adversely affected. Income Taxes The effective tax rate for fiscal 2005 was 34.8% compared to 34.7% for fiscal 2004. Fiscal 2004 Compared to Fiscal 2003 Revenues and Gross Profit Revenues for fiscal 2004 were $1.37 billion compared to $1.27 billion for fiscal 2003, an
increase of 8% or $105.4 million. Both the Generic Segment and the Brand Segment contributed to the
overall increase in revenues. Revenues for the Generic Segment, which accounted for approximately
80% of consolidated revenues, increased $83.5 million or 8% over the prior year while Brand Segment
revenues increased $21.9 million or 9% over the prior year. Generic Segment net revenues exceeded $1.0 billion for the second time in the Companys
history, reaching $1.10 billion compared to $1.01 billion in fiscal 2003. The increase in net
revenues is primarily the result of new products launched in fiscal 2004, which contributed net
revenues of $134.6 million, largely due to omeprazole. Relatively stable pricing on existing
products also contributed to the increase in Generic Segment net revenues. These increases were
partially offset by lower volume. Generic volume shipped was approximately 10.8 billion doses in
fiscal 2004 compared to 11.6 billion doses in fiscal 2003. Our focus is to maximize gross margins
within our product portfolio which may result in fluctuations in volume and changes to our product
mix. Following the entrance into the market of generic competition, both price and volume erosion
may occur in the pharmaceutical industry which could adversely affect products in our portfolio. Revenues for the Brand Segment benefited from a full year of Amnesteem sales. The Brand
Segment generated revenues of $278.5 million, an increase of $21.9 million or 9% over fiscal 2003.
Amnesteem, which was launched in the third quarter of fiscal 2003, contributed revenues of $75.9
million in fiscal 2004, an increase of 24% over the prior year. Also contributing to the increase
in revenues is $13.9 million realized from the sertaconazole sale recorded under the caption Other
Revenue. Product sales, as well as sales of the rights to pharmaceutical products, are included in
revenues as such sales are a normal part of our operations. For Amnesteem, significant price erosion was experienced in fiscal 2004 due to the entrance
into the market of other generic competitors. This was compensated for, however, by increased
volume as Amnesteem held its position as market leader, maintaining an overall market share of
approximately 43% into May of 2004. Increased competition resulted in price erosion and lower
volume on Acticin®, Digitek and Maxzide® during fiscal 2004 while other products in the portfolio,
primarily phenytoin and Phenytek, experienced both favorable pricing and increased volume. Consolidated gross profit for fiscal 2004 was $762.5 million, or 56% of revenues, compared to
$671.4 million, or 53% of revenues in fiscal 2003. For the Generic Segment, gross profit for fiscal
2004 increased by $69.2 million to $600.3 million from $531.1 million in fiscal 2003 and increased
as a percentage of revenues from 52% to 55%. The increase is primarily due to higher margins
contributed by new products, primarily omeprazole. Additionally, a slight overall increase in gross
margin was realized by the Generic Segments existing products as a result of favorable product
mix. Brand Segment gross profit for fiscal 2004 increased $21.9 million to $162.2 million from
$140.3 million in fiscal 2003 31




---



##### Table of Contents



and increased as a percentage of revenues from 55% to 58%, primarily as a result of favorable
pricing realized on several core products and the sertaconazole sale for which there were minimal
associated costs in fiscal 2004. This increase was realized despite the fact that sales of
Amnesteem contribute lower gross margins than the majority of the Brand Segments other core
products due to royalties paid under a supply and distribution agreement. Research and Development R&D expense for fiscal 2004 was $100.8 million or approximately 7% of revenues compared to
$86.7 million or 7% of revenues in fiscal 2003, which represents an increase of $14.1 million or
16%. The increase was primarily attributable to the Generic Segment, for which R&D expense
increased $14.5 million or 33%, partially offset by a slight decrease in the Brand Segment of $0.4
million or 1%. The increase in the Generic Segment R&D expense is due equally to increased R&D headcount, as
well as an increase in the amount and timing of current and future ANDA submissions, which resulted
in increased study costs. The decrease in the Brand Segment R&D expense is due to the completion, during fiscal 2004, of
clinical studies primarily related to nebivolol, a product for the treatment of hypertension. These
studies had been fully enrolled in the prior year. Selling and Marketing Selling and marketing expense for fiscal 2004 was $74.6 million compared to $65.6 million in
fiscal 2003. As a percentage of revenues, selling and marketing expense approximated 5% in both
years. Generic Segment selling and marketing expense for fiscal 2004 increased $0.5 million or 5%
to $11.7 million from $11.2 million. Brand Segment selling and marketing expense increased $8.5
million or 16% to $62.9 million in fiscal 2004 from $54.5 million in fiscal 2003. This increase was
primarily the result of pre-marketing costs associated with the upcoming launch of Apokyn. General and Administrative G&A expense was $127.0 million in fiscal 2004, an increase of $19.5 million or 18% from $107.4
million in fiscal 2003. G&A expenses approximated 9% of revenues in both years. The increase in G&A
expense is the result of increased Corporate expenses, partially offset by lower expenses in the
Generic Segment. Generic Segment G&A expense decreased $2.7 million or 12% to $18.7 million in fiscal 2004.
Brand Segment G&A expenses remained constant at $11.0 million for fiscal years 2004 and 2003. Corporate G&A expense for fiscal 2004 was $97.3 million compared to $75.1 million in fiscal
2003, an increase of $22.2 million or 30%. This increase is primarily due to increased legal
expenses related to ongoing as well as recently settled litigation. Successful defense of patent
infringement claims, including Paragraph IV challenges, is an integral part of our ability to
continue to deliver pharmaceutical products to the market. Litigation Settlements Net gains of $34.8 million were recorded in fiscal 2004 with respect to the settlement of
various lawsuits. Of this, $12.5 million was related to a settlement reached with respect to the
marketing and manufacturing of Zagam, and $10.2 million was related to a settlement reached with
respect to mirtazapine. The remainder of the settlement primarily relates to future payments to be
made to Mylan totaling $10.0 million from Mylans co-defendants in the lorazepam and clorazepate
litigation. This $10.0 million represents a partial reimbursement of the settlement funds paid by
Mylan toward the settlement announced in fiscal 2003. These additional payments were agreed to by
the co-defendants, and the settlement received final approval from the judge overseeing the
litigation during fiscal 2004. Other Income, Net Other income, net of other expenses, was $17.8 million in fiscal 2004 compared to $12.5
million in fiscal 2003. This increase of $5.3 million is primarily the result of a $5.0 million
gain on the sale of an office building recorded in fiscal 2004, partially offset by a greater loss
recorded on our investment in Somerset. In addition, fiscal 2003 included a $5.7 million impairment
charge recorded on an investment which Mylan held in a foreign entity. 32




---



##### Table of Contents



We own a 50% equity interest in Somerset and account for this investment using the equity
method of accounting. The recorded loss in Somerset for fiscal 2004 was $7.1 million compared to a
loss of $4.6 million in fiscal 2003. Additionally in fiscal 2004, Mylan received dividends totaling
$10.0 million. Income Taxes The effective tax rate for fiscal 2004 was 34.7% compared to 36.1% for fiscal 2003. The
decrease in the effective tax rate was primarily due to the benefit of expansion tax credits
received from certain states and other economic incentives awarded by the government of Puerto
Rico. Liquidity and Capital Resources The Companys primary source of liquidity continues to be cash flows from operating
activities, which were $203.7 million for fiscal 2005. Working capital as of March 31, 2005, was
$1.28 billion, an increase of $138.9 million from the balance at March 31, 2004. The majority of
this increase was the result of higher marketable securities, and an increase in net accounts
receivable and net deferred tax assets, partially offset by lower inventories, higher accounts
payable and income taxes payable and a decrease in other current assets. The increase in accounts receivable at March 31, 2005, is primarily the result of sales of
fentanyl which was launched during the fourth quarter of fiscal 2005. The increase in estimated
sales allowances netted against accounts receivable also increased primarily as a result of the
launch of fentanyl. See Application of Critical Accounting Policies for further discussion of
estimated sales allowances. Net deferred tax assets increased primarily as a result of future tax
benefits related to the increase in provisions for estimated sales allowances. The decrease in inventory is the result of lower inventories carried with respect to certain
products, such as omeprazole, and is reflective of the corresponding decrease in revenues from
these products. This decrease is also reflective of the overall increase in volume shipped during
fiscal 2005, due in part to new product launches, primarily fentanyl. In the prior year, inventory
at March 31, 2004, increased from March 31, 2003, due to new product launches and planned
production increases in order to meet forecasted demand. The increase in accounts payable is the result of the change in the amount of outstanding
checks in excess of cash in our primary disbursement accounts. See discussion of financing
activities below. Income taxes payable increased from March 31, 2004, to March 31, 2005, primarily
as a result of the timing of estimated tax payments. Other current assets decreased primarily as a
result of the receipt of $10.0 million from the fiscal 2004 sale of the Companys investment in a
foreign entity, and the receipt of $17.0 million related to lawsuits settled in prior periods. In addition to the receipt of the $17.0 million from lawsuits settled in prior periods, during
the first quarter of fiscal 2005, Mylan received approximately $35.0 million related to the
settlement of certain patent litigation claims involving omeprazole. In fiscal 2005, Mylan paid $9.0 million to resolve all pending litigation with respect to
paclitaxel. In fiscal 2004 payments of $32.6 million were made related to two lawsuits which were
settled during fiscal 2003. Cash used in investing activities during fiscal 2005 was $174.9 million. Of the Companys $2.1
billion of total assets at March 31, 2005, $778.7 million was held in cash, cash equivalents and
marketable securities. Investments in marketable securities consists of a variety of high credit
quality debt securities, including U.S. government, state and local government and corporate
obligations. These investments are highly liquid and available for working capital needs. As these
instruments mature, the funds are generally reinvested in instruments with similar characteristics. Capital expenditures during fiscal 2005 were $90.7 million. These expenditures were incurred
primarily with respect to the Companys planned expansions. Due to the timing of the completion of certain phases of the Companys previously
announced expansion and ERP implementation, certain capital
expenditures which had originally been forecasted for fiscal
2005, will now be expended in fiscal 2006. Additionally, the Company expects the majority of the
expenditures related to the ERP implementation to occur in fiscal
2006 and fiscal 2007. Including the effect of these
items, capital expenditures for fiscal 2006 are expected to be
approximately $120 million. Cash used in financing activities was $2.6 million for fiscal 2005. Included in financing
activities in the prior year was $133.1 million used to purchase shares of the Companys stock
under a stock repurchase program. This program was 33




---



##### Table of Contents



completed on November 18, 2003. Also included in financing activities in fiscal 2005 was a
$19.6 million change in the amount of outstanding checks in excess of cash in our primary
disbursement accounts. The Company utilizes a cash management system under which uncleared checks
in excess of the cash balance in the bank account at the end of the reporting period are shown as a
book cash overdraft. The Company transfers cash on an as-needed basis to fund clearing checks.
The Company does not incur any financing charges with respect to this arrangement. In
the third quarter of fiscal 2004, the Company's Board of Directors voted to increase the quarterly dividend 35% to
3.0 cents per share. Dividend payments totaled $32.3 million during fiscal 2005. The Company is involved in various legal proceedings that are considered normal to its
business (see Note 16 to the Consolidated Financial Statements). While it is not feasible to
predict the outcome of such proceedings, an adverse outcome in any of these proceedings could
materially affect the Companys financial position and results of operations. The Company is actively pursuing, and is currently involved in, joint projects related to the
development, distribution and marketing of both generic and brand products. Many of these
arrangements provide for payments by the Company upon the attainment of specified milestones. While
these arrangements help to reduce the financial risk for unsuccessful projects, fulfillment of
specified milestones or the occurrence of other obligations may result in fluctuations in cash
flows from operating activities. In order to provide additional operating leverage, if necessary, the Company maintains a
revolving line of credit with a commercial bank providing for borrowings of up to $50.0 million
(see Note 7 to the Consolidated Financial Statements). As of March 31, 2005, no funds have been
advanced under this line of credit. Additionally, the Company is continuously evaluating
initiatives as a strategic part of its future growth, which may include; stock repurchase programs,
and the potential acquisition of products, as well as companies. Consequently, the Company may
utilize current cash reserves or incur additional indebtedness to finance any such strategic
initiatives, which could impact future liquidity. Contractual Obligations The following table summarizes our contractual obligations at March 31, 2005 and the effect
that such obligations are expected to have on our liquidity and cash flows in future periods: Less than
    
    
    One - Three
    
    
    Three - FiveAs of March 31, 2005
    
    Total
    
    
    One Year
    
    
    Years
    
    
    Years
    
    
    Thereafter(in thousands)Operating leases
    
    $
    13,977
    
    
    $
    5,644
    
    
    $
    7,513
    
    
    $
    604
    
    
    $
    216Long-term obligations
    
    
    19,325
    
    
    
    1,821
    
    
    
    5,463
    
    
    
    3,642
    
    
    
    8,399Line of credit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Letter of credit
    
    
    775
    
    
    
    775
    
    
    
    
    
    
    
    
    
    
    
    $
    34,077
    
    
    $
    8,240
    
    
    $
    12,976
    
    
    $
    4,246
    
    
    $
    8,615
 We lease certain real property under various operating lease arrangements that expire
generally over the next four years. These leases generally provide us with the option to renew the
lease at the end of the lease term. We have also entered into agreements to lease vehicles, which
are typically 24 to 36 months, for use by our sales force and key employees. Long-term obligations, primarily deferred compensation, consist of the discounted future
payments under individually negotiated agreements with certain key employees and directors. We maintain a revolving line of credit with a commercial bank. This line of credit expires on
July 31, 2005 and allows Mylan to borrow up to $50.0 million on an unsecured basis, at an
alternative base rate. At the Companys option, it may elect an interest rate based on the
published daily London Interbank Offered Rate by giving written notice to the lender. The agreement
does not contain any significant financial covenants. At March 31, 2005 and 2004, we had no
outstanding borrowings under this line of credit. In addition to the above, the Company has entered into various product licensing and
development agreements. In some of these arrangements, we provide funding for the development of
the product or to obtain rights to the use of the patent,
through milestone payments, in exchange for marketing and distribution rights to the product.
Because milestones represent 34




---



##### Table of Contents



the completion of specific contractual events and it is uncertain if
and when these milestones will be achieved, such contingencies have not been recorded on the
Companys consolidated balance sheet. In the event that all projects are successful, milestone and
development payments of approximately $9.3 million would be paid. The Company periodically enters into licensing agreements with other pharmaceutical companies
for the manufacture, marketing and/or sale of pharmaceutical products. These agreements generally
call for the Company to pay a percentage of amounts earned from the sale of the product as a
royalty. The Company does not have material financial guarantees or other contractual commitments that
are reasonably likely to adversely affect liquidity. The Company does not have any special purpose
entities or off-balance sheet financing arrangements. We have entered into employment and other agreements with certain executives that provide for
compensation and certain other benefits. These agreements provide for severance payments under
certain circumstances. Application of Critical Accounting Policies Our significant accounting policies are described in Note 2 to the Consolidated Financial
Statements, which were prepared in accordance with accounting principles generally accepted in the
United States of America. Included within these policies are certain policies which contain
critical accounting estimates and, therefore, have been deemed to be critical accounting
policies. Critical accounting estimates are those which require management to make assumptions
about matters that were uncertain at the time the estimate was made and for which the use of
different estimates, which reasonably could have been used, or changes in the accounting estimates
that are reasonably likely to occur from period to period, could have a material impact on the
presentation of our financial condition, changes in financial condition or results of operations.
The Company has identified the following to be its critical accounting policies: the determination
of revenue provisions; and the impact of existing legal matters. These critical accounting policies
affect each of the operating segments. Revenue Provisions Revenue is recognized for product sales upon shipment when title and risk of loss have
transferred to the customer and when provisions for estimates, including discounts, rebates,
promotional adjustments, price adjustments, returns, chargebacks, and other potential adjustments
are reasonably determinable. Accruals for these provisions are presented in the Consolidated
Financial Statements as reductions to net revenues and accounts receivable and within other current
liabilities. Accounts receivable are presented net of allowances relating to these provisions,
which were $349.4 million and $264.2 million at March 31, 2005 and 2004. Other current liabilities
include $51.8 million and $28.2 million at March 31, 2005 and 2004, for certain rebates and other
adjustments that are paid to indirect customers. The following is a rollforward of the most significant provisions for estimated sales
allowances during fiscal year ended March 31, 2005: Checks/Credits
    
    
    ProvisionsBalance
    
    
    Issued
    
    
    Recorded in
    
    
    BalanceMarch 31, 2004
    
    
    to Third Parties
    
    
    Current Period
    
    
    March 31, 2005Chargebacks
    
    $
    133,784
    
    
    $
    (860,343
    )
    
    $
    892,625
    
    
    $
    166,066Customer
performance and
promotions
    
    $
    37,611
    
    
    $
    (162,939
    )
    
    $
    195,130
    
    
    $
    69,802Returns
    
    $
    45,311
    
    
    $
    (35,955
    )
    
    $
    37,188
    
    
    $
    46,544
 The accrual for chargebacks increased primarily as a result of chargebacks related to sales of
fentanyl in the fourth quarter of fiscal 2005 and continued price erosion on the Companys existing
portfolio. This increase was partially offset by certain customers reducing the amount of
inventory they have on their shelves at year end compared to the
prior year. No material amounts included in the provision for
chargebacks recorded in
the current period relate to prior periods. Direct rebates from
sales of fentanyl and promotions offered to customers with respect to the fentanyl launch also
accounted for the majority of the increase in the accrual for customer performance and promotions. 35




---



##### Table of Contents



Provisions for estimated discounts, rebates, promotional and other credits require a lower
degree of subjectivity and are less complex in nature, yet combined represent a significant portion
of the overall provisions. These provisions are estimated based on historical payment experience,
historical relationship to revenues, estimated customer inventory levels and contract terms. Such
provisions are determinable due to the limited number of assumptions and consistency of historical
experience. Others, such as price adjustments, returns and chargebacks, require management to make
more subjective judgments and evaluate current market conditions. These provisions are discussed in
further detail below. Price Adjustments Price adjustments, which include shelf stock adjustments, are credits
issued to reflect decreases in the selling prices of our products. Shelf stock adjustments are
based upon the amount of product that our customers have remaining in their inventories at the time
of the price reduction. Decreases in our selling prices are discretionary decisions made by us to
reflect market conditions. Amounts recorded for estimated price adjustments are based upon
specified terms with direct customers, estimated launch dates of competing products, estimated
declines in market price, and in the case of shelf stock adjustments, estimates of inventory held
by the customer. In most cases, data with respect to the level of inventory held by the customer is
obtained directly from certain of our largest customers. Additionally, internal estimates are
prepared based upon historical buying patterns and estimated end user demand. Such information
allows us to assess the impact that a price adjustment will have given the quantity of inventory on
hand. We regularly monitor these and other factors and evaluate our reserves and estimates as
additional information becomes available. Returns Consistent with industry practice, we maintain a return policy that allows our
customers to return product within a specified period prior to and subsequent to the expiration
date. Our estimate of the provision for returns is based upon our historical experience with actual
returns, which is applied to the level of sales for the period that corresponds to the period
during which our customers may return product. This period is known by us based on the shelf lives
of our products at the time of shipment. Additionally, we consider factors such as levels of
inventory in the distribution channel, product dating and expiration period, size and maturity of
the market prior to a product launch, entrance in the market of additional generic competition,
changes in formularies or launch of over the counter products, to name a few, and make adjustments
to the provision for returns in the event that it appears that actual product returns may differ
from our established reserves. We obtain data with respect to the level of inventory in the
channel directly from certain of our largest customers. Although the introduction of additional
generic competition does not give our customers the right to return product outside of our
established policy, we do recognize that such competition could ultimately lead to increased
returns. We analyze this on a case by case basis, when significant, and make adjustments to
increase our reserve for product returns as necessary. Chargebacks The provision for chargebacks is the most significant and complex estimate used
in the recognition of revenue. The Company markets products directly to wholesalers, distributors,
retail pharmacy chains, mail order pharmacies and group purchasing organizations. The Company also
markets products indirectly to independent pharmacies, managed care organizations, hospitals,
nursing homes and pharmacy benefit management companies, collectively referred to as indirect
customers. Mylan enters into agreements with its indirect customers to establish contract pricing
for certain products. The indirect customers then independently select a wholesaler from which to
actually purchase the products at these contracted prices. Alternatively, certain wholesalers may
enter into agreements with indirect customers which establish contract pricing for certain products
which the wholesalers provide. Under either arrangement, Mylan will provide credit to the
wholesaler for any difference between the contracted price with the indirect party and the
wholesalers invoice price. Such credit is called a chargeback, while the difference between the
contracted price and the wholesalers invoice price is referred to as the chargeback rate. The
provision for chargebacks is based on expected sell-through levels by our wholesaler customers to
indirect customers, as well as estimated wholesaler inventory levels. For the latter, in most
cases, inventory levels are obtained directly from certain of our largest wholesalers.
Additionally, internal estimates are prepared based upon historical buying patterns and estimated
end user demand. Such information allows us to estimate the potential chargeback that we may
ultimately owe to our customers given the quantity of inventory on hand. We continually monitor
our provision for chargebacks and evaluate our reserve and estimates as additional information
becomes available. Legal Matters The Company is involved in various legal proceedings, some of which involve claims for
substantial amounts. An estimate is made to accrue for a loss contingency relating to any of these
legal proceedings if it is probable that a liability was incurred as of the date of the financial
statements and the amount of loss can be reasonably estimated. Because of the subjective nature
inherent in assessing the outcome of litigation and because of the potential that an adverse
outcome in a legal proceeding could have a material impact on the Companys financial position or
results of operations, such estimates are considered to be critical accounting estimates. After
review, it was determined at March 31, 2005 that for each of the
various legal proceedings in which we are involved, the conditions mentioned above were not
met. The Company will 36




---



##### Table of Contents



continue to evaluate all legal matters as additional information becomes
available. Recent Accounting Pronouncements In December 2004, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards (SFAS) No. 123(R), Share-Based Payment.SFAS 123(R) establishes standards
for the accounting for transactions in which an entity exchanges its equity instruments for goods
and services. Under SFAS 123(R), companies will no longer be able to account for share-based
compensation transactions using the intrinsic method in accordance with APB No. 25, Accounting for
Stock Issued to Employees. Instead, companies will be required to account for such transactions
using a fair-value method and to recognize compensation expense over the period during which an
employee is required to provide services in exchange for the award. In April 2005, the SEC
delayed the effective date of SFAS 123(R) to fiscal years beginning after June 15, 2005.
Management is currently assessing the impact that adoption of this Statement will have on the
Companys Consolidated Financial Statements. 
 ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk The Company is subject to market risk primarily from changes in the market values of
investments in marketable debt and equity securities. Additional investments are made in overnight
deposits, money market funds and marketable securities with maturities of less than three months.
These instruments are classified as cash equivalents for financial reporting purposes and have
minimal or no interest rate risk due to their short-term nature. Professional portfolio managers
manage the majority of our investments. The following table summarizes the investments in marketable debt and equity securities which
subject the Company to market risk at March 31, 2005 and 2004: (in thousands)
    
    2005
    
    
    2004Marketable debt securities
    
    $
    667,170
    
    
    $
    581,212Marketable equity securities
    
    
    3,178
    
    
    
    4,233$
    670,348
    
    
    $
    585,445
 Marketable Debt Securities The primary objectives for the marketable debt securities investment portfolio are liquidity
and safety of principal. Investments are made to achieve the highest rate of return while retaining
principal. The investment policy limits investments to certain types of instruments issued by
institutions and government agencies with investment-grade credit ratings. Of the $667.2 million
invested in marketable debt securities at March 31, 2005, $163.2 million will mature within one
year. This short duration to maturity creates minimal exposure to fluctuations in market values for
these investments. A significant change in current interest rates could affect the market value of
the remaining $504.0 million of marketable debt securities that mature after one year. A 5% change
in the market value of the marketable debt securities that mature after one year would result in a
$25.2 million change in marketable debt securities. 37




---



##### Table of Contents



ITEM 8. Financial Statements and Supplementary Data Index to Consolidated Financial Statements and
Supplementary Financial Information PageConsolidated Balance Sheets as of March 31, 2005 and 2004
    
    
    39Consolidated Statements of Earnings for the fiscal years ended March 31, 2005, 2004 and 2003
    
    
    40Consolidated Statements of Shareholders Equity for the fiscal years ended March 31, 2005, 2004 and 2003
    
    
    41Consolidated Statements of Cash Flows for the fiscal years ended March 31, 2005, 2004 and 2003
    
    
    42Notes to Consolidated Financial Statements
    
    
    43Managements Report on Internal Control over Financial Reporting
    
    
    60Reports of Independent Registered Public Accounting Firm
    
    
    61Supplementary Financial Information
    
    
    63
 38




---



##### Table of Contents



Mylan Laboratories Inc. 
 Consolidated Balance Sheets
 March 31,
    
    2005
    
    
    2004AssetsCurrent assets:Cash and cash equivalents
    
    $
    137,733
    
    
    $
    111,484Marketable securities
    
    
    670,348
    
    
    
    585,445Accounts receivable, net
    
    
    297,334
    
    
    
    191,094Inventories
    
    
    286,267
    
    
    
    320,797Deferred income tax benefit
    
    
    119,327
    
    
    
    78,477Prepaid expenses and other current assets
    
    
    17,443
    
    
    
    40,315Total current assets
    
    
    1,528,452
    
    
    
    1,327,612Property, plant and equipment, net
    
    
    336,719
    
    
    
    273,051Intangible assets, net
    
    
    120,493
    
    
    
    134,601Goodwill
    
    
    102,579
    
    
    
    102,579Other assets
    
    
    47,430
    
    
    
    47,218Total assets
    
    $
    2,135,673
    
    
    $
    1,885,061Liabilities and shareholders equityLiabilitiesCurrent liabilities:Trade accounts payable
    
    $
    78,114
    
    
    $
    50,410Income taxes payable
    
    
    44,123
    
    
    
    23,837Current portion of long-term obligations
    
    
    1,586
    
    
    
    1,586Cash dividends payable
    
    
    8,078
    
    
    
    8,052Other current liabilities
    
    
    113,606
    
    
    
    99,654Total current liabilities
    
    
    245,507
    
    
    
    183,539Long-term obligations
    
    
    19,325
    
    
    
    19,130Deferred income tax liability
    
    
    24,905
    
    
    
    22,604Total liabilities
    
    
    289,737
    
    
    
    225,273Shareholders equityPreferred stock  par value $0.50 per shareShares authorized: 5,000,000Shares issued: none
    
    
    
    
    
    
    Common stock  par value $0.50 per shareShares authorized: 600,000,000 in 2005 and 2004Shares issued: 304,434,724 in 2005 and 303,553,121 in 2004
    
    
    152,217
    
    
    
    151,777Additional paid-in capital
    
    
    354,172
    
    
    
    338,143Retained earnings
    
    
    1,808,802
    
    
    
    1,637,497Accumulated other comprehensive earnings
    
    
    870
    
    
    
    2,4962,316,061
    
    
    
    2,129,913Less treasury stock  at costShares: 35,129,643 in 2005 and 2004
    
    
    470,125
    
    
    
    470,125Total shareholders equity
    
    
    1,845,936
    
    
    
    1,659,788Total liabilities and shareholders equity
    
    $
    2,135,673
    
    
    $
    1,885,061
 See Notes to Consolidated Financial Statements. 39




---



##### Table of Contents



Mylan Laboratories Inc. 
 Consolidated Statements of Earnings
 Fiscal year ended March 31,
    
    2005
    
    
    2004
    
    
    2003Revenues:Net revenues
    
    $
    1,253,374
    
    
    $
    1,360,707
    
    
    $
    1,269,192Other revenue
    
    
    
    
    
    
    13,910
    
    
    
    Total revenues
    
    
    1,253,374
    
    
    
    1,374,617
    
    
    
    1,269,192Cost of sales
    
    
    629,834
    
    
    
    612,149
    
    
    
    597,756Gross profit
    
    
    623,540
    
    
    
    762,468
    
    
    
    671,436Operating expenses:Research and development
    
    
    87,881
    
    
    
    100,813
    
    
    
    86,748Selling and marketing
    
    
    79,838
    
    
    
    74,625
    
    
    
    65,625General and administrative
    
    
    179,640
    
    
    
    126,987
    
    
    
    107,445Litigation settlements, net
    
    
    (25,990
    )
    
    
    (34,758
    )
    
    
    (2,370
    )Earnings from operations
    
    
    302,171
    
    
    
    494,801
    
    
    
    413,988Other income, net
    
    
    10,076
    
    
    
    17,807
    
    
    
    12,525Earnings before income taxes
    
    
    312,247
    
    
    
    512,608
    
    
    
    426,513Provision for income taxes
    
    
    108,655
    
    
    
    177,999
    
    
    
    154,160Net earnings
    
    $
    203,592
    
    
    $
    334,609
    
    
    $
    272,353Earnings per common share:Basic
    
    $
    0.76
    
    
    $
    1.24
    
    
    $
    0.98Diluted
    
    $
    0.74
    
    
    $
    1.21
    
    
    $
    0.96Weighted average common shares outstanding:Basic
    
    
    268,985
    
    
    
    268,931
    
    
    
    278,789Diluted
    
    
    273,621
    
    
    
    276,318
    
    
    
    282,330
 See Notes to Consolidated Financial Statements. 40




---



##### Table of Contents



Mylan Laboratories Inc. 
 Consolidated Statements of Shareholders Equity
 Fiscal year ended March 31,
    
    2005
    
    
    2004
    
    
    2003Common stock  shares issued:Shares at beginning of year
    
    
    303,553,121
    
    
    
    300,904,262
    
    
    
    297,451,189Fractional shares issued relative to the stock split
    
    
    
    
    
    
    
    
    
    
    1,413Stock options exercised
    
    
    881,603
    
    
    
    2,648,859
    
    
    
    3,451,660Shares at end of year
    
    
    304,434,724
    
    
    
    303,553,121
    
    
    
    300,904,262Treasury stock:Shares at beginning of year
    
    
    (35,129,643
    )
    
    
    (29,143,443
    )
    
    
    (13,079,325
    )Shares acquired upon the exercise of stock options
    
    
    
    
    
    
    
    
    
    
    (22,818
    )Issuance of restricted stock
    
    
    
    
    
    
    472,500
    
    
    
    Stock purchases
    
    
    
    
    
    
    (6,458,700
    )
    
    
    (16,041,300
    )Shares at end of year
    
    
    (35,129,643
    )
    
    
    (35,129,643
    )
    
    
    (29,143,443
    )Common shares outstanding
    
    
    269,305,081
    
    
    
    268,423,478
    
    
    
    271,760,819Common stock, $0.50 par:Balance at beginning of year
    
    $
    151,777
    
    
    $
    150,452
    
    
    $
    148,725Stock options exercised
    
    
    440
    
    
    
    1,325
    
    
    
    1,727Balance at end of year
    
    
    152,217
    
    
    
    151,777
    
    
    
    150,452Additional paid-in capital:Balance at beginning of year
    
    
    338,143
    
    
    
    304,350
    
    
    
    267,094Fractional shares issued relative to the stock split
    
    
    
    
    
    
    
    
    
    
    49Stock options exercised
    
    
    9,628
    
    
    
    25,342
    
    
    
    29,035Issuance of restricted stock
    
    
    
    
    
    
    5,656
    
    
    
    Unearned compensation
    
    
    3,901
    
    
    
    (9,352
    )
    
    
    Tax benefit of stock option plans
    
    
    2,500
    
    
    
    12,159
    
    
    
    8,172Other
    
    
    
    
    
    
    (12
    )
    
    
    Balance at end of year
    
    
    354,172
    
    
    
    338,143
    
    
    
    304,350Retained earnings:Balance at beginning of year
    
    
    1,637,497
    
    
    
    1,330,933
    
    
    
    1,080,736Net earnings
    
    
    203,592
    
    
    
    334,609
    
    
    
    272,353Dividends declared ($0.12 per share for fiscal 2005,
$0.10 per share for fiscal 2004 and $0.08 per share for fiscal 2003)
    
    
    (32,287
    )
    
    
    (28,045
    )
    
    
    (22,156
    )Balance at end of year
    
    
    1,808,802
    
    
    
    1,637,497
    
    
    
    1,330,933Accumulated other comprehensive earnings:Balance at beginning of year
    
    
    2,496
    
    
    
    3,718
    
    
    
    7,920Net unrealized loss on marketable securities
    
    
    (1,626
    )
    
    
    (1,222
    )
    
    
    (4,202
    )Balance at end of year
    
    
    870
    
    
    
    2,496
    
    
    
    3,718Treasury stock, at cost:Balance at beginning of year
    
    
    (470,125
    )
    
    
    (343,121
    )
    
    
    (102,236
    )Shares acquired upon the exercise of stock options
    
    
    
    
    
    
    
    
    
    
    (344
    )Issuance of restricted stock
    
    
    
    
    
    
    6,084
    
    
    
    Stock purchases
    
    
    
    
    
    
    (133,088
    )
    
    
    (240,541
    )Balance at end of year
    
    
    (470,125
    )
    
    
    (470,125
    )
    
    
    (343,121
    )Total shareholders equity
    
    $
    1,845,936
    
    
    $
    1,659,788
    
    
    $
    1,446,332Comprehensive earnings:Net earnings
    
    $
    203,592
    
    
    $
    334,609
    
    
    $
    272,353Other comprehensive (loss) earnings, net of tax:Net unrealized holding (losses) gains on securities
    
    
    (1,711
    )
    
    
    3,009
    
    
    
    4,140Reclassification for losses (gains) included in net earnings
    
    
    85
    
    
    
    (4,231
    )
    
    
    (8,342
    )Other comprehensive loss, net of tax
    
    
    (1,626
    )
    
    
    (1,222
    )
    
    
    (4,202
    )Comprehensive earnings
    
    $
    201,966
    
    
    $
    333,387
    
    
    $
    268,151
 See Notes to Consolidated Financial Statements. 41




---



##### Table of Contents



Mylan Laboratories Inc. 
 Consolidated Statements of Cash Flows
 Fiscal year ended March 31,
    
    2005
    
    
    2004
    
    
    2003Cash flows from operating activities:Net earnings
    
    $
    203,592
    
    
    $
    334,609
    
    
    $
    272,353Adjustments to reconcile net earnings to net cash
provided from operating activities:Depreciation and amortization
    
    
    45,100
    
    
    
    44,323
    
    
    
    40,580Realized gain on sale of marketable securities
    
    
    
    
    
    
    (6,509
    )
    
    
    (12,829
    )Net loss from equity method investees
    
    
    2,372
    
    
    
    4,459
    
    
    
    5,846Change in estimated sales allowances
    
    
    108,778
    
    
    
    (24,016
    )
    
    
    79,895Deferred income tax (benefit) expense
    
    
    (36,899
    )
    
    
    32,275
    
    
    
    (22,025
    )Write-down of investments and intangible assets
    
    
    
    
    
    
    
    
    
    
    7,571Gain on sale of building
    
    
    
    
    
    
    (5,000
    )
    
    
    Other non-cash items
    
    
    7,951
    
    
    
    765
    
    
    
    3,214Receipts from (payments of) litigation settlements, net
    
    
    17,000
    
    
    
    (51,388
    )
    
    
    28,616Cash received from Somerset
    
    
    
    
    
    
    10,000
    
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    (192,799
    )
    
    
    18,617
    
    
    
    (113,155
    )Inventories
    
    
    34,530
    
    
    
    (83,020
    )
    
    
    (42,558
    )Trade accounts payable
    
    
    8,082
    
    
    
    (25,378
    )
    
    
    29,183Income taxes
    
    
    22,010
    
    
    
    (11,096
    )
    
    
    4,801Other operating assets and liabilities, net
    
    
    (16,006
    )
    
    
    (13,063
    )
    
    
    31,651Net cash provided from operating activities
    
    
    203,711
    
    
    
    225,578
    
    
    
    313,143Cash flows from investing activities:Proceeds from (purchase of):Capital assets
    
    
    (90,746
    )
    
    
    (118,451
    )
    
    
    (32,595
    )Reduction of investment in a limited liability partnership
    
    
    
    
    
    
    7,269
    
    
    
    1,359Sale of assets
    
    
    
    
    
    
    12,000
    
    
    
    30Marketable securities
    
    
    (780,806
    )
    
    
    (793,539
    )
    
    
    (821,902
    )Sale of marketable securities
    
    
    693,289
    
    
    
    640,511
    
    
    
    871,904Other items, net
    
    
    3,372
    
    
    
    1,884
    
    
    
    (2,528
    )Net cash (used in) provided from investing activities
    
    
    (174,891
    )
    
    
    (250,326
    )
    
    
    16,268Cash flows from financing activities:Cash dividends paid
    
    
    (32,261
    )
    
    
    (26,024
    )
    
    
    (21,192
    )Increase in outstanding checks in excess of cash in disbursement accounts
    
    
    19,622
    
    
    
    9,771
    
    
    
    Purchase of common stock
    
    
    
    
    
    
    (133,088
    )
    
    
    (240,541
    )Proceeds from exercise of stock options
    
    
    10,068
    
    
    
    26,671
    
    
    
    30,434Net cash used in financing activities
    
    
    (2,571
    )
    
    
    (122,670
    )
    
    
    (231,299
    )Net increase (decrease) in cash and cash equivalents
    
    
    26,249
    
    
    
    (147,418
    )
    
    
    98,112Cash and cash equivalents  beginning of year
    
    
    111,484
    
    
    
    258,902
    
    
    
    160,790Cash and cash equivalents  end of year
    
    $
    137,733
    
    
    $
    111,484
    
    
    $
    258,902Supplemental disclosures of cash flow information:Cash paid during the year for:Income taxes
    
    $
    123,725
    
    
    $
    156,821
    
    
    $
    171,382Non-cash investing activities:Marketable securities received from liquidation of investment
in limited liability partnership
    
    $
    
    
    
    $
    
    
    
    $
    16,445Non-cash financing activities:Issuance of restricted stock
    
    $
    
    
    
    $
    11,740
    
    
    $
    
 See Notes to Consolidated Financial Statements. 42




---



##### Table of Contents



Mylan Laboratories Inc. 
 Notes to Consolidated Financial Statements Note 1. Nature of Operations Mylan Laboratories Inc. and its subsidiaries (the Company or Mylan) are engaged in the
development, licensing, manufacture, marketing and distribution of pharmaceutical products for
resale by others. The principal markets for these products are proprietary and ethical
pharmaceutical wholesalers and distributors, drug store chains, drug manufacturers, institutions,
and public and governmental agencies within the United States. Note 2. Summary of Significant Accounting Policies Principles of Consolidation.The Consolidated Financial Statements include the accounts of
Mylan Laboratories Inc. and those of its wholly-owned and majority-owned subsidiaries. All
intercompany accounts and transactions have been eliminated in consolidation. Cash Equivalents.Cash equivalents are composed of highly liquid investments with an
original maturity of three months or less at the date of purchase. The Company utilizes a cash
management system under which a book cash overdraft in the amount of $29,393,000 and $9,771,000
at March 31, 2005 and 2004, exists for the Companys primary disbursement accounts. This
overdraft, which is included in accounts payable, represents uncleared checks in excess of the
cash balance in the bank account at the end of the reporting period. The Company transfers cash
on an as-needed basis to fund clearing checks. Marketable Securities.Marketable securities are classified as available for sale and are
recorded at fair value based on quoted market prices, with net unrealized gains and losses, net
of income taxes, reflected in accumulated other comprehensive earnings as a component of
shareholders equity. Net gains and losses on sales of securities available for sale are computed
on a specific security basis and are included in other income. Concentrations of Credit Risk.Financial instruments that potentially subject us to credit
risk consist principally of interest-bearing investments and accounts receivable. Mylan invests its excess cash in high-quality, liquid money market instruments (principally
commercial paper, government, municipal and government agency notes and bills) maintained by
financial institutions. The Company maintains deposit balances at certain of these financial
institutions in excess of federally insured amounts. Mylan performs ongoing credit evaluations of its customers and generally does not require
collateral. Approximately 78% and 58% of the accounts receivable balances represent amounts due
from four customers at March 31, 2005 and 2004. Total allowances for doubtful accounts were
$7,340,000 and $5,965,000 at March 31, 2005 and 2004. Inventories.Inventories are stated at the lower of cost or market, with cost determined by

the first-in, first-out method. Provisions for potentially obsolete or slow-moving inventory are
made based on our analysis of inventory levels, historical obsolescence and future sales
forecasts. Property, Plant and Equipment.Property, plant and equipment are stated at cost less
accumulated depreciation. Depreciation is computed and recorded on a straight-line basis over the
assets estimated service lives (3 to 10 years for machinery and equipment and 15 to 39 years for
buildings and improvements). The Company periodically reviews the original estimated useful lives
of assets and makes adjustments when appropriate. Depreciation expense was $26,455,000,
$23,237,000 and $20,780,000 for fiscal years 2005, 2004 and 2003, respectively. Intangible Assets.Intangible assets are stated at cost less accumulated amortization.
Amortization is generally recorded on a straight-line basis over estimated useful lives ranging
from 2 to 20 years. The Company periodically reviews the original estimated useful lives of
assets and makes adjustments when events indicate a shorter life is appropriate. Impairment of Long-Lived Assets.The carrying values of long-lived assets, which includes
property, plant and equipment and intangible assets with definite lives, are evaluated
periodically in relation to the expected future cash 43




---



##### Table of Contents



flows of the underlying assets. Adjustments are made in the event that estimated
undiscounted net cash flows are less than the carrying value. Goodwill is tested for impairment at least annually based on managements assessment of the
fair value of the Companys identified reporting units as compared to their related carrying
value. If the fair value of a reporting unit is less than its carrying value, additional steps,
including an allocation of the estimated fair value to the assets and liabilities of the
reporting unit would be necessary to determine the amount, if any, of goodwill impairment. Indefinite-lived intangibles are tested at least annually for impairment. Impairment is
determined to exist when the fair value is less than the carrying value of the assets being
tested. Other Assets.Investments in business entities in which we have the ability to exert
significant influence over operating and financial policies (generally 20% to 50% ownership) are
accounted for using the equity method. Under the equity method, investments are initially
recorded at cost and are adjusted for dividends and undistributed earnings and losses. Non-marketable equity investments for which we do not have the ability to exercise
significant influence are accounted for using the cost method. Such investments are included in
other assets on the balance sheet. Under the cost method of accounting, investments in private
companies are carried at cost and are adjusted only for other-than-temporary declines in fair
value, distributions of earnings and additional investments. Other assets are periodically reviewed for other-than-temporary declines in fair value. Revenue Recognition.Mylan recognizes revenue for product sales upon shipment when title and
risk of loss pass to its customers and when provisions for estimates, including discounts,
rebates, price adjustments, returns, chargebacks, and other promotional programs, are reasonably
determinable. No revisions were made to the methodology used in determining these provisions
during the fiscal year ended March 31, 2005. The following briefly describes the nature of each
provision and how such provisions are estimated. Discounts are reductions to invoiced amounts offered to customers for payment within a
specified period and are estimated upon shipment utilizing historical customer payment
experience. Rebates are offered to key customers to promote customer loyalty and encourage greater
product sales. These rebate programs provide that upon the attainment of pre-established volumes
or the attainment of revenue milestones for a specified period, the customer receives credit
against purchases. Other promotional programs are incentive programs periodically offered to our
customers. The Company is able to estimate provisions for rebates and other promotional programs
based on the specific terms in each agreement at the time of shipment. Consistent with industry practice, Mylan maintains a return policy that allows customers to
return product within a specified period prior to and subsequent to the expiration date. The
Companys estimate of the provision for returns is based upon historical experience with actual
returns. Price adjustments, which include shelf stock adjustments, are credits issued to reflect
decreases in the selling prices of products. Shelf stock adjustments are based upon the amount of
product which the customer has remaining in its inventory at the time of the price reduction.
Decreases in selling prices are discretionary decisions made by the Company to reflect market
conditions. Amounts recorded for estimated price adjustments are based upon specified terms with
direct customers, estimated launch dates of competing products, estimated declines in market
price and, in the case of shelf stock adjustments, estimates of inventory held by the customer. The Company has agreements with certain indirect customers, such as independent pharmacies,
managed care organizations, hospitals, nursing homes, governmental agencies and pharmacy benefit
management companies, which establish contract prices for certain products. The indirect
customers then independently select a wholesaler from which to actually purchase the products at
these contracted prices. Mylan will provide credit to the wholesaler for any difference between
the contracted price with the indirect party and the wholesalers invoice price. Such credit is
called a chargeback. The provision for chargebacks is based on expected sell-through levels by
our wholesaler customers to indirect customers, as well as estimated wholesaler inventory levels. Sales of product rights for marketable products are recorded as revenue upon disposition of
the rights. Included in 44




---



##### Table of Contents



other revenue for fiscal 2004 was $13,910,000, representing income related to the sale of
the U.S. and Canadian rights for sertaconazole nitrate 2% cream. Accounts receivable are presented net of allowances relating to the above provisions. No
revisions were made to the methodology used in determining these provisions during the fiscal
year ended March 31, 2005 and 2004. Such allowances were $349,355,000 and $264,170,000 at March
31, 2005 and 2004. Other current liabilities include $51,772,000 and $28,179,000 at March 31,
2005 and 2004, for certain rebates and other adjustments that are paid to indirect customers. Three of the Companys customers accounted for 11%, 19% and 16%, respectively, of revenue in
fiscal 2005. Two customers accounted for 21% and 15% of revenues in fiscal 2004 and three
customers accounted for 16%, 14% and 20%, respectively, of revenues in fiscal 2003. Research and Development.Research and development expenses are charged to operations as
incurred. Advertising Costs.Advertising costs are expensed as incurred and amounted to $9,745,000,
$8,997,000 and $6,381,000 in fiscal years 2005, 2004 and 2003, respectively. Income Taxes.Income taxes have been provided for using an asset and liability approach in
which deferred income taxes reflect the tax consequences on future years of events that we have
already recognized in the financial statements or tax returns. Changes in enacted tax rates or
laws will result in adjustments to the recorded tax assets or liabilities in the period that the
new tax law is enacted. Earnings per Common Share.Basic earnings per common share is computed by dividing net
earnings by the weighted average common shares outstanding for the period. Diluted earnings per
common share is computed by dividing net earnings by the weighted average common shares
outstanding adjusted for the dilutive effect of stock options granted, excluding antidilutive
shares, under our stock option plans (see Note 11). At March 31, 2005, 2004 and 2003, there were
6,779,000, 90,000 and 4,854,150 shares, respectively, that were antidilutive. A reconciliation of basic and diluted earnings per common share is as follows: (in thousands, except per share data)Fiscal year ended March 31,
    
    2005
    
    
    2004
    
    
    2003Net earnings
    
    $
    203,592
    
    
    $
    334,609
    
    
    $
    272,353Weighted average common shares outstanding
    
    
    268,985
    
    
    
    268,931
    
    
    
    278,789Assumed exercise of dilutive stock options
    
    
    4,636
    
    
    
    7,387
    
    
    
    3,541Diluted weighted average common shares outstanding
    
    
    273,621
    
    
    
    276,318
    
    
    
    282,330Earnings per common share:Basic
    
    $
    0.76
    
    
    $
    1.24
    
    
    $
    0.98Diluted
    
    $
    0.74
    
    
    $
    1.21
    
    
    $
    0.96
 Stock Options.In accordance with the provisions of Financial Accounting Standards Board
(FASB) Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensationand SFAS No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure
an amendment of FASB Statement No. 123, the Company accounts for its stock option plans under the
intrinsic-value-based method as defined in Accounting Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees. The following table illustrates the effect on net
earnings and earnings per share if the Company had applied the fair value recognition provisions
of SFAS No. 123 to stock-based employee compensation: 45




---



##### Table of Contents



(in thousands, except per share data)Fiscal year ended March 31,
    
    2005
    
    
    2004
    
    
    2003Net earnings, as reported
    
    $
    203,592
    
    
    $
    334,609
    
    
    $
    272,353Add: Stock-based compensation expense included in reported net earnings, net of related tax effects
    
    
    3,901
    
    
    
    2,388
    
    
    
    Deduct: Total compensation expense determined under fair value based method for all stock awards,net of
related tax effects
    
    
    (16,210
    )
    
    
    (25,261
    )
    
    
    (19,909
    )Pro forma net earnings
    
    $
    191,283
    
    
    $
    311,736
    
    
    $
    252,444Earnings per share:Basic  as reported
    
    $
    0.76
    
    
    $
    1.24
    
    
    $
    0.98Basic  pro forma
    
    $
    0.71
    
    
    $
    1.16
    
    
    $
    0.91Diluted  as reported
    
    $
    0.74
    
    
    $
    1.21
    
    
    $
    0.96Diluted  pro forma
    
    $
    0.70
    
    
    $
    1.14
    
    
    $
    0.91
 Use of Estimates in the Preparation of Financial Statements.The preparation of financial
statements, in conformity with accounting principles generally accepted in the United States of
America, requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Because of the uncertainty inherent in such
estimates, actual results could differ from those estimates. Reclassification.Certain prior year amounts were reclassified to conform to the fiscal 2005
presentation. Fiscal Year.The Companys fiscal year ends on March 31. All references to fiscal year shall
mean the 12 months ended March 31. Recent Accounting Pronouncements.In December 2004, the FASB issued SFAS No. 123(R),
Share-Based Payment.SFAS 123(R) establishes standards for the accounting for transactions in
which an entity exchanges its equity instruments for goods and services. Under SFAS 123(R),
companies will no longer be able to account for share-based compensation transactions using the
intrinsic method in accordance with APB No. 25. Instead, companies will be required to account for such
transactions using a fair-value method and to recognize compensation expense over the period
during which an employee is required to provide services in exchange for the award. In April
2005, the SEC delayed the effective date of SFAS 123 (R) to fiscal years beginning after June 15,
2005. Management is currently assessing the impact that adoption of this Statement will have on
the Companys Consolidated Financial Statements 46




---



##### Table of Contents



Note 3. Balance Sheet Components Selected balance sheet components consist of the following at March 31, 2005 and 2004: (in thousands)
    
    2005
    
    
    2004Inventories:Raw materials
    
    $
    119,654
    
    
    $
    149,048Work in process
    
    
    39,589
    
    
    
    34,511Finished goods
    
    
    127,024
    
    
    
    137,238$
    286,267
    
    
    $
    320,797Property, plant and equipment:Land and improvements
    
    $
    9,704
    
    
    $
    9,704Buildings and improvements
    
    
    161,050
    
    
    
    132,983Machinery and equipment
    
    
    269,208
    
    
    
    240,594Construction in progress
    
    
    85,324
    
    
    
    54,181525,286
    
    
    
    437,462Less accumulated depreciation
    
    
    188,567
    
    
    
    164,411$
    336,719
    
    
    $
    273,051Other current liabilities:Payroll and employee benefit plan accruals
    
    $
    21,251
    
    
    $
    20,644Accrued rebates
    
    
    51,772
    
    
    
    28,179Royalties and product license fees
    
    
    11,446
    
    
    
    20,493Legal and professional
    
    
    18,148
    
    
    
    13,650Other
    
    
    10,989
    
    
    
    16,688$
    113,606
    
    
    $
    99,654
 Note 4. Marketable Securities The amortized cost and estimated fair value of marketable securities are as follows: Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Fair(in thousands)
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    ValueMarch 31, 2005Debt securities
    
    $
    669,044
    
    
    $
    194
    
    
    $
    2,068
    
    
    $
    667,170Equity securities
    
    
    
    
    
    
    3,178
    
    
    
    
    
    
    
    3,178$
    669,044
    
    
    $
    3,372
    
    
    $
    2,068
    
    
    $
    670,348March 31, 2004Debt securities
    
    $
    580,179
    
    
    $
    1,125
    
    
    $
    92
    
    
    $
    581,212Equity securities
    
    
    1,492
    
    
    
    2,785
    
    
    
    44
    
    
    
    4,233$
    581,671
    
    
    $
    3,910
    
    
    $
    136
    
    
    $
    585,445
 Net unrealized gains on marketable securities are reported net of tax of $434,000 and
$1,278,000 in fiscal 2005 and
fiscal 2004. Maturities of debt securities at fair value as of March 31, 2005 are as follows: (in thousands)Mature within one year
    
    $
    163,175Mature in one to five years
    
    
    121,919Mature in five years and later
    
    
    382,076$
    667,170
 47




---



##### Table of Contents



Gross gains of $7,000, $7,322,000 and $13,650,000 and gross losses of $67,000, $813,000 and
$821,000 were realized during fiscal years 2005, 2004 and 2003, respectively. Note 5. Intangible Assets Intangible assets, excluding goodwill, consist of the following components: (in thousands)
    
    WeightedAverage Life
    
    
    Original
    
    
    Accumulated
    
    
    Net Book(years)
    
    
    Cost
    
    
    Amortization
    
    
    ValueMarch 31, 2005Amortized intangible assets:Patents and technologies
    
    
    19
    
    
    $
    118,935
    
    
    $
    48,478
    
    
    $
    70,457Product rights and licenses
    
    
    12
    
    
    
    111,433
    
    
    
    69,923
    
    
    
    41,510Other
    
    
    20
    
    
    
    14,267
    
    
    
    6,524
    
    
    
    7,743$
    244,635
    
    
    $
    124,925
    
    
    
    119,710Intangible assets no longer subject to amortization:Trademarks
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    783$
    120,493March 31, 2004Amortized intangible assets:Patents and technologies
    
    
    19
    
    
    $
    117,435
    
    
    $
    42,304
    
    
    $
    75,131Product rights and licenses
    
    
    12
    
    
    
    109,333
    
    
    
    59,111
    
    
    
    50,222Other
    
    
    20
    
    
    
    14,267
    
    
    
    5,802
    
    
    
    8,465$
    241,035
    
    
    $
    107,217
    
    
    
    133,818Intangible assets no longer subject to amortization:Trademarks
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    783$
    134,601
 Other intangibles consist principally of non-compete agreements, customer lists and
contracts. Amortization expense for fiscal years 2005, 2004 and 2003 was $17,708,000, $20,155,000 and
$18,864,000, respectively, and is expected to be $14,761,000, $14,483,000, $14,031,000,
$13,720,000 and $12,702,000 for fiscal years 2006 through 2010, respectively. During fiscal 2005, the Company purchased various patents and product licenses in the
aggregate amount of $3,600,000. During fiscal 2004, the Company paid $4,500,000 for intangible
assets acquired as part of a licensing agreement for omeprazole. 48




---



##### Table of Contents



Note 6. Other Assets Other assets consist of the following components at March 31, 2005 and 2004: (in thousands)
    
    2005
    
    
    2004Cash surrender value
    
    $
    38,965
    
    
    $
    35,854Investments in and advances to Somerset
    
    
    
    
    
    
    871Other
    
    
    8,465
    
    
    
    10,493$
    47,430
    
    
    $
    47,218
 Cash surrender value is related to insurance policies on certain officers and key employees
and the value of split-dollar life insurance agreements with certain former executive officers. In November 1988, the Company acquired 50% of the outstanding common stock of Somerset
Pharmaceuticals, Inc. (Somerset). Mylan accounts for this investment using the equity method of
accounting. Equity in loss of Somerset includes our 50% portion of Somersets financial results,
as well as expense for amortization of intangible assets resulting from the acquisition of the
interest in Somerset. Such intangible assets are being amortized using the straight-line basis
over 15 years. Amortization expense was $924,000 in each of fiscal years 2005, 2004 and 2003.
During fiscal 2004, the Company received a dividend of $10,000,000 from Somerset. No dividends
were received in fiscal years 2005 or 2003. The recorded loss in Somerset for fiscal 2005 was
$3.3 million compared to a loss of $7.1 million in fiscal 2004. The investment in Somerset was
reduced to zero during fiscal 2005. As such, in accordance with APB No. 18, The Equity Method of Accounting for Investments in Common Stock, the Company has
temporarily ceased recording losses on this investment. Note 7. Revolving Line of Credit In July 2004, the Company renewed its agreement with a commercial bank for a revolving line
of credit. This line of credit expires on July 31, 2005 and allows Mylan to borrow up to $50.0
million on an unsecured basis, at an alternative base rate. At the Companys option, it may
elect an interest rate based on the published daily London Interbank Offered Rate by giving
written notice to the lender. The agreement does not contain any significant financial covenants.
At March 31, 2005 and 2004, there were no outstanding borrowings under this line of credit. Note 8. Long-Term Obligations Long-term obligations consist of the following components at March 31, 2005 and 2004: (in thousands)
    
    2005
    
    
    2004Deferred compensation
    
    $
    17,196
    
    
    $
    17,307Retirement benefits
    
    
    3,374
    
    
    
    2,974Other
    
    
    341
    
    
    
    435Total long-term obligations
    
    
    20,911
    
    
    
    20,716Less: Current portion of long-term obligations
    
    
    1,586
    
    
    
    1,586Long-term obligations, net of current portion
    
    $
    19,325
    
    
    $
    19,130
 Deferred compensation consists of the discounted future payments under individually
negotiated agreements with certain key employees and directors. The agreements with certain key
employees provide for annual payments ranging
from $18,000 to $1,000,000 to be paid over periods commencing at retirement and ranging from
ten years to life. 49




---



##### Table of Contents



Note 9. Income Taxes Income taxes consist of the following components: (in thousands)Fiscal year ended March 31,
    
    2005
    
    
    2004
    
    
    2003Federal:Current
    
    $
    134,994
    
    
    $
    133,223
    
    
    $
    156,823Deferred
    
    
    (34,513
    )
    
    
    30,549
    
    
    
    (18,127
    )100,481
    
    
    
    163,772
    
    
    
    138,696State and Puerto Rico:Current
    
    
    10,560
    
    
    
    12,501
    
    
    
    17,211Deferred
    
    
    (2,386
    )
    
    
    1,726
    
    
    
    (1,747
    )8,174
    
    
    
    14,227
    
    
    
    15,464Income taxes
    
    $
    108,655
    
    
    $
    177,999
    
    
    $
    154,160Pretax earnings
    
    $
    312,247
    
    
    $
    512,608
    
    
    $
    426,513Effective tax rate
    
    
    34.8
    %
    
    
    34.7
    %
    
    
    36.1
    %
 Temporary differences and carryforwards that result in the deferred tax assets and
liabilities are as follows at March 31: (in thousands)
    
    2005
    
    
    2004Deferred tax assets:Employee benefits
    
    $
    10,301
    
    
    $
    9,824Contractual agreements
    
    
    
    
    
    
    Intangible assets
    
    
    10,615
    
    
    
    9,721Accounts receivable allowances
    
    
    113,267
    
    
    
    75,301Inventories
    
    
    3,587
    
    
    
    1,852Investments
    
    
    6,003
    
    
    
    8,099Federal tax loss carryforwards
    
    
    
    
    
    
    Tax credit carryforwards
    
    
    
    
    
    
    Other
    
    
    1,117
    
    
    
    656Total deferred tax assets
    
    
    144,890
    
    
    
    105,453Deferred tax liabilities:Plant and equipment
    
    
    22,848
    
    
    
    19,271Intangible assets
    
    
    25,946
    
    
    
    27,915Investments
    
    
    1,569
    
    
    
    2,394Other
    
    
    105
    
    
    
    Total deferred tax liabilities
    
    
    50,468
    
    
    
    49,580Deferred tax asset, net
    
    $
    94,422
    
    
    $
    55,873Classification in the Consolidated Balance Sheets:Deferred income tax benefit  current
    
    $
    119,327
    
    
    $
    78,477Deferred income tax liability  noncurrent
    
    
    24,905
    
    
    
    22,604Deferred tax asset, net
    
    $
    94,422
    
    
    $
    55,873
 Deferred tax assets relating to net operating loss carryforwards and research and
development tax credit carryforwards were acquired in fiscal 1999 with the acquisition of
Penederm. The utilization of these assets is subject to 50




---



##### Table of Contents



certain limitations set forth in the
U.S. Internal Revenue Code. In fiscal 2003, the Company utilized approximately $10,709,000 of acquired federal
net operating loss carryforwards to reduce its tax liability. In
fiscal 2004, the Company utilized the
remainder of the net operating loss carryforwards of $2,707,000 and federal tax credit
carryforwards of $2,092,000. Federal research and development tax credits of $567,000 that were deferred at March 31,
2003, due to tax law changes, were applied for and received in fiscal 2004. A reconciliation of the statutory tax rate to the effective tax rate is as follows: Fiscal year ended March 31,
    
    2005
    
    
    2004
    
    
    2003Statutory tax rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %State and Puerto Rico income taxes
    
    
    2.8
    %
    
    
    2.7
    %
    
    
    3.3
    %State and Puerto Rico tax credits
    
    
    (1.3
    %)
    
    
    (0.7
    %)
    
    
    (0.7
    %)Federal tax credits
    
    
    (2.1
    %)
    
    
    (1.8
    %)
    
    
    (1.8
    %)Other items
    
    
    0.4
    %
    
    
    (0.5
    %)
    
    
    0.3
    %Effective tax rate
    
    
    34.8
    %
    
    
    34.7
    %
    
    
    36.1
    %
 Federal tax credits result principally from operations in Puerto Rico and from qualified
research and development expenditures, including orphan drug research. State tax credits are
comprised mainly of awards for expansion and wage credits at our manufacturing facilities and
research credits awarded by certain states. State income taxes and state tax credits are shown net
of the federal tax effect. Operations in Puerto Rico benefit from incentive grants from the government of Puerto Rico,
which partially exempt the Company from income, property and municipal taxes. In fiscal 2001, a new
tax grant was negotiated with the government of Puerto Rico extending tax incentives until fiscal
2010. This grant exempts all earnings during this grant period from tollgate tax upon repatriation
of cash to the United States. In fiscal 2004, $100,000,000 of cash from post-fiscal 2000 earnings
was repatriated to the United States. Pursuant to the terms of our new tax grant, no tollgate tax
was due for this repatriation. Under Section 936 of the U.S. Internal Revenue Code, Mylan is a grandfathered entity and is
entitled to the benefits under such statute through fiscal 2006. Our Section 936 federal tax
credits totaled approximately $3,874,000 in fiscal 2005 and $4,732,000 each year in fiscal 2004 and
2003. Our federal income tax returns have been audited by the Internal Revenue Service through
fiscal 2000. We are currently under audit by the Internal Revenue Service for fiscal years 2002
through 2004. Note 10. Preferred and Common Stock In fiscal 1985, the Board of Directors (the Board) authorized 5,000,000 shares of $0.50 par
value preferred stock. No shares of the preferred stock have been issued. The Company entered into a Rights Agreement (the Rights Agreement) with American Stock
Transfer & Trust Company, as rights agent, in August 1996, and declared a dividend of one share
purchase right on each outstanding share of common stock, to provide the Board with sufficient time
to assess and evaluate any takeover bid and explore and develop a reasonable response. Effective
November 1999, the Rights Agreement was amended to eliminate certain limitations on the Boards
ability to redeem or amend the rights to permit an acquisition and also to eliminate special rights
held by incumbent directors unaffiliated with an acquiring shareholder. In August 2004, the Rights
Agreement was amended to
change the original expiration date of the rights from September 5, 2006 to August 13, 2014.
The Rights Agreement was further amended in September 2004, to temporarily change the threshold at
which Rights (as defined in the Rights Agreement) will become immediately exercisable from 15% to
10%. By a December 2004 amendment to the Rights Agreement, the term for the lower ownership
threshold is set to expire December 31, 2005. In May 2002, the Board approved a Stock Repurchase Program to purchase up to 22,500,000 shares
of our outstanding common stock. This Stock Repurchase Program was administered through open market
transactions and purchases of common stock under this program were at market prices. In fiscal
2004, 6,458,700 shares of common stock were purchased for approximately $133,088,000. The Stock
Repurchase Program was completed on November 18, 2003. 51




---



##### Table of Contents



Note 11. Stock Option Plan On July 25, 2003, Mylans shareholders approved the Mylan Laboratories Inc. 2003 Long-Term
Incentive Plan(the 2003 Plan). Under the 2003 Plan, 22,500,000 shares of common stock are
reserved for issuance to key employees, consultants, independent contractors and non-employee
directors of Mylan through a variety of incentive awards including: stock options, stock
appreciation rights, restricted shares and units, performance awards, other stock based awards and
short-term cash awards. Upon approval of the 2003 Plan, the 1997 Plan was frozen and no further
grants of stock options will be made under that plan. In August 2003, the Company awarded 472,500 shares of restricted common stock to certain
executives as permitted under the 2003 Plan. All restricted stock awards entitle the participant to
dividend and voting rights. The shares vest at the end of a three-year period. Upon issuance of the
restricted shares, unearned compensation of $11,740,000 was charged to shareholders equity for the
fair value of the restricted stock issued and is being recognized as compensation expense ratably
over the three-year period. Compensation expense, net of any related tax effects, for fiscal 2005
and 2004 was $3,901,000 and $2,388,000. Additional stock options are outstanding from the expired plans and other plans assumed
through acquisitions. The following table summarizes stock option activity: Weighted AverageNumber of Shares
    
    
    Exercise PriceUnder Option
    
    
    per ShareOutstanding at March 31, 2002
    
    
    19,264,891
    
    
    $
    10.70Options granted
    
    
    8,774,028
    
    
    
    16.70Options exercised
    
    
    (3,451,660
    )
    
    
    15.58Options forfeited
    
    
    (698,778
    )
    
    
    12.67Outstanding at March 31, 2003
    
    
    23,888,481
    
    
    
    13.13Options granted
    
    
    1,911,951
    
    
    
    20.08Options exercised
    
    
    (2,667,593
    )
    
    
    10.18Options forfeited
    
    
    (302,931
    )
    
    
    17.12Outstanding at March 31, 2004
    
    
    22,829,908
    
    
    
    13.99Options granted
    
    
    649,900
    
    
    
    19.05Options exercised
    
    
    (891,092
    )
    
    
    11.30Options forfeited
    
    
    (286,928
    )
    
    
    19.13Outstanding at March 31, 2005
    
    
    22,301,788
    
    
    $
    14.17
 The following table summarizes information about stock options outstanding as of March 31,
2005: Options Outstanding
    
    
    Options ExercisableRanges of Exercise
    
    Number
    
    
    Average
    
    
    Average
    
    
    Number
    
    
    AveragePrice per Share
    
    of Shares
    
    
    Life (1)
    
    
    Price (2)
    
    
    of Shares
    
    
    Price (2)$     6.56 - $11.27
    
    
    4,547,868
    
    
    
    5.15
    
    
    $
    10.24
    
    
    
    4,485,994
    
    
    $
    10.2311.34 -   11.58
    
    
    5,587,261
    
    
    
    5.96
    
    
    
    11.49
    
    
    
    5,576,011
    
    
    
    11.4811.62 -   14.82
    
    
    4,500,267
    
    
    
    6.98
    
    
    
    13.07
    
    
    
    4,071,959
    
    
    
    13.0114.99 -   19.36
    
    
    6,288,178
    
    
    
    7.99
    
    
    
    18.76
    
    
    
    2,446,437
    
    
    
    18.1619.43 -   26.00
    
    
    1,378,214
    
    
    
    8.60
    
    
    
    20.74
    
    
    
    203,601
    
    
    
    21.12$     6.56 - $26.00
    
    
    22,301,788
    
    
    
    6.74
    
    
    $
    14.17
    
    
    
    16,784,002
    
    
    $
    12.61
   (1)
    
    Weighted average contractual life remaining in years.(2)
    
    Weighted average exercise price per share. 52




---



##### Table of Contents



The number of shares exercisable and the associated weighted average exercise price as of
March 31, 2004 was 13,356,216 shares at $12.03 per share. SFAS No. 123 requires the calculation of the fair value of options granted during each fiscal
year. The fair value of options granted in fiscal years 2005, 2004 and 2003, using the
Black-Scholes option pricing model, and the assumptions used are as follows: Fiscal year ended March 31,
    
    2005
    
    
    2004
    
    
    2003Volatility
    
    
    41.8
    %
    
    
    41.1
    %
    
    
    44.0
    %Risk-free interest rate
    
    
    3.2
    %
    
    
    2.7
    %
    
    
    3.1
    %Dividend yield
    
    
    0.6
    %
    
    
    0.4
    %
    
    
    0.5
    %Expected term of options (in years)
    
    
    4.2
    
    
    
    6.5
    
    
    
    6.0Weighted average fair value per option
    
    $
    6.73
    
    
    $
    8.51
    
    
    $
    7.36
 Pro forma disclosure of net income and earnings per share had the Company applied the fair
value recognition provisions of SFAS No. 123 to stock-based compensation using the above
assumptions is presented in Note 2. Note 12. Employee Benefits The Company has a plan covering substantially all employees to provide for limited
reimbursement of postretirement supplemental medical coverage. In addition, in December 2001, the
Supplemental Health Insurance Program for Certain Officers of Mylan Laboratories was adopted to
provide full postretirement medical coverage to certain officers and their spouse and dependents.
These plans generally provide benefits to employees who meet minimum age and service requirements.
The Company accounts for these benefits under SFAS No. 106, Employers Accounting for
Postretirement Benefits Other Than Pensions. The amounts accrued related to these benefits were not
material at March 31, 2005 and 2004. The Company has defined contribution plans covering essentially all of its employees. Its
defined contribution plans consist primarily of a 401(k) retirement plan with a profit sharing
component for non-union employees and a 401(k) retirement plan for union employees. Profit sharing
contributions are made at the discretion of the Board. The Companys matching contributions are
based upon employee contributions or service hours, depending upon the plan. Total employer
contributions to all plans for fiscal years 2005, 2004 and 2003 were $13,382,000, $11,927,000
and $11,707,000, respectively. The Company provides supplemental life insurance benefits to certain management employees.
Such benefits require annual funding and may require accelerated funding in the event that we would
experience a change in control. The production and maintenance employees at the Companys manufacturing facilities in
Morgantown, West Virginia, are covered under a collective bargaining agreement which expires in
April 2007. These employees represented approximately 24% of the Companys total workforce at March
31, 2005. Note 13. Segment Reporting The Company has two reportable operating segments, a Generic Segment and a Brand Segment,
based on differences in products, marketing or regulatory approval. Additionally, certain general
and administrative expenses, such as legal expenditures, litigation settlements, and non-operating
income and expenses are reported in Corporate/Other. Generic pharmaceutical products are therapeutically equivalent to a brand name product and are
marketed primarily to wholesalers, retail pharmacy chains, mail-order pharmacies and group
purchasing organizations. These products are approved for distribution by the FDA through the
Abbreviated New Drug Application (ANDA) process. Three customers accounted for 20%, 15% and 12%,
respectively, of Generic Segment net revenues in fiscal 2005. Two customers accounted for 21% and
11%, respectively, of Generic Segment net revenues in fiscal 2004, while three customers accounted
for 20%, 15% and 12% in fiscal 2003. Brand pharmaceutical products are generally new, patent-protected products marketed directly
to health care professionals. These products are approved by the U.S.
Food and Drug Administration (FDA) primarily through the New Drug
Application
process. Our Brand Segment also includes off-patent brand products, which have prescriber and
customer loyalties and brand recognition, as well as branded 53




---



##### Table of Contents



generics which are responsive to
promotional efforts. Two customers accounted for 14% and 17% of Brand Segment revenues in fiscal
2005. Three customers accounted for 22%, 27% and 13%, respectively, of Brand Segment revenues in
fiscal 2004, while two customers accounted for 13% and 16% in fiscal 2003. The accounting policies of the operating segments are the same as those described in Note 2.
The table below presents segment information for the fiscal years identified. For the Generic and
Brand Segments, segment profit represents segment gross profit less direct research and
development, selling and marketing, and general and administrative expenses. Generic and Brand
Segment assets include property, plant and equipment, trade accounts receivable, inventory and
intangible assets other than goodwill, and certain other assets. Corporate/Other assets include
consolidated cash, cash equivalents, marketable securities, investment in Somerset and other
assets, goodwill and all income tax-related assets. The following table provides a reconciliation of segment information to total consolidated
information: (in thousands)Fiscal year ended March 31,
    
    2005
    
    
    2004
    
    
    2003Total revenuesGeneric
    
    $
    1,012,503
    
    
    $
    1,096,128
    
    
    $
    1,012,617Brand
    
    
    240,871
    
    
    
    278,489
    
    
    
    256,575Consolidated
    
    $
    1,253,374
    
    
    $
    1,374,617
    
    
    $
    1,269,192Depreciation and amortization expenseGeneric
    
    $
    20,588
    
    
    $
    21,996
    
    
    $
    19,607Brand
    
    
    18,137
    
    
    
    17,495
    
    
    
    17,555Corporate/Other
    
    
    6,375
    
    
    
    4,832
    
    
    
    3,418Consolidated
    
    $
    45,100
    
    
    $
    44,323
    
    
    $
    40,580Segment profit (loss)Generic
    
    $
    386,199
    
    
    $
    510,821
    
    
    $
    454,043Brand
    
    
    35,379
    
    
    
    46,521
    
    
    
    32,682Corporate/Other
    
    
    (109,331
    )
    
    
    (44,734
    )
    
    
    (60,212
    )Consolidated
    
    $
    312,247
    
    
    $
    512,608
    
    
    $
    426,513Property, plant and equipment additionsGeneric
    
    $
    62,062
    
    
    $
    37,777
    
    
    $
    25,400Brand
    
    
    16,378
    
    
    
    16,260
    
    
    
    5,335Corporate/Other
    
    
    12,306
    
    
    
    64,414
    
    
    
    1,860Consolidated
    
    $
    90,746
    
    
    $
    118,451
    
    
    $
    32,595
 March 31,
    
    2005
    
    
    2004
    
    
    2003Segment assetsGeneric
    
    $
    777,648
    
    
    $
    677,450
    
    
    $
    536,171Brand
    
    
    199,651
    
    
    
    198,142
    
    
    
    213,016Corporate/Other
    
    
    1,158,374
    
    
    
    1,009,469
    
    
    
    996,036Consolidated
    
    $
    2,135,673
    
    
    $
    1,885,061
    
    
    $
    1,745,223
 In fiscal years 2005, 2004 and 2003, segment profit (loss) for Corporate/Other includes a net
gain of $25,990, $34,758 and $2,370, respectively, for litigation settlements. 54




---



##### Table of Contents



The Companys consolidated revenues are generated via the sale of products in the
following therapeutic categories: (in thousands)Fiscal year ended March 31,
    
    2005
    
    
    2004
    
    
    2003Cardiovascular
    
    $
    549,378
    
    
    $
    600,238
    
    
    $
    622,911Central Nervous System
    
    
    337,365
    
    
    
    330,081
    
    
    
    335,041Dermatology
    
    
    74,048
    
    
    
    102,513
    
    
    
    87,369Gastrointestinal
    
    
    90,987
    
    
    
    137,743
    
    
    
    27,356Other(1)
    
    
    201,596
    
    
    
    204,042
    
    
    
    196,515$
    1,253,374
    
    
    $
    1,374,617
    
    
    $
    1,269,192
   (1)
    
    Other consists of numerous therapeutic classes, none of which individually
exceeds 5% of consolidated revenues. Note 14. Commitments The Company leases certain real property under various operating lease arrangements that
expire over the next eight years. These leases generally provide the Company with the option to
renew the lease at the end of the lease term. The Company also entered into agreements to lease
vehicles, which are typically 24 to 36 months, for use by its sales force and certain key
employees. For fiscal years 2005, 2004 and 2003, The Company made lease payments of $4,939,000,
$3,136,000 and $5,640,000, respectively. Future minimum lease payments under these commitments are as follows: (in thousands)
    
    OperatingFiscal
    
    Leases2006
    
    $
    5,6442007
    
    
    4,0212008
    
    
    2,7482009
    
    
    7442010
    
    
    557Thereafter
    
    
    263$
    13,977
 The Company has entered into various product licensing and development agreements. In some of
these arrangements, the Company provides funding for the development of the product or to obtain
rights to the use of the patent, through milestone payments, in exchange for marketing and
distribution rights to the product. Milestones represent the completion of specific contractual
events, and it is uncertain if and when these milestones will be achieved. In the event that all
projects are successful, milestone and development payments of approximately $9,300,000 would be
paid. The Company has also entered into employment and other agreements with certain executives that
provide for compensation and certain other benefits. These agreements provide for severance
payments under certain circumstances. Additionally, the Company has split-dollar life insurance agreements
with certain retired executives. In the normal course of business, Mylan periodically enters into employment, legal settlement
and other agreements which incorporate indemnification provisions. While the maximum amount to
which Mylan may be exposed under such agreements cannot be reasonably estimated, the Company
maintains insurance coverage which management believes will effectively mitigate the Companys
obligations under these indemnification provisions. No amounts have been recorded in the financial
statements with respect to the Companys obligations under such agreements. 55




---



##### Table of Contents



Note 15. Related Parties Mylan holds an equity interest in a supplier. During fiscal years 2004 and 2003, Mylan paid
$5,651,000 and $3,715,000, respectively, to the supplier in return for certain raw materials used
in production and $901,000 and $2,727,000 in fiscal 2004 and 2003, respectively, for royalties
under a product licensing agreement with this supplier. Note 16. Contingencies Legal Proceedings While it is not possible to determine with any degree of certainty the ultimate outcome of the
following legal proceedings, the Company believes that it has meritorious defenses with respect to
the claims asserted against it and intends to vigorously defend its position. An adverse outcome in
any of these proceedings could have a material adverse effect on the Companys financial position
and results of operations. Omeprazole In fiscal 2001, Mylan Pharmaceuticals Inc. (MPI), a wholly-owned subsidiary of Mylan
Laboratories Inc. (Mylan Labs), filed an ANDA seeking approval from the Food and Drug
Administration (FDA) to manufacture, market and sell omeprazole delayed-release capsules, and
made Paragraph IV certifications to several patents owned by AstraZeneca PLC (AstraZeneca) that
were listed in the FDAs Orange Book. On September 8, 2000, AstraZeneca filed suit against MPI
and Mylan Labs in the U.S. District Court for the Southern District of New York alleging
infringement of several of AstraZenecas patents. MPI filed multiple motions for summary judgment
as to all claims of infringement, and the summary judgment motions remain pending. On May 29, 2003,
the FDA approved MPIs ANDA for the 10 mg and 20 mg strengths of omeprazole delayed-release
capsules and, on August 4, 2003, Mylan Labs announced that MPI had commenced the sale of omeprazole
10 mg and 20 mg delayed-release capsules. AstraZeneca then amended the pending lawsuit to assert
claims against Mylan Labs and MPI, and filed a separate lawsuit against MPIs supplier, Esteve
Quimica S.A. (Esteve), for unspecified money damages and a finding of willful infringement which
could result in treble damages, injunctive relief, attorneys fees, costs of litigation and such
further relief as the court deems just and proper. In November 2002, MPI filed suit in the U.S. District Court for the District of Delaware
against Kremers Urban Development Company (KUDCo) and several other companies affiliated with
Schwarz Pharma AG (the Schwarz Pharma Group) alleging KUDCo and the Schwarz Pharma Group are
infringing U.S. patent 5,626,875 (the 875 Patent) in connection with KUDCos manufacture and
sale of omeprazole capsules in the U.S. KUDCo and the Schwarz Pharma Group asserted defenses and
counterclaims in that action alleging the inventors listed on the 875 Patent are not the actual
inventors of the invention described therein, and further seeking money damages alleging the
infringement action was not proper. On August 7, 2003, KUDCo and an individual filed a lawsuit
against MPI and Esteve in the U.S. District Court for the District of Columbia asserting claims
that were not asserted in the Delaware action. During the first quarter of fiscal 2005, a
settlement was agreed to with respect to the cases involving MPI, KUDCo and the Schwarz Pharma
Group, and these lawsuits have been dismissed, with prejudice. Under the settlement, MPI received a
payment of $37,500,000, a portion of which represented the reimbursement of legal expenses. Lorazepam and Clorazepate The Company previously reported final court approval in the first quarter of fiscal 2004 of a
settlement of a direct purchaser class action related to the sale of lorazepam and clorazepate,
which settlement did not include several related cases. Trial on the last remaining case began on
May 3, 2005, involving an action brought by a group of health insurers who opted out of previous
class action settlements. These plaintiffs are seeking to recover
approximately $12,000,000 in
damages, plus possible trebling and attorneys fees. Pricing and Medicaid Litigation On September 26, 2003, the Commonwealth of Massachusetts sued Mylan Labs and 12 other generic
drug companies alleging unlawful manipulation of reimbursements under the Massachusetts Medicaid
program. The lawsuit identified three drug products sold by MPI, and sought equitable relief,
attorneys fees, cost of litigation and monetary damages in unspecified sums. The court has
dismissed the complaint, without prejudice, and granted Massachusetts leave to amend. 56




---



##### Table of Contents



On June 26, 2003, UDL and MPI received requests from the U.S. House of Representatives Energy
and Commerce Committee requesting information about certain drug products sold by UDL and MPI, in
connection with the Committees investigation into pharmaceutical reimbursement and rebates under
Medicaid. UDL and MPI are cooperating with this inquiry and provided information in response to the
Committees requests in 2003. Several states Attorneys General (AGs) have also sent letters to
MPI, UDL and Mylan Bertek Pharmaceuticals Inc., a wholly-owned subsidiary of Mylan Labs, demanding
that those companies retain documents relating to Medicaid reimbursement and rebate calculations
pending the outcome of unspecified investigations by those AGs into such matters. In addition, in
July 2004, Mylan Labs received subpoenas from the AGs of California and Florida in connection with
civil investigations purportedly related to price reporting and marketing practices regarding
various drugs. Mylan is cooperating with each of these investigations and has begun producing
information in response to the subpoenas. On August 4, 2004, the City of New York filed a civil lawsuit against 44 pharmaceutical
companies, including Mylan Labs, in the U.S. District Court for the Southern District of New York
alleging violations of federal and state Medicaid laws, Medicaid and common law fraud, breach of
contract, other New York statutes and regulations, and unjust enrichment, and on January 26, 2005,
the plaintiff filed an amended complaint naming MPI and UDL as defendants. The case has been
transferred to the AWP multi-district litigation proceedings pending in the U.S. District Court for
the District of Massachusetts for pretrial proceedings. A similar suit was filed by the
Commonwealth of Kentucky on November 4, 2004, against Mylan Labs, MPI and approximately 40 other
pharmaceutical companies in the Franklin County Circuit Court alleging violations of the Kentucky
Consumer Protection Act, the Kentucky Medicaid Fraud Statute, the Kentucky False Advertising
Statute, fraud and negligent misrepresentation relating to reporting of average wholesale prices
(AWP). In addition, on December 6, 2004, the State of Wisconsin sued Mylan Labs, MPI and
approximately 35 other pharmaceutical companies in the Circuit Court for Dane County, Wisconsin
alleging violations of Wisconsin false advertising, price reporting and fraud statutes and, the
Wisconsin Trusts and Monopolies Act, and also asserting a claim for unjust enrichment. Nassau
County, New York filed a similar complaint in the U.S. District Court for the Eastern District of
New York on November 24, 2004 containing federal and state claims against numerous pharmaceutical
companies including Mylan Labs, MPI and UDL. On January 26, 2005, the Counties of Rockland, Suffolk
and Westchester filed amended complaints in the U.S. District Court for the District of
Massachusetts against approximately 50 pharmaceutical companies, including Mylan Labs, MPI and UDL,
alleging violations of federal and state Medicaid laws, Medicaid and common law fraud, breach of
contract, other New York statutes and regulations and unjust enrichment. Onondaga County, New York
filed a substantially similar complaint in the U.S. District Court for the Northern District of New
York in January 2005. In addition to the case filed by Onandaga County, New York, Mylan Labs, MPI
and UDL have been named as defendants along with several dozen other drug manufacturers in lawsuits
filed by 22 other counties in the State of New York in March 2005 and April 2005, asserting
substantially similar claims to those asserted by Onandaga County. On January 26, 2005, the State
of Alabama filed suit against 79 pharmaceutical companies, including Mylan Labs, MPI and UDL, in
the Circuit Court of Montgomery County, Alabama, alleging that Alabama has been defrauded by false
reporting of AWP, WAC and direct prices and asserts claims for fraud, wantonness and unjust
enrichment, seeking compensatory and punitive damages and injunctive relief. In each case, the
plaintiff seeks money damages and civil penalties in unspecified amounts and declaratory and
injunctive relief, and in each matter Mylan Labs and its subsidiaries have not yet been required to
respond to the complaint or the amended complaint, as applicable. The Company intends to defend
these actions vigorously. By letter dated January 12, 2005, MPI was notified by the U.S. Department of Justice of an
investigation concerning MPIs calculations of Medicaid drug rebates. To the best of MPIs
information, the investigation is in its early stages. MPI is collecting information requested by
the government and is cooperating fully with the governments investigation. Shareholder Litigation On November 22, 2004, an individual purporting to be a Mylan Labs shareholder, filed a civil
action in the Court of Common Pleas of Allegheny County, Pennsylvania, against Mylan Labs and all
members of its Board of Directors alleging that the Board members had breached their fiduciary
duties by approving the planned acquisition of King Pharmaceuticals, Inc. (King) and by declining
to dismantle the Companys anti-takeover defenses to permit an auction of the Company to Carl Icahn
or other potential buyers of the Company, and also alleging that certain transactions between the
Company and its directors (or their relatives or companies with which they were formerly
affiliated) may have been wasteful. On November 23, 2004, a substantially identical complaint was
filed in the same court by another purported Mylan Labs shareholder. The actions are styled as
shareholder derivative suits on behalf of Mylan Labs and class actions on behalf of all Mylan Labs
shareholders, and have been consolidated by the court under the caption In re Mylan Laboratories
Inc. Shareholder Litigation. Mylan Labs and its directors filed preliminary objections seeking
dismissal of the complaints. On January 19, 2005, the plaintiffs amended their complaints to add
Bear Stearns & Co., Inc., Goldman Sachs & Co., Richard 57




---



##### Table of Contents



C. Perry, Perry Corp., American Stock Transfer & Trust Company, and John Does 1-100 as
additional defendants, and to add claims regarding trading activity by the additional defendants
and the implications on Mylan Labs shareholder rights agreement. The plaintiffs are seeking
injunctive and declaratory relief and undisclosed damages. Mylan Labs and its directors have not
yet been required to respond to the amended complaint. On December 10, 2004, High River Limited Partnership (High River), an entity controlled by
Carl Icahn, filed suit in the U.S. District Court for the Middle District of Pennsylvania against
Mylan Labs, its Vice Chairman and Chief Executive Officer Robert J. Coury, Richard C. Perry, Perry
Corp. and John Does 1-100, asserting against the Company a claim for violation of federal
securities laws and against the Company and Mr. Coury a claim for alleged breaches of Pennsylvania
statutory and common law, in connection with SEC filings and other public statements concerning the
planned King acquisition. The complaint also asserts claims under the federal securities laws and
Pennsylvania corporate law concerning a possible shareholder vote relating to the proposed merger.
On January 27, 2005, the court granted a motion by defendants Perry Corp. and Mr. Perry to transfer
the case to the U.S. District Court for the Southern District of New York. Mylan Labs, Mr. Coury
and the other defendants have filed motions to dismiss the complaint in its entirety, which motions
are currently pending before the court. On February 22, 2005, High River filed a complaint naming Mylan Labs and its directors in the
U.S. District Court for the Middle District of Pennsylvania challenging the validity under
Pennsylvania law of amendments to the provisions of the Companys bylaws requiring shareholders to
provide advance notice of nominations of directors for election at Mylan Labs annual meeting of
shareholders. Icahns High River sought a temporary restraining order (TRO) in an attempt to
block implementation of the advance notice bylaw. The Court denied High Rivers motion for a TRO,
and High River voluntarily withdrew the case without prejudice. On March 24, 2005, High River
filed another complaint in the same court naming the same defendants and seeking substantially the
same relief. Mylan has moved to dismiss the new action. Other Litigation The Company is involved in various other legal proceedings that are considered normal to its
business. While it is not feasible to predict the ultimate outcome of such other proceedings, the
Company believes that the ultimate outcome of such other proceedings will not have a material
adverse effect on its financial position or results of operations. Previously Reported Matters That Have Been Resolved Paclitaxel In June 2001, Tapestry Pharmaceuticals, Inc. (formerly NAPRO Biotherapeutics Inc.)
(Tapestry) and Abbott Laboratories Inc. (Abbott) filed suit against Mylan Labs, MPI and UDL,
also a wholly-owned subsidiary of the Company, in the U.S. District Court for the Western District
of Pennsylvania alleging that the manufacture, use and sale of MPIs paclitaxel product, which MPI
began selling in July 2001, infringes certain patents owned by Tapestry and allegedly licensed to
Abbott. During the first quarter of fiscal 2005, all parties agreed to a settlement of this case
and the lawsuit has been dismissed, with prejudice. MPI paid $9,000,000 pursuant to the settlement. Mirtazapine In fiscal 2004, Mylan Labs and MPI reached an agreement with Organon U.S.A. Inc. (Organon)
and Akzo Nobel N.V. (Akzo) pursuant to which Organon and Akzo agreed to pay MPI $15,000,000 in
settlement of allegations that Organon and Akzo violated antitrust laws by listing U.S. Patent No.
5,977,099 in the FDAs Orange Book, and by suing Mylan and MPI for alleged infringement of that
patent. Of the $15,000,000, which was recorded in the fourth quarter of fiscal 2004, and collected
subsequently, approximately $4,800,000 represented reimbursement of legal expenses. The underlying
patent infringement suit was resolved in favor of Mylan Labs and MPI by summary judgment in
December 2002. Nifedipine In February 2001, Biovail Laboratories Inc. (Biovail) filed suit against Mylan Labs, MPI and
Pfizer Inc. (Pfizer) alleging antitrust violations with respect to agreements entered into
between the Company and Pfizer regarding nifedipine. Biovail, Pfizer and the Company agreed to a
settlement pursuant to which Biovail dismissed its lawsuit with prejudice. Pfizer, Mylan Labs and
MPI were also named as defendants in five other putative class action suits alleging antitrust
claims based on the same alleged conduct. The U.S. District Court for the Northern District of West
Virginia dismissed three of 58




---



##### Table of Contents



the five putative class actions in 2002 and, on March 18, 2004, the court denied the remaining
two plaintiffs motion for class certification. On April 30, 2004, the court dismissed both
remaining actions with prejudice. Lorazepam and Clorazepate On March 31, 2003, the Company announced a tentative settlement of a direct purchaser class
action related to the sale of lorazepam and clorazepate for a total amount of $35,000,000. The
Companys co-defendants agreed to an initial contribution of approximately $7,000,000 toward the
$35,000,000 settlement. The Companys obligation was accrued at March 31, 2003. During the first
quarter of fiscal 2004, this settlement received final court approval. Upon receiving such
approval, the Company recorded a gain of approximately $10,000,000 related to additional
contributions which the co-defendants agreed in April 2003 to make to the Company. This additional
$10,000,000 reduces the Companys share of the total settlement to approximately $18,000,000. The
Company is to receive the $10,000,000 in five annual payments of $2,000,000 each. Zagam® Mylan
Labs, Mylan Caribe, Inc. and Mylan Bertek filed suit against Aventis Pharmaceuticals,
Inc., successor in interest to Rhone-Poulenc Rorer Pharmaceuticals, Inc.; Rhone-Poulenc Rorer
Pharmaceuticals, LTD; Rorer Pharmaceutical Products, Inc.; Rhone-Poulenc Rorer, S.A., and their
affiliates in the U.S. District Court for the Western District of Pennsylvania in May 2001, and the

defendants counterclaimed. The Company previously identified this matter as a case in which an
adverse outcome could have had a material adverse effect on the Companys financial position and
results of operations. In April 2003, the Company entered into a settlement of the matter pursuant
to which the Company received a payment of $12,500,000, the dismissal of the defendants
counterclaims and termination of the agreements in question. Buspirone In fiscal 2003, the Company reached an agreement in principle with Bristol-Myers Squibb
(BMS) which would resolve all disputes between the companies related to buspirone and paclitaxel,
BMS Buspar® and Taxol®, respectively, when finalized. That settlement has become final and the
Company has received a one-time payment of approximately $35,000,000, and non-exclusive, paid-up,
royalty free, irrevocable licenses under any applicable BMS patents to manufacture, market and sell
buspirone and paclitaxel. The $35,000,000 is included in litigation settlements, net in the
Consolidated Statements of Earnings in fiscal 2003. 59




---



##### Table of Contents



Managements Report on Internal Control over Financial Reporting Management of Mylan Laboratories Inc. is responsible for establishing and maintaining adequate
internal control over financial reporting. Internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with accounting principles
generally accepted in the United States of America. Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate. Management evaluated our internal control over financial reporting as of March 31, 2005. In making
this assessment, management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission in Internal Control-Integrated Framework (COSO). As a
result of this assessment and based on the criteria in the COSO framework, management has concluded
that, as of March 31, 2005, our internal control over financial reporting was effective. Our independent registered public accounting firm, Deloitte & Touche LLP, has audited managements
assessment of our internal control over financial reporting. Deloitte & Touche LLPs opinion on
managements assessment and on the effectiveness of our internal control over financial reporting
appears on page 61 of this annual report on Form 10-K. 60




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm Board of Directors and Shareholders
Mylan Laboratories Inc.: We have audited the accompanying consolidated balance sheets of Mylan Laboratories Inc. and
subsidiaries as of March 31, 2005 and 2004, and the related consolidated statements of earnings,
shareholders equity and cash flows for each of the three years in the period ended March 31, 2005.
Our audits also included the financial statement schedule listed in the Index at Item 15. These
financial statements and financial statement schedule are the responsibility of the Companys
management. Our responsibility is to express an opinion on the financial statements and financial
statement schedule based on our audits. We conducted our audits in accordance with standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects,
the financial position of Mylan Laboratories Inc. and subsidiaries as of March 31, 2005 and 2004,
and the results of their operations and their cash flows for each of the three years in the period
ended March 31, 2005, in conformity with accounting principles generally accepted in the United
States of America. Also, in our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein. We have also audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the effectiveness of the Companys internal control over financial reporting
as of March 31, 2005, based on the criteria established in Internal ControlIntegrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated
May 13, 2005 expressed an unqualified opinion on managements assessment of the effectiveness of
the Companys internal control over financial reporting and an unqualified opinion on the
effectiveness of the Companys internal control over financial reporting. Deloitte & Touche LLP
Pittsburgh, Pennsylvania
May 13, 2005 61




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm Board of Directors and Shareholders
Mylan Laboratories Inc.: We have audited managements assessment, included in the accompanying Managements Report on
Internal Control over Financial Reporting, that Mylan Laboratories Inc. and subsidiaries (the
Company) maintained effective internal control over financial reporting as of March 31, 2005,
based on criteria established in Internal ControlIntegrated Frameworkissued by the Committee of
Sponsoring Organizations of the Treadway Commission. The Companys management is responsible for
maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting. Our responsibility is to express an
opinion on managements assessment and an opinion on the effectiveness of the Companys internal
control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, evaluating managements assessment, testing and evaluating the
design and operating effectiveness of internal control, and performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis
for our opinions. A companys internal control over financial reporting is a process designed by, or under the
supervision of, the companys principal executive and principal financial officers, or persons
performing similar functions, and effected by the companys board of directors, management, and
other personnel to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A companys internal control over financial reporting includes
those policies and procedures that (1) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles,
and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the financial statements. Because of the inherent limitations of internal control over financial reporting, including the
possibility of collusion or improper management override of controls, material misstatements due to
error or fraud may not be prevented or detected on a timely basis. Also, projections of any
evaluation of the effectiveness of the internal control over financial reporting to future periods
are subject to the risk that the controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, managements assessment that the Company maintained effective internal control over
financial reporting as of March 31, 2005, is fairly stated, in all material respects, based on the
criteria established in Internal ControlIntegrated Frameworkissued by the Committee of Sponsoring
Organizations of the Treadway Commission. Also in our opinion, the Company maintained, in all
material respects, effective internal control over financial reporting as of March 31, 2005, based
on the criteria established in Internal ControlIntegrated Frameworkissued by the Committee of
Sponsoring Organizations of the Treadway Commission. We have also audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the consolidated financial statements and financial statement schedule as of
and for the year ended March 31, 2005 of the Company and our
report dated May 13, 2005 expressed an
unqualified opinion on those financial statements and financial statement schedule. Deloitte & Touche LLP
Pittsburgh, Pennsylvania
May 13, 2005 62




---



##### Table of Contents



Mylan Laboratories Inc. 
 Supplementary Financial Information
 Quarterly Financial Data
(unaudited, in thousands, except per share data) 1st
    
    
    2nd
    
    
    3rd
    
    
    4thQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    YearFiscal 2005Total revenues
    
    $
    339,012
    
    
    $
    306,955
    
    
    $
    290,972
    
    
    $
    316,435
    
    
    $
    1,253,374Gross profit
    
    
    179,753
    
    
    
    155,253
    
    
    
    135,347
    
    
    
    153,187
    
    
    
    623,540Net earnings
    
    
    82,033
    
    
    
    48,654
    
    
    
    34,770
    
    
    
    38,135
    
    
    
    203,592Earnings per share (1):Basic
    
    $
    0.31
    
    
    $
    0.18
    
    
    $
    0.13
    
    
    $
    0.14
    
    
    $
    0.76Diluted
    
    $
    0.30
    
    
    $
    0.18
    
    
    $
    0.13
    
    
    $
    0.14
    
    
    $
    0.74Share prices(2):High
    
    $
    24.59
    
    
    $
    20.48
    
    
    $
    18.88
    
    
    $
    18.08
    
    
    $
    24.59Low
    
    $
    20.15
    
    
    $
    14.69
    
    
    $
    16.42
    
    
    $
    15.88
    
    
    $
    14.69Fiscal 2004Total revenues
    
    $
    331,408
    
    
    $
    360,060
    
    
    $
    349,786
    
    
    $
    333,363
    
    
    $
    1,374,617Gross profit
    
    
    177,429
    
    
    
    207,708
    
    
    
    199,184
    
    
    
    178,147
    
    
    
    762,468Net earnings
    
    
    83,863
    
    
    
    91,278
    
    
    
    84,618
    
    
    
    74,850
    (3)
    
    
    334,609Earnings per share (1):Basic
    
    $
    0.31
    
    
    $
    0.34
    
    
    $
    0.32
    
    
    $
    0.28
    
    
    $
    1.24Diluted
    
    $
    0.31
    
    
    $
    0.33
    
    
    $
    0.31
    
    
    $
    0.27
    
    
    $
    1.21Share prices(2):High
    
    $
    23.57
    
    
    $
    26.85
    
    
    $
    28.16
    
    
    $
    25.82
    
    
    $
    28.16Low
    
    $
    17.45
    
    
    $
    20.73
    
    
    $
    22.45
    
    
    $
    22.16
    
    
    $
    17.45
   (1)
    
    The sum of earnings per share for the four quarters may not equal earnings per share for
the total year due to changes in the average number of common shares outstanding.(2)
    
    Closing prices as reported on the New York Stock Exchange (NYSE).(3)
    
    Includes $15.0 million (pre-tax) related to the settlement of certain litigation (See Note
16). 
 ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. 
 ITEM 9A. Controls and Procedures An evaluation was performed under the supervision and with the participation of the Companys
management, including the Chief Executive Officer and the Chief Financial Officer, of the
effectiveness of the design and operation of the Companys disclosure controls and procedures as of
March 31, 2005. Based upon that evaluation, the Chief Executive Officer and the Chief Financial
Officer concluded that the Companys disclosure controls and procedures were effective. No change in the Companys internal control over financial reporting occurred during the last
fiscal quarter that has materially affected, or is reasonably likely to materially affect, the
Companys internal control over financial reporting. 63




---



##### Table of Contents



Managements Report on Internal Control over Financial Reporting is on page 59. Managements
assessment of the effectiveness of Mylans internal control over financial reporting as of March
31, 2005, has been audited by Deloitte & Touche LLP, an independent registered public accounting
firm, as stated in their report which is on page 61. 
 PART III 
 ITEM 10. Directors and Executive Officers of the Registrant Code of Ethics The Company has adopted a Code of Ethics that applies to our Chief Executive Officer, Chief
Financial Officer and Controller. This Code of Ethics is posted on the Companys Internet website
at www.mylan.com. The Company intends to post any amendments to or waivers from the Code of Ethics
on that website. The other information required by this Item 10 will be included in an Annual Report on Form
10-K/A to be filed by the Company within 120 days after its fiscal year end (the Form 10-K/A). 
 ITEM 11. Executive Compensation The information required by this Item 11 will be included in the Form 10-K/A. 
 ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters The information required by this Item 12 will be included in the Form 10-K/A. 
 ITEM 13. Certain Relationships and Related Transactions The information required by this Item 13 will be included in the Form 10-K/A. 
 ITEM 14. Principal Accounting Fees and Services The information required by this Item 14 will be included in the Form 10-K/A. 
 PART IV 
 ITEM 15. Exhibits and Financial Statement Schedules 1. Consolidated Financial Statements The Consolidated Financial Statements listed in the Index to Consolidated Financial Statements
are filed as part of this Form. 64




---



##### Table of Contents



2. Financial Statement Schedules MYLAN LABORATORIES INC.
SCHEDULE II  -  VALUATION AND QUALIFYING ACCOUNTS
(in thousands) Additions/Deductionscharged toBeginning
    
    
    costs and
    
    
    
    
    
    
    EndingDescription
    
    Balance
    
    
    expenses
    
    
    Deductions
    
    
    BalanceAllowance for Doubtful Accounts:Fiscal Year EndedMarch 31, 2005
    
    $
    5,965
    
    
    $
    2,007
    
    
    $
    632
    
    
    $
    7,340March 31, 2004
    
    $
    8,438
    
    
    $
    2,325
    
    
    $
    4,798
    
    
    $
    5,965March 31, 2003
    
    $
    6,622
    
    
    $
    2,772
    
    
    $
    956
    
    
    $
    8,438
 3.
    
    Exhibits3.1
    
    Amended and Restated Articles of Incorporation of the registrant, as amended, filed as
Exhibit 3.1 to Form 10-Q for the quarter ended June 30, 2003, and incorporated herein by
reference.3.2
    
    Amended and Restated By-laws of the registrant, as amended to date, filed as Exhibit 3.1 to
the Report on Form 8-K filed with the SEC on February 22, 2005, and incorporated herein by
reference.4.1(a)
    
    Rights Agreement dated as of August 22, 1996, between the registrant and American Stock
Transfer & Trust Company, filed as Exhibit 4.1 to Form 8-K filed with the SEC on September 3,
1996, and incorporated herein by reference.4.1(b)
    
    Amendment to Rights Agreement dated as of November 8, 1999, between the registrant and
American Stock Transfer & Trust Company, filed as Exhibit 1 to Form 8-A/A, filed with the SEC
on March 31, 2000.4.1(c)
    
    Amendment No. 2 to Rights Agreement dated as of August 13, 2004, between the registrant and
American Stock Transfer & Trust Company, filed as Exhibit 4.1 to the Report on Form 8-K filed
with the SEC on August 16, 2004, and incorporated herein by reference.4.1(d)
    
    Amendment No. 3 to Rights Agreement dated as of September 8, 2004, between the registrant
and American Stock Transfer & Trust Company, filed as Exhibit 4.1 to the Report on Form 8-K
filed with the SEC on September 9, 2004, and incorporated herein by reference.4.1(e)
    
    Amendment No. 4 to Rights Agreement dated as of December 2, 2004, between the registrant and
American Stock Transfer &Trust Company, filed as Exhibit 4.1 to the Report on Form 8-K filed
with the SEC on December 3, 2004, and incorporated herein by reference.10.1
    
    Mylan Laboratories Inc. 1986 Incentive Stock Option Plan, as amended to date, filed as
Exhibit 10(b) to Form 10-K for the fiscal year ended March 31, 1993, and incorporated herein
by reference.*10.2
    
    Mylan Laboratories Inc. 1997 Incentive Stock Option Plan, as amended to date, filed as
Exhibit 10.3 to Form 10-Q for the quarter ended September 30, 2002, and incorporated herein by
reference.*
 65




---



##### Table of Contents



10.3
    
    Mylan Laboratories Inc. 1992 Nonemployee Director Stock Option Plan, as amended to date,
filed as Exhibit 10(l) to Form 10-K for the fiscal year ended March 31, 1998, and incorporated
herein by reference.*10.4(a)
    
    Mylan Laboratories Inc. 2003 Long-Term Incentive Plan, filed as Appendix A to Definitive
Proxy Statement on Schedule 14A, filed with the SEC on June 23, 2003, and incorporated herein
by reference.*10.4(b)
    
    Form of Stock Option Agreement under the Mylan Laboratories Inc. 2003 Long-Term Incentive Plan*10.4(c)
    
    Form of Restricted Share Award under the Mylan Laboratories Inc. 2003 Long-Term Incentive Plan.*10.5(a)
    
    Executive Employment Agreement dated July 22, 2002, between the registrant and Robert J.
Coury, filed as Exhibit 10.1 to Form 10-Q for the quarter ended June 30, 2002, and
incorporated herein by reference.*10.5(b)
    
    Amendment No. 1 to Executive Employment Agreement dated as of December 15, 2003, between
the registrant and Robert J. Coury, filed as Exhibit 10.15(a) to Form 10-Q for the quarter
ended December 31, 2003, and incorporated herein by reference.*10.6
    
    Executive Employment Agreement dated as of July 1, 2004, between the registrant and Edward J.
Borkowski, filed as Exhibit 10.27 to Form 10-Q/A for the quarter ended September 30, 2004 and
incorporated herein by reference.*10.7
    
    Executive Employment Agreement dated as of July 1, 2004, between the registrant and Louis J.
DeBone, filed as Exhibit 10.28 to Form 10-Q/A for the quarter ended September 30, 2004 and
incorporated herein by reference.*10.8
    
    Executive Employment Agreement dated as of July 1, 2004, between the registrant and John P.
ODonnell, filed as Exhibit 10.29 to Form 8-K, filed with the SEC on December 3, 2004 and
incorporated herein by reference.*10.9
    
    Executive Employment Agreement dated as of July 1, 2004, between the registrant and Stuart A.
Williams, filed as Exhibit 10.30 to Form 10-Q/A for the quarter ended September 30, 2004, and
incorporated herein by reference.*10.10
    
    Form of Employment Agreement dated as of December 15, 2003, between the registrant and
certain executive officers (other than named executive officers), filed as Exhibit 10.18 to
Form 10-Q for the quarter ended December 31, 2003, and incorporated herein by reference.*10.11
    
    Retirement Benefit Agreement dated as of December 31, 2004, between the registrant and
Robert J. Coury filed as Exhibit 10.7 to Form 10-Q for the quarter ended December 31, 2004,
and incorporated herein by reference.*10.12
    
    Retirement Benefit Agreement dated as of December 31, 2004, between the registrant and
Edward J. Borkowski, filed as Exhibit 10.8 to Form 10-Q for the quarter ended December 31,
2004, and incorporated herein by reference.*10.13
    
    Retirement Benefit Agreement dated as of December 31, 2004, between the registrant and
Stuart A. Williams, filed as Exhibit 10.9 to Form 10-Q for the quarter ended December 31,
2004, and incorporated herein by reference.*10.14
    
    Amended and Restated Retirement Benefit Agreement dated as of December 31, 2004, between the
registrant and Louis J. DeBone, filed as Exhibit 10.10 to Form 10-Q for the quarter ended
December 31, 2004, and incorporated herein by reference.*10.15
    
    Amended and Restated Retirement Benefit Agreement dated as of December 31, 2004, between the
registrant and John P. ODonnell, filed as Exhibit 10.11 to Form 10-Q for the quarter ended
December 31, 2004, and incorporated herein by reference.*
 66




---



##### Table of Contents



10.16
    
    Retirement Benefit Agreement dated January 27, 1995, between the registrant and C.B. Todd,
filed as Exhibit 10(b) to Form 10-K for the fiscal year ended March 31, 1995, and incorporated
herein by reference.*10.17(a)
    
    Retirement Benefit Agreement dated January 27, 1995, between the registrant and Milan
Puskar, filed as Exhibit 10(b) to Form 10-K for the fiscal year ended March 31, 1995, and
incorporated herein by reference.*10.17(b)
    
    First Amendment to Retirement Benefit Agreement dated September 27, 2001, between the
registrant and Milan Puskar, filed as Exhibit 10.1 to Form 10-Q for the quarter ended
September 30, 2001, and incorporated herein by reference.*10.18(a)
    
    Retirement Benefit Agreement dated March 14, 1995, between the registrant and Patricia
Sunseri, filed as Exhibit 10(k) to Form 10-K for the fiscal year ended March 31, 1997, and
incorporated herein by reference.*10.18(b)
    
    First Amendment to Retirement Benefit Agreement dated September 27, 2001, between the
registrant and Patricia Sunseri, filed as Exhibit 10.1 to Form 10-Q for the quarter ended
September 30, 2001, and incorporated herein by reference.*10.19
    
    Split Dollar Life Insurance Arrangement between the registrant and the Milan Puskar
Irrevocable Trust filed as Exhibit 10(h) to Form 10-K for the fiscal year ended March 31,
1996, and incorporated herein by reference.*10.20
    
    Service Benefit Agreement dated January 27, 1995, between the registrant and Laurence S.
DeLynn, filed as Exhibit 10(g) to Form 10-K for fiscal year ended March 31, 1995, and
incorporated herein by reference.*10.21(a)
    
    Transition and Succession Agreement dated as of December 15, 2003, between the registrant
and Robert J. Coury, filed as Exhibit 10.19 to Form 10-Q for the quarter ended December 31,
2003, and incorporated herein by reference.*10.21(b)
    
    Amendment No. 1 to Transition and Succession Agreement dated as of December 2, 2004,
between the registrant and Robert J. Coury, filed as Exhibit 10.1 to Form 10-Q for the quarter
ended December 31, 2004, and incorporated herein by reference.*10.22(a)
    
    Transition and Succession Agreement dated as of December 15, 2003, between the registrant
and Edward J. Borkowski, filed as Exhibit 10.20 to Form 10-Q for the quarter ended December
31, 2003, and incorporated herein by reference.*10.22(b)
    
    Amendment No. 1 to Transition and Succession Agreement dated as of December 2, 2004,
between the registrant and Edward J. Borkowski, filed as Exhibit 10.2 to Form 10-Q for the
quarter ended December 31, 2004, and incorporated herein by reference.*10.23(a)
    
    Transition and Succession Agreement dated as of December 15, 2003, between the registrant
and Louis J. DeBone, filed as Exhibit 10.21 to Form 10-Q for the quarter ended December 31,
2003, and incorporated herein by reference.*10.23(b)
    
    Amendment No. 1 to Transition and Succession Agreement dated as of December 2, 2004,
between the registrant and Louis J. DeBone, filed as Exhibit 10.3 to Form 10-Q for the quarter
ended December 31, 2003, and incorporated herein by reference.*10.24(a)
    
    Transition and Succession Agreement dated as of December 15, 2003, between the registrant
and John P. ODonnell, filed as Exhibit 10.22 to Form 10-Q for the quarter ended December 31,
2003, and incorporated herein by reference.*
 67




---



##### Table of Contents



10.24(b)
    
    Amendment No. 1 to Transition and Succession Agreement dated as of December 2, 2004,
between the registrant and John P. ODonnell, filed as Exhibit 10.5 to Form 10-Q for the
quarter ended December 31, 2004, and incorporated herein by reference.*10.25(a)
    
    Transition and Succession Agreement dated as of December 15, 2003, between the registrant
and Stuart A. Williams, filed as Exhibit 10.23 to Form 10-Q for the quarter ended December 31,
2003, and incorporated herein by reference.*10.25(b)
    
    Amendment No. 1 to Transition and Succession Agreement dated as of December 2, 2004,
between the registrant and Stuart A. Williams, filed as Exhibit 10.6 to Form 10-Q for the
quarter ended December 31, 2004, and incorporated herein by reference.*10.26
    
    Amended and Restated Transition and Succession Agreement dated as of November 7, 2001,
between the registrant and Patricia Sunseri, filed as Exhibit 10.2 to Form 10-Q for the
quarter ended December 31, 2001, and incorporated herein by reference.*10.27
    
    Form of Transition and Succession Agreement dated as of December 15, 2003, with certain
executive officers (other than named executive officers), filed as Exhibit 10.24 to Form 10-Q
for the quarter ended December 31, 2003, and incorporated herein by reference.*10.28
    
    Executives Retirement Savings Plan, filed as Exhibit 10.14 to Form 10-K for the fiscal year
ended March 31, 2001, and incorporated herein by reference.*10.29
    
    Supplemental Health Insurance Program For Certain Officers of Mylan Laboratories Inc.,
effective December 15, 2001, filed as Exhibit 10.1 to Form 10-Q for the quarter ended December
31, 2001, and incorporated herein by reference.*10.30
    
    Mylan Laboratories Inc. Severance Plan, filed as Exhibit 10.12 to Form 10-Q for the quarter
ended December 31, 2004, and incorporated herein by reference.*10.31
    
    Form of Indemnification Agreement between the registrant and each Director, filed as Exhibit
10.31 to Form 10-Q/A for the quarter ended September 30, 2004, and incorporated herein by
reference.*10.32
    
    Description of the registrants Director Compensation Arrangements in effect as of February
9, 2005, filed as Exhibit 10.13 to Form 10-Q for the quarter ended December 31, 2004, and
incorporated herein by reference.*21
    
    Subsidiaries of the registrant.23
    
    Consent of Independent Registered Public Accounting Firm.31.1
    
    Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32
    
    Certifications of CEO and CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
    68




---



##### Table of Contents



SIGNATURES Pursuant to the requirements of section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has duly caused this Form to be signed on its behalf by the undersigned, thereunto
duly authorized on May 18, 2005. Mylan Laboratories Inc.by
    
    /s/ ROBERT J. COURYRobert J. CouryVice Chairman of the Board and Chief Executive
Officer
 Pursuant to the requirements of the Securities Exchange Act of 1934, this Form has been signed
below by the following persons on behalf of the registrant and in the capacities indicated as of
May 18, 2005. Signature
    
    Title/s/ ROBERT J. COURY
    
    Vice Chairman, Chief Executive Officer and Director(Principal Executive Officer)Robert J. Coury/s/ EDWARD J. BORKOWSKI
    
    Chief Financial Officer(Principal Financial Officer)Edward J. Borkowski/s/ GARY E. SPHAR
    
    V.P.  Corporate Controller(Principal Accounting Officer)Gary E. Sphar/s/ MILAN PUSKARChairman and DirectorMilan Puskar/s/ WENDY CAMERONDirectorWendy Cameron/s/ LAURENCE S. DELYNNDirectorLaurence S. DeLynn/s/ DOUGLAS J. LEECHDirectorDouglas J. Leech/s/ JOSEPH C. MAROON, M.D.DirectorJoseph C. Maroon, M.D./s/ ROD PIATTDirectorRod Piatt/s/ PATRICIA A. SUNSERIDirectorPatricia A. Sunseri/s/ C.B. TODDDirectorC.B. Todd/s/ R.L. VANDERVEEN, PH.D., R.PH.DirectorR.L. Vanderveen, Ph.D., R.Ph./s/ STUART A. WILLIAMS, ESQ.DirectorStuart A. Williams, Esq.
 69




---



##### Table of Contents



EXHIBIT INDEX 10.4(b)
    
    Form of Stock Option Agreement under the Mylan Laboratories Inc. 2003 Long-Term Incentive Plan.10.4(c)
    
    Form of Restricted Share Award under the Mylan Laboratories Inc. 2003 Long-Term Incentive Plan.21
    
    Subsidiaries of the registrant.23
    
    Consent of Independent Registered Public Accounting Firm.31.1
    
    Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32
    
    Certifications of CEO and CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 70