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Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Mylan Third Quarter 2018 Financial Results. [Operator Instructions] As a reminder, this conference is being recorded.
Now it's my pleasure to turn the call to Melissa Trombetta, Head of Global Investor Relations.
Thank you, Carmen. Good evening, everyone. Welcome to Mylan's Third Quarter 2018 Earnings Conference Call. Joining me for today's call are Mylan's Chief Executive Officer, Heather Bresch; President, Rajiv Malik; Chief Commercial Officer, Tony Mauro; and Chief Financial Officer, Ken Parks. During today's call, we will be making forward-looking statements on a number of matters, including our financial guidance for 2018. These forward-looking statements are subject to risks and uncertainties that could cause future results or events to differ materially from today's projections. Please refer to the earnings release we furnished to the SEC on Form 8-K earlier today as well as our supplemental earnings slides, all of which are posted on our website at investor.mylan.com for a fuller explanation of those risks and uncertainties and the limits applicable to forward-looking statements. Mylan routinely post information that may be important to investors on this website, and we use this website address as a means of disclosing material information to the public in a broad, nonexclusionary manner for purposes of the SEC's Regulation Fair Disclosure. In addition, we will be referring to certain actual and projected financial metrics of Mylan on an adjusted basis, which are non-GAAP financial measures. We will refer to these measures as adjusted and present them in order to supplement your understanding and assessment of our financial performance. Non-GAAP measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP. The most directly comparable GAAP measures as well as reconciliations of the non-GAAP measures to those GAAP measures are available in our third quarter earnings release and supplemental earnings slides as well as on our website. Let me also remind you that the information discussed during this call, except for the participant questions, is the property of Mylan and cannot be recorded or rebroadcast without Mylan's expressed written permission. An archived copy of today's call will be available on our website and will remain available for a limited time. With that, I'd like to turn the call over to Heather.
Thank you, Melissa. Good afternoon, and thank you for joining today's call. While we are continuing to see the global health care environment evolve at a rapid pace, Mylan's third quarter performance was in line with our expectations, and we delivered solid year-over-year growth. However, in the market search for stability, analyzing certain indicators and isolation can exacerbate volatility. We'll discuss our perspective related to several examples of these during today's call, whether that be Mylan's pending generic Advair approval, utilization of biosimilars and complex generics or the overemphasis of the impact of commoditized oral solid dose products within our North America business. Our ability to deliver long-term growth is not dependent upon the timing of any one approval, any one country's market dynamics or any one dosage form, but, rather, the broader more complete context of Mylan's global diversified business model; more than 7,500 products around the world divided almost equally between generic and brand sales; market leadership in countries throughout our geographies and a scientific platform that has generated a record number of complex generics and biosimilar launches for Mylan year-to-date. We continue to believe Mylan is Built to Last. With all this said, we remain committed to our full year 2018 guidance provided in August, and this confirmation is not dependent on any single product approval or launch. In North America, while our business is predominantly generic, we are benefiting from a broad mix of dosage forms well beyond oral solids and are seeing continued stabilization of the pricing environment. Year-to-date, we have launched nearly 40 new products in North America, with 2/3 of these being injectables. In Europe, our business benefits from an equal mix of branded generic and over-the-counter products. Year-to-date, we have launched nearly 300 products across all of these channels. Our commercial infrastructure in Europe allows us to maximize key launches, such as our insulin analog and the first wave of our biosimilar to Humira across countries in this region. In our Rest of World segment, Mylan's smallest but fastest growing region, we've seen consistent double-digit growth for the year with more than 130 new product launches year-to-date. We also continue to benefit from organic and inorganic new product opportunities in this region, including Sebivo and TOBI. These results are made possible, thanks to the successful integration of our differentiated global platform, which allows this management team to be 100% focused on executing and maximizing the organic shareholder value contribution of all of our global assets. We're now positioned to explore opportunities to drive capital market discipline down into every segment of our business, distinguishing between value-creating and value-consuming growth, and then focusing our strategies and investment on driving economically profitable growth. As we look ahead, we're very optimistic about our long-term growth prospects. We have secured almost all regulatory approvals necessary for our key 2019 product drivers around the world. But given the reality of today's operating environment, we know that's not enough. We still have the important work of ensuring our products get pulled through the system and into the patient's hands who need them. Perseverance and adaptability are prevailing, and we continue to see utilization uptick with our Glatiramer Acetate, our HIV portfolio and our biosimilar to Neulasta as prime examples. Our employees are critical to this effort. Each of them contributes to our mission to provide the world's 7 billion people access to medicine, and I'd like to thank them for their hard work and continued dedication to Mylan. With that, I'll turn the call over to Rajiv to provide you with some greater detail on developments from this quarter.
Thank you, Heather. Let me start by celebrating the broad contribution, in fact, of our Morgantown facility's restructuring and remediation, which began in the second quarter of this year on our North American business as this may have been misunderstood by the investment community. Our U.S. business is much more than commoditized order solid doses and consists of a broad portfolio of injectables, gum, semisolids, in addition to hard-to-make oral solids. Currently, only one of our top 10 and 8 of our top 50 gross margin-generating products for North America are manufactured in Morgantown. It should be noted that we did not expect to have any significant new product launches from the site in 2019. As we work to reduce the complexity of this facility, we have proactively discontinued a number of products while also transferring some to other sites. These actions have led to a temporary disruption in supply of certain products for our customers and reduced volume in North America generic sales. However, the value related to the rationalized product is not proportionate to the reduced volumes of those commoditized products. While we are executing on our commitment to FDA, the plant continues to supply products for the U.S. market. Our remediation and restructuring activities will continue in the near term. We understand that this current and temporary situation post a burden on our customers and appreciate their ongoing confidence in Mylan based on our outstanding historical track record.
As one of world's largest pharmaceutical markets, the U.S. remains a key market for Mylan. We will continue to focus on providing a broad range of products, including industry-leading new launches and maintaining a meaningful market share across a diversified portfolio. No matter where our products are produced in our network, our goal is to ensure the highest quality and service levels to our customers and optimal volume value mix.
As Heather mentioned, over the past 12 months, we have had a record-breaking year of scientific accomplishments, representing a significant milestone in the company's nearly 50-year history and validating our strength in managing and executing on complex product approvals. This is a culmination of years' long scientific investments and endeavors to bring complex generics and biosimilars to the market. Our team's managing designs and working closely with our partner have consistently delivered remarkable results, and we are looking forward to continuing this momentum as we close out 2018 and is awaiting approval for generic Advair, Wixela, and revefenacin YUPELRI. Mylan will continue to differentiate itself by leveraging its size platform and adding more complex products to our portfolio over the long term. Regarding Wixela, we are in the continuous and ongoing discussions with FDA regarding the progress of the review. Based on our latest update from agency, they are in the final stage of labeling review. We continue to believe that the FDA will be able to resolve any outstanding issues very soon. Now I'd like to take the opportunity to elaborate on the previously disclosed acquisition of worldwide rights to cystic fibrosis products, TOBI Podhaler and TOBI solution from Novartis. This is a meaningful and strategic addition to our respiratory platform in the U.S.A., and a very complementary and durable addition to our Creon franchise in Europe, Australia, Japan and Canada, and also broadens our portfolio of dry powder inhaler and nebulized products. Such bolt-on acquisitions must first and foremost be strategically aligned to boost our franchise as well as deliver on our financial metrics, such as EPS accretion and ROIC. This asset acquisition is not only strategic but checks all our financial metrics boxes. Before I turn it over to Ken, I would like to express my appreciation to our employees around the world for their hard work, dedication and many contributions. Thank you.
Thanks, Rajiv, and good afternoon, everyone. I'll take a few minutes to provide a quick overview of our financial results for the third quarter. Total revenues of $2.9 billion were 4% lower than the prior year or 2% lower excluding the negative impact of foreign exchange. On a constant currency basis, Europe, which was up 2%; and Rest of World, which was up 11%, helped to mitigate a 13% decline in North America. The decrease in North America net sales was primarily driven by lower volumes on existing products, including EpiPen, partially offset by new product sales, including the recent launch of Fulphila. The decline in volumes was primarily driven by the timing of purchases of our products by customers and actions associated with the restructuring and remediation program at our Morgantown manufacturing facility.
In addition, North America net sales were negatively impacted by approximately $50 million related to the implementation of the new revenue recognition accounting standard at the beginning of 2018. North America net sales, excluding the $50 million impact, were down 9% versus the prior year. Adjusted net earnings increased 10% to $648 million and adjusted diluted EPS increased 14% to $1.25 during the quarter. That includes benefits from ongoing integration activities and the lower share count following the completion of our 1 billion share repurchase program in the beginning of the year. Moving to segment profitability. Excluding approximately $98 million of expenses related to the Morgantown restructuring and remediation program, North America adjusted segment profitability declined 6%, which is less than the rate of the sales decline and primarily due to the impact of new product launches and favorable product mix. Europe's profitability grew 7% during the quarter, mostly driven by new product sales and favorable product mix also. Rest of World profitability expanded 45%, mostly driven by new product sales, including those in our ARB franchise, Australia and China. Both Europe and Rest of World continue to benefit from our ongoing Mylan integration activities as we execute on our plans to further optimize our cost structure.
Adjusted free cash flow for the 9 months ended September 30, 2018 totaled $2 billion, an increase of 6% compared to the prior year, reflecting favorable working capital performance and lower capital expenditures. Year-to-date, adjusted free cash flow conversion was healthy at approximately 119% of adjusted net earnings, another measure of the strength and durability of the cash flow-generating capabilities of our business. At the end of Q3 2018, we reduced our debt-to-adjusted EBITDA leverage ratio to 3.8x. As anticipated, our capital deployment priority is focused on deleveraging in the second half of 2018, and we expect this to continue into 2019. We intend to repay at least $1.2 billion of debt maturing through the end of 2019, including EUR 500 million maturing later this year and the balance maturing next year. Our solid free cash flow generation could allow us to repay additional debt in 2019. And we'll provide an update of our complete 2019 debt repayment and leverage targets when we provide our 2019 outlook. We remain fully committed to our investment-grade credit rating and to further reducing leverage as we work towards our long-term average, debt-to-adjusted EBITDA leverage ratio target of approximately 3.0x. Finally, as you've heard earlier, we're reaffirming our full year 2018 guidance. We expect total revenue to be in the range of $11.25 billion to $12.25 billion, which is roughly flat at the midpoint versus 2017. We also expect adjusted EPS to be in the range of $4.55 to $4.90 per share, which represents an increase of 4% at the midpoint when compared to the prior year. For cash flow, we continue to expect to generate between $2.1 billion to $2.5 billion of adjusted free cash flow, which is consistent with our initial guidance for 2018. As we discussed over the last few quarters, we're continuing to evaluate metrics other than EPS that better reflect how we manage and measure the performance of the business. We expect to utilize those metrics as we provide guidance externally on the outlook for the business, and we'll provide more detail when we update you on the 2019 outlook call early next year. With that, we'll now open up the call for questions. Carmen?
[Operator Instructions] Our first question comes from Elliot Wilbur with Raymond James.
Just specifically wanted to get a little bit more color and insight into some of the segment profitability metrics. I guess, specifically North America and Europe, both were very strong despite some constraints on the top line. In fact, I think you're close to record level since you began the new segment disclosure reporting a couple of years ago. Wouldn't have expected that in North America kind of given the absence of EpiPen contribution and not really sure what kind of drove the strong year-over-year and sequential profitability trends in Europe as well. So maybe just a little bit more insight into those dynamics will be helpful.
Okay, Elliot, thank you for the question. You're exactly right. I mean, this was a strong profitability growth quarter, not just for Europe and for North America but also for the Rest of World. And as we talked about in the comments, as I talked about specifically in the comments, and you can see when you look at our press release, our gross margin ratio increased from a little more than 52% on an adjusted basis last year in the third quarter to more than 55% this year. Called out basically the 2 drivers in both places: number one -- both places being North America and Europe, number one, our product launches, new product launches, and we've talked about that as we move through the year. We specifically said that new product launches in Europe would be more heavily weighted to the second half of the year. And we saw both in Europe and North America exactly the expectations that we had moving into the quarter. Those new product launches tend to run at profitability levels slightly higher than the overall Mylan average. So that was a positive contributor in both North America and Europe regions. Secondly, I would call out for Europe specifically, we've talked about, as we've come into 2018, the focus and investment into our global key brands. Some of those global key brands are out of the legacy Mylan business, some of them are out of the EPD business we acquired a couple of years ago. And some of those come out of the Meda business that we acquired in 2016. We called it out because we said, as we move into 2018, we were going to continue to reap the benefits from our Mylan integration activity to be able to reduce our overall G&A cost and at the same time take that money invested back into selling and marketing to support those global key brands that are very sensitive to advertising promotion and selling efforts in the countries across Europe, specifically, and that's exactly what we've done this year. We've had the savings from G&A, and we've had the discipline and focus and leadership and teams to support these global key brands and not just one market but multiple markets. So that should give you a little bit more color. It's really around product launches. You've heard scientific capabilities, and that's turning into revenues and profits and then the focus on our global key brands.
Our next question comes from Ronny Gal with Bernstein.
I wanted to touch on 2 things, if I can. First, I noticed the UNH contracts where you're preferred brand for their plan, so a nice execution there on the commercial marketing side. Any chance you can let us know what roughly the pricing is for this product versus its list price or some other [ metric ] that this is more of a generic level pricing or more of a branded level pricing? And similarly, with most of the European adalimumab contract already in, can you give us a fair assessment of where your volume will stand, your volume share will stand in 2019 in Europe?
Yes, Ronny, thanks for the question. First on the UNH, I think, thank you for recognizing this. It's a great opportunity, we think. This partnership we have with United really provides enormous amount of access and affordability to this marketplace. And we think this unique contracting opportunity really will drive opportunity not just in 2018 but in 2019 as well. And as it relates to Hulio, our Humira products in Europe, it's just beginning. We're seeing tenders, as you've noted, across many of the European markets, like the Netherlands, Norway and Denmark. Certainly, we feel like there's a huge, tremendous opportunity within Europe, not just in the tender markets but in the markets where we'll have physician substitution. So we're excited about the beginning of the launch, winning a few tenders in select markets and really expanding on that going forward into 2019.
Our next question comes from Chris Schott with JPMorgan.
The first one I had was on Morgantown. Any additional color you can provide in terms of the impact the remediation is having on both your top and bottom line adjusted results as well as any more granularity on when in '19 we can expect the operations to begin to normalize at that facility? And just a quick second one, which is an update on the strategic review. Any time lines when we can think about an update here? And directionally, any color in terms of what the committee is spending its time evaluating?
Thanks, Chris. I'll take Morgantown, and Heather will comment on the second part. Chris, as you will anticipate, when we have taken -- undertaken the remediation and restructuring because we mentioned in our quarter 2 call that just to manage the -- manage to keep this with the FDA's evolving standards, we need to rationalize and simplify the plant and reduce the complexity. So we had undertaken certain discontinuation of commodity products as well as moving these products within our network to some other sites. So we -- I think if we separate qualitative and quantitative, it's more a qualitative issue for us because it gets set out from the customer service level point of view, our reputation [ that this is an elaborate plan ], that's where I think we feel the more pain rather than the quantitative one because what -- where we have lost those is mostly on the commodity products with -- yes, you see a couple of billion dollars going down, but they're -- as we mentioned, disproportionately, they're not from the value point of view there -- so we -- as we go in 2019, you will see us restructuring in Morgantown, that's number one but basically balancing the network so that we can optimally deliver the meaningful market share, the value and the volume mix. So that's where we are heading.
And Chris, as far as the strategic review, as we just announced it last quarter, I can assure you the board is busy looking at lots of things as we talked about unlocking that value. And I think that when they're ready for an update, we certainly will put that out. But we put no time frames around that.
Our next question comes from Liav Abraham with Citi.
A couple of quick questions. Firstly, can you just provide a little more granular details on the Fulphila launch and how that's progressing? And then, secondly, Ken, in the past, you've provided us with a breakdown of revenue for new products in the quarter broken down into U.S. and Rest of World. Could you provide that for this quarter as well?
Yes, thank you. On Fulphila, maybe just to give you kind of what's been our approach when we talk about this surgical launch, we really had been focusing on community oncology clinics as well as hospital-based outpatient clinics. So as we continue to watch weekly, we see our weekly movement into these clinics as going to 700 or 800 units a week here, and we see that continuing to grow. Last week alone, we're a little over 8% of the prefilled syringe market, which makes up almost 50% of the entire Neulasta marketplace. So we are very happy. We're very happy where we're at today and where we continue to see our trends grow and continuing to build upon that oncology practice experience and really building out relationships with the GPOs and the IDNs in terms of how we can look at long-term value, continuing to grow and capture share in this very, very large U.S. marketplace.
And Liav, so for the quarter, we had slightly under $300 million of new product launch revenues, which I would say about half of that came out of North America overall and the remainder of it was split between Europe, our API and ARB business, and then the remainder was in just kind of the Rest of World segment. So that would be kind of the highest level breakdown of where that's coming from.
Our next question comes from Gary Nachman with BMO Capital Markets.
With generic Copaxone, you've been taking more share in the last couple of months. So what types of formulary wins have you been getting? And how much additional price did you have to give up to get that share? And if generic Advair is approved soon, what do you expect market formation to look like at this point?
Maybe just to hit upon Copaxone, what I will say is we didn't -- last quarter and the previous quarter, we weren't happy where our market share was. We have been continuing to focus on this with pharmacies, with PDNs and with payers. And you're right, over the last quarter, we've seen sequential 25% gain in market share; a 5% total market share gain in Q2 to Q3; and at one point in Q3, new scripts, we're getting the 30% level for the first time. So we are very excited where we're going, but we're not finished, and we've got more to do and more to work with as it relates to that. And as it relates to Advair...
Yes, I would just add as it relates to Advair, I mean, whenever the market does form, we believe it's going to be an important product for a long period of time. As you know, a very high barrier-to-entry, very complicated product, we look forward to bringing it to the market. But believe that as we continue to learn about -- and as the continued dynamics evolve with how to pull product through, I can assure you we will be launching it as smart as we can to ensure that we're able to get it into the patient's hands. So we look forward to the launch as soon as it can happen.
Our next question comes from Umer Raffat with Evercore.
First on EpiPen. My question is, you're filing, say, no more than 3% of any product -- no more than 3% of your revenues are any single product. So that would imply EpiPen and its authorized generic being something like $350 million. But we're seeing Pfizer report $174 million first 9 months alone or $230 million run rate. So that Pfizer run rate doesn't quite reconcile with EpiPen and its AG being $350 million. Is it fair to say EpiPen's $350 million and the AG's another $200 million? And then, Ken, for your debt paydown schedule, are you assuming any significant change in your working capital? Or any new securitizations?
So I -- Umer, number one, your statement, the reiteration of our statement around no product accounting for more than 3% of total revenues is absolutely correct. And so the math would get you exactly where you laid out for us. I can't speak to what Pfizer has out there. But I can tell you exactly what we know, which are the numbers we manage and the sales that we account for. And your first statement is exactly dead on and consistent with our earlier statements. On debt paydown, what I would tell you is we have shown, over the last couple of years, consistent improvement in working capital velocity; the couple of days per quarter and a year-over-year comparison of improvement in working capital days on hand, which is exactly what we're driving towards as we move to the balance of this year and into 2019. And we're going to have a lot of opportunities to take a look at where that working capital velocity will come from. We've talked in some other settings, including in our Investor Day earlier this year, how we got Europe combined all on a single ERP system instance. And in doing so, that gives us ability to reach out and look at receivables from 1 spot instead of 35. We'll get payables from 1 spot instead of 35. And we built in and are doing specific activities to drive those days in the directions that they need to be moved to. So your question around debt paydown is, number one, we certainly have the debt repayments outlined that are coming due in this year and next year. And I will tell you that we also expect to continue to drive working capital velocity improvements, not just in the balance of 2018, but through 2019, and I would even suggest going forward. When you put numbers around that, every day of working capital for Mylan accounts for about $40 million of cash flow so the continuation of working capital velocity is high on all of our list and, specifically, mine.
Our next question comes from Tim Chiang with BTIG.
I noticed that you guys highlighted gross margin improvement this quarter of 55% approximately. Is this a number that you think can be repeated in future quarters? And also, you're benefiting from lower SG&A spending, also lower R&D spending. Is that also something that's going to continue?
On gross margin, what I'd tell you is we watch every quarter as it occurs. We certainly had a period, as I outlined, of $300 million or so of new product launches and you hear Rajiv, Heather and Tony all talking about the pipeline, and we're investing in those products that are more complex, those that bring more value, not only to us but to the patient. And in doing so, that -- those tend to be slightly higher profitable products. The timing of new product launches could drive a quarterly movement in what gross profit looks like. But what I would tell you over time is this pipeline that this team has built over multiple years is set to deliver gross products, gross margins at nice rates over the long term, but I won't call out any quarter alone. Secondly, your question around SG&A, I'd go back to, say, the statements earlier around SG&A which is we continue to look at these assets that we brought together through acquisitions. We find opportunities to continue to improve the G&A part of that SG&A and still invest in the selling side of that equation. So we have opportunity. When you say is it sustainable? Yes, we continue to find opportunities to do things in our, "back office", more streamlined, more improved, which just gives us more dollars to drop through either to the bottom line or to invest where we need to grow products. And then I'll let Rajiv comment on the R&D question.
Yes, look, our commitment on R&D is very well highlighted and illustrated, as we mentioned, in Heather's remark as well as in my remarks. So R&D spend is a timing issue and not a trend.
Our next question comes from Irina Koffler with Mizuho.
As your labeling discussions on Wixela proceed, can you reassure us that it's still a substitutable product that we're talking about and your confidence level around that?
Absolutely, we can reassure you that it's a substitutable product. And we are very optimistic, and we believe FDA needs to do what they need to do, and we respect the same. But at the same time, we have been very confident about the possible comment or views.
Our next question is from Louise Chen with Cantor Fitzgerald.
This is Jennifer Kim on for Louise. I just had 2 quick ones. First, I think you mentioned that there was a volume decline for EpiPen this quarter, is it the timing of purchases? And I'm wondering then would you anticipate the volumes to sort of operate themselves in the fourth quarter? And then the second question is with the recent approval of a second biosimilar for Neulasta, how does that affect your thinking about the market?
Maybe if I hit on EpiPen very quickly, what I would say is traditionally, Q3 for us is the highest volume quarter just due to the seasonality of the product. So what I would say is I think Q4 will rebalance itself out to probably 20% of the annual volumes, as we've seen in traditional years of past. As it relates to another Neulasta product, like I said, this is a $4 billion product in oncology, the largest biologic product available in the oncology therapeutic world. And right now, we're tracking a little bit above 8% in the pre-filled syringe area. So I think there's opportunity for more. I think there's a great opportunity for Mylan. And I think we'll continue to see our product grow and we'll stay very surgical, on track with our plan as we're very happy with the results and very happy where it's going.
Our next question comes from Jason Gerberry with Bank of America.
Just a question on biosimilar Lantus. I'm just curious, is this a product you guys think is one that you can get an acceptable gross profit margin on? And I ask in lieu of Merck's decision to walk away from this, citing profitability metrics, and I know they're about a year ahead of you guys. So just kind of curious if you can help us think about that one.
I will take it then, Tony, please feel free to add. We believe Lantus is a very important product, and we remain confident, first of all, in science, and in fact we continue to work with the FDA to find a substitutable product. At the same time, we believe there's a market and there's a need. And we've been very confident from our costing point of view, from the backward integration, which we have done with our partner, Biocon, that we will be able to have a positive gross margin when we come to the launch of this very important product.
And maybe just to add, as Rajiv said, this diabetes franchise is one that continues to grow globally. And I think each market will be -- each market will have its own sets of opportunities, and we'll be very focused on the markets we concentrate to grow and ensure our market share is valuable and bringing access to this important patient community.
Our next question is from Ami Fadia with Leerink.
I've got 2 questions. Firstly on Fulphila, can you give us a sense of your capacity with regards to supplying to demand in the market? And secondly, on Advair, when it gets approved, what type of a ramp are you anticipating? Would you expect a relatively slow ramp, kind of like the way we've seen with Copaxone? Or would you anticipate a more typical generic ramp?
Ami, regarding Fulphila, I think we -- our capacity is exactly as we had planned and as we had anticipated this launch. So we don't see any capacity constraints from a modeling perspective. And you...
And as far as Advair, I mean, here's what I would say, Ami. As we've talked about these complex products being pulled through the chain, and I tried to reiterate this in my opening commentary that it's not just good enough to get our product approval the regulatory burden, but also our work about pulling it through. And I can assure you that we are absolutely doing our part as we look at how this is going to be positioned with our end goal being that it reaches the patient's hands who need them and brings that access and affordability to this marketplace. So -- as once we do get the product launched, we'll obviously stay close and report back. I think that we've taken very appropriate and conservative assumptions. And I think it'll be something that's got a very long tail to the longevity and contribution from this product.
Our next question is from David Risinger with Morgan Stanley.
Zhu Shen here for David Risinger, could you please provide more color on the new financial metrics that you're considering to focus The Street on?
You go ahead, Heather.
Yes, sure, and then anything you want to add. Look, I think we've been continuing to indicate that we don't believe that the EPS in the short term is kind of around that projection as the right indicator for what's really fueling our long-term viability or performance over the long term, and really, quite honestly, what we're focused as a management team. So these are things -- we're looking at a lot of things. And obviously, when we come back with 2019 outlook, we certainly will share them with you as well as our rationale.
And the only thing I would -- and I completely agree with everything Heather just said, and I would just say, consider how you see our financial results come out, which are that EPS is certainly a number that certain people like to take a look at. And we certainly want to make sure and drive that to be as optimal as we can. But what I would also tell you is what we really also want to do is make sure we're not just focused on EPS in a quarter, but consistent, solid cash flow generation and conversion of EBITDA and net income into cash, so we can continue to delever, continue to invest in our business and continue to build that pipeline. So you'll see us looking at things around what's driving value to the business from an economic perspective, and what's driving cash into the -- out of the business and then back into the business, to make sure that we are keeping our balance sheet healthy and our company strong and ready to deliver on the business plans that we have set for ourselves, not just for the next quarter or the next year, but the next few years. So as I said, we'll give you more color around those specifics as we continue to look at it when we get in front of you in late February time frame with our outlook for 2019.
And ladies and gentlemen, this concludes our Q&A and program for today. Thank you for participating. This concludes it, and you may all disconnect.