The following discussion and analysis addresses material changes in the results of operations and financial condition of Mylan Inc. and subsidiaries (the "Company", "Mylan" or "we") for the periods presented. This discussion and analysis should be read in conjunction with the Consolidated Financial Statements and the related Notes to Consolidated Financial Statements, and the Company's other SEC filings and public disclosures.

This Form 10-K 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", "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 above under "Risk Factors" in Part II, Item 1A. The Company undertakes no obligation to update any forward-looking statements for revisions or changes after the date of this Form 10-K.

Executive Overview

We are a leading global pharmaceutical company and have developed, manufactured, marketed, licensed and distributed high quality generic, branded and branded generic pharmaceutical products for more than 45 years. As a result of our acquisition of the former Merck Generics business in October 2007 and the acquisition of a controlling interest in Matrix in January 2007, we are a leader in branded specialty pharmaceuticals and the third largest active pharmaceutical ingredient ("API") manufacturer with respect to the number of drug master files ("DMFs") filed with regulatory agencies. We hold a leading generics sales position in four of the world's largest pharmaceutical markets, those being the United States ("U.S."), the United Kingdom ("U.K."), France and Japan, and we also hold leading sales positions in several other key generics markets, including Australia, Belgium, Italy, Portugal and Spain.

Mylan has three reportable segments: the "Generics Segment", the "Specialty Segment", and the "Matrix Segment", as determined in accordance with Statement of Financial Accounting Standards ("SFAS") No. 131, Disclosures about Segments of an Enterprise and Related Information. Certain general and administrative expenses, as well as litigation settlements, revenue related to the sale of Bystolic rights, amortization of intangible assets and certain purchase accounting items (such as the write-off of in-process research and development and the amortization of the inventory step-up), non-cash impairment charges, and other expenses not directly attributable to the segments are reported in Corporate/Other.

The measure of profitability used by the Company with respect to segments is gross profit less direct research and development expenses ("R&D") and direct selling, general and administrative expenses ("SG&A").

Change in Fiscal Year

Effective October 2, 2007, we changed our fiscal year end from March 31st to December 31st. We have defined various periods that are covered in the discussion below as follows:

• "calendar year 2008" - January 1, 2008 through December 31, 2008;

• "calendar year 2007" or "comparable twelve-month period" - January 1, 2007 through December 31, 2007;

• "transition period" - April 1, 2007 through December 31, 2007;

• "comparable nine-month period" - April 1, 2006 through December 31, 2006; and

• "fiscal 2007" - April 1, 2006 through March 31, 2007.

The above periods include Matrix from January 8, 2007 and the former Merck Generics business from October 2, 2007. As a result of the change in year end, the Company believes that a comparison between calendar year 2008 and calendar year 2007 and a comparison between the transition period and the comparable nine-month period enhances a reader's understanding of the Company's results of operations and, as such, these are the comparisons which are presented below in the section titled "Results of Operations". The financial and operational trends highlighted in the comparisons presented below are consistent with those that would result from a comparison of calendar year 2008 to the transition period and from a comparison of the transition period to fiscal 2007, respectively.

An overview of fiscal 2007 is also provided below in order to highlight certain trends and the effects on that year of the Matrix transaction which are not in the comparable nine-month period.

Bystolic®

In January 2006, the Company announced an agreement with Forest Laboratories Holdings, Ltd. ("Forest"), a wholly-owned subsidiary of Forest Laboratories, Inc., for the commercialization, development and distribution of Bystolic in the United States and Canada (the "2006 Agreement"). Under the terms of that agreement, Mylan received a $75.0 million up-front payment and $25.0 million upon approval of the product. Such amounts were being deferred until the commercial launch of the product and were to be amortized over the remaining term of the license agreement. Mylan also had the potential to earn future milestones and royalties on Bystolic sales and an option to co-promote the product, while Forest assumed all future development and selling and marketing expenses.

In February 2008, Mylan executed an agreement with Forest whereby Mylan sold to Forest its rights to Bystolic (the "Amended Agreement"). Under the terms of the Amended Agreement, Mylan received a one-time cash payment of $370.0 million, which was deferred along with the $100.0 million received under the 2006 Agreement, and retained its contractual royalties for three years, through 2010. Mylan's obligations under the 2006 Agreement to supply Bystolic to Forest were unchanged by the Amended Agreement. Mylan believed that these supply obligations represented significant continuing involvement as Mylan remained contractually obligated to manufacture the product for Forest while the product was being commercialized. As a result of this continuing involvement, Mylan had been amortizing the $470.0 million of deferred revenue ratably through 2020 pending the transfer of manufacturing responsibility that was anticipated to occur in the second half of 2008.

In September 2008, Mylan completed the transfer of all manufacturing responsibilities for the product to Forest, and Mylan's supply obligations have therefore been eliminated. The Company believes that it no longer has significant continuing involvement and that the earnings process has been completed. As such, the deferred revenue of $468.1 million was recognized and included in other revenues in the Company's Consolidated Statements of Operations during calendar year 2008.

Future royalties are considered to be contingent consideration and are recognized in other revenue as earned upon sales of the product by Forest. Such royalties are recorded at the net royalty rates specified in the Amended Agreement.

Issuance of Cash Convertible Notes

On September 15, 2008, Mylan completed the sale of $575.0 million of 3.75% Cash Convertible Notes due 2015 ("Cash Convertible Notes"). The Cash Convertible Notes were sold in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the "Securities Act").

The Cash Convertible Notes, which are unsecured, pay interest semi-annually at a rate of 3.75% per annum and mature on September 15, 2015. The Cash Convertible Notes are convertible under certain circumstances into cash at an initial conversion reference rate of 75.0751 shares of Mylan's common stock per $1,000 principal amount of notes (which is equal to an initial conversion reference price of approximately $13.32 per share). The Cash Convertible Notes are not convertible into shares of Mylan common stock or any other securities.

Goodwill Impairment

On February 27, 2008, the Company announced that it was reviewing strategic alternatives for its specialty business, Dey, including the potential sale of the business. This decision was based upon several factors, including a strategic review of the business, the expected performance of the Perforomist® product, where anticipated growth was determined to be slower than expected and the timeframe to reach peak sales was determined to be longer than was originally anticipated.

As a result of our ongoing review of strategic alternatives, we determined that it was more likely than not that the business would be sold or otherwise disposed of significantly before the end of its previously estimated useful life. Accordingly, a recoverability test of Dey's long-lived assets was performed during the three months ended March 31, 2008 in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets ("SFAS No. 144"). We included both cash flow projections and estimated proceeds from the eventual disposition of the long-lived assets. The estimated undiscounted future cash flows exceeded the book values of the long-lived assets and, as a result, no impairment charge was recorded.

Upon the closing of the former Merck Generics business acquisition, Dey was defined as the Specialty Segment under the provisions of SFAS No. 131. Dey is also considered a reporting unit under the provisions of SFAS No. 142, Goodwill and Other Intangible Assets ("SFAS No. 142"). Upon closing of the transaction, the Company allocated $711.2 million of goodwill to Dey.

The Company tests goodwill for possible impairment on an annual basis and at any other time events occur or circumstances indicate that the carrying amount of goodwill may be impaired. As we had determined that it was more likely than not that the business would be sold or otherwise disposed of significantly before the end of its previously estimated useful life, the Company was required, during the three months ended March 31, 2008, to assess whether any portion of its recorded goodwill balance was impaired.

The first step of the SFAS No. 142 impairment analysis consisted of a comparison of the fair value of the reporting unit with its carrying amount, including the goodwill. We performed extensive valuation analyses, utilizing both income and market-based approaches, in our goodwill assessment process. The following describes the valuation methodologies used to derive the estimated fair value of the reporting unit.

Income Approach: To determine fair value, we discounted the expected future cash flows of the reporting unit. We used a discount rate, which reflected the overall level of inherent risk and the rate of return an outside investor would have expected to earn. To estimate cash flows beyond the final year of our model, we used a terminal value approach. Under this approach, we used estimated operating income before interest, taxes, depreciation and amortization in the final year of our model, adjusted to estimate a normalized cash flow, applied a perpetuity growth assumption, and discounted by a perpetuity discount factor to determine the terminal value. We incorporated the present value of the resulting terminal value into our estimate of fair value.

Market-Based Approach: To corroborate the results of the income approach described above, we estimated the fair value of our reporting unit using several market-based approaches, including the guideline company method which focused on comparing our risk profile and growth prospects to a select group of publicly traded companies with reasonably similar guidelines.

Based on the SFAS No. 142 "step one" analysis that was performed for Dey, the Company determined that the carrying amount of the net assets of the reporting unit was in excess of its estimated fair value. As such, the Company was required to perform the "step two" analysis for Dey, in order to determine the amount of any goodwill impairment. The "step two" analysis consisted of comparing the implied fair value of the goodwill with the carrying amount of the goodwill, with an impairment charge resulting from any excess of the carrying value of the goodwill over the implied fair value of the goodwill based on a hypothetical allocation of the estimated fair value to the net assets. Based on the second step analysis, the Company concluded that $385.0 million of the goodwill recorded at Dey was impaired. As a result, the Company recorded a non-cash goodwill impairment charge of $385.0 million during the three months ended March 31, 2008, which represented our best estimate as of March 31, 2008. The allocation discussed above was performed only for purposes of assessing goodwill for impairment; accordingly, we have not adjusted the net book value of the assets and liabilities on the Company's Consolidated Balance Sheet, other than goodwill, as a result of this process.

The determination of the fair value of the reporting unit required the Company to make significant estimates and assumptions that affect the reporting unit's expected future cash flows. These estimates and assumptions primarily include, but are not limited to, the discount rate, terminal growth rates, operating income before depreciation and amortization, and capital expenditures forecasts. Due to the inherent uncertainty involved in making these estimates, actual results could differ from those estimates. In addition, changes in underlying assumptions would have a significant impact on either the fair value of the reporting unit or the goodwill impairment charge.

The hypothetical allocation of the fair value of the reporting unit to individual assets and liabilities within the reporting unit also requires the Company to make significant estimates and assumptions. The hypothetical allocation requires several analyses to determine the estimate of the fair value of assets and liabilities of the reporting unit.

In September 2008, following the completion of the comprehensive review of strategic alternatives for Dey, the Company announced its decision to retain the Dey business. This decision included a plan to realign the business, including positioning the Company to divest Dey's current facilities over the next two years. As a result, the Company expects to incur severance and other exit costs. In addition, the comprehensive review resulted in a non-cash impairment of certain non-core, insignificant, third-party products.

Levetiracetam Launch

On November 4, 2008, the Company announced that its wholly-owned subsidiary, Mylan Pharmaceuticals Inc. ("MPI"), received final approval from the U.S. Food and Drug Administration ("FDA") for its Abbreviated New Drug Application ("ANDA") for levetiracetam tablets, 250 mg, 500 mg and 750 mg. Levetiracetam tablets are the generic version of UCB Pharma's Keppra®. Levetiracetam tablets had U.S. sales of approximately $1.0 billion for the 12 months ended September 30, 2008 for these three strengths, according to IMS. Pursuant to an agreement with UCB Societe Anonyme and UCB Pharma Inc. to settle pending litigation relating to levetiracetam tablets, Mylan began shipment of its product immediately upon approval. Additional generic competition entered the market in mid-January 2009.

Other Product Opportunities

On December 2, 2008, the Company announced that Mylan and MPI have entered into a settlement agreement with Novartis Pharmaceuticals Corp., Novartis Corp. and Novartis International AG related to letrozole tablets, the generic version of Novartis' Femara®. Under the agreement, Mylan is provided a patent license that will enable the Company to market letrozole tablets, 2.5 mg, prior to the expiration of U.S. Patent No. 4,978,672. Additional terms related to the settlement remain confidential, and the agreement is subject to review by the U.S. Department of Justice and the Federal Trade Commission. Letrozole tablets, which are used in the treatment of breast cancer, had U.S. sales of approximately $470.0 million for the 12 months ended September 30, 2008, according to IMS. Mylan was the first generic drug company to file a substantially complete ANDA containing a Paragraph IV certification for the product.

Financial Summary

Mylan's financial results for calendar year 2008 included total revenues of $5.14 billion. For the comparable twelve-month period, total revenues were $2.67 billion. This represents an increase of $2.47 billion in total revenues. Consolidated gross profit for the current year was $2.07 billion compared to $1.11 billion in the comparable twelve-month period, an increase of $960.9 million. In the current year, operating income of $297.9 million was realized compared to an operating loss of $996.1 million in the comparable twelve-month period.

The net loss available to common shareholders for the current year was $320.3 million compared to $1.23 billion in the comparable twelve-month period. This translates into a loss per diluted share of $1.05 for calendar year 2008, compared to $4.91 in the comparable twelve-month period. Comparability of results between these two periods is affected by the following items:

Calendar Year 2008:

• The recognition of $468.1 million (pre-tax) of deferred revenue related to Mylan's sale of the product rights of Bystolic;

• $415.6 million (pre-tax), which consisted primarily of incremental amortization related to purchased intangible assets and the amortization of the inventory step-up associated with the acquisition of the former Merck Generics business;

• Non-cash impairment loss on the goodwill of the Specialty Segment of $385.0 million (pre-tax and after-tax);

• Non-cash impairment charges of $72.5 million (pre-tax) on certain other assets;

• A $139.0 million (pre-tax and after-tax) dividend on the 6.5% mandatory convertible preferred stock; and

• A full twelve months of results from the former Merck Generics business in calendar year 2008 as compared to three months in calendar year 2007.

Calendar Year 2007:

• The write-off of acquired in-process research and development related to the acquisition of the former Merck Generics business in the amount of $1.27 billion (pre-tax and after-tax);

• The write-off of acquired in-process research and development related to the acquisition of Matrix of $147.0 (pre-tax and after-tax);

• Charges totaling $57.2 million (pre-tax) related to early repayment of certain debt and financing fees;

• Net gains of $85.0 million (pre-tax) on foreign currency exchange contracts, primarily a foreign currency option contract related to the purchase price for the former Merck Generics business acquisition;

• $170.8 million (pre-tax), which consisted primarily of incremental amortization expense related to purchased intangible assets and the amortization of the inventory step-up associated with the acquisitions of the former Merck Generics business and Matrix; and

• A $16.0 million (pre-tax and after-tax) dividend on the 6.5% mandatory convertible preferred stock.

In addition to the above, the loss per common share for calendar year 2007 was impacted by the issuance of 26.2 million shares of common stock in March 2007 and the issuance of 55.4 million shares of common stock in November 2007. Because these offerings occurred during calendar year 2007, the loss per common share did not bear the full impact of these new shares. However, these shares were outstanding for the full calendar year 2008. A more detailed discussion of the Company's financial results can be found below in the section titled "Results of Operations".

Results of Operations

                                       Calendar Year December 31,            Nine Months December 31,            Fiscal Year
                                         2008               2007              2007               2006           March 31, 2007
                                                        (Unaudited)                          (Unaudited)
                                                             (In thousands, except per share amounts)

Revenues:
Net revenues                        $    4,631,237      $  2,646,643      $   2,162,943      $  1,103,247      $      1,586,947
Other revenues                             506,348            19,380             15,818            21,310                24,872

Total revenues                           5,137,585         2,666,023          2,178,761         1,124,557             1,611,819
Cost of sales                            3,067,364         1,556,728          1,304,313           515,736               768,151

Gross profit                             2,070,221         1,109,295            874,448           608,821               843,668

Operating expenses:
Research and development                   317,217           182,911            146,063            66,844               103,692
Acquired in-process research and
development                                      -         1,416,036          1,269,036                 -               147,000
Goodwill impairment                        385,000                 -                  -                 -                     -
Selling, general and
administrative                           1,053,485           512,352            449,598           152,784               215,538
Litigation settlements, net                 16,634            (5,946 )           (1,984 )         (46,154 )             (50,116 )

Total operating expenses                 1,772,336         2,105,353          1,862,713           173,474               416,114

Earnings (loss) from operations            297,885          (996,058 )         (988,265 )         435,347               427,554
Interest expense                           357,045           200,394            179,410            31,292                52,276
Other income, net                           11,337            97,060             86,611            39,785                50,234

(Loss) earnings before income
taxes and minority interest                (47,823 )      (1,099,392 )       (1,081,064 )         443,840               425,512
Income tax provision                       137,423           112,823             60,073           155,267               208,017

(Loss) earnings before minority
interest                                  (185,246 )      (1,212,215 )       (1,141,137 )         288,573               217,495
Minority interest (income)
expense                                     (4,031 )          (2,901 )           (3,112 )               -                   211

Net (loss) earnings before
preferred dividends                       (181,215 )      (1,209,314 )       (1,138,025 )         288,573               217,284
Preferred dividends                        139,035            15,999             15,999                 -                     -

Net (loss) earnings available to
common
shareholders                        $     (320,250 )    $ (1,225,313 )    $  (1,154,024 )    $    288,573      $        217,284

(Loss) earnings per common share:
Basic                               $        (1.05 )    $      (4.91 )    $       (4.49 )    $       1.37      $           1.01

Diluted                             $        (1.05 )    $      (4.91 )    $       (4.49 )    $       1.34      $           0.99

Weighted average common shares
outstanding:
Basic                                      304,360           249,652            257,150           211,075               215,096

Diluted                                    304,360           249,652            257,150           215,275               219,120

Calendar Year 2008 Compared to Calendar Year 2007

Total Revenues and Gross Profit

For calendar year 2008, Mylan reported total revenues of $5.14 billion compared to $2.67 billion in the same prior year period. This represents an increase of $2.47 billion. In calendar year 2008, the former Merck Generics business contributed third-party revenues of $2.57 billion of which $2.19 billion are included in the Generics Segment and $386.0 million are included in the Specialty Segment. In calendar year 2007, for the three months following the date of acquisition, the former Merck Generics business contributed third-party revenues of $700.6 million of which $598.5 million are included in the Generics Segment and $102.1 million are included in the Specialty Segment. Also included in total revenues for the current year is $468.1 million of previously deferred revenue recognized related to the sale of our rights of Bystolic. Excluding revenue contributed by the former Merck Generics business for both years, and the Bystolic revenue in the current year, total sales for calendar

year 2008 were $2.10 billion compared to $1.97 billion. This represents an increase of approximately 6.7% or $131.0 million over the comparable twelve-month period, which includes approximately 1.0% of unfavorable foreign currency translation impact on Matrix's revenues due to the strengthening of the U.S. Dollar. Matrix contributed third-party revenues of $376.0 million compared to $343.6 million in the comparable twelve-month period.

In arriving at net revenues, gross revenues are reduced by provisions for estimates, including discounts, customer performance, indirect rebates 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 calendar year ended December 31, 2008, the most significant amounts charged against gross revenues were for chargebacks in the amount of $1.46 billion and promotions and indirect rebates in the amount of $753.7 million.

Gross profit for calendar year 2008 was $2.07 billion and gross margins were 40.3%. For calendar year 2007, gross profit was $1.11 billion and gross margins were 41.6%. Gross profit was impacted by certain purchase accounting related items recorded during calendar year 2008 of approximately $415.6 million, which consisted primarily of incremental amortization related to the purchased intangible assets and the amortization of the inventory step-up associated with the acquisition of the former Merck Generics business. In addition, gross profit is impacted by certain non-cash impairment charges of $65.7 million recorded during the calendar year ended December 31, 2008. Excluding these items, as well as the Bystolic revenue, gross margins would have been approximately 44.6%. Prior year gross profit is also impacted by similar purchase accounting related items recorded primarily with respect to the acquisition of the former Merck Generics business and the acquisition of Matrix in the amount of $170.8 million. . . .