Valeant Pharmaceuticals International, Inc. First Quarter 2015 Financial Results Conference Call April 29, 2015

Transcription

1 Valeant Pharmaceuticals International, Inc. First Quarter 2015 Financial Results Conference Call April 29, 2015

2 Forward-looking Statements Forward-looking Statements Certain statements made in this presentation may constitute forward-looking statements, including, but not limited to, statements regarding the expected integration of the Dendreon and Salix businesses, the amount and timing of expected synergies, expected future performance, including 2015 guidance with respect to revenue, Cash EPS, organic growth, our inventory reduction program, and our outlook with respect to performance in 2016, expectations with respect to gross margins, marketing efforts, debt reduction, and restructuring expenses, the timing of and outcome of regulatory approvals and commercial plans with respect to product candidates. Forward-looking statements may generally be identified by the use of the words anticipates, expects, intends, plans, should, could, would, may, will, believes, estimates, potential, target, or continue and variations or similar expressions. These statements are based upon the current expectations and beliefs of management and are subject to certain risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties include, but are not limited to, risks and uncertainties discussed in the Company's most recent annual or quarterly report and detailed from time to time in Valeant s other filings with the Securities and Exchange Commission and the Canadian Securities Administrators, which factors are incorporated herein by reference. Readers are cautioned not to place undue reliance on any of these forwardlooking statements. These forward-looking statements speak only as of the date hereof. Valeant undertakes no obligation to update any of these forward-looking statements to reflect events or circumstances after the date of this presentation or to reflect actual outcomes. Non-GAAP Information To supplement the financial measures prepared in accordance with generally accepted accounting principles (GAAP), the Company uses non- GAAP financial measures that exclude certain items. Management uses non-gaap financial measures internally for strategic decision making, forecasting future results and evaluating current performance. By disclosing non-gaap financial measures, management intends to provide investors with a meaningful, consistent comparison of the Company s core operating results and trends for the periods presented. Non-GAAP financial measures are not prepared in accordance with GAAP; therefore, the information is not necessarily comparable to other companies and should be considered as a supplement to, not a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP. The Company has provided preliminary results and guidance with respect to cash earnings per share, adjusted cash flows from operations and organic product growth rates, which are non-gaap financial measures. The Company has not provided a reconciliation of these preliminary and forward-looking non-gaap financial measures due to the difficulty in forecasting and quantifying the exact amount of the items excluded from the non-gaap financial measures that will be included in the comparable GAAP financial measures. Reconciliations of historical non-gaap financials can be found at Note 1: The guidance in this presentation is only effective as of the date given, April 29, 2015, and will not be updated or affirmed unless and until the Company publicly announces updated or affirmed guidance. 1

3 Agenda 1. First Quarter 2015 Results 2. Business Performance 3. Dendreon and Salix Integration 4. Financial Summary and 2015 Guidance 2

4 Q1 Highlights (1/2) Continued outperformance of U.S. businesses, driven by recent product launches, fueled top line and bottom line results Exceeded Q1 Guidance despite losing $140 million of revenues and $0.12 Cash EPS due to the rising U.S. dollar Excluding negative impact from foreign exchange and divestiture of injectable business, revenue increased 27% and Cash EPS increased 50% Y/Y Strong performance from most business units around the world helped to fuel 15% same store organic growth in Q1 Third consecutive quarter of organic growth >15% Salix and Dendreon integrations largely complete Salix to deliver more than $530 million in synergies and achieve $500 million run rate synergies by the end of Q2 Dendreon to deliver more than $130 million in synergies and achieve 90% run rate synergies by year-end Dendreon profitable in Q1 with revenues as expected 3

5 Q1 Highlights (2/2) Increasing 2015 Cash EPS guidance to $ $11.20 Based on outperformance of Legacy Valeant, coupled with contributions from Salix and Dendreon Total company organic growth > 10% (same store) Q2 through Q4; Bausch + Lomb organic growth ~ 10% full year 2015 Reconfirming 20%+ Cash EPS accretion and expectation to exceed $7.5 billion EBITDA in

6 Q Financial Results Q Q Y/Y% Adjusted Y/Y% (a),(b) Total Revenue $2.19 B $1.89 B 16% 27% Cash EPS $2.36 $ % 50% Salix Acquisition Related Includes ($0.01) impact from incremental shares issued Excludes ($0.02) impact from cash interest expense for debt issued prior to close a) FX Impact: Revenue -$140 million and Cash EPS -$0.12 b) 2014 includes $53 million in revenue and $0.11 Cash EPS from divested injectable business 5

7 Q Organic Growth Same Store Sales Y/Y growth rates for businesses that have been owned for one year or more Q Total U.S. 26% Total Developed 18% Total Emerging Markets 7% Total Company 15% Pro Forma Y/Y growth rates for entire business, including businesses that have been acquired within the last year Q Total U.S. 36% Total Developed 25% Total Emerging Markets 7% Total Company 21% 6

8 Bausch + Lomb Organic Growth Country/Region Q Product Sales Y/Y% United States $321 14% Consumer $111 4% Rx Pharma $116 32% Surgical $48 0% Contact Lens $48 17% Other Developed Markets $240-4% Emerging Markets $184 7% Total (a) $745 6% Other Developed Markets impacted by Japan s -14% Y/Y due to April 1, 2014 sales tax increase in Japan, which resulted in incremental Q demand Excluding impact from Japan Bausch + Lomb grew 8% Y/Y (a) Excludes Bausch + Lomb generics which are managed and reported with Valeant generics and total company organic growth 7

9 Q Top 20 Brands Top 20 products revenue of $857M in Q1 2015, representing 40% of total revenue Largest product contributed ~3% of Q1 revenue Top 10 products contributed 27% of Q1 revenue Top 20 products, excluding newly acquired products (Provenge, Isuprel, Nitropress), grew 36% Q over Q Majority of growth from volume Once Salix wholesaler inventory levels have normalized, 4-5 Salix products will enter the Top 20 8

10 Q Top 20 Brands (1/2) ($M) Product Q1 14 Q2 Q3 Q4 Q1 15 1) Isuprel $72 2) Wellbutrin $69 $72 $80 $82 $68 3) Jublia - $3 $12 $54 $62 4) Nitropress $62 5) Ocuvite /PreserVision $60 $66 $62 $62 $60 6) Xenazine $50 $54 $56 $52 $57 7) Solodyn $51 $43 $54 $61 $57 8) Targretin Capsules $15 $29 $44 $48 $51 9) Lotemax Franchise $26 $45 $35 $47 $43 10) ReNu Multiplus $55 $49 $41 $46 $42 9

11 Q Top 20 Brands (2/2) ($M) Product Q1 Q2 Q3 Q4 Q1 11) Virazole $13 $7 $3 $17 $33 12) Arestin $15 $30 $30 $38 $32 13) CeraVe $22 $26 $21 $27 $30 14) Provenge $30 15) Retin-A Franchise $18 $19 $30 $30 $28 16) BioTrue Solution $24 $27 $26 $25 $28 17) Elidel $26 $25 $22 $31 $26 18) Carac $12 $12 $14 $42 $26 19) Ziana $14 $13 $17 $23 $26 20) Zovirax Franchise $40 $19 $23 $35 $25 10

12 U.S. Dermatology Highlights All promoted products had positive organic growth Jublia Driven by new product launches, dermatology grew 38% Y/Y Jublia TRxs Up 87% Q/Q resulting from sales force and DTC efforts New Jublia Tennis Commercial aired April 20 th featuring John McEnroe Jublia 8mL launch planned for early May #1 among Dermatologists with 50% market share #1 among Podiatrists with 38% market share Primary care writers continue to grow Onexton January launch; script trends similar to Jublia launch; ~5,000 scripts per week after 14 weeks First commercial aired April 6 Fully integrated DTC campaign accelerating growth Retin-A Micro Franchise Luzu Sales up >50% Y/Y New Luzu DTC campaign accelerated weekly TRx to new high Obagi and Solta Combined growth of 24% Y/Y 11

13 U.S. Eye Health Highlights Contact Lenses Growth driven by the success of Biotrue ONEday Biggest revenue quarter for Biotrue ONEday since launch, growing >100% Y/Y Biotrue ONEday Toric approved Bausch + Lomb Ultra continues to be well received by healthcare professionals and is currently selling to capacity (pilot line only) Bausch + Lomb Ultra production from first commercial line beginning in May Ophthalmology Rx Continued strong double digit growth across multiple brands Surgical Bausch + Lomb Ultra Multifocal and Toric approved Double digit growth for Trulign, envista, Stellaris/PC and VICTUS procedures Y/Y Growth offset decline in Excimer laser and conversion from sales to leases of VICTUS Femtosecond lasers 3 product launches including VICTUS which received 510K clearance on new software and hardware Minimal market growth in cataract surgeries Y/Y 12

14 Other U.S. Business Highlights Neuro & Other/Generics Organic growth driven by Xenazine, Ammonul and Virazole Consumer Strong organic revenue growth from CeraVe (40%), Preservision (20%), Occuvite (15%) and Soothe XP (19%) Lens care grew 17% Y/Y driven by 24% growth in BioTrue Multipurpose Solutions Oral Health High double digit growth driven by strong volume growth for Arestin Continued additions to the dental product portfolio 13

15 Rest of World Business Highlights Emerging Markets - Europe/Middle East, $212M Revenues, 6% Y/Y Organic Growth Strong organic growth in Poland (29%) and the Middle East (26%) Russia organic growth negative given strong consumer buying in Q4 14 ahead of retail price increases Emerging Markets - Asia, $125M Revenues, 10% Y/Y Organic Growth Strong organic growth across most markets including Thailand (30%+), China (17%), S. Korea (15%), and Malaysia (13%) Emerging Markets - Latin America, $89M Revenues, 7% Y/Y Organic Growth Mexico delivered 11% organic growth ROW Developed, $361M Revenues, -1% Y/Y Organic Growth Strong performance in Canada and Australia, with 9% and 3% organic growth, respectively Japan declined by (10%) Y/Y due to April 1, 2014 sales tax increase which resulted in incremental Q demand 14

16 Dendreon Integration Dendreon off to a strong start Revenue on plan Profitable in Q1 as a result of restructuring of the business All synergies identified with total plan of ~ $130 million+ (including manufacturing) 90% of synergies on a run rate basis to be achieved by year-end Gross margins in mid-60% by year-end Focus on new accounts while maintaining support with existing users Renewed emphasis on urology in addition to oncology 15

17 Salix Integration (1/3) Completed acquisition on April 1, 2015 New Leadership team appointed Bill Bertrand: General Manager, former COO Salix John Temperato: Head of Sales, previously held senior sales positions at Salix Tom Hadley: Head of Marketing, former marketing lead for Jublia and Luzu Synergies All synergies identified, plan to exceed original synergy guidance of $500M with $530 million in synergies now expected $500 million run rate synergies to be captured by end of Q2 remainder by year-end All office based employees notified Day 1 Order to cash processes integrated Day 1 16

18 Recent Salix TRx Trends (2/3) +19% y/y Sources: SHS PHAST and Company Data 17

19 Salix Integration (3/3) Expanded and refocused sales forces Maintaining three specialty GI sales forces with some realignment Expanding Hospital and Federal teams which will also promote select Valeant products Creating new sales force to provide greater focus on pain covering Relistor and Valeant brands Plan to cover primary care through specialty sales force coupled with extensive DTC advertising once IBS-D indication is approved Refocused marketing Greater focus on DTC and patient engagement across brands Xifaxan - IBS-D Update PDUFA date of May 28 In discussion with the FDA on labeling 18

20 Key R&D Milestones for 2015 Product Category Action Status EnVista Toric Eye Health File PMA 1H 2015 Additional studies requested To Be Filed mid Luminesse (Brimonidine) Eye Health File NDA 1H 2015 Filed NDA in March Vesneo (glaucoma) Eye Health File NDA 1H 2015 On Track Lotemax Gel Next Gen Eye Health File NDA 2H 2015 Filing delayed until mid-2016 Ultra Multi Focal Eye Health File PMA 1H 2015 Approved Ultra Toric Eye Health File PMA 2H 2015 Approved BioTrue Toric Eye Health File PMA 2H 2015 Approved IDP-118 (moderate to severe plaque psoriasis) IDP 120 (novel acne combination ) Derm Initiate Phase III 1H 2015 Phase III Initiated Derm Initiate Phase II 2H 2015 On Track Arestin LCM Oral Health File NDA 2H 2015 On Track Xifaxan (IBS-D Indication) Gastrointestinal PDUFA Date May 28 On Track 19

21 Financial Outlook Howard Schiller

22 Financial Summary Q Q Q Q Q Total Revenue $1,886M $2,041M $2,056M $2,280M $2,191M Cost of Goods Sold% (% of product sales) 26% 28% 26% 24% 25% SG&A% (% of total revenue) 26% 25% 24% 23% 26% R&D Expense $61M $66M $59M $59M $56M Operating Margin (% of total revenue) (excluding amortization) 45% 44% 47% 50% 47% Cash EPS (Reported) $1.76 $1.91 $2.11 $2.58 $2.36 GAAP Cash Flow from Operations $484M $376M $619M $816M $491M Adjusted Cash Flow from Operations* $636M $500M $771M $624M $708M Fully Diluted Share Count 342M 341M 341M 342M 343M 21

23 Geographic breakdown Based on actuals & projected 2016 revenue 12% Q1 14 4% 6% 5% 10% 7% 8% 64% 8% Q1 15 6% 4% 12% 6% 7% 2016 Est. 3% 4% 9% 13% 9% 53% 8% 10% 64% 19% 9% 20% 49% 71% United States Emerging Europe, Africa, & Middle East Asia Western Europe Canada / Australia Latin America 22

24 Restructuring and Integration Expenses Q1 restructuring and integration expenses of $65M As projected, pre-2015 transactions represented < $25M; Majority related to Bausch + Lomb Waterford plant 2015 transactions represented $41M in the quarter of which Dendreon was $35M Q2 restructuring and integration expenses for pre-2015 transactions expected to be < $10M Salix and Dendreon Salix: Restructuring and integration expenses expected to be ~$300M Significant restructuring accounting charge to occur in Q2 2015, while cash severance will be paid out over 1-3 years, depending upon employee position Dendreon: Additional $20M restructuring charge in 2015 (for a total of $55M or ~40% of synergies) 23

25 Cash Flow from Operations Q Adjusted Net Income GAAP Cash Flow from Operations Adjusted Cash Flow from Operations $809 million $491 million $708 million Cash Conversion 88% Adjusted cash flow from operations excludes build up of A/R related to Marathon where we did not purchase A/R Under the terms of a renegotiated managed care contract, two quarterly rebate payments made in Q Excluding second payment, adjusted cash flow would be $757 million, or 94% cash conversion Investment in working capital was $78 million driven largely by an increase in inventory 24

26 Balance Sheet Post- Salix: $31.2B total debt Weighted average cost of debt: 5.1% ~ 40% bank / 60% bonds Revolver currently undrawn Bonds for Salix acquisition consolidated on Balance Sheet in Q1 even though transaction had not yet closed ~ $10.1 B bonds closed into escrow on March 27 th Proceeds from bonds included in restricted cash Proceeds from equity included in cash and cash equivalents Fees and expenses related to Salix debt financing in accrued liabilities Accounts Receivable DSO* in line with previous years (calculated using gross sales): Q1 2014: 72 Days Q1 2015: 71 Days * Gross revenue is disclosed in 10K for calculation purposes 25

27 Updated 2015 Guidance (1/2) New 2015 Previous 2015 Revenues $ $10.6 billion $9.2 - $9.3 billion Cash EPS $ $11.20 per share $ $10.40 per share Organic growth > 10% (same store) expected Q2 through Q4 Bausch + Lomb organic growth ~10% for full year 2015 Timing of synergy capture Salix to deliver more than $530 million in synergies and achieve $500 million run rate synergies by the end of Q2 Dendreon to deliver more than $130 million in synergies and achieve 90% of run rate synergies by year-end Debt and Shares Outstanding Weighted average cost of debt: ~5.1% 350 million fully diluted shares outstanding Q2 through Q4 26

28 Updated 2015 Guidance (2/2) Salix revenue of ~$1.0 billion Does not assume IBS-D approval; we will update guidance post approval Assumes inventory levels reduced to 1.5 months or less by year end Operating cash flow Legacy Valeant will continue to target greater than 90% cash conversion Salix operating cash flow impacted by wholesaler inventory work down program Will update guidance for operating cash flow when work down program is well under way Guidance does not include use of balance sheet Expect debt paydown and small acquisitions Q2 Guidance Revenues: $ $2.55 billion Cash EPS: $ $2.50 Reflects significant inventory work down of Salix products 2016 Outlook Reconfirm 20%+ Cash EPS accretion assuming IBS-D approval by end of 2015 Expect to exceed $7.5B EBITDA in

29 Valeant Pharmaceuticals International, Inc. First Quarter 2015 Financial Results Conference Call April 29, 2015