allergan inc (act) earnings report: q2 2015 conference...

CompanyName:AllerganPLCCompanyTicker:ACTSector:HealthCareIndustry:Drugs

EventDescription:Q22015EarningsCallMarketCapasofEventDate:117.33BPriceasofEventDate:339.5

©2014TheStreet,Inc.Al l R ightsReserved Page1of21

ALLERGANINC(ACT)EarningsReport:Q22015ConferenceCallTranscriptThefollowingALLERGANINCconferencecalltookplaceonAugust6,2015,08:30AMET.Thisisatranscriptofthatearningscall:

CompanyPart icipants

LisaDeFrancesco;Allergan;VP-GlobalIRBrentSaunders;Allergan;President,CEOTessaHilado;Allergan;CFODavidNicholson;Allergan;EVP,President-GlobalBrandsR&DBillMeury;Allergan;President-GlobalGenerics,CommercialOperationsPhilippeSchaison;Allergan;President-AllerganMedical

OtherPart icipants

ChrisSchott;JPMorgan;AnalystJamiRubin;GoldmanSachs;AnalystLiavAbraham;Citigroup;AnalystSumantKulkarni;BankofAmericaMerrillLynch;AnalystMarcGoodman;UBS;AnalystRonnyGal;SanfordC.Bernstein;AnalystElliotWilbur;RaymondJames;AnalystRandallStanicky;RBCCapitalMarkets;AnalystUmerRaffat;EvercoreISI;AnalystGreggGilbert;DeutscheBank;AnalystDavidMaris;BMOCapitalMarkets;AnalystDavidRisinger;MorganStanley;Analyst

MANAGEMENTDISCUSSIONSECTION

Operator :

Atthistime,IwouldliketowelcomeeveryonetotheAllergan2015secondquarterearningsconferencecall.

(OperatorInstructions)

I'llnowturntheconferenceovertoLisaDeFrancesco,VicePresidentGlobalInvestorRelations.

Pleasegoahead.

LisaDeFrancesco (VP-GlobalIR):

Thankyou.Goodmorning,everyone.I'dliketowelcomeyoutotheAllergansecondquarter2015earningsconferencecall.EarlierthismorningweissuedapressreleasereportingAllergan'searningsforthesecondquarterendedJune30,2015.Thepressreleaseandourslidedeckwhicharewearepresentingthismorningareavailableonourcorporatewebsiteatwww.Allergan.com.

Weareconductingalivewebcastofthiscall,areplayofwhichwillbeavailableonourwebsiteafterits




conclusion.Pleasenotethattoday'scalliscopyrightedmaterialofAllerganandcannotberebroadcastwithouttheCompany'sexpresswrittenconsent.

Turningtoslide2,I'dalsoliketoremindyouthatduringthecourseofthiscallmanagementwillmakeprojectionsorotherforward-lookingremarksregardingfutureeventsorthefuturefinancialperformanceoftheCompany.It'simportanttonotethatsuchstatementsandeventsareforward-lookingstatementsandreflectourcurrentperspectiveofthebusinesstrendsandinformationasoftoday'sdate.ActualresultsmaydiffermateriallyfromcurrentexpectationsandprojectionsdependingonanumberoffactorsaffectingtheAllerganbusiness.ThesefactorsaredetailedinourpublicperiodicfilingswiththeSecuritiesandExchangeCommission.Allergandisclaimsanyintentorobligationtoupdatetheseforward-lookingstatementsexceptasexpresslyrequiredbylaw.

Withusontoday'scallareBrentSaundersourCEOandPresident,whoprovideanoverviewofoursecondquarterbusinesshighlights;TessaHilado,ourChiefFinancialOfficer,willthendiscusstheAllergansecondquarterresultsinmoredetail;andDavidNicholson,ExecutiveVicePresidentandPresidentofGlobalBrandsR&Dwillprovideanupdateonourbrands'R&Dprogressinthequarterandupcomingdevelopmentmilestones.AlsoonthecallandavailableduringtheQ&AarePaulBisaro,ourExecutiveChairman;BobStewart,PresidentofGlobalGenericsandCommercialOperations;BillMeury,MaryPresidentofBrandedPharma;PaulNavarre,PresidentofInternationalBrands;PhilippeSchaison,PresidentofAllerganMedical;andBobBailey,ourChiefLegalOfficer.

Withthat,IwillturnthecallovertoBrent.

BrentSaunders (President,CEO):

Thanks,Lisa.Andgoodmorning,everyone.It'sgreattobewithyoutoreviewourresultsforthesecondquarterof2015whichbuildsontheterrificresultswehadlastquarter.ThiswasalsoourfirstfullquarterofacombinedoperationsfollowingthecloseoftheAllerganacquisitiononMarch17.AndI'mveryproudofwhatourteamhasaccomplished,especiallythemomentumtheyhavecreatedtopropelourfuturegrowth.

Turningtoslide5,Allergan'ssecondquarterperformancehighlightsourabilitytoexecuteonourfourpillarsofourlong-termgrowthstrategy.Firstoperationalexcellenceisyieldingexceptionalfinancialperformanceandresultsinallkeybusinesssegments,keyproductsandkeygeographies.Second,therapeuticarealeadershipisleadingtodouble-digitgrowthamongmanyofourfranchises.

Third,ourproductiveandinnovativeR&Denginehasproducedmorethan100brandedproductapprovalsgloballyand56brandedregulatorysubmissionsyeartodate.Andfourth,weareexecutingonstrategicbusinessdealstosupportourgrowthinkeytherapyareasandchargeupourpipelineforthefuture.

WealsochangedournametoAllerganinthequartertosymbolizeourtransformationintoaleaderingrowthpharmawherebrandsnowcontributemorethantwo-thirdsofourCompany'srevenue.Withourfocusongrowthpharmawe'reencouragingouremployeesaroundtheworldtobeboldandsmartinthewaywethinkandact.

Turningtoslide6,theannouncementofourplanstocombineourglobalgenericsbusinesswithTevaina$40.5billiondealisthelatestboldmovebyourCompanytocontinueourtransformationtowardsbeingaleaderinbrandedgrowthPharma.Foryearswe'vebeenmovinguptheinnovationcurvetowardsespeciallyspecialtypharmaproducts.Thisagreementclearlyacceleratesourtransformation.

Thisdealallowsustodramaticallysimplifyouroperatingstructure,sharpenourfocusonsevencoretherapyareas,andreloadourcapitalstructuretocontinueourtransformation.There'scertainlymoreto




comeonthisstory.Weareconfidentthatwearecreatingthemostdynamiccompanyingrowthpharmawhileaddingourimpressiveglobalgenericcommercial,genericR&DoperatingcapabilitiestoTeva.

Nowlet'sturntoslide7andtalkaboutthebusinessperformanceinthesecondquarter.Oursecondquarterrevenuemorethandoubledonayear-over-yearbasisto$5.7billionasaresultoftheacquisitionsofAllerganandForest.Onaproformabasissaleswereup12%excludingtheimpactofforeigncurrency,NamendaIRanddivestitures,withdouble-digitgrowthinourbrandandglobalgenericssegments.ThestrongsalesincreasefromsynergiesfromtheintegrationofAllerganandForestweretheprimarydriversofthe29%increaseinearningspershareto$4.41.

Meanwhile,non-GAAPEBITDAroseto$2.6billionandcashflowfromoperationswasabout$1.7billionexcludingone-timecashpaymentsforseverance,acquisitionsandintegration.Tessawilltalkmoreaboutthefinancialsshortly.

Onslide8,ourglobalgenericsbusinessisdoingverywellandtheunitsthatcompriseitarefiringonallcylindersasweprepareforthecombinationwithTeva.Genericsalesareup17%excludingtheimpactofforeigncurrency.Genericprofitabilityisup.AndourexceptionalgenericR&Dcapabilitiesareevidentwith12newfirst-to-filedrugsthisyear.ThisbringsthetotalnumberofANDAsunderreviewtoaapproximately220,with76confirmedfirsttofiles.

USgenericrevenueswere$1.1billioninthequarter,andcontinuetobenefitfromnewproductintroductionsandcontributionfromhigh-barrierandsemi-exclusiveproductslikegenericConcerta.Meanwhile,ourinternationalgenericsteamcontinuestodriveexcellentperformanceinkeymarkets,excludingtheimpactofforeigncurrencysuchastheUK,whichwasup85%includingtheeffectoftheAudenMckenzietransactionthatclosedinMay,andRussiawhichwasup32%.

Turningtoslide9,ourbrandbusinesscontinuestodriveimpressiveperformance,with12ofthetop15globalbrandsgrowing,manywithdouble-digitproformayear-over-yeargrowth.Salesincreased11%excludingNamendaIR,thedivestituresandtheimpactofforeignexchange.Andthesuccessisbroad-based.

Excludingtheimpactofcurrencywedrovedouble-digitgrowthineyecare,GI,keywomenhealthproductsandcardiovascular;double-digitgrowthfromourlatestlargestleadingbrandslikeBotox,Restasis,NamendaXR,andourfillers,includingJuvederm;double-digitgrowthfromwell-establishedbrandslikeBystolic,LoLoestrinandEstrace;anddouble-digitgrowthfromLinzess,Ozurdex,andotherlaunchbrands,whichputsusinexcellentpositiontopowergrowthwellintothefuture.Itisaterrificlineupofbrandswithlongexclusivityandisbackedbyagreatteamonthegroundandourleadingpipelinewithmultipleshotsoneachofoursevenprioritytherapeuticareas.

Turningtoslide10,wecontinuetodriveconversionofpatientstoNamendaXR,rightuptotheendoftheNamendaIRexclusivity,reachingabout53%beforegenericentry.WithcontinuedpromotionandthelaunchofNamzaricwebelievethepenetrationrategoesevenhighertowardsourtargetof60%to65%astheyearprogresses.Andwithonce-a-daydosing,formularyaccessateveryoneofthetopeightplansandafocusedsalesteamwe'vemaintainedrelativelystablevolumesonNamendaXR,evenastheNamendaIRprescriptionsdrop.

We'renowdoingtheblockingandtacklingtobuilddemandandaccessforNamzaric.Withfullpromotionjustgettingunderway,ourDTCcampaignbeginninginSeptember,andananticipated7outofthetop10planshavingcoveragebythebeginningof2016,wethinkwearewellpreparedtodrivemarketexpansionin2016.Giventhebroaduseofcombinationdonepezilandmemantinetherapy,theefficacyofNamzaric,andthepatient,caregiverandsystembenefitsofonepillonceaday,wethinkthere'sagreatopportunityfortheinnovationofNamzarictobecomethecornerstoneofonce-a-daybranded




marketinAlzheimer'streatment.

Turningtoslide11,inafewmomentsDavidNicholsonwillgiveanupdateonthepipelinebutIwanttopointoutthatourpipelineremainsoneofthebest-keptsecretsofourCompany.With70projectsinmidtolatedevelopmentweareinanenviablepositionofhavingmultipleprogramsineachofourtherapeuticareastohelpussustainleadershipintheareaswechoosetocompete.Andwe'vethispipelinestepbystep,notbyinvestingbigdollarsondiscoverybutbyinvestinginsmartdevelopmentprojects.

EvenwiththeexcellentbreadthanddepthofourcurrentpipelinewearealwaysonthelookoutforR&Dassetsthatcanextendourleadershipbybringingnovelapproachestoexistingtherapyareas.Inthelasttwomonthsalonewe'veannouncedagreementsforfourplannedacquisitionsinaesthetics,eyecare,andCNS.Eachwillbringnoveltytoexistingareasandwilladdtoourabilitytoleadinthesetherapeuticareas.Andeachofthesedealsbringsgame-changerpotentialideastoourpipeline.

Kybellaisofftoastrongstartinaesthetics,withsalesalreadysurpassing$1millionandarecentapprovalinCanada.We'remakinggreatprogresstowardsclosingthetransactionnowthatwehaveclearedantitrustreviewintheUS.Andasweannouncedyesterday,wenolongerintendtoissueoursharestocompletethisacquisition.

TheOculeveacquisitionhasalsoclearedHSRintheUSandwelookforwardtoextendingourdryeyeopportunitieswithournovelnasalneurostimulationdevice.InCNSweareworkingtoclosedealstoextendourmigraineofferingwithMerck'sfirst-in-classoralCGRPantagonist,andtheNaurexnovelapproachtotreatingmooddisorders,includingseveredepressionwhichremainsaleadingcauseofsuicide.

Inclosing,ourteamcontinuestofocusonexecution.AndtheresultsindicatethatweareexceptionallyskilledatdeliveringstrongoperatingresultswhilealsodoingsurprisingthingsthatmakeourCompanythemostdynamicinallofhealthcare.I'msoproudofourteamfortheirperformanceandI'mlookingforwardtowhatwecandowiththestrengthandfocusonbrandedpharmaceuticalsandasignificantlyreducedoperatingstructureandreloadedcapitalstructure.

WiththatI'llnowturnthecallovertoTessa.

T essaHilado (CFO):

Thankyou,Brent.Goodmorning,everyone.Turningtoouroverallresultsforthesecondquarteronslide13,inQ2wedeliveredstrongperformancebothyearoveryearandquartertoquarter.Onanon-GAAPbasis,consolidatednetrevenueforthesecondquarterwas$5.7billion,anincreaseof36%versusQ12015.

Non-GAAPR&Dinvestmentforthequarterwas$406millioncomparedto$185millionintheprior-yearperiod.Non-GAAPSG&Aasapercentageofrevenuewas21.7%,anincreaseof3percentagepointsovertheprior-yearquarterasaresultoftheForestbrandedproductsandAllerganbusiness,whichwehavehigherSG&Aspend.

AdjustedEBITDAforthequarterwas$2.6billion,anincreaseof203%versustheprioryear,drivenbystrongrevenuesandhighergrossmarginsacrossoursegments.Non-GAAPearningsperdilutedshareforthequarterincreased29%to$4.41comparedto$3.42perdilutedshareinthesecondquarterof2014.Ournon-GAAPtaxrateimprovedfrom17.1%intheyear-agoperiodto14.5%inthecurrent-yearquarter,mainlyduetothegeographicmixofourbusinesses.

Cashflowfromoperationsforthesecondquarterwas$1.4billion,anincreaseof198%versustheyear-




agoquarter.Excludingacquisition-relatedrestructuringandintegrationpayments,oursecondquarterfreecashflowwouldbe$1.7billion.

Beforeturningtoourbusinesssegmentresults,Iwouldliketotakeamomenttoreviewournewsegmentreportingforthesecondquarter.Inthisquarterwearereportingresultsinfivesegments.

TheUSbrandsegmentrepresentssalesandexpensesrelatedtobrandedproductswithintheUnitedStates,includingBotoxtherapeutics.TheUSmedicalaestheticssegmentrepresentssalesandexpensesrelatedtoaestheticsanddermatologyproductswithintheUnitedStates,includingBotoxcosmetics.TheinternationalbrandsegmentrepresentsrevenuesandoperatingexpensesincountriesthathavethemajorityoftheirbusinessesrepresentedbybrandedsalesandrevenuesandexpensesrelatedtoproductsalesinCanada,SwitzerlandandAustria.

Theglobalgenericssegmentrepresentsrevenueandoperatingexpensesincountriesthathavethemajorityofthepresentedbygenericproductsales,ourthird-partymedicinebusinessandrevenuesandexpensesrelatedtoproductsalesintheUS,Canada,SwitzerlandandAustria.TheANDAdistractionsegmentresultsrepresentsalesandexpensesrelatedtodistributionofgenericandbrandpharmaceuticalproductsmanufacturedbythirdparties.

Also,asaresultofTeva'sacquisitionofAllergan'sgenericbusiness,Allerganwillreportthegenericsbusinessasdiscontinuedoperationsbeginninginthethirdquarterof2015.Sincethedivestedbusinessspansbothglobalgenericsandinternationalbrandsegments,itwillbedifficulttodaytomodeltheremainingAllerganbusiness.WewillprovidesomeguidanceinSeptember.

TurningnowtoourUSbrandresultsonslide15,thebusinessdeliveredstrongperformanceyearoveryearandquarteroverquarter.USbrandsrevenuewas$2.44billionforthequarter,up331%versustheprior-yearperiodand35%inthepriorquarter,drivenbytheadditionoftheForestandAllerganbusinessesandstronggrowthacrosskeyproductsincludingLinzessandNamendaXR.

AdjustedgrossmarginwithinUSbrandsremainedsteadyat87.4%.SG&Aasapercentageofrevenueincreasedto20.8%versus17.8%intheyear-agoquarter,drivenbyexpensesrelatedtotheForestandAllerganacquisitions.

Turningtoslide16andourUSmedicalaestheticsbusiness,secondquarterrevenueswere$487million,anincreaseof510%versusfirst-quarter2015results.Secondquartergrossmarginof93%andsegmentmarginof70.6%werelargelyinlinewithexpectations.SG&Ainthequarterremainedsteady.

Turningtoslide17andourinternationalbrandresults,secondquarterrevenueswere$717millionversus$169millionintheprior-yearperiod,anincreaseof324%.Grossmarginsincreased21.7percentagepointsto77.8%inthesecondquarterduelargelytotheinclusionofhigher-marginlegacyAllerganproducts.SegmentSG&Aimproved7.2percentagepointsto32%versusQ12015duelargelytosynergycapturerelatedtotheAllerganacquisition.

Onslide18,globalgenericsrevenuesinthequarterwere$1.6billion,up10%versustheprior-yearperiod.GrowthwasdrivenbystrongsalesinthebasebusinessincludinggenericConcerta,offsetinpartbyadditionalcompetitiononcertainproductsincludinggenericLidoderm.Adjustedgrossmarginsincreased1percentagepointcomparedtotheyear-agoquarter,duetocontinuedstrongperformancewithinourinternationalbusiness.

LowergrossmarginversusthepriorquarterwasmainlyduetolowercontributionofGuanfacineERandOxycodoneinthesecondquarterversusthefirstquarterof2015.SG&Aasapercentageofadjustednetrevenuedecreasedslightlyto15%from15.8%intheyear-agoquarter.




TurningtoourANDAbusinessonslide19,revenuesincreasedto$462million,upfrom$427millionintheprior-year,anincreaseof8%drivenbytrendsinourbasebusinessandahighermixofchaindrugstoressales.Slide20detailsourdebtcapitalizationfollowingthecompletionofourfirstfullquarterfollowingthecloseoftheAllerganacquisition.Weendedthesecondquarter2015withtotaldebtofapproximately$42.9billion,andequityof$72.1billionrelatedtotheAllerganacquisitionandpreviousfinancing.

Inthesecondquarter,wepaiddownapproximately$1.4billionofourdebt.Currentlyourleverageratiostandsat3.9timesdebttoproformaadjustedEBITDA,versus4.1timesinthepriorquarter.Weremaincommittedtousingstrongfreecashflowsfromourbusinesssegmentstoacceleratedebtrepayment.Andwecontinuetoremaincommittedtoinvestmentgraderatings.

I'dnowliketoturnthecallovertoDavidNicholsonwhowillprovideanupdateonourbrand'sR&Dprogressinthequarter.David?

DavidNicholson (EVP,President-GlobalBrandsR&D):

Thanks,Tessa.Andgoodmorning,everyone.Let'sgotoslide22.Ourbrand'sR&Dteamcontinuestobetremendouslyproductive.Year-to-dateandworldwideourstronglate-stagepipelinehasdeliveredmorethan100pharmaceuticalandmedicaldeviceapprovalsand56regulatorysubmissions.Iwillhighlightsomeofthemostsignificantoftheseinmyoverview.

Followingthefirstroundofintegrationprioritization,wenowhavemorethan70mid-tolate-stagedevelopmentproducts,withapproximately45projectsineitherlate-stagedevelopmentorregistration.TheproductivityofthelegacyAllerganR&Dorganizationsisdemonstratedbytheindustry-leadingfigureof14NMEapprovalsintheUnitedStatesoverthelastsix-and-a-halfyears.Goingforward,we'llcontinuetomakedata-drivenprioritizationdecisionsonallofourprograms.

Inadditiontorationalizinganddrivingproductivityfromourexistingpipeline,wearecommittedtoidentifyingandexecutingacquisitionsandlicensingagreementsthatfurtherstrengthenourlong-termleadershippositioninkeytherapeuticareas.ThisisexemplifiedbyourpendingacquisitionofKythera,OculeveandNaurex,andourlicensingofMerck'soralCGRPprogramduringthequarter.

Thenexttwoslidessummarizesomehighlightsanddescribetheprogressinourlate-stagepipeline.Slide23showslate-stagegame-changingopportunitiesacrossourtherapeuticareas.Inaesthetics,we'readdingKybellafromKytheratoourpipeline.OuraestheticpipelinealreadyincludesBimatoprostorhairgrowth,AczoneandSarecyclineforacne,aswellasmanylineextensionstoourfillers.

Ineyecare,we'readdingtheintranasaldryeyedevicefromOculevetoourdryeyefranchise,furtherenhancingourleadingpositioninthistherapeuticarea.MycolleaguesandIhavereviewedourRestasisdataandagainfindourefficacyandtolerabilitydataverycompellingincomparisontorecentlypublisheddatafromothercompoundsindevelopmentandregistration.InPhaseIII,wearedevelopingDARPinandhaveasustainedreleaseformulationofBimatoprost.

InCNSweareaddingtheNaurexanNMDAmodulatortoourpipeline.Thesecompoundshavethefirstnovelmechanismtomooddisordersformorethantwodecades.

We'realsoaddingoralCGRPantagonists.Thesecompounds,inlicensefromMerck,aredesignedbothfortheacutetreatmentaswellasfortheprophylaxisofmigraines.WealsohaveCariprazinindevelopmentandNamzaricwhichcombinestwocomplementarytherapeuticagents,NamendaandAricept.

RecentlymuchattentionhasturnedtopreventionofAlzheimer'sand,likeallofusIhope,aneffectivepreventativetherapywillbediscovered.DataonNamzaricwasrecentlypresentedatthe2015Alzheimer'sAssociationInternationalconference.TheefficacyofNamzaricinpatientswithAlzheimer'sis




atleastasimilarmagnitudetothatreportedwiththepresentpreventativeagentsindevelopment.

InGIdisorders,togetherwithourpartnerIronwood,wecontinuetodevelopdosageandformulationsofourIBS-CagentLinzesstoofferaverycompletepackagetophysiciansandpatients.Also,we'recompletingtheinitialdevelopmentofeluxadoline,Viberzi,forIBS-D.Inurology,togetherwithourpartnerSerenity,wehaveintranasaldesmopressincompletingPhaseIIIfornocturia.

Inouranti-infectivefranchisewe'vecontinuedtodevelopDalvanceandAvycaz.InbiologicsPhaseIIIwillbecompletedthisyearforbevacizumab,abiosimilarofAvastinwhichispartofourpartnershipwithAmgen.Last,butcertainlynotleast,isBotox.Wecontinuetofurtherdevelopandlaunchthisagentacrossouraesthetics,CNSandurologyfranchises.

Turningtoslide24,I'mgoingtoupdateyouonprogresswithregulatoryauthoritiesforkeylate-stageproducts.Inaesthetics,NatrelleInspiratexturedbreastimplantsreceivedFDAapprovalforwomenundergoingbreastreconstruction,augmentationorrevisionsurgery.Andwe'reontrackforFDAsubmissionofourVolbellafillerinthethirdquarterof2015.Yesterday,wereceivedFDAapprovaltomarket28additionalstylesofNatrelle410breastimplants.

InAsia,we'vereceivedlicensingrightsforcommercialsaleofJuvederminChina,andsubmittedanNDAforBotoxforcrow'sfeetlinesinJapan.Ineyecare,BotoxreceivedapprovalinJapanforthetreatmentofstrabismus.We'reontrackforFDAsubmissionofamulti-dosepreservative-freeformulationofRestasisinSeptember.

We'recurrentlyenrollingpatientsinPhaseIIItrialsforBimataprostintheUS.Andwe'veinitiatedpivotalPhaseIIItrialsofourleadDARPininage-relatedmaculardegenerationontargetinJunethisyear.

InCNSwehaveaPDUFAdateinSeptemberforcariprazineasatreatmentforschizophreniaandbipolarmania.AndthisquarterwelaunchedNamzaricandwe'llbefilingadditionaldosecombinationsofthisagentlaterthisyear.

InGIourstrongpipelinedoescontinuetodevelopnewopportunities.WeexpecttocompletethePhaseIIIstudyforalow-dosageformofLinzesstotreatchronicidiopathicconstipationinthesecondhalfoftheyear.AndweexpecttosubmitansNDAforthisindicationnextyear.

Meanwhile,Viberzi(eluxadoline)hasbeenapprovedbytheFDAasatwice-dailyoraltreatmentforIBS-D.We'reawaitingDEAschedulingofViberzipriortolaunchofthisproductintheUnitedStates.AndwesubmittedadossierofeluxadolineinEuropeinMay.

Inwomen'shealth,enrollmentinourPhaseIIItrialofEsmyaforthetreatmentofbleedingdisorderscausedbyuterinefibroidsisontrack.We'recommittedtocompletingtrialenrollmentthisyear.

Inurology,we'vecompletedourPhaseIIItrialsofSER120innocturia.ThedataisunderourreviewpriortosubmissiontotheAgency.

Andanti-infectives,ourdevelopmentofasingle-doseformulationofDalvanceremainsontrack.We'vemaderegulatorysubmissionsforapprovalinboththeUnitedStatesandEurope.We'realsoanticipatingapprovalforTeflaroinbacteremiaduringthecourseofthisyear.

Onslide25,weoutlinesomeofourmostrecentbusinessdevelopmentopportunities.Obviouslythesehelpustofurthersolidifyourleadershippositioninourcoretherapeuticareas.

WithKythera,weaddafirst-in-classagentKybellaforthetreatmentofsubmentalfatordoublechintoourproductline.TheproductislaunchedintheStatesandwasrecentlyimprovedinCanada.Inaddition,Kytherahasaninterestingandgeneticallyvalidatedhairgrowthproductinearlydevelopment.




OculevewillstrengthenourleadingpositionindryeyewiththeOD-01developmentprogram,intranasalneuro-stimulatorydevicethatincreasestearproductioninpatientswithdryeye.

OurlicensingagreementwithMerckbuildsonourcommitmenttothedevelopmentoftreatmentsformigraine.We'readdingoralformulationsofCGRPantagoniststoourproductline.TheuseofbothsmallmoleculesaswellasantibodieshasclearlyshownthatCGRPantagonismiseffectiveintreatingmigraines.Therearefourinjectableantibodiesindevelopment,whilstwewillhavetheonlyoralCGRPantagonist.

Finally,Naurex--theacquisitionofNaurexaddsinnovativedevelopmentprogramsindepressiontoourpipeline.Depressionisanareaofmedicinethathasseenminimalprogressforthelast20years.

TheNaurexcompoundsareNMDAmodulators,auniqueapproachforthetreatmentofdepression.Theseagentshavethepotentialtobefastonsetantidepressantsandhencemaybebeneficialinthealleviationofsuicidality,whichissooftenaterriblefeatureofthisdisorder.Inearly-stagedevelopment,theNaurexteamshowedtheircompoundto,indeed,tobefastinonset,andalsotobeeffectiveintreatingdepression,whichfailedtorespondtotraditionalantidepressants.

Inclosing,thesecondquarter2015wasanotherperiodofcontinuedstrongproductivityfortheAllerganR&Dteam.Welookforwardtocontinuetodeliveronthepromiseofmanyofourdevelopmentprogramsinourpipelinefortheremainderof2015andbeyond.

Withthat,I'dliketoturnitovertoBrentforclosingremarks.Brent?


Thankyou,David.Asyou'veheard,wehavealotgoingonandlookforwardtogivingyouupdatesonourprogressoverthenextfewmonths.InmidtolateSeptemberwewillprovideupdatedguidanceforourcontinuingoperationsfortheremainderof2015.ThiswillreflectourglobalgenericsbusinessasdiscontinuedoperationsaswewaitforthecloseofthetransactionwithTevanextyear.

Inconjunctionwithourthird-quarterearningsresults,wealsoplantohostanR&DupdatemeetingonNovember4,inIrvine,Californiaatourcampus.ItwillbeouropportunityfortheR&DteamtoshineaspotlightontheprioritizationR&Dportfolio.

WiththatI'dliketoturnthecallbacktoLisaforQ&A.


Thankyou,Brent.We'llnowtakequestions.Ifyoucouldpleaselimityourselftoonequestiononly.Wehaveonly30minutestogetthroughallofyourquestions.Thankyou.

QUESTIONS&ANSWERS

Operator :

(OperatorInstructions

ChrisSchott,JPMorgan.

ChrisSchott (Analyst-JPMorgan):

Oneofthequestionswe'vebeengettingposttheTevadivestitureis,asyouguysareconsideringtransformationalacquisitions,it'sobviouslyaveryfluidmarketoutthererightnow,isitpossibleforAllergantopursuealargetransactionbeforetheTevadealclosesiftherighttransactionwereavailable,




bothfromanoperationalandfinancialstandpoint?

Andjustaveryquicksecondone--onthatguidanceinSeptember,isthatjust2015orcanwethinkaboutapreliminaryviewoneither2016oranupdateonthe$252017outlookatthattime,aswell?Thankssomuch.


WithrespecttopotentialfortransformationalM&A,IthinkthewaytothinkaboutitisthemostlikelyscenariowouldbeafterthecloseofTevaif,infact,weweretodotransformationalM&A.Certainlyanythingispossiblepriortothat.Andwehavealwaysbeenboldinthinkingabouthowtoexecutethingsifthetimingwasright.

ButIthink,infairness,giventhecommitmenttoourinvestmentgraderatingandourabilitytodeploycashafterthedealhasclosedversusprior,orperhapsourflexibilitytodeploycashafterthedealcloses,isbetterthanprior.Ithinkthat'sprobablyhowyoushouldthinkaboutit.

Now,thatdoesn'tmeanwecouldn'tengageinanalysisordiscussionsorotherthingslikethatwithsomeonewhowasinterestedindoingadealwithusorwewereinterestedindoingadealwiththem.ButIwouldsaythatit'smostlikelyafterthecloseoftheTevatransaction.WithrespecttotheguidancemaybeI'llaskTessatotalkaboutthatforasecond.

T essaHilado (CFO):

InSeptember,whatwewillbeprovidingyouiswhattheremainingbusinesswilllooklikesinceTevawillbediscontinuedoperation.That'snotexactlyaveryeasyseparationtodo.Andalsojusttomanageexpectations,soweprovidethat.Giventheaccountingrulesitwillbeverydifficultatthispointintimeforyoutomodelwhattheremaining2015willlooklike.

Asanexample,forinstance,debtwillcontinuetoremainwiththeAllerganbrandedbusinessandnotgotothecontinuedoperations.There'snosuchthingasnon-GAAPdiscontinuedoperations.So,we'llprovidealittlebitmoreclaritycomeSeptember,butit'sreallylargelyfocusedontheremainderof2015.

ChrisSchott (Analyst-JPMorgan):

Thankyou.

Operator :

JamiRubin,GoldmanSachs.

JamiRubin (Analyst-GoldmanSachs):

Justtofollowuponthatearlierquestion,BrentorTessa,whenyougiveproformaearningsgoingforward,whichpresumablyonlyincludesthebrandedbusiness,willthatbrandedbusinessalsoincludealltheinterestexpensethatyou'recarryingonyourbooks?Inotherwords,Iwouldassumethatsomeofthat$40.5billionisgoingtoreducedebt.So,howdowethinkaboutthatwhenwethinkaboutthebasebusinessgoingforward?

Andthen,secondly,justtofollowuponthat$25number,that$25obviouslyincludesabout$5or$2.4billioninEBITfromthegenericbusiness.Brent,atwhatpointcanweexpectyoutoupdateusonthatguidance?Ithinkonthelastcallyoudidn'twithdrawthat$25.So,again,anycoloronhowweshouldthinkabouttheCompany'sabilitytoreplacethat$2.4billioninEBIT?Thanks.

T essaHilado (CFO):




Youdefinitelytouchedonsomeofthenuancesrelatedtodiscontinuedoperationsasitpertainstodebtasanexample,forinstance.Onago-forwardbasisintheSeptemberearningswhatyouwillseeisthatdebtwillresideintheremainingCompanyandnotallocatedtodiscontinuedops.Obviouslyasyouthinkaboutthatonago-forwardbasis,itwouldreallylargelydependonwhatwedowiththecapitalonago-forwardbasis.

WhatwehadindicatedinourcallrelatedtoTevathatwewoulduseaportionoftheproceedstopaydowndebt.But,again,it'slargelydependentonhowmuchweuseforcapitaldeployment.Havingsaidthat,though,wearecommittedtoourinvestmentgraderatingsowewillensurethattheappropriateamountofdebtispaiddown.


Ithinkthenet-net,Jami,onguidance--andIknowthiswilldriveyourteamsnutsandmanyonthephonenuts--therulesaretherules.It'stheaccountingpolicy.So,thenextcouplequarters,tilweactuallyclosethetransaction,itwillbeverydifficultforyouguystorunmodelsanddocleancomparisons.

Weare,asalways,committedtoasmuchtransparencyaroundproductsales,likewewereinthispressrelease.Andwewilldothebestwecangiventherulesthatwehavetoalllivewith.Butitwillmakeforsometoughmodelingworkonyourguys'partoverthenexttwoorthreequarters.Andweapologizeinadvanceforthatandwilldoeverythingwecantohelpfacilitatethat.

Withrespecttothe$25aspiration,whatIsaid,Ithinkyouaskedthisquestiononthedealcall,ifIrecallcorrectly,Jami,wasthatweabsolutelyremainsteadfastinouraspirationtoincreaseourearningspersharetoashighaspossible,includingthe$25target.Whathaschangedobviouslyis,bysellingthegenericsbusinessandthe$2.4billionofEBITDAtoTeva,thetimingofthataspiration.

Andsoweneedtocontinuetolookathowwewilldeploythatcapitalandhowthetimingofthedeploymentofthatcapitalwillpullthroughtogiveamorepreciseviewofit.So,again,wearenotwithdrawingthe$25butwewillcomebackandhavetoaddsomevariablestoit,likecapitaldeploymentandtimingofcapitaldeploymenttogetthere.

JamiRubin (Analyst-GoldmanSachs):

Thankyou.

Operator :

LiavAbraham,Citi.

LiavAbraham(Analyst-Citigroup):

Brent,anotherquestiononthetopicofbusinessdevelopment.Iwantedtogetabetterunderstandingofyourappetiteforearlier-stageresearch.Yousaidthatyou'reinterestedinapotentiallytransformationaltransactionandinterestedinmovingupthevaluechain.You'vealsosaidthatyou'renotnecessarilyinfavorofearly-stageresearch.

I'mtryingtoreconcilethesecomments.Canyouengageinalargerpharmatransactionandmoveupthevaluechainwithoutagreatercommitmenttoearly-stageresearchgoingforward?Andisn'tthisnecessarytoatleastacertainextenttosecurelonger-termorganicgrowth?

AndthenveryquicklyforBill,canyoucommentonhowmuchyou'llbegivingawayincrementallyintermsofrebatesinordertosecureformularystatusforNamzaricnextyear?Thanks.





Sure,Liav.Ithinktheanswertothefirstpartofyourquestionisyes,withanexclamationpointonit.Look,Ithinkweloveresearchandwehavenoissuewithresearch.Wejustdon'tliketodoitourselvesunless,ofcourse,it'suniqueresearchorsomethingthatisn'twidelyavailableinexternalresearch,likeventure-backedcompaniesorresearchoracademia-backedcompaniesorsmallerbiotechs.

IthinkifyoulookatwhatDavidandhisteamdidwithAllergan,wekepttheresearchcapabilitieswheretheyhaduniquestrengthsandproventrackrecords,likeinaestheticsandeyecare.Andwewillcontinuetofundthat,asappropriate.Whatwewon'tdoiswasteourmoneyonR&Dthatiswidelyavailableelsewhere.

So,Ithinkyouhavetoreallyconsiderusasverypracticalwhenitcomestoresearch,basicresearch.Butalsoavirtual-likecompanywhenitcomestoresearch,asdemonstratedbysomeofthedealswejustdid,likeNaurexoreventhelicensingoftheoralCGRPsfromMerck.David,anyothercommentsonresearch?


OneofthepointsthatIalwaysliketomakeishowimpressedIamwiththebiotechindustrythesedays.I'veseenthebiotechindustrytodayfoundedbysomanybrilliantacademicscientists,coupledwithmoreandmorepeoplewithpharmaceuticalexecutiveexperience,excellentingeneratingearly-stagemolecules,whichwecanpickupandfurtherdevelopthroughtothemarket.Thereareplentyofopportunitiesoutthere.

Also,whenyoulookatwhat'sgoingonintheacademicworldyouincreasinglyseeacademicinstitutionssettingthemselvesuptogeneratemorespinoffopportunities.Andweareverykeenoninteractingwiththeexternalworld.Wethinkthat'swhereresearchwillbeperformed.


Tobefair,andyou'veheardmesaythisbefore,Liav,Idon'tthinkwhatwedoisanydifferentthanthegreatotherinnovatorsinourindustry,andreallynotdoingdiscoverythemselves,butlicensingincompounds.Andthere'ssomefantasticcompaniesthathavesolvedforhugeunmetmedicalneedwithoutdiscoverylabs.Iwantgothroughnamingthembuttheygetthebiotechmonikerbuttheyreallyhavenodiscovery,butrathersmartbusinessdevelopmentandlicensing.

Andthat'sessentiallyourapproach.Wejustcomeatitwithaverypracticalapproachandarealbentfornotwastingmoney.Bill,doyouwanttotalkaboutNamzaric?

BillMeury(President-GlobalGenerics,CommercialOperations):

OnNamzaric,workingwithAdamas,wegotaproducttomarketthattheAlzheimer'scommunityhaswantedforover10yearssincewelaunchedNamendain2004.Wethinkitshouldbethestandardofcareforpatientswithmoderatetoseveredisease.Andwe'reattheveryearlystagesoftheexclusivityperiod.Andsoourprimaryaimisgoingtobemarketshareandvolumeandgivingaccesstophysiciansandcaregivers.

Asitrelatestothediscountrate,it'sgoingtobeconsistentwithwhatwehadforXRin2015.AndforXRIthinkitwillbeconsistentin2016.Nodramaticchanges.Wemanagetheprice-volumerelationshiponthatbusinessverycarefullyandwe'reatapricepointthatisattractivetohealthplansandacceptabletous.

LiavAbraham(Analyst-Citigroup):

That'sgreat.Thankyou.




Operator :

SumantKulkarni,BankofAmerica.

SumantKulkarni(Analyst-BankofAmericaMerrillLynch):

OnyourdryeyeprogramsafterthepurchaseofOculeve,doyouseeanygapsinthetypesofproductofferingsthatyouhaveinthatportfolio?And,veryquickly,howshouldwethinkaboutyourcardiovascularfranchisegiventhatBystolicisstillarelativelysignificantcontributorintermsofsales?


David,doyouwanttotalkaboutourdryeyepipeline?


Sure.Indryeye,itisanunderservedmarketatthemoment.There'sRestasisoutthereandacoupleofotherthingsindevelopment,buttherearenotmanyproductofferingsfordryeye.Andarelativelylowproportionofpatientssufferingfromdryeyeactuallyreceivetreatmentatthemoment.AndIthinkwithRestasis,obviouslywehavetheleadingproduct.

Oculeveisaveryinterestingdevice.Iuseditmyselfrecently.Icanassureyouitworksandit'sreallyaddingtoourproductline.

Inadditiontotheanti-inflammatoryagentslikeRestasis,therearesomeotheropportunitiesinthebiotechpipelinewithdifferentmechanismsofaction.Ithinkinthefuturewearegoingtoseeotheropportunitiesoutthere,whicharegoingtobeeffectiveapproachesindryeye.


Bill,anythingtoadd?


Yes,Iwouldjustsay,rightnowwehavethewaterfrontlargelycovered.WehaveanOTC,orartificialtear.OculeveessentiallyisanaturaltearoptionandthenRestasisisananti-inflammatory.So,weofferamorecompleteproductlinefortheeyecarecommunitythananycompanyinthesector.AndIagreewithDavidthatthereareafewopportunitiesouttherebutwehavemostofthemarketcovered.


Ithinkalsopeopleunderestimatetheimportanceofthemulti-dosepreservative-free,whichweintendtofileinSeptember.Havingworkedinthisspacebefore,oneofthebiggestissueswithchroniceyedrops,particularlyRestasisbecauseofitssingle-doseapplicator,isdosageandcompliancebecauseit'sveryhardtogetthatlittlesingle-doseintheeye.

So,forpatientconvenienceandpatientcomplianceanddosing,themulti-doseapplicatorisahugeinnovationandsomethingthatwe'reveryexcitedaboutbringingtomarketnextyear.AndthenkeepinmindwealsohavefourotherdevelopmentprogramsofbothRestasisandnovelmechanismsearlierinourpipeline.

OnBystolicandcardio,IthinkthewayIthinkaboutit--andBillcancertainlychimein--isBystolic,whilecertainlyacardiodrug,ismanagedabitmorelikeaprimarycaredrug.About80%ofitsvolumecomesfromourprimarycarefieldforce.WedohaveapartnershipwithTrevenaforanearlier-stageproductsowe'renotcompletelywalkingawayfromcardiobutit'snotoneofourcorefocustherapeuticareas.Billor




David,anythingyou'dadd?


That'sexactlyright.TheexclusivityperiodonBystolicextendsoutformanyyears.It'sabigprimarycareproduct.We'regoingtoincreasedetailinginthesecondhalfoftheyear.Wehavegreatformularycoverageandit'sgotaterrificfollowingincardiologyandprimarycare.


Ialwayshearanecdotal,butIhearfromdoctorsallthetimeaboutitbeingtheirfavoritebetablockertoprescribe,solongastheycangetitthroughmanagedcare.

SumantKulkarni(Analyst-BankofAmericaMerrillLynch):

Thankyou.

Operator :

MarcGoodman,UBS.

MarcGoodman (Analyst-UBS):

BrentormaybeBill,canyoutalkaboutsomeofthekeyproductsintheportfolioandjustthedynamicsinthequarter?Restasisseemedtobeverystronginthequarter,muchbiggerthanwhatwethought,breastaestheticsismuchweakerthanwethought,Botox.JustsomeofthekeyproductsandjustthedynamicsUSversusinternational,what'sgoingon.Thanks.


MaybeI'llaskBilltotalkabouthisandthen,Philippe,maybeyoucouldchimeinonafewofthekeyaestheticproducts.


I'llstartwithBotoxtherapeutic.We'refocusedontwohigh-growthareaswhichismigraineandoveractivebladder.Ourprioritiesrightnowaretoincreaseinjectorproductivityandexpandourinjectoruserbase.Andwehavecompletefocusonthat.

Wethinkthetrendsinthesecondquarterlookterrific.AndIthinktheoutlookfortherestoftheyearisthesame.Idon'tseeanythingthatwoulddisruptthereliabilityofthatsalesstream.

AsitrelatestoRestasis,we'refocusedonalargeOTCartificialtearmarket.Therearemillionsofpatientsoverusingartificialtears.Wehaveanefforttoincreasethediagnosisratethroughin-officescreeningsfordryeye,whichhavebeenlinkedtoblurredvision,adversepost-opoutcomes.So,there'saneducationaleffortsthere.

Andthen,finally,welaunchedaprimarycareeffortforRestasis.Andtheformularycoverageonthedrugisrocksolid.AndthenI'djustprobablyaddLinzessinthere.Wehaveourfootonthegas.Theresponsetooursecondwaveofdirect-to-consumeradvertisingisexceedingindustrynorms.

Wejustlaunchedaneffortintolong-termcareforthefirsttimesinceLinzesswasapproved,andthat'sabout25%ofthemarket.OurrelationshipwithIronwoodisexcellent.Andwe'rewaitingtolaunchalow-doseversionofLinzess.

So,Ifeelverygoodaboutourtopproducts.AndasBrentmentionedinhisopeningremarks,12ofour15




productsareincreasing--ifyoulookattheUSbusiness,12ofthe15productsareincreasingatadouble-digitrate.Andwe'vehadvirtually,inmyopinion,nodisruptionduetotheintegrationinthistotalfocusoncustomers.


Philippe,doyouhavesomethoughts?

PhilippeSchaison (President-AllerganMedical):

Sure.Onthefacialbusiness,grewby13.5%versustheprioryearforthequarter,andyeartodatewegrewby13%.VerystronggrowthalsoinBotoxwhichgrewby12.5%.AllthisgrowthismostlylinkedtoourstrongDTCcampaign.AndyoumighthaveseenourBotoxadandourVolumaad.AndonVolumayoucanseethatbrandawarenessincreasedby42%from27%inQ1.So,averystrongbusinessandlinkedtoverystrongadvertisingduringthesecondquarter.

MarcGoodman (Analyst-UBS):

Great.Thanks.

Operator :

RonnyGal,Bernstein.

RonnyGal(Analyst-SanfordC.Bernstein):

Justaquickhousekeepingone--wouldyoubeabletoprovideustheconstantcurrencygrowthratefortheaestheticproducts.Thisisthewaywetrack(inaudible).Andthen,second,regardingthe[ossical]installmentfranchise,InoticedthatyouwereexcludedinbothCVSandExpressformulariesstartingin2016.Howshouldwethinkaboutthisfranchise?Isthereanotherphasetothisfranchiseoristhissomethingthatgenerallyweshouldthinkaboutasflattodeclining?


Tessa,doyouwanttotakethefirstquestion?

T essaHilado (CFO):

Onanoverallbasis,excurrency,wegrewabout11%.Thinkaboutitthisway.MostofouraestheticsproductsaremostlyUSproducts.Thereareproductssoldinternationallybutit'snotsignificantasitrelatestotheportfolio,soagoodamountofthemdoesnothaveanycurrencyimpactgiventhey'reUS-based.


Yes.Andasitrelatestothemesalamineproductline,asyouknow,Ronny,youwinsomeandyoulosesome.WegotabigwinwithLinzessonthatsameformularyattheexpenseofAMITIZA.Butasitrelatedtothemesalamineproductlinetheyexcludedit.

Weviewitasamaturebusiness.ItispromotedbehindLinzess.Wehaveacoregroupofusers.We'remanagingvolumeandofcoursetakingpriceincreaseswhenandwhereappropriate.Andthat'showIwouldthinkaboutit,asanestablishedbusiness.

RonnyGal(Analyst-SanfordC.Bernstein):

Okay.Thanks.




Operator :

ElliotWilbur,RaymondJames.

Elliot Wilbur (Analyst-RaymondJames):

Injustrunningthroughthesegmentdata,itlookslikethegenericbusinesscontributedabout23%ofthesegmentprofitability,inclusiveofR&Dallocation.Andgoingforwardwe'realltaskedwithtryingtofigureouthowmuchoftheproceedsfromthegenericbusinesswillbeappliedtoimmediatedebtreductionversuspotentiallyusinginternalcashflowgenerationtopaydowndebtandtargetexternalopportunities.Butisthattherightpercentagetothinkaboutandjustaballparknumberwhenthinkingaboutyourpriorindicationsthatthecombinedbusinesswouldgenerate,around$8billioninfreecashflow?Wouldthegenericbusinessaccountforroughly20%,25%ofthat?


Tessacancertainlyaddhertwocents.Elliot,Ithinkit'snotthatsimple.Andthat'stheissueweweretryingtohighlightwiththeearliercommentsarounditbeingverytoughforyouguys.Andourapologiesinadvanceforthatforthenextcouplequartersbecausewhat'sinthatbusiness,aswereportittoday,isn'tnecessarilywhat'sbeingsoldtoTevadownastraightline.Also,asyoudoGAAPreportingandreportingarounddiscontinuedoperationswhatgetsassignedtowhatpartofeachbusinessisalsonotintuitiveandnotnecessarilystraightforwardtorealityeither.

So,it'sgoingtomakeforsomedifficultquartersahead.Again,wearecommittedtoasmuchtransparencyaswecanpossiblyprovidearoundproductsales,andperhapscashflowmaybeagoodwaytolookatthebusiness.Butit'snotasstraightforwardorasintuitiveasyouwouldhopeorwantittobe,justinfairness.Idon'tknow,Tessa--?

T essaHilado (CFO):

IfImayjustaddtothat,justtogivealittleofcontext.Youhavetorememberthatwewerereallymanagingthebusinessonaconsolidatedbasis.Weweren'tmanagingthebusinessseparatelyassolelyagenericbusinessandabrandedbusiness.Wedidn'thavetheholdingcompanyapproach.Weactuallyweremanagingthebusinessonaconsolidatedbasis.Andfromasegmentreportingbasiseventoday,ininternationalbrandsorgenericproductsandinglobalgenerics,there'salsobrandedproducts.

Theotherthingtonote,whichyoualsohighlightedisfromabalancesheetperspectiveit'sreallyallintermingledasitrelatestodebtandthetaxrate,someofthethingsthatarenotnecessarilyoperationallyrelated.So,Ijustwantedtogivecontextastowhyit'snotasdifficulttostripoutanddoapercentageofcashflowandsaythat'swhat'sattributabletogenerics.

Operator :

RandallStanicky,RBCCapital.

RandallStanicky(Analyst-RBCCapitalMarkets):

Brent,justaquestionforyou.AlotofpeoplehavebeenwatchingthelegacyAllerganproductswaitingforsomemoderation.Thathasn'thappened.Infact,theywerereallystrong.AndsothequestionthatIhaveis,justgiventhedifferenceinspendingsupportlevelsonsalesandmarketingbetweenlegacyAllerganandwhereyou'reattoday--andI'mjustlookingatslide15--numberone,doyoufeellikethatinfrastructureisright-sized?Andthen,secondly,justyourconfidencelevelonsomeofthekeyproductsandbeingabletocontinuetosustainthatgrowth?BotoxandRestasiswereverystrong.





Randall,it'sagreatquestion.Ithinkwehaverationalizedoursalesforceforouracquisitionsandforthemarketasweseeitoverthenextfewyears.So,wedon'tanticipateanyadditionalcutsinthefield.And,infact,wewouldselectivelyaddifwethoughttheopportunitypaidback.

Asanexample,withtheacquisitionofKythera,wewillincreaseourfacialaestheticssalesforcebyroughly75positions,makingusthestrongestfieldforceinaestheticsbyalargemargin.So,Ithinkyou'llseeuscontinuetolookforwayssolongasweareincreasingourtightstrategyofproductflow,eitherthroughourR&Dengineorthroughlicensingandacquisition,ofbuildingandmakingsurewemaintainstrongleadershippositionscommerciallyineachofourtherapeuticareas.

WithrespecttospendingonDTCandotherwise,wealwayslookatthereturnoninvestment.TotheextentwethinkwecanaddmoremoneytoBotoxorRestasisorLinzess,orevenNamzaric,whichwillkickoffinthefallinDTC,we'realwaysmonitoringthesituation,lookingatbothresponseandreturnonthoseinvestments,andhavenoissuemakingthemsolongasweseeastrongROI.


TheotherthingthatweheardlegacyAllergantalkalotaboutwastheinternationalemergingmarketinAsiangeographiesasabigopportunity.Isthatsomethingthatweshouldstillthinkaboutforyouguysthatisinfrontofyou?


Yes.It'saslowerbuildbutbigopportunityovertime.Lookattheapprovals,forexample,ofJuvederminChinathisquarter.ThatgivesusagreatopportunitytobuildonBotoxinthatmarket.

I'llbedowninBrazilnextweekwithourteamlookingathowwecanleverageourinfrastructureinLatinAmericaandgrow.ClearlythedivestitureoftheTevabusinesshassomedrawbacksinmidmarketslikeEasternEuropeandRussiainthatweweregoingtoleveragetheoldlegacyActavisinfrastructureinthosemarkets.ButIthinkwecancompensateforthoseandcontinuetogrowandbuildinemergingmarkets.


Great.Thanks,Brent.

Operator :

UmerRaffat,EvercoreISI.

UmerRaf f at (Analyst-EvercoreISI):

MaybethefirstoneforDavid.David,what'sthestatusontheDARPinJapanesetrialthat'songoing?Shouldwebeexpectinganupdatesoonandwhatwouldthatlooklike?

AndthensecondoneforBrent,ifImay.OntransformationalM&A,thequestionweallkeepgettingfrominvestors,howdoyouthinkaboutcompanieswithgrowthprofilesthatmightbelowerthanyour10%,orcompanieswithpotentialbiosimilarheadwinds,orevenex-UScompanies,forthatmatter?Ijustwanttounderstandhowyouthinkaboutthis.


Sure.David,doyouwanttotakeDARPinandI'llcomebacktothetransformationalM&Aquestion?





Sure.ForDARPininJapan,weactuallywantJapantojoininourglobalPhaseIIIprogram.InordertodothatweneededtocompleteasmallstudyinJapanandcompareittoanadditionalsmallstudyintheUnitedStates.We'reintheprocessoffinalizingthosestudiespriortoincludingJapanesesitesinthePhaseIIItrialssometimenextyear.So,yes,therewillbesomeupdatesonthatgoingforward.


Toyoursecondpoint,Umer,aroundtransformationalM&Awithcompanieswithlowergrowthprofilesorthelike,Ithink,infairness,itwouldbeverydifficultforustodoatransformationaldealwithacompanywithahighergrowthratebecauseIthink,basedonatleasttoday'smeasure,theonlyonewithahighergrowthrateisCelgene.So,thatwouldreallylimittheuniverse.

Thatbeingsaid,Ithinkthattheissueforusiswewanttobeingrowthpharma.Wouldwebewillingtogofrom,let'ssay,roughly10%toa9%top-linegrowthratetodoahighlyaccretivebottom-linedeal?Theanswerisabsolutely.Wouldwebewillingtogofrom10%to3%or4%top-linegrowthtodoahighlyaccretivedeal?Iwouldsayhighlyunlikely.Wewanttogooutandmakesurethatwecanacquiresomethingthatwebelievehasagrowthorientationtoit,thathaslongerdurationassets.

AndIthinkyoushouldalsokeepinmindwe'repretty,asIusetheword,boldinourthinking.Ithinkalotofpeoplelookattheuniverseoftransformationaldealsandsay--well,youcan'ttouchthisbecauseit'sgotthisparticularproductdragorthisparticularissue.We'vebeenknowntobeverycreativeinsolvingforthosethingsinthepast.

Albeitaverysmalldeal,IwouldpointtoFuriexasjustanillustrationwheretheyhadtwoassets.TheyhadtheNDAforeluxadolineandtheyhadaroyaltystreamfromTakeda.WedivestedtheroyaltystreamtoTakedatoRoyaltyPharmaatthetimeweannouncedthedeal.Wehadthatpre-wired.So,wekeptwhatwewantedandwesoldsomethingthatwasvaluabletosomebodyelsetohelppayforthedeal.So,totheextentwelookatcompaniesoropportunitiesthathavethingswelike,andsomethingsperhapswedon'tlike,therearealwayspotentialsolutionsforsolvingforthoseissues.

Operator :

GreggGilbert,DeutscheBank.

GreggGilbert (Analyst-DeutscheBank):

Brent,ifanotherpartyweretoboldlyapproachyouasaninversiontarget,otherthandoingwhat'sbestforshareholders,whichIthinkyouhaveareputationofdoing,alongwithPaulandtheBoard,aretherecertainelementsofthemodelanditsspecialnessingrowthprofilethatyou'dbeconcernedaboutthatmightplayintoyourthinkingaboutlonger-termshareholdervaluecreation?Thanks.


Gregg,Ithinkyou'reright.Itwouldhavetobeaboldoffer.Second,IthinkPaulandIalwayswoulddebateandtalktoourBoardaboutthebestlong-terminterestofourshareholders.

IthinkasyoustepbackandlookatwhatIthinkissospecialaboutthisCompany,alotofitgoestothedepthandqualityofourmanagementteam.Totheextentsomeonewouldbeopentothinkingaboutculturalchangeandchangeandbalancetoleadershipandtalentandmanagement,Ithinkthatwouldbemorehelpfulforus.

IthinkclearlyourcommitmenttoR&DandthewaywethinkaboutR&Disalsoveryspecial.And




Ithinkourabilitytobenimbleandmovequicklyanddowhatwebelieveisalwaysintheshareholders'bestinterestisalsoabitunique.Thosearethetypesofdiscussionsthatwewouldhave.It'snotlimitedtothat,butthatwouldbe,Ithink,atleasttopofmindfordebate.IseePaulshakinghisheadsoIknowhe'sinagreement.

GreggGilbert (Analyst-DeutscheBank):

Thanks,guys.

Operator :

DavidMaris,BMOCapital.

DavidMaris (Analyst-BMOCapitalMarkets):

OnNaurex,thislookstobeapotential$1billion-plusdrug.AndIknowwe'llcovermoreofitduringtheR&Dday.Butifmaybeyoucantalkalittlebitaboutwhat'sattractedyoutothis,howit'sdifferentiatedinthemarket,butalso,mostimportantly,whatarethenextstepstowardthepathtoapproval?


I'llaskDavidtocomment.I'lljustgiveyoumyquicktakeofwhyIwassoexcitedtodothedealwithNaurex,isthatthisisanarea,ahugemarketwithhugewhitespaceforunmetneed.Youcandebatethenumbersbutveryfewpatients,infact,aminorityofpatients,areadequatelyservedbySSRIorSNRI.Andthentheyhavetolivewith,insomecases,verydifficultsideeffectsfromthosemedicines,aswellasthelongonsetofactionforthosewithacuteissuesthatneedtobedealtwithmorequickly.

AndIthink,David,youmentionedthisinyourearlierremarks,there'sbeennorealnovelbreakthroughindepressioninabout20years.So,forustobeabletobeattheforefrontofpotentiallyrevolutionizingthetreatmentofthisverylargeandhorrificdiseaseissomethingIthinkthat'sveryexcitingforusgivenourcommitmenttoleadinginCNSandinparticularpsychiatry.David,yourtwocents?


I'veonlygottimefortwocentsapparently,soI'llhavetobequick.I'vebeenworkinginpsychiatryfor20years.I'vetakencompoundsthroughtothemarket.Billandhisteamhavecommercializedsomeofthebiggest-sellingantidepressants.So,Ithinktheteamthatwe'vegothereknowsdepressionandtheareaoverthelast20decades.

So,whenanopportunitylikeNaurexcomesalongwithanovelmechanismofaction--overthelasttwodecades,I'mbeingcorrectedbymycolleagues--justfeelslike20.(laughter)Sowhenanewopportunitycomesalongwithanewmechanismofaction,Ithinktheteamherecanrecognizeandseizeitprettyquickly.

Thesethingsareexciting--completelynovelmechanismofaction,showingafastonsetofactionindepression,andnotonlyindepressionbutindepressionwherethepatientsfailtorespondtoSSRIs.So,that'sanexcitingopportunity.AndthenextstepsforusaretogettingtoPhaseIIIasquicklyaspossiblewithGLYX-13,theleadmolecule,andtogetintoPhaseIIbwiththesecondcompound,NRX-1074.Weaimtodothatasearlyaspossiblenextyear.


Certainlywe'dliketocloseadealbutthenwe'llmoveprettyaggressivelyintodoingthat.




DavidMaris (Analyst-BMOCapitalMarkets):

Great.Thankyouverymuch.

Operator :

DavidRisinger,MorganStanley.

DavidRisinger (Analyst-MorganStanley):

Ihaveacoupleofquestionshere.Thefirstis,withrespecttothegenericsbusinessthatyou'resellingtoTeva,thereweresomeslightdifferencesbetweenthepressreleaseandtheslides.Couldyoujusttelluswhattheorganicgrowthwasinthesecondquarterofthegenericsbusinessthatyou'reselling?AndthenIhaveafollow-up.


David,ifIunderstandthequestion,IthinkthedifferencesarebetweenwhatwehaveandwhatTevahadontheirslidedeck.Anditwouldbeverydifficultforustocommentonthedifferencesbetweenwhatwehaveandwhatanothercompanyhas.

T essaHilado (CFO):

IfIrecall,we'veprovidedthegenericsbusinessEBITDAfor2015andtheyprovidedanumberfor2016.Thatwasthedifference.Andobviouslywecan'tcommentontheir--.


And,justtobefair,it'stheirnumberfor2016notournumberfor2016,justtobeclear.


I'msorry,ImeantthedifferencebetweenAllergan'spressreleasetodayandAllergan'sslidestoday.Thereweresomeslightdifferencesintherevenuereportedonyourslides.

T essaHilado (CFO):

Wecanaddressthat.


HiDavid,it'sLisa.Inthetopglobalbrandedproducthighlightsslide,theex-USbrandedproductsfromForest,WarnerChilcottandAptalisarenotcountedasgenericproducts.They'recountedinthebrandtotal.Whenyoulookatourglobalgenericssegment,ourglobalgenericssegmentstillcountsthose,asperaccountingrules,aspartoftheglobalgenericsbusiness.That'sthedifference.


Andintermsoftheorganicgrowthofthegenericsbusiness,whatwasthatinthesecondquarter?


That'swhatwegaveyouasthe--well,theglobalgenericssegmentitselfgrew17%onaconstantcurrencybasisquarteroverquarter.





That'snotaclean--that'sthepointIwastryingtomakeearlieraboutwhyit'ssodifficulttomodel.That'snotapplestoapplesofwhat'sbeingsoldandwhat'sstaying.Thereareputsandtakesfromthesegmentsversuswhatwasactuallybeingsold.Andthat'swhatmakesitsocomplicated.


Gotit.Okay.Icanfollowuponthat.Andthen,separately,withrespecttotheNamendaswitchhere,obviouslyit'stakingyoulongerthanexpectedtogettoyourtargetof60%to65%,butyou'releavingthatunchanged.I'malittlebitsurprisedthatyou'releavingthatunchanged.Whenyoutalkabout60%to65%,isthatapercentageofthetotalprescriptionsincludingthegenerics,oristhatjustthebrandedAllerganfranchisethatyou'renowforecasting?


ThatwouldbethetotalNamendabusinessincludingbrandsandgenerics.AndthewaywethinkaboutitiswelaunchedNamzariconlytwo-and-a-halfweeksago.ADTCcampaignstartsinSeptember.

WeexpectexceptionalformularycoveragebyJanuary1andtheincrementalsalesfromNamzaricbyessentiallytakingadvantageofanuntappedcombinationmarket,especiallyinmoderateAlzheimer'sdisease,effectivelyisgoingtogetustoourtargetconversionrate.AsIsaidearlier,iftheformularycoveragehadnotdevelopedlikeithas,wemighthaveadifferentsituationrighthere.Butasitrelatesto2016,Namzaricisgoingtobehighlyeconomical,XRalreadyis,andIthinkthemajorityofpatientsaregoingtohaveanopportunitytogetit.


Okay.That'sveryhelpful.Thankyouverymuch.


Thanks,everybody.Brent,wouldyouliketomakesomeclosingremarks?


Yes.Iwouldjustliketothankeveryoneforjoiningthecalltoday,and,inclosing,justsummarize.Ithinkwehadaverystrongandwell-executedquarter.

Ithinkourplansareinmotiontocontinuetofocusonoperationalexcellenceanddrivingourgrowthagendaandourfocusonourkeytherapeuticcategories,andestablishinglong-durationleadershipinthosecategories.Ithinkourleadingpipeline,ourreloadedcapitalstructure,andournowfocusonbrandedpharmaceuticalsandwillingnesstotakeboldanddecisiveactionsmakeusthemostdynamiccompanyingrowthpharma.IthankyouforyourtimeandlookforwardtoupdatingyoulateragaininSeptember.


Thanks,everyone.Iknowwedidn'tgettoquiteafewpeopleintheQ&A,sowe'llfollow-upwithyoushortly.Thanks.

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allergan inc (act) earnings report: q2 2015 conference...

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