allergan incorporated (agn) earnings report: q1 2016 ... · pharma. you can see it in the...

CompanyName:AllerganPLCCompanyTicker:AGNSector:HealthCareIndustry:Drugs

EventDescription:Q12016EarningsCallMarketCapasofEventDate:83.02BPriceasofEventDate:223.21

AllerganIncorporated(AGN)EarningsReport:Q12016ConferenceCallTranscriptThefollowingAllerganIncorporatedconferencecalltookplaceonMay10,2016,08:30AMET.Thisisatranscriptofthatearningscall:

CompanyPart icipants

LisaDeFrancesco;Allergan,Inc.;InvestorRelationsBrentSaunders;Allergan,Inc.;CEO&PresidentBillMeury;Allergan,Inc.;ChiefCommercialOfficerDavidNicholson;Allergan,Inc.;ChiefR&DOfficerRobStewart;Allergan,Inc.;COOTessaHilado;Allergan,Inc.;CFOPaulBisaro;Allergan,Inc.;ExecutiveChairman

OtherPart icipants

DavidRisinger;MorganStanley;AnalystJamiRubin;GoldmanSachs;AnalystGreggGilbert;DeutscheBank;AnalystRandallStanicky;RBCCapitalMarkets;AnalystMarcGoodman;UBS;AnalystDavidAmsellem;PiperJaffray&Co.;AnalystKenCacciatore;CowenandCompany;AnalystChrisSchott;JPMorgan;AnalystRonnyGal;SanfordC.Bernstein&Co.;AnalystLiavAbraham;Citigroup;AnalystLouiseChen;GuggenheimSecuritiesLLC;AnalystUmerRaffat;EvercoreISI;AnalystJasonGerberry;LeerinkPartners;AnalystDavidMaris;WellsFargoSecurities;Analyst

MANAGEMENTDISCUSSIONSECTION

Operator :

Goodmorningmynameis(Lashonda)andIwillbeyourconferenceoperatortoday.Atthistime,IwouldliketowelcomeeveryonetotheAllerganFirstQuarter2016EarningsConferenceCall.

Alllineshavebeenplacedonmutetopreventanybackgroundnoise.Afterthespeakersremarkstherewillbeaquestionandanswersession.

OperatorsInstructions)

I'llnowturntoday'scalltoLisaDeFrancesco,VicePresidentInvestorRelations,tobegin.Pleasegoahead.

LisaDeFrancesco (InvestorRelations):

Thankyou,Operator.Goodmorning,everyone.

I'dliketowelcomeyoutotheAllerganfirst-quarter2016earningsconferencecall.

Earlierthismorning,weissuedapressreleasereportingAllerganearningsfromcontinuingoperationsforthefirstquarterendedMarch31,2016.Thepressreleaseandourslidedeck,whichwearepresentingthismorning,areavailableonourcorporatewebsiteatwww.Allergan.com.

We'reconductingalivewebcastofthiscall,areplayofwhichwillbeavailableonourwebsiteafteritsconclusion.Pleasenotetoday'scalliscopyrightedmaterialofAllerganandcannotberebroadcastwithoutthecompany'sexpresswrittenconsent.

Turningtoslide2,I'dalsoliketoremindyouduringthecourseofthiscallmanagementwillmakeprojectionsorotherforward-lookingremarksregardingfutureeventsorthefuturefinancialperformanceofthecompany.

It'simportanttonotethatsuchstatementsandeventsareforward-lookingstatementsandreflectourcurrentperspectivesofthebusinesstrendsandinformationasoftoday'sdate.

ActualresultsmaydiffermateriallyfromcurrentexpectationsandprojectionsdependingonthenumberoffactorsaffectingtheAllerganbusiness.ThesefactorsaredetailedinourperiodicpublicfilingswiththeSecuritiesandExchangeCommission.Allergandisclaimsanyintentorobligationtoupdatetheseforward-lookingstatementsexceptasexpresslyrequiredbylaw.

Turningtoslide3inouragendathismorning,withusontoday'scallareBrentSaunders,ourCEOandPresident,whowillprovideanoverviewofourfirst-quarterbusinesshighlights;BillMeury,ourChiefCommercialOfficer,whowillprovideanoverviewofourcommercialperformanceinthequarter;DavidNicholson,ChiefR&DOfficer,whowillprovidehighlightsfromourpipelineachievementsin2016andupcomingmilestones;BobStewart,ourChiefOperatingOfficer,whowillprovideafewhighlightsonourglobalgenericsbusiness;andTessaHilado,ourChiefFinancialOfficerwillthediscusstheAllerganfirst-quartercontinuingoperationsresultsinmoredetail.AlsoonthecallandavailableduringtheQ&AarePaulBisaro,ourExecutiveChairman,andBobBailey,ourChiefLegalOfficer.

Withthat,I'llturnitovertoBrent.

BrentSaunders (CEO&President):

Thankyou,Lisa.Goodmorning,everyone.

Beginningonslide5,Allerganremainsthemostdynamicandexcitingcompanyinourindustry,andinmymind,thatmakesusthebestpharmaceuticalcompanyintheworld.Youcanseeitinourresultsthisquarter.

Youcanseeitinthewayourteamhaspivotedtofocusonourfutureasastandaloneleaderingrowthpharma.YoucanseeitintheoperationalexcellenceondisplayinteamsacrossourCompany.Youcanseeitinthewaywefocusonbuildingtherapeuticarealeadershipinthecategorieswherewechoosetocompete.

YoucanseeitinthewayweareusingOpenSciencetobuildanindustry-leadingR&Dpipelinetosustainourleadershipinthosetherapeuticareas.Andyoucanaskourcustomersaboutourhighlyresponsiveservice-orientedapproachtocustomerintimacy.Thosearejustafewreasonswhyweareespeciallyexcitedaboutourfuture.

AsweconsideredouroptionsfordeployingcashfollowingTeva'splanned$40.5billionacquisitionofour

globalgenericsbusinessinthesecondquarter,werealizedthattherewasnobetterinvestmentthanowningourfast-growingCompany.So,ourBoardhasauthorizedthecompany'sfirstsharerepurchaseprogramatavalueofupto$10billion.

We'llstartwith$4billionto$5billionduringtherestof2016,buyingasmuchasprudentlypossibleintheopenmarket.Iffavorablemarketconditionspersist,wewillhaveadditionalcapacitytoconsiderbuyingmoreaftersatisfyingthefirstpartoftheprogram.

Inadditiontothestockrepurchaseprogram,wewillhavetheabilitytopaydowndebttomaintainourinvestmentgradecreditratingsandpreservesignificantcapacitytoinvestforgrowth.Giventhestrengthofourcurrentbusinessandtheopportunitiesweseeahead,weremainfocusedonrunningoneofthefinestcompaniesinourindustry.Tessawilltalkmoreaboutthesharerepurchaseprograminjustafewminutes.

Turningtoslide6,Allergan'sfirst-quarterperformancereflectsourcontinuingexecutiononeachelementofourgrowthpharmastrategy.First,top-linegrowth.Inthefirstquarter,wepoweredanotherfinequarterwithtotalrevenueup48%andbrandedgrowthup71%versusprioryear.Onaproformabasisbrandedrevenuewasupdoubledigitsagainthisquarter.

Second,wemaintainedleadershippositionsinoursevencoretherapeuticareas.AndwiththerecentlaunchesofnewdrugslikeVIBERZI,VRAYLAR,andKYBELLA,wehaveaddedsignificantmuscleandgrowthpotentialtoourGI,CNS,andaesthetictherapeuticareas.

Third,ourR&Denginecontinuestoproduceatrecordpace.WedeliveredtwonewbrandedFDAapprovalsandfourFDAsubmissionsjustinthefirstquarter.InEuropewealsoreceivedapositiveopinionforZENPEP,namedENZEPI,toenhanceourcysticfibrosisandpancreasinsufficiencyoffering.

OurOpenSciencemodelishelpingusbuildasustainableR&DpipelinebybringingusnovelassetslikeXAF5forunder-eyebags,andfromHeptares,aportfolioofselectiveagentsformajorneurologicaldisorderslikeAlzheimer'sdiseasewherewearethemarketleader.Ourbest-in-classgenericsR&Denginecontinuestoperformwell,andRobStewartwillhighlightthislater.

Fourth,ourfocusonoperationalexcellencehelpedussimplifytheoperatingstructure,streamlineourITsystems,anddrivemorethana500basispointimprovementinouroperatingmarginsversusprioryear.OuroperationalexcellencealsohasbeenondisplaywiththelaunchofourgenericCrestorintheUS.Ourgenericsteam,togetherwithANDA,executedflawlesslytogetproductontopharmacyshelvesfastinordertotakeadvantageofthisfirst-to-marketopportunity.

Nowletmeturntocontinuingoperationsbusinessperformanceinthefirstquarter,onslide7.Ourfirst-quarternetrevenuegrew48%onayear-over-yearbasisto$3.8billionasaresultoftheAllerganacquisitionandstrongglobalgrowthwithinallofourkeytherapeuticcategories.Brandedrevenuewasthekeydriver,up71%.Strongsalesinkeyproductsandoperatingmarginexpansionacrossourbusinessdrovea15%increaseinnon-GAAPearningspershareto$3.04.

Meanwhile,non-GAAPoperatingincomeroseto$1.8billion,anincreaseof68%versusprioryear.Andcashflowfromoperationswas$1.45billionexcludingR&Dassetacquisitions,restructuringandintegrationpayments.Theseresultsillustratethestronglong-termgrowthprofileofAllergan.

Turningtoslide8,ourstrategyisbasedonutilizingallofourgrowthpharmaassetstogether,includingourbest-in-classcommercialenginetobringlife-changingmedicinestopatientsaroundtheworld.Aswelookatourproductportfolio,ourbrandedbusinesscontinuestothriveinthefirstquarterwith10%proformarevenuegrowthexcludingtheimpactofcurrencyandtheNamendaIRanddivestitures.

Ourtopglobalproducts,whichrepresentmorethan75%oftotalbrandedrevenue,grew13%excludingtheimpactofcurrencyandNamendaIR,withoverhalfthoseproductsgrowingatdouble-digitrates.Thisquarterperformanceisatruetestamenttothehardworkofourteamandthesuccessofourgrowthpharmastrategyandmindset.

Movingtoslide9,asweneartheconclusionofthegenericsdivestiture,Ihavebeencarefullyconsideringhowtostreamlineourmanagementstructuretobetteralignourresourcesasafocused,branded,growthpharmabusinesswithmanyleadingglobalbrands.We'veannouncedthestreamlinedexecutiveteamstoleadAllergangoingforward.

Inthisnewleadershipstructure,allofourcommercialbusinesseswillbecombinedunderBillMeury,whohasbeenemployedasourChiefCommercialOfficer.TherewillbethreemajorbusinesssegmentsunderBill.ThefirstsegmentisUSspecializedtherapeuticswhichincludeseyecare,medicalaesthetics,medicaldermatologyandBOTOXTherapeutics.

ThesecondsegmentisUSgeneralmedicine,whichincludesCNS,CV,GI,women'shealth,AI,andurology.Thethirdsegmentisinternational,whichincludesallofourbusinessesoutsidetheUSorganizedinmultipleregions.ANDA,ourfourthsegmentwillcontinuetoreporttoRobStewart.

Weremainfocusedondrivinggrowthbybuildingtherapeuticarealeadershipinoursevencoretherapeuticareas--eyecare,aestheticsandmedicaldermatology,CNS,GI,women'shealth,BOTOXTherapeutics,andanti-infectives.WewillcontinuetobeadrugdevelopmentpowerhouseandutilizeourOpenSciencemodeltoinvestininnovationandpropelfuturegrowthinthesetherapeuticareas.

Ibelievethisnewcommercialstructurewillfurtherenhanceourglobalfocus,speeddecision-making,andalignresourcesandprioritieswithourR&Dpriorities.

WearealsoappointingRobStewarttothepositionofChiefOperatingOfficer.InthisroleRobwillmakesureourmanufacturingoperationsrunsmoothlytomeetoursalesgoals,overseeharmonizationofourITsystemsandprocesses,andfinishpreviousintegrations.

Withthat,IwillturnthecallovertoBillMeury,ournewChiefCommercialOfficer.

BillMeury(ChiefCommercialOfficer):

Thanks,Brent.Goodmorning,everyone.

Twohallmarksofgrowthpharmaarecategoryleadershipandcustomerintimacy.TheyaretruedifferentiatorsforAllergan,especiallywithinourcommercialteam,whichconsistsofaworldwidesalesforceofmorethan7,500strong.

I'mlookingforwardtoleadingtheAllergancommercialorganization,whichisagreatportfolioofproducts,asyouknow,andanindustry-leadingteamwithdeepknowledgeandexpertiseofkeytherapyareas.

Allthetalentweneededforthefutureorganizationwasherewithinourfourwalls.Andwiththisnewintegratedstructure,wecanbegintoleverageresourcesglobally,andacrossproductlinesinlockstepwithourR&Dorganization.We'resquarelyfocusedonleadershipineachofourtherapeuticareasandonhavingauniqueconnectionwithourcustomers,bothofwhicharecompetitiveadvantages.

Turningtoslide11,thefundamentalsofourbusinessarestrong.Overallbasicdemand,marketshare,growthandsalesperformancewererobustinthefirstquarter.Andwe'rewellpositionedtosustainthegrowthforthesefranchisesfortheremainderof2016andbeyond.Inallsevenofourtherapeuticareasourteamsdeliveredhighsingle-ordouble-digitsalesgrowth,excludingtheimpactofforeignexchange,

versustheprioryear.

Ineyecare,salesincreasedby11%,poweredbycontinuedstrengthfromRestasis,Combigan,andOzurdex.USsalesforRestasis,ourflagshipproduct,increasedby22%.We'repreparingforthelaunchofRestasisMDPF,multi-dosepreservative-free,inthesecondhalfoftheyear,andlookingforwardtotheapprovalofOculeve,ournasalneuro-stimulator,inearly2017,whichwillsignificantlystrengthenourproductofferingforocularsurfacedisease.

Behindthesetwoproductswehaveacortisolanalogandamucinsecretagogue.Weare,asyouknow,aneyecarecompany,andwelookforwardtobuildingthedeepestandbroadestportfolioforocularsurfacedisease.

InCNS,wedelivered211%growthwithBOTOXMigraine,NamendaXR,andVRAYLAR.Thesewerethekeygrowthproductsinthequarterandareexpectedtocontinuedrivinggrowthin2016andbeyond.

Inaesthetics,salesincreasedby7%withBOTOXfillersandKYBELLA.Allthreebusinessesareinanexcellentpositionandweexpecttosustainhighgrowthratesin2016andbeyond,too.Salesinaestheticsincreasedatanimpressiverateof16%,excludingmedicaldermatology.Medicaldermrevenue,however,wasimpactedbyaone-timeharmonizationforallowancesinthequarter.However,prescriptiontrendswererelativelystableandweexpectgrowthinthebackhalfoftheyear.

InGI,LINZESS,ourflagship,continuestoexceedexpectationsandpostexceptionalgrowth.AndthelaunchofVIBERZIisofftoaverystrongstart.Weexpectsalesforthisfranchisetoincreaseatadouble-digitratein2016andbeyonddespiteadeclineinthe(ace-calldelta-call)productline.Wealsoseestronggrowthandcontinuetobeexcitedaboutourfutureinwomen'shealth,urology,andanti-infectives.

Onslide12wehaveeightproductsinlaunchphaseacrosseachofourleadingtherapeuticareas.Thisisimportantasitprovidesnewproductsforoursalesforces,newproductstodelivertoourcustomers,andnewinnovationtosolveunmetmedicalneedforpatients.Letmetalkalittlebitaboutthreeofournewestlaunches,VRAYLAR,VIBERZI,andKYBELLA,allofwhichhaveblockbusterpotential.

Turningtoslide13,welaunchedVIBERZI,ourtreatmentforIBS-D,rightattheendof2015andwe'reofftoastrongstart.Basedonsales,VIBERZIistrendingatapproximately80%ofLINZESSIBS-Cduringthesametimeperiodpostlaunch,whichisinlinewithourexpectations.

Morethan8,000physicianshaveprescribedVIBERZItodate,andabout65%ofthephysicianbasearerepeatprescribers.Andwe'reseeinganiceboosttoscriptsfollowingthestartofourDTCcampaigninApril.

LINZESS,ourtreatmentforIBS-Ccontinuestoexperiencestronggrowthfouryearspostlaunch.We'veseenincrementalgrowthfollowingthelaunchofourlong-termcarefocuseddetailingprogramandDTCadvertisingcampaigns.WenowhavetwoproductsthatcancoverarangeofIBSneedstotreatthesepatients.

Turningtoslide14andVRAYLAR,VRAYLARwaslaunchedinmidMarchintheUnitedStatesandistrackingstronglywithcompetitiveproducts,includingRexultiandLatudaatthetimeoftheirlaunches,exceedingourinternalexpectations.VRAYLARhashigherscripttrendsversusLatudaatlaunch.AndVRAYLAR'svolumeissimilartoRexaltiwithoutacurrentindicationinMDD.

Thefutureofthisproductisverypromising.VRAYLARcouldpotentiallybetheonlyapprovedtreatmentwithfivedifferentindicationsorclaims.Thatwouldbeasignificantadvantagefortheproductandwouldmakeitapotentialblockbusterinthemarketplace.

Nowturningtoslide15,KYBELLA,ourproductforsubmentalfatreduction,ordoublechin,isofftoastrongstart.SinceweacquiredtheproductfromKytherainOctoberof2015,we'veacceleratedthetrainingoftargetedaccounts.Sofarwe'vetrainedover4,000injectors,oralmost50%ofthepotentialuserbase,and,importantly,3,000ofthosetrainedhavealreadybegunordering.

Inthebackhalfoftheyear,weplantolaunchaDTCcampaignforKYBELLA.Thecampaignwillgreatlyenhancethecurrentpromotionaleffort,whichisreallylayingthegroundworkinthecreationanddevelopmentofthisnewmarketforinjectable.

Wecontinuetobelievethisproducthasaverystrongfuturepotential,andourR&Dteamisexploringanumberofnewindications.We'realsocontinuingtodevelopandprepareforthelaunchoftheproductex-USinvariousmarkets,includingtherecentlaunchinCanadaandotherinternationalmarketslaterthisyearandin2017.

Insummaryourcommercialbusinesscontinuestoperformwellandweplantocontinuetofocusonourcoretherapyarealeadershipandinleadingtheindustrywithlaunchesandultimatelyindouble-digittop-linegrowth.

Withthat,I'llturnthecallovertoDavid.

DavidNicholson (ChiefR&DOfficer):

Thanks,Bill.Goodmorning,everyone.

Let'smovetoslide17.Thispresentsourlate-stagedevelopmentpipeline.InQ1,wecontinuetomakeverysignificantprogress,2016beinganotherextremelybusyyearforourR&Dteam.

Weexpectmorethanadozenapprovalsandregulatorysubmissions,andweareontracktoachievingthesemilestones.I'mnotgoingtotalkabouteverythingonthisslidebutIwouldliketotalkaboutafewofthekeyhighlights.

First,approval.WereceivedUSapprovalofAczoneGel7.5%forthetreatmentofacne,providinganewconcentrationofdapsoneforonce-a-dayapplication.AndwereceivedFDAapprovalofDalvancesingle-doseasanantibioticforskinandskinstructureinfections.Thesingle-doseallowsfordeliveryofthisIVantibioticin30minutesintheemergencydepartmentandinfusioncenters,andwillprovideselectivepatientsthebenefitofreceivingacompletecourseofparenteraltreatment,whichmayavoidhospitaladmissions.

Regardingsubmissionstoregulatoryauthorities,wesubmittedanNDAforOxymetazolineasatreatmentforrosacea.Also,wesubmittedanSNDAforLINZESSlowdose,72micrograms,forthetreatmentofchronicidiopathicconstipation,orCIC,whichprovidesanotherimportantdosingoptionforphysiciansandpatientsandcouldacceleratetheconversiontotheOTCmarket.

WealsofiledanSNDAforasingle-handedinsertwithoptimizedpackagingforLiletta,ourintrauterinedevice.Ourpartner,SerenityPharmaceuticals,submitted,andtheFDAhasaccepted,anNDAforSer120,apotentialnewtreatmentfornocturia.

Turningtodevelopmentprograms,earlierthisweek,weannouncedpositivetop-lineresultsfromVenusI,oneoftwoPhaseIIIclinicaltrialsevaluatingtheefficacyandsafetyofulipristalacetateforthetreatmentofuterinefibroids.Inthetrial,both10-milligramand5-milligramtreatmentarmsmetallco-primaryandsecondaryendpointsversusplacebo,andtherewerenotreatmentrelatedseriousadverseevents.

ThisisimportantprogressforourEsmyaprogramandforpatients.It'sestimatedthatuterinefibroidsaccountformorethan200,000hysterectomiesannuallyintheUS.That'saboutone-thirdofall

hysterectomiesperformedintheUnitedStates.Esmyahasthepotentialtoofferthefirstandonlynon-surgicaloraltreatmentoptionforwomensufferingfromuterinefibroidsintheUnitedStates.Theresultsareveryexcitingandwecontinuetoanticipatethe2017submissionforthisproduct.

InadditioninQ1,togetherwithGedeonRichter,weinitiatedPhaseIIItrialsforCariprazineinbipolardepression.Twoparallelstudieswillbeconductedatapproximately85sitesintheUSandEurope.Bipolardepressionisoneofthemostdifficultmentalillnessestotreat,andresponseratesvarygreatlyfromonepatienttoanother.So,it'simportanttocontinuetoexplorenewtherapiesandincreasethenumberofoptionsthatareavailabletohelppatientsmanagetheirsymptoms.

Turningtoslide18,asBrentmentioned,Allergan'sR&Dpipelinecontinuestobeinnovativeandproductive,anditiscontinuingtogrowthroughourOpenSciencemodel.In2015,weacquired,inlicensed,orenteredintocollaborations,providingmorethantennewpipelineopportunitiesacrossourkeytherapeuticareas.WeachievedregistrationforfourNMEsintheUnitedStates.

In2016,wehavealreadyaddedtwoadditionaldevelopmentprogramsthroughOpenScience.First,ourdevelopmentandcommercializationpartnershipwithHeptaresaddsabroadclinicalandpreclinicalportfolioasmuscarinicM1,M4,anddualM1-M4agonists,includingHDL9936andHDL18318forthetreatmentofAlzheimer'sdisease.Thesemuscarinicagonistshavethepotentialtoimprovesymptomsofthisdisorder,suchascognitionandpsychosis.

MuscarinicagonistshavepreviouslybeendemonstratedtoimprovecognitioninAlzheimer'sbutdevelopmenthasbeenhinderedduetoofftargetsideeffects.WebelievethattheHeptarescompoundshaveselectivityadvantages,whichshouldresultinmaintenancewithabeneficialeffectwithoutthedeleterioussideeffects.OuracquisitionofTopokineaddsXAF5,apotentialfirst-in-classtreatmentfor(stiatobletheron),ormoreeasilyknownasundereyebags.

We'vehadagreatstartto2016inR&D.Wehavemanymoremilestonesaheadfortheremainderoftheyear.OurpipelinecontinuestovalidateourapproachtoR&DinnovationthroughourOpenSciencemodel.

Ithankourmorethan2,000AllerganR&Dcolleaguesaroundtheworldfortheirtremendousworkanddedicationindrivinginnovationinachievingtheseresultsandfortheircommitmenttotheworkahead.

IwillnowturnthecallovertoRobStewarttobrieflydiscussafewhighlightsoftheglobalgenericsbusiness.Rob?

RobStewart (COO):

Thanks,David.Goodmorning.

Turningtoslide20.Ourgenericsbusinessremainsabest-in-classasset,andIcouldnotbemoreproudoftheaccomplishmentsofourentireorganization.TheR&Dteamcontinuestoachieveanincrediblenumberoffilings,bothintheUnitedStatesaswellasinkeyinternationalmarkets.

Moreimpressivethanthenumbersarethequalityoftheassetsfiled,includingfirst-to-fileapplicationsforgenericAbraxane,aswellasgenericXifaxan.OutofallofthefirsttofilespublishedbyFDAin2016ourgenericteamholds50%ofthoseaccepted.They'vedonethisyearafteryear,andnowhaveamassedover98first-to-fileapplicationspendingattheAgency.OutsideoftheUnitedStates,wehavefiledover1,000marketingauthorizations.So,theperformanceremainsstrongnotonlyintheUSbutacrosstheglobe.

Priceerosionisalwaysaheadwindinthegenericindustryand2016isnodifferent.Companiesthat

investedindevelopinghigh-qualityassetsandinvestedintheirsupplychaincapabilityareabletocounterpriceerosionmoreeffectivelywithnewproductlaunches,strongquality,andreliablecustomerservice.

Thisyear,we'velaunched13newproductsintheUnitedStates,includinggenericCrestorlastweek.Internationallywelaunched62productsincludingpemetrexed.Wecontinuetoseeerosionwithinexpectationsaroundmidsingledigits,differentfromthemorecommoditizedgenericmodelsoutthere.

Movingtoslide21,ourentireorganizationremainsfocusedonclosingthetransactionwithTevainJune.Weareoperationallyreadytocloseoncewereceivetheanti-trustclearance.Wehaveregulatoryapprovalsinallcountries,withexceptionoftheUS,butbothteamsareworkingdiligentlytocompletethatprocess.

Inclosing,ourperformanceremainsstrong.Ourteamcontinuestoexecute.AndmostofourleadershipteamatAllerganGenericsiscontinuingonwithTevasoweexpecttoseecontinuedstrongperformancepostclose.

I'llnowturnthecallovertoTessatoreviewourfirst-quarterfinancialresults.Tessa?

T essaHilado (CFO):

Thankyou,Rob.Goodmorning,everyone.

Pleasenotethisdiscussionofresultsreflectscontinuingoperations,whichwehavebeenreportingsinceQ32015followingtheannouncementofthedivestitureofourglobalgenericsbusinesstoTeva.

Turningtoouroverallresultsforthefirstquarterof2016onslide23,inthefirstquarter,wedeliveredstrongyear-over-yearperformance.Onanon-GAAPbasisconsolidatednetrevenueforthefirstquarter2016was$3.8billion,anincreaseof48%versusthefirstquarterof2015,withbrandednetrevenuesincreasing71%to$3.4billion,primarilydrivenbytheAllerganacquisition.

SequentiallyresultswereimpactedbylowerANDArevenuesandtheimpactofanticipatedseasonalityontoppromotedbrandedproducts.Non-GAAPgrossmarginforthequarterwas80.1%,anincreaseof8.9percentagepointsversusfirst-quarter2015,whichreflectsarevenuemixfollowingtheacquisitionofAllerganandtheimpactfromANDA.

WhileANDA'srevenuehasdeclinedversusprioryearthelostrevenuewasattheverylowmargin.Non-GAAPR&Dinvestmentforthequarterwas$277millioncomparedto$172millionintheprior-yearperiod.

Non-GAAPSG&Awasrelativelyflatcomparedtolastquarterat$1.01billionasaresultofcontinuedspendingbehindournewproductlaunches,includingKYBELLA,VIBERZI,andVRAYLAR.SG&AincreasedfromthepreviousyearperiodasaresultoftheacquisitionofAllergan.

Non-GAAPoperatingincomeforthequarterwas$1.75billion,anincreaseof68%versustheprioryear,drivenbyhigherrevenuesandhighergrossmarginsacrossourbusinesssegments,mainlyasaresultoftheAllerganacquisition.Non-GAAPearningsperdilutedshareforthequarterincreased15%to$3.04comparedto$2.65perdilutedshareinthefirstquarterof2015.

Ournon-GAAPtaxratewas9.7%inthequarter.Thisratewasdriveninpartbytheentireinterestexpensebeingincludedinourcontinuingoperationsearnings.Cashflowfromoperationsforthefirstquarterwas$1.2billion,impactedbyrecentR&Dassetacquisitionsandintegrationexpenses.Excludingtheseitems,cashflowfromoperationswas$1.45billion.

TurningnowtoourUSbrandsresultsonslide24,thebusinesscontinuedtodeliverstrongperformanceyearoveryear.USbrandsrevenuewas$2.3billionforthequarter,up27%versustheprioryearperiod,drivenbytheadditionoftheAllerganbusiness,andstronggrowthacrossotherkeybrandedproducts,offsetbyadeclineinNamendaIRwiththelossofexclusivityforthatproductandlowerrevenueoftheAsacol/Delzicolfranchise.

AdjustedgrossmarginwithinUSbrandscontinuedtoshowimprovement,withmarginsofapproximately89%,up0.8percentagepointsversustheprior-yearquarter.SG&Aasapercentageofrevenuedecreasedto21.7%versus23.8%intheyear-agoquarter,drivenbyourcontinuedabilitytomaximizeourcommercialinfrastructureposttheAllerganacquisition

Andnowturningtoslide25,ourUSmedicalbusiness,first-quarterrevenueswere$450million.There'snosignificantprior-yearcomparisonforUSmedicalasitwasacquiredaspartoftheAllerganacquisitioninMarchof2015.OnaproformabasisUSmedicalbusinessrevenuegrew2percentageversusprioryearand14%excludingmedicaldermatology.GrowthwasdrivenbykeyproductsincludingBOTOXat12%,fillersat14%andKYBELLA.

Sequentiallyrevenuewasimpactedbytypicalseasonality.Ourmeddermbusinessnetrevenuedeclinedversustheprioryearonaproformabasisattributedtoaone-timeharmonizationofallowancesversusQ12015.Prescriptiontrendsfortheproductswerestableandweexpectstrongfull-yearperformancefromthisbusinessdrivenbyAczone.

First-quartergrossmarginscontinuedtobestableat93.1%.Sequentially,SG&AincreasedslightlyasaresultofcontinuedKYBELLApromotionalspendandsalesforceexpansionrelatedtothelaunchofthisproduct.

Turningtoslide26andourinternationalbrandresults,first-quarterrevenueswere$673millionversus$119millionintheprior-yearperiodlargelyduetotheAllerganacquisition.

ExcludingFX,onaproformabasisinternationalrevenuesinthefirstquartergrew16%,drivenbycontinuedstronggrowthofBOTOXcosmetic,fillersandOzurdex.

Grossmarginswere85.3%inthequarter.AndsegmentSG&Aincreased2percentagepointsto31.9%versusfourth-quarter2015,duelargelytonewproductlaunchesincluding(airfloral)andconstellainvariousmarkets.

TurningtoourANDAbusinessonslide27,revenuesincreased34%to$365millionversus$554millionintheprioryearperiod,drivenbyanticipatedlowerretailbusiness,primarilyfromtheCVSacquisitionofTargetin-storepharmacies.Grossmarginsincreased2.3percentagepointsto16.9%duetoproductmix.Resultsinallperiodsincludethird-partyrevenuesandrelatedexpensesofgenericproductsmanufacturedbythecompanyanddistributedthroughANDA.

detailsourdebtcapitalization.Weendedthefirst-quarter2016withtotaldebtofapproximately$42.6billionandequityof$77.5billion.Atquarterendourleverageratiowas4.43timesdebttoadjustedEBITDAversus4.07timesintheprioryearquarter.ThroughAprilwemadeapproximately$1.2billionindebtpayments,bringingouradjustedleverageratioto4.3timesdebttoadjustedEBITDA.

WeremaincommittedtomaintainingourinvestmentgraderatingsFollowingthecloseofthedivestitureofourgenericsbusinesstoTevaweanticipatepayingtheremainingtermloanbalanceofapproximately$8billion,whichisnoprepaymentpenalties.

Turningtoslide29,letmemakeafewcommentsonour2016guidance,whichwearereiteratingtoday.Wecontinuetoexpectfull-yearnetrevenuestobeapproximately$17billion,includingbranded

businessrevenuesofapproximately$15billion,reflectingdouble-digitgrowthdrivenbystrongsalesofkeyproductsandnewlaunchesin2016.

Notethatrevenueswillbeback-halfweightedasaresultofcontributionfromlaunchesbeinggreaterinthesecondhalfandtypicalpharmaseasonality.Ourrevenueforecastreflectsloweryear-over-yearrevenueexpectationsforANDAofapproximately$500millionduetotheCVSacquisitionofTargetin-storepharmacy.

Wecontinuetoexpectourgrossmarginstoremainstrongwithnomaterialchangefromcurrentlevelsineachsegment.WecontinuetoanticipateSG&Aasapercentageofnon-GAAPrevenuetobeapproximately25%oftotalnetrevenue.AndweexpecttheSG&Aasapercentageofrevenuetotrenddownwardsthroughouttheyearnaturallyasrevenueisincreased,andaswecontinuetoseetheimpactofouranticipatedbusinesssimplificationactivitiesfollowingthedivestitureofourglobalgenericsbusinesstoTeva.

Aspartofthebusinesssimplificationplan,weannouncedanewstreamlinedseniorleadershipstructure.Thisnewstructurewillallowustoleverageresourcesacrosstherapeuticareasandproductcategoriesandfocusonthekeyattributesofgrowthpharma,includingstrongtop-linerevenuegrowthandoperationalexcellence,whichwillresultinindustry-leadingoperatingmargins.

R&Dspendisexpectedtobeapproximately$1.5billionasaresultofthemanyimportantlate-stageprogramsadvancinginourpipeline,includingthecommencementofPhaseIIIprogramsofour(pastanelandyabrugia)plansinthebackhalfofthisyear.Ourtaxrateshouldbegintotrendgraduallytowardnormalizedlevelsintherangeof14%followingthecloseofTeva.

Wewillprovideanupdatedforecastfor2016includingourexpectationsforearningspersharefollowingthecloseoftheTevatransaction,mostlikelyonoursecond-quarterearningscallinAugust.

Andnowstartingonslide30,IwouldliketospendafewminutesonourcapitaldeploymentexpectationsfollowingthecloseoftheTevatransaction.ToechoBrent'scommentsduringhisintroduction,wehavegreatconvictioninourgrowthpharmastrategyandinthestrongfutureprospectsofourCompany.Ourstrategyforcapitaldeploymentwillinvolveathree-prongedapproachwithoptionsthatarenotmutuallyexclusive,withagoalofprovidingthebestvalueandreturntoourshareholders.

Onslide31,thedivestitureofourglobalgenericsbusinessprovidesuswithsignificantliquidity.AsmentionedbyRobpreviously,Tevahasdoneagreatjobworkingthroughaveryintricateprocess.WorkingtogetherwithourcolleaguesatAllergan,Tevareadyforasuccessfuldayonefollowingtheclose,whichisontrackforJune.

Movingtoslide32,asyousawthismorningweannouncedourBoard'sauthorizationtorepurchaseupto$10billionofourownstockfollowingthecloseoftheTevatransaction.Werealizedthattherewasnobetterinvestmentthaninourownfast-growingCompany.Weexpecttoexecute$4billionto$5billionoverafour-tosix-monthperiod,buyingasmuchasprudentlypossibleinopenmarketpurchasessubjecttofavorablemarketconditions.Iffavorablemarketconditionspersist,wewillhavemoreliquiditytoconsiderbuyingmoreaftersatisfyingthefirstpartoftheprogram.

Inadditiontothestockrepurchaseprogram,wearealsocommittedtomaintainingourinvestmentgraderatingsandwillpaydownapproximately$8billionofdebtfollowingthecloseoftheTevatransaction.ThisleavesuswithsignificantcapacitytoinveststrategicallyinthegrowthofourCompany.

WiththatI'llturnthecallovertoBrentforclosingremarks.

Thankyou,Tessa.Nowtofinishletmeprovidesomecommentsontheoverallenvironment.Overthepastsixmonths,wehaveseenaparticularlytoughenvironmentforcompaniesrelyingonastrategyofhighleverageandbuyinglow-qualitynon-coreassets,significantlyraisingprices,anddrasticallycuttinglife-bloodinvestmentsatR&Dandcommercialinfrastructure.Whenthestrategyisflawed,theoutcomewillbebadevenifittakestime.

Whatisleftwillbehigh-qualitycompaniesthatcontinuetoinvestinR&Dandthosethatcomeupwithnewwaystospeedintroductionofmedicalinnovations.Thebestofthosehigh-qualitycompanieswillnotrelyonlyonwhattheirteamsdiscoverin-housebutwillalsohaveanopenmindanduseOpenSciencetoattractinnovationsfromacrosstheentireecosystem.

TheywillhaveexcellentR&Dcapabilitiestobringthoseinnovationsthroughtherigorsofclinicaltrialsandregulatoryreviewaroundtheworld.Andthemostdynamicofthosecompanieswillhavecommercialenginesthatareresilient,persistentandeffectiveatdrivinggrowth.

Allerganisoneofthosehigh-qualitydynamicgrowingpharmaceuticalcompanies.ThatishowwearerunningthisCompany.IamproudofourteamdoingthisgreatworkateverylevelandhonoredtobetheirCEO.

Withthat,let'sopenituptoquestions.Lisa?

Operator,we'llstarttakingquestions.Iwouldliketoaskeveryonetoaskonequestiononlysowecangettoeveryoneonthecallthistime.

Thankyou.

QUESTIONS&ANSWERS

Operator :

(OperatorInstructions)

DavidRisingerwithMorganStanley.

DavidRisinger (Analyst-MorganStanley):

Yes,thanksverymuch.Congratsonthenewstoday.IwantedtoaskanumberofquestionsbutI'lljustkeepittoonetostartandthenI'llcirclebackintothequeue.Withrespecttocapitalallocation,obviouslyinvestorsarefocusedonhowyou'regoingtousetheproceedsoncetheTevatransactioncloses.

So,Iwashopingthatyoucouldtalkalittlebitmoreaboutcapitalallocation.Specificallyslide32saystuck-indeals.Ithinkthat'swhatinvestorsarelookingfor.They'renotlookingforlargedeals.ButifyoucouldprovidealittlebitmorecolorontheM&Athatyou'refocusedon?

Andalsoifyoucouldcommentonanythoughtsonapotentialdividend?

Thankyou.

Sure.I'lltakethequestion,David,andmaybeTessawilljumpin,aswell.Ithinkyou'reexactlyright.Asyoulookattheslide32thatTessahadup,wearecurrentlylookingatthreeareasforcapitalallocation--one,thesharerepurchasethatweannouncedtoday,upto$3billion;payingdowndebt,and

maintainingourinvestmentgradecreditratings,andwillpaydownabout$8billionwithoutpenaltiesimmediatelyuponreceiptoftheproceedsfromTeva;andthencontinuingtolookatadvancingourgrowthpharmastrategy.

Webelievetodaythatthebestwaytoadvanceourgrowthpharmastrategyistobolsterourtherapeuticarealeadership,bothwithtuck-inproductacquisitionsandwithintellectualpropertyR&Dassetacquisitions.AndIthink,asDavidpointedout,wedidabout10ofthoselastyear,we'vedone2inthefirstquarter.Andthey'vebeen,Ithink,highlyproductiveandpotentiallyverysuccessfulforus.

So,we'regoingtosticktotheknittingofwhat'screatedgrowthpharma.IftherewasatransformationaldeallikeAllergan,whichwasabitofaone-in-a-milliontypeopportunity,tobeawhiteknighttobuyaonce-in-a-lifetimeassetlikeAllergan,certainlywearegoingtostayopenmindedtothat.Butourcorefocusisonrunningthebestpharmaceuticalcompanyintheworld,andsupportingthatgrowththroughthisthree-prongedcapitaldeploymentstrategy.

T essaHilado (CFO):

Yes,ondividends,ourcapitaldeploymentphilosophyactuallyreallycentersonwhatisinthelong-termgoodforourshareholdersfromavalueperspective.Andwedobelievelongertermthatdividendpresumablycouldbepartofthatstrategy.

DavidRisinger (Analyst-MorganStanley):

Thankyou.

Operator :

JamiRubinwithGoldmanSachs.

JamiRubin (Analyst-GoldmanSachs):

Thankyou.Brent,onthebackofthe$10billionauthorizedsharebuybackprogram,obviouslyverygoodnewsfrommyperspectiveandI'msuremanyinvestors.ButwhynotannounceabuybackthroughanASRordutchauctionratherthanwaitingoverasix-monthperiodtobuyback$4billionto5billionthroughtheopenmarket?Istherealimitationbecauseofthestructureofyourbusiness?Whynotacceleratethatprocess?Andalsocanyouspeaktomarketconditionsthatwouldpreventyoufromdoingtheentire$10billionbuyback?Thanksverymuch.

Sure,I'llstartandmaybeTessacanjumpin.Ithinkinfairness,Jami,wewouldhavelovedtohaveboughtinanASRatthecurrentprices.But,tobefair,restrictionsinIrishlawmakeanopenmarketstructureourbestcourseofaction.IfyoulookatIrishcompanies,thereisnoIrishcompanythathaseverdoneanASR.Andthere'scertainreasonsforthat,whichwouldprobablytaketherestofourtimeonthecalltowalkthrough.Tessa,doyouwanttojumpin?

T essaHilado (CFO):

Yes,wealsoobviouslyevaluatethevariousstructuresthatcouldsatisfyandwouldlooklikeanASR.ButcurrentlytherearereallynostructuresthatcouldprovideusthebenefitsofatraditionalASRwithoutlegaloraccountingcomplications.AsBrentpointedout,therehasbeennoIrishcompanythathasactuallyexecutedanASR,reallylargelyduetothelimitationsinIrishlaw.

Thesecondquestionwascanyouspeaktothemarketconditionsthatwouldpreventyoufromdoingtheentire$10billionbuyback?

T essaHilado (CFO):

Attheendoftheday,itreallydependsonvolumeonaregularbasisbecauseweobviouslywanttobuyprudently.Andthen,secondly,aswelookgoingforwardintermsofothercapitaldeploymentoptionsandhowthestockperforms,thatcouldpotentiallyaffectourthinking.

Inreality,thereasonwhyweannounced$4billionto$5billionsharebuybackprogrambecausereallythat'stheonlythingwecanbuyinthenextfourtosixmonths.Thatdoesn'tmeanwewon'tgouptothe$10billionbeforeweactuallyendthe$5billionprogram.Wewillthenassessputtinginadditional10b-5gridstoexecuteuptothe$10billion.

Justtobeclear,Jami,becauseIthinkthisquestioncouldbeoutthere,toreiteratewhatTessasaid,doingthe$4billionto5billionoverthenextseveralmonths,inourview,isaboutthemaximumwecanbuygiventhevolumesofwhatourstockhashistoricallytradedat.Ifwecouldbuymorewewillandwe'llupdateyouatthattime.

Wewouldliketoexecutethefull$10billionbutwecanonlycommittowhatwecancommittoatthistime.Andwewillkeepallofyouupdated,probablyonourquarterlycalls,aswegoforward.ButourBoardwasverycommittedtothebuybackandthat'swhyitwas$10billion.Andrightnowwecanexecutewhatwecanexecutefortheforeseeablefutureandwewillcontinuetoupdateyouaswego.

Justaquickfollow-up,obviouslyyourdesireistodotuck-indealstohelpgrowthepipeline,buttheremaynotbetuck-inopportunities,ortuck-inopportunitiespresentthemselvesthroughoutthecourseoftheyear.Areyoulimitingyourselfto$10billion?Becausebasedonmynumbersyoucouldgoevenhigherthana$10billionbuyback.Isthissomethingyou'reconstantlybalancingandassessingoris$10billionasfarasyou'llgoonabuyback?

Tobefair,we'reconstantlyevaluatingalloftheopportunitiesincludingdebtrepayment.Maintainingourinvestmentgraderatingisincrediblystrategictous,sothatisatthetopofourlist,aswell.

Thatbeingsaid,ifweexecutethefull$10billionandmarketconditionscontinuetogoupveryfavorable,IwouldcertainlybringtoourBoardwithalotofadvocacytocontinueandauthorizemore.Butatthispoint$10billionholdsusoverforthenextseveralmonthsorperhapsmore,sowe'reingoodshape.Wewillbeintheopenmarketbuyingourstockfortheforeseeablefuture,andwe'llkeepeverybodyupdated.And,tobefair,ifwecouldhavedoneitthroughanASR,ifitwereavailabletoIrishcompanies,wewouldhavedoneit.It'sjustnot.

Right.Thankyouverymuchandcongratulations.

Operator :

GreggGilbertwithDeutscheBank.

GreggGilbert (Analyst-DeutscheBank):

Thankyou.So,IguesstherearesomedrawbackstobeingIrish.(laughter)

Theyhavegoodbeer,too,though.

Brent,youcouldspendyearsbolsteringyourpositionsinthoseseventherapeuticareas.Assumingtheyareallcore,isthatyourintention?Orwhatwouldittakeforyoutostrayfromthat?And,withinthat,areyougloballyorgeographicallywhereyouwanttobewithinthoseseven?Thanks.

Ithinkyou'reright,Gregg,wecouldspendyearsbolsteringourpositioninthoseseventherapeuticareas.And,infact,atR&DdaylastNovemberweshowedalotofthewhitespaceopportunitiesineachofthosetherapeuticareas.Thosethatwanttogolookatit,Ithinkthatpresentationisstilluponourwebsite.

Andyouknowwhat?That'sthefoundationofourstrategy,Gregg,isthatthereissomuchopportunityforyearstocontinuetobolsterourposition,andsowewill.Welikeeveryoneofthetherapeuticareasthatwe'rein.Wethinkthere'shugeunmetmedicalneed,hugeopportunitiestohelppatientswithcuresandtreatments,andtremendousscientificadvance.So,sowe'regoingtocontinuetodeployOpenScienceandopportunitiestobringinselectedmarketedproductstobolsterourpositionandbecomenumberonegloballyineveryoneofthosetherapeuticareas.

Withrespecttoanewtherapeuticarea,Ithinkthebarwouldbehighforustoconsiderdenovoanewtherapeuticarea.Itwouldhavetobeanareawithstronggrowthpotential,lotsofwhitespace,andlimitedcompetitionforassetsinthatcategory.Thereareafewthatweevaluatethatmeetthosegoalsbutwe'renotfocusedondoingthatatthistime.

IthinkintermsofglobalexpansionthatwasahugeopportunityforusinthePfizertransaction.Wetalkedaboutthatasprobablyourmostcompellingrevenuesynergy.AndasastandaloneAllerganitremainsacompellingopportunityforus.

IthinkasyoulookatthegrowththatPaulNavarreandtheinternationalteamputupthisquarterandinpreviousquarters,it'sastrongproofpointinourinterestingrowingappropriatelyexUS.We'regoingtofocusoneyecare,onaestheticsanddermatology,andGIandwomen'shealth.Thosearetheareasthatwe'regoingtostayfocused,andlookatgoingintonewmarkets.

Ithink,Paul,we'veexpandedandtakenbacksomedistributerrights.Perhapsyoujustwanttocommentononeortwoofthosemarkets?

PaulBisaro (ExecutiveChairman):

Yes.WehaveexpandedinEasternEurope.Wewentdirectinto10newmarkets,includingRomania,Bulgaria,Hungary.WealsowentdirectinGreeceandIsrael.Andwearenowentering,orthissummerwe'regoingtoenterIran,whichisasignificantopportunityforusforthemedicalaestheticbusiness.So,wearecontinuingourexpansioninternationally.

Thanks.

Operator :

RandallStanickywithRBCCapitalMarkets.

RandallStanicky(Analyst-RBCCapitalMarkets):

Greatthanks.Brent,Allerganisaverybigcompanynow.Whatdoyoudefineasatuck-in?AndthenaquickoneforTessa,justthinkingaboutSG&Aandthat25%ofrevenue,aftertherestructuringpostTeva,asyouleave2016,whatpercentofrevenuedoyouthinkyou'regoingtobeat?Thanks.

It'shardtodefinetuck-inbysize,Randall.Ithinkthatit'smoreofthecharacteristicsoftuck-ins.So,thinkaboutatuck-inbeinglimitedtotheseventherapeuticareasthatwe'rein.Thatwouldbeacriteria.

Itwouldhavetobeagrowthassettosupportthesevenareas.WewouldhavetoonlyneedtoaddlimitedadditionalcapabilitiestosupporttheproductortheR&Dasset.So,that'showIthinkoftuck-ins.Ithinkwithinsize,obviouslyit'sgoingtobeanywherefrom$50milliontoafewbilliondollars.Butthereareexceptionstoeachoneofthoserules,aswell.Tessa?

T essaHilado (CFO):

BasicallyforSG&Aasapercentageofrevenue,asweindicated,itwouldberoughlyat25%.Andaspreviouslydiscussedfirstquarterisreallythelowrevenuequarterforusbecauseoftypicalseasonality.So,wewouldexpectcomingoutof2016inthefourthquarterforSG&Aasapercentageofrevenuetobelowerthanthat.

Havingsaidthat,Ithinkwhatweneedtotakeintoconsideration,aswell,istheimportantlauncheswehavefor2016.AndactuallytheothermetricthatIwouldguideyoutoisprobablylookingatoperatingmargins,aswell,which,asyouknow,we'reatthetopoftheindustry.JustlookingatSG&Aasapercentageofrevenuewouldbealittledeceivingbecauseitwouldfluctuatethroughthequartersbecauseofseasonality.Butwewouldtrendlowerasrevenuesgrowfor2016.

Randall,maybejusttocomebacktothefirstpartofyourquestion,ifIcould,forasecond,maybethebetterwaytothinkaboutitinsteadoftuck-insisreallysteppingstonestogrowth.Itwouldhavetobeapathfromourexistingpositioninatherapeuticarea,andthesteppingstonewouldbetodrivegrowthorleadershipinthattherapeuticarea.

Andthatincludespipeline,aswell?

Thatincludespipeline,absolutely,becauseorgrowthhastobesustainable.I'vealwayssaidinnovationisourlifebloodandR&Disacriticalelementtothat.

That'sgreat,guys,thankyou.

Operator :

MarcGoodmanwithUBS.

MarcGoodman (Analyst-UBS):

Yes,goodmorning.Justtocontinueontheexpensesconversation,whatamountofexpensesdoweneedtotakeoutfornextyear,justasastartingpoint?Andthecontextofthequestionis,there'sbeenalotofconsolidationintothisCompany.Therewasalotofcostcuttingandsynergythatwaspromisedpreviously,andalotofthatwentawaywhenyouweregoingtobeacquiredbyPfizer.Butnowwe'rebacksowe'recurious--howmuchonanabsolutebasisarewedefinitelytakingout?Andthenhowmuchexpenseswilljusttrendupbutrevenuestrenduphighersuchthatyougetsomebenefitonthemargin?

Letmejuststart.Marc,justtokidyouabit.Thesynergieswe'vecommittedtowithrespecttoourpreviousintegrationsneverwentaway.Theymayhavefrompeoplewhofollowusbutinternallywehavemaintainedanincrediblyrigorousanddisciplinedprocessoftrackingandexecutingagainstthose.

ThereweresomethatweputontheshelfrelatedtobothActavis/AllerganintegrationandsomerelatedtotheTevadivestiture.Andwedidthatappropriatelyso.Buttheydidn'tgoaway.Wehavetakenthemofftheshelfandhavestartedtofocusonachievingthosethroughouttheremainingpartofthisyearandintonextyear.Butalloftheworkwehavecommittedtowewilldeliver.

T essaHilado (CFO):

Andjusttoremindeveryone,wewillprovidemoreclarityposttheTevatransactionintermsofEPS,andmoregranulardetailforthebackhalfof2016.Andin2017,asweplantolookat2017,wewillprovideguidanceinthenormalcourse,whichwouldbeinearly2017.

MarcGoodman (Analyst-UBS):

Well,Iguessifyoudon'twanttoanswerthatmaybewecouldaskoneotherquestion,whichis,BOTOXwasextremelystronginthequarter,constantcurrency.Canyoujustgiveusalittlemorecoloronwhat'sgoingonthere?

Bill,doyouwanttotakethat?

Youknowthere'stwosidestothatbusiness.There'satherapeuticsideandthenthere'stheaestheticsside.Andthen,ofcourse,youcanlookatitthroughbothaUSandinternationallens.

Onthetherapeuticside,themaindriverscontinuetobeproductmigraineandoveractivebladder.Wealsogotanewindicationforneurorehabcondition,lowerlimbspasticity.JustyesterdayattheNationalUrologymeetinginSanDiego,therewasahead-to-headstudypublishedthatwasactuallyconductedbyNIHcomparingBOTOXforoveractivebladdertointerstintMedtronicsproduct,whichIthinktheurologycommunityfoundveryinstructive.Thatsideofthebusinessisverystrong.

Whenyouturntotheaestheticsside,asyouknow,it'stheleadingbrandintheworld.Ithasaworld-classeCommerceandcustomerloyaltyprogram,whichcontinuestosustainsaleslevels.Ifyouthinkaboutitgeographically,theinternationalbusiness,salesforBOTOXwereupalmost20%.

So,thisisjustarocksolidproductthathas11differentindications.It'sgotauniqueinjectionpatternthatusersunderstand.It'shighlyeconomical.And,ofcourse,,wehaveawholeseriesofnewindicationsindevelopmentonboththetherapeuticandtheaestheticsside.Thisisapuredemandstory.

Operator :

DavidAmsellemwithPiperJaffrey.

DavidAmsellem(Analyst-PiperJaffray&Co.):

Thanks.IjustwantedtoaskaboutMemantinefranchiseandthisfocusonthatbusiness.Thequestionhereis,areyoudisappointedwithhowNAMZARICistracking?Andthen,secondly,whatareyourthoughtsonlongtermintermsoftheportionoftheMemantinemarketthatyouthinkyou'llbeabletoretain?Thanks.

It'sagoodquestion.Iwouldn'tsaydisappointedwithNAMZARIC.Ijustthinkit'satimingmatter.TheoriginalindicationforNAMZARICincludedpatientswhowereonessentiallythenon-sixcombination.Butitdidn'tincludepatientswhowereonlyreceivingAricept.

Ithinkforphysicians,that'sanimportantindication,whichweexpecttogetinthesecondhalfof2016.It'sclearamongneurologistsandprimarycarephysiciansthatNAMZARICissuperiortoanythingonthemarket,whetheritsNamendaXRorAricept.OncewegetthatindicationwewillessentiallylaunchitandIthinkyou'llseeaverydifferenttrajectory.

Overall,though,whetherit'sXRorNAMZARIC,thisisaverystablebusiness.Andwehaveaheavypromotionaleffort.We'retheonlyoneinthecategorythatisactive.Neurologistsandprimarycarephysiciansknowthat.

Ourformularycoveragein2016andin2017isverystrong.AndIbelievethatwe'regoingtoatleastmaintainthebusinessthatwehavetoday.AndthelaunchofthenewindicationforNAMZARICfornewpatients--thatis,patientsonlyanAricept--couldrestoregrowthtothisbusiness.So,I'mveryconfidentaboutthenext12-24months.

DavidAmsellem(Analyst-PiperJaffray&Co.):

Thankyou.

Operator :

KenCacciatorewithCowen.

KenCacciatore (Analyst-CowenandCompany):

Thankyou.Bill,congratulationsonyournewrole.Maybeaskaboutthepayerenvironmentingeneral,ifthere'sbeenanymeaningfulchangesoractionsingeneral.So,ifyoucouldjustdiscussthat.AndmaybewithsomespecificitytoVIBERZIfirst,vis-a-visXifaxan.Canyoutalkaboutcoveragethere?AndVRAYLAR,aswell,thecoverage,asyou'repursuingthatlaunchorcontinuingthatlaunch.Thankyou.

Yes,goodquestion.NaturallytheformularycoverageforVIBERZIisdeveloping.butthemajorityoftheclaimsforVIBERZIduringthefirstseveralweeksoflaunchhavebeenapproved,soI'mveryencouragedbyit.

ESIandCVSCaremarkplaceVIBERZIonformularYinanunrestrictedposition,whichIthoughtwasaterrificdevelopmentthisearlyinthelaunch.Iexpectoverthenext9to12monthstheformularycoverageforVIBERZIisgoingtolookjustliketheformularycoverageforLINZESS.

SpeakingaboutLINZESS,itwasaddedtoCVSCaremarkformulary,andinthePartDspace,WellCareand

Aetna.Andthoseareverysignificantformularywinsfortheproductandreallyshoreup2016andIthinkinto2017.

There'snothing,really,inmyview,atleastasitrelatestoourproductline,thatisgoingtosurpriseus.Wealreadyhavealineofsightto2017.Theproductsetmostimportanttoourgrowthare,first,economical.Mostoftheirgrowthiscomingfromvolumeandsingle-digitpriceappreciation.So,Ithinkaslongaswecontinuetocommunicatewithpayersandwe'repredictableandtransparentaboutourfuturepricingdecisions,Ithinkwe'regoingtobeabletomaintainaccessacrossthisentireproductline.

AndthenasitrelatestoVRAYLAR,theproductisofftoaterrificstart.Weknowpsychiatryverywell.Thefeedbackthatwe'regettingisexceedingourexpectationsintermsoftheactualexperiencewiththedrug.Formularycoverageisdeveloping,asexpected.

Thisisacategorywhere,whiletherearealotofproducts,there'sagreatdealoftrialanderror,sohealthplansareinclinedtoplacetheproductonformularyevenifit'sbehindtheuseofaSeroqueloraRisperdalorZyprexa.AndIthinkessentiallywhat'sgoingtohappeninthiscategoryistherewillbeachangingoftheguardbetweentheolderatypicals,theonesIjustmentioned,toneweratypicalslikeVRAYLAR,oreventhetwoothers,LatudaandRexalti,becausewhenyoulookatthebenefit-riskratioofthenewerones,includingVRAYLAR,it'sclearlybetterthanwhatyouseewiththeolderanti-psychotics.We'reveryencouragedbywhat'sgoingonwithVRAYLARinthefirsteightweeks.

KenCacciatore (Analyst-CowenandCompany):

Thankyou.

Operator :

ChrisSchottwithJPMorgan.

ChrisSchott (Analyst-JPMorgan):

Great,thanksverymuch.Ijusthadaquestion,justcomingbacktoprice,givenallthefocusthesedays.Canyoujustcommentatalljustacrosstheentirebusinesswhenwethinkaboutthemixofpriceversusvolumesrelativetonewlaunches.WhenyouthinkaboutyourQ1salesandparticularlyyourQ1pharmagrowth,howmuchofthiswaspriceversusvolume?

Andthenjustaquicksecondone,comingbacktobusinessdevelopment,giventhefocuswhichseemstobemoreontuck-insatthispoint,isitstillfairtoassumethatyou'regoingtodeploythemajorityofthecashthatyou'regoingtoreceivefromtheTevadealoverthenext12to18months?Orcouldthattakealongerperiodoftimetoredeployintoyourbusiness?Thankyou.

LetmequicklytouchonpriceandthenaskBilltocommentmorespecifically,becauseIthinkthisholdstrue,sinceyouasked,Chris,acrosstheentireportfolio.Ithinkbothinthebrandedandinthegenericbusinessthere'sbeenalotofdebateandconcern,Ithink,amongstthecommunityaroundpricing.Ithinktherealityiswhenyouhaveinnovativeproductsthatmeetunmetneed,thatcandistinguishthemselvesfromolderproducts,pricingreallyisn'tthecentralissue.It'stheabilitytocommercializeandsupportyourdrugwithdata.

Onthegenericsideit'saverysimilarstory.WhenyouinvestinR&D,asBobStewartpointedout,whenyouhaveateamthathas90firsttofileswaitingattheFDA,whentheygoaftercomplexgenericsandhigherbarrierproductsyougetabetterpricingenvironment.Ithinkthenet-netisthereareothersthathavereportedweaknessinpricebutthat'sbecausetheirportfoliolacksinnovation.Itlacks

differentiation.

Andeveninhighlyinnovativeareasonthebrandedside,wherethere'smultipleentriesintothesamemarketwithverysimilarmechanismsofaction,itdrivespricedown.Whenyoustandalonewithyourdrug,likewedowithVIBERZI,asanexample,youtendtohavebetterpricingdynamicsintheenvironment.It'sreallythatstraightforward.Bill,doyouwanttocommentspecificallyonourportfolio?

Yes.Iwouldjustfirstcommentthatourpricingstrategystemsfromtheintellectualpropertysurroundingtheseproducts.Wehaveexclusivityperiodsthatextendwellintothe2020s,sowepriceforthelongterm.IfyouwanttolookatthebusinessoverallintheUnitedStates,thesplitwasroughly50/50withthepriceappreciation,ofcourse,beinginthemidsingledigits.Ifyouwanttolookatthoseproductsthatareresponsibleforthemajorityofourgrowthandsales,ourtopalmostdozenproducts,thegrowthiscoming70%fromvolumeand30%fromprice.

So,it'sjustasolidbusiness.Again,itgoesbacktothefactthatwe'replayingforthelongtermhere.Thesearecategoriesinwhichwehavetheproductofferingsandstrongcustomerrelationships.Wedon'thaveashort-termoutlookasitrelatestoprice.Andwehaven'tbuiltignitionto2016estimatesorevenbeyondthat'sunrealisticgiventhecurrentmarketdynamics.

Ithinkwithrespecttobusinessdevelopment,tothesecondpartofyourquestion,perhapstuck-insisn'ttherightwaytothinkaboutit.IliketheanalogyIcameupearlierofsteppingstonesbecausewe'rereallylookingatsupportingthepathtogrowth.We'renotjustlookingatrandomtuck-instosupportnon-coreareasorthelike.It'saveryfocusedstrategymoreonapathway.That'swhyIthinkasteppingstoneapproachisprobablytherightwaytothinkaboutit.

And,look,wehaveenoughshotsongoal.Thereareenoughopportunitiesouttherethatwebelievethatthecurrentcapitalallocation,asdescribed,istherightwaytothinkaboutitforthemoment.Butwewillupdateyouquarterlyofourthoughts.Ifwethinktheopportunitieseitherdon'tworkbecausewedon'tlikethescienceortheproductprofileorit'stooexpensive,thenthatcouldfreeupmoremoneyforadditionalsharerepurchaseoradditionaldebtrepayment.Butrightnowwethinkwe'vegottherightbalancebasedonourviewoftheworldaswesitheretoday.

ChrisSchott (Analyst-JPMorgan):

Great,thankssomuch.

Operator :

RonnyGalwithBernstein.

RonnyGal(Analyst-SanfordC.Bernstein&Co.):

Goodmorning.Congratulationsonthequarter.Thankyoufortakingquestion.IfIcouldstartwithBillforjustaquickclarification.First,theharmonizationofallowancesthatyoumentionedforacoupleofproducts,whatexactlyisit?Itsoundsalittlebitlike--Ijustwanttomakesureit'snotessentiallyreversalofstuffinthechannelorsomethinglikethat.

T essaHilado (CFO):

I'lladdressthat,Ronny.Basicallyit'sreallyjustharmonizingallofouraccountingpolicies,andthisrelatesspecificallytoAczone.Thenumber,intermsofanincreaseinallowance,notadecreaseinallowance,is

lessthan$20million.

Justtobefair,Ronny,it'sone-timeandontheoverallbusinessit'sreallynotsignificant,asTessapointedout.Thereasonwecalleditoutspecifically,oneiswe'recommitmenttotransparency,but,two,itismeaningfultothegrowthratefortheUSmedicalsegment.Peopledofollowmedicalaestheticsverycloselysowewantedtobifurcateandshowthatbusinessisincrediblystrongat15%growth,andthatthedampeningoftheoverallsegmentwasreallyaone-timeevent.

T essaHilado (CFO):

Andjusttoclarify,ithadnothingtodowithinventoryorchannelstuffingatall.Prescriptionsspecificallyforthatproductisverystable.

RonnyGal(Analyst-SanfordC.Bernstein&Co.):

Okay.AndthenoneforDavid.David,youputouttheresultsonEsmyaacoupleofdaysago.Canyouputthequalityoflifemeasuresincontextforus?Itwasverystrongintermsofstatisticalsignificance.Butcanyoudiscussessentiallywhatisthebenefitthatthepatientshaveexperiencedintermsofhowthescaleisconstructed?Essentiallyhowmuchreliefarethepatientsgettinginthis?

WedohaveapatientrecordedoutcomescaleaspartofthePhaseIIItrials.AndwehavediscussedwiththeAgencytowhatextentwearegoingtobeabletousethedatafromtheTROsinourlabel.

Intermsofactivitiesofdailyliving,wegotaverypositiveresultinthefirstPhaseIIItrialwherethepatientssawsignificantbenefitintheirdailyactivities.So,wearealsoveryhappyaboutthoseresults,notjustthetrial,wasn'tonlypositivebecauseofthechangesinthebleedingprofile.

And,Bill,maybecommerciallydoyouwanttojusttouchonEsmyaforasecondrelatedtoitspositionvis-a-visasanoralandassubstantiallyahead?

Yes,Listen,pharmacologicallyit'sdifferentthanaGNRHmodulator.AndIthinkthat'sgoingtoflowrightthroughtothebenefit-riskprofileofEsmyarelativetoanotheroption.ThisisthefirststudyintheUnitedStateswhereanoralcompoundhasshownanexcellentefficacyforthetreatmentofuterinefibroids.Theimpactoftumorsizeandbleedingisgoingtobereallyimportant.

Thisisalargecategory.Over10millionwomensufferfromuterinefibroids.Thiswillbetheflagshipofourwomen'shealthbusinessinafewyears.OutsidetheUnitedStates,whereitsbeenlaunchedinCanadaandtheEU,onceyouadjustforpriceandpopulation,yearthreesalesisnear$400million.So,thisfirsttrialwassignificantnotonlyintermsofimportantforthecommunityofOG/GYNsandwomen'shealthingeneral,butalsoimportanttousintermsofabigpipelinedevelopment.

TessaandIarewritingdownthe$400million.

T essaHilado (CFO):

That'sright.Dulynoted,Bill.

Operator :

LiavAbrahamfromCiti.

LiavAbraham(Analyst-Citigroup):

Goodmorning.Brent,canyoucommentonyourcommitmenttodouble-digitunderlyingrevenuegrowthoverthemediumtermwithyourcurrentassetbasegivensomeofthepotential(inaudible)overtheneartomediumtermsituation,LifitegrasttoRestasis?Andtowhatextentwillthiscommitmentinformyourbusinessdevelopmentstrategy?Inotherwords,doyouhaveapreferenceforassetsthatareonthemarketorclosetothemarketversuspipelineassetsinearly-tomid-stagedevelopment,orareyouagnostic?Thankyou.

Ourcommitmenttodouble-digitrevenuegrowthissincere,it'sstrong.Welookatourabilitytoexecuteonthatoverthenextfewyears.Andwethinkgivenourcurrentassetsandcurrentpipeline,onariskadjustedbasiswethinkwecangetthere.Obviouslytherearealwaysputsandtakesthatcometothatbutwehaveahighdegreeofconfidencethatwecoulddonootherdealsanddeliverthatgrowthoverthenextfewyears.

Aswethinkabouttuck-ins--orsteppingstonedeals,asI'vebeencallingthem--theintellectualpropertytypeofdealsorR&Ddealsaredesignedtogetuswellintothe2020swithdouble-digitgrowthbecausethat'sthenameofourbusiness.It'saboutnewproductlaunches,it'saboutinnovationandlookingformedicinesthatsupporttreatmentorcuresforunmetneed.So,we'regoingtocontinuetodothat.Butwe'rereallythinkingaboutwellintothe2020swherewehavetosupportourbusinesstomaintainthedouble-digitgrowth.

Ithinkwithrespecttooursteppingstoneapproachtomarketedproducts,we'rereallylookingforinnovativeproductsthatwethinkreallydoprovideameaningfuldifferentiationintermsofunmetneed,andthatfitneatlyintoourcurrenttherapeuticareasothatwecangetmoreleverageoutofourinfrastructure,whetherthatbeG&Aorsellingandmarketing.That'sreallyhowwesee.

Wehavethisgreatcommercialengine,bothintheUSandoutsidetheUS,thatwewanttocontinuetoleverageandmakemoreof,andfranklymakesourrepresentatives,itmakesourmedicalaffairsteams,itmakesourmanagedcareteamsmorerelevantwhenwetalkaboutthosetherapeuticareas.So,therearemultiplereasonswhywelikeourtherapeuticarealeadershipapproachwithmultipleproductsacrossanentirebroadspectrum.So,soIthinkwe'reinprettygoodpositiontocontinuetodeliverdoubledigitorabout10%top-linegrowth.Bill,anythingyou'dadd?

Yes,Liav,whatwe'refocusedon,ifyouthinkabout2016andhowdoesthathappen,inadditiontoVRAYLARorVIBERZIandKYBELLA,whicharetruenewproductlaunches,wehavenewindicationsorcombinationsorlineextensions,whichalsocansupportparticularlyhealthybusinesses.Forexample,(bivavilsun)willlaunchin2016.Then,ofcourse,wehavethenewindicationforNAMZARIC.We'lllaunchthemulti-dosepreserve-freeformofRESTASIS.Andinearly2017we'lllaunchalow-doseor72-microgramofLINZESS.

Eachofthoseproductimprovementsisagainstafairlysignificantandimportantpartofoursalesstream.That'showwethinkaboutthenext12to24months.

LiavAbraham(Analyst-Citigroup):

Great,thankyou.

Operator :

LouiseChenwithGuggenheim.

LouiseChen (Analyst-GuggenheimSecuritiesLLC):

Hi,thanksfortakingmyquestions.Ijusthadtwoquickquestionshere.First,weoftengetasked,withrespecttoAllergan,whatyourstrategicvisionisforthecompanylongerterm--doyouwanttobeaspecialtypharma,growthpharmacompany,doyouwanttobealargecappharmaorbiotech.Iwaswonderingifyoucouldgiveusmorecolorhere.

Andthen,secondly,justonSG&Aleverage,justcuriousifyouplantoimprovethatovertime.And,ifso,whatgivesyouconfidencethatyoucanachievethisobjective?Thanks.

Yes,thankyou.Greatquestion.It'sinteresting,thespecpharmalabel,whichishowIthinkmostpeopledescribeus,ispurelyacreationofmanyofyouinthatyou'respecpharmaanalysts--notallofyou,butmany.So,that'saWallStreetdesignation.

Wehaveafewyearsagodesignatedourselvesasgrowthpharmaandthat'sstrategicallywhatwewanttobeknownas.Wewanttobefocusedontop-linegrowth,therapeuticarealeadershipandasustainedR&DinvestmentthroughourOpenScienceapproach.So,that'sourstrategy.We'vearticulateditnowforafewyears.

IthinkpostTevaitbecomesevenclearerthatweareafocusedresearch-basedgrowth-orientedcompanywithstrongtherapeuticarealeadershipinthesevenareasthatwecompetein,withstrongpipelinetosupporteachofthoseareas,andacommitmenttobeingopen-mindedaroundopportunitiestoenhanceourleadershipandenhanceourgrowththroughasteppingstoneapproachtoM&A.

T essaHilado (CFO):

AndonSG&AasImentionedearlier,wehaveaveryefficientoperatingstructure.Aswenotedinoneofthecharts,wethinkwe'llbeatroughly25%exitingtheyearinthefourthquarter,withhigherrevenueatthelowerratethanthat.AndasIalsomentioned,Ithinkagoodmeasuretolookat,aswell,isoperatingmarginsgiventhefactthatwehaveagoodnumberoflaunchesthisyear.Andonoperatingmarginswecontinuetoimprovethatsequentiallyquarteroverquarter,andwebelievewe'reinthetopoftheindustry.

LouiseChen (Analyst-GuggenheimSecuritiesLLC):

Thankyou.

Operator :

UmerRaffatwithEvercoreISI.

UmerRaf f at (Analyst-EvercoreISI):

Hi,thankyoufortakingmyquestion.First,perhapsforBill,Bill,there'sbeenabunchoffeedbackonlineaboutsalesforcedisruptioninBOTOXurology.So,IthoughtitwasgoodtoseeyoureportBOTOXoveractivebladderasakeydriverofurologygrowth.Couldyoujustpleaseclarifywherethingsstandinthatdivision?

Andthen,also,asecondoneongenericsdivision,Isawthe10-Q,itwasabout$1.3billioningenericssalesversusabout$1.7billioninQ1lastyear.AndIunderstandtheremustbechoppinessinproductlaunches.Ijustwantedtounderstandthattrendaswell.Thankyou.

IthinkourBOTOXtherapeuticfranchise,theproofpointisinthenumbersthatweredelivered,andtheteamisfocused.ObviouslytherewassomeissuesinoururologyareathatwererelatedtofollowingCompanypolicy.Wetakethatveryseriously.WehaveaverystrongcomplianceandinternalauditprocessinsideourCompany.Internalcontrolsareattheforefrontofwhatwedoandwhenpeopleviolatethatwedealwithitverystrictlyandseverely.So,that'swhathappenedthere.

Iwouldn'tgettoocaughtupononlinechatter.Youcoulddriveyourselfcrazylookingatsomeofthosemessageboardsandthinktheworldwascomingtoanend,notjustatAllerganbutacrosstheentireworld,ifyoubelievemostofthestuffyou'seeonthosethings.Butsufficeittosaythebusinessisincrediblystable,resilientandgrowing.

Iwouldjustadd,Iwasatarecentsalesawardstrip,thatthemanagementteamthat'sinplaceandthemajorityofthatfieldforcewasfocusedonourcustomers,andnaturallyincreasingtheuseofBOTOXinOAB,whichisoneofthefastestgrowingsegmentsofthatproduct.So,it'sinourrearviewmirroratthispoint.

Onthegenericsside--Bob?

RobStewart (COO):

Yes,whatIwouldsayonthegenericsside,thisbusinesscontinuestoperforminlinewithourexpectations.Youcan'tnecessarilygolookathistoricalyear-over-yearcomparisonsinthisbusinessaswe'repreparingforthisbusinesstomergewithTeva.There'salsoanumberofcyclicalthingswithinthebusinesswithproductlaunchesandtimingofthingslikethat.

Buttheunderlyingbusinessisperformingincrediblystrong.Wecontinuetoseepriceerosion,asImentionedinmypreparedremarks,asmidsingledigit.AndoverallitcontinuestofireonallcylinderswithrespecttoR&D,aswellascommercialexecutionoflaunches.

ThisisPaul.Justremember,revenueisneveragoodviewofthegenericsbusinessperformancebecauseIcanassureyou,inthesecondquarter,withthelaunchofgenericCrestorwe'regoingtohaveblowoutnumbersontherevenueside.AndIagreewithRobthatourbusinessisperformingverywell.IthinktheTevafolksaregoingtobeveryhappytoclosethetransactionandcontinuethatstrength.

Gotit.But,Paul,justtobeclear,versusQ4the$300milliondropinrevenue,isthereaknownlaunchthatfadedaway?

No,there'salsocyclicalissuesinthegenericbusiness,aswell.Thefirstquarterisalwaysthetoughestquarter.We'veseenityearoveryear.Thatcontinuestobethesametrendthatwe'vealwayshad.

Thankyouverymuch.

Operator :

JasonGerberrywithLeerinkPartners.

JasonGerberry(Analyst-LeerinkPartners):

Hi,goodmorning,andthanksfortakingmyquestions,andcongratstoBillforthechangeinrole.MyquestionforBrent,actually,justthinkingaboutthechangeintoneregardingatransformationalM&AdealfromJulywhenyouannouncedtheTevadealtopresentwhereitseemslikemaybethere'salittlebitofde-emphasis,butstillkeepinganopenmindtotransformationaldeals,whatI'mwonderingiswhat'schangedinthatperiodoftimegiventhatvaluationshavepulledback?

Andthen,secondly,withthechangeinthetreasurynoticeandthelook-backrules,ifyoucanjustwalkusthroughtherestrictionsintermsofusingequityuntiltheWarnerandForestdeals.AndevenAllergandealshittheirthree-year(inaudible).Thanks.

Ithinkthatperhapsifyoupickedupaslightchangeintoneit'sbecauseaswe'vegottenmorecomfortablewiththecurrentbusinessthatwehaveandoperate,aswe'vegottenmorecomfortablewithourpipeline,itgoestohowIopenedthecall--wehavethebestpharmaceuticalbusinessintheworld.It'sgrowingatproforma10%brandedsales.Ithasadeeppipelineofplus70mid-tolate-stagepipelineopportunities.Wehaveastrongcapitaldeploymentopportunity,bothwithsharebuybacks,debtrepaymentandsteppingstonedeals.Andwehaveaninvestmentgraderatedbalancesheet.

So,weareinthepullpositionandourfocusisgoingtobeonoperatingandrunningourCompanyandcontinuingtoputupquarter-after-quarterperformance.Ifwecansupportthatorturboboostthatwithopportunisticdealsthatmaycomealong,likeAllergancamealonginaveryuniquesituation,thenIthinkthisisaboldmanagementteamthat'sgoingtolookatwhat'sinthebestinterestofourshareholderstodriveshareholdervaluecreation,andwe'lldoit.

Buttherealityis--andI'vebeensayingthisforalongtime--99%ofourfocus,themanagementteamsittingaroundthephonerightnow,isonrunningourbusiness.Andwe'regoingtocontinuetoputupexecutionalexcellenceasourtopgoal,andwe'regoingtocontinuetosupportthebusinesswithgrowth-orientedsteppingstonedeals.But,really,ourfocusisonrunningthebusiness.

T essaHilado (CFO):

Withregardstothetreasuryyields,asyoucanimagine,weanalyzedthatextensively,andbasedonouranalysistwothingshavecomeout.Oneiswedon'texpectanymaterialchangeinourtaxrate.Andthen,two,thenewtreasuryrulesactuallyalsoaffirmourstatusasanIrish-domiciledcompany.

Withregardstoatransformationaldeal,webelievewecancontinuetomaintainourIrishdomicile.Asyouknow,thenewrulesprovideforathree-yearlook-backintermsofdeterminingwhatwecallgoodsharesforpurposesofcalculatinginversion.October2016isthethree-yearanniversarydatefortheWarnerChilcottacquisition,whichthengivesusmorecapacitytoissuesharestoatargetcompany.

Theonethingthatyouhavetonote,though,thatwealwayshavetheflexibilitytoissuesharesforcashwithoutactuallyaffectingourstatusasaforeigncompany.

Orsellintheopenmarket.

T essaHilado (CFO):

Orsellintheopenmarket,right.So,there'sreallynothinginthecurrentTreasuryrulestodaythatprecludeusfromexecutingonourstrategy,whetherthat'stuckinortransformationaldeals.

Justtobeclear,Jason,I'dsaytwothings.One,theTreasuryruleshadnoimpactonthissmallshiftinthinking,asTessajustoutlined.Withperhapsjustsomeminormaneuvering,wecouldexecuteanytransformationaldealwewantedtodo.I'mnotworriedaboutthat.

Therealityis,whywouldweissueourstockatthispriceconsideringwejustannouncedupto$10billionofbuyback.Wethinkourstockorthatcurrencyistooinexpensivetoissuetoatargetatthispointanyway.

T essaHilado (CFO):

Plusevenifyoulookatfromaliquidityperspective,evenwitha$10billionsharerepurchaseauthorization,andifweexecuteuptothatamountandthepaymentofdebt,net-netwestillhavesufficientliquiditytopursuedeals.

JasonGerberry(Analyst-LeerinkPartners):

Gotit,okay,thankyou.

Operator :

AndourlastquestioncomesfromthelineofDavidMariswithWellsFargo.

DavidMaris (Analyst-WellsFargoSecurities):

Goodmorning.BrentandDavid,onthepipeline,IseetheonebiosimilarforAvastinonthepipelinechartthatyoustatewillfileinthesecondhalfof2016.Canyouupdateusonthestatusoftheothers?

And,Brent,whatroledothebiosimilarsplayinthebrandedpharmamodel?Isthisanotherassetthatyoucouldtradeorthatyou'dconsidertradingorisitcoretothegrowthpharmamodel?

Yes,letmeanswerthebackpartandDavidcantalkaboutstatusoftheprograms.IthinkthewayIthinkaboutbiosimilars,atleastoverthenextfewyears,isthat,forus,forAllergan,we'vemademostoftheinvestmentalready.Andwe'veseengoodsuccesswithmostoftheprogramsincollaborationwithAmgen.So,forus,atthispoint,we'vemadetheinvestment,weshouldparticipateinthecommercializationand/orsalesofthoseproductsthroughourpartnershipwithAmgen.

IthinklongtermIdon'tthinkbiosimilarswillnecessarilybeacorepartofourstrategy.WemaydecidetocontinuetoinvestinthepartnershipwithAmgen,becauseitsbeenagoodcollaborationandsuccessfulpartnership.Wemaylookatselectiveopportunitiestoparticipateonaone-offbasis.AndwedohavecapabilitiesinourownorganizationinLiverpoolwherewewilllooktodosomeuniquethings.

Bthink,infairness,wearefocusedonsupportingourseventherapeuticareaswiththevastmajorityofourR&Ddollars,withthevastmajorityofourinvestment,tomakesurethatwecancontinuetoinnovatearoundunmetneedandtosupportourgrowthpharmaagenda.David,doyouwanttotouchonthe--?

Sure,sure,justbriefly,theotherbiosimilarsthatwe'reworkingontogetherwithAmgen,asI'msureyou'reallaware,arebiosimilarsforHerceptin,RituxanandErbitux.WeanticipategettingthePhaseIIIdataforHerceptinlaterintheyear.ObviouslyRituxanandErbituxareearlierinthepipeline.Erbituxisstillinpreclinicaldevelopment.Rituxanismovingintotheearlystagesofdevelopmentthisyearandthe(settle-line)developmentproceedsaccordingtoexpectations.

DavidMaris (Analyst-WellsFargoSecurities):

Great,thankyouverymuch.

Brent,wouldyouliketomakeanyclosingremarks?

Yes.Ijustwanttothankeveryone.IknowitwasalittlebitofalongercallthannormalbutIthinkitwasworthourtime.Obviously,weremainveryfocusedonexecutionalexcellence,oncontinuingtodeliverourgoalsandagendawithrespecttogrowthpharma.Wedolookforwardtoprobablyournextcallwithrespecttosecond-quarterearningsinAugusttoupdateyoubothonearningsfortheremainderoftheyearandourlifepostcloseoftheTevatransaction.So,thankyouagainforyourtimeandlookforwardtocatchingupagain.

Thanks,everyone.

Operator :

Thisconcludestoday'sconferencecall.

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