valeant pharmaceuticals international (vrx) earnings ... · the following valeant pharmaceuticals...

CompanyName:ValeantPharmaceuticalsInternationalIncCompanyTicker:VRXSector:HealthCareIndustry:Drugs

EventDescription:Q12016EarningsCallMarketCapasofEventDate:9.90BPriceasofEventDate:24.64

©2014TheStreet,Inc.Al l R ightsReserved Page1of31

ValeantPharmaceuticalsInternational(VRX)EarningsReport:Q12016ConferenceCallTranscriptThefollowingValeantPharmaceuticalsInternationalconferencecalltookplaceonJune7,2016,08:00AMET.Thisisatranscriptofthatearningscall:

CompanyPart icipants

LaurieLittle;ValeantPharmaceuticalsInternationalInc;InvestorRelationsJoePapa;ValeantPharmaceuticalsInternationalInc;CEORobRosiello;ValeantPharmaceuticalsInternationalInc;CFOLindaLaGorga;ValeantPharmaceuticalsInternationalInc;TreasurerTageRamakrishna;ValeantPharmaceuticalsInternationalInc;ChiefMedicalOfficerAnneWhitaker;ValeantPharmaceuticalsInternationalInc;CompanyGroupChairmanAriKellen;ValeantPharmaceuticalsInternationalInc;CompanyGroupChairmanJeremyLipshy;ValeantPharmaceuticalsInternationalInc;Director

OtherPart icipants

LouiseChen;GuggenheimSecuritiesLLC;AnalystTimChiang;BTIG;AnalystGreggGilbert;DeutscheBank;AnalystWendyLin;JPMorgan;AnalystAnnabelSamimy;StifelNicolaus;AnalystAndrewFinkelstein;SusquehannaFinancialGroup/SIG;AnalystUmerRaffat;EvercoreISI;AnalystDavidRisinger;MorganStanley;AnalystDavidAmsellem;PiperJaffray&Company;AnalystCindyGuan;GoldmanSachs;AnalystDavidMaris;WellsFargoSecurities;AnalystIrinaKoffler;MizuhoSecuritiesUSA;AnalystMorganWilliams;BarclaysCapital;AnalystDougMiehm;RBCCapitalMarkets;AnalystAlanRidgeway;Scotiabank;AnalystDavidCommon;JPMorgan;Analyst

MANAGEMENTDISCUSSIONSECTION

Operator :

Atthistime,IwouldliketowelcomeeveryonetotheValeantfirst-quarter2016resultsconferencecall.

(OperatorInstructions)

Ms.LaurieLittle,HeadofInvestorRelations,youmaybeginyourconference.

LaurieLitt le (InvestorRelations):




Thanks,Operator.Goodmorning,everyone.WelcometoValeant'sinvestorconferencecallwherewewillbediscussingourfirst-quarter2016financialresults.

Participatingontoday'scallareJoePapa,ChiefExecutiveOfficer;RobRosiello,ChiefFinancialOfficer;Dr.TageRamakrishna,ChiefMedicalOfficer;Dr.AriKellen,CompanyGroupChairman;AnneWhitaker,CompanyGroupChairman;andLindaLaGorga,ourTreasurer.

Inadditiontothelivewebcast,acopyoftoday'sslidepresentationcanbefoundonourwebsiteundertheInvestorRelationssection.

Beforewebegin,ourpresentationtodaycontainsforward-lookinginformation.We'veaskedthatyoutakeamomenttoreadtheforward-lookingstatementlegendatthebeginningofourpresentation,asitcontainsimportantinformation.

Inaddition,thispresentationcontainsnon-GAAPfinancialmeasures.Formoreinformationaboutthenon-GAAPfinancialmeasures,pleaserefertoslide1.Non-GAAPreconciliationscanalsobefoundinthepressreleaseissuedearliertodayandpostedonourwebsite.

Finally,thefinancialguidanceinthispresentationiseffectiveonlyasoftoday.Itisourpolicytoupdateourfirmguidanceonlythroughbroadlydisseminatedpublicdisclosure.

Withthat,IwillturnthecallovertoJoe.

JoePapa(CEO):

Thankyou,Laurie.Goodmorning,everyone.Thankyouforjoiningus.

Todaywe'dliketocoverthefollowingtopics.First,I'dliketosharesomethoughtsfollowingmyfirstmonthatValeant.Rhenwe'llcovertheresultsofthefirstquarter.Next,I'llwalkyouthroughourplansforstabilizingValeantin2016,includingupdatingour2016guidance.Thenwewilladdresstheareasofimprovement,aswellasareasofopportunity.FinallyI'dliketotellyouwhyI'mconfidentinValeant'sfuture.

Inadditiontotoday'spreparedremarkswehaveseveralslidesattheendofthedeckintheappendixthatwewillnotcoverintoday'spresentation.

Beyondthepreparedagendaonslide3,whatIwanttodotodayisreallysimple.Iwanttoanswerfourquestions.WhydidIjoinValeant?WhatisthecurrentsituationIfound,boththegoodandthebad?Whatisourpositionrelatedtoourdebt,ourliquidity,andtheregulatoryfilings?AndwhyIbelieveValeantwillbesuccessfulinthefuture?

Now,letmecommentfirstonthatquestionaboutdebt,liquidityandregulatoryfilings.We'llhavemoretosayaboutthislaterbutletmespendafewminutesnow.

Basedonourguidance,wehaveasolidpositionwithourliquidity.AndIexpecttobeincompliancewiththedebtcovenantsthroughout2016andbeyond.

Also,wearenowplanningtofileourquarterlyinformationinatimelyfashionfortheregulatorySECfilings.TimewillbeourfriendatValeantasweworktoimprovetheValeantbusinessand,importantly,topaydowndebt.

Now,letmestartaboutValeantandwhatIfoundasIwasdoingmyduediligenceandjoiningthecompany.

IbelievethatValeanthasadiversecollectionofleadinghealthcarefranchisesandbrandssuchas




Bausch&Lomb,CeraVeandSalix.AsIdidmyduediligenceIdiscoveredValeanthadaverybroadgeographicglobalfootprint.

Ibelievethatourcommitmenttobringinnovativeproductstothemarketthroughanexcitingnewproductpipelinecontinuestobeunder-valuedandmisunderstoodandIhopetochangethatperception.

Finally,inmy30-plusyearsinthepharmabusinessinbothbranded,genericandOTCpartsofthebusiness,IknewmanyoftheValeantemployeesbeforeIjoined.AndnowIknowevenmore.Inmyfirst30days,I'vealsohadthepleasureofmeetingmanyofthetalentedanddedicatedemployeesthatworkatValeant.

Globally,wehave22,000Valeantemployeesthatdrivetoworkeverydaytofocusonimprovingpeople'slives.I'mdelightedtojointheteamthatfocusesonimprovingpeople'slivesonthismission.

Likethoseofyouonthephonetoday,I'vealsoreadmanyofthearticlesonValeant.Somehavenotbeenfavorable.Iknowit'sbeenadifficultninemonthsfortheteam,butIalsoknowwehavededicatedleaderswhoknowwhatisrightandnecessarytoturnthisCompanyaround.We'llre-engageourworkforce,we'llrebuildourrelationshipswithproviders,payersandregainthetrustofourdebtholdersandshareholders.

Andduringthe30daysthatI'vebeenwithValeant,I'vedonewiththat,metwithemployeesatalllevelsofthecompany,salesleadership,keyopinionleaders,manyofourkeytradepartners,prescribers,managedcare,GPO.AndI'veevenhadachancetohaveacoupletripstomeetwithCongress.Insummaryfortoday,myhopeisIcancapturesomeoftheexcitementthatIseeinValeantasIwalkthroughtoday'sfirstquarterbutalsosomeofthechallengesandtheopportunitiesinfrontofus.

Now,turningtoslide4.WehavetheQ12016summary,thefirst-quarterresults.Ourtotalrevenuewas$2.4billionversusourguidanceof$2.3billionto$2.4billion.GAAPEPSwasalossof$1.08.

Adjustednon-GAAPEPSwas$1.27whichfallswithintheguidancerange.GAAPcashflowfromoperationswas$558millionandadjustedEBITDAnon-GAAPwasjustover$1billion.

Now,letmeturnthecallovertoourCFO,Rob,todiscussthequarteringreaterdetail.Rob?

RobRosiello (CFO):

Beginningonslide5isafinancialsummaryofourGAAPresults.AsJoestated,wehadanetlossof$1.08pershareforthequarterwhileGAAPcashflowfromoperationswas$558million.

COGSwas27%inthequarterwithSG&Aat34%andR&Dinvestmentwasjustover$100million,arecordforValeant.

IwanttopointoutthatSG&Aincluded$37millionofincrementalcostrelatedtoValeant'sformerCEOofwhich$25.3millionwasforshare-basedcompensation.However,sincetheperformancethresholdwasnotmet,novalueorshareswereultimatelyreceivedbytheformerCEO.

SG&Aalsoincluded$29millionoflegalandprofessionalfeesinconnectionwithvariousinvestigationsandrelatedactivities.

Turningtoslide6andfollowingourGAAPpresentation,I'dalsoliketoprovideanon-GAAPsummary.Wereportedadjustednon-GAAPEPSof$1.27forthefirstquarterandyoucanseethehistoricaladjustednon-GAAPEPSnumbersforthepastfivequartersallunderournewtaxpresentation.

ComparedtoQ12015,revenueincreasedjustover$200millionor9%.Theimpactof2015acquisitions




provided$572millionofgrowthinthequarter.ThiscamefromSalix,Marathon,DendreonandAmoun.ThisgrowthwasoffsetbythenegativerevenueimpactofFXofjustover$50millionanddivestituresofapproximately$20million.

ThebasebusinessinQ1declinedby$289million,drivenbydermatologyincludingthegenericazationofTargretinandthetransitiontoWalgreens,thecontinueddeclineinourneurobusinessanddeclinesinourophthalmologyRxbusiness.

COGSincreased3percentagepoints,primarilydrivenbylowerdermrevenuesandtheunfavorableimpactofgrossmarginsfromFXinemergingmarkets.

SG&Aincreasedfrom26%to31%,drivenbyrevenuedeclinesdescribedaboveaswellasanincreaseinadvertisingandpromotion,forexample,DTCadvertising,andemployeeretentionof$20million.

Onslide7,asyouknow,Valeantcurrentlyreportsundertwosegments,developedandemergingmarkets.Revenuesinthedevelopedmarketwere$1.9billion,anincreaseof11%yearoveryear,whileoperatingincomedeclined8%.

Whiletheincreasewaslargelyduetoacquisitionscompletedin2015,weexperiencedsloweruptakeinthedermatologyrecoverythanexpected.RevenueforUSdermatology,andI'mincludingObagiandSolta,was$229millionascomparedto$399millionintheprioryear.

FollowingthelaunchoftheWalgreensprograminJanuary,wesawvolumeflatteningandASPsdecliningpostlaunch.OverallvolumechallengeswereexacerbatedbythelossofrefillsfollowingtheshutdownattheendofJanuaryofourpreviousspecialtypharmacyrelationship,aswellasthenegativeexternalnarrativeandsomeinternaldisruptionswhichJoewillcoverinmoredetaillaterinthepresentation.

RevenuesfortheUSGIbusinesswere$343millionforthequarter,withgrossmarginsat85%.RevenuesforXifaxan,thelargestSalixproduct,were$207millionforthequarter,whichcorrespondedtoaretailTRxincreaseof32%overtheprioryear.

Otherestablishedbrandsalsoshowedgrowthinthequarterandwe'repleasedthechannelinventoriesfortheSalixbusinesshavebeenreducedto1.5monthsandwearenowsellingtodemand.

OtherareasofnoteinthissegmentincludedcontinuedgrowthinourUScontactlenswithUltra,whichwasup58%yearoveryear,aidedbyanationalTVcampaignandthelaunchofUltraforpresbyopia.

OurUSconsumerdivisionwasawardedthesupplieroftheyearbyWalmart,anachievementnoteasytoattain,whilealsolaunchingseveralnewproducts,surveys,ointmentandpreservationerasMV.Overallvisioncarewasup9%versusmarketgrowthof1%.

Severalunitsachievedstrongorganicgrowth,includingProvenge,whichgrew6%overtheprioryearandourgenericsportfoliowhichgrew14%yearoveryear.TherewasstronggrowthinFranceandtheUK,particularlyinsalesofB&Lsurgical.WealsosawpositivemomentumfromJubliainCanadawhichcurrentlyenjoysroughlya60%share.

Onslide8,revenuesfortheemergingmarketwere$442millionforthequarter.Thisincreaseinrevenuewasdrivenbythe2015Amounacquisition,offsetbyunfavorableforeignexchangeof$44million.ThefallingrossmarginswasdrivenbyFXincountrieswherethepurchasingormanufacturingofgoodsareinadifferentcurrencythanwhereproductsaresold.

Samestoreorganicgrowthwas2%butwouldhavebeennearly10%ifnotforthe$30millioninventorydraw-downinRussiaandPoland.SeveralcountriesdeliveredstrongorganicgrowthsuchasMexicoat




8%,Chinaat19%,andIndiaindouble-digits.WedidseeinventorylevelssuccessfullydeclineinRussiaandPolandtoapproximately3.5monthsfromthe4to5monthsseenthroughout2015.

Withthat,IwillturnthecallbackovertoJoe.

JoePapa(CEO):

Thankyou,Rob.

Onslidenumber9whatI'dliketodoistrytoquicklysummarizeValeant'scurrentstate.WehaveleadingdermatologybrandsandGIbrandsandastrongpipeline.We'vegotgreatglobalBausch&Lombplatform.

We'vegotadurable,sustainablebusinessmodelinbothconsumer,ophthalmicandbrandedgenericsandwehavestrongcashflow.ButwehaveexperiencedsomesignificantchallengesinourdermatologybusinessaswetransitiontoouraccessprogramwithWalgreens.WecontinuetostronglybelieveintheprogramandbothWalgreensandValeantareworkingdiligentlytocorrecttheissues.

OurSalixbusinessiscurrentlyrunningbeloworiginalexpectationsbutwecontinuetobelievethatthereremainsasizableopportunityandsignificantunmetmedicalneedinthisarea.Unfortunately,negativeexternalattentioncontinuestoadverselyimpactthebusinessandourreputationwithpatients,physiciansandallofyou,ourshareholders,aswellasourdistractedorganization.

Onslide10,tofurtheremphasizehowthebusinessisperforming,thefollowingchartillustratesthatnearlyallofourbusinessesareperformingatourexpectation,withtheexceptionoftheUSdermatologyandtheSalixbusiness.

Onslide11weareconfidentwehaveaplantogoforward.Wehavetoberealisticastotheimpactallthishashadonouroperationsandourfinancialexpectationsfortheyear.

Ournewfull-year2016guidanceascomparedtowhatwepreviouslyreportedis$9.9billionto$10.1billionandadjustednon-GAAPEPSof$6.60to$7.WeexpectanadjustedEBITDAnumberof$4.8billionto$4.95billionfor2016.Assumptionssurroundingthisguidancecanbefoundintheappendixofthepresentationpostedonthewebsite.

Now,I'llturnthecallbacktoRob.

RobRosiello (CFO):

Slidenumber12showswherethechangeistakingplace.ItisprimarilyUSdermatologyandGIwithothervarioussmallchangesattributedtootherfactors.

Letmestartwithdermatology.Thecurrentbudgetrepresentsa$410milliontake-downofrevenue.Thisreductionisdrivenbylowerscriptvolume,lowerfillrates,speedbumpsintheaccessprogram,combinedwithlowerASPsandoverallhighermanagedcarerebates.

ForXifaxan,itrepresentsa$390millionreduction,relativetoourpreviousexpectations.Xifaxanhasdeliveredstronggrowthbutitislessthanourexpectationsand,webelieve,thepotential.

Disruption,salesforceturnover,changesinleadership,shiftsinstrategy,anincreaseinenrollmentsinhighdeductibleplanswhichwebelieveforthefirsttimeextendedintothesecondquarter,havecontributedtoourlowerforecast.Thethirdbucketofroughly$300millionincludesotherunits,additionalpricingreductions,suchastheGPOrebatesforNitropressandIsuprel.

Slide13showswhatdrivestheramptothemid-pointofourguidance.Letmewalkthroughit.Sothefirst




istodaywe'reannouncing$1.27inQ1.ThesecondwouldbeassumingaQ1runrateperformancefortherestoftheyear,puremath,wouldadd$3.81.

Ifweaddtothatthehistoricseasonalityandtypicalsecond-halframpcharacteristicinourbusiness,whatwemightcallthetypical40/60,thatwouldaddanadditional$1.25andwenetouttheGPOrebatethatwerecentlyannouncedforIsuprelandNitropress.

ThefixingdermandSalixandgrowthaccelerationwouldprovideadditional$0.50.Again,thatwouldnetoutthenewmanagedcarecontracts.Othermarkets,particularlyemerginggrowth,whichwefeelverygoodabout,woulddeliveranadditional$0.17.Andthenwewouldnetoutofthatsubtractionofgenericerosion,forexampleZegerid,andotherpotentialpricingactionsthatwemighttake.

Takethistogether,thiswoulddeliverthemid-pointofourguidance.AndweseeupsidesinimprovingtheASPsinvolumes,particularlyinourdermatologybusinessthroughengagementwithindependentpharmacies,adjustmentstoco-paysandbuy-downsandimprovementintheprioroffprocess.

NowI'dliketoturnthecallovertoLinda,ourTreasurer,todiscussourdebtandliquidityposition.

LindaLaGorga(Treasurer):

Thanks,Rob.

First,focusingonourliquidity.Whilewehaverevisedourguidancefor2016,ourcurrentandforecastedliquiditypositionremainssolid.AsofMarch31,wehad$1.3billionofcashandasoftodaywehaveapproximately$1.2billionofcash.

Weremainfocusedonreducingourpermanentdebtwhichincludesourtermloansandbonds.Yeartodate,wehaverepaid$730millionintermloansthroughvariousmaturitypayments,amortizationpaymentsandpaymentsusingassetsaleproceeds.Wehave$273millioninmandatorypaymentsremainingin2016withminimalamortizationrequirementsin2017.

Ourcreditagreementincludestwomaintenancecovenants,asecuredleverageratioandaninterestcoverageratio.Weareincompliancewithbothfinancialmaintenancecovenantsinthefirstquarterandwecontinuetoexpectthatwewillremainincompliancewithbothfinancialmaintenancecovenantsthroughout2016.Therearenofinancialmaintenancecovenantsinourindenturesgoverningourbonds.

Reducingourtotalleverageisoneofourpriorities.Basedonourrevised2016guidance,weexpectournetleverageratiotobeapproximately6timesorlessbyyear-end2016.

Movingtoslide15.Weremaincommittedtousingthevastmajorityofourcashflowtopaydowndebt.Basedonourrevisedguidance,ourcashflowavailablefordebtrepaymentandotherpurposeshasdecreasedby$500millionfromthe$2.2billioninourMarchinvestorcallandisnow$1.7billion.

ThereductioninourcashavailablefordebtpaymentandotherpurposesislessthanthereductioninadjustedEBITDA,primarilyduetoareductionintheuseofcashforworkingcap.Inthefirstquarter,ourworkingcapitalwasasourceofcash.Basedonourrevisedguidance,weareprojectingworkingcapitaltobeapproximatelyneutraltocashflowfortheyear.

TheprojectedcashflowfordebtpaymentisweightedtowardsQ2,Q3andQ4,aswecompletedtheSproutpaymentof$500millioninthefirstquarter.InourMarchinvestorcall,wesaidweexpectedtopaydownatleast$1.7billionofpermanentdebtwhichisourtermloansandbonds.Weremaincommittedtorepaying$1.7billionofpermanentdebtthroughourcashflowandproceedsfrompotentialnon-coreassetsales.




Basedondebtrepaidtodateandourupcomingyet-to-be-paidmandatoryQ3andQ4amortizationpaymentsunderourcreditagreement,wewillhavepaidover$1billionoftermloans,leavinganincremental$700millionofpermanentdebtrepaymenttomeetourgoal.Wecontinuouslymonitorthemarketandwillremainopportunisticacrossourbankdebtandseniornotestopursuethebestapproachtomeetourgoals.

Aswelookforwardinto2017,ourcashflowavailablefordebtrepaymentwillimprove,aswewouldexpectittobegreaterthan$2billion,aswedonotexpecttohavepaymentssimilartotheSproutpaymentaswefocusonourexistingoperationsandreducingourleverage.

Withthat,IwillturnthecallbackovertoJoe.

JoePapa(CEO):

Thankyou,Linda.

Onslide16youseeValeant'sstabilizationplan.I'vebeenatValeantforapproximatelyonemonthnowandI'dliketooutlineonthispagetheareasthatweneedtoaddressandimprove.

Ibelieveit'sathree-stepprocess,tobeclear.First,thestabilizationprocessofValeant,whichIthinkwilltakethreetosixmonths.Thatwouldbefollowedbyaturnaroundstageandultimatelyatransformationstagethatwilltakeamulti-yearprocessforValeant.Today'sdiscussionisreallygoingtobelimitedthestabilizationplanandwhatwethinkaretheimportantelementsofthatstabilizationplan.

Numberone,weneedtodriveengagementinthecompany.Weneedtore-recruitValeantemployeesbacktothecompany.Weneedtoaddsomeadditionaloutsidetalent.Andwe'regoingtoworkveryhardtore-engagewithourpartners,thepatients,theprescribers,thepayersandinvestors.

Numbertwo,wewanttoreallocatestrategicresourcesatValeanttofixthedermatologybusiness,accelerateSalixgrowth,whichisalreadyquitegood,asRobmentioned,butIjustwanttoclearlyreacceleratethatgrowth.

Numberthree,wewanttorefocusR&Ddollarsintoinvestmentforcoreassetsofophthalmology,dermatology,GIandconsumer.Wewanttomanagetheneuroandotherbusinessforcashgenerationandtopaydowndebt.

Finally,wewanttoexecuteontheprioritiesthatwealreadyknowtoexist.Wewanttoimprovepatientaccessandaddresspricingissues.Wewanttoexecuteonnon-coreassetsalestohelpreducethecomplexityofValeantbusiness.Wewanttofocusondebtreductionandintendtocooperatewithallgovernmentinquiriesandseekexpeditedresolution.

Onslide17wehaveidentifiedanactionplanandbegunitsimplementationfordermatology.First,wemustrepairourcorporatereputationandregaintrustwithallofourstakeholders.Thiswillbedonethroughanumberofinitiatives,includingCEOactionsofcustomerengagementandoverallpricingandaccess.Wealsowillreiterateoursupporttothefieldsofdermatologyandpodiatry,bothR&Dandcorporateinvestment.

WealsomustrebuildtheaccesswiththeWalgreenprogramandtheindependentpharmacy.We'vebeenlaunchinganewcouponprogramwithindependentpharmaciesinJuneandwewillcontinueworkingwithWalgreenstoimprovethepatientandprescriberexperiences.

WemustrestoreprofitabilityatWalgreensthroughtheimplementationofreimbursementandpriorauthorizationsupportviaqualifiedthirdparties.Wehavecontractedwithathird-partyvendorthatwilltakeoverthisprocessinJune.




Withrespecttodermatology,Iwanttomakesurethatyou'reawareasignificantportionofourWalgreensprescriptionshaveprofitabilitysignificantlybelowourinternalprojectionsandmeaningfullybelownon-Walgreenprescriptions.Insomeinstances,theseprescriptionsactuallyhaveanegativeaveragesellingprice.Thevastmajorityoftherevenueshortfallindermatologyinourrevisedguidancerelatestothisaveragesellingpriceshortfall.

Thegoodnewsisthatwebelievethisproblemisfixableandweareworkingcollaborativelywithourpartnerstoaddresstheseissues.ItisinWalgreens'andValeant'sinteresttofixthisproblem.IfwearesuccessfulinimprovingtheWalgreensASPtherewillbeanadditionalupsidetoourcurrentdermlatestestimate.Wewillcontinuetoadvanceourrichpipelineanddemonstrateourcommitmenttothefieldofdermatologyalsointermsoftheactionplansfordermatology.

Now,onslide18therearesomeearlyindicationsofrecovery.We'vebeguntoseetheprocesstostabilizethisbusinessandseesomeearlyindicationsofrecovery.We'veseenanuptickinprescriptionsinMay,whichobviouslyisanencouragingsignbutwestillhavealotmoretodo.Wearejustabouttolaunchanaccessprogramforindependentpharmaciesthatwillimprovethepatientexperience.

Onslide19,aswithdermatology,wehaveaplantoacceleratetheSalixfranchise.TheproblemwiththeSalixfranchise,wehadsignificantsalesturnoverwiththeSalixintegrationoverthelast12months.Wehaveappointedanewleadertostabilizetheorganizationandaccelerategrowth.

Wehavealsolaunchedanewhepaticencephalopathyeducationandsalesmaterialtobothdoctorsandpatients.Andwehavealsodeployedanadditional67%incrementalsalesrepsforhepaticencephalopathytodrivegrowth.Wehavealsoreachedoutto12majorteachinginstitutionsandlaunchedaneweducationalprogramaboutHE.Inadditiontoeducation,weareimprovingpatientaccessandadherencethroughtheoptimizationofourreimbursementhubandotherpatientassistanceprograms.

Onslide20youcanseethatXifaxanretailTRxwasgrowing32%versuslastyear.ButweseetremendousopportunityforthebrandgiventhenewindicationandthecontinuedpotentialwithHE.ThereremainsasignificantunmetmedicalneedinHEpatients,asexpertsestimatethatupto5.5millionpatientsintheUShavecirrhosis.Ofthispopulation,it'sestimatedthatupto2.2millionareattheriskofdevelopingovertHE.

Annually,over600,000patientsaredischargedfromthehospitalwithHEbeingtheprimarydiagnosis.WeestimatethetotalmarketrevenueopportunityintheUSforHEisatover$5billion.

OntheIBSDopportunity,roughly10%to15%oftheUSadultpatientpopulationsuffersfromIBSand65%ofthesehaveadiarrhealcomponent.Despitenewtreatmentoptions,manyofthemareundiagnosedandarenottreated.ThisrepresentsanotherXifaxangrowthopportunity.

Onslide21wecontinuetoseesteadygrowthinXifaxanscriptsonayear-over-yearbasisbuttobeclear,theyarebelowourpreviousexpectations.TheperformanceofthenewsalesteamshouldacceleratethefranchiseinotherSalixbrandstocontinuetoshowadditionalgrowth.Finally,wecontinuetoinvestinthepipelineopportunitiestosustainlong-termgrowth,includingoralRelistor.

Movingtoslide22.AlthoughValeanthasareasthatneedstabilizationandimprovement,Ibelievethatwehaveasolidfutureahead.Wehaveastrongglobalportfolioofbrands.WehaveaplantofixdermatologyanddrivemomentuminSalix.

Wehaveasteadyperformanceinconsumer,contactlens,dentistry,oncology,genericsandinAsia.WehaveanattractiveR&Dpipelinethatwilldrivefuturegrowth.WehaveimprovedourUSmarketaccessandastrongcashflowgeneration.




Letmetalkaboutafewofthose.Slide23providesabriefviewofournumerousValeantbrandsandthemagnitudeofourfranchises.

Onslide24wesummarizewehaveapproximately$3.5billionofconsumer-orienteddurableproductsthatcollectivelyhaveoperatingmarginsatroughly37%andgrowinginthemidsingle-digits.ThiswouldincludetheBausch&Lombproducts,lens,solutions,aswellasCeraVeandothertopicalproducts.IwillletothersspeculateonthevalueofthispartofourValeantbusinessbutadurableglobalgrowingbusinesswitha37%EBITDAmarginiscertainlyaveryvaluableasset.

Slide25,Dendreon'sanothervaluablebutunder-appreciatedbusinesswithinourportfolio.Provengedeliversastatisticallysignificantbenefit,a38%improvementinthree-yearsurvivalrateversuscontrol.Overthepastyear,theteamhasturnedthebusinesstoaprofitable,growingbusinessbytargetingtherightprescribersandimprovingthegrossmarginbymorethan10%.Weexpecttoseethisbusinesscontinuetogrownicelyasurologistsnowmakeup49%ofthebusinessandhaveincreasedtheirenrollmentsforProvengeinfusionsby22%yearoveryearinQ1.

Onslide26,overthepastfewmonthstherehasbeenmuchdiscussionaboutmanagedcareaccessacrossourportfolio.Wehavemadesignificantprogressinforgingnewrelationshipswithourpartnersandfeelthatthingsarestableforourproducts.Weareimprovingourcommercialaccesswithseveralkeybrands,aswellasimprovingourMedicarePartDcoverageinthesecondhalfof2016.

BeginningJune1,JubliaisnowcoveredonAARPwithoutapriorauthorizationandtheLotemaxfamilyofproductsmovedtoapreferredbrandontheAetnaMedicareSaverRxplan.Finally,ourmanagedcareteamisnowfocusingtheireffortstomaximizeformularyaccessforourupcominglaunchofproducts.

Insummary,fromaUSmarketaccessperspective,wearewellpositionedfor2016,2017andbeyond.NowI'mgoingtoturnthecallovertoTagewhoheadsupourR&Doperations.Tage?

T ageRamakrishna(ChiefMedicalOfficer):

Thankyou,Joe.Onslide27youwillseeasummaryofourR&Ddevelopmentprograms.IcontinuetobelievethatValeanthasoneofthemostproductiveR&Dorganizationsintheindustry.Unfortunately,ourR&Dorganizationismisunderstoodbecausewefocusontheresultsofourpipelineratherthanthefinancialinvestment.

Thisslideisatestamentofouroutput-drivenR&Dmodel.Wehaveasignificantnumberofactiveprogramsinallofourcoretherapeuticareas.Itistheoutputandresultsthatmattersforpatientsandphysicianswhichenableustobringnewandimprovedtreatmentstopatients'lives.

In2016,weplanonlaunching20newproducts.Additionally,onslides28aand29,youwillseeourdrugdevelopmentsuccessrateindermatologyissignificantlyhigherthantherestofthepharmaceuticalindustry,with100%successrateinourPhase3dermatologydevelopmentprogramsasnotedonslide29.

Slide30.WecurrentlyhavethreeproductsunderreviewattheFDA,twowithPDUFAdatesnextmonthandoneinNovember.RelistorOral,whichasyouknow,istheoralformulationofourcurrentlyapprovedRelistorsubQinjectionfortheindicationsofopioid-inducedconstipationinpatientswithadvancedillnessandpatientswithchronicnon-cancerpain.

LatanoprostenebunodisforthereductionofelevatedIOPinpatientswithopen-angleglaucomaorocularhypertension.Andfinally,BrodalumabisourmonoclonalantibodythattargetstheIL17receptorantagonist.Itisforthetreatmentofmoderatetosevereplaquepsoriasisforpatientswhoarecandidatesforsystemictherapyorphototherapy.

Asyoumayknow,wearecurrentlypreparingtogobeforeanFDAAdvisoryCommitteesometimethis




summer.BrodalumabMAAhasalsobeenacceptedbytheEMEA.

Finally,onourwebsiteyouwillseeaquicksnapshotofsomeofourkeyR&Dprogramsindevelopment.Youcanalsofindwherewe'llbepresentingupcomingdevelopmentdataandabstractatthisyear'smedicalconferences.

IwillnowturnthecallbacktoJoe.

JoePapa(CEO):

Thankyou,Tage.Inclosing,IbelievethatValeantisanexceptionalCompanywithadiversecollectionofleadinghealthcarefranchisesandbrandsthatwillmakeadifferenceinpeoples'lives.WehaveasteadyperformanceinthemajorityofourbusinessandwehaveanattractiveR&Dpipelinethatwilldrivefuturegrowth.Wehaveastabilizationplanandwewillexecuteonthisplan.

We'vehitafewspeedbumpsincertainbusinessesthatweneedtoyouaddressbutwealsohaveanimportantcatalystforlaterthisyearandnextyearandwearegeneratingstrongcashflow.Thepastyearhasbeentoughoneveryonebutwewillworkthroughthisperiod,dotherightthingsandbeastrongerCompanyinthefuture.

Now,Operator,let'sopenupthecallforquestions.

Operator,please?

QUESTIONS&ANSWERS

Operator :

(OperatorInstructions)

LouiseChen,Guggenheim.

LouiseChen (Analyst-GuggenheimSecuritiesLLC):

Hi.Thanksforthequestion.MyquestionisonBausch&Lomb.

Wegetalotofquestionsonthisbusiness,andtherehasn'tbeenanupdateinawhile.SojustcurioushowweshouldthinkabouttheEBITDAforthisfranchiseandthegrowthgoingforward?

JoePapa(CEO):

Thankyou,Louise.SoIthinkprobablythebestthingIcouldsayonitisrelativetotheslidethatwehadinthepresentation.It'sa$3.5billionCompanyorsegmentofourCompany.

Now,tobeclear,thatalsoincludessomeotherpartsofthebusinessthatwethinkareconsumer-oriented,thingsliketheCeraVe,thedermalproducts,someOTCproducts,etcetera.ButtheBausch&Lomb,themajorityofthatisballparkinthat$3billion,$3.5billionrangeintermsofabusinessforus.Idoexpectthatwe'llbeabletoprovidesomeadditionalguidanceaswelookathowwedoourfutureguidancebutforrightnowIthinkbestprobablyIcangiveyouthesizeofit.

Intermsofthegrowthrate,Ithinkifyoulookatthewordsthatweused,amidsingle-digitgrowthrate,thenumberweusedinthepresentationwas4%butIthinkthat'sthekindofgrowthwe'reseeinginit.AndasIsaid,whatIthinkaboutitmostspecificallysinceIjoinedthecompany,it'saverydurablebusiness.It'saconsumer-orientedbusiness.Ifyouthinkaboutthecontactlenses,what'sinthesolutionsforallthepatients.We'vegotsomevitaminsinthereintermsofforpatientsthathaveophthalmicvitaminsandthingslikethat.




Wethinkit'saverystablebusiness.It'sgrowingsomewhereinthemidsingle-digits,4%istheLTMnumberforit.Andwehopetoprovidemaybealittlebitmoreguidanceonthataswegivealittlebitmoresegmentationinformationaswegoforwardinthefuture.

Operator,nextquestion.

Operator :

TimChiang.

T imChiang (Analyst-BTIG):

Hi,Joe.Iknowyou'vebeenatthecompanyonlyaboutamonthorso,butIthinkthere'sbeenalotofquestionsintermsofwhetherornotyouwouldpursueasaleofkeysegmentswithinthecompany.

Areyouguysstillfocusedonjustsellingnon-coreassetsatthispoint?Howdoestheguidancereflectthepotentialforsomeofyourassetsbeingsoldatthispoint?

JoePapa(CEO):

Sure.ThatisaquestionthatI'veheardacoupledifferenttimesnow.IthinkthewayI'dhavetosayitisthatbasedon30days--andIhavetoputitasacaveat,it'sonlybeen30daysnow--myreviewofthebusinessisthatreallytherearesomeveryimportantcoreassetswithinthecompany.ThecoreassetsthatweseeareclearlytheBausch&Lombfranchise,theSalixfranchise,thedermfranchiseandtheconsumerfranchise.Weviewthoseascoreassetswherewewanttospendbehindthose,spendbehindthembothinR&D,capitalexpendituresintermsofwhatwe'relookingat.

Havingsaidthatcomment,therearesomeareasofthecompanythatIwouldrefertoasnon-core.Idon'twanttogointothespecificsofthem,butthenon-coreareaareplaceswherewewilllooktopotentiallylookatassetsales.

Wethinkthoseassetsalestherecanhelpdotwothings.Numberone,itcancertainlygeneratecashtopaydowndebt.Numbertwo,Ithinkthisisalsoveryimportantone,isthatitcanreducesomeofthecomplexityofourbusinessbysellingoffsomeoftheseassetsthataregoodassetsbuttheyarecomplexandtheydoresultinamorecomplexbusinessforus.

Iwouldsayrightnowourviewofthisiswe'lllooktosellnon-coreassetstoreducecomplexity,topaydowndebt.Thatwouldbothbe,Iwouldsay,mostlyintheareaofnon-coreiswhatwe'regoingtolookatthistime.Andnon-corecouldbebothproductsand/orsomegeographiesoftheworldaretheareasthatwe'lllookatfor,whatIwouldcall,non-coreassetsales.SoIthinkthat'sprobablyaboutasfarasIcangorelativetomyfirst30days,Tim,withtheanswer.

Operator,nextquestion?

Operator :

GreggGilbert.

GreggGilbert (Analyst-DeutscheBank):

Thanks,hi,Joe.Iwanttotrytocontainmyselftoonetwo-parter.Yourlargestrevenueline,neuroandother,inthequarterwasprettyrobust.Canyouofferanycolorthereandtalkabouthowdurableyouexpectthattobe?

Mysecondpartis,Joe,havetherebeenanyofferstoacquirethecompany?Andweretheyaboveor




belowthestockprice?PerhapsyoucandescribeyourphilosophyontheindependentfutureofValeantandhowyouwouldhandlesuchapproachesiftheyoccurred,particularlyinlightofmediaspeculation.Thanks.

JoePapa(CEO):

Soletmestartwiththefirstpartofthisquestion,intermsofrevenueandtherobustnessoftheneurology.IthinkRobtalkedalittlebitaboutthatinterms--andI'llprobablytalkaboutit.Robmaywanttoaddsomemorecomments.

Certainly,asweputtogethertheplanforneurologyandother,it'saverydiversifiedbusiness.It'sabusinessthathasanumberofdifferentproductsinitandclearlytheperformancetherehasbeenacceptable.We'vegotsomeareaswhereonproductAorproductBwe'regoingtodosomethings.

Forexample,aswebuiltourguidanceouthere,webuiltintothefactthatfortwoproductsinthere,IsuprelandNitropress,thatwe'veannouncedarebate,avolumediscountrebate.Andthatvolumediscountrebatewillbebetween10%to40%discountsforhospitalsthatareacquiringIsuprelandNitropress.Wehadtobuildthatintothenumbersbeyondthefirst-quarterresults.

Secondarily,thereisanexpectationthatNitropressmaygogenericsometimeinthenext12months.Sowehadtobuildthatintoourconceptforthefullyear.Rob,anythingyouwanttoaddtothatpart?

RobRosiello (CFO):

I'djustaddthreepoints.OneisXenazinewhichtherenowhasagenerichasbeengoingdownbutactuallyholdingupquitewell.Andasyoupointout,Gregg,thebusinesshadaverygoodfirstquarter.

TRxshavecontinuedtocomedownandweobviouslyannouncedtheGPOrebateof10%to40%.Sothisisastrongbusinessbutthosearethreeheadwindsthatitwillhavefortherestoftheyear.

JoePapa(CEO):

Thenthefinalquestion,Gregg,onacquiringthecompany,obviouslyyouknowI'mlimitedtowhatIcansayinanswertothatquestion.Ithinkwe'vegotaverystrongfutureasaCompany.AsIsaid,therearesomenon-coreassetsthatwewilllooktodivestandspecificallyiftheycanhelpustoreducecomplexityandalsotohelpuspaydowndebt.ButIthinkasI'vereallytriedtolayoutthestoryhere,Ithinkwe'vegotaverybrightfuture.

Clearlywehavesomechallenges.Imentionedthechallengewiththedermatologyprogramandwhatwe'redoingwithWalgreensandsomeofthenegativeASPs,theaveragesellingpriceswe'redealingwithindermatology.ButIthinkallthosethingsarefixable.Oncewegetthatbehindus,wethinkthecompanyhasaverybrightfutureandonebasedoncommentsTagemade,onourpipelinewhichIthinkismisunderstoodandIlooktomovethatforwardandtrytochangeperceptionofourpipelineforthefuture.

SoIthinkI'mgoingtoprobablylimitmycommentsonanyacquisitionofthecompanyotherthantosaywewilllooktosellsomenon-coreassetsales,specificallytohelpustopaydowndebtandtoclearlytoreducethecomplexityofouroverallbusiness.


Operator :

ChrisSchott,JPMorgan.




WendyLin (Analyst-JPMorgan):

Goodmorning.ThisisWendyLinonforChris.Thanksforthequestion.

CanyoutalkaboutthefewchallengesinthedermatologyfranchiseandtheWalgreensimplementationthatneedtobeaddressed?Whatisdrivingtheprofitabilitychallenges?Whatarethenextstepstowardsstabilizingthefranchise?Howlongdoyouthinkitwilltakebeforeweseemeaningfulimprovement?

Thankyou.

JoePapa(CEO):

Thankyouforthequestion.Ithinkitisaveryimportantquestionintermsofwhatwe'retryingtodowithdermatology.Dermatology,there'stworealissues,Ithink,isthewayI'dprobablysayit.Oneissuewiththeprogramisjustensuringthatwecontinuetogetaccessaswe'veseensomechangeinthechanneldynamicsasweswitchfromaspecialtypharmacytoputtingtogetheraprogramwithWalgreens.

TheWalgreensprogramisagreatconceptbutitisanewprogram.Withanynewprogramtherearespeedbumpsthatyougothroughasyouputtogethertheprogram.IthinkbothwhatI'veseensofaristhatWalgreensandValeantareverycommittedtogettingthesespeedbumpsironedout.

I'vealreadyhadseveralcallsandin-personmeetingswithWalgreensinmyfirst30days.AndI'vegotameetingnextweekwiththeWalgreensCEOandtheUSleadershiptotalkabouthowwecanworkthroughsomeoftheseprograms,activitiesthatarepartoftheissueswithboththepriorauthorization,aswellastheaveragesellingprice.

Theaveragesellingprice,though,isanissueandItriedtolaythatoutinmycomments.Theissueisthatthereisapercentageofthebusinesswheretheaveragesellingpriceissignificantlybelowwhatwehadpreviouslyexpectedasweputtheprogramtogether.Andinfact,insomeplacesthataveragesellingpriceisnegative.Bythatmeans,everytimeaprescriptiongoesoutthedoorwe'retapingdollarbillstothatprescriptionasitgoesoutthedoor.

That'ssomethingthatwehavetogetfixed.I'mconfidentthatitwillgetfixed.Itdoesn'tmakesenseforittocontinueasis.Butuntilwegetthatfixedwetriedtoberealisticinourlookingatthedermatologybusinessforthefuture.Oncewegetthisfixed,andwhenwegetthisfixedweareveryconfidentthatwe'llgeneratesomesignificantupsidetodermatology.

ButIbecarefulabouthowlongitwilltakebecauseIthinkthat'sstillsomethingwe'retryingtoworkthroughwithourpartners.Iprobablydon'twanttogointotheexactdetailsbutIdohopetohavemeetingsintheverynearfuturewithourWalgreenscounterparttotalkthroughsomeoftheissuesthereforthatprogram.

Theotherprogramclearlyistomakesurewehavesufficientcouponingoutthereforindependentpharmaciesandthat'sgoingtohappeninJune.Sothatclearly,wethink,willbeanotherimportantpartoftheprogramtobefixed.

SoIthinkthatreallytriestoaddressthequestionsyouhadrelativetothekeychallengeswithourdermatologyprogramandsomeofthe--speedbumpsisthewordIusefortheWalgreensprogram.


Operator :

AnnabelSamimy,Stifel.




AnnabelSamimy(Analyst-StifelNicolaus):

Hi.Thanksfortakingmyquestion.

Andalittlebitalongthoselines,bothindermatologyandinGI,we'retalkingalotaboutASPsbeingdown.Butitseemslikeyouhadimprovedthatmarketaccessforthesepromotedproductsin2016,bothforsomeofthekeydermatologyproductsandsomeofthekeyXifaxanproducts.Andthevolumetrendsseemtobestable,ifnotgoingupalittlebit.

Sowhatisit--maybemoreaddressdermatologybutmaybemorespecificallyonXifaxan,whatisitthat'scausingthenetrevenuestobemuchlowerthanwhatwouldbeindicatedfromsomeofthevisiblemetricsthatwesee?

JoePapa(CEO):

Well,firstandforemost,IwanttomakesureIaddress--thedermatology,letmetalkaboutthatfirst,thenI'llgettoXifaxan.Onthedermatology,reallyitisthisissuethatItalkedabout,someoftheASPs,oraveragesellingprices,beingbelowwhatwehadexpected.ButitgoesbacktothecommentsthatImadeontheWalgreensprogramonthepreviouscall.

SoI'llprobablyleavethatoneasideandspendaminutetalkingaboutwhatwe'reseeingwithXifaxan.IalsohaveAnneWhitakerherewhomaywanttoaddsomeadditionalcomments.She'sbeentheindividualthat'sdoneagreatjob--herandherteam--onimprovingourmarketaccess.

Sufficeittosay,IthinkthatweareveryexcitedaboutwhatweseewithXifaxan.Butwehavetobecandid.Theperception,orcertainlythesituationwefindourselvesinrightnow,istheproductisunder-performingwhereweexpectedittogo.Buttobeclear,it'sup32%.SoIthink32%isagreatnumberyearoveryearintotalprescriptions.

Butaswelookedoutforthefullyear,wehaveseensomedisruption.Thedisruptionwasinthesalesforce.Overthelast12monthswehadsalesforcedisruption.Aswelookedatthatsalesforcedisruptionweaddressedit.Weputanewleaderin.WeputincrementalsalesforceeffortbehindXifaxan.Wethinkthat'sgoingtobeanimportantpartofthesolution.

ButthereissomeASPquestionsthatwerereallyasaresultofsomeofwhatIwouldrefertoasgainingsomeadditionalaccessandgainingpreferredaccesswhichwethinkaregoodtradeoffs.ButAnne,youmaywanttomakeacommentalittlebitmoreaboutthat.

AnneWhitaker (CompanyGroupChairman):

Ithinkwe'veimprovedtheaccess.Ofcourse,Xifaxanhadgoodaccessbutwehadsomecleaninguptodotoensurethatalltheplanshadthefulllabels,includingtheIBSDindicationsaswell.AndsowedoseeanumberofpriorauthorizationsforXifaxan.

Whatweexperienced,Ithink,aswecameintothefirstpartoftheyearwasjustatransitionactuallywiththevendorwhowassupportinguswithourPAprocess.Andthen,secondly,weknowthathighdeductiblehealthplansthatmorepatientsenrolledinthemthisyearthanpreviousyears.AndwhenaproductlikeXifaxanyouseetheimpactthereaswell.

SoIfeelgoodabouttheaccessgoingforward.Ifeelgoodaboutourhubservicesgoingforwardaswell.Ibelievewecleanedupsomeofthelabelissues,orlabelingthattheplandidnothaveupdated.

AnnabelSamimy(Analyst-StifelNicolaus):

Thankyou.




JoePapa(CEO):

Thankyou.


Operator :

AndrewFinkelstein,SusquehannaFinancial.

AndrewFinkelstein (Analyst-SusquehannaFinancialGroup/SIG):

Goodmorning.Thanksfortakingthequestion.

IwashopingyoucouldaddressabitmoreaboutsomeofthetrendsoutsidetheUS.There'scertainlyalotoffocusonkeyproductsyouhavehere.Youtalkedabouttheimportanceofthelargerglobalfootprint.Ithinkyougavesomedetailsontheamountofdestockinginthefirstquarter,preferablyonanorganicbasis.

TheAmounacquisitionwasasizablecontributoroffsetbythedestocking.Ifyoucouldtalkaboutwhatthatbusinesslookslikegoingforwardandhowtoevaluatewhattherunrateisforwardandhowyouthinkyoucanleverageitasyoumoveforward(audiogap).

JoePapa(CEO):

Thankyou.Thanksforthequestion.Youwerebreakingupalittlebit.

Ithinktherealquestionwastofocusonwhat'shappeningoutsidetheUS,what'shappeningwithemergingmarketsandwherearewewiththatrelativetoboththegrowthrate.Butalsojusthowwearelookingatitwhenyoutakeouttheheadwindsandthetailwindsoutoftheemergingmarketsnumbersandsomeoftheproductsthere.

Sonumberone,theBausch&Lombfranchiseintheemergingmarketscontinuestoperformverystrongly.Oneofthethingsthatwehadtodoisaddsomeincrementalcapacityforsomeofournewcontactlensesbecausetheperformancehasbeenverystrongwiththeproducts.Weareverypleasedwiththat.

Numbertwo,Iwouldsay--thatwasespeciallyinAsia--numbertwo,IthinkoneofthecommentsRobmadeIthinkisreallyappropriateheretosay.AlthoughGAAPrevenueswereup4%,ifyoutakeoutsomeofthenormalizationoftheinventoryquestion,same-storesaleswouldhavebeengrowingatabout10%.Sowethinkthat'sareallystrongperformanceinemergingmarkets.

Numberthree,whatI'dprobablysaythatIthinkisanimportantcommentbeforeaskingRobifhewantstoaddanything,isthattheotherimportantpointIwouldsayaboutourex-USoremergingmarketssegment,isthatmuchofitiseitherBausch&Lombbrandswhichisobviously,wethink,hasaverydurablebusinessortheyarebrandedgenerics.Thecombinationofbothofthose,wethink,areverydurableassets.AndIthinkthat'soneoftherealimportantpointsabouttheValeantex-USbusiness.

It'seitherinBausch&Lombwhichhasmanyconsumer-typeassetswhichwethinkareverydurable.Orit'sinthebrandedgenericbusinesswhichalsohasaverydurablebusiness.

SoIthinkforboththosereasons,aswethinkaboutthefuture,we'reveryexcitedaboutwhattheopportunityistherebecausethedurabilityorsustainabilityofboththesebusinesssegmentsofBausch&Lombandalsobrandedgenerics.Rob,anythingyouwanttoaddtotheemergingmarketsegmentquestion?




RobRosiello (CFO):

Iappreciatethequestion.FromaregionalpointofviewLatinAmericahasseencontinuedgoodgrowth,ashasNorthAsia.Andthenifyougoinsidetheregions,youhavebrightspots,asImentioned,inpartsofEurope.Idothinkthisisanarea,andaswementioned,whenyoumakethatcorrectionoftheinventorydraw-downinRussiaandPoland,youseeoverallemerginggrowthtothelevelsthatIthinkwe'vehadbefore,ofnearly10%.


Thanks.IfIcouldslipinaclarificationontwothingsonguidance?

Therewasachangeintheexpectedworkingcapitalbuildforthisyear.Ifyoucouldclarifythat?

AnddoesguidanceincludeanyrevenueorcostsforthekeyPDUFAproducts,theVesneoorRelistorthatcouldbeapprovedandlaunchedthisyear?

Thanks.

JoePapa(CEO):

Whydon'tIturnthefirstpartofthatquestiontoLindaontheworkingcapitalandthenI'lltakethesecondpart.


Sure.Onworkingcapitalaswetalkedaboutbefore,wewouldexpect--weusuallylookatwhererevenuesaregoing.Andwiththechangetorevenuesrelativetolastyear,whileonecouldevenpotentiallyprojectthere,wecouldhavepotentiallyprojectedasourceofcash.Atthispoint,lookingattheyearandhowthingshaveprogressed,we'reprojectingitsgoingtobeneutraltocash.Justthinkofitrelativetowhererevenueswerein2015versusnowandthegrowthbetweenthosetwoyears.

JoePapa(CEO):

AndLinda,thecommentwasaboutsomeofthemilestoneslikefor[Verota]andsomeoftheotherthings.Thosearealsobuiltinatthistime.


Correct.Soifyoulookon--


Sorrytointerrupt.Iwasaskingiftherewasanyrevenueorlaunchcostintheguidance.

JoePapa(CEO):

Okay.Itwasmorethanthemilestones.Thereislaunchcostinthere,buttobeclear,theVerotaproductisalateintheyear2016--late2016PDUFAdate.SoIdon'twanttosuggest--there'snorevenueatthistimeandwe'regoingtogetreadyforlaunch,butthere'snotanactuallaunch.Thatwillbeplannedsometimeinearly2017,tobeclear.


Thanksverymuch.




JoePapa(CEO):

Norevenue.Okay,nextquestion.

Operator :

UmerRaffat.

UmerRaf f at (Analyst-EvercoreISI):

Thankyoufortakingmyquestions.FirstoneforRob,ifImay.Rob,canyouconfirmthecovenantsoninterestcoverageare$4.7billion,thatyouimpliedEBITDAcurrently?Andmoreimportantly,wheredoyouthinkitisin2017startingsecondquarter?Doesitapproach$5billionornot?That'sthefirstandprobablythemostimportantquestionI'mgettingaswell.

OneforJoe.Joe,IjustwanttounderstandwhatexactlyistheEBITDAforBauschandforSalix?Iknowthere'sthatslide24intherethatimpliesacertainEBITDAmargin.ButIjustwanttounderstand,indollarswhatisBauschandwhatisSalixrightnow?

AndfinallyforAnne.Anne,whereexactlyareyouguysrightnowwithmanagedcareconversationsonthecommercialsidespecifically?Thankyou.

JoePapa(CEO):

We'lltrytoansweryourone-partquestion,Umer.Buttrytogettoit.Firstofall,thequestiononthecovenantsand,Linda,youwanttotakethatpartofthequestion,please.


Sure.Umer,thereisnotonenumberforthecovenantsasyouwouldexpect.It'sanLTMcalculation.It'sgoingtovarybyquarter.Mostimportantly,aswesaid,basedonourcurrentguidance,weexpecttoremainincomplianceofourfinancialmaintenancecovenantsfortheremainderoftheyear.


Whatabout2017?


Wehavenotprovided2017guidanceatthispoint.


Okay.Butcoulditapproach$5billion,thecovenant,startingsecond-quarter2017whentheinterestcoveragethresholdapproaches3X?


Umer,wehavenotgiven2017guidanceandwhatyou'reaskingisnotcleartome.

JoePapa(CEO):

Letmetrytosummarizealittlebit.Linda,ifIsayanythingincorrectlymakesureyoucorrectme.ItobviouslyhasalotofvariabilitybasedontheLTM.Ballparkit'sinthat--forthe2016--ballparkit'sintherangeofsomewhereapproximately$4.7billion.Buttherecanbesomevariabilityandwe'vegotsomecomfortwithwhereweareversusthatnumberinaverysimplisticway.There'salotmoredetailsthatgo




intothatbutconceptuallyit'ssomewhereinthatrelativerange.

I'mgoingtobridgetothenextquestionaboutEBITDAonBausch&LombandSalixand(technicaldifficulty).We'renotatthistimepreparedtoputforwardtheexactEBITDAnumbersforeachindividualbusiness.ThereasonIgavetheBauschbreakout--anditwasreallymoreconsumerbecauseitwasbothBauschandsomeofourdermbusinesses--isthatIwantedtogiveaperspectiveonwhatIthinkisaverydurablebusinessintermsofwhatwehavewithBausch&Lombintermsofitbeingpredominantlyconsumer.There'ssomeobviouslypartsofitthatarenotconsumer.

ButIdothinkthatdurabilityisanimportantpartofreallyaveryvaluableassetandthat'swhywegavetheoperatingmarginsfortheBausch&Lombbusiness.Ithinkbyanystretchofanyvaluationmodel,thatwouldbeaveryvaluableassetforthecompanyandthat'sreallythereasonIgaveit.We'renotgoingtogiveoutthespecifics,though,ontheSalixatthistime.

Lookto,though,thefuturethatwewilllooktoprovidemoredetailedinformationaswelookattheappropriatewaytoguideforthefuture.Butbasedonthe30days,Ithinkwe'llleaveitatthat.Andthen,Anne,there'saquestiononthemanagedmarketsyouwanttocommenton?


Yes,Umer,yourquestionwaswhereareweinthediscussionswiththemanagedmarkets,thepayersandsuch.Andsowe'vehadalotofdiscussionsoverthepast9to10monthsandI'mveryproudofwhattheteamhasaccomplished.IcansafelysaythatIfeelourportfolioissecurefor2016,basedonthediscussionsthatwe'vehadwithregardstocommercialandthenwithany--ofcoursenochangeswithPartDforthisyear.

Now,Isaythatwithacaveatthatpayersoftenwilldocategoryreviewsonaquarterlybasis.SowecouldgetanoticefromapayerthattheydecidedtodoacategoryreviewforQ4orsomethingthisyear.Butthat'sthesituationthateveryCompanyisin.

Soourconversationstodaywiththeteamandwithourpayercustomersarefocusedon2017.WehaveourbidsinforPartD.Andforcommercialfor2017itvariesbyplan.Somewe'rejustdoingextensions.Somewe'redoingcategoryreviewsastheycomeup.ButIfeelverygoodabouttheaccesswehavetodayandthatwe'llbebuildingonthatfor2017.

JoePapa(CEO):

Thankyou,Anne.


Thankyouverymuch.

JoePapa(CEO):


Operator :

DavidRisinger.

DavidRisinger (Analyst-MorganStanley):

Thanksverymuch.IhaveaquestionwithrespecttothenegativeASPs.Iguessit'smulti-partandIapologize,butcouldyoujustexplainwhytherearenegativeASPs,howyouwillfixthat,andthen




whethertherewillbeanynegativeimpactonRxtrendsasaresultofraisingASPs?Thankyou.

JoePapa(CEO):

Sure.David,thisisamulti-partquestionthatI'lltrytogivemybesttowards.Whatwe'vedoneisfirstandforemost,I'llsayweareveryexcitedabouttheWalgreenspairingandwethinkwe'vegotagreatpartnerinWalgreensandwe'relookingtoworkthroughsomeofthesequestions.

Theprogram,asyouknow,isaveryinnovativeprogram,it'sa20-yearprogram.Andnaturallywhenyouputsomethingtogetherthat'sinnovative,you'regoingtoexperiencesomespeedbumps.Andthat'sthewayIwoulddescribewhatweseetoday,isjustsomespeedbumpsbetweenasweputtogetherdifferentpartsoftheprogram.

Theprogram--andI'lltrytodoitasbrieflyasIcould--whenyoucomeforwardtherearedifferentpatientsthatwalkinthedoor.Someareclearlycoveredbycommercialinsurance.Someofthemarecoveredbutthereisapriorauthorizationinplace.Someofthemarejustsimplycashpayingcustomers.Dependingonwhichtypeofcustomeryouare,you'regoingtoenterintoacertainpathwayforhowyourprescriptionsarereimbursedandwhattheylooklike.

Theissuethatwefindisthataswewentthroughthis,therearesomecustomers,patients,thatastheygothroughthispathwaywefindthatwe'rereceivingareimbursementornotreceivingreimbursementdependingonwhat'shappeningwiththatpatient,what'shappeningwiththepriorauthorization,whetherthepriorauthorizationgetsrejectedornotgetsrejected.ThatiscausingsomeofwhatwewouldrefertoasanegativeASP.ThatisthendrivingdowntheASPwiththeWalgreensprogramversusournon-Walgreenscustomers.

Itisouryouattempt,andthereasonIbelieveitcanbefixedisthatwenowhavethedatatolookatthat.Weknowexactlywhereit'scomingfrom.Weknowthetypesofpatientissuesthatwecanaddress.Andwecanworktowardsthatintermsoftryingtoimprovetheoverallprogramand,importantly,theASPs.That'sthereasonwhyI'mverycomfortableIcanfixthis,wecanworkverycloselywithWalgreenstofixit.

Ican'texactlygiveyouwhat'sgoingtohappenwiththeRxtrendsbecausethatwouldbeaspeculationthatI'mnotyetpreparedtodo.ButIwillsaythatweunderstandwhatcanbedonewiththeASPsandweknowthetypesofpatientsthatthisisimpactingandwe'llputtogetheraprograminplaceandworkwithourpartnertogetthatresolved.Idothink--thebottomlineiswedothinkit'sfixable.


Great.Andthenintermsofthesecond-halfgenericsprogram,isthatgoingtohappenornot?

JoePapa(CEO):

Thegenerics,thereisagenericprogramwhichwereferredto,IthinkitwascalledPlanB.ItisscheduledforlaterthisyearandweareworkingcloselywiththeWalgreensteamtomakethathappen.

Onceagain,it'saverynovelconcept.It'saconceptthatisbasedonhavingmoredispensingofourbrandedproductsinplaceofageneric.Wedothinkthere'salargepartofvalue,especiallywiththeprescriberbase.BecauseIthinktheprescribers--Iclearlybelievetherearesomeimportantvehicledifferenceswith--especiallyindermatologyproducts.SowedolookforwardtoworkingthroughthatprogramwithWalgreens.Butonceagain,it'sslatednorthesecondhalfoftheyearatthistime.


Thankyou.




JoePapa(CEO):


Operator :

DavidAmsellem,PiperJaffray.

DavidAmsellem(Analyst-PiperJaffray&Company):

Thanks.AquestionontheUSneuroandothersegment.

Alotoftheseproductsareoff-patentorgoingoffpatent.Canyoutalkabouttheextenttowhichwe'llseegenericcompetition,eitherthisyearornextyearonsomeofthekeyproducts?

Putanotherway,forproductslikeNitropressorIsuprel.Shouldwethinkaboutgenericscomingthisyearornextyear?Andhowyou'rethinkingabouttheerosionofthatbusinessduetocompetition?

Thanks.

JoePapa(CEO):

I'llstartand,Rob,ifthere'sthingsyouwanttoaddtothis.Thisissomethingwehavelookedatveryclosely.We'velookedatthetotalUSneurobusiness.Reallyit'sadiversifiedproductbusiness,isprobablythebestway,becauseit'snotjustaneurologybusiness.Asyoupointout,thereareanumberofproductsthatareoff-patentorsoontobeoff-patent.

WedoexpectthegenericcompetitorsspecificallyonNitropressandIsuprel.Weexpectthemreallysometimeinthenext6to12monthsandthatisthecurrentexpectation.Therearesomeadditionalgenericsthatweexpectinourportfolio.Theytendtobeinsomeoftheotherareas,somedermatologyproductslikeZ ianaandotherproductsthatwedoexpectsomegenericsandwebuiltthatintoourguidancefor2016andbeyond.

Rob,anythingyouwanttoaddtowhatIsaid?

RobRosiello (CFO):

Justthethree.Zegerid,ourcurrentexpectationisQ3.Isuprel,NitropressandVirazole,ourexpectationisearlyin2017.

DavidAmsellem(Analyst-PiperJaffray&Company):

Thankyou.

JoePapa(CEO):


Operator :

CindyGuan.

CindyGuan (Analyst-GoldmanSachs):

Hi.Thanksverymuch.

IwaswonderingifyoucouldgivemorecolorontheperformanceinophthalmologyRxthisyearand




what'stheoutlookthere?

Thensecondly,haveyouhadanyconversationsrecentlywiththeratingagenciesintermsofwhatthey'relookingforindeterminingwhethertheywoulddowngradeorremovethenegativeoutlook?

Thankyou.

JoePapa(CEO):

I'llstartwiththeperformanceoftheophthalmicRx.IalsohaveAriherewithme.Ari,ifyouwanttoaddanycommentsyou'rewelcometodothataswell.I'llturntheratingagencyquestiontoLinda.

OnthehequestionoftheophthalmicRx,Ithinkprobablythemostimportantthingtosaythereisthatwe'vegotsomenewproductscomingintotheportfolio.Specifically,theproductthatTagementioned,latanoprostenebunod,iswethink,areallyexcitingproduct.ThedataontheuseofproductsforglaucomaisactuallythatlatanoprostorXalatan,aproductthatactuallycamefrommypastwhenIwaswithPharmacia,isstillthemarketleader.Itstillhasballparktwo-thirdsofthemarketisinthetreatmentofglaucomaisintheareaoflatanoprost,otherwiseknownasXalatan.

Wehaveaproductthatisbetterthan--orwebelievethatwillbebetterthanXalatanorlatanoprost.Andthatisthereasonthatwe'reveryoptimisticintermsofthefuture.

Now,tobeclear,weneedtogetitapprovedandweareawaitingtheFDAprocessfortheapprovalonthat.ButIdothink,though,thatlatanoprostenebunodthatTagetalkedabout,isreallyexcitingpartofourfuture.

Ari,isthereanythingelseyouwanttotalkabout?Iknowwe'vegotanumberofprogramswe'reputtingtogetherformarketaccesswithourophthalmicbusiness.Anythingelseyouwanttoadd?

AriKellen (CompanyGroupChairman):

yes,maybeacouplepoints,Joe.Oneisthethreeflagshipbrandsorsegments,theLotemaxfranchise,ProlensaandBesivance.AllperformedwellfromasharepointofviewinQ1.LotemaxandProlensagrewthemonthlyscripts6%and2%,respectively,bothgainingshareintheoverallmarket.BesivancedeclinedonaTRxbasis5%butactuallygainedshareinthebrandedsegment.

JoePapa(CEO):

Okay,thankyou.AndLinda,therewasaquestionontheratingagenciesandrecentconversations.


Sure,Cindy,wecontinuetohaveregulardialoguewithbothS&PandMoody'swhocoverus.Andasyouwouldexpect,theywill,fromthosedialoguesandindividualwork,maketheirindividualassessments.

JoePapa(CEO):

Thankyou,Linda.Operator…


Werethetwoincludedinguidanceorno?Relistorandlatanoprost?WerethoseincludedinguidanceassumingtheygetapprovedinJuly?

JoePapa(CEO):




Wedidincludethembutataverysmallrate.Obviouslyreflectingputtingsometypeofprobabilityweightingon--weexpecttogetthemapproved.Exacttimingyoualwayswanttomakesureyou'resomewhatconservativeintiming.Butyes,they'reincludedbutverysmallatthistime.


Okay,thankyou.

JoePapa(CEO):

Nextquestion,operator.

Operator :

DavidMaris,WellsFargo.

DavidMaris (Analyst-WellsFargoSecurities):

Hi.Joe,myquestionshavetodowithtransparencywhichiswhatyoustartedthecallwith.Afewthings.

First,inmid-Mayyoureaffirmedfirst-quarterguidancebutdidn'treaffirmtheyear.Canyouwalkusthroughwhyyoudidn'twithdrawguidanceatthatpoint?

Secondly,whynoGAAPEPSguidance?ItseemslikeprovidingGAAPandthenbuildingtonon-GAAPismoreinkeepingwiththeSEC'sgoalanduseofGAAPandnon-GAAP.

Andthenthird,whatdidtheSECsubpoenaaskfor?Andwhataretheyinvestigating?

JoePapa(CEO):

Okay.I'llstartwiththecommentaryonguidanceandthenthecommentary,Rob,ifyouwanttomakesomecommentsspecificallytotheGAAPquestionthatDavidasked.Letmestartwithguidance.

Sotransparency,Idobelieveit'saveryimportantpartandsomethingIclearlycontinuetohopetoimprovethetransparencyofournumbers.TodaywereportintwoareasandIhopetolookatthatintermsofboththedevelopedmarketsandtheemergingmarketsandlooktoprovidesomeadditionalclarity.Aswhatwedidwithtoday,alittlebitofastartjustonwhatwesaidabouttheBausch&LombandconsumerfranchiseandalsoDendreon.Myhopeistoprovidegreatertransparencyovertime.

Onthespecificquestionof--IjoinedthecompanyonMay2.Myfirst30dayshavebeenfilledwith,David,istoreallygetamuchbetterunderstandingofthebusiness.I'vebeendoingbusinessreviewswithallofthebusinessesandIreallywantedtomakesureIunderstoodwhatwasup,whatwasdown.

Aswithanybusiness,andcertainlytheValeantbusinessisnodifferent,there'ssomethingsthataregoingupandthere'ssomethingsthatarecomingdown.AndbeforeImadeanychangesinnumbersIfeltitwasmostimportanttoreallyunderstandthebusinessesfromAtoZ ,toreallyunderstandwherearewewiththebusinessandwhyarewethereandimportantlywhataretheactionplans.That'swhytome,asItalkedaboutit,IreallytalkedabouttheconceptofwhatIwasdoingwiththisbusiness,reallybeingastabilizationofthecompanyinthenearterm,thenmovingfromstabilizationtoturnaroundandthenfinallygoingtotransformation.

MycommentstodayarelimitedonlytothestabilizationportionoftheprogramandactivitiesbecauseIthinkthatisclearlythefirstareathatneededtheattention.Ithinkthat'sathree-tosix-monthprocess.Andthenwe'llbridgetotheturnaroundandthetransformation.

Butmycommentsabouttheguidancewereittakesalotofworktoreallyunderstandwhat'shappening




inthebusiness,especiallyonethathasthecomplexitythattheValeantbusinesshas.AndI'vebeenworkingverydiligentlyinmyfirst30daystomakesureIdidthat.Rob,alsosomequestionsontheSEC,theGAAPnumbersand--

RobRosiello (CFO):

LetmestartwiththeGAAP.Wefindforourinvestorsitismoreinformativetoguidetothenon-GAAP.Andwedon'tfeelwecanaccuratelypredicttheGAAPguidance.IntermsoftheSECinvestigation--


IfIcouldjustinterruptforasecond.Whatyou'resayingisit'seasiertoguidetonon-GAAPadjustedearningsthanGAAPearnings,orthat'swhatinvestorswant,whichisthat?

JoePapa(CEO):

I'dsayitthefollowingway.I'dsayourhistoryhasbeen,aswithmanycompanies,David,isthatwe'veguidedtotheadjustednumbersandIthinkthat'sreallythewaywediditinthepastandwe'llcontinuetodoitforthefuture.

Thefinalpartofyourquestion,David,wastheSECletterthat--what'stheissuethere.Theletterthatwereceivedconcernedthecompany'sformerrelationshipwithPhilidor,itsaccountingpracticesandpoliciesandanypublicdisclosuresonthematterswiththequestionthatwehadfromtheSEC.ThatwaswhatweareaddressingandwillcontinuetoworkwiththeSEC.

AsIsaid,asamatterofpolicy,wewillworkwithallgovernmentinquiriesandtrytobecooperativeand,importantly,getthoseresolvedasquicklyaspossibletoputthosebehindusandmoveforward.That'sbeenmygoal,asIstatedinmypreviouscomments,andIjustprobablyreiterateatthispoint.Operator,nextquestion.


Thankyou.

Operator :

IrinaKoffler,Mizuho.

Ir inaKof f ler (Analyst-MizuhoSecuritiesUSA):

Hi.Thanksfortakingthequestions.

Canyoutalkabouthowyouthinkaboutthecashreservesneededtoaddressalltheongoinglitigation?Andifallofthesepotentiallegalexpenseswouldimpactyourfuturedebtrepayment?

That'squestionone.

ThenwonderingifyoucouldcommentonAddyiandhowit'sdoing?Andifthere'sanycontractualreasonwhyyoucan'tstoppromotingthatorwhyyouwanttobeinthisbusiness?

Thanks.

JoePapa(CEO):

Letmestartonthecashreserves.Linda,youcanaddanything.




Ithinkthere'stwopartstothisquestion.Numberoneissomeoftheissuesthatwe'redealingwithtoaddressthelitigation.AndIsaidnumberone,wecan'tpredicttheexactoutcomeofanylitigation.Obviouslythesearemorelonger-terminduration.ButyouIdoexpect,asIsaidinthecallearlier,we'regoingtoabsolutelycooperatewithallgovernmentinquiriesand,importantly,we'regoingtotrytoresolvethemasquicklyaspossibleandputthembehindus.

Onthequestion,though,intermsofcashreserves,IthinktheimportantpointIwilladdtothequestion,becauseIthinkit'sgettingtoyourquestion'sreallyimportant,isthattherealimportantissueiswegetbeyond2016andgetinto2017.We'llhaveless,whatIwouldcall,contingentpaymentsandmilestonepaymentsfromabusinessdevelopmentpointofview.Sowe'llhaveactuallymorecashtoputtowardsdebtrepaymentaswethinkaboutthefuture.

AndIthinkthat'sprobablyanimportantcommentaspeoplethinkaboutwherewearewithourliquidity,wherewearewithourdebtcovenantsaaswegetto2017.Wewon'thavesomeofthemilestonepaymentsand/orcontingentliabilitiesthatwe'vehadinthepast.We'dbeabletopaydownmoredebtforthefuture.

Onthefinalquestion,partofyourquestionwasAddyi.WethinkAddyi'sstillaverygoodproductandwe'reexcitedaboutwhattheopportunityis.ItcandidlyneedssomeadditionalactivitiesandAnneandtheteamareworkinghardandtryingtomakethosehappen.AndAriandtheteam,everybody'sworkingtoreallytakealookatwhat'srequiredthereandwhat'sgoingmakethatproductasuccessfulproductforthefuture.

AndIthinkthat'sprobablyaboutasfarasI'llsayrightnow.Westillthinkit'saverygoodprunedwe'lllookforwardtocontinuingtoputmoreresourcesbehinditinthefuturetomakeitasuccessfulproduct.Operator,nextquestion.

Operator :

DouglasTsao,Barclays.

MorganWilliams (Analyst-BarclaysCapital):

Hi,thisisMorganWilliamsonforDoug.Iwashopingtodiginalittledeepertothemanagedcarecontracting.Iwaswonderingifyoucouldprovidesomeclarityonwhetheryou'restillfocusedonbundledcontractsorwhetheryou'renowlookingtocontractonaproduct-by-productbasis?Andthenonthatpoint,howyoucanwestarttothinkaboutexpansionandrebatesasyoutrytoimproveaccessindermandGI?

Andthenonequickfollow-uponapreviousquestion.DoesthenegativeASPthatyou'reseeingthroughtheWalgreensprogramaffecttheWalgreensactivityfeesorwhattheywouldreceivefromValeant?Thanks.

JoePapa(CEO):

Sure.I'mgoingtoaskAnnetofirstaddressthemanagedcarecontracts.TheonlythingI'llsayupfrontonthatisclearlythatAnneandherteamhavedoneagreatjobofgettingtheaccessthatweneedformanagedcaretoday.Sowe'reingoodshapewithwhereweneedtobetodayrelativeto--asyou'rethinkingabouttryingtomodelourbusiness,wethinkwe'vegotwhatweneedtodaygoingintothefuture.ButAnne,anythingyouwanttoadd?


Ijustwanttoreiteratethataswell.Ifeelgoodaboutthepositionthatwe'reintoday.We'resecurefor




2016andI'moptimisticaboutexpandingaccessfor2017.

Specificallyonyourquestionaroundarewebundlingversusindividualcontractsforeachoftheproducts.HistoricallyValeantandthecompaniesithasacquiredhasreallymanagedindividualrebatesforeachoftheproducts.Aswegoforward,we'llworkwithourpayerpartnersandunderstandthatthere'svalueinreallyleveragingourportfolio.

Youmightimagineinareaslikeophthalmology,aswepreparetolaunchnewproductsthere,ordermatology,itcouldbeadvantageousustoleverageourportfolio.We'lltakethatonacase-by-casebasisandreallyunderstandwhatthepayers'needsareaswellasourownneedsandpresentacontractoffering.

JoePapa(CEO):

I'msorry,IknowthesecondpartofthequestionwasthenegativeASPandWalgreens.Remindme,I'msorry,I…

RobRosiello (CFO):

(MultipleSpeakers)service.


Doesthataffecttheactivityfees?

JoePapa(CEO):

No,thesimpleanswerisno.It'saseparatenegotiatedagreement.ButIwouldsaycertainlyaswegoandtalktoWalgreensabouttheprogram,asIsaid,wethinkit'sagreatprogram.It'salong-termprogram,it'sa20-yearprogram.Buttherearegoingtobethesespeedbumpthingsthatwehavetoworkthrough.ButthenegativeASPdoesnothaveanimpactontheservicefees.


Okay,thankyou.

JoePapa(CEO):

Operator,nextquestion.

Operator :

DougMiehm.

DougMiehm(Analyst-RBCCapitalMarkets):

Goodmorning.I'msorrytobeatthistodeath,butIjustreallywanttotrulyunderstandhowwe'regettingnegativeASPsintheWalgreensbusinessonthedermside.

Youdidmentionthatyougotcoveredlives,yougotpriorauthorizationandsomecashpay.ButcouldyouwalkthroughananalysisofhowthatactuallyoccurstogetanegativeASP?

Andthenwhatyoucanspecificallydotoaddressit?

JoePapa(CEO):

Sure.Soletmestartonceagainandtryto--IappreciatethequestionandIneedtobemoreclearonit.




PartiallyreflectsmyfactthatI'monlyhere30days,Ithink.WiththeWalgreensprogram,whathappensisthatpatientscomeinthreedifferentcategories.

You'reeitheracashpayingcustomer,youareacommercialcoveredcustomeroryouhavecommercialcoveragebutthere'sapriorauthorizationprocess.Theissuethatwecomeforwardwithisthatinsomecaseswe'reactuallysendingouttheproductbeforethepriorauthorizationisbeingapproved.

Andinsomecasesthepriorauthorizationmaybeapproved,insomecasesitmaynotbeapproved.AsyougettothatsituationyoufindyourselfinasituationwherethereisapotentialnegativeASPwhenyougoacrosstheentirecategory.Thatispartoftheissuewefindourselvesin.There'salsowithinthatcategorywehavedifferentco-pays.Thedifferentco-payshaveanimpactonwhattheactualASP,oraveragesellingprice,is.Itisamultitudeoffactorsthatcometogether.

ThereasonIbelievethiscanbefixedisthatweclearlyhavethedatanow.We'vegotthefirstquarterbehindus.Weunderstandwhat'shappened.Wehavedata.Wecanlookatthatdataandmakedecisionsaboutwhat'stherightwaytogoforwardwiththeprogram.Andthat'sthereasonIhavetheconfidencethatit'sinWalgreens'interest,it'sinValeant'sinteresttosolvethis.AndIlookforwardtotryingtosolvethiswiththeteamatWalgreens.


Okay,fine.

JoePapa(CEO):



Justafollow-upquestionwithrespecttoyourlaunches.We'dexpecttoseelatanoprosteneandalsoRelistorOral.

Canyoutelluswhatplansareinplaceforthelaunchesandwhenyouexpectthoseactuallaunchestooccur?

That'sit.Thanks.

JoePapa(CEO):

Sure.SoIthinkthefirstthingI'dreferyoutoistheslidethatTagewentthroughintermsofthetimingwherewehavePDUFAdatesforRelistorandlatanoprostinJulyandBrodaisinNovember.Obviouslywe'vegottoworkthroughthefinalstagesofgettinganFDAapproval.Idon'twanttosayexactlywhenitwillhappenbutwedohavePDUFAactiondatesthatwewouldlookforwardtointeractingwiththeFDAonthoseproducts.Sothatreallyistheprimarymetricintermsofgettingtheproductsapproved--orthebiggestmilestoneisgettingitthroughtheFDAprocess.

Beyondthat,we'vegototheractionstepsinplaceforpreparationforit.Wehadour--ifItalkaboutlatanoprost,forexample,wehadourentiresalesleadershipinjust,Ithinkitwas10daysago.Theywereintotalkabouttheyoulaunchprogramsandsomeofthethingsweneedtoaccomplish.We'veclearlybeenworkingonthedifferentpriorauthorizationprocessandothercoverageprocessthatwillberequiredwiththeproduct.Sowe'vegotanumberofseriesofstepsthatarebuiltin.

Wehavebeensomewhat,IwouldIsay,conservativeonwhatweputinforthesalesforthoseforthisyearuntilwegetmoreinformationonexacttiming,exactlabels,etcetera.Butwethinkthattheactionstepsofgettingreadyforthelaunchareunderway.Itwilljustbearesultofreallytryingtogettothatfinal




labeling,gettheproductthroughthefinalFDAprocess.I'mgoingtooffer,Tage,doyouhaveanyothercommentsaboutapprovalprocess?IthinkI'veansweredthat.

T ageRamakrishna(ChiefMedicalOfficer):

Ithinkyou'vecoveredit.

JoePapa(CEO):

Ifanyonehasanyotherrelativetomarketingprogramsortheaccess.


ThisisAnne.Iwouldjustmakeonecommentwithregardtomarketaccesstimeline.Werecognizethatintheglaucomaspaceit'slargelyaPartBpatientpopulationthatwe'llbegoingafter.Sowe'llbeworkingthroughthosetimelinestohopefullyhavetheproductaddedtoformularynextyear.We'llbeindoublyasolidpositionfortheportfolioandmanagingthatthefollowingyear.

ForRelistorOralwe'llbeworkingthroughmarketaccessopportunitiesaswell,onthecommercialaswellasonPartB.Iwouldjustcautionusabitthatittakesalittlelongertogetaccessthesedaysthanitusedto.Wewillbuildthatintoourplanningforeachoftheselaunchproducts.

JoePapa(CEO):

That'swhywe'vebeenconservativeonwhatweputinforsalesnumbers,whatwedidputinactionstepstogetreadyforthelaunchintermsofexpenses.Operator,Ithinkwehavetimeformaybetwoorthreemorequestions.Sonextquestion.

Operator :

AlanRidgeway.

AlanRidgeway(Analyst-Scotiabank):

Goodmorning,guys.IwashopingwecoulddrilldownalittlebitmoreonXifaxanandwhatyouguysareseeing.

Ifyoucouldpotentiallyprovideuswithsomemorecoloronwherethegrowthiscomingfrom,asfaraswhatyou'reseeingasfarasontheHEsideortheIBSside,andifeitherofthosemarketsisparticularlyresponsiblefortheunder-performanceversusyourmodels?

Andthenasafollow-uponthat,couldyoutalktousalittlebitaboutwhatpercentageofthecoveredliveswhichyounowhavereallygoodpercentageofcoveredlives,couldyoumaybegiveussomeinformationastohowmanyofthosestillrequirepre-authordon'trequirepre-authorizationforeachofthedifferentlabels?

Sowehaveabetterunderstandingofhowthismarketmightprogress.

I'llleaveitatthat.Thanks.

JoePapa(CEO):

Sure,thankyou.IwanttobeclearSalix.It'saninterestingcomment.WetalkedaboutSalix'sprescriptionsbeingup32%yearoveryear.That'sinanystretchofanyCompany,that'sagreatproductperformance.Sowe'reveryexcitedaboutthat.




Theissueis,though,thatweareseeingsomedisruptionthatoccurredinoursalesforceoverthe12-monthperiod.Thatdisruptionwassignificantand,therefore,wewantedtomakesurethataswethoughtaboutthefutureofthisproduct,thatwewantedtoberealisticinwhatitmeantforthefuture.Andthat'stheprimaryissue.

IthaslesstodowiththeperformanceoftheproductwithHEortheperformancewithIBSD.Ithadmoretodowithwesawsomedisruptioninoursalesforcebecauseofturnover,becauseofsomeofthechanges.Sowefeltweneededtoberealisticinhowwelookedatthefutureperformanceoftheproduct.

Onthequestion,though,IthinktheansweriswefindbothHEandIBSDasbothbeingveryimportantaspects.ThereasonHEisreallyisthebestdrugfortreatmentofHEpatientintermsofwhatitmeans.It'sachronicutilization.SotheHEpatientisaveryimportantpatientforusandonethatwethinkwecanmakeasignificantdifferenceinthelivesofHEpatientandthereforewe'regoingtocontinuetotrytogetthatmessageout.

Thecleartake-away,though,fromourslideshastobethatifyouthinkaboutwhatwe'reseeing,isthatthereisnot--there'salargemajorityofpatientsthathaveHEorhavethepotentialtodevelopHE,areclearlynotgettingtheproductyet.Andthat'ssomethingwethinkthatthroughgoodprogramswithphysicianeducation,withkeyopinionleadersupportandwithworkingwithactualpatientunderstandingandsalesmaterialsforpatientsandeducationmaterialsforpatients,wethinkwecandoabetterjob.Andthat'sreallywhatwe'retargetedtodo.

Buttobeclear,itwasnotperformingfortherestoftheyearatthelevelthatwaspreviouslyexpectedandweneededtoreducethenumberconsistentwiththat.Onthesecondpartofthequestiononthecoveredlives,Anne,doyouwant--wedohaveagoodpositionwithcoveredlivesbutmaybecommentonthepriorauthorization.


Right.Soagain,wehave98%coveredlives.Ithinkwithaproductlikethis,tobeexpected,thepayershaveutilizationmanagementpackagesinplace.Soabout40%oftheclaimsthatcomethroughforXifaxanhavesomesortofutilizationmanagement.MostofthosearePA,priorauthorization,tolabel.Insomecasesitmightbeaquantitylimit,giventhenewIBSDindication.ThemostcommonPAthatweseeisreallythePAtothelabel.

WithregardtoyourquestionaroundIBSDversusHEandthedifferentratesorjustdifferentcoverage,todaywecontractXifaxanasamolecule.Weareinconversationswithpayersabouthowtodifferentiatethetwoindicationsandprovidedifferentaccesssolutionsforthosedifferentindications.Butasoftoday,welargelycontractthemolecule.

JoePapa(CEO):

Thankyou,Anne,forthatcomment.

Operator,wehavetimeformaybeone--twomorequestions.

Operator :

DavidCommon.

DavidCommon (Analyst-JPMorgan):

Thanksforsqueezingmein.

Ithinkitwouldbeaworthwhileconfidence-buildingmeasureifyouwouldbepreparedtosharethe




actualnumbers,thenumeratoranddenominator,thefiguresthatgointotheratiosforyourtwodebtcovenants.

Andmysecondquestionwhichreallyhasnothingtodowithmyfirst,ifImay,IwonderifIcouldjustcharacterizeyourguidance.Woulditbethesortofguidancethatyou'reequallylikelytoexceedandfallshortof,a50/50case?Orwoulditbeasetofnumbersthatyou'rehighlyconfidentthatyoucanmeetand/orexceed?

Thankyou.

JoePapa(CEO):

I'mgoingtoaddressthesecondpartofyourquestionfirstandthenI'mgoingtoaskLindaifshewantstomakeanycommentsontheguidancepart.Onthesecondpartofthequestiononguidance,IthinkI'vegottousethewordthatIusedduringthecommentary,thatwetrytotakearealisticviewtowardsguidance.

However,insomeareaswherethereissomeuncertaintyaboutexactproductlaunchtimingorexactproductlaunchapprovals,aboutthingsthatwedon'tknowexactlywhenit'sgoingtohappen,wetrytobesomewhatconservativethere.Thingsliketheaveragesellingprice,wetriedtobeconservativerelativeto--wecangetthisfixedbutwedidn'twanttobuildinallthatfixbecausesometimesthingslikethistakesometime.Sowetriedtobeconservativeasitwouldrelatetoareaswhereweknowthere'ssomethingsthatneedtobefixed.Becauseonceagain,there'satimingquestiononit.

ButIthinkintotalwe'vetriedtobe--Iwouldphrasetheguidancecommentaswetriedtoberealisticwithwhatweknow.Wherethere'ssomeuncertaintyonthingsthatneedtogetdone,wetriedtobeconservativesothattherewouldnotbeanyover-statementsinwhatwe'retryingtoaccomplish.

IfwegetaquickresolutionofASP,there'sclearlysomeupside.Ifwegetaquickapprovalandgetreadyfortheselaunches,getthemlaunchedontime,therecouldbesomeupside.Ithinkwetriedtobeconservativeinthoseassumptionswherethere'ssomeuncertaintyinthemarketplace.Onthequestionofthe--thefirstpartofthequestiononthenumeratoranddenominator,Linda,doyouwantto--


David,weappreciateyourfeedback.Whatwe'vetriedtodothisquarterandwesaidwewoulddothisinapriorcall,iswe'veincludedadjustedEBITDAwhichwillhelppeopleunderstandthatmetric.AndwhileIappreciateit'snotidenticaltoourcreditagreement,Ihopeit'sahelpfulpieceofadditionalinformation.


Itis.Iappreciatethat.CouldIalsosayinthecontextofthisguidancequestion,sinceweareaboutfiveweekspastyournormalreleaseofMarchquarterfigures,IthoughtitmightbeworthwhilejusttoaskhowistheJunequarter?

JoePapa(CEO):

SoIthinktheanswerI'mgoingtosayisthatweseetheJunequarterasbeingfavorabletoQ1,soclearlythatisthefirstcommentI'doffer.Idon'tthinkIwanttosaytoomuchmorespecificsonitbecausethere'sstillalotofmovingpiecesinthequarterbutwedoseeitisfavorabletothefirstquarteratthistime.

Iwillpointout,though,thatRobdidanicejobofshowingthebridgeofhowwe'regoingtobuildtotheguidanceforthesecondhalfoftheyear.Andthesecondhalfoftheyearhasthenormalgrowththatwe'llseeinthebusinessandtheseasonalitythatweseeinthesecondhalfofthebusiness.SoIdon'twant




peopletogettoofaraheadofusrelativetothesecondquarter.Rob,anythingyouwanttoadd?


Thankyou.

JoePapa(CEO):

Operator,Ithinkwehavetimeforonelastquestion.

Operator :

GreggGilbert.

GreggGilbert (Analyst-DeutscheBank):

Yes.Canyoucommentonyourcashtaxrateinthemidsingle-digits,Rob,andhowsustainableyouthinkthatis?Istherearuleofthumbtothinkaboutwherethatcangoovertimeandbasedondifferentvariables?

Thanks.

JoePapa(CEO):

Gregg,Ithinkwe'reveryfortunatethatwehaveRobheretoanswerthisquestion.Wehavesomeotheradditionaltaxexpertise.SoRob,I'llturnittoyoufirst.

RobRosiello (CFO):

Cashtaxesmadeupthetwofactorswhichwe'renotbreakingoutthe--we'reonlybreakingouttheeffectivetaxrateofthenon-GAAPmeasures.OurcashtaxrateincludestheeffectoftheNOLsthatwilllastroughly--andI'llletJeremycommentonthetimingofthose.

JeremyLipshy(Director):

SoourcashtaxwillbereflectiveoftheuseoftaxattributessuchasNOLsandcreditaswellasothertimingitems.OurNOLsareprojectedtolastforthenextthreeyearsorsowithintheUSandabout10yearsinCanada.Sowethinkthatwillbefromacashtaxperspective,aneffectivetaxrateinthesingle-digitsforthenextfiveyears.

JoePapa(CEO):

Thankyou,Jeremy.

Ifwe'regoingtobringthiscalltoaclose,Ifirstofallwantedtothankeveryoneforjoiningustoday.Iunderstandthere'salotmoreinformationIneedtoprovideandwetriedtomaketodayalittlebitmorethanjustanaveragequarterbecauseIreallywantedtotalkaboutsomeofthethingswearelookingatstrategicallyintermsofthestabilizingofthecompanyandwhatwe'retryingtodo.

Havingsaidthat,weknowthere'salotmoreweneedtoansweratafuturecall.Ilookforwardtotalkingmoreabouttheturnaroundprogramandthetransformationprogramofthecompany.

ButIwantedtokeepmycommentstodaymostlytowhatIwouldrefertoasastabilizationprogramandhowwe'regoingtofixthedermbusiness,howwe'regoingtoacceleratetheXifaxangrowth,howwelookatthebusinessontheBausch&Lombassetsandwhatwethinkisaverydurablenatureofthoseassets.Tomethat'swhatwasoneoftheimportantthings.




Ialsowantedtomakesurewehadachancetomakepeoplecomfortable,thattheyunderstandtheliquidityandthatwehaveastrongliquidityposition.Wearecomfortablewithourdebtcovenantsrelativetohowwefindourselves.

AndtherewasaninterestingquestionthatIprobablywanttospendasecondon.ThequestionisourGAAPprojectionsforearnings.WeclearlyhavethosebutIthinkwhatwe'vetriedtodoisgivepeopleanunderstandingofouradjustedearningsbecausethatreallyiswhatwethinkisreallyimportantforpeopletounderstandgoingintothefuture.

SoIthinkItriedtocoveralltheitemsbutI,onceagain,wouldsaythankyouverymuch.Ilookforwardtogettingoutthereandtellingyoumoreaboutwhatweseeassomeoftheexcitementinthefuture,especiallywithsomeofthethingsthatTagetalkedabout,whichIthinkistherealexciting,ishowwe'regoingtoimprovepeople'slivesbylaunchingnewinnovativeproductsthatmakeadifferenceinpeople'slives.

Tome,that'stheexcitement.Ilookforwardtohavingmoreconversationswithallofourshareholdersanddebtholdersinthefuture.Thankyouforjoiningustoday.Haveagreatday.

Operator :

Ladiesandgentlemen,thisconcludestoday'sconferencecall.

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