Baxalta Performance Update | Q1 2016 | Page 32 Notice To Investors Non-GAAP Financial Measures: The financial information included in these schedules includes financial measures that are not calculated in accordance with generally accepted accounting principles (GAAP). Reconciliations of the GAAP to non-GAAP financial measures can be found on pages 33 - 36. The non-GAAP financial measures include “adjusted gross margin”, “adjusted operating income,” “adjusted EBITDA,” “adjusted tax rate,” and “adjusted diluted earnings per share”. Non-GAAP financial measures may provide a more complete understanding of the Company’s operations and may facilitate an additional analysis of the Company’s results of operations, particularly in evaluating performance from one period to another. The Company has presented “adjusted operating income,” which excludes interest and other (income) expense and intangible asset amortization; and “adjusted EBITDA” which, in addition to the previous adjustments, also excludes depreciation expense. Additionally, the non-GAAP financial measures presented exclude the impact of certain special items, which are excluded because they are highly variable, difficult to predict, and of a size that may substantially impact the Company’s operations and can facilitate an additional analysis of the Company’s results of operations, particularly in evaluating performance from one period to another. Upfront and milestone payments related to collaborative arrangements that have been expensed as research and development (R&D) are uncertain and often result in a different payment and expense recognition pattern than internal R&D activities and therefore are typically excluded as special items. Intangible asset amortization is excluded to facilitate an evaluation of current and past operating performance, particularly in terms of cash returns, and is similar to how management internally assesses performance. The Company’s management uses non-GAAP financial measures to evaluate the Company’s performance and provides them to investors as a supplement to the Company’s reported results, as they believe this information provides additional insight into the Company’s operating performance by disregarding certain nonrecurring items. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. In addition, these non-GAAP financial measures should not be considered in isolation, as a substitute for, or as superior to, financial measures calculated in accordance with GAAP, and the Company’s financial results calculated in accordance with GAAP and reconciliations to those financial statements should be carefully evaluated. | 
