![]() Valeant Pharmaceuticals International, Inc. Investor Presentation May 2012 Exhibit 99.1 |
![]() Special Notice Regarding Publicly Available Information THE BORROWER HAS REPRESENTED AND WARRANTED TO THE ARRANGER THAT THE INFORMATION IN THIS DOCUMENT DOES NOT CONSTITUTE OR CONTAIN ANY MATERIAL NON-PUBLIC INFORMATION WITH RESPECT TO THE BORROWER OR THE TARGET OR ANY PARTY RELATED THERETO (COLLECTIVELY, “PARTIES”) OR THEIR RESPECTIVE SECURITIES FOR PURPOSES OF UNITED STATES FEDERAL AND STATE SECURITIES LAWS. 2 Note 1: The guidance in this presentation is only effective as of the date given, May 3, 2012, and will not be updated or affirmed unless and until the Company publicly announces updated or affirmed guidance. |
![]() Forward-looking Statements 3 FORWARD-LOOKING STATEMENTS CERTAIN STATEMENTS MADE IN THIS PRESENTATION MAY CONSTITUTE FORWARD-LOOKING STATEMENTS, INCLUDING, BUT NOT LIMITED TO, STATEMENTS REGARDING THE CLOSING OF PENDING TRANSACTIONS, EXPECTED REVENUE AND SYNERGIES, PRODUCT APPROVALS AND LAUNCHES AND FINANCIAL GUIDANCE FOR 2012. FORWARD-LOOKING STATEMENTS MAY BE IDENTIFIED BY THE USE OF THE WORDS “ANTICIPATES,” “EXPECTS,” “INTENDS,” “PLANS,” “COULD,” “SHOULD,” “WOULD, ” “MAY,” “WILL,” “BELIEVES,” “ESTIMATES,” “POTENTIAL,” OR “CONTINUE” AND VARIATIONS OR SIMILAR EXPRESSIONS. THESE STATEMENTS ARE BASED UPON THE CURRENT EXPECTATIONS AND BELIEFS OF MANAGEMENT AND ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE DESCRIBED IN THE FORWARD-LOOKING STATEMENTS. THESE RISKS AND UNCERTAINTIES INCLUDE, BUT ARE NOT LIMITED TO, RISKS AND UNCERTAINTIES DISCUSSED IN THE COMPANY'S MOST RECENT ANNUAL OR QUARTERLY REPORT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ("SEC") AND OTHER RISKS AND UNCERTAINTIES DETAILED FROM TIME TO TIME IN THE COMPANY'S FILINGS WITH THE SEC AND THE CANADIAN SECURITIES ADMINISTRATORS ("CSA"), WHICH FACTORS ARE INCORPORATED HEREIN BY REFERENCE. READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON ANY OF THESE FORWARD-LOOKING STATEMENTS. THE COMPANY UNDERTAKES NO OBLIGATION TO UPDATE ANY OF THESE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE OF THIS PRESENTATION OR TO REFLECT ACTUAL OUTCOMES. NON-GAAP INFORMATION TO SUPPLEMENT THE FINANCIAL MEASURES PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP), THE COMPANY USES NON-GAAP FINANCIAL MEASURES THAT EXCLUDE CERTAIN ITEMS, SUCH AS AMORTIZATION OF INVENTORY STEP-UP, STOCK-BASED COMPENSATION STEP-UP, RESTRUCTURING AND ACQUISITION- RELATED COSTSTBD, ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT ("IPR&D"), LEGAL SETTLEMENTS, AMORTIZATION AND OTHER NON-CASH CHARGES, AMORTIZATION OF DEFERRED FINANCING COSTS, DEBT DISCOUNTS AND ASC 470-20 (FSP APB 14-1) INTEREST, LOSS ON EXTINGUISHMENT OF DEBT, AND (GAIN) LOSS ON INVESTMENTS, NET, AND ADJUSTS TAX EXPENSE TO CASH TAXES. MANAGEMENT USES NON-GAAP FINANCIAL MEASURES INTERNALLY FOR STRATEGIC DECISION MAKING, FORECASTING FUTURE RESULTS AND EVALUATING CURRENT PERFORMANCE. BY DISCLOSING NON-GAAP FINANCIAL MEASURES, MANAGEMENT INTENDS TO PROVIDE INVESTORS WITH A MEANINGFUL, CONSISTENT COMPARISON OF THE COMPANY’S CORE OPERATING RESULTS AND TRENDS FOR THE PERIODS PRESENTED. NON-GAAP FINANCIAL MEASURES ARE NOT PREPARED IN ACCORDANCE WITH GAAP; THEREFORE, THE INFORMATION IS NOT NECESSARILY COMPARABLE TO OTHER COMPANIES AND SHOULD BE CONSIDERED AS A SUPPLEMENT TO, NOT A 2012 FIRST QUARTER FINANCIAL RESULTS FOR 2012, WHICH CAN BE FOUND AT www.valeant.com. SUBSTITUTE FOR, OR SUPERIOR TO, THE CORRESPONDING MEASURES CALCULATED IN ACCORDANCE WITH GAAP. FURTHER RECONCILIATIONS ARE ALSO AVAILABLE IN THE COMPANY’S PRESS RELEASE DATED MAY 3, 2012, REPORTING ITS |
![]() Agenda Executive Summary & Transaction Overview Business Overview Key Investment Considerations Historical Financial Overview Questions and Answers 4 |
![]() Transaction Overview |
![]() 6 Transaction Overview Valeant Pharmaceuticals International, Inc. (“Valeant” or the “Company”) is a multinational specialty pharmaceutical company with a diverse global product portfolio Valeant has continued to demonstrate strong financial performance For the LTM period ended March 31, 2012, the Company generated $2,755 million of revenue and $1,876 million of adjusted EBITDA 1 The Company expects 2012 revenue of $3.4 - $3.6 billion Low effective tax rate and capex resulted in free cash flow of $886 million 2 for 2011 and $311 million 2 for the 3 months ended March 31, 2012 Valeant is planning to syndicate a new $500 million incremental Senior Secured Term Loan B Facility (“Term Loan B”) to repay borrowings under its revolving credit facility and for general corporate purposes, including acquisitions This will allow Valeant to maintain adequate liquidity and financial flexibility Pro forma senior secured leverage will be 1.7x 3 (synergy adjusted) and total leverage will be 3.9x 3 (synergy adjusted) based on LTM March 31, 2012 pro forma adjusted EBITDA of $1,876 million Shortly after the funding date the company expects to complete a recently commenced restructuring of certain foreign subsidiary ownership. Upon completion of the international restructuring, substantially all of the IP rights will be held by newly-formed Luxembourg, Ireland and Bermuda subsidiaries of VPII, each of which shall become guarantors of the senior credit facilities and pledge all or substantially all of their assets to secure those guarantees 6 ¹ EBITDA adjusted for one-time items including acquired in-process R&D, restructuring costs, legal settlements, acquisition-related costs, impairment costs, and other one- time items; pro forma to reflect the full LTM, synergized impact of Elidel, Dermik, Sanitas, Ortho Dermatologics, Afexa, iNova, Gerot Lannach, Probiotica, Natur Produkt, University Medical, Atlantis, Pedinol, and EyeTech acquisitions. Additional details on pg. 37. 2 Not pro forma for the full LTM synergized impact of Elidel, Dermik, Sanitas, Ortho Dermatologics, Afexa, iNova, Gerot Lannach, ProBiotica, Natur Produkt, University Medical, Atlantis, Pedinol, and EyeTech acquisitions. 3 Net of $150 million in cash |
![]() 7 Sources and Uses ($ in millions) Sources Incremental Term Loan B $500 Total Sources $500 Uses Cash to Balance sheet for General Corporate Purposes, Including Acquisitions $230 Revolver Repayment 70 Natur Produkt Acquisition 180 OID, Fees and Expenses 20 Total Uses $500 |
![]() 8 ¹ EBITDA adjusted for one-time items including acquired in-process R&D, restructuring costs, legal settlements, acquisition-related costs, impairment costs, and other one- time items; pro forma to reflect the full LTM, synergized impact of Elidel, Dermik, Sanitas, Ortho Dermatologics, Afexa, iNova, Gerot Lannach, Probiotica, Natur Produkt, University Medical, Atlantis, Pedinol, and EyeTech acquisitions. 2 Estimated cash balance as of May 2012 pro forma for the transaction. 3 Reflects repurchase activity between March 2012 and May 2012. 4 In the 3 month period ended March 31, 2012 the Company repurchased $1.1 million principal amount of its 5.375% senior convertible notes due 2014 for a purchase price of $4.0 million. Convertible debt balance inclusive of unamortized discount. 5 Based upon closing price on 22-May-2012. Note: Leverage multiples are calculated based on total debt net of $150 million of cash and cash equivalents per the credit agreement definition. Pro Forma Capitalization ($ in millions) 03-31-2012 Amount 05-31-2012E PF Amount % of Capitalization x LTM 3/31/2012 PF EBITDA¹ Coupon Maturity Cash² $330 $407 Revolver ($275 million) 0 0 L+275 April 20, 2016 Term Loan A 2,160 2,160 L+275 April 20, 2016 Term Loan B 591 591 L+275 February 13, 2019 New Term Loan B 500 TBD February 13, 2019 Total Senior Secured Debt $2,751 $3,251 15% 1.7x 6.500% Senior Unsecured Notes³ 916 916 6.500% 2016 6.750% Senior Unsecured Notes 498 498 6.750% 2017 6.875% Senior Unsecured Notes³ 939 939 6.875% 2018 7.000% Senior Unsecured Notes 686 686 7.000% 2020 6.750% Senior Unsecured Notes 650 650 6.750% 2021 7.250% Senior Unsecured Notes 541 541 7.250% 2022 5.375% BVF Convertible Notes 18 18 5.375% 2014 Total Debt $6,999 $7,498 34% 3.9x Market Capitalization 14,618 14,618 Total Capitalization $21,614 $22,314 100% 3/31/2012 LTM Pro Forma Adjusted EBITDA¹ $1,876 4 5 |
![]() 9 Key Transaction Highlights Focused R&D Spend with Strong Pipeline of Future Products Capital Structure with Significant Equity Value & Modest Leverage Diversified Specialty Pharmaceutical Company Strong Management Team Significant Free Cash Flow Generation 9 Uniquely Positioned Product Portfolio Favorable Industry Dynamics Successful Integration Track Record |
![]() Business Overview |
![]() 11 Overview of Valeant Headquartered in Montreal, Quebec, Valeant is a multinational specialty pharmaceutical company with a diverse global product portfolio The Company has over 900 products and over 5,800 SKUs, with no product contributing more than 10% of total revenue In September 2010, Valeant Pharmaceuticals International underwent a transformative merger with Biovail, creating a “New Valeant” (the “Company”) with expanded scale and global presence For the LTM period ended March 31, 2012, the Company generated $2,754 million of revenue and $1,876 million of adjusted EBITDA 1 The Company’s specialty pharmaceutical, branded generics and OTC products are divided into four main business lines 2 : U.S. Dermatology – Branded pharmaceutical and OTC dermatology products U.S. Neurology and Other – Branded neurology products and OTC products Canada and Australia – Branded and generic Pharmaceutical and OTC products Emerging Markets – Branded generic pharmaceutical products historically sold primarily in Europe (Poland, Serbia, Hungary, Croatia and Russia), Latin America (Mexico, Brazil and exports out of Mexico), South East Asia and South Africa 11 ¹ EBITDA adjusted for one-time items including acquired in-process R&D, restructuring costs, legal settlements, acquisition-related costs, impairment costs, and other one- time items; pro forma to reflect the full LTM, synergized impact of Elidel, Dermik, Sanitas, Ortho Dermatologics, Afexa, iNova, Gerot Lannach, Probiotica, Natur Produkt, University Medical, Atlantis, Pedinol, and EyeTech acquisitions. Please see schedule on page 37. 2 New segment reporting effective the first quarter of 2012 |
![]() 12 Valeant’s Operating Philosophy Low cost operating structure Minimal headquarters staff All managers work in addition to manage, including CEO True performance-based pay Don’t bet on science, bet on management Avoid discovery Litmus test all development efforts through partnering Low cost, low risk programs – singles and doubles, not home runs Invest in branded, generic, and OTC across select attractive geographies Not overly dependent on any one product or geography Manage our risk - avoid gambling on new chemical entities (NCEs) Acquiring under managed companies with marketed products has higher returns than traditional R&D Avoid the big guys in the areas where they are strong Broad indications in high profile therapeutics areas – cardiovascular, oncology, vaccines Countries – U.S., Western Europe, Japan, China Primary care, building new diseases, blockbuster categories Do not fall in love with your assets – be willing to sell, partner, shut down Big pharma overpays for scarce “strategic” assets Ultimate scorecard is shareholder return If an asset is worth more to someone else, recognize it 12 |
![]() 13 Valeant’s Operating Philosophy (cont.) Be prudent about investing ahead of need – curse of the industry Spending on future indications before drug is approved Building sales force—which is a commodity—ahead of demand Infrastructure – either geographic, corporate Business Development is a CEO and line responsibility Deployment of capital is most important decision for CEO and Board Line management should be involved and select, negotiate, own and be held accountable for deals Change is good – management change quickly in underperforming units Reinforces accountability – both in and beyond unit New ideas, new energy Speed and lack of bureaucracy is the greatest advantage for a small company Clear accountabilities, clear strategy Clear performance metrics No excuses culture Embrace fact-based decision-making Positional power if not accompanied by open-mindedness, smarts, and track record is dangerous Facts trump opinion Meritocratic culture 13 |
![]() 14 Valeant’s Key Marketed Products Dermatology 14 Products focused on patients suffering from actinic keratoses, skin cancer, acne, psoriasis, skin-aging and pigmentation Platform has grown through the acquisitions of Vital Science, Dermik, Ortho Dermatologic, Elidel and Zovirax over the past several years 24% organic product sales growth in Q1 2012 Neurology Targets neurological diseases such as epilepsy, migraines, depression, chronic pain, Huntington’s disease, Parkinson’s disease and orphan diseases 6% organic product sales growth in Q1 2012 (excluding Welbutrin XL, Cardizem CD and Ultram ER) Branded Generics in Emerging Markets Branded generics business develops, markets and manufactures products that are equivalent to their brand name counterparts Robust pipeline of over 250 new product launches Emerging markets area of high focus, with 12% organic growth in Q1 2012 Platform has grown through recent acquisitions of Natur Produkt and Gerot Lannach in Russia, as well as Probiotica in Brazil Product Sales by Segment 1 Q1 2012 Q1 2011 ¹ Q1 2012 total revenue of $856 million and Q1 2011 revenue of $565 million. The percentages exclude dermatology divestiture in Q1 2012 of $66m and $36m in Q1 2011. Canada and Australia 17% Emerging Markets 31% U.S. Dermatology 28% U.S. Neurology 24% U.S. Neurology 38% Emerging Markets 23% U.S. Dermatology 27% Canada and Australia 12% |
![]() 15 15 Geographic Diversity Tailored Market Approach by Region ¹ Q1 2012 total revenue of $856 million and Q1 2011 revenue of $565 million. The percentages exclude dermatology divestiture in Q1 2012 of $66m and $36m in Q1 2011. Valeant Canada Specialty Pharma Valeant US Specialty Pharma Valeant Latin America Branded Generics Valeant Latin America Branded Generics Valeant South Africa Specialty Pharma Valeant Australia Specialty Pharma Valeant South East Asia Specialty Pharma Valeant Europe Branded Generics |
![]() 16 Consistent Financial Performance ($ in millions) Note: Historical financials for Valeant exclude certain pro forma run rate adjustments for completed acquisitions for which financials have not been made publicly available. ¹ EBITDA adjusted for one-time items including acquired in-process R&D, restructuring costs, legal settlements, acquisition-related costs, impairment costs and other one- 2 Adjusted for one-time items and stock-based compensation expense included in SG&A. 16 Q1 2012 organic product growth of 11% Strong organic growth across key dermatology brands $157 $143 $336 $1,125 $1,326 $1,535 $690 $657 $830 $1,928 $2,463 $2,755 FY 2007A FY 2008A FY 2009A FY 2010A FY 2011A LTM 31-Mar-2012 EBITDA Revenue R&D (% of Revenue) Feb-08: Mr. Michael Pearson hired as CEO of Legacy Valeant Sep-2010: Transformative merger of Legacy Valeant with Biovail time items. SG&A (% of Revenue) EBITDA Margin 1 2 58% 14% 42% 13% 42% 5% 31% 6% 23% 3% 23% 3% 22% 56% 54% 40% 22% 23% |
![]() 2012 YTD Achievements Successful acquisition agenda Announced 9 transactions year to date ~$625 million in total purchase price; averaged <2.0x sales Expanded growth platforms in Russia and Brazil Multiple integrations completed and ongoing Several underway: Europe, US Dermatology and Australia R&D productivity and product launches Late stage successes: IDP-108 Robust regional programs 100+ new OTC and Branded Generics products approved/launched in ex-US markets Working Capital Improvement Improved from 35% of LTM revenue in Q4 11 to 30% of LTM revenue in Q1 12 Inventory increased vs Q4 due to stock build related to tech transfers (Brazil, U.S.) Securities Repurchase Program Repurchased over 5.26 million common shares for an aggregate purchase price of $281 million; 316 million fully diluted share count as of March 31, 2012 17 |
![]() New Product Pipeline Geography Key Pipeline Highlights US/Global • IDP 108: Onychomychosis (PIII) • IDP 107: Oral acne (PII) • IDP 118: Psoriasis (PI) • Multiple life cycle management Canada • Opana: Pain • Multiple OTC programs Australia • Opana: Pain • Ziana: Acne • Multiple OTC programs • iNova pipeline: Rx, OTC, Branded Generics Central and Eastern Europe • 200+ Branded Gx and OTC products • 25+ representation products Latin America • 50+ branded Generics and OTC products South East Asia / South Africa • iNova pipeline: Rx, OTC, Branded Generics 18 |
![]() Acquisition Updates Announced YTD 2012 Swiss Herbal Remedies (Canada) – (Expected to close by June) Probiotica (Brazil) – Closed EyeTech (U.S.) – Closed Pele Nova (Brazil) – Closed Pedinol (U.S.) – Closed Natur Produkt (Russia) – (Expected to close mid-year) Gerot Lannach (Russia) – Closed Atlantis (Mexico) – Closed AcneFree (U.S.) – Closed Other Transactions Divested Bioskin Acquired assets – Ortho Dermatologics – Canada Acquired assets – Ortho Dermatologics – Brazil 19 Total Purchase Price = ~$625 million Expected 2012 Revenue Run Rate = ~$280 million Sales Multiple Paid = <2.0x As part of our business strategy, we pursue acquisitions as opportunities arise. We are actively evaluating and engaging in discussions concerning potential acquisition targets, some of which could occur in the near term and/or could be material |
![]() Progress on 2012 Synergy Program 20 Run rate expected by mid- year Run Rate May 3, 2012 $200 million $165 million Run Rate Feb 23, 2012 $135 million Run rate expected by Year- end $230+ million* * Includes acquisitions announced and closed in 2012 |
![]() Annual Financial Guidance for 2012 21 Previous Guidance Revenue $3.1 - $3.4 billion $3.95 - $4.20 Adjusted Cash EPS > $1.2 billion in Adjusted Cash Flow from Operations As of May 3, 2012* Revenue > $3.4 - 3.6 billion $4.45 - $4.70 Adjusted Cash EPS > $1.4 billion in Adjusted Cash Flow from Operations * Earnings guidance as of the given date of May 3 , 2012 only. Please see Note 1. rd |
![]() Investment Considerations |
![]() 23 Key Transaction Highlights Focused R&D Spend with Strong Pipeline of Future Products Capital Structure with Significant Equity Value & Modest Leverage Diversified Specialty Pharmaceutical Company Strong Management Team Significant Free Cash Flow Generation 23 Uniquely Positioned Product Portfolio Favorable Industry Dynamics Successful Integration Track Record |
![]() Q1 2011 Diversified Specialty Pharmaceutical Company More than 900 products marketed with over 5,800 SKUs Vast array of therapeutic categories including neurology, dermatology, and a broad generics business Highly diversified revenue stream No product contributing more than 10% of total revenue Limited near term patent and U.S. healthcare reform risk Broad geographic distribution further enhanced by recent acquisitions 24 Product Sales by Segment 1 Product Sales by Geography 1 Q1 2012 Q1 2011 Q1 2012 ¹ Q1 2012 total revenue of $856 million and Q1 2011 revenue of $565 million. The percentages exclude dermatology divestiture in Q1 2012 of $66m and $36m in Q1 2011. Canada and Australia 17% Emerging Markets 31% U.S. Dermatology 28% U.S. Neurology 24% United States 52% Canada and Australia 17% Emerging Markets 31% U.S. Neurology 38% Emerging Markets 23% U.S. Dermatology 27% Canada and Australia 12% Emerging Markets 23% United States 65% Canada and Australia 12% |
![]() Uniquely Positioned Product Portfolio Product portfolio contains few products that necessitate large R&D or promotional spend Existing marketed products and sizeable generics business mitigate the risk of market share erosion due to generic competition 25 Product Segment Comments Emerging Markets Central Europe Latin America South Africa Southeast Asia Highly diversified product mix with >500 products No patent expiry risk Robust pipeline of >250 new product launches Dermatology Zovirax Topical cream and ointment for the treatment of herpes Off patent since 1997 and still retains a majority of the market share for the treatment of topical herpes As a topical, it is difficult to demonstrate bioequivalence, hindering the development of a competing generic product Neurology Wellbutrin XL Antidepressant drug which has been off patent for several years yet still retains strong market position in the U.S. Ability to stay ahead of the generic erosion curve has been attributed in part to concerns about generics having potentially differing efficacy to the branded version Considerable brand loyalty among physicians has developed as it tends to be a 3rd/4th line treatment for depression Xenazine Approved in the U.S. for the treatment of chorea associated with Huntington’s disease; Only approved treatment in the U.S. - commands premium pricing and extended IP leverage through its orphan drug designation Sold in the U.S. through Lundbeck and in Canada (brand name Nitoman, where it is also approved for other indications) OTC and Other CeraVe OTC skin care line continues to see significant growth; CeraVe grew 52% YoY in 2011 versus 2010 Frequently ranked as the most recommended skin care product by dermatology nurses (over 70% of the time) 2012 2013 2014 2015 2016 Products 1) Benzaclin None 1) Atralin 1) Xenazine 2) Acanya 1) Retin-A Micro 2) Elidel Total 2011 Revenue ~$76 million $0 ~$25 million ~$140 million ~$150 million US Patent Exposure |
![]() 26 Favorable Industry Dynamics Large and growing market 2010 Global pharmaceutical market sales of $875 billion Market expected to grow at a 3 - 6% compound rate to ~$1.1 trillion by 2015 Aging demographics will continue to drive global healthcare spend Near-term opportunities for generic and specialty pharmaceutical companies Branded Generics / OTC Global generic spend is expected to grow at a 13.1% CAGR through 2015, driven by both emerging markets and developed markets working to reduce healthcare expenditure Selected Specialty Areas (ex. Dermatology, Oncology and Pain) Emerging Markets Pharmaceutical sales in key emerging markets are expected to nearly double in sales, adding $150 billion by 2015 Limited patent risk 26 Source: IMS Health and Wall Street Research 1 Inclusive of anti-depressants and mood stabilizers. |
![]() 27 Focused R&D Spend with Targeted Pipeline of Future Products Valeant’s “Leveraged R&D” allows the company to progress development programs while limiting R&D spend and increasing the probability of success and effectiveness for the compounds in its pipeline The Company strategically partners and in-licenses products, annual R&D expenditure ~3% of sales Valeant has a strong history of effective partnerships and in-licensing Potiga / Trobalt 1 partnership with GSK Licensing agreements with Meda on Elidel, Xerese, etc ¹ Trobalt is now referred to as Potiga in the United States; Trobalt remains the brand name for territories outside the United States. 27 |
![]() 28 Successful Integration Track Record Proven integration process drives significant synergies and improved organic growth The senior management team has significant experience managing integrations, having completed ~30 product and / or company acquisitions of various sizes over the past 4 years, including: Most notably, Valeant’s merger with Biovail which closed in September 2010 demonstrated synergy realization well ahead of schedule AcneFree Atlantis Aton Pharma Delta Biovail / Valeant Merger Bunker Coria Labs Dermatech Dermik Laboratories Dow Pharmaceutical Sciences EMO-FARM EyeTech Gerot Lannach iNova Laboratoire Dr. Renaud Natur Produkt Ortho Dermatologics Pedinol Pele Nova (minority stake) PFI PharmaSwiss Probiotica Sanitas Swiss Herbal Assets Tecnofarma Vital Science Zovirax Nov-2010 Estimate Jan-2011 Estimate Current Estimate Full Year Run Rate $300 million $300 million $350 million Time to Achieve End of 2012 End of 2012 End of 2012 2011 P&L Impact $200 million + $250 million + $300 million + |
![]() Significant Free Cash Flow Generation Valeant’s top-line growth, high operating margins, modest capital expenditures and working capital requirements result in significant free cash flow generation 2011 Free Cash Flow of $866 million (excluding synergies) Pro forma free cash flow supported by efficient corporate structure (low corporate cash tax rate < 10%) Limited capital needs 2011 capital expenditures of ~$48 million Note: Historical financials for Valeant exclude certain pro forma run rate adjustments for completed acquisitions for which financials have not been made publicly available. 1 Free Cash Flow defined as operating cash flow less capital expenditures. Not pro forma for the full LTM synergized impact of Elidel, Dermik, Sanitas, Ortho Dermatologics, Afexa, iNova, Gerot Lannach, ProBiotica, Natur Produkt, University Medical, Atlantis, Pedinol, and EyeTech acquisitions. 29 Ability to Generate Cash Valeant’s ability to generate cash will enable it to pay down debt while providing the financial flexibility to continue to invest in its business $482 $434 $740 $1,103 $1,268 $1,487 $64 $39 $27 $22 $59 $48 FY 2007A FY 2008A FY 2009A FY 2010A FY 2011A LTM 31- Mar- 2012 EBITDA-CapEx CapEx 1 |
![]() $21,709 $3,251 $7,498 Enterprise Value Debt Secured Debt Total Debt Capital Structure with Significant Equity Value and Modest Leverage ($ in millions) Conservatively capitalized with total debt to capitalization of 34% Pro Forma Senior Secured Leverage of 1.7x and Total Leverage of 3.9x 1 Market capitalization as of 22-May-2012. 2 Debt balances pro forma for proposed $500 million capital raise 30 Specialty Pharma Landscape Significant Enterprise Value Coverage ~6.7x Coverage ~2.9x Coverage $28,091 $16,624 $14,618 $9,404 $9,075 $8,768 $5,169 $4,073 Allergan Shire Valeant Mylan Watson Forest Warner Chilcott Endo 1 2 |
![]() 31 Experienced Management Team 31 Valeant has a strong management team with substantial industry experience Valeant is led by Chairman and Chief Executive Officer J. Michael Pearson Pearson previously served as Head of the Global Pharmaceutical Practice and head of the Mid- Atlantic region of McKinsey & Company Over a 23-year career, he has worked with leading Chief Executive Officers and was an integral driver of major turnarounds, acquisitions and corporate strategy J. Michael Pearson Chairman of the Board and Chief Executive Officer Appointed Chairman and CEO of Legacy Valeant in February 2008 Prior to joining, Mr. Pearson was a Director at McKinsey & Company Prior McKinsey positions include: McKinsey's Board of Directors, head of the global Pharmaceutical Practice and head of McKinsey's mid-Atlantic region Howard Schiller Executive Vice President and Chief Financial Officer Mr. Schiller joined Valeant in December 2011 Prior to joining, Mr. Schiller was Chief Operating Officer for the Investment Banking Division at Goldman Sachs, responsible for the management and strategy of the business During his 24 years at Goldman Sachs, Howard advised large multinational companies on strategic transactions, financings, restructurings, and leveraged buyouts Rajiv De Silva President and Chief Operating Officer of Specialty Pharmaceuticals Mr. De Silva joined Legacy Valeant in January 2009 Previously, Mr. De Silva held various leadership positions with Novartis AG including President, Novartis Vaccines USA and Head, Vaccines of the Americas Mr. De Silva was previously a partner at McKinsey, focused on the pharmaceutical industry Robert Chai-Onn Executive Vice President, General Counsel & Corporate Secretary Mr. Chai-Onn joined Legacy Valeant in 2004 as Vice President, Assistant General Counsel Prior to joining Valeant, he was a corporate lawyer at the law firm of Gibson, Dunn & Crutcher LLP Brian Stolz Executive Vice President & Chief Human Capital Officer Mr. Stolz joined Valeant in July 2011 Prior to joining Valeant, he was a Principal at ghSMART and a consultant at McKinsey & Co. |
![]() Historical Financial Overview |
![]() Adjusted EBITDA – CAPEX 1 33 33 Pro Forma Financial Review ($ in millions) Revenue Adjusted EBITDA 1 Source: Public Company Filings Note: Historical financials for Valeant exclude certain pro forma run rate adjustments for completed acquisitions for which financials have not been made publicly available. 1 EBITDA adjusted for one-time items including acquired in-process R&D, restructuring costs, legal settlements, acquisition-related costs, impairment costs, and other one- time items; Not pro forma to reflect the full LTM, synergized impact of Elidel, Dermik, Sanitas, Ortho Dermatologics, Afexa, iNova, Gerot Lannach, ProBiotica, Natur Produkt, University Medical, Atlantis, Pedinol, and EyeTech acquisitions. $48 million of 3/31/2012 LTM Capital Expenditures. 2 Free Cash Flow defined as operating cash flow less capital expenditures, excludes expected synergies. Not pro forma for the full LTM synergized impact of Elidel, Dermik, Sanitas, Ortho Dermatologics, Afexa, iNova, Gerot Lannach, ProBiotica, Natur Produkt, University Medical, Atlantis, Pedinol, and EyeTech acquisitions. Free Cash Flow 2 Valeant Biovail Synergies |
![]() $452 $495 $464 $515 $565 609 $601 $688 $856 Q1 Q2 Q3 Q4 34 Quarterly Revenue Trends ($ in millions) 34 Note: Includes out-license of Cloderm in Q1’2011 and divestiture of dermatology products in Q1’12 Consistent quarter over quarter performance Pro Forma 2010 2011A 2012A |
![]() First Quarter Performance ($ in millions) 35 11% organic revenue growth in 1Q 2012 (excluding the impact of foreign exchange and acquired sales) Strong volume increases across all segments outside of U.S. Neurology 74% gross profit margin in Q1 2012 $113 million spend in Q1 2012 under the new $1.5 billion securities repurchase program approved in November 2011 ~$172 million spend in Q2 2012, bringing total program spend to $443 million since November 2011 $565 $856 1Q 2011 1Q 2012 Total Revenue Adjusted Cash Flow from Operations $204 $322 1Q 2011 1Q 2012 – Increased Canada contract manufacturing – Product mix (U.S. & Europe) – Unfavorable exchange rates (Europe) – Delayed plant construction — Sequential increases in cost of goods sold: |
![]() Q1 2012 Cash Flow Bridge ($ in millions) 36 $164 $322 $350 $113 $302 $11 $87 $8 $330 Cash December 2011 Securities Repurchases Acquisitions CapEx Restructuring/ Integration/ Legal Settlements Other² Cash March 2012 Net Issuance LT Debt Net Cash Flow Generated¹ ¹ Includes impact of divestiture of IDP-111 and 5FU 2 Includes payment of withholding tax upon vesting of share based awards, one-time working capital adjustments, proceeds from the exercise of stock options and other miscellaneous cash outflows |
![]() 37 Pro Forma EBITDA Reconciliation 37 March 31, 2012 LTM EBITDA ($ millions) GAAP Operating Income $287 + Restructuring and Other Acquisition Related Costs¹ 180 + Acquired In-Process R&D 107 + Legal Settlements 15 + Purchase Price Step-Ups² 164 + Stock-Based Compensation Expense 33 + Depreciation and Amortization and Other Non-Cash Charges 701 + Other one-time Adjustments³ 48 LTM 31-March-2012 Adjusted EBITDA $1,535 + EBITDA and Synergy Adjustments for Announced and Completed Acquisitions 4 341 LTM 31-March-2012 Pro Forma Adjusted EBITDA $1,876 1 Restructuring and other acquisition related costs include R&D cancellation and wind-down costs, employee severance, accelerated equity compensation, facility closures, and other restructuring costs. 2 Adjustments from purchase price step-ups from acquisitions including inventory, PP&E, and stock-based compensation. 3 Includes one-time FX adjustments. 4 Includes LTM EBITDA and synergy contribution from completed acquisitions of Elidel, Sanitas, Dermik, Ortho Dermatologics, Afexa, iNova, Gerot Lannach, Probiotica, University Medical, Atlantis, Pedinol and EyeTech and LTM EBITDA and synergy contribution from announced but not yet completed acquisitions of Natur Produkt for the twelve month period ended March 31, 2012. |
![]() Questions and Answers |