PRGO - Earnings call transcript Q2 2018

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Operator

Good morning, and welcome to the Perrigo Second Quarter 2018 Financial Results Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask question. Please note this event is being recorded. I would now like to turn the conference over to Brad Joseph, VP, Investor Relations and Communications. ahead. go Please

Bradley Joseph

this morning, the XXXX Good a welcome Perrigo's our issued to to release of Thank available presentation is Conference everyone, for Call. Quarter on earlier we releases Earnings the as had A Hope Second copy review the is you. website, press and morning. slide you chance call. all this

call, Ron and participants Winowiecki. Please the are language call and our Röhrhoff; morning. Uwe issued in today's that statements. CEO, during make press Safe statements Perrigo everyone will earlier President this this like forward-looking refer I'd important Perrigo's investors Joining to information Harbor remind CFO, and release these and to regarding for shareholders

for measures In for the addition, in appendix non-GAAP reconciliations presented. all today's provided we've financial presentation,

agenda slide the to on X. Turning

will exclusive to morning's performance discuss provide highlights licensing Nasonex. business, of go RX separation our share to value-creation for non-prescription commentary announcement pursue on Pharmaceuticals Uwe the of roadmap, will S. first of the milestones to morning's and for the the Prescription for the this half related version a agreement including of this approval then regulatory U. year. rights First, planned or additional on details Uwe on

Next, of Ron segment, guidance. second and results our XXXX the performance our by will discuss quarter strength updated sheet, balance

will then questions. we Finally, open up for the call

Uwe. over like I'd to the turn Now call to

Uwe Röhrhoff

RX start Pharmaceutical I Brad. will comments separate my business. today announcement the you, Thank the on to

respective strategic, The industry are are and They of divergent operational strength from platforms dynamics many of Perrigo's segments commented and a my requirements. and As I've markets. opportunities within navigating with both and their well-positioned RX Perrigo, seven times during starting consumer respective unique, their are in our at financial, spaces. first are well-established months each position

and I analysis market an and market segments, the in intense innovative product-driven agility diagnostics. surveys, which competitor the distinctly risk leveraging durable of of that discuss goods different As detail of limited servicing minute, of RX designed a creates solutions, solution a and performed and business analysis customer to roadmap, respective their combining of fast-moving customers marketplace chain business at including intense our requires management, in self-care will purchase. consumer consumer more a outside operates complex distributor. focused businesses, bottoms-up we model customized This capabilities oversimplifying, portfolio the in point our each of value-creation which is part of from number supply meet our At by model

portfolio we phase products. on creates capitalize During Perrigo of separation review, the value-creation of RX the a our differentiated generic final platform the its that have better which RX concluded of shareholders to extensive an business business include roadmap, for enables and pharmaceutical value

most effective respective announcement our unlocking By value consumers Perrigo and as the enables financial growth all capital execute our energy management for shareholder. positioned consumer RX meet Perrigo is and to to initiatives. operating our today's potential value-creation our to for greater and the on and companies. businesses customers, is leadership In Importantly, is potential committed to businesses, each team The respective while of two business. on expanding consumer separate healthcare focus summary, leading driving structure the committing needs of better

options customers. individual top solutions the to and in be Throughout for the for expected and consumer remains The to businesses tax-efficient board We process, in board. this management to or RX consider merger, separation both a have high-quality separation with our driving strategies XXXX. growth separation the commitments and will delivering The is and assist the priority to including of half our completed these engaged external process shareholder. value-enhancing working advisors second on advisors sale, our is closely all innovative

a approved the we separation any board disclose specific action deems Going company not about developments further until the will that forward, has process appropriate. the

slide our for value-creation to roadmap. will briefly X. used Turning framework the discuss I

initiatives this our strengthen the review previously a initiated comprehensive XX the position to team members businesses than market operating we develop represents of long-term exercise I our during understand we the by efficiencies the our a September increase operational and our income shareholder and to March, throughout our roadmap and drive businesses believe identified efforts intense driving inorganic I call opportunities by positioning, discussed growth, providing encouraged am as webcast top-line customers conference return. look review consumer forward designed organic output in scheduled leader. total and update specific can process As a on to our in with The the of roadmap. presented for focus growth, to increase XXXX. more enhance Perrigo strategic on develop this competitive comprehensive a our and capabilities both better XX, drive exciting and of

X. slide to Turning

the identified switch This provide OTC alternatives. and growth outcome a value-creation to within execute growth for enhancing framework pathway to: new long-term roadmap three, one, store brand our and of existing this with our Healthcare an exemplifies opportunities in-licensing our drive OTC establishing to supply opportunities. the and of offerings; switches; roadmap, This leverage our franchise. OTC an durable one future portfolio growth; announcement select selected opportunities, illustrates efficient strategy pathway expand and Consumer two, infrastructure; As announced Americas the categories for future growth RX from exciting brand organic opportunities morning expand for commitment we new our value-creation chain,

version and vested are differentiation, holistic who's self-health by store a competitive we for partners in manufacturer economics committed our only and brand a our retail driving to OTC of Given the solution. providing brand

Nasonex first and expand Perrigo, the strengthen the us acquisition and of X. provides is Turning allergy to opportunity for a category. kind to product its slide The

the seeking to on of type example we our intranasal in consumers products we and important strategic capitalize the the more timeframe. other this As roadmap. product to we opportunity five-year category as quickly execute diligently bring of average working are a have from customers OTC prescription switched switch allergy are is previously OTC status, than This to perfect to

highlights our Now, to turning slide X. operational on

Americas business, to the year this store are achieving and business, approximately the discuss this grew operating continues the our XX.X% prior which business nutrition XXXX, half gain For Ron versus continues as be our infant first OTC franchises, strong, first to shortly. X.X% our in year. the remains adjusted our improvement The margin by experiencing to animal durable, In XX-basis-point of compared brand prior for EPS market-leading half challenges will of a despite The met evidenced of performance year, combined CHCA operating calendar our adjusted in year. share, health which we business goals.

Healthcare Consumer Turning to our International segment.

currency improvements relatively flat of half fund sales on margin excluding operating as gross greater XXX from to in segment were challenges, we the RX margin higher product to operating continue year, coupled adjusted prior business half we gross experienced points and primary exited half in than in resulted the market growth in has our drive the to price and year, of the than profit brand the organic points launches, Benefits constant investments pipeline. Adjusted which basis, margin. first the first focused net been insourcing with to the and disappointing an XXXX, adjusted drove in our making the initiatives basis challenging weakness Despite the strategy our of first with while erosion approximately commitment in changes improved basis due new versus investments For the gross expansion. The these XX%, operating higher to for a and XXX adjusted expectation. increased increased realized margin In reason year, R&D, underperformance in dynamics, our is guidance. business the of an shortfall XX% for demonstrating businesses.

year. once our cash the XXXX. balance the conversion our million first Finally, and to income of repurchased half of generation that to cash flexibility, two Utilizing flow strong To-date our delivered value durable half decisions commitment during nearly important net XX% shares we illustrate was approximately we flow our again consistent of flow. announced sheet shareholder creation. free cash first worth the platform $XXX Adjusted for adjusted

respective enhance and the potential that enable First consumer was of businesses. to RX a separation us value-creation business of RX the our will

an strategies XXXX. value-creation roadmap announced from XX, pathway strategy expand innovative Nasonex growth We RX-to-OTC in switch. to our franchise identified with the on September look our sharing to we Second, OTC our forward

will call the turn Ron. I over to Now

Ron L. Winowiecki

Uwe. Thanks,

well-positioned store consistent XX months focused last these CHC on by consumer durable brand continue continued start our International our the me businesses Each the into both basis, share second businesses of and constant heading team an as deliver to market the half results of over year. organic saying performance execute to on currency Let gain are brand segments to continued grew consumer strategy. of our as our

guidance discuss will I by for followed for our performance updated quarter, the Next, second our XXXX. results

$XX non-GAAP is a effect adjustments. primary of quarter. exclusion $XX due second net XX, Net of was acquisition-related tax and adjustments. tax were you tax pre-tax The contingent rate adjustments XX.X% results compared income a to income and see million can the million. driven Turning and $XX of primarily in are of percentage results to GAAP reported expense pre-tax to $X.X charges as the the our by the for The amortization GAAP expense in consideration non-cash billion of reported sales million quarter, slide XX.X%. difference was to the

net a or sales million, Net X% tick prior were quarter Americas a decline constant year, the XX. channel in to than due in in Turning year, $XXX a business $XXX to primarily late a to were lower the to the flea CHC results basis. of million start this compared and by driven The in currency were slide XX% prior and on Sales lower on business. approximately sales the health animal the season. dynamics decline

infant category, the Sales and combined was continued drive Our grew cessation lower net to cough/cold/allergy were year our OTC levels, product offset the X% historical offerings in to to continued by net approximately coupled the performance strong as nutrition expand franchises by with infant prior customers. sales market-leading in erosion category. we sales OTC smoking with we the the growth. compared to partially consistent as sales net driven nutrition in strong price

were these input million. XXX basis primarily continued for the to product year, profit points was The sales in prior costs. offset due health the higher business, below for to improvement team product costs. quarter quarter higher New lower gross margin margin to $XX sales to Adjusted drive higher XX.X%, initiatives the in of the addition animal

may gross administrative the as adjusted XX.X%, the year, The the to vary selling the was improvement margin and partially points the lower and margin from quarter. the the timing actual XX amount in year, lower reduced team operating quarter basis compared offsetting increase. proactively cost for expenses of the prior However, than prior

half of business. improvement operating prior illustrating year, XX.X%, this of first was durability the the margin XXXX, a over XX-basis-point adjusted For the

mix, organic sales Sales Net product on was growth. the XX. sales team over of initiatives. constant currency year. quarter of sales year compared and discontinued International to in compared over the by million in an prior to prior declined these an and as slide million, lower points the due investments increased approximately margin year. year, increase XX.X%, analgesic of $X in sales CHC addition second to basis. of Adjusted X% half ship was product Net XXX XX.X%, by the of the Net slightly $XX increase Adjusted were year, orders $XXX the were products continued now in on will launches product in offsetting million. margin to that the insourcing Turning the driven anti-parasite, the in categories, to XX new in new improved prior now lower to fund were were lifestyle points effects the quarter $XXX operating continues of basis prior the the gross benefit Partially million. basis an

margin to year, mix, continued product for first XX.X%, half For higher the products new the of In the future with first of launch nearly including growth the commercial investments, the margins, this year, team and teams XXX over deliver providing business. prior this of operating our on growth profit of to the baseline prioritized in improvement basis increase adjusted continued was our an points half XXXX, initiatives. as improve

million, $XXX Turning to Reported in last were XX. sales net million RX to the year. $XXX compared on slide quarter

gross the on quarter than to changes impact was net of lower existing partnership price by net New last primarily than was XX%, million effect of of year, the products. $XX product were approximately partners, to of primarily due more greater pass-through strong the lower of by Sequentially, due driven to last which at same products was erosion. Adjusted was million, Due XX.X% to primarily year-over-year price gross relatively margin the margin was Compared offset the erosion product Compared in the to second and lesser quarter. by year, sales investments $X consistent net was sales was effects higher affected flow-through Adjusted price sales. and the year, sales. a operating gross in a than a gross XXX margin expected, margin in the to the to compared R&D mix second in quarters adjusted basis same XX.X% of of percentage margin margin XXXX. due and adjusted XX.X% pricing. points gross to first prior quarter XXXX as

adjusted XX%, For investing the was XXXX, compared approximately XX% to of more margin operating the year. prior half first approximately in while R&D

now Turning to XX. slide

businesses. Our and flow underscoring balance the our cash strong, sheet remained strength generation of

June on approximately balance was $X.X billion. outstanding debt the $XXX sheet of XXXX, million cash XX, and total As was total

cash operations. of first million the from During $XXX generated six months in XXXX, we

operations GAAP cash in from from income would XX% with cash $XXX sheet, half million a the cash for related balance believe Merck of $XX nearly conversion year-to-date results our of as This strength to cash which in first Nasonex combined flow of total in Excluding the flow, year. a net licensing percentage marketplace. our million. We the adjusted included differentiates adjusted the flow operations, investment, is the of us strong

decisions allocation long-standing commitment total shareholder our the returns are within capital to policy. investment-grade Our of context financial on focused

capital As share in million in in Year-to-date, and of completed allocation and repurchases paid $XX we and dividends part the $XXX of we quarter. of balanced approximately million our share dividends. second approximately $XX paid completed $XXX million repurchases million disciplined strategy,

continues Americas, share segment beginning a in to durable XX. on let's consumer soft our Now guidance market. gain discuss each CHC platform our updated In with slide

expect continue approximately to net We billion. sales $X.XX of

the and our infant business, the approximately by excluding includes of businesses. reminder, quick sales net growth market-leading versus nutrition a animal impact As year, the health guidance X% driven OTC last

health business, As margin loss CHC call or currency higher XX%. lower calendar animal and half operating efficiencies. discussed May, at by in anticipate International, to movements, business, $X.XX during second the of animal coupled due near guidance billion. has input levels, record Adjusted the to operating Due which of includes in initiatives partnered health performance be to unfavorable continuous adjusted improvement margin impacts high-margin earnings in adjusting product to operating Americas the business chain XXXX. the the net we approximately driven been the XXXX supply now approximately In foreign primarily the in costs, this CHC sales we guidance with are

business segment drive guidance for an is to organic margin to Second guidance adjusted on X% gross XXXX to growth, actions XX.X%. basis, adjusted at to as with half improving while margin approximately we're the our team The currency operating to expand taken we X% fund strategy. be updating investments growth in approximately still this drive profile $XXX adjusted RX, constant In margin the enable expected have approximately million, to organic us year remaining the in continues sales our to focused unchanged net to XX%. operating brand this

provide me the changes Number guidance. in one, RX segment specific generic let details slide XX, to ProAir. more the Turning into

which response on letter benefit. we release of the we issued letter generic press XXXX, and stating of expected in-licensing new fourth number May keen remain product specific earnings our to per approximate achieve authorized received were complete this The partnership through partnerships on was no XXXX team important version XXXX. and for from adjusted and receive products. to have development XX, response to its share and two, opportunistic had market. agreements delays, creating $X.XX the committed maximizing generic generics. a business expect expected a a has The product to Subsequently, RX Number longer reminder, products, on ProAir, complete in launch and goal for we FDA to bring a signed focus of a As the authorized other including quarter program launch a team a

launches those now scopolamine. have three, been Number However, delayed.

the XXXX. RX discussed fourth quarter, quarter in the launched in As of key a last experienced scopolamine, business disruption product supply a

complex its re-launch deviation, product a with anticipate issue. identified to market As a stability, remediate finally, patch reminder, no this has a and longer The of work continues our than we greater with XXXX. of challenging this And said, of to in That partner our is second partnered fundamentals product. team assumption, of quarter. price a the pricing the updating includes including guidance half Consistent in our headwinds experience the for anticipated. consistent with current practice business, our dynamics, grounded erosion XXXX updated in second the the guidance

the the year, Now segment. second let half particularly me phasing guidance discuss during expected the updated how assumptions in impact RX our of these

now We expect XXXX to in consolidated adjusted depicts approximately sales billion movements. sales on $X.X of to adjustments XX our Slide billion due $X.X changes to foreign We currency unfavorable XX% quarter timing the to of fourth guidance, the guidance. product due operating as income the the new as well of consolidated realized $XX expect be launches. net net million of XXXX RX to RX

$XXX a drive the our durable at earnings to consumer growth approximately adjusted despite adjusted Consistent guidance, summary, XXX% million, $X.XX operating per guidance from of conversion approximately the margins In range. which to cash is new range our marketplace. our soft now other flow in In businesses expect Adjusted adjustments After than guidance be dynamics in effective and adjusted due have income to expectations XXXX than of to is to the taking is minor to range outlined. now adjusted guidance RX previous for lower account now operating in share. I in with change EPS products into $XXX in $X.XX guidance million, just tax operating be at our midpoint now operations interest, addition, is we income rate, we million continue the greater consumer $XXX million. $XXX our for expected XXXX

companies each will to potential to the and strategic, is addition, executing I value-creation of with moving we discussing financial to to Brad. value-creation forward turn business. call And respective operating, our our enhance the with now September. the create independent team separate roadmap finally, plan forward look two In over in platforms

Bradley Joseph

now can ask to call Carrie, please the many one great question, question, Given, people we open can are if it'd be how looking Ron. keep Thanks, a to for on the questions? line we please.

Operator

The Chris Please ahead. will first go question from come of JPMorgan. Schott

Chris Z. Neyor

Chris on is This Chris for Schott. Morning. Neyor

or RX about that two are be Thanks. move On we you separation, as split these to franchise potential ties units? business any there the thinking should meaningful consumer and dis-synergies

Uwe Röhrhoff

believe that done exercise Yeah. our Thank question. impacts We, from value-creation the separation. meaningful you we during the obviously, for are have and analysis no roadmap there

detailed for each the that a process individual minimizing we of separation have and far the separation business, advantages separation on those impact we issues. believe the However, marginal outweigh

Ron L. Winowiecki

at Chris, those dispositive the separation functions we're I create really things, of And it. work I integrated on the It's of driving continue distribution, was businesses, migrating the Yeah. types add platforms. if strategically mean, businesses a too. would correct. studied already businesses each marketing, is respective kind to And Uwe We've been R&D look functionality. themselves, at within as XXX% evolution. about now consideration. sales, really been natural really of they're to think segment, the choice the regulatory, you operating integrated the our carefully into And we back-office independent and agility. those a We've

they're in think these the the those businesses. you of – value-creation value existing in the business, process, of the in already if So, chain already architectures are respective functions kind core

Chris Z. Neyor

the for question. Thanks

Operator

the ahead. of question Berenberg come will Patrick Markets. go And Capital next Please from Trucchio

Patrick R. Trucchio

have two guidance potential been the everyone. regards that including question to list by RX-to-OTC statins switches. is categories of There morning, recently provided recent switches, removed BPH. Perrigo from in Good regarding FDA and Thanks. draft the its My

be from studies it labeling you being approvals innovators And product this seen more on likely categories much. heard very guidance? think about FDA's products more to to so, FDA technology-enabled make And you its these guidance? more what any push from do when as given thinking in secondly, agency on there executive of based a will the you've Thanks consideration and switching accommodating the switch, and final innovators CHPA, finally, additional first, expand in for U.S.? the attempt And categories? So, in think for likely do we should will wait the if we the anticipate OTC other will guidance are and and OTC and should flexibility final

Ron L. Winowiecki

Hi, can Patrick. This start I'll is commentary. Uwe certainly additional question. provide Ron. Thanks the and for

products movements I clearly business in So, FDA getting one listen, to save of under it our the are is the our value business core model, his over-the-counter XXXX almost call agenda for right? consumers' healthcare space validating the stated model, in Gottlieb initiatives U.S. favorable to that more in the

you've movement, And positive. legislative very seen, the is Act. have you trend Modernization or the monograph it's whether So regulatory

the for yet quantified consumers buying their have dollars, spending dollars, reinstituting in flex recent use OTC You can but indications where about draft products form. health not

sweet You're really things which spot fits in cessation seeing our portfolio. the of products, around smoking

just the trend So important policy to clearly in model because to broader your affordable think the favorable the I'm than answering quality as validating I I business model, self-care business FDA almost question indicative provider. one framework our our is call understand it's and it of a

interesting about think said I relative in we to you class the of We the it's they're We want asked sure I that quite seen certain use discuss intervention. that, get certainly trades. make and think let's asked have in categories to of use, trends. specific having about about and talking I pharmacy there's specifics, the not the a third of trade We've a trade. our talked one to And Now, skis. past it's of you ahead we sense, class openly class like what where saying

the where it's you very Some about are of an market talked our again, to with class that pharmacy in right business structure framework. UK, And would the application into intervention natural trades over-the-counter fit, model. have way that a a of

on behalf meet answer our be. business So, should again, their switches. business And would in at that's not I way model mean, ask say those say, to trades business to our our role designed don't the about and what you what Perrigo I trade of that the model, designed is of and all when direction. class we purchase move I of our see I But the don't to specifically That's will to will want the question. model there of to innovators. speak want consumers think point class of I is to point think that RX-to-OTC be at

Uwe Röhrhoff

And type have Yes. win active capabilities clearly a right we brand however, of criteria where clear more take and expand to already we in identified where products. significant that, store with our Nasonex environment, on commitment a activity add we our can categories only that role and selected the leverage in-licensing to to demonstrates to this have present we where are in

Bradley Joseph

Thanks, Pat.

please. question, Next

Operator

will ahead. next The come question from Louise Chen go of Cantor. Please

Louise Chen

Thanks on Hi. taking generic just my I for question. the a business. had question

announcement behind it for the So, separate generics given your how the and out? how the could think business today doing in timing What business much did you something is this generics? you on strategic put today, about you if valuation of leverage your in environment light

Uwe Röhrhoff

a from generation. extended cash very attractive Well, sustainable business flow margin very, excellent product I and a think its perspective, profile differentiated strategic because topical, is of this portfolio in its

of needs, can quality it or that, a which to compare have that take the company value-creation business this future. we the to company see has a includes business, more separation addresses executed I the to a it on unique in answer sale, we we options, needs. leverage identified market. market prime into stand-alone that here. a have includes a and shareholder look pathway valuable think, market company here dynamics that a that we create the with better with multiple a option is as not here other you if a find in to think at is So, are here to significant a And on time that constraint merger agility And best we the And the I in near the lean, get capitalize market

Ron L. Winowiecki

Yeah.

to timing, three Because Uwe of things half likely we in coming do all saying going the right talked to the be you'll timing about clear, in position likely there the about. well. we'll of And time Uwe's a we're We're course great to operating take it that to in cash of a XXXX, platform. over asked separation later from openly And best see talked that. to year. it strength, we're at options will press Louise, the up be flow is But the going consider release, asset, point, the regulatory the characteristics. of You considerations, great do our and duration this of are set

Louise Chen

the separate And business what on about decide it? the for if you RX, leverage to

Ron L. Winowiecki

it's not capital for proper business, – of remember, not on comment execution there's structure that's that and mean, multiple Louise, I us to of just Yeah. again, forms here.

talking we're form or one maybe versus three consider. So two about can we

fair So for to on comment it's that. just not us

Louise Chen

you. Thank Okay.

Bradley Joseph

Thanks question, for the Louise.

Operator

question Please Sachs. come of Goldman go from Rubin next The Jami will ahead.

Jami Rubin

Thank you.

is may. in, can XX% hard flu wondering, negative last how I to think generic Will and would a grow? still quarter when that you and the if differentiated is we out long basis face that do second or couple business the the that comps? durable going you can quarter flu? we're last? And is given your was one-time, portfolio. you if my think on continue a negative Just back just you environment that fourth margin Do And your Yes, have margin if question quarter But higher than points still think they continue the do the that question? is operating about operating a how you a quarters Or should that X,XXX product peers. you couple think about margin growth it is XX% will that to is been business growth the this in CHC of be have CHC forward, especially negative the in first the

Ron L. Winowiecki

Yes. Thanks, Jami.

and/or and second one I'll listen, if first take as the as well on So then first take I'll let the Uwe the that's fair. appropriate comment

the response. tag-team we'll So

these short is about businesses, been circa open basis. business LTM been Pet growing has a been consumer challenged that. very that dynamic. CHC just It's a the We've an X%, marketplace. X%. of think growing in circa CHC International Americas bit For has little on the its about health

So basis. find it's CHC an at. If of Americas were an asset we're X% pet north excluded, looking very on growth LTM health closely you'd

don't we the So I quarter-by-quarter, to that's that is, look about think that. question way we talked answer

we mix. design. our CHC Again, were soft we're improving partially little quarter, in Before by this product International a

part But phasing products the product taking IDs profile you're then but or improvement growth that margin (XX:XX) of of you're you're products, is better you're So to that cannibalization. launching while some out mix some off launching market, improve and products the business. additional new old

So continues some expect to in quarter. in businesses basis, CHC go-forward the CHC Americas those store as both to that example were grow. dynamics International brand we are gain to a market, softer an Relative the On of share. this

second heard I guidance to International the is because again, – market-leading If second pet But health, pet be our pull to in and directly X% nutrition your expected to you way year, of health we CHC positive question. look say X% a half businesses well. growing my are out of hate our answer the clear. operating in you at OTC to as commentary year the that the half grow And own

within So Uwe feel if basis, market they're that's the businesses. on we're question great on comment the we go-forward And or I'll you Again, basis, a grows think look if on those let we positions. RX thinking fair. as respective in an good LTM when second

Uwe Röhrhoff

been the cold. comment, for has X.X%, Yeah. the Maybe driver to and Ron's not this add the growth, to cough

disappointing product portfolio diversified that. and the we very a of with business, animal the with performance very is the well, that deal exception doing on have We will health

we it. more seen look that to margin, and ability significant business our price for performance, On is year, than for rather still question to maintaining RX this our new the it have side, products the at was speaks a we when first a launch take launch if you operating consistently. Nevertheless, yes, the manage in extremely business. to our And definitely of XX% important given in launch half if a case, of this concessions this the

that come So message actually, the underlying I we margin to that expect half is at But later. the ability is. strong you asset if I environment. think in those look pretty is something products to the And market positive, that our how year, the to think indicates of manage good the for first

Jami Rubin

the that that a show in the business difficult business? expect next the to even quarter huge you quarter will year? growth So there I on last flu season with CHCA just fourth and follow-up year, comps, continue Would comparisons can first difficult of was even with then,

Ron L. Winowiecki

Yes.

was really observation last year If was a recall dynamic. good that so did Remember, were launching year certain really appreciate the and products QX flu this a QX year that. we and dynamic. have growth. that season you It we good of drove not growth more last We

Jami Rubin

Okay.

Ron L. Winowiecki

was It a seasonal not effect.

is effect seasonal the was of really callout this year. the in QX So

Jami Rubin

Thank you.

Uwe Röhrhoff

Omeprazole we in very to Yes. the the a We category. And category forget that the for don't ODT here seen GI It allergy us. business. has expand attractive had good launch growth. tried That's

I we good fairly a analgesics performance. think have

cough-and-cold this is So a company. than more

Bradley Joseph

Thanks, Jami.

question, Next please.

Operator

question next The Wilbur ahead. Raymond go Please will Elliot of come from James.

Elliot Wilbur

probably Thanks. to Ron. Good morning. directed I Question, best guess,

permanent back transition on do high more was income of with terms basis, of agreement? I that sort just that the impact had could sort much up thinking temporary level, expenses the about then one could rate? business that here a allocation. the such in a that, tax to calculus outside of the in to burdened what that fully stream of from envelope some of question just consumer of unallocated G&A isn't the kind thinking about think Thanks. of business business, without the Perrigo you business, in marginal we be on a follow be G&A As How And we services around offloaded generics do of potential actually the

Ron L. Winowiecki

Elliot. right? for It's when the calculator Thanks, out, question you dangerous So understand get sure. the

group. have at running RX, our its margin a Americas businesses about take out business XX%, if earlier, overarching XX%, XX%. you you have consumer businesses, called strong two strong certainly very look that profile. against you structures, peer And you at CHC So think then the have as

growth. in margin rate CHC it great investing we're while International, call expansion XX%, have run for circa You

So the great free momentum the you in very well know. in to margin cash the expansion characteristic, flow And remain consumer as have also businesses, you continues strong.

that bit just want company The goes call diversified framework, enterprise. is very a other part little to that structure because on strong, it bit a out, global little is the I to a enterprise and

jurisdictions. You're have XX% enterprise revenue in in non-U.S. of going that to base your

and So will in very at confident the a financial a separate we're framework, that, strategic companies structural standpoint, competitive we having be groups. that very way set a said peer to respective positioned as margin both operational from up and relative looking their profile,

$X through and working company that carefully process. overhead we're B. want there between don't So A I company But of into to is get

the relative can I'll and to studied set it, the operating P&L an needs You respective that'll we've structures financial their businesses groups. profile carefully in of rest those be competitive our call competitive, we'll confident assured peer the the with businesses, of respective each up we're of businesses. model very And

that tax yet, tax I'll said I about on think or sold, it to specifically Now, comment be it's that, having don't not as a point – this, can't it this companies and both merged. I say find at you'll or could of be the I the could because rate taxes. spun want RX stand-alone – rate speak

enterprise Elliot, Certainly So competitive, rate about the best rate tax the at I (XX:XX) can't there our is find way tax to you'll will articulate sure. no think to think the point, this to rate. for within be is But consumer what it. remaining way you –

Bradley Joseph

Thanks, Elliot. question. Appreciate the

Operator

The next Stanley. David ahead. from go Please Risinger of question will come Morgan

David R. Risinger

Thank Yes. you.

to And business your you. visions with So just or business Thank ahead better real could not? sort five of get CHCA compete that I discuss love Europe. a of just longer-term? respect for are for in player CHCI, hoping this that separate opportunities to outlook to for cost-efficiency dis-synergies, if you issue we number there the the margins for So, then, this sense as was I'd

Ron L. Winowiecki

what know from Americas, CHC top-line don't business to he it, consistent your that the say What about it. is, But talked margin best about give the the to adjusted we're model September, Already expectations. but call growing about growth, share. so We've take running September, the we dollar we're not first levels, well-positioned expand that comment Well, model pretty and in level we'll XXX to creation modeling about talk Store in the profile, before. comment running listen, longer-term on When we to brand I'll listen, every this at because And a as index bps. from on words, I operating CHC of gain can perspective. I'll record at about kind year the margins I'll to now talked business In about last The so more has the we're levels. XX from record margins we we excited your talk more five And discuss expansion a we operating revenue above business expended over years. a when that is to substantially by operating will guidance. other everybody business, at with, think we're market growth roadmap. value-creation leader. be versus Americas been a we've growth the models margin market is But let profile, as a business profile. a run little line margin way get kind margin again the at the consistent, value the we'll continues about you consistent. of color International Uwe top-line saying since to say, in pretty Running the modeling at talk

see I want to to out, at call important expansion great I we International. Now, continuing are margin do because think CHC comment, it's to

margins over team in This year-over-year know, in you Svend adjusted business. business have we earlier the to have call we XXX great year and our next four get almost years, about being first industrialized a job. plan bps, we of year. have the margins years, As we have in bps up fantastic XXX were there. in it, a talked the three few very commented momentum and And that operating the half the done his to high-teens

platform Svend the see team. Ron good Janish also work the in in chain do the CHC of good given business, by and that's operating and we profile So the margin expansion supply International been set

to that good I'll a talk of later, some want out, little that some expansion sure competitive conversations I CHCI call make Uwe the so. positioning in we have the bit at about business. see ultimately Just let and we'll

Uwe Röhrhoff

healthcare pretty consumer you to meet September all ideas to the needs when our And we the our drive in much about disclose the that more and energy includes of a encourage of all Yeah. and activity. on strategies of to business, our that committing It's consumer call multitude again I participate capital and business. of in of XX

course, of cost key environment healthcare products. Of is we providing in because of efficiency operate such an affordable quality of strategy elements one the

center of our is This, activities. always at dimensions. all of that So, the course, includes

our costs. and share that we will And overhead are costs, best something are you, September. a includes here course, lean Of you in strategies can the up always set elements. And that our of in company, what includes do operating it and with ideas those

focused CHCI complexity, we diverse think management business done our complexity. brands of And the brand. reducing strategy business, I Specifically by reducing executing our and a so wonderful and focusing a purchased on job right promoting far the very certain on have with a has the brand on number

a well. on We margin continue do much as steps just have you and what margin targets with leveraging be actually achieved will by as and pathway healthy this XX can and to for doing we do we our in parallel achieved think have is worked that. September will And as achieve to activities our business. that The will higher milestones have aim exactly are production on on insourcing to network, But step-by-step we much in in that we again this strategy share approach business. we the we

Bradley Joseph

Dave. Thanks,

David R. Risinger

Thank you.

Operator

from of come Please will Deutsche go Bank. question Gregg ahead. next Gilbert The

Gregg Gilbert

Uwe, not U.S. Hi. at you OTC our the suggested thought I were Yes. conference that branded May, in. in in very you interested something was

for I a for are of my call be situation? that more is in interested of this may or And in one-off the should part Merck arrangement the Nasonex So, the on as you in U.S., you take a Ron. and fact second branded OTC sign

in overwhelming to that me removing On to clear that the the not separate, from valuation. buyers would per remaining acquisition pretty a it's delaying necessarily products, launches where clear you're It's delivering at separation generic not Perrigo's and big be on forecast. in RX be interest environment least me what recent generic from help not would rationale the there challenging and current would a to Perrigo

a terms least XX,XXX-foot the you Thanks, of of rationale separating a executing that quarters help have on at you separation. lot the knowing the chop interest. those actually we perhaps of some But coming wood can So, at us of maybe view, and in with to have guys. in non-public info expressions

Uwe Röhrhoff

and for there the to And strong capabilities. competition roadmap, And the The people And I'll the a internally category, where question. our Nasonex basically have growth selective growth win. we all businesses of RX-to-OTC involved, involved part our Yeah. in analyzed are developing that had what our win just example right we have we value-creation right of identified people grounded perfect internal that. areas strategies. we that to the was is in of switch have again, first XX here start analysis on here with the as were we development strategy and, where

sector. We a strong have presence actually with products. in the We significant similar brand allergy a presence have store

those that believe say We to innovate channels, with the a type our such, cases, a selective switching can products the it's knowhow, say in drive time partners the technical I an actually OTC and store such short for not we (XX:XX). retail global it right our regulatory somebody the we to do in brand value our we those switching improve on that selective presence. certain believe would the certain would acquired our growth is with license attractive U.S. knowhow. with fairly to is to category we win market together help in later And category adding by not significantly have of still and and I retail have an our from production the and with categories in we mainly this opportunity the partners. really who position which knowhow branded We have strategy a have knowhow, have is strategy. rooted does it interval

Ron L. Winowiecki

for what of very so valuation those open relative your to way I'm two I go this on independent say, of described call, and Uwe on comments, understanding the kind remaining. ultimate we the think about me it's framing don't it I was to you well-positioned or to Yeah. said I companies his – the And models if two question, correctly, the second Gregg, valuation business I you strategy, what repeat to valuation is comments. guess, at the we've least. today's back in is explain better have the it to start probably would is those can need

businesses. However, unique they're very

management RX, You portfolio It look architecture. intense in product-driven of kind marketplace. customers. a distributes business of and few the agility a unique a requires to it's at It

And so, model, selling really level. not the kind to level. really We're right? It's a the consumers or of distribution at a distribution to consumer through innovating

integrating think solutions, you a Consumer self-care integrating if So, really Consumer Healthcare, a and model relative marketplace of complex supply that a that of and chain. is consumer dichotomy business Healthcare how is fast-moving to goods

is strategy. company. how optionality the you That's really clear theses we buy to talked exercise separation RX. value-creation to great There's And will here. not want can relative theses. about for the So two about RX investment investment somebody clear A pursue the value-creation an RX very only opportunity

do time original before, As you behind spin talked about we we the transaction. for the us this year. to Those know, some now to are constraints December in constrained were launch had constraints Gregg, due a to we've

a thinking optionality. think spin, valuation rush. So a on about listen, creation sale we're you we start no And great there's in merge, process,

its component. relative structure that separate execute We'll we make we'll to So in value a about asset at way great to right think operating creation and preparing. have legal is we're sure position the a the time to of

it end continuing well. as you relative company the said and I'm it at same our of is position these commitment up, brought time While you not growth this driving not its matter however, comment, – to to I'll we in you year. the then And businesses, have great and day, own of what we This pipeline, one. expected, if. launch a the glad continue great did market we go I investing a to it consumer the owned very we products the It's has RX believe we year Uwe's a again, that. a thought was good At when, But, platforms.

market products great hard. portfolio have Those a to that coming very are are We that driving pipeline.

a good at investment we and going going business on focusing now we're continue the what's RX right employee important most a customers look But to plan. stand our to business very stand-alone of strong as thesis And thesis So that's to basis. plan we great here investment on sure driving our for on execute as base make is value continue is today. our we

make about point a from think So, in want way view. business the that's of to we sure short-term I the it

Bradley Joseph

Gregg. Thanks,

Gregg Gilbert

Thanks.

Operator

come The Markets. go next ahead. question will Please RBC Stanicky Randall of from Capital

Randall S. Stanicky

needing Great. an be least question, I provide Thanks And both integrated as to integration next XX I of given September to we businesses update cutting think dis-synergy of apart? announce over XX separation guys overlap the understand And earnings these opposed secondly, how some important to today waiting for these the answer this services? the question. this till Uwe, at value try buckets really maybe going hear the where where of will you're guidance two back Thanks. and events? a businesses XX should to RX they some of as which separate the didn't investors the on business, how is the on is? of strategic why think Where businesses, months. comment day the can these about are just to And easily maybe it to on underlying be you then, Ron, pull

Uwe Röhrhoff

appropriately. focus our a of teams business which Yeah. roadmap anticipate process became can value-creation clear your question. during consumer and RX individual dynamics and at the It Thanks market dedicated each behind would from business, management for invest benefit

So is always the and an Nasonex. is communicate that the we that, team switch, And that make management on wanted We have say those. the it made alternative, decisions something then the strategic here One are share and not you couple an roadmap that policy the other policy There to but made the necessary goal said RX-to-OTC we of examples. a executed is this is actually decision, is that. And the get once always between certainly is not was alignment management portfolio to board decisions we one the RX the have since on decisions we review roadmap. with the to when which of board. it our the to and made value-creation

this a separately market growth not business based address the could systematic development That of somebody operation, guidance R&D, not we do number with a process as that driver. that is of, we has can would identified a say, evaluation course of on of between environment separation is that of, with focus how forward? setup and mostly by, of just RX there? is be an That I it technology perspective, say RX, you included how focused the product is fairly actually we have result is has And service (XX:XX) What's couple consumer it they the benefit business. that going a business. the what and dis-synergies will That work, the addressed business from integrated what agile includes are clean from business organizational think can a with dis-synergies, managing do needs disappointing they strong say, because So driven a business? identified driven the because this, And the I that plans business the really have integration run better clear growth to I actually has to to need performance benefit this on a with call team because And don't the of it standpoint? for this drive it best managed. that look fresh that a RX a and management

supply from have disintegration a integrated, distribution a than on more work runs purchasing that. and perspective planning chain is perspective the but a side We that that from from

marketing We have functions. already sales, separate

separate a have R&D function. We

work fairly very administrative a very competitive and company a be a completed of confident needs side the and be efficient very company. done in consumer in result actually are we time So to setup that due lean the can RX on and more can very, that

dis-synergies. we are so not And about concerned

Randall S. Stanicky

you. Thank Great.

Bradley Joseph

Thanks, Randall.

Operator

The next Please comes from go question David ahead. Wells Fargo. Maris of

David Maris

the lot you business? if it's you lot about – that wondering rationale if the where why animal process. fit seems said aren't the synergies Hi. that not Thank maybe of R&D the thinking separated same are sale you that the you. there's like for business sale a animal being not or overlap tell I the of strategy? how your of you on can fit on It and a And the But thesis was for address spin-out health same in could and would part there in doesn't that RX everything health. us

Uwe Röhrhoff

an announcement Well, on Animal made RX obviously not an RX. today we business. is health

is not So part of that this is it why announcement.

compared this a our to of that would it, we win not have that this this have we analyzed our our of Is you. said a you have. part the business to win decision. On the core as right policy decision. a of have is all with And our the this is make is of we we business a separate And made range. business, However, analysis. if in of as is the inform the I the no we businesses marketplace? that right all ongoing of disagreement That performance what capital businesses or once made sell to businesses. And in fit cost have value-creation business the we But inform applies part on have decision before, roadmap, our disappointing. we one capability? therefore, we to target Do they our and capital identified is return There to is

Bradley Joseph

Thanks.

David Maris

All right. Thank very much. you

Bradley Joseph

Next question.

Operator

comes question Ami from ahead. of next Leerink. Please The Fadia go

Ami Fadia

or out CHCA of to terms how of switch? focus the in able the Thank products drive reallocate have. you that RX sort a able RX-to-OTC could the could or bit drive faster about And that Could help identified after on Good you to how you that of you could growth sort criteria? also benefit we've drive potentially other would in Does morning. Thanks the of of you of potentially you've on the But and of to I from capital growth? acquiring talked And what separating switch? sort allow of Hi. could branded faster be what rest potential be lot separation RX sort you. CHCI actively areas that go would or new for then a the guess, little company that question. focus to benefit businesses? elaborate

Uwe Röhrhoff

your of how answers question. I our I most we Thank [September] (XX:XX) say And to (sic) about meeting. for that the of December bit to it. a I to think want Yeah. you defer give XX But have little you must

clearly our can the of part identified we consumer accelerate have value-creation As for roadmap, growth business. we how

opportunities. organic at looked have We

at We opportunities. inorganic have looked

switches. to allocation with We looked have capital at inorganic we operational efficiencies. respect opportunities looked to and at drive have again, RX-to-OTC profits operational And

that in we one core equity fairly that this have that capabilities. very we a with respect said core with to our around is play believe I before, to that fast-track do we is enough to to switch selective it and It we assets has with can announced within switch available strategy and a capabilities As time. designed have that categories today, in has our do

where area first So caution to execute this everybody playing. are still product that say this I we And would is a on. is very we selective then our

growth initiatives September we this with would elements there So discuss of business. is one element in in which those many the to And of our XX. many are like you drive consumer will

a you. are we ready ask to of for that So share I have until with patience little to bit

Bradley Joseph

Thanks for question, Ami. the

Next please. question,

Operator

question go ahead. The come Jefferies. of Please David will next from Steinberg

David Michael Steinberg

capital Thanks. deployment. Further discussion on

So, that stock any of right-sizing last of couple Tysabri deleveraging you And and to you significant you you the refrained bought selling quarters, off external were a obviously, back from in were amount strategies. prior your that, royaltiy. Europe,

would And of questions of tuck-ins part in and a revolve lineages on sort of of the acquisitions. I future side. consumer continue your the around lot timing assume making you nature my So as

Will side, tuck-ins on consumer bit at your back And finally, during small generics still period Thanks. you your during larger split-off still PG sized businesses. different? will refrained you time potentially you're of to or the is the or are of you've of (X:XX:XX), looking be sell-off making at business? the historical going businesses, acquisitions nature the of in looking then, acquisitions go little a not looking of the you with this acquisitions, period And acquisitions type the from to Omega, sort looking Mylan? spinoff the So either which road, down refrain from then this of

Uwe Röhrhoff

Yeah.

that that they you when inorganic capitalize see we a to timing strategy. inorganic about that consumer we and detailed opportunities you on is our from willing of in strategic share it On the acquisition on and to are value-creation we of ready present more strategy in-licensing part on fit rights our Nasonex XX. our when strategy information themselves again, And they take are us the perspective, on the side, can for with to our But identified side the growth have September roadmap. clearly

how are we be are we see we So, again from that, XX. perspective, that But committed identified where you details, share and our sweet to opportunities to on going that completely spot. to on execute we that in the with September is have

Ron L. Winowiecki

before, of Uwe's flow a remind and we the And only inorganic have great flow and just have to remember, sit the about as progressive to side, the from very cash it, until about back commitment liquidity, maturities say our in tuck-on shareholder and today returns strategy balance in the at XXXX. million total Yeah. of balance you, our think David, have sheet, we've to and company, ourselves, $XXX I to profile, the we you criteria acquisitions. cash just sheet strong great in, to credit context talked characteristics this would relative of invest only look we point, investment-grade an

of of variable by way, a years, is term almost loan, loan structure. a two-and-a-half – that term next kind the of obviously refinancing which the cash available the kind and So, all is

that, So, having execute we're in from in a to view a strategy that Uwe said standpoint, we're from sheet a position great great of just point cash balance outlined. flow position a the

we're starting let's very is from not that So strong. forget baseline

Bradley Joseph

that's And Great. the think time have. all I that, we Carrie, with

you all for for your attention Hope Perrigo. and and in And thank you so thank your to soon. time want interest to we everybody to talk

Operator

you for conference now today's is attending The concluded. Thank presentation.

line. You may now a disconnect your day. Have great

Perrigo (PRGO) 9 Aug 182018 Q2 Earnings call transcript