CompanyName:ValeantPharmaceuticalsInternationalIncCompanyTicker:VRXSector:HealthCareIndustry:Drugs
EventDescription:Q12016EarningsCallMarketCapasofEventDate:9.90BPriceasofEventDate:24.64
©2014TheStreet,Inc.Al l R ightsReserved Page1of31
ValeantPharmaceuticalsInternational(VRX)EarningsReport:Q12016ConferenceCallTranscriptThefollowingValeantPharmaceuticalsInternationalconferencecalltookplaceonJune7,2016,08:00AMET.Thisisatranscriptofthatearningscall:
CompanyPart icipants
LaurieLittle;ValeantPharmaceuticalsInternationalInc;InvestorRelationsJoePapa;ValeantPharmaceuticalsInternationalInc;CEORobRosiello;ValeantPharmaceuticalsInternationalInc;CFOLindaLaGorga;ValeantPharmaceuticalsInternationalInc;TreasurerTageRamakrishna;ValeantPharmaceuticalsInternationalInc;ChiefMedicalOfficerAnneWhitaker;ValeantPharmaceuticalsInternationalInc;CompanyGroupChairmanAriKellen;ValeantPharmaceuticalsInternationalInc;CompanyGroupChairmanJeremyLipshy;ValeantPharmaceuticalsInternationalInc;Director
OtherPart icipants
LouiseChen;GuggenheimSecuritiesLLC;AnalystTimChiang;BTIG;AnalystGreggGilbert;DeutscheBank;AnalystWendyLin;JPMorgan;AnalystAnnabelSamimy;StifelNicolaus;AnalystAndrewFinkelstein;SusquehannaFinancialGroup/SIG;AnalystUmerRaffat;EvercoreISI;AnalystDavidRisinger;MorganStanley;AnalystDavidAmsellem;PiperJaffray&Company;AnalystCindyGuan;GoldmanSachs;AnalystDavidMaris;WellsFargoSecurities;AnalystIrinaKoffler;MizuhoSecuritiesUSA;AnalystMorganWilliams;BarclaysCapital;AnalystDougMiehm;RBCCapitalMarkets;AnalystAlanRidgeway;Scotiabank;AnalystDavidCommon;JPMorgan;Analyst
MANAGEMENTDISCUSSIONSECTION
Operator :
Atthistime,IwouldliketowelcomeeveryonetotheValeantfirst-quarter2016resultsconferencecall.
(OperatorInstructions)
Ms.LaurieLittle,HeadofInvestorRelations,youmaybeginyourconference.
LaurieLitt le (InvestorRelations):
CompanyName:ValeantPharmaceuticalsInternationalIncCompanyTicker:VRXSector:HealthCareIndustry:Drugs
EventDescription:Q12016EarningsCallMarketCapasofEventDate:9.90BPriceasofEventDate:24.64
©2014TheStreet,Inc.Al l R ightsReserved Page2of31
Thanks,Operator.Goodmorning,everyone.WelcometoValeant'sinvestorconferencecallwherewewillbediscussingourfirst-quarter2016financialresults.
Participatingontoday'scallareJoePapa,ChiefExecutiveOfficer;RobRosiello,ChiefFinancialOfficer;Dr.TageRamakrishna,ChiefMedicalOfficer;Dr.AriKellen,CompanyGroupChairman;AnneWhitaker,CompanyGroupChairman;andLindaLaGorga,ourTreasurer.
Inadditiontothelivewebcast,acopyoftoday'sslidepresentationcanbefoundonourwebsiteundertheInvestorRelationssection.
Beforewebegin,ourpresentationtodaycontainsforward-lookinginformation.We'veaskedthatyoutakeamomenttoreadtheforward-lookingstatementlegendatthebeginningofourpresentation,asitcontainsimportantinformation.
Inaddition,thispresentationcontainsnon-GAAPfinancialmeasures.Formoreinformationaboutthenon-GAAPfinancialmeasures,pleaserefertoslide1.Non-GAAPreconciliationscanalsobefoundinthepressreleaseissuedearliertodayandpostedonourwebsite.
Finally,thefinancialguidanceinthispresentationiseffectiveonlyasoftoday.Itisourpolicytoupdateourfirmguidanceonlythroughbroadlydisseminatedpublicdisclosure.
Withthat,IwillturnthecallovertoJoe.
JoePapa(CEO):
Thankyou,Laurie.Goodmorning,everyone.Thankyouforjoiningus.
Todaywe'dliketocoverthefollowingtopics.First,I'dliketosharesomethoughtsfollowingmyfirstmonthatValeant.Rhenwe'llcovertheresultsofthefirstquarter.Next,I'llwalkyouthroughourplansforstabilizingValeantin2016,includingupdatingour2016guidance.Thenwewilladdresstheareasofimprovement,aswellasareasofopportunity.FinallyI'dliketotellyouwhyI'mconfidentinValeant'sfuture.
Inadditiontotoday'spreparedremarkswehaveseveralslidesattheendofthedeckintheappendixthatwewillnotcoverintoday'spresentation.
Beyondthepreparedagendaonslide3,whatIwanttodotodayisreallysimple.Iwanttoanswerfourquestions.WhydidIjoinValeant?WhatisthecurrentsituationIfound,boththegoodandthebad?Whatisourpositionrelatedtoourdebt,ourliquidity,andtheregulatoryfilings?AndwhyIbelieveValeantwillbesuccessfulinthefuture?
Now,letmecommentfirstonthatquestionaboutdebt,liquidityandregulatoryfilings.We'llhavemoretosayaboutthislaterbutletmespendafewminutesnow.
Basedonourguidance,wehaveasolidpositionwithourliquidity.AndIexpecttobeincompliancewiththedebtcovenantsthroughout2016andbeyond.
Also,wearenowplanningtofileourquarterlyinformationinatimelyfashionfortheregulatorySECfilings.TimewillbeourfriendatValeantasweworktoimprovetheValeantbusinessand,importantly,topaydowndebt.
Now,letmestartaboutValeantandwhatIfoundasIwasdoingmyduediligenceandjoiningthecompany.
IbelievethatValeanthasadiversecollectionofleadinghealthcarefranchisesandbrandssuchas
CompanyName:ValeantPharmaceuticalsInternationalIncCompanyTicker:VRXSector:HealthCareIndustry:Drugs
EventDescription:Q12016EarningsCallMarketCapasofEventDate:9.90BPriceasofEventDate:24.64
©2014TheStreet,Inc.Al l R ightsReserved Page3of31
Bausch&Lomb,CeraVeandSalix.AsIdidmyduediligenceIdiscoveredValeanthadaverybroadgeographicglobalfootprint.
Ibelievethatourcommitmenttobringinnovativeproductstothemarketthroughanexcitingnewproductpipelinecontinuestobeunder-valuedandmisunderstoodandIhopetochangethatperception.
Finally,inmy30-plusyearsinthepharmabusinessinbothbranded,genericandOTCpartsofthebusiness,IknewmanyoftheValeantemployeesbeforeIjoined.AndnowIknowevenmore.Inmyfirst30days,I'vealsohadthepleasureofmeetingmanyofthetalentedanddedicatedemployeesthatworkatValeant.
Globally,wehave22,000Valeantemployeesthatdrivetoworkeverydaytofocusonimprovingpeople'slives.I'mdelightedtojointheteamthatfocusesonimprovingpeople'slivesonthismission.
Likethoseofyouonthephonetoday,I'vealsoreadmanyofthearticlesonValeant.Somehavenotbeenfavorable.Iknowit'sbeenadifficultninemonthsfortheteam,butIalsoknowwehavededicatedleaderswhoknowwhatisrightandnecessarytoturnthisCompanyaround.We'llre-engageourworkforce,we'llrebuildourrelationshipswithproviders,payersandregainthetrustofourdebtholdersandshareholders.
Andduringthe30daysthatI'vebeenwithValeant,I'vedonewiththat,metwithemployeesatalllevelsofthecompany,salesleadership,keyopinionleaders,manyofourkeytradepartners,prescribers,managedcare,GPO.AndI'veevenhadachancetohaveacoupletripstomeetwithCongress.Insummaryfortoday,myhopeisIcancapturesomeoftheexcitementthatIseeinValeantasIwalkthroughtoday'sfirstquarterbutalsosomeofthechallengesandtheopportunitiesinfrontofus.
Now,turningtoslide4.WehavetheQ12016summary,thefirst-quarterresults.Ourtotalrevenuewas$2.4billionversusourguidanceof$2.3billionto$2.4billion.GAAPEPSwasalossof$1.08.
Adjustednon-GAAPEPSwas$1.27whichfallswithintheguidancerange.GAAPcashflowfromoperationswas$558millionandadjustedEBITDAnon-GAAPwasjustover$1billion.
Now,letmeturnthecallovertoourCFO,Rob,todiscussthequarteringreaterdetail.Rob?
RobRosiello (CFO):
Beginningonslide5isafinancialsummaryofourGAAPresults.AsJoestated,wehadanetlossof$1.08pershareforthequarterwhileGAAPcashflowfromoperationswas$558million.
COGSwas27%inthequarterwithSG&Aat34%andR&Dinvestmentwasjustover$100million,arecordforValeant.
IwanttopointoutthatSG&Aincluded$37millionofincrementalcostrelatedtoValeant'sformerCEOofwhich$25.3millionwasforshare-basedcompensation.However,sincetheperformancethresholdwasnotmet,novalueorshareswereultimatelyreceivedbytheformerCEO.
SG&Aalsoincluded$29millionoflegalandprofessionalfeesinconnectionwithvariousinvestigationsandrelatedactivities.
Turningtoslide6andfollowingourGAAPpresentation,I'dalsoliketoprovideanon-GAAPsummary.Wereportedadjustednon-GAAPEPSof$1.27forthefirstquarterandyoucanseethehistoricaladjustednon-GAAPEPSnumbersforthepastfivequartersallunderournewtaxpresentation.
ComparedtoQ12015,revenueincreasedjustover$200millionor9%.Theimpactof2015acquisitions
CompanyName:ValeantPharmaceuticalsInternationalIncCompanyTicker:VRXSector:HealthCareIndustry:Drugs
EventDescription:Q12016EarningsCallMarketCapasofEventDate:9.90BPriceasofEventDate:24.64
©2014TheStreet,Inc.Al l R ightsReserved Page4of31
provided$572millionofgrowthinthequarter.ThiscamefromSalix,Marathon,DendreonandAmoun.ThisgrowthwasoffsetbythenegativerevenueimpactofFXofjustover$50millionanddivestituresofapproximately$20million.
ThebasebusinessinQ1declinedby$289million,drivenbydermatologyincludingthegenericazationofTargretinandthetransitiontoWalgreens,thecontinueddeclineinourneurobusinessanddeclinesinourophthalmologyRxbusiness.
COGSincreased3percentagepoints,primarilydrivenbylowerdermrevenuesandtheunfavorableimpactofgrossmarginsfromFXinemergingmarkets.
SG&Aincreasedfrom26%to31%,drivenbyrevenuedeclinesdescribedaboveaswellasanincreaseinadvertisingandpromotion,forexample,DTCadvertising,andemployeeretentionof$20million.
Onslide7,asyouknow,Valeantcurrentlyreportsundertwosegments,developedandemergingmarkets.Revenuesinthedevelopedmarketwere$1.9billion,anincreaseof11%yearoveryear,whileoperatingincomedeclined8%.
Whiletheincreasewaslargelyduetoacquisitionscompletedin2015,weexperiencedsloweruptakeinthedermatologyrecoverythanexpected.RevenueforUSdermatology,andI'mincludingObagiandSolta,was$229millionascomparedto$399millionintheprioryear.
FollowingthelaunchoftheWalgreensprograminJanuary,wesawvolumeflatteningandASPsdecliningpostlaunch.OverallvolumechallengeswereexacerbatedbythelossofrefillsfollowingtheshutdownattheendofJanuaryofourpreviousspecialtypharmacyrelationship,aswellasthenegativeexternalnarrativeandsomeinternaldisruptionswhichJoewillcoverinmoredetaillaterinthepresentation.
RevenuesfortheUSGIbusinesswere$343millionforthequarter,withgrossmarginsat85%.RevenuesforXifaxan,thelargestSalixproduct,were$207millionforthequarter,whichcorrespondedtoaretailTRxincreaseof32%overtheprioryear.
Otherestablishedbrandsalsoshowedgrowthinthequarterandwe'repleasedthechannelinventoriesfortheSalixbusinesshavebeenreducedto1.5monthsandwearenowsellingtodemand.
OtherareasofnoteinthissegmentincludedcontinuedgrowthinourUScontactlenswithUltra,whichwasup58%yearoveryear,aidedbyanationalTVcampaignandthelaunchofUltraforpresbyopia.
OurUSconsumerdivisionwasawardedthesupplieroftheyearbyWalmart,anachievementnoteasytoattain,whilealsolaunchingseveralnewproducts,surveys,ointmentandpreservationerasMV.Overallvisioncarewasup9%versusmarketgrowthof1%.
Severalunitsachievedstrongorganicgrowth,includingProvenge,whichgrew6%overtheprioryearandourgenericsportfoliowhichgrew14%yearoveryear.TherewasstronggrowthinFranceandtheUK,particularlyinsalesofB&Lsurgical.WealsosawpositivemomentumfromJubliainCanadawhichcurrentlyenjoysroughlya60%share.
Onslide8,revenuesfortheemergingmarketwere$442millionforthequarter.Thisincreaseinrevenuewasdrivenbythe2015Amounacquisition,offsetbyunfavorableforeignexchangeof$44million.ThefallingrossmarginswasdrivenbyFXincountrieswherethepurchasingormanufacturingofgoodsareinadifferentcurrencythanwhereproductsaresold.
Samestoreorganicgrowthwas2%butwouldhavebeennearly10%ifnotforthe$30millioninventorydraw-downinRussiaandPoland.SeveralcountriesdeliveredstrongorganicgrowthsuchasMexicoat
CompanyName:ValeantPharmaceuticalsInternationalIncCompanyTicker:VRXSector:HealthCareIndustry:Drugs
EventDescription:Q12016EarningsCallMarketCapasofEventDate:9.90BPriceasofEventDate:24.64
©2014TheStreet,Inc.Al l R ightsReserved Page5of31
8%,Chinaat19%,andIndiaindouble-digits.WedidseeinventorylevelssuccessfullydeclineinRussiaandPolandtoapproximately3.5monthsfromthe4to5monthsseenthroughout2015.
Withthat,IwillturnthecallbackovertoJoe.
JoePapa(CEO):
Thankyou,Rob.
Onslidenumber9whatI'dliketodoistrytoquicklysummarizeValeant'scurrentstate.WehaveleadingdermatologybrandsandGIbrandsandastrongpipeline.We'vegotgreatglobalBausch&Lombplatform.
We'vegotadurable,sustainablebusinessmodelinbothconsumer,ophthalmicandbrandedgenericsandwehavestrongcashflow.ButwehaveexperiencedsomesignificantchallengesinourdermatologybusinessaswetransitiontoouraccessprogramwithWalgreens.WecontinuetostronglybelieveintheprogramandbothWalgreensandValeantareworkingdiligentlytocorrecttheissues.
OurSalixbusinessiscurrentlyrunningbeloworiginalexpectationsbutwecontinuetobelievethatthereremainsasizableopportunityandsignificantunmetmedicalneedinthisarea.Unfortunately,negativeexternalattentioncontinuestoadverselyimpactthebusinessandourreputationwithpatients,physiciansandallofyou,ourshareholders,aswellasourdistractedorganization.
Onslide10,tofurtheremphasizehowthebusinessisperforming,thefollowingchartillustratesthatnearlyallofourbusinessesareperformingatourexpectation,withtheexceptionoftheUSdermatologyandtheSalixbusiness.
Onslide11weareconfidentwehaveaplantogoforward.Wehavetoberealisticastotheimpactallthishashadonouroperationsandourfinancialexpectationsfortheyear.
Ournewfull-year2016guidanceascomparedtowhatwepreviouslyreportedis$9.9billionto$10.1billionandadjustednon-GAAPEPSof$6.60to$7.WeexpectanadjustedEBITDAnumberof$4.8billionto$4.95billionfor2016.Assumptionssurroundingthisguidancecanbefoundintheappendixofthepresentationpostedonthewebsite.
Now,I'llturnthecallbacktoRob.
RobRosiello (CFO):
Slidenumber12showswherethechangeistakingplace.ItisprimarilyUSdermatologyandGIwithothervarioussmallchangesattributedtootherfactors.
Letmestartwithdermatology.Thecurrentbudgetrepresentsa$410milliontake-downofrevenue.Thisreductionisdrivenbylowerscriptvolume,lowerfillrates,speedbumpsintheaccessprogram,combinedwithlowerASPsandoverallhighermanagedcarerebates.
ForXifaxan,itrepresentsa$390millionreduction,relativetoourpreviousexpectations.Xifaxanhasdeliveredstronggrowthbutitislessthanourexpectationsand,webelieve,thepotential.
Disruption,salesforceturnover,changesinleadership,shiftsinstrategy,anincreaseinenrollmentsinhighdeductibleplanswhichwebelieveforthefirsttimeextendedintothesecondquarter,havecontributedtoourlowerforecast.Thethirdbucketofroughly$300millionincludesotherunits,additionalpricingreductions,suchastheGPOrebatesforNitropressandIsuprel.
Slide13showswhatdrivestheramptothemid-pointofourguidance.Letmewalkthroughit.Sothefirst
CompanyName:ValeantPharmaceuticalsInternationalIncCompanyTicker:VRXSector:HealthCareIndustry:Drugs
EventDescription:Q12016EarningsCallMarketCapasofEventDate:9.90BPriceasofEventDate:24.64
©2014TheStreet,Inc.Al l R ightsReserved Page6of31
istodaywe'reannouncing$1.27inQ1.ThesecondwouldbeassumingaQ1runrateperformancefortherestoftheyear,puremath,wouldadd$3.81.
Ifweaddtothatthehistoricseasonalityandtypicalsecond-halframpcharacteristicinourbusiness,whatwemightcallthetypical40/60,thatwouldaddanadditional$1.25andwenetouttheGPOrebatethatwerecentlyannouncedforIsuprelandNitropress.
ThefixingdermandSalixandgrowthaccelerationwouldprovideadditional$0.50.Again,thatwouldnetoutthenewmanagedcarecontracts.Othermarkets,particularlyemerginggrowth,whichwefeelverygoodabout,woulddeliveranadditional$0.17.Andthenwewouldnetoutofthatsubtractionofgenericerosion,forexampleZegerid,andotherpotentialpricingactionsthatwemighttake.
Takethistogether,thiswoulddeliverthemid-pointofourguidance.AndweseeupsidesinimprovingtheASPsinvolumes,particularlyinourdermatologybusinessthroughengagementwithindependentpharmacies,adjustmentstoco-paysandbuy-downsandimprovementintheprioroffprocess.
NowI'dliketoturnthecallovertoLinda,ourTreasurer,todiscussourdebtandliquidityposition.
LindaLaGorga(Treasurer):
Thanks,Rob.
First,focusingonourliquidity.Whilewehaverevisedourguidancefor2016,ourcurrentandforecastedliquiditypositionremainssolid.AsofMarch31,wehad$1.3billionofcashandasoftodaywehaveapproximately$1.2billionofcash.
Weremainfocusedonreducingourpermanentdebtwhichincludesourtermloansandbonds.Yeartodate,wehaverepaid$730millionintermloansthroughvariousmaturitypayments,amortizationpaymentsandpaymentsusingassetsaleproceeds.Wehave$273millioninmandatorypaymentsremainingin2016withminimalamortizationrequirementsin2017.
Ourcreditagreementincludestwomaintenancecovenants,asecuredleverageratioandaninterestcoverageratio.Weareincompliancewithbothfinancialmaintenancecovenantsinthefirstquarterandwecontinuetoexpectthatwewillremainincompliancewithbothfinancialmaintenancecovenantsthroughout2016.Therearenofinancialmaintenancecovenantsinourindenturesgoverningourbonds.
Reducingourtotalleverageisoneofourpriorities.Basedonourrevised2016guidance,weexpectournetleverageratiotobeapproximately6timesorlessbyyear-end2016.
Movingtoslide15.Weremaincommittedtousingthevastmajorityofourcashflowtopaydowndebt.Basedonourrevisedguidance,ourcashflowavailablefordebtrepaymentandotherpurposeshasdecreasedby$500millionfromthe$2.2billioninourMarchinvestorcallandisnow$1.7billion.
ThereductioninourcashavailablefordebtpaymentandotherpurposesislessthanthereductioninadjustedEBITDA,primarilyduetoareductionintheuseofcashforworkingcap.Inthefirstquarter,ourworkingcapitalwasasourceofcash.Basedonourrevisedguidance,weareprojectingworkingcapitaltobeapproximatelyneutraltocashflowfortheyear.
TheprojectedcashflowfordebtpaymentisweightedtowardsQ2,Q3andQ4,aswecompletedtheSproutpaymentof$500millioninthefirstquarter.InourMarchinvestorcall,wesaidweexpectedtopaydownatleast$1.7billionofpermanentdebtwhichisourtermloansandbonds.Weremaincommittedtorepaying$1.7billionofpermanentdebtthroughourcashflowandproceedsfrompotentialnon-coreassetsales.
CompanyName:ValeantPharmaceuticalsInternationalIncCompanyTicker:VRXSector:HealthCareIndustry:Drugs
EventDescription:Q12016EarningsCallMarketCapasofEventDate:9.90BPriceasofEventDate:24.64
©2014TheStreet,Inc.Al l R ightsReserved Page7of31
Basedondebtrepaidtodateandourupcomingyet-to-be-paidmandatoryQ3andQ4amortizationpaymentsunderourcreditagreement,wewillhavepaidover$1billionoftermloans,leavinganincremental$700millionofpermanentdebtrepaymenttomeetourgoal.Wecontinuouslymonitorthemarketandwillremainopportunisticacrossourbankdebtandseniornotestopursuethebestapproachtomeetourgoals.
Aswelookforwardinto2017,ourcashflowavailablefordebtrepaymentwillimprove,aswewouldexpectittobegreaterthan$2billion,aswedonotexpecttohavepaymentssimilartotheSproutpaymentaswefocusonourexistingoperationsandreducingourleverage.
Withthat,IwillturnthecallbackovertoJoe.
JoePapa(CEO):
Thankyou,Linda.
Onslide16youseeValeant'sstabilizationplan.I'vebeenatValeantforapproximatelyonemonthnowandI'dliketooutlineonthispagetheareasthatweneedtoaddressandimprove.
Ibelieveit'sathree-stepprocess,tobeclear.First,thestabilizationprocessofValeant,whichIthinkwilltakethreetosixmonths.Thatwouldbefollowedbyaturnaroundstageandultimatelyatransformationstagethatwilltakeamulti-yearprocessforValeant.Today'sdiscussionisreallygoingtobelimitedthestabilizationplanandwhatwethinkaretheimportantelementsofthatstabilizationplan.
Numberone,weneedtodriveengagementinthecompany.Weneedtore-recruitValeantemployeesbacktothecompany.Weneedtoaddsomeadditionaloutsidetalent.Andwe'regoingtoworkveryhardtore-engagewithourpartners,thepatients,theprescribers,thepayersandinvestors.
Numbertwo,wewanttoreallocatestrategicresourcesatValeanttofixthedermatologybusiness,accelerateSalixgrowth,whichisalreadyquitegood,asRobmentioned,butIjustwanttoclearlyreacceleratethatgrowth.
Numberthree,wewanttorefocusR&Ddollarsintoinvestmentforcoreassetsofophthalmology,dermatology,GIandconsumer.Wewanttomanagetheneuroandotherbusinessforcashgenerationandtopaydowndebt.
Finally,wewanttoexecuteontheprioritiesthatwealreadyknowtoexist.Wewanttoimprovepatientaccessandaddresspricingissues.Wewanttoexecuteonnon-coreassetsalestohelpreducethecomplexityofValeantbusiness.Wewanttofocusondebtreductionandintendtocooperatewithallgovernmentinquiriesandseekexpeditedresolution.
Onslide17wehaveidentifiedanactionplanandbegunitsimplementationfordermatology.First,wemustrepairourcorporatereputationandregaintrustwithallofourstakeholders.Thiswillbedonethroughanumberofinitiatives,includingCEOactionsofcustomerengagementandoverallpricingandaccess.Wealsowillreiterateoursupporttothefieldsofdermatologyandpodiatry,bothR&Dandcorporateinvestment.
WealsomustrebuildtheaccesswiththeWalgreenprogramandtheindependentpharmacy.We'vebeenlaunchinganewcouponprogramwithindependentpharmaciesinJuneandwewillcontinueworkingwithWalgreenstoimprovethepatientandprescriberexperiences.
WemustrestoreprofitabilityatWalgreensthroughtheimplementationofreimbursementandpriorauthorizationsupportviaqualifiedthirdparties.Wehavecontractedwithathird-partyvendorthatwilltakeoverthisprocessinJune.
CompanyName:ValeantPharmaceuticalsInternationalIncCompanyTicker:VRXSector:HealthCareIndustry:Drugs
EventDescription:Q12016EarningsCallMarketCapasofEventDate:9.90BPriceasofEventDate:24.64
©2014TheStreet,Inc.Al l R ightsReserved Page8of31
Withrespecttodermatology,Iwanttomakesurethatyou'reawareasignificantportionofourWalgreensprescriptionshaveprofitabilitysignificantlybelowourinternalprojectionsandmeaningfullybelownon-Walgreenprescriptions.Insomeinstances,theseprescriptionsactuallyhaveanegativeaveragesellingprice.Thevastmajorityoftherevenueshortfallindermatologyinourrevisedguidancerelatestothisaveragesellingpriceshortfall.
Thegoodnewsisthatwebelievethisproblemisfixableandweareworkingcollaborativelywithourpartnerstoaddresstheseissues.ItisinWalgreens'andValeant'sinteresttofixthisproblem.IfwearesuccessfulinimprovingtheWalgreensASPtherewillbeanadditionalupsidetoourcurrentdermlatestestimate.Wewillcontinuetoadvanceourrichpipelineanddemonstrateourcommitmenttothefieldofdermatologyalsointermsoftheactionplansfordermatology.
Now,onslide18therearesomeearlyindicationsofrecovery.We'vebeguntoseetheprocesstostabilizethisbusinessandseesomeearlyindicationsofrecovery.We'veseenanuptickinprescriptionsinMay,whichobviouslyisanencouragingsignbutwestillhavealotmoretodo.Wearejustabouttolaunchanaccessprogramforindependentpharmaciesthatwillimprovethepatientexperience.
Onslide19,aswithdermatology,wehaveaplantoacceleratetheSalixfranchise.TheproblemwiththeSalixfranchise,wehadsignificantsalesturnoverwiththeSalixintegrationoverthelast12months.Wehaveappointedanewleadertostabilizetheorganizationandaccelerategrowth.
Wehavealsolaunchedanewhepaticencephalopathyeducationandsalesmaterialtobothdoctorsandpatients.Andwehavealsodeployedanadditional67%incrementalsalesrepsforhepaticencephalopathytodrivegrowth.Wehavealsoreachedoutto12majorteachinginstitutionsandlaunchedaneweducationalprogramaboutHE.Inadditiontoeducation,weareimprovingpatientaccessandadherencethroughtheoptimizationofourreimbursementhubandotherpatientassistanceprograms.
Onslide20youcanseethatXifaxanretailTRxwasgrowing32%versuslastyear.ButweseetremendousopportunityforthebrandgiventhenewindicationandthecontinuedpotentialwithHE.ThereremainsasignificantunmetmedicalneedinHEpatients,asexpertsestimatethatupto5.5millionpatientsintheUShavecirrhosis.Ofthispopulation,it'sestimatedthatupto2.2millionareattheriskofdevelopingovertHE.
Annually,over600,000patientsaredischargedfromthehospitalwithHEbeingtheprimarydiagnosis.WeestimatethetotalmarketrevenueopportunityintheUSforHEisatover$5billion.
OntheIBSDopportunity,roughly10%to15%oftheUSadultpatientpopulationsuffersfromIBSand65%ofthesehaveadiarrhealcomponent.Despitenewtreatmentoptions,manyofthemareundiagnosedandarenottreated.ThisrepresentsanotherXifaxangrowthopportunity.
Onslide21wecontinuetoseesteadygrowthinXifaxanscriptsonayear-over-yearbasisbuttobeclear,theyarebelowourpreviousexpectations.TheperformanceofthenewsalesteamshouldacceleratethefranchiseinotherSalixbrandstocontinuetoshowadditionalgrowth.Finally,wecontinuetoinvestinthepipelineopportunitiestosustainlong-termgrowth,includingoralRelistor.
Movingtoslide22.AlthoughValeanthasareasthatneedstabilizationandimprovement,Ibelievethatwehaveasolidfutureahead.Wehaveastrongglobalportfolioofbrands.WehaveaplantofixdermatologyanddrivemomentuminSalix.
Wehaveasteadyperformanceinconsumer,contactlens,dentistry,oncology,genericsandinAsia.WehaveanattractiveR&Dpipelinethatwilldrivefuturegrowth.WehaveimprovedourUSmarketaccessandastrongcashflowgeneration.
CompanyName:ValeantPharmaceuticalsInternationalIncCompanyTicker:VRXSector:HealthCareIndustry:Drugs
EventDescription:Q12016EarningsCallMarketCapasofEventDate:9.90BPriceasofEventDate:24.64
©2014TheStreet,Inc.Al l R ightsReserved Page9of31
Letmetalkaboutafewofthose.Slide23providesabriefviewofournumerousValeantbrandsandthemagnitudeofourfranchises.
Onslide24wesummarizewehaveapproximately$3.5billionofconsumer-orienteddurableproductsthatcollectivelyhaveoperatingmarginsatroughly37%andgrowinginthemidsingle-digits.ThiswouldincludetheBausch&Lombproducts,lens,solutions,aswellasCeraVeandothertopicalproducts.IwillletothersspeculateonthevalueofthispartofourValeantbusinessbutadurableglobalgrowingbusinesswitha37%EBITDAmarginiscertainlyaveryvaluableasset.
Slide25,Dendreon'sanothervaluablebutunder-appreciatedbusinesswithinourportfolio.Provengedeliversastatisticallysignificantbenefit,a38%improvementinthree-yearsurvivalrateversuscontrol.Overthepastyear,theteamhasturnedthebusinesstoaprofitable,growingbusinessbytargetingtherightprescribersandimprovingthegrossmarginbymorethan10%.Weexpecttoseethisbusinesscontinuetogrownicelyasurologistsnowmakeup49%ofthebusinessandhaveincreasedtheirenrollmentsforProvengeinfusionsby22%yearoveryearinQ1.
Onslide26,overthepastfewmonthstherehasbeenmuchdiscussionaboutmanagedcareaccessacrossourportfolio.Wehavemadesignificantprogressinforgingnewrelationshipswithourpartnersandfeelthatthingsarestableforourproducts.Weareimprovingourcommercialaccesswithseveralkeybrands,aswellasimprovingourMedicarePartDcoverageinthesecondhalfof2016.
BeginningJune1,JubliaisnowcoveredonAARPwithoutapriorauthorizationandtheLotemaxfamilyofproductsmovedtoapreferredbrandontheAetnaMedicareSaverRxplan.Finally,ourmanagedcareteamisnowfocusingtheireffortstomaximizeformularyaccessforourupcominglaunchofproducts.
Insummary,fromaUSmarketaccessperspective,wearewellpositionedfor2016,2017andbeyond.NowI'mgoingtoturnthecallovertoTagewhoheadsupourR&Doperations.Tage?
T ageRamakrishna(ChiefMedicalOfficer):
Thankyou,Joe.Onslide27youwillseeasummaryofourR&Ddevelopmentprograms.IcontinuetobelievethatValeanthasoneofthemostproductiveR&Dorganizationsintheindustry.Unfortunately,ourR&Dorganizationismisunderstoodbecausewefocusontheresultsofourpipelineratherthanthefinancialinvestment.
Thisslideisatestamentofouroutput-drivenR&Dmodel.Wehaveasignificantnumberofactiveprogramsinallofourcoretherapeuticareas.Itistheoutputandresultsthatmattersforpatientsandphysicianswhichenableustobringnewandimprovedtreatmentstopatients'lives.
In2016,weplanonlaunching20newproducts.Additionally,onslides28aand29,youwillseeourdrugdevelopmentsuccessrateindermatologyissignificantlyhigherthantherestofthepharmaceuticalindustry,with100%successrateinourPhase3dermatologydevelopmentprogramsasnotedonslide29.
Slide30.WecurrentlyhavethreeproductsunderreviewattheFDA,twowithPDUFAdatesnextmonthandoneinNovember.RelistorOral,whichasyouknow,istheoralformulationofourcurrentlyapprovedRelistorsubQinjectionfortheindicationsofopioid-inducedconstipationinpatientswithadvancedillnessandpatientswithchronicnon-cancerpain.
LatanoprostenebunodisforthereductionofelevatedIOPinpatientswithopen-angleglaucomaorocularhypertension.Andfinally,BrodalumabisourmonoclonalantibodythattargetstheIL17receptorantagonist.Itisforthetreatmentofmoderatetosevereplaquepsoriasisforpatientswhoarecandidatesforsystemictherapyorphototherapy.
Asyoumayknow,wearecurrentlypreparingtogobeforeanFDAAdvisoryCommitteesometimethis
CompanyName:ValeantPharmaceuticalsInternationalIncCompanyTicker:VRXSector:HealthCareIndustry:Drugs
EventDescription:Q12016EarningsCallMarketCapasofEventDate:9.90BPriceasofEventDate:24.64
©2014TheStreet,Inc.Al l R ightsReserved Page10of31
summer.BrodalumabMAAhasalsobeenacceptedbytheEMEA.
Finally,onourwebsiteyouwillseeaquicksnapshotofsomeofourkeyR&Dprogramsindevelopment.Youcanalsofindwherewe'llbepresentingupcomingdevelopmentdataandabstractatthisyear'smedicalconferences.
IwillnowturnthecallbacktoJoe.
JoePapa(CEO):
Thankyou,Tage.Inclosing,IbelievethatValeantisanexceptionalCompanywithadiversecollectionofleadinghealthcarefranchisesandbrandsthatwillmakeadifferenceinpeoples'lives.WehaveasteadyperformanceinthemajorityofourbusinessandwehaveanattractiveR&Dpipelinethatwilldrivefuturegrowth.Wehaveastabilizationplanandwewillexecuteonthisplan.
We'vehitafewspeedbumpsincertainbusinessesthatweneedtoyouaddressbutwealsohaveanimportantcatalystforlaterthisyearandnextyearandwearegeneratingstrongcashflow.Thepastyearhasbeentoughoneveryonebutwewillworkthroughthisperiod,dotherightthingsandbeastrongerCompanyinthefuture.
Now,Operator,let'sopenupthecallforquestions.
Operator,please?
QUESTIONS&ANSWERS
Operator :
(OperatorInstructions)
LouiseChen,Guggenheim.
LouiseChen (Analyst-GuggenheimSecuritiesLLC):
Hi.Thanksforthequestion.MyquestionisonBausch&Lomb.
Wegetalotofquestionsonthisbusiness,andtherehasn'tbeenanupdateinawhile.SojustcurioushowweshouldthinkabouttheEBITDAforthisfranchiseandthegrowthgoingforward?
JoePapa(CEO):
Thankyou,Louise.SoIthinkprobablythebestthingIcouldsayonitisrelativetotheslidethatwehadinthepresentation.It'sa$3.5billionCompanyorsegmentofourCompany.
Now,tobeclear,thatalsoincludessomeotherpartsofthebusinessthatwethinkareconsumer-oriented,thingsliketheCeraVe,thedermalproducts,someOTCproducts,etcetera.ButtheBausch&Lomb,themajorityofthatisballparkinthat$3billion,$3.5billionrangeintermsofabusinessforus.Idoexpectthatwe'llbeabletoprovidesomeadditionalguidanceaswelookathowwedoourfutureguidancebutforrightnowIthinkbestprobablyIcangiveyouthesizeofit.
Intermsofthegrowthrate,Ithinkifyoulookatthewordsthatweused,amidsingle-digitgrowthrate,thenumberweusedinthepresentationwas4%butIthinkthat'sthekindofgrowthwe'reseeinginit.AndasIsaid,whatIthinkaboutitmostspecificallysinceIjoinedthecompany,it'saverydurablebusiness.It'saconsumer-orientedbusiness.Ifyouthinkaboutthecontactlenses,what'sinthesolutionsforallthepatients.We'vegotsomevitaminsinthereintermsofforpatientsthathaveophthalmicvitaminsandthingslikethat.
CompanyName:ValeantPharmaceuticalsInternationalIncCompanyTicker:VRXSector:HealthCareIndustry:Drugs
EventDescription:Q12016EarningsCallMarketCapasofEventDate:9.90BPriceasofEventDate:24.64
©2014TheStreet,Inc.Al l R ightsReserved Page11of31
Wethinkit'saverystablebusiness.It'sgrowingsomewhereinthemidsingle-digits,4%istheLTMnumberforit.Andwehopetoprovidemaybealittlebitmoreguidanceonthataswegivealittlebitmoresegmentationinformationaswegoforwardinthefuture.
Operator,nextquestion.
Operator :
TimChiang.
T imChiang (Analyst-BTIG):
Hi,Joe.Iknowyou'vebeenatthecompanyonlyaboutamonthorso,butIthinkthere'sbeenalotofquestionsintermsofwhetherornotyouwouldpursueasaleofkeysegmentswithinthecompany.
Areyouguysstillfocusedonjustsellingnon-coreassetsatthispoint?Howdoestheguidancereflectthepotentialforsomeofyourassetsbeingsoldatthispoint?
JoePapa(CEO):
Sure.ThatisaquestionthatI'veheardacoupledifferenttimesnow.IthinkthewayI'dhavetosayitisthatbasedon30days--andIhavetoputitasacaveat,it'sonlybeen30daysnow--myreviewofthebusinessisthatreallytherearesomeveryimportantcoreassetswithinthecompany.ThecoreassetsthatweseeareclearlytheBausch&Lombfranchise,theSalixfranchise,thedermfranchiseandtheconsumerfranchise.Weviewthoseascoreassetswherewewanttospendbehindthose,spendbehindthembothinR&D,capitalexpendituresintermsofwhatwe'relookingat.
Havingsaidthatcomment,therearesomeareasofthecompanythatIwouldrefertoasnon-core.Idon'twanttogointothespecificsofthem,butthenon-coreareaareplaceswherewewilllooktopotentiallylookatassetsales.
Wethinkthoseassetsalestherecanhelpdotwothings.Numberone,itcancertainlygeneratecashtopaydowndebt.Numbertwo,Ithinkthisisalsoveryimportantone,isthatitcanreducesomeofthecomplexityofourbusinessbysellingoffsomeoftheseassetsthataregoodassetsbuttheyarecomplexandtheydoresultinamorecomplexbusinessforus.
Iwouldsayrightnowourviewofthisiswe'lllooktosellnon-coreassetstoreducecomplexity,topaydowndebt.Thatwouldbothbe,Iwouldsay,mostlyintheareaofnon-coreiswhatwe'regoingtolookatthistime.Andnon-corecouldbebothproductsand/orsomegeographiesoftheworldaretheareasthatwe'lllookatfor,whatIwouldcall,non-coreassetsales.SoIthinkthat'sprobablyaboutasfarasIcangorelativetomyfirst30days,Tim,withtheanswer.
Operator,nextquestion?
Operator :
GreggGilbert.
GreggGilbert (Analyst-DeutscheBank):
Thanks,hi,Joe.Iwanttotrytocontainmyselftoonetwo-parter.Yourlargestrevenueline,neuroandother,inthequarterwasprettyrobust.Canyouofferanycolorthereandtalkabouthowdurableyouexpectthattobe?
Mysecondpartis,Joe,havetherebeenanyofferstoacquirethecompany?Andweretheyaboveor
CompanyName:ValeantPharmaceuticalsInternationalIncCompanyTicker:VRXSector:HealthCareIndustry:Drugs
EventDescription:Q12016EarningsCallMarketCapasofEventDate:9.90BPriceasofEventDate:24.64
©2014TheStreet,Inc.Al l R ightsReserved Page12of31
belowthestockprice?PerhapsyoucandescribeyourphilosophyontheindependentfutureofValeantandhowyouwouldhandlesuchapproachesiftheyoccurred,particularlyinlightofmediaspeculation.Thanks.
JoePapa(CEO):
Soletmestartwiththefirstpartofthisquestion,intermsofrevenueandtherobustnessoftheneurology.IthinkRobtalkedalittlebitaboutthatinterms--andI'llprobablytalkaboutit.Robmaywanttoaddsomemorecomments.
Certainly,asweputtogethertheplanforneurologyandother,it'saverydiversifiedbusiness.It'sabusinessthathasanumberofdifferentproductsinitandclearlytheperformancetherehasbeenacceptable.We'vegotsomeareaswhereonproductAorproductBwe'regoingtodosomethings.
Forexample,aswebuiltourguidanceouthere,webuiltintothefactthatfortwoproductsinthere,IsuprelandNitropress,thatwe'veannouncedarebate,avolumediscountrebate.Andthatvolumediscountrebatewillbebetween10%to40%discountsforhospitalsthatareacquiringIsuprelandNitropress.Wehadtobuildthatintothenumbersbeyondthefirst-quarterresults.
Secondarily,thereisanexpectationthatNitropressmaygogenericsometimeinthenext12months.Sowehadtobuildthatintoourconceptforthefullyear.Rob,anythingyouwanttoaddtothatpart?
RobRosiello (CFO):
I'djustaddthreepoints.OneisXenazinewhichtherenowhasagenerichasbeengoingdownbutactuallyholdingupquitewell.Andasyoupointout,Gregg,thebusinesshadaverygoodfirstquarter.
TRxshavecontinuedtocomedownandweobviouslyannouncedtheGPOrebateof10%to40%.Sothisisastrongbusinessbutthosearethreeheadwindsthatitwillhavefortherestoftheyear.
JoePapa(CEO):
Thenthefinalquestion,Gregg,onacquiringthecompany,obviouslyyouknowI'mlimitedtowhatIcansayinanswertothatquestion.Ithinkwe'vegotaverystrongfutureasaCompany.AsIsaid,therearesomenon-coreassetsthatwewilllooktodivestandspecificallyiftheycanhelpustoreducecomplexityandalsotohelpuspaydowndebt.ButIthinkasI'vereallytriedtolayoutthestoryhere,Ithinkwe'vegotaverybrightfuture.
Clearlywehavesomechallenges.Imentionedthechallengewiththedermatologyprogramandwhatwe'redoingwithWalgreensandsomeofthenegativeASPs,theaveragesellingpriceswe'redealingwithindermatology.ButIthinkallthosethingsarefixable.Oncewegetthatbehindus,wethinkthecompanyhasaverybrightfutureandonebasedoncommentsTagemade,onourpipelinewhichIthinkismisunderstoodandIlooktomovethatforwardandtrytochangeperceptionofourpipelineforthefuture.
SoIthinkI'mgoingtoprobablylimitmycommentsonanyacquisitionofthecompanyotherthantosaywewilllooktosellsomenon-coreassetsales,specificallytohelpustopaydowndebtandtoclearlytoreducethecomplexityofouroverallbusiness.
Operator,nextquestion?
Operator :
ChrisSchott,JPMorgan.
CompanyName:ValeantPharmaceuticalsInternationalIncCompanyTicker:VRXSector:HealthCareIndustry:Drugs
EventDescription:Q12016EarningsCallMarketCapasofEventDate:9.90BPriceasofEventDate:24.64
©2014TheStreet,Inc.Al l R ightsReserved Page13of31
WendyLin (Analyst-JPMorgan):
Goodmorning.ThisisWendyLinonforChris.Thanksforthequestion.
CanyoutalkaboutthefewchallengesinthedermatologyfranchiseandtheWalgreensimplementationthatneedtobeaddressed?Whatisdrivingtheprofitabilitychallenges?Whatarethenextstepstowardsstabilizingthefranchise?Howlongdoyouthinkitwilltakebeforeweseemeaningfulimprovement?
Thankyou.
JoePapa(CEO):
Thankyouforthequestion.Ithinkitisaveryimportantquestionintermsofwhatwe'retryingtodowithdermatology.Dermatology,there'stworealissues,Ithink,isthewayI'dprobablysayit.Oneissuewiththeprogramisjustensuringthatwecontinuetogetaccessaswe'veseensomechangeinthechanneldynamicsasweswitchfromaspecialtypharmacytoputtingtogetheraprogramwithWalgreens.
TheWalgreensprogramisagreatconceptbutitisanewprogram.Withanynewprogramtherearespeedbumpsthatyougothroughasyouputtogethertheprogram.IthinkbothwhatI'veseensofaristhatWalgreensandValeantareverycommittedtogettingthesespeedbumpsironedout.
I'vealreadyhadseveralcallsandin-personmeetingswithWalgreensinmyfirst30days.AndI'vegotameetingnextweekwiththeWalgreensCEOandtheUSleadershiptotalkabouthowwecanworkthroughsomeoftheseprograms,activitiesthatarepartoftheissueswithboththepriorauthorization,aswellastheaveragesellingprice.
Theaveragesellingprice,though,isanissueandItriedtolaythatoutinmycomments.Theissueisthatthereisapercentageofthebusinesswheretheaveragesellingpriceissignificantlybelowwhatwehadpreviouslyexpectedasweputtheprogramtogether.Andinfact,insomeplacesthataveragesellingpriceisnegative.Bythatmeans,everytimeaprescriptiongoesoutthedoorwe'retapingdollarbillstothatprescriptionasitgoesoutthedoor.
That'ssomethingthatwehavetogetfixed.I'mconfidentthatitwillgetfixed.Itdoesn'tmakesenseforittocontinueasis.Butuntilwegetthatfixedwetriedtoberealisticinourlookingatthedermatologybusinessforthefuture.Oncewegetthisfixed,andwhenwegetthisfixedweareveryconfidentthatwe'llgeneratesomesignificantupsidetodermatology.
ButIbecarefulabouthowlongitwilltakebecauseIthinkthat'sstillsomethingwe'retryingtoworkthroughwithourpartners.Iprobablydon'twanttogointotheexactdetailsbutIdohopetohavemeetingsintheverynearfuturewithourWalgreenscounterparttotalkthroughsomeoftheissuesthereforthatprogram.
Theotherprogramclearlyistomakesurewehavesufficientcouponingoutthereforindependentpharmaciesandthat'sgoingtohappeninJune.Sothatclearly,wethink,willbeanotherimportantpartoftheprogramtobefixed.
SoIthinkthatreallytriestoaddressthequestionsyouhadrelativetothekeychallengeswithourdermatologyprogramandsomeofthe--speedbumpsisthewordIusefortheWalgreensprogram.
Operator,nextquestion?
Operator :
AnnabelSamimy,Stifel.
CompanyName:ValeantPharmaceuticalsInternationalIncCompanyTicker:VRXSector:HealthCareIndustry:Drugs
EventDescription:Q12016EarningsCallMarketCapasofEventDate:9.90BPriceasofEventDate:24.64
©2014TheStreet,Inc.Al l R ightsReserved Page14of31
AnnabelSamimy(Analyst-StifelNicolaus):
Hi.Thanksfortakingmyquestion.
Andalittlebitalongthoselines,bothindermatologyandinGI,we'retalkingalotaboutASPsbeingdown.Butitseemslikeyouhadimprovedthatmarketaccessforthesepromotedproductsin2016,bothforsomeofthekeydermatologyproductsandsomeofthekeyXifaxanproducts.Andthevolumetrendsseemtobestable,ifnotgoingupalittlebit.
Sowhatisit--maybemoreaddressdermatologybutmaybemorespecificallyonXifaxan,whatisitthat'scausingthenetrevenuestobemuchlowerthanwhatwouldbeindicatedfromsomeofthevisiblemetricsthatwesee?
JoePapa(CEO):
Well,firstandforemost,IwanttomakesureIaddress--thedermatology,letmetalkaboutthatfirst,thenI'llgettoXifaxan.Onthedermatology,reallyitisthisissuethatItalkedabout,someoftheASPs,oraveragesellingprices,beingbelowwhatwehadexpected.ButitgoesbacktothecommentsthatImadeontheWalgreensprogramonthepreviouscall.
SoI'llprobablyleavethatoneasideandspendaminutetalkingaboutwhatwe'reseeingwithXifaxan.IalsohaveAnneWhitakerherewhomaywanttoaddsomeadditionalcomments.She'sbeentheindividualthat'sdoneagreatjob--herandherteam--onimprovingourmarketaccess.
Sufficeittosay,IthinkthatweareveryexcitedaboutwhatweseewithXifaxan.Butwehavetobecandid.Theperception,orcertainlythesituationwefindourselvesinrightnow,istheproductisunder-performingwhereweexpectedittogo.Buttobeclear,it'sup32%.SoIthink32%isagreatnumberyearoveryearintotalprescriptions.
Butaswelookedoutforthefullyear,wehaveseensomedisruption.Thedisruptionwasinthesalesforce.Overthelast12monthswehadsalesforcedisruption.Aswelookedatthatsalesforcedisruptionweaddressedit.Weputanewleaderin.WeputincrementalsalesforceeffortbehindXifaxan.Wethinkthat'sgoingtobeanimportantpartofthesolution.
ButthereissomeASPquestionsthatwerereallyasaresultofsomeofwhatIwouldrefertoasgainingsomeadditionalaccessandgainingpreferredaccesswhichwethinkaregoodtradeoffs.ButAnne,youmaywanttomakeacommentalittlebitmoreaboutthat.
AnneWhitaker (CompanyGroupChairman):
Ithinkwe'veimprovedtheaccess.Ofcourse,Xifaxanhadgoodaccessbutwehadsomecleaninguptodotoensurethatalltheplanshadthefulllabels,includingtheIBSDindicationsaswell.AndsowedoseeanumberofpriorauthorizationsforXifaxan.
Whatweexperienced,Ithink,aswecameintothefirstpartoftheyearwasjustatransitionactuallywiththevendorwhowassupportinguswithourPAprocess.Andthen,secondly,weknowthathighdeductiblehealthplansthatmorepatientsenrolledinthemthisyearthanpreviousyears.AndwhenaproductlikeXifaxanyouseetheimpactthereaswell.
SoIfeelgoodabouttheaccessgoingforward.Ifeelgoodaboutourhubservicesgoingforwardaswell.Ibelievewecleanedupsomeofthelabelissues,orlabelingthattheplandidnothaveupdated.
AnnabelSamimy(Analyst-StifelNicolaus):
Thankyou.
CompanyName:ValeantPharmaceuticalsInternationalIncCompanyTicker:VRXSector:HealthCareIndustry:Drugs
EventDescription:Q12016EarningsCallMarketCapasofEventDate:9.90BPriceasofEventDate:24.64
©2014TheStreet,Inc.Al l R ightsReserved Page15of31
JoePapa(CEO):
Thankyou.
Operator,nextquestion?
Operator :
AndrewFinkelstein,SusquehannaFinancial.
AndrewFinkelstein (Analyst-SusquehannaFinancialGroup/SIG):
Goodmorning.Thanksfortakingthequestion.
IwashopingyoucouldaddressabitmoreaboutsomeofthetrendsoutsidetheUS.There'scertainlyalotoffocusonkeyproductsyouhavehere.Youtalkedabouttheimportanceofthelargerglobalfootprint.Ithinkyougavesomedetailsontheamountofdestockinginthefirstquarter,preferablyonanorganicbasis.
TheAmounacquisitionwasasizablecontributoroffsetbythedestocking.Ifyoucouldtalkaboutwhatthatbusinesslookslikegoingforwardandhowtoevaluatewhattherunrateisforwardandhowyouthinkyoucanleverageitasyoumoveforward(audiogap).
JoePapa(CEO):
Thankyou.Thanksforthequestion.Youwerebreakingupalittlebit.
Ithinktherealquestionwastofocusonwhat'shappeningoutsidetheUS,what'shappeningwithemergingmarketsandwherearewewiththatrelativetoboththegrowthrate.Butalsojusthowwearelookingatitwhenyoutakeouttheheadwindsandthetailwindsoutoftheemergingmarketsnumbersandsomeoftheproductsthere.
Sonumberone,theBausch&Lombfranchiseintheemergingmarketscontinuestoperformverystrongly.Oneofthethingsthatwehadtodoisaddsomeincrementalcapacityforsomeofournewcontactlensesbecausetheperformancehasbeenverystrongwiththeproducts.Weareverypleasedwiththat.
Numbertwo,Iwouldsay--thatwasespeciallyinAsia--numbertwo,IthinkoneofthecommentsRobmadeIthinkisreallyappropriateheretosay.AlthoughGAAPrevenueswereup4%,ifyoutakeoutsomeofthenormalizationoftheinventoryquestion,same-storesaleswouldhavebeengrowingatabout10%.Sowethinkthat'sareallystrongperformanceinemergingmarkets.
Numberthree,whatI'dprobablysaythatIthinkisanimportantcommentbeforeaskingRobifhewantstoaddanything,isthattheotherimportantpointIwouldsayaboutourex-USoremergingmarketssegment,isthatmuchofitiseitherBausch&Lombbrandswhichisobviously,wethink,hasaverydurablebusinessortheyarebrandedgenerics.Thecombinationofbothofthose,wethink,areverydurableassets.AndIthinkthat'soneoftherealimportantpointsabouttheValeantex-USbusiness.
It'seitherinBausch&Lombwhichhasmanyconsumer-typeassetswhichwethinkareverydurable.Orit'sinthebrandedgenericbusinesswhichalsohasaverydurablebusiness.
SoIthinkforboththosereasons,aswethinkaboutthefuture,we'reveryexcitedaboutwhattheopportunityistherebecausethedurabilityorsustainabilityofboththesebusinesssegmentsofBausch&Lombandalsobrandedgenerics.Rob,anythingyouwanttoaddtotheemergingmarketsegmentquestion?
CompanyName:ValeantPharmaceuticalsInternationalIncCompanyTicker:VRXSector:HealthCareIndustry:Drugs
EventDescription:Q12016EarningsCallMarketCapasofEventDate:9.90BPriceasofEventDate:24.64
©2014TheStreet,Inc.Al l R ightsReserved Page16of31
RobRosiello (CFO):
Iappreciatethequestion.FromaregionalpointofviewLatinAmericahasseencontinuedgoodgrowth,ashasNorthAsia.Andthenifyougoinsidetheregions,youhavebrightspots,asImentioned,inpartsofEurope.Idothinkthisisanarea,andaswementioned,whenyoumakethatcorrectionoftheinventorydraw-downinRussiaandPoland,youseeoverallemerginggrowthtothelevelsthatIthinkwe'vehadbefore,ofnearly10%.
AndrewFinkelstein (Analyst-SusquehannaFinancialGroup/SIG):
Thanks.IfIcouldslipinaclarificationontwothingsonguidance?
Therewasachangeintheexpectedworkingcapitalbuildforthisyear.Ifyoucouldclarifythat?
AnddoesguidanceincludeanyrevenueorcostsforthekeyPDUFAproducts,theVesneoorRelistorthatcouldbeapprovedandlaunchedthisyear?
Thanks.
JoePapa(CEO):
Whydon'tIturnthefirstpartofthatquestiontoLindaontheworkingcapitalandthenI'lltakethesecondpart.
LindaLaGorga(Treasurer):
Sure.Onworkingcapitalaswetalkedaboutbefore,wewouldexpect--weusuallylookatwhererevenuesaregoing.Andwiththechangetorevenuesrelativetolastyear,whileonecouldevenpotentiallyprojectthere,wecouldhavepotentiallyprojectedasourceofcash.Atthispoint,lookingattheyearandhowthingshaveprogressed,we'reprojectingitsgoingtobeneutraltocash.Justthinkofitrelativetowhererevenueswerein2015versusnowandthegrowthbetweenthosetwoyears.
JoePapa(CEO):
AndLinda,thecommentwasaboutsomeofthemilestoneslikefor[Verota]andsomeoftheotherthings.Thosearealsobuiltinatthistime.
LindaLaGorga(Treasurer):
Correct.Soifyoulookon--
AndrewFinkelstein (Analyst-SusquehannaFinancialGroup/SIG):
Sorrytointerrupt.Iwasaskingiftherewasanyrevenueorlaunchcostintheguidance.
JoePapa(CEO):
Okay.Itwasmorethanthemilestones.Thereislaunchcostinthere,buttobeclear,theVerotaproductisalateintheyear2016--late2016PDUFAdate.SoIdon'twanttosuggest--there'snorevenueatthistimeandwe'regoingtogetreadyforlaunch,butthere'snotanactuallaunch.Thatwillbeplannedsometimeinearly2017,tobeclear.
AndrewFinkelstein (Analyst-SusquehannaFinancialGroup/SIG):
Thanksverymuch.
CompanyName:ValeantPharmaceuticalsInternationalIncCompanyTicker:VRXSector:HealthCareIndustry:Drugs
EventDescription:Q12016EarningsCallMarketCapasofEventDate:9.90BPriceasofEventDate:24.64
©2014TheStreet,Inc.Al l R ightsReserved Page17of31
JoePapa(CEO):
Norevenue.Okay,nextquestion.
Operator :
UmerRaffat.
UmerRaf f at (Analyst-EvercoreISI):
Thankyoufortakingmyquestions.FirstoneforRob,ifImay.Rob,canyouconfirmthecovenantsoninterestcoverageare$4.7billion,thatyouimpliedEBITDAcurrently?Andmoreimportantly,wheredoyouthinkitisin2017startingsecondquarter?Doesitapproach$5billionornot?That'sthefirstandprobablythemostimportantquestionI'mgettingaswell.
OneforJoe.Joe,IjustwanttounderstandwhatexactlyistheEBITDAforBauschandforSalix?Iknowthere'sthatslide24intherethatimpliesacertainEBITDAmargin.ButIjustwanttounderstand,indollarswhatisBauschandwhatisSalixrightnow?
AndfinallyforAnne.Anne,whereexactlyareyouguysrightnowwithmanagedcareconversationsonthecommercialsidespecifically?Thankyou.
JoePapa(CEO):
We'lltrytoansweryourone-partquestion,Umer.Buttrytogettoit.Firstofall,thequestiononthecovenantsand,Linda,youwanttotakethatpartofthequestion,please.
LindaLaGorga(Treasurer):
Sure.Umer,thereisnotonenumberforthecovenantsasyouwouldexpect.It'sanLTMcalculation.It'sgoingtovarybyquarter.Mostimportantly,aswesaid,basedonourcurrentguidance,weexpecttoremainincomplianceofourfinancialmaintenancecovenantsfortheremainderoftheyear.
UmerRaf f at (Analyst-EvercoreISI):
Whatabout2017?
LindaLaGorga(Treasurer):
Wehavenotprovided2017guidanceatthispoint.
UmerRaf f at (Analyst-EvercoreISI):
Okay.Butcoulditapproach$5billion,thecovenant,startingsecond-quarter2017whentheinterestcoveragethresholdapproaches3X?
LindaLaGorga(Treasurer):
Umer,wehavenotgiven2017guidanceandwhatyou'reaskingisnotcleartome.
JoePapa(CEO):
Letmetrytosummarizealittlebit.Linda,ifIsayanythingincorrectlymakesureyoucorrectme.ItobviouslyhasalotofvariabilitybasedontheLTM.Ballparkit'sinthat--forthe2016--ballparkit'sintherangeofsomewhereapproximately$4.7billion.Buttherecanbesomevariabilityandwe'vegotsomecomfortwithwhereweareversusthatnumberinaverysimplisticway.There'salotmoredetailsthatgo
CompanyName:ValeantPharmaceuticalsInternationalIncCompanyTicker:VRXSector:HealthCareIndustry:Drugs
EventDescription:Q12016EarningsCallMarketCapasofEventDate:9.90BPriceasofEventDate:24.64
©2014TheStreet,Inc.Al l R ightsReserved Page18of31
intothatbutconceptuallyit'ssomewhereinthatrelativerange.
I'mgoingtobridgetothenextquestionaboutEBITDAonBausch&LombandSalixand(technicaldifficulty).We'renotatthistimepreparedtoputforwardtheexactEBITDAnumbersforeachindividualbusiness.ThereasonIgavetheBauschbreakout--anditwasreallymoreconsumerbecauseitwasbothBauschandsomeofourdermbusinesses--isthatIwantedtogiveaperspectiveonwhatIthinkisaverydurablebusinessintermsofwhatwehavewithBausch&Lombintermsofitbeingpredominantlyconsumer.There'ssomeobviouslypartsofitthatarenotconsumer.
ButIdothinkthatdurabilityisanimportantpartofreallyaveryvaluableassetandthat'swhywegavetheoperatingmarginsfortheBausch&Lombbusiness.Ithinkbyanystretchofanyvaluationmodel,thatwouldbeaveryvaluableassetforthecompanyandthat'sreallythereasonIgaveit.We'renotgoingtogiveoutthespecifics,though,ontheSalixatthistime.
Lookto,though,thefuturethatwewilllooktoprovidemoredetailedinformationaswelookattheappropriatewaytoguideforthefuture.Butbasedonthe30days,Ithinkwe'llleaveitatthat.Andthen,Anne,there'saquestiononthemanagedmarketsyouwanttocommenton?
AnneWhitaker (CompanyGroupChairman):
Yes,Umer,yourquestionwaswhereareweinthediscussionswiththemanagedmarkets,thepayersandsuch.Andsowe'vehadalotofdiscussionsoverthepast9to10monthsandI'mveryproudofwhattheteamhasaccomplished.IcansafelysaythatIfeelourportfolioissecurefor2016,basedonthediscussionsthatwe'vehadwithregardstocommercialandthenwithany--ofcoursenochangeswithPartDforthisyear.
Now,Isaythatwithacaveatthatpayersoftenwilldocategoryreviewsonaquarterlybasis.SowecouldgetanoticefromapayerthattheydecidedtodoacategoryreviewforQ4orsomethingthisyear.Butthat'sthesituationthateveryCompanyisin.
Soourconversationstodaywiththeteamandwithourpayercustomersarefocusedon2017.WehaveourbidsinforPartD.Andforcommercialfor2017itvariesbyplan.Somewe'rejustdoingextensions.Somewe'redoingcategoryreviewsastheycomeup.ButIfeelverygoodabouttheaccesswehavetodayandthatwe'llbebuildingonthatfor2017.
JoePapa(CEO):
Thankyou,Anne.
UmerRaf f at (Analyst-EvercoreISI):
Thankyouverymuch.
JoePapa(CEO):
Operator,nextquestion?
Operator :
DavidRisinger.
DavidRisinger (Analyst-MorganStanley):
Thanksverymuch.IhaveaquestionwithrespecttothenegativeASPs.Iguessit'smulti-partandIapologize,butcouldyoujustexplainwhytherearenegativeASPs,howyouwillfixthat,andthen
CompanyName:ValeantPharmaceuticalsInternationalIncCompanyTicker:VRXSector:HealthCareIndustry:Drugs
EventDescription:Q12016EarningsCallMarketCapasofEventDate:9.90BPriceasofEventDate:24.64
©2014TheStreet,Inc.Al l R ightsReserved Page19of31
whethertherewillbeanynegativeimpactonRxtrendsasaresultofraisingASPs?Thankyou.
JoePapa(CEO):
Sure.David,thisisamulti-partquestionthatI'lltrytogivemybesttowards.Whatwe'vedoneisfirstandforemost,I'llsayweareveryexcitedabouttheWalgreenspairingandwethinkwe'vegotagreatpartnerinWalgreensandwe'relookingtoworkthroughsomeofthesequestions.
Theprogram,asyouknow,isaveryinnovativeprogram,it'sa20-yearprogram.Andnaturallywhenyouputsomethingtogetherthat'sinnovative,you'regoingtoexperiencesomespeedbumps.Andthat'sthewayIwoulddescribewhatweseetoday,isjustsomespeedbumpsbetweenasweputtogetherdifferentpartsoftheprogram.
Theprogram--andI'lltrytodoitasbrieflyasIcould--whenyoucomeforwardtherearedifferentpatientsthatwalkinthedoor.Someareclearlycoveredbycommercialinsurance.Someofthemarecoveredbutthereisapriorauthorizationinplace.Someofthemarejustsimplycashpayingcustomers.Dependingonwhichtypeofcustomeryouare,you'regoingtoenterintoacertainpathwayforhowyourprescriptionsarereimbursedandwhattheylooklike.
Theissuethatwefindisthataswewentthroughthis,therearesomecustomers,patients,thatastheygothroughthispathwaywefindthatwe'rereceivingareimbursementornotreceivingreimbursementdependingonwhat'shappeningwiththatpatient,what'shappeningwiththepriorauthorization,whetherthepriorauthorizationgetsrejectedornotgetsrejected.ThatiscausingsomeofwhatwewouldrefertoasanegativeASP.ThatisthendrivingdowntheASPwiththeWalgreensprogramversusournon-Walgreenscustomers.
Itisouryouattempt,andthereasonIbelieveitcanbefixedisthatwenowhavethedatatolookatthat.Weknowexactlywhereit'scomingfrom.Weknowthetypesofpatientissuesthatwecanaddress.Andwecanworktowardsthatintermsoftryingtoimprovetheoverallprogramand,importantly,theASPs.That'sthereasonwhyI'mverycomfortableIcanfixthis,wecanworkverycloselywithWalgreenstofixit.
Ican'texactlygiveyouwhat'sgoingtohappenwiththeRxtrendsbecausethatwouldbeaspeculationthatI'mnotyetpreparedtodo.ButIwillsaythatweunderstandwhatcanbedonewiththeASPsandweknowthetypesofpatientsthatthisisimpactingandwe'llputtogetheraprograminplaceandworkwithourpartnertogetthatresolved.Idothink--thebottomlineiswedothinkit'sfixable.
DavidRisinger (Analyst-MorganStanley):
Great.Andthenintermsofthesecond-halfgenericsprogram,isthatgoingtohappenornot?
JoePapa(CEO):
Thegenerics,thereisagenericprogramwhichwereferredto,IthinkitwascalledPlanB.ItisscheduledforlaterthisyearandweareworkingcloselywiththeWalgreensteamtomakethathappen.
Onceagain,it'saverynovelconcept.It'saconceptthatisbasedonhavingmoredispensingofourbrandedproductsinplaceofageneric.Wedothinkthere'salargepartofvalue,especiallywiththeprescriberbase.BecauseIthinktheprescribers--Iclearlybelievetherearesomeimportantvehicledifferenceswith--especiallyindermatologyproducts.SowedolookforwardtoworkingthroughthatprogramwithWalgreens.Butonceagain,it'sslatednorthesecondhalfoftheyearatthistime.
DavidRisinger (Analyst-MorganStanley):
Thankyou.
CompanyName:ValeantPharmaceuticalsInternationalIncCompanyTicker:VRXSector:HealthCareIndustry:Drugs
EventDescription:Q12016EarningsCallMarketCapasofEventDate:9.90BPriceasofEventDate:24.64
©2014TheStreet,Inc.Al l R ightsReserved Page20of31
JoePapa(CEO):
Operator,nextquestion?
Operator :
DavidAmsellem,PiperJaffray.
DavidAmsellem(Analyst-PiperJaffray&Company):
Thanks.AquestionontheUSneuroandothersegment.
Alotoftheseproductsareoff-patentorgoingoffpatent.Canyoutalkabouttheextenttowhichwe'llseegenericcompetition,eitherthisyearornextyearonsomeofthekeyproducts?
Putanotherway,forproductslikeNitropressorIsuprel.Shouldwethinkaboutgenericscomingthisyearornextyear?Andhowyou'rethinkingabouttheerosionofthatbusinessduetocompetition?
Thanks.
JoePapa(CEO):
I'llstartand,Rob,ifthere'sthingsyouwanttoaddtothis.Thisissomethingwehavelookedatveryclosely.We'velookedatthetotalUSneurobusiness.Reallyit'sadiversifiedproductbusiness,isprobablythebestway,becauseit'snotjustaneurologybusiness.Asyoupointout,thereareanumberofproductsthatareoff-patentorsoontobeoff-patent.
WedoexpectthegenericcompetitorsspecificallyonNitropressandIsuprel.Weexpectthemreallysometimeinthenext6to12monthsandthatisthecurrentexpectation.Therearesomeadditionalgenericsthatweexpectinourportfolio.Theytendtobeinsomeoftheotherareas,somedermatologyproductslikeZ ianaandotherproductsthatwedoexpectsomegenericsandwebuiltthatintoourguidancefor2016andbeyond.
Rob,anythingyouwanttoaddtowhatIsaid?
RobRosiello (CFO):
Justthethree.Zegerid,ourcurrentexpectationisQ3.Isuprel,NitropressandVirazole,ourexpectationisearlyin2017.
DavidAmsellem(Analyst-PiperJaffray&Company):
Thankyou.
JoePapa(CEO):
Operator,nextquestion?
Operator :
CindyGuan.
CindyGuan (Analyst-GoldmanSachs):
Hi.Thanksverymuch.
IwaswonderingifyoucouldgivemorecolorontheperformanceinophthalmologyRxthisyearand
CompanyName:ValeantPharmaceuticalsInternationalIncCompanyTicker:VRXSector:HealthCareIndustry:Drugs
EventDescription:Q12016EarningsCallMarketCapasofEventDate:9.90BPriceasofEventDate:24.64
©2014TheStreet,Inc.Al l R ightsReserved Page21of31
what'stheoutlookthere?
Thensecondly,haveyouhadanyconversationsrecentlywiththeratingagenciesintermsofwhatthey'relookingforindeterminingwhethertheywoulddowngradeorremovethenegativeoutlook?
Thankyou.
JoePapa(CEO):
I'llstartwiththeperformanceoftheophthalmicRx.IalsohaveAriherewithme.Ari,ifyouwanttoaddanycommentsyou'rewelcometodothataswell.I'llturntheratingagencyquestiontoLinda.
OnthehequestionoftheophthalmicRx,Ithinkprobablythemostimportantthingtosaythereisthatwe'vegotsomenewproductscomingintotheportfolio.Specifically,theproductthatTagementioned,latanoprostenebunod,iswethink,areallyexcitingproduct.ThedataontheuseofproductsforglaucomaisactuallythatlatanoprostorXalatan,aproductthatactuallycamefrommypastwhenIwaswithPharmacia,isstillthemarketleader.Itstillhasballparktwo-thirdsofthemarketisinthetreatmentofglaucomaisintheareaoflatanoprost,otherwiseknownasXalatan.
Wehaveaproductthatisbetterthan--orwebelievethatwillbebetterthanXalatanorlatanoprost.Andthatisthereasonthatwe'reveryoptimisticintermsofthefuture.
Now,tobeclear,weneedtogetitapprovedandweareawaitingtheFDAprocessfortheapprovalonthat.ButIdothink,though,thatlatanoprostenebunodthatTagetalkedabout,isreallyexcitingpartofourfuture.
Ari,isthereanythingelseyouwanttotalkabout?Iknowwe'vegotanumberofprogramswe'reputtingtogetherformarketaccesswithourophthalmicbusiness.Anythingelseyouwanttoadd?
AriKellen (CompanyGroupChairman):
yes,maybeacouplepoints,Joe.Oneisthethreeflagshipbrandsorsegments,theLotemaxfranchise,ProlensaandBesivance.AllperformedwellfromasharepointofviewinQ1.LotemaxandProlensagrewthemonthlyscripts6%and2%,respectively,bothgainingshareintheoverallmarket.BesivancedeclinedonaTRxbasis5%butactuallygainedshareinthebrandedsegment.
JoePapa(CEO):
Okay,thankyou.AndLinda,therewasaquestionontheratingagenciesandrecentconversations.
LindaLaGorga(Treasurer):
Sure,Cindy,wecontinuetohaveregulardialoguewithbothS&PandMoody'swhocoverus.Andasyouwouldexpect,theywill,fromthosedialoguesandindividualwork,maketheirindividualassessments.
JoePapa(CEO):
Thankyou,Linda.Operator…
CindyGuan (Analyst-GoldmanSachs):
Werethetwoincludedinguidanceorno?Relistorandlatanoprost?WerethoseincludedinguidanceassumingtheygetapprovedinJuly?
JoePapa(CEO):
CompanyName:ValeantPharmaceuticalsInternationalIncCompanyTicker:VRXSector:HealthCareIndustry:Drugs
EventDescription:Q12016EarningsCallMarketCapasofEventDate:9.90BPriceasofEventDate:24.64
©2014TheStreet,Inc.Al l R ightsReserved Page22of31
Wedidincludethembutataverysmallrate.Obviouslyreflectingputtingsometypeofprobabilityweightingon--weexpecttogetthemapproved.Exacttimingyoualwayswanttomakesureyou'resomewhatconservativeintiming.Butyes,they'reincludedbutverysmallatthistime.
CindyGuan (Analyst-GoldmanSachs):
Okay,thankyou.
JoePapa(CEO):
Nextquestion,operator.
Operator :
DavidMaris,WellsFargo.
DavidMaris (Analyst-WellsFargoSecurities):
Hi.Joe,myquestionshavetodowithtransparencywhichiswhatyoustartedthecallwith.Afewthings.
First,inmid-Mayyoureaffirmedfirst-quarterguidancebutdidn'treaffirmtheyear.Canyouwalkusthroughwhyyoudidn'twithdrawguidanceatthatpoint?
Secondly,whynoGAAPEPSguidance?ItseemslikeprovidingGAAPandthenbuildingtonon-GAAPismoreinkeepingwiththeSEC'sgoalanduseofGAAPandnon-GAAP.
Andthenthird,whatdidtheSECsubpoenaaskfor?Andwhataretheyinvestigating?
JoePapa(CEO):
Okay.I'llstartwiththecommentaryonguidanceandthenthecommentary,Rob,ifyouwanttomakesomecommentsspecificallytotheGAAPquestionthatDavidasked.Letmestartwithguidance.
Sotransparency,Idobelieveit'saveryimportantpartandsomethingIclearlycontinuetohopetoimprovethetransparencyofournumbers.TodaywereportintwoareasandIhopetolookatthatintermsofboththedevelopedmarketsandtheemergingmarketsandlooktoprovidesomeadditionalclarity.Aswhatwedidwithtoday,alittlebitofastartjustonwhatwesaidabouttheBausch&LombandconsumerfranchiseandalsoDendreon.Myhopeistoprovidegreatertransparencyovertime.
Onthespecificquestionof--IjoinedthecompanyonMay2.Myfirst30dayshavebeenfilledwith,David,istoreallygetamuchbetterunderstandingofthebusiness.I'vebeendoingbusinessreviewswithallofthebusinessesandIreallywantedtomakesureIunderstoodwhatwasup,whatwasdown.
Aswithanybusiness,andcertainlytheValeantbusinessisnodifferent,there'ssomethingsthataregoingupandthere'ssomethingsthatarecomingdown.AndbeforeImadeanychangesinnumbersIfeltitwasmostimportanttoreallyunderstandthebusinessesfromAtoZ ,toreallyunderstandwherearewewiththebusinessandwhyarewethereandimportantlywhataretheactionplans.That'swhytome,asItalkedaboutit,IreallytalkedabouttheconceptofwhatIwasdoingwiththisbusiness,reallybeingastabilizationofthecompanyinthenearterm,thenmovingfromstabilizationtoturnaroundandthenfinallygoingtotransformation.
MycommentstodayarelimitedonlytothestabilizationportionoftheprogramandactivitiesbecauseIthinkthatisclearlythefirstareathatneededtheattention.Ithinkthat'sathree-tosix-monthprocess.Andthenwe'llbridgetotheturnaroundandthetransformation.
Butmycommentsabouttheguidancewereittakesalotofworktoreallyunderstandwhat'shappening
CompanyName:ValeantPharmaceuticalsInternationalIncCompanyTicker:VRXSector:HealthCareIndustry:Drugs
EventDescription:Q12016EarningsCallMarketCapasofEventDate:9.90BPriceasofEventDate:24.64
©2014TheStreet,Inc.Al l R ightsReserved Page23of31
inthebusiness,especiallyonethathasthecomplexitythattheValeantbusinesshas.AndI'vebeenworkingverydiligentlyinmyfirst30daystomakesureIdidthat.Rob,alsosomequestionsontheSEC,theGAAPnumbersand--
RobRosiello (CFO):
LetmestartwiththeGAAP.Wefindforourinvestorsitismoreinformativetoguidetothenon-GAAP.Andwedon'tfeelwecanaccuratelypredicttheGAAPguidance.IntermsoftheSECinvestigation--
DavidMaris (Analyst-WellsFargoSecurities):
IfIcouldjustinterruptforasecond.Whatyou'resayingisit'seasiertoguidetonon-GAAPadjustedearningsthanGAAPearnings,orthat'swhatinvestorswant,whichisthat?
JoePapa(CEO):
I'dsayitthefollowingway.I'dsayourhistoryhasbeen,aswithmanycompanies,David,isthatwe'veguidedtotheadjustednumbersandIthinkthat'sreallythewaywediditinthepastandwe'llcontinuetodoitforthefuture.
Thefinalpartofyourquestion,David,wastheSECletterthat--what'stheissuethere.Theletterthatwereceivedconcernedthecompany'sformerrelationshipwithPhilidor,itsaccountingpracticesandpoliciesandanypublicdisclosuresonthematterswiththequestionthatwehadfromtheSEC.ThatwaswhatweareaddressingandwillcontinuetoworkwiththeSEC.
AsIsaid,asamatterofpolicy,wewillworkwithallgovernmentinquiriesandtrytobecooperativeand,importantly,getthoseresolvedasquicklyaspossibletoputthosebehindusandmoveforward.That'sbeenmygoal,asIstatedinmypreviouscomments,andIjustprobablyreiterateatthispoint.Operator,nextquestion.
DavidMaris (Analyst-WellsFargoSecurities):
Thankyou.
Operator :
IrinaKoffler,Mizuho.
Ir inaKof f ler (Analyst-MizuhoSecuritiesUSA):
Hi.Thanksfortakingthequestions.
Canyoutalkabouthowyouthinkaboutthecashreservesneededtoaddressalltheongoinglitigation?Andifallofthesepotentiallegalexpenseswouldimpactyourfuturedebtrepayment?
That'squestionone.
ThenwonderingifyoucouldcommentonAddyiandhowit'sdoing?Andifthere'sanycontractualreasonwhyyoucan'tstoppromotingthatorwhyyouwanttobeinthisbusiness?
Thanks.
JoePapa(CEO):
Letmestartonthecashreserves.Linda,youcanaddanything.
CompanyName:ValeantPharmaceuticalsInternationalIncCompanyTicker:VRXSector:HealthCareIndustry:Drugs
EventDescription:Q12016EarningsCallMarketCapasofEventDate:9.90BPriceasofEventDate:24.64
©2014TheStreet,Inc.Al l R ightsReserved Page24of31
Ithinkthere'stwopartstothisquestion.Numberoneissomeoftheissuesthatwe'redealingwithtoaddressthelitigation.AndIsaidnumberone,wecan'tpredicttheexactoutcomeofanylitigation.Obviouslythesearemorelonger-terminduration.ButyouIdoexpect,asIsaidinthecallearlier,we'regoingtoabsolutelycooperatewithallgovernmentinquiriesand,importantly,we'regoingtotrytoresolvethemasquicklyaspossibleandputthembehindus.
Onthequestion,though,intermsofcashreserves,IthinktheimportantpointIwilladdtothequestion,becauseIthinkit'sgettingtoyourquestion'sreallyimportant,isthattherealimportantissueiswegetbeyond2016andgetinto2017.We'llhaveless,whatIwouldcall,contingentpaymentsandmilestonepaymentsfromabusinessdevelopmentpointofview.Sowe'llhaveactuallymorecashtoputtowardsdebtrepaymentaswethinkaboutthefuture.
AndIthinkthat'sprobablyanimportantcommentaspeoplethinkaboutwherewearewithourliquidity,wherewearewithourdebtcovenantsaaswegetto2017.Wewon'thavesomeofthemilestonepaymentsand/orcontingentliabilitiesthatwe'vehadinthepast.We'dbeabletopaydownmoredebtforthefuture.
Onthefinalquestion,partofyourquestionwasAddyi.WethinkAddyi'sstillaverygoodproductandwe'reexcitedaboutwhattheopportunityis.ItcandidlyneedssomeadditionalactivitiesandAnneandtheteamareworkinghardandtryingtomakethosehappen.AndAriandtheteam,everybody'sworkingtoreallytakealookatwhat'srequiredthereandwhat'sgoingmakethatproductasuccessfulproductforthefuture.
AndIthinkthat'sprobablyaboutasfarasI'llsayrightnow.Westillthinkit'saverygoodprunedwe'lllookforwardtocontinuingtoputmoreresourcesbehinditinthefuturetomakeitasuccessfulproduct.Operator,nextquestion.
Operator :
DouglasTsao,Barclays.
MorganWilliams (Analyst-BarclaysCapital):
Hi,thisisMorganWilliamsonforDoug.Iwashopingtodiginalittledeepertothemanagedcarecontracting.Iwaswonderingifyoucouldprovidesomeclarityonwhetheryou'restillfocusedonbundledcontractsorwhetheryou'renowlookingtocontractonaproduct-by-productbasis?Andthenonthatpoint,howyoucanwestarttothinkaboutexpansionandrebatesasyoutrytoimproveaccessindermandGI?
Andthenonequickfollow-uponapreviousquestion.DoesthenegativeASPthatyou'reseeingthroughtheWalgreensprogramaffecttheWalgreensactivityfeesorwhattheywouldreceivefromValeant?Thanks.
JoePapa(CEO):
Sure.I'mgoingtoaskAnnetofirstaddressthemanagedcarecontracts.TheonlythingI'llsayupfrontonthatisclearlythatAnneandherteamhavedoneagreatjobofgettingtheaccessthatweneedformanagedcaretoday.Sowe'reingoodshapewithwhereweneedtobetodayrelativeto--asyou'rethinkingabouttryingtomodelourbusiness,wethinkwe'vegotwhatweneedtodaygoingintothefuture.ButAnne,anythingyouwanttoadd?
AnneWhitaker (CompanyGroupChairman):
Ijustwanttoreiteratethataswell.Ifeelgoodaboutthepositionthatwe'reintoday.We'resecurefor
CompanyName:ValeantPharmaceuticalsInternationalIncCompanyTicker:VRXSector:HealthCareIndustry:Drugs
EventDescription:Q12016EarningsCallMarketCapasofEventDate:9.90BPriceasofEventDate:24.64
©2014TheStreet,Inc.Al l R ightsReserved Page25of31
2016andI'moptimisticaboutexpandingaccessfor2017.
Specificallyonyourquestionaroundarewebundlingversusindividualcontractsforeachoftheproducts.HistoricallyValeantandthecompaniesithasacquiredhasreallymanagedindividualrebatesforeachoftheproducts.Aswegoforward,we'llworkwithourpayerpartnersandunderstandthatthere'svalueinreallyleveragingourportfolio.
Youmightimagineinareaslikeophthalmology,aswepreparetolaunchnewproductsthere,ordermatology,itcouldbeadvantageousustoleverageourportfolio.We'lltakethatonacase-by-casebasisandreallyunderstandwhatthepayers'needsareaswellasourownneedsandpresentacontractoffering.
JoePapa(CEO):
I'msorry,IknowthesecondpartofthequestionwasthenegativeASPandWalgreens.Remindme,I'msorry,I…
RobRosiello (CFO):
(MultipleSpeakers)service.
MorganWilliams (Analyst-BarclaysCapital):
Doesthataffecttheactivityfees?
JoePapa(CEO):
No,thesimpleanswerisno.It'saseparatenegotiatedagreement.ButIwouldsaycertainlyaswegoandtalktoWalgreensabouttheprogram,asIsaid,wethinkit'sagreatprogram.It'salong-termprogram,it'sa20-yearprogram.Buttherearegoingtobethesespeedbumpthingsthatwehavetoworkthrough.ButthenegativeASPdoesnothaveanimpactontheservicefees.
MorganWilliams (Analyst-BarclaysCapital):
Okay,thankyou.
JoePapa(CEO):
Operator,nextquestion.
Operator :
DougMiehm.
DougMiehm(Analyst-RBCCapitalMarkets):
Goodmorning.I'msorrytobeatthistodeath,butIjustreallywanttotrulyunderstandhowwe'regettingnegativeASPsintheWalgreensbusinessonthedermside.
Youdidmentionthatyougotcoveredlives,yougotpriorauthorizationandsomecashpay.ButcouldyouwalkthroughananalysisofhowthatactuallyoccurstogetanegativeASP?
Andthenwhatyoucanspecificallydotoaddressit?
JoePapa(CEO):
Sure.Soletmestartonceagainandtryto--IappreciatethequestionandIneedtobemoreclearonit.
CompanyName:ValeantPharmaceuticalsInternationalIncCompanyTicker:VRXSector:HealthCareIndustry:Drugs
EventDescription:Q12016EarningsCallMarketCapasofEventDate:9.90BPriceasofEventDate:24.64
©2014TheStreet,Inc.Al l R ightsReserved Page26of31
PartiallyreflectsmyfactthatI'monlyhere30days,Ithink.WiththeWalgreensprogram,whathappensisthatpatientscomeinthreedifferentcategories.
You'reeitheracashpayingcustomer,youareacommercialcoveredcustomeroryouhavecommercialcoveragebutthere'sapriorauthorizationprocess.Theissuethatwecomeforwardwithisthatinsomecaseswe'reactuallysendingouttheproductbeforethepriorauthorizationisbeingapproved.
Andinsomecasesthepriorauthorizationmaybeapproved,insomecasesitmaynotbeapproved.AsyougettothatsituationyoufindyourselfinasituationwherethereisapotentialnegativeASPwhenyougoacrosstheentirecategory.Thatispartoftheissuewefindourselvesin.There'salsowithinthatcategorywehavedifferentco-pays.Thedifferentco-payshaveanimpactonwhattheactualASP,oraveragesellingprice,is.Itisamultitudeoffactorsthatcometogether.
ThereasonIbelievethiscanbefixedisthatweclearlyhavethedatanow.We'vegotthefirstquarterbehindus.Weunderstandwhat'shappened.Wehavedata.Wecanlookatthatdataandmakedecisionsaboutwhat'stherightwaytogoforwardwiththeprogram.Andthat'sthereasonIhavetheconfidencethatit'sinWalgreens'interest,it'sinValeant'sinteresttosolvethis.AndIlookforwardtotryingtosolvethiswiththeteamatWalgreens.
DougMiehm(Analyst-RBCCapitalMarkets):
Okay,fine.
JoePapa(CEO):
Operator,nextquestion?
DougMiehm(Analyst-RBCCapitalMarkets):
Justafollow-upquestionwithrespecttoyourlaunches.We'dexpecttoseelatanoprosteneandalsoRelistorOral.
Canyoutelluswhatplansareinplaceforthelaunchesandwhenyouexpectthoseactuallaunchestooccur?
That'sit.Thanks.
JoePapa(CEO):
Sure.SoIthinkthefirstthingI'dreferyoutoistheslidethatTagewentthroughintermsofthetimingwherewehavePDUFAdatesforRelistorandlatanoprostinJulyandBrodaisinNovember.Obviouslywe'vegottoworkthroughthefinalstagesofgettinganFDAapproval.Idon'twanttosayexactlywhenitwillhappenbutwedohavePDUFAactiondatesthatwewouldlookforwardtointeractingwiththeFDAonthoseproducts.Sothatreallyistheprimarymetricintermsofgettingtheproductsapproved--orthebiggestmilestoneisgettingitthroughtheFDAprocess.
Beyondthat,we'vegototheractionstepsinplaceforpreparationforit.Wehadour--ifItalkaboutlatanoprost,forexample,wehadourentiresalesleadershipinjust,Ithinkitwas10daysago.Theywereintotalkabouttheyoulaunchprogramsandsomeofthethingsweneedtoaccomplish.We'veclearlybeenworkingonthedifferentpriorauthorizationprocessandothercoverageprocessthatwillberequiredwiththeproduct.Sowe'vegotanumberofseriesofstepsthatarebuiltin.
Wehavebeensomewhat,IwouldIsay,conservativeonwhatweputinforthesalesforthoseforthisyearuntilwegetmoreinformationonexacttiming,exactlabels,etcetera.Butwethinkthattheactionstepsofgettingreadyforthelaunchareunderway.Itwilljustbearesultofreallytryingtogettothatfinal
CompanyName:ValeantPharmaceuticalsInternationalIncCompanyTicker:VRXSector:HealthCareIndustry:Drugs
EventDescription:Q12016EarningsCallMarketCapasofEventDate:9.90BPriceasofEventDate:24.64
©2014TheStreet,Inc.Al l R ightsReserved Page27of31
labeling,gettheproductthroughthefinalFDAprocess.I'mgoingtooffer,Tage,doyouhaveanyothercommentsaboutapprovalprocess?IthinkI'veansweredthat.
T ageRamakrishna(ChiefMedicalOfficer):
Ithinkyou'vecoveredit.
JoePapa(CEO):
Ifanyonehasanyotherrelativetomarketingprogramsortheaccess.
AnneWhitaker (CompanyGroupChairman):
ThisisAnne.Iwouldjustmakeonecommentwithregardtomarketaccesstimeline.Werecognizethatintheglaucomaspaceit'slargelyaPartBpatientpopulationthatwe'llbegoingafter.Sowe'llbeworkingthroughthosetimelinestohopefullyhavetheproductaddedtoformularynextyear.We'llbeindoublyasolidpositionfortheportfolioandmanagingthatthefollowingyear.
ForRelistorOralwe'llbeworkingthroughmarketaccessopportunitiesaswell,onthecommercialaswellasonPartB.Iwouldjustcautionusabitthatittakesalittlelongertogetaccessthesedaysthanitusedto.Wewillbuildthatintoourplanningforeachoftheselaunchproducts.
JoePapa(CEO):
That'swhywe'vebeenconservativeonwhatweputinforsalesnumbers,whatwedidputinactionstepstogetreadyforthelaunchintermsofexpenses.Operator,Ithinkwehavetimeformaybetwoorthreemorequestions.Sonextquestion.
Operator :
AlanRidgeway.
AlanRidgeway(Analyst-Scotiabank):
Goodmorning,guys.IwashopingwecoulddrilldownalittlebitmoreonXifaxanandwhatyouguysareseeing.
Ifyoucouldpotentiallyprovideuswithsomemorecoloronwherethegrowthiscomingfrom,asfaraswhatyou'reseeingasfarasontheHEsideortheIBSside,andifeitherofthosemarketsisparticularlyresponsiblefortheunder-performanceversusyourmodels?
Andthenasafollow-uponthat,couldyoutalktousalittlebitaboutwhatpercentageofthecoveredliveswhichyounowhavereallygoodpercentageofcoveredlives,couldyoumaybegiveussomeinformationastohowmanyofthosestillrequirepre-authordon'trequirepre-authorizationforeachofthedifferentlabels?
Sowehaveabetterunderstandingofhowthismarketmightprogress.
I'llleaveitatthat.Thanks.
JoePapa(CEO):
Sure,thankyou.IwanttobeclearSalix.It'saninterestingcomment.WetalkedaboutSalix'sprescriptionsbeingup32%yearoveryear.That'sinanystretchofanyCompany,that'sagreatproductperformance.Sowe'reveryexcitedaboutthat.
CompanyName:ValeantPharmaceuticalsInternationalIncCompanyTicker:VRXSector:HealthCareIndustry:Drugs
EventDescription:Q12016EarningsCallMarketCapasofEventDate:9.90BPriceasofEventDate:24.64
©2014TheStreet,Inc.Al l R ightsReserved Page28of31
Theissueis,though,thatweareseeingsomedisruptionthatoccurredinoursalesforceoverthe12-monthperiod.Thatdisruptionwassignificantand,therefore,wewantedtomakesurethataswethoughtaboutthefutureofthisproduct,thatwewantedtoberealisticinwhatitmeantforthefuture.Andthat'stheprimaryissue.
IthaslesstodowiththeperformanceoftheproductwithHEortheperformancewithIBSD.Ithadmoretodowithwesawsomedisruptioninoursalesforcebecauseofturnover,becauseofsomeofthechanges.Sowefeltweneededtoberealisticinhowwelookedatthefutureperformanceoftheproduct.
Onthequestion,though,IthinktheansweriswefindbothHEandIBSDasbothbeingveryimportantaspects.ThereasonHEisreallyisthebestdrugfortreatmentofHEpatientintermsofwhatitmeans.It'sachronicutilization.SotheHEpatientisaveryimportantpatientforusandonethatwethinkwecanmakeasignificantdifferenceinthelivesofHEpatientandthereforewe'regoingtocontinuetotrytogetthatmessageout.
Thecleartake-away,though,fromourslideshastobethatifyouthinkaboutwhatwe'reseeing,isthatthereisnot--there'salargemajorityofpatientsthathaveHEorhavethepotentialtodevelopHE,areclearlynotgettingtheproductyet.Andthat'ssomethingwethinkthatthroughgoodprogramswithphysicianeducation,withkeyopinionleadersupportandwithworkingwithactualpatientunderstandingandsalesmaterialsforpatientsandeducationmaterialsforpatients,wethinkwecandoabetterjob.Andthat'sreallywhatwe'retargetedtodo.
Buttobeclear,itwasnotperformingfortherestoftheyearatthelevelthatwaspreviouslyexpectedandweneededtoreducethenumberconsistentwiththat.Onthesecondpartofthequestiononthecoveredlives,Anne,doyouwant--wedohaveagoodpositionwithcoveredlivesbutmaybecommentonthepriorauthorization.
AnneWhitaker (CompanyGroupChairman):
Right.Soagain,wehave98%coveredlives.Ithinkwithaproductlikethis,tobeexpected,thepayershaveutilizationmanagementpackagesinplace.Soabout40%oftheclaimsthatcomethroughforXifaxanhavesomesortofutilizationmanagement.MostofthosearePA,priorauthorization,tolabel.Insomecasesitmightbeaquantitylimit,giventhenewIBSDindication.ThemostcommonPAthatweseeisreallythePAtothelabel.
WithregardtoyourquestionaroundIBSDversusHEandthedifferentratesorjustdifferentcoverage,todaywecontractXifaxanasamolecule.Weareinconversationswithpayersabouthowtodifferentiatethetwoindicationsandprovidedifferentaccesssolutionsforthosedifferentindications.Butasoftoday,welargelycontractthemolecule.
JoePapa(CEO):
Thankyou,Anne,forthatcomment.
Operator,wehavetimeformaybeone--twomorequestions.
Operator :
DavidCommon.
DavidCommon (Analyst-JPMorgan):
Thanksforsqueezingmein.
Ithinkitwouldbeaworthwhileconfidence-buildingmeasureifyouwouldbepreparedtosharethe
CompanyName:ValeantPharmaceuticalsInternationalIncCompanyTicker:VRXSector:HealthCareIndustry:Drugs
EventDescription:Q12016EarningsCallMarketCapasofEventDate:9.90BPriceasofEventDate:24.64
©2014TheStreet,Inc.Al l R ightsReserved Page29of31
actualnumbers,thenumeratoranddenominator,thefiguresthatgointotheratiosforyourtwodebtcovenants.
Andmysecondquestionwhichreallyhasnothingtodowithmyfirst,ifImay,IwonderifIcouldjustcharacterizeyourguidance.Woulditbethesortofguidancethatyou'reequallylikelytoexceedandfallshortof,a50/50case?Orwoulditbeasetofnumbersthatyou'rehighlyconfidentthatyoucanmeetand/orexceed?
Thankyou.
JoePapa(CEO):
I'mgoingtoaddressthesecondpartofyourquestionfirstandthenI'mgoingtoaskLindaifshewantstomakeanycommentsontheguidancepart.Onthesecondpartofthequestiononguidance,IthinkI'vegottousethewordthatIusedduringthecommentary,thatwetrytotakearealisticviewtowardsguidance.
However,insomeareaswherethereissomeuncertaintyaboutexactproductlaunchtimingorexactproductlaunchapprovals,aboutthingsthatwedon'tknowexactlywhenit'sgoingtohappen,wetrytobesomewhatconservativethere.Thingsliketheaveragesellingprice,wetriedtobeconservativerelativeto--wecangetthisfixedbutwedidn'twanttobuildinallthatfixbecausesometimesthingslikethistakesometime.Sowetriedtobeconservativeasitwouldrelatetoareaswhereweknowthere'ssomethingsthatneedtobefixed.Becauseonceagain,there'satimingquestiononit.
ButIthinkintotalwe'vetriedtobe--Iwouldphrasetheguidancecommentaswetriedtoberealisticwithwhatweknow.Wherethere'ssomeuncertaintyonthingsthatneedtogetdone,wetriedtobeconservativesothattherewouldnotbeanyover-statementsinwhatwe'retryingtoaccomplish.
IfwegetaquickresolutionofASP,there'sclearlysomeupside.Ifwegetaquickapprovalandgetreadyfortheselaunches,getthemlaunchedontime,therecouldbesomeupside.Ithinkwetriedtobeconservativeinthoseassumptionswherethere'ssomeuncertaintyinthemarketplace.Onthequestionofthe--thefirstpartofthequestiononthenumeratoranddenominator,Linda,doyouwantto--
LindaLaGorga(Treasurer):
David,weappreciateyourfeedback.Whatwe'vetriedtodothisquarterandwesaidwewoulddothisinapriorcall,iswe'veincludedadjustedEBITDAwhichwillhelppeopleunderstandthatmetric.AndwhileIappreciateit'snotidenticaltoourcreditagreement,Ihopeit'sahelpfulpieceofadditionalinformation.
DavidCommon (Analyst-JPMorgan):
Itis.Iappreciatethat.CouldIalsosayinthecontextofthisguidancequestion,sinceweareaboutfiveweekspastyournormalreleaseofMarchquarterfigures,IthoughtitmightbeworthwhilejusttoaskhowistheJunequarter?
JoePapa(CEO):
SoIthinktheanswerI'mgoingtosayisthatweseetheJunequarterasbeingfavorabletoQ1,soclearlythatisthefirstcommentI'doffer.Idon'tthinkIwanttosaytoomuchmorespecificsonitbecausethere'sstillalotofmovingpiecesinthequarterbutwedoseeitisfavorabletothefirstquarteratthistime.
Iwillpointout,though,thatRobdidanicejobofshowingthebridgeofhowwe'regoingtobuildtotheguidanceforthesecondhalfoftheyear.Andthesecondhalfoftheyearhasthenormalgrowththatwe'llseeinthebusinessandtheseasonalitythatweseeinthesecondhalfofthebusiness.SoIdon'twant
CompanyName:ValeantPharmaceuticalsInternationalIncCompanyTicker:VRXSector:HealthCareIndustry:Drugs
EventDescription:Q12016EarningsCallMarketCapasofEventDate:9.90BPriceasofEventDate:24.64
©2014TheStreet,Inc.Al l R ightsReserved Page30of31
peopletogettoofaraheadofusrelativetothesecondquarter.Rob,anythingyouwanttoadd?
DavidCommon (Analyst-JPMorgan):
Thankyou.
JoePapa(CEO):
Operator,Ithinkwehavetimeforonelastquestion.
Operator :
GreggGilbert.
GreggGilbert (Analyst-DeutscheBank):
Yes.Canyoucommentonyourcashtaxrateinthemidsingle-digits,Rob,andhowsustainableyouthinkthatis?Istherearuleofthumbtothinkaboutwherethatcangoovertimeandbasedondifferentvariables?
Thanks.
JoePapa(CEO):
Gregg,Ithinkwe'reveryfortunatethatwehaveRobheretoanswerthisquestion.Wehavesomeotheradditionaltaxexpertise.SoRob,I'llturnittoyoufirst.
RobRosiello (CFO):
Cashtaxesmadeupthetwofactorswhichwe'renotbreakingoutthe--we'reonlybreakingouttheeffectivetaxrateofthenon-GAAPmeasures.OurcashtaxrateincludestheeffectoftheNOLsthatwilllastroughly--andI'llletJeremycommentonthetimingofthose.
JeremyLipshy(Director):
SoourcashtaxwillbereflectiveoftheuseoftaxattributessuchasNOLsandcreditaswellasothertimingitems.OurNOLsareprojectedtolastforthenextthreeyearsorsowithintheUSandabout10yearsinCanada.Sowethinkthatwillbefromacashtaxperspective,aneffectivetaxrateinthesingle-digitsforthenextfiveyears.
JoePapa(CEO):
Thankyou,Jeremy.
Ifwe'regoingtobringthiscalltoaclose,Ifirstofallwantedtothankeveryoneforjoiningustoday.Iunderstandthere'salotmoreinformationIneedtoprovideandwetriedtomaketodayalittlebitmorethanjustanaveragequarterbecauseIreallywantedtotalkaboutsomeofthethingswearelookingatstrategicallyintermsofthestabilizingofthecompanyandwhatwe'retryingtodo.
Havingsaidthat,weknowthere'salotmoreweneedtoansweratafuturecall.Ilookforwardtotalkingmoreabouttheturnaroundprogramandthetransformationprogramofthecompany.
ButIwantedtokeepmycommentstodaymostlytowhatIwouldrefertoasastabilizationprogramandhowwe'regoingtofixthedermbusiness,howwe'regoingtoacceleratetheXifaxangrowth,howwelookatthebusinessontheBausch&Lombassetsandwhatwethinkisaverydurablenatureofthoseassets.Tomethat'swhatwasoneoftheimportantthings.
CompanyName:ValeantPharmaceuticalsInternationalIncCompanyTicker:VRXSector:HealthCareIndustry:Drugs
EventDescription:Q12016EarningsCallMarketCapasofEventDate:9.90BPriceasofEventDate:24.64
©2014TheStreet,Inc.Al l R ightsReserved Page31of31
Ialsowantedtomakesurewehadachancetomakepeoplecomfortable,thattheyunderstandtheliquidityandthatwehaveastrongliquidityposition.Wearecomfortablewithourdebtcovenantsrelativetohowwefindourselves.
AndtherewasaninterestingquestionthatIprobablywanttospendasecondon.ThequestionisourGAAPprojectionsforearnings.WeclearlyhavethosebutIthinkwhatwe'vetriedtodoisgivepeopleanunderstandingofouradjustedearningsbecausethatreallyiswhatwethinkisreallyimportantforpeopletounderstandgoingintothefuture.
SoIthinkItriedtocoveralltheitemsbutI,onceagain,wouldsaythankyouverymuch.Ilookforwardtogettingoutthereandtellingyoumoreaboutwhatweseeassomeoftheexcitementinthefuture,especiallywithsomeofthethingsthatTagetalkedabout,whichIthinkistherealexciting,ishowwe'regoingtoimprovepeople'slivesbylaunchingnewinnovativeproductsthatmakeadifferenceinpeople'slives.
Tome,that'stheexcitement.Ilookforwardtohavingmoreconversationswithallofourshareholdersanddebtholdersinthefuture.Thankyouforjoiningustoday.Haveagreatday.
Operator :
Ladiesandgentlemen,thisconcludestoday'sconferencecall.
Allrightsreserved(c)2014TheStreet,Inc.
Pleasefeelfreetoquoteupto200wordspertranscript.Anyquoteshouldbeaccompaniedby"ProvidedbyTheStreet"andalinktothecompletetranscriptandwww.thestreet.com.Anyotheruseormethodofdistributionisstrictlyprohibited.
THEINFORMATIONCONTAINEDINEACHWRITTENORAUDIOTRANSCRIPT(the"TRANSCRIPT")ISAREPRODUCTIONOFAPARTICULARCOMPANY'SCONFERENCECALL,CONFERENCEPRESENTATIONOROTHERAUDIOPRESENTATION.THETRANSCRIPTSAREPROVIDED"ASIS"AND"ASAVAILABLE"ANDTHESTREETISNOTRESPONSIBLEINANYWAYNORDOESITMAKEANYREPRESENTATIONORWARRANTYREGARDINGTHEACCURACYORCOMPLETENESSOFTHETRANSCRIPTSASPRODUCED,NORTHESUBSTANCEOFAPARTICULARCOMPANY'SINFORMATION.
THETRANSCRIPTSAREPROVIDEDFORINFORMATIONALPURPOSESONLY.THESTREETISNOTPROVIDINGANYINVESTMENTADVICEORENDORSINGANYPARTICULARCOMPANY.