2/5/2016
`
`Valeant Pharmaceuticals International Management Discusses Q2 2013 Results - Earnings Call Transcript
`
`I Seeking Alpha
`
`Seeking Alpha
`
`Valeant Pharmaceuticals International Management Discusses
`Q2 2013 Results - Earnings Call Transcript
`Aug. 7 2013 320 PM ET
`by SA Transcripts
`
`Operator
`
`Good morning. My name is Matthew and I will be your conference operator today. At this time Id like to welcome everyone
`to the Valeant Pharmaceuticals Second Quarter 2013 Earnings Call. Operator Instructions Thank you. Laurie Little you
`may begin your conference.
`
`Laurie Little
`
`Thanks Matthew. Good morning everyone and welcome to Valeants Second Quarter 2013 Financial Results Conference
`Call. Presenting on the call today are J. Michael Pearson Chairman and Chief Executive Officer and Howard Schiller
`Chief Financial Officer.
`In addition to a live webcast a copy of todays slide presentation could be found on our website
`under the Investor Relations section.
`
`non-GAAP
`
`the
`
`Certain statements in this presentation may constitute forward-looking statements. Please see Slide 1 for important
`information regarding these forward-looking statements and associated risks and uncertainties. Readers are cautioned
`to place undue reliance on any of these forward-looking statements. The company undertakes no obligation to update any
`of these forward-looking statements to reflect events or circumstances after the date of this presentation or to reflect
`actual outcome.
`In addition this presentation contains non-GAAP financial measures. For more information about
`financial measures please refer to Slide 1. Non-GAAP reconciliations can be found in the press release issued
`earlier today and posted on our website.
`
`not
`
`And with that
`
`I will
`
`turn the call over to Mike Pearson.
`
`J. Michael Pearson
`
`Thank you Laurie. Good morning everyone and thank you for joining us. As you have read in our press release we
`followed up our strong performance in the first quarter with another quarter of outstanding operating results. On todays
`I will review our second quarter results and performance and provide an update on Valeants business. I will
`call
`then turn
`Lomb transaction which closed Monday and discuss the
`the call over to Howard to provide an update on the Bausch
`business going forward. After our remarks Howard and I will be available for QA.
`
`pre-closing
`
`This morning we reported Valeants second quarter results for 2013 which were driven by strong organic growth and solid
`results across all of our operating units. Total revenue for the quarter was $1.1 billion as compared to $775 million in the
`second quarter of 2012 which excludes the one-time milestone payment of $45 million we received from GSK for the U.S.
`launch of Potiga in the second quarter last year. Product sales for the second quarter of 2013 were $1.06 billion as
`compared to $743 million in the same period in the prior year an increase of 43%. Our second quarter cash EPS was
`$1.34 per share or an increase of 54% over 2012. Our cash EPS would have been $1.36 except for $0.01 for the
`Lomb and a $0.01 negative impact for foreign exchange. Adjusted cash flow from
`financing cost of Bausch
`operations was $423 million for the quarter or an increase of 61 % over the prior year. We would also like to mention that
`our net income to adjusted cash flow from operations conversion ratio was greater than 1 % which has been our objective
`as weve talked about previously.
`
`http//seekingalpha.com/article/1614832-valeant-pharmaceuticals-international-management-discus.
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`Valeant Pharmaceuticals International Management Discusses Q2 2013 Results - Earnings Call Transcript
`to be strong for the company even with the negative impact from the introduction of a generic
`Organic growth continued
`competitor for the Zovirax Ointment. With this impact our U.S. promoted business declined 5% on a same-store sales
`basis. But excluding the Zovirax Ointment and Cream the rest of the promoted portfolio increased 7% on a same-store
`sales basis. We are not adjusting for any other generic products. As we expected our neuro and other business returned
`the impact of generic Cardizem CD and
`to positive growth and increased 2% on a same-store sales basis now that
`generic Ultram XR are largely behind us. Despite the continued headwind of generic indiscernible and a couple of other
`small products in Canada our Canadian/Australian operations grew 4% on a same-store sales basis. Our Emerging
`Market segment delivered a total organic growth rate of 14% in the quarter continuing the exceptionally strong progress
`seen in 2012.
`
`I Seeking Alpha
`
`I will
`
`touch on the key growth drivers on the next slide. There are several key drivers that are fueling our growth this year.
`For example U.S. promoted products overall grew 7% on a same-store sales basis as OraPharma our oral health or
`dental business continued its stellar performance and once again delivered double-digit growth as it has each quarter
`since our acquisition. CeraVe also continued its positive track record and grew over 50% as compared to the previous
`year. I am pleased to report that our aesthetics franchise has its best quarter since Medicis launched its aesthetic products.
`In particular Dysport had its best quarter ever and gained significant market share against BOTOX and ZMM. We expect
`that progress to continue as we roll out our new MMVP 2 ph loyalty program to physicians.
`
`year-to-date
`year-to-date.
`
`Our Emerging Market segment showed tremendous growth this quarter which was driven by growth by several key
`In Poland we continue to grow faster than the market which is growing 6% year-to-date according
`to IMS Health
`markets.
`In Russia we increased organically 16%
`while our operations are growing 11 % and nearly double the market.
`to outperform the local market which is growing at approximately 10%. Specifically major products has
`delivered double-digit growth the past 6 quarters since we announced the acquisition. Our operations in Southeast Asia
`their track record of quarterly double-digit growth. And our operations in Latin America have
`South Africa continued
`showed strength across the board particularly our Probiotica business in Brazil which has increased over 60%
`In addition Mexico remains on track and has delivered 8% organic growth year-to-date versus the market growth rate
`of 3%.
`
`continuing
`
`We had another active business development quarter. And clearly the highlight of the quarter was the acquisition of
`In addition we significantly strengthened our aesthetic product offering with the
`Lomb which closed on August 5.
`Bausch
`acquisition of Obagi a leader in the physician-dispensed skincare market. The co-marketing agreement with Mentor
`Implant a novel saline breast
`which gives us access to the leading breast implants in the U.S. and the acquisition of Ideal
`Implant in 2014.
`implant. We expect
`to gain FDA approval for the Ideal
`We also continue to strengthen our business in Russia with the acquisition of certain products from CROMA for the local
`market and Ekomir a leading Russian OTC business. Finally we gained entry into Vietnam one of the fastest-growing
`emerging markets with the acquisition of the majority share of Euvipharm. We plan to use of the Euvipharm platform to
`into Vietnam. We continue to see interesting opportunities around the world and we would expect
`introduce other products
`to be active with tuck-in acquisitions over the rest of the year.
`
`As most of you are aware once a year Valeant overviews the performance of past acquisitions with our Board of Directors
`and our investors reviewing key metrics to evaluate the success of our transactions. On the next 2 slides we have
`analyzed all acquisitions that were over $75 million in purchase price and completed since 2008. As you can see each of
`in the original deal model with the
`our acquisitions is performing extremely well as compared to the revenue forecasted
`exception of Afexa. Fortunately Afexa and in particular COLD-FX has rebounded dramatically in 2013. And from a cash
`flow standpoint Afexa is now on track as compared to our deal model. I would also like to note the strong performance of
`Biovail Sanitas PharmaSwiss and Nova which are among the largest transactions over the last 5 years. In aggregate
`our acquisitions have grown organically at 12% compound annual growth rate.
`
`Turning to Slide 8. Cash flows are clearly the most fundamental driver of a successful acquisition and the best measure of
`the acquisitions made since 2008 are either on track or well ahead of
`a deals success. We are very pleased to note that all
`the deal model from a cash generation standpoint. In the aggregate we are substantially ahead of the forecasted cash
`flows we modeled at the time of acquisition. We believe we are one of only a very few companies that has established
`such a track record based on both exceeding synergies but more important overachieving on expected growth.
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`Valeant Pharmaceuticals International Management Discusses Q2 2013 Results - Earnings Call Transcript
`
`I Seeking Alpha
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`Despite our reputation for not investing in RD at the same levels of our competitors we believe we have a very exciting
`late-stage pipeline coming to the market over the next couple of years. Given some new news across a number of
`products I would like to provide an update on this call. First an update on efinaconazole or Jublia. As you know we
`in May. And I want to reiterate that there were no safety or efficacy concerns
`received a complete response letter
`from the
`FDA regarding this compound.
`to meet with the FDA to discuss their
`In July Howard and I joined our team in Washington
`concerns centered specifically on our container closure system. This week we hope to reach a final agreement with FDA
`on a plan for addressing all of the same issues. And we expect to receive approval
`in the second or third quarter of 2014.
`
`On Acanya 2 pieces of good news. We have been able to extend the patent
`life for Acanya previously set to expire in 2015
`up to 2029. This was a more specific formulation patent which was granted.
`In addition we have recently received Phase
`III results for a new formulation of Acanya which demonstrate both improved efficacy and improved tolerability. We expect
`to file this new product with the FDA by the end of the year.
`
`Luliconazole or Luzu has been filed and has a PDUFA date of December 11 2013. We have engaged in positive
`discussions with the FDA and hope to publish Phase III data later this year. BV METROGEL which we entered into a
`licensing agreement with Actavis earlier this year now has a PDUFA date of May 24 2014. Our dermatology RD group is
`also working on several line extensions for CeraVe. And we would expect
`the CeraVe family of products to surpass $100
`million in sales by next year. We have successfully launched CeraVe in Canada and plan to launch in Mexico Brazil and
`Australia later this year. Finally we have a robust pipeline of branded generics and OTC products across our emerging
`markets which we expect to launch the remainder of this year and next.
`
`To wrap up our discussion of the quarter we have provided this chart so you can track and compare our recent quarterly
`performance. I will not go over each line item but note that our margins continue to be within expectations with gross
`margins of 77% SGA ratio of 22% and operating margins of 52%. There are 2 areas on our PL that
`I did want to provide
`some overview. First we recognized a noncash unrealized foreign exchange
`loss of $8.3 million on an intercompany loan
`this quarter that we excluded from our cash EPS calculation as we agreed to do at our last investor meeting. This related to
`the structure used by the iNova acquisition. Second in the spring of 2012 the board addressed historical
`issues related to
`RSUs that have been previously issued to directors but would not be deliverable until after the director has left
`the board.
`Not wanting to encourage directors to leave in order to realize compensation the board approved an acceleration of
`certain RSUs which the company settled a portion of these awards in cash. And the resulting net economic impact was the
`same as the share repurchased by the company. This resulted in a one-time charge of $15 million in compensation
`expense.
`
`With this I would like to turn the call over to Howard.
`
`Howard Bradley Schiller
`
`Thank you Mike. Now turning to our acquisition of Bausch
`Lomb. Its been a very busy time since we announced
`the deal
`back in May. During this time we have learned more about the business and the people whove made it successful.
`I am
`Lomb has very similar culture to Valeant which will be an important factor as 2 companies
`pleased to note that Bausch
`come together. BL is performance-based much like Valeant and theyre team-oriented with a strong willingness to wear
`multiple hats and accept change. We are very excited that so many of the Bausch
`Lomb senior management will be
`joining Valeant. And I
`look forward to working with all of them.
`
`Yesterday Mike and I met with Fred Hassan and we are pleased that he will be joining our board and actively advising us
`on the integration and ongoing operations of BL. Our belief in the strategic rationale for the acquisition has only been
`reinforced through this process as well. Eye health is an attractive specialty both in the U.S. and globally. This acquisition
`expands our reach not only in existing markets but now opens up new opportunities in territories such as China Turkey
`and the Middle East. And the fact that Western Europe and Japan are largely OTC contact
`lens and lens solution
`businesses and are profitable and growing make our entry into those markets very attractive.
`
`Finally weve also been able to refine and sharpen our deal model and feel very confident that we can significantly exceed
`In addition recently launched products such as Lotemax Gel Prolensa the new IOLs and
`our $800 million synergy target.
`lens have provided us with revenue upside. And we expect several of the pipeline products to
`the Biotrue daily contact
`provide us with new revenue opportunities in the future as we do not build pipeline revenues into any deal model.
`Furthermore BL was recently able to extend a patent for Besivance
`from 2021 to 2031 which was not
`included in our
`
`deal model.
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`Valeant Pharmaceuticals International Management Discusses Q2 2013 Results - Earnings Call Transcript
`Lomb and Valeant employees we have already identified synergies in
`As recently stated in the memo to both Bausch
`excess of $800 million. We will be reducing our combined headcount between 10% to 15% which is a lower percentage
`large pharma mergers. We will achieve these synergies with no impact in the North American field
`than in other recent
`forces and less than 5% of the total synergies will be coming from sales forces globally. We expect to achieve at least $500
`in 2014. Finally we expect
`million in run rate synergies by the end of 2013 with the remainder to be achieved
`achieve these synergies will be significantly less than 1 x full synergy target. And as always we will update you on our
`
`the cost to
`
`progress.
`
`The next slide gives you the percentage of our $800 million-plus synergy target by business or function. As you can see
`the bulk of the savings are coming from cutting GA expenses combining the 3 BL business units into 1 eye health
`business unit and eliminating the BL regional
`infrastructure and merging the businesses into our decentralized structure
`reducing marketing spend and rationalizing spend on RD projects. We continue to be extremely confident in our ability to
`significantly exceed our $800 million target. And we will update you on our progress.
`
`With the addition of BL we are extremely excited about the business mix and the opportunities it provides for both organic
`Lomb is closed the U.S. represents about 50% of our sales with 2 leading
`and inorganic growth. Now that Bausch
`specialty platforms dermatology and aesthetics and eye health. We also have a very strong and growing Emerging
`Markets position which represents about 25% of revenue. We have entered Western Europe and Japan with OTC contact
`lens and lens solution businesses. As I mentioned earlier they are largely cash pay profitable and growing. By type of
`lenses the BL surgical business
`business branded Rx is still our largest category. But devices which includes contact
`and aesthetics is now 20% of our business.
`
`Were also diversifying from a product perspective with no 1 product representing more than 3% of total sales. The
`percentage of revenue from our top 10 products is around 21 % and around 31 % of revenue is derived from the top 20
`products. This analysis demonstrate our diversification and has a unique position within our industry. Also given the
`pressures from governments around the world we like the fact that 75% of our sales are either cash pay or private
`insurance.
`
`laws. As you
`In addition to the benefits of diversification we have a very small percentage of our sales exposed to patent
`can see on this chart no more than 3% of revenue is at risk for generic competition in any 1 year. And in the case of
`to sustain these franchises. We would
`Bromday and Lotemax suspension new products have already been launched
`life cycle management programs to extend the lives of other franchises as well. As you are
`expect to be able to implement
`aware focusing on small durable products has and continues to be a big part of our strategy.
`
`We raised a total of $9.6 billion to finance the BL transaction and retain some dry powder for tuck-in acquisitions. In June
`we raised $2.3 billion in equity or added 27 million shares. Going forward our diluted share count will be approximately
`interest expense will now be approximately
`340 million shares. In addition we raised over $7 billion of debt and our total
`$245 million per quarter. We continue to have an objective to have our debt-to-adjusted EBITDA ratio below 4x and expect
`to get there in the second half of 2014.
`
`Before we get to our updated guidance for 2013 I want to remind everyone of our May guidance and our year-to-date
`performance. In May we guided to $5.55 to $5.85 cash EPS for 2013. Year-to-date we have delivered $2.64 cash EPS
`which would imply based on our May guidance a $2.91 to $3.21 cash EPS for the second half of the year. With the BL
`for the second
`transaction now closed were updating our financial guidance for 2013 along with the quarterly breakdown
`Including this quarterly guidance is not a practice we plan to continue but with the
`half of 2013 to provide greater clarity.
`integration of BL we felt this was appropriate at this time.
`
`We now expect cash EPS in the range of $6 to $6.20 for 2013. This guidance includes a negative $0.11 per share for the
`pre-closing cost of the BL acquisition financing. Thats both the interest expense and the impact of the additional shares
`pre-closing. Of this $0.11 $0.01 was recognized in Q2 and $0.10 will negatively impact our results in Q3. In addition FX
`movements which cost us $0.01 in the second quarter will cost us an additional $0.05 per share in the second half of
`2013. As you can see we expect $1.33 to $1.43 cash EPS in Q3 and $2.03 to $2.13 cash EPS in Q4. We estimate the
`combined organization will deliver revenues between $5.8 billion to $6.2 billion in 2013. We also plan to update guidance
`on adjusted cash flow from operations at the appropriate time but we also expect them to continue to be quite strong.
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`Valeant Pharmaceuticals International Management Discusses Q2 2013 Results - Earnings Call Transcript
`I Seeking Alpha
`In closing we are very proud of our quarterly results and our year-to-date performance. We are very excited about our
`future and believe that with a continued focus on durable assets and growing markets were laying a solid foundation to
`continue our performance into the future. With that well now open up the call for questions.
`
`Question-and-Answer Session
`
`Operator
`
`Operator
`
`Instructions Your first question comes from the line of Marc Goodman with UBS.
`
`Marc Goodman - UBS Investment Bank Research Division
`
`Lomb of 40%. As we think about -- actually I was
`First thing is in the past youve talked about the accretion from Bausch
`just curious. Given the change in interest rates and given the fact that youve got your equity deal done now and
`everything can you talk about how you think about the accretion Second thing is on Bausch that was a pretty good detail
`of where the costs are going to come from. I was just curious. Whats the extra cost-cutting
`that you found relative to your
`expectations I heard a lot of comments about extra revenues that you found.
`I was curious. Wheres the extra cost-cutting
`to get to the higher numbers quicker that you found And then third if you could just talk about Latin America specifically a
`little more. This has been an area that other companies have talked about as an area of weakness relative to expectations
`and yet you continue to do really well there. So I was curious. How do you continue to do well Just whats happening
`there and how to think about the growth there and how sustainable it
`
`is.
`
`J. Michael Pearson
`
`Okay. Marc why dont we have Howard talk about the accretion and Ill
`America
`
`talk about the additional cost opportunities in Latin
`
`Howard Bradley Schiller
`
`Sure. Marc as you recall when we announced the BL deal when we talked about the 40% accretion it was -- we talked
`about how the deal closed on January 1 2013 and how weve gotten all
`the synergies. Thats what the accretion would be.
`As you mentioned the interest rates we ended up paying were slightly higher than what we anticipated. We also issued a
`few more shares than we had thought which would impact that a bit. Now with that being said we also would expect
`the
`I think we feel very good about the progress were making. And that analysis we did
`synergies to exceed our initial
`based on 2013 based on the new synergies is still
`roughly whole. But obviously when we come out with our 2014
`guidance well see it be a much bigger impact of the synergy capture because well both of course capture much higher
`percentage of the synergies in 2014 than we will
`in 2013. But in 2013 the guidance represents the beginning of that
`capture. But again 2014 well see a much bigger impact from the synergies.
`
`target.
`
`J. Michael Pearson
`
`In terms of where were finding some additional cost opportunities. And as you know its a pretty detailed
`Yes Marc.
`the details. I think weve found quite a bit in purchasing
`exercise going sort of by region by function going through all
`probably more in purchasing than we expected to find when you compare rates that both companies are paying for things
`like car rentals and IMS data and bottles and things like that that we think we can get some non-personnel savings there
`I think the area of the GA it was actually a pretty expensive heavy model
`quite a bit higher than what we had thought.
`that they had in terms of both the 3 divisions the surgical the contact
`lens and the pharma and then the regional
`structures. So theres actually more GA savings than we had expected to find. And weve also been able to leverage a lot
`of the commercial support functions that we had in our company with ones that they had. So for example well now have a
`commercial support organization that will cover both the dermatology group as well as the eye health group which has
`led to more savings than we expected. But
`its no one thing. And as we continue to look the teams are doing a great job.
`They keep coming up with ideas and we continue to find incremental savings. And were already well north of the $800
`million. In terms of Latin America our businesses -- I cant speak to issues other companies are having. But the market has
`slowed a little bit both Brazil and Mexico. Brazil was growing at 15% plus and its down to probably about 10% or maybe
`even high single-digits in terms of the market. And Mexico was growing sort of high single-digits last year.
`Its down to
`probably about 3% this year. But we continue to outperform the markets.
`I think it speaks maybe to the types of products we
`have. The products we have tend to be as you know branded generics and the lower-cost products. We dont have -- and I
`think the biggest issues in Latin America are the end-of-patent
`life products. The line of products are coming off-patent
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`Valeant Pharmaceuticals International Management Discusses Q2 2013 Results - Earnings Call Transcript
`which obviously has the same dynamic as you see in the United States. And probably the other thing is we manage very
`carefully how much product we have in the distribution channels. And anything over 90 days we basically write off. So we
`have very limited products compared to I think most companies in terms of-- in the channel. And we manage that very
`very carefully. And weve seen thats been helpful also in Europe for example where we have many many companies that
`in the channel and we try to keep it around 2 months.
`have more than 6 months almost up to 1 year of products
`
`I Seeking Alpha
`
`Operator
`
`Your next question comes from the line of Lennox Gibbs with TD Securities.
`
`Lennox Gibbs - TD Securities Equity Research
`
`A couple of questions. First off on the decision to move Medicis to New Jersey. I think your original position was that
`Medicis would have remained in Scottsdale. Can you step us through the change in the thought process around the
`Medicis operation
`
`J. Michael Pearson
`
`I think there were 2 things that drove the decision. One was the acquisition of BL where we had -- again I was just
`Yes.
`infrastructure. You need to support pharmaceutical business as a device business. So this
`speaking to the commercial
`the commercial operations in terms of providing samples out
`business things like regulatory support supply chain support
`those types of things. Before we had BL dermatology was really our largest
`to the field processing expense accounts all
`business in the United States and most of that was out there. But with BL they had the same structure basically in New
`Jersey where that was the home of their pharmaceutical business. So it didnt make sense to have 2 structures performing
`the same function. So we had to make a choice. We also have -- as seen over the 6 months or so that weve owned
`Medicis the ability to attract and retain and recruit people in Arizona with pharmaceutical experience is quite limited. And
`talent. So New
`therefore it becomes quite expensive. So when people left we were paying a premium to have to attract
`infrastructure for the long term. And so again
`Jersey seemed to be the much more natural place to have this commercial
`bit larger and more
`that has led to more synergies and quite frankly probably a higher-performing group since its a little
`
`professional.
`
`Lennox Gibbs - TD Securities Equity Research
`
`Okay good. And then secondly with respect to your recent comments around the aspiration to become one of the worlds
`largest health care companies. It seems that you might need to adopt more of a mainstream strategy maybe larger
`is what
`therapeutic categories in order to achieve that objective. Maybe you can tell me if thats a fair assessment. But if
`are some of the new segments that you foresee targeting in order to drive that kind of expansion
`
`it
`
`J. Michael Pearson
`
`Yes. Lennox I dont -- actually I think we would plan to have our same model. We think we can be successful by not doing
`what large pharma companies are doing. And thats been our strategy that will continue to be our strategy. And so were
`-- were not going to go -- therapeutic areas are largely driven by RD in terms of why
`into the traditional
`not looking to get
`I mean we dont plan to spend -- increase our RD spend with the percent of sales to what other
`people organize that way.
`companies are doing. And well continue to focus on both specialty segments and attractive geographic markets. So I think
`our strategy will remain the same. And we did put a big aspiration out there. But thats our approach its motivational to our
`people. And its a plan we hope to achieve.
`
`Lennox Gibbs - TD Securities Equity Research
`
`But what additional specialty categories do you think might be attractive in order to get to that objective
`
`J. Michael Pearson
`
`I dont think we want to discuss specifics on the call. But I think it will be similarfrom a characteristic standpoint to what
`Lomb which is sort of cash pay smallerproducts durable
`Howard was outlining earlier when he talked about Bausch
`I think that we like the device area as well. So we would continue to grow that area. But in terms of specific
`products.
`categories I dont think we want to go into them on this call.
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`Operator
`
`Valeant Pharmaceuticals International Management Discusses Q2 2013 Results - Earnings Call Transcript
`
`I Seeking Alpha
`
`Your next question comes from the line of Chris Schott with JPMorgan.
`
`Christopher T. Schott
`
`- JP Morgan Chase Co Research Division
`
`A couple of questions. First you talked a bit about it
`in the presentation. But can you elaborate a little bit more on the
`Western European operations for Bausch This is an area where you historically dont have exposure. Bausch obviously
`a very different business more cash pay et cetera. Butjust
`interested in your views on that part of the franchise. The
`call on Bausch I think you highlighted a 5% growth rate for the ophthalmology market on a
`second question on the initial
`global basis. I guess do you see the assets youre acquiring here as having growth thats in line with that target above or
`below that target Just trying to get a sense of how youre viewing the opportunities over the next few years. And then the
`final question I had is I just was wondering as we think about the cost structure here do you see anything unique about
`Bauschs cost structure thats allowing for this high synergy level Or should we think about this type of cost reduction
`as
`something that could be applied to I guess other more traditionally run global pharma businesses over time
`
`Howard Bradley Schiller
`
`Okay.
`
`Ill start with the last question about the Bausch cost structure. As Mike mentioned earlier that when we approach
`this this is very much bottoms-up. And every company is structured a little bit differently. On paper they may appear that
`theyre similar. And in this case Bausch had prepared to be a public company and so then obviously on the GA
`functions there was quite a bit of overlap. Also as you know we just run a leaner GA cost structure than other companies.
`In addition they have the global business units which we dont run. We run decentralized so were able to eliminate the
`global business units. They also had some regional
`infrastructure that weve talked about. And we tend to run consistent
`with our model very lean or no regional
`infrastructure and the infrastructure is in the countries where the operations are.
`And then again on areas like RD were able to rationalize RD spend on projects consistent with our model of not taking
`big bets on risky early-stage projects. So I think its -- I dont
`think its necessarily something thats unique to Bausch.
`I think
`its consistent with our approach in other deals. And every company we look at is going to provide different opportunities
`some more some less. But our approach to it
`is very consistently bottoms-up consistent with our core operating principles.
`
`J. Michael Pearson
`
`Yes Western Europe. So Western Europe is an area that we early on made a decision to get out of. And I think that
`proved to be a good decision. We were not
`looking to get back into Western Europe per se because the markets over there
`Lomb business is very different. Its not -- theres really very
`continue to be difficult. But