I N S T I T U T I O N A L E Q U I T Y R E S E A R C H
`Stephanie Price, CFA
`Varun Choyah
`
`1 (416) 594-7047
`1 (416) 956-3229
`
`Stephanie.Price@cibc.com
`Varun.Choyah@cibc.com
`
`
`
`
`
`E A R N I N G S U P D A T E
`July 23, 2015
`Healthcare - Canada
`S E C T O R O U T P E R F O R M E R
`M A R K E T W E I G H T
`
`$275.00
`$250.14
`S&P/TSX 60
`$106.03-$250.14
`344.4M
`330.5M Shrs
`2,275,037
`$86,148.2M
`Nil / Nil
`December
`$21.05 per Shr
`33.0%
`$17,752.4M
`$7,249.9M
`
`
`2016
`2015
`2014
`2013
`$2952.4A $3981.3A $5503.4E $7494.5E
`
` $5156.6E $7371.8E
`2013
`2014
`2015
`2016
`$6.24A
`$8.34A
`$11.66E
`$16.69E
`
`
`$11.06E
`$16.09E
`
`
`
`
`35.2x
`26.1x
`18.9x
`13.9x
`
`
`20.1x
`14.1x
`40.1x
`30.0x
`21.5x
`15.0x
`
`
`22.6x
`15.5x
`
`Stock Rating:
`Sector Weighting:
`Key Ratios and Statistics
`12-18 mo. Price Target
`VRX-NYSE (7/23/15)
`Key Indices:
`52-week Range
`Shares Outstanding
`Float
`Avg. Daily Trading Vol.
`Market Capitalization
`Dividend/Div Yield
`Fiscal Year Ends
`Book Value
`2016 ROE (E)
`Net Debt
`Common Equity
`
`
`EBITDA ($mln)
`Current
`Prior
`Estimates (Dec. 31)
`EPS (Cash)-Curr
`EPS (Cash)-Prior
`Valuation (Dec. 31)
`EV/EBITDA-Curr
`EV/EBITDA-Prior
`P/EPS (Cash)-Curr
`P/EPS (Cash)-Prior
`
`j
`
`Valeant Pharmaceuticals
`International
`Solid results; Increased Guidance
`
`What's The Event
`
`Valeant reported solid Q2 results that were ahead of consensus on
`all metrics. Organic growth was above expectations, margins were
`strong and cash flow was robust. The only near-term headwinds are
`F/X and "genericization" (Xenazine and Targretin), which are being
`more than offset by organic growth.
`
`Implications
`
`We have increased our F2015 and F2016 forecasts to account for the
`roll-out of the IBS-D indication and the recent Amoun acquisition.
`We see continued organic growth (primarily in U.S. dermatology and
`B+L) and believe the company is poised for additional acquisitions.
`In the near term, tuck-ins are probable, with another sizeable
`acquisition becoming more likely as Valeant pays down debt. Valeant
`remains SO-rated with a $275 price target, up from $250.
`
`
`
`
`
`
`
`
`
`
`
`Company Description
`Valeant is a leading specialty pharmaceutical provider. The company focuses
`on products with limited patent risk such as generics, over-the-counter,
`topicals and devices.
`www.valeant.com/
`
`
`
`
`All figures in US dollars, unless otherwise stated.
`CIBC World Markets does and seeks to do business with companies covered in its research reports. As a result, investors
`should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.
`Investors should consider this report as only a single factor in making their investment decision.
`See "Important Disclosures" section at the end of this report for important required disclosures, including potential
`conflicts of interest. See "Price Target Calculation" and "Key Risks to Price Target" sections at the end of this report,
`where applicable.
`Find CIBC research on Bloomberg, Reuters, firstcall.com
`and ResearchCentral.cibcwm.com
`
`
`CIBC World Markets Inc., P.O. Box 500, 161 Bay Street, Brookfield Place, Toronto, Canada M5J 2S8 (416) 594-7000
`
`15-137015 © 2015
`
`
`
`SENJU EXHIBIT 2235
`LUPIN v. SENJU
`IPR2015-01099
`
`Page 1 of 10
`
`

`
`Sector Outperformer
`Stephanie Price, CFA (416-594-7047) Stephanie.Price@cibc.ca
`Varun Choyah, (416-956-3229) Varun.Choyah@cibc.ca
`
`Company Profile
`Valeant Pharmaceuticals is a diverse, decentralized specialty pharmaceutical company engaged in
`the formulation, clinical testing, registration, manufacture and commercialization of pharmaceutical
`products. The company has a diverse product portfolio, with a focus on branded pharmaceuticals,
`branded generics and over-the-counter products in key areas such as dermatology, neurology,
`infectious diseases, ophthalmology, oncology and consumer products.
`
`LTM Margin (%)
`
`60%
`
`50%
`
`40%
`
`30%
`
`20%
`
`10%
`
`0%
`
`Free Cash Flow ($ mlns)
`
`2,000
`
`1,500
`
`1,000
`
`00
`
`05
`
`(500)
`
`3,000
`
`2,500
`
`2,000
`
`1,500
`
`1,000
`
`500
`
`Revenue ($ mlns)
`
`Q1-F2015
`Q3-F2014
`Q1-F2014
`Q3-F2013
`Q1-F2013
`Q3-F2012
`Q1-F2012
`Q3-F2011
`Q1-F2011
`Q3-F2010
`Q1-F2010
`Q3-F2009
`Q1-F2009
`Q3-F2008
`Q1-F2008
`
`0
`
`Total Revenue
`
`LTM EBITDA Margin
`
`Q1-F2015
`Q3-F2014
`Q1-F2014
`Q3-F2013
`Q1-F2013
`Q3-F2012
`Q1-F2012
`Q3-F2011
`Q1-F2011
`Q3-F2010
`Q1-F2010
`Q3-F2009
`Q1-F2009
`Q3-F2008
`Q1-F2008
`
`LTM EBITDA
`
`LTM Free Cash Flow
`
`5,000
`4,500
`4,000
`3,500
`3,000
`2,500
`2,000
`1,500
`1,000
`500
`0
`
`EBITDA ($ mlns)
`
`Solid results; Increased Guidance - July 23, 2015
`
`Valeant Pharmaceuticals
`VRX-NYSE
`7/23/15
`250.14
`
`12- To 18- Month Price Target:
`$275.00
`Healthcare - Canada
`Sector Weighting:
`All figures in USD millions, except per share data.
`Key Statistics
`
`Market Weight
`
`Share Price (US$)
`Shares Outstanding
`Market Capitalization
`Key Multiples
`
`Valeant
`P/E
`EV/EBITDA
`Peers (Average)
`P/E
`EV/EBITDA
`Profitability
`
`EBITDA Margin
`Net Margin
`Cash per Share
`Net Debt/EBITDA
`Income Statement
`
`Sales
` Growth (y/y)
`Operating Expenses
`Adjusted EBITDA
`Amortization
`Interest & Other
`EBT
`Income Tax
`Net Income
`Adj. Net Income
`Cash EPS
`Free Cash Flow
`
`250.14 Net Cash (Debt)
`
`344.4
`Enterprise Value
`
`86,148.2
`F2014A
`
`F2015E
`
`30.0x
`26.1x
`
`21.5x
`15.9x
`F2014A
`
`48.2%
`11.1%
`$0.96
`3.75
`F2014A
`
`21.5x
`18.9x
`
`18.1x
`15.2x
`F2015E
`
`50.3%
`5.3%
`$8.48
`4.11
`F2015E
`
`(17,752.4)
`
`103,900.6
`
`
`F2016E
`
`15.0x
`13.9x
`
`15.1x
`12.4x
`F2016E
`
`53.3%
`24.1%
`$19.65
`2.37
`F2016E
`
`
`8,263.5
`43.2%
`
`2,272
`
`3,981
`
`1,685
`
`947
`
`1,093
`
`180
`
`912
`
`2,850
`$8.34
`F2014A
`
`
`10,938.3
`32.4%
`
`3,064
`
`5,503
`
`2,163
`
`1,442
`
`675
`
`97
`
`578
`
`4,090
`$11.66
`F2015E
`
`
`14,068.0
`28.6%
`
`3,728
`
`7,495
`
`2,342
`
`1,257
`
`3,574
`
`179
`
`3,396
`
`5,925
`$16.69
`F2016E
`
`Cash Flow From Operations
`Capital Expenditures
`Free Cash Flow
`Free Cash Flow Per Share
`Free Cash Flow Yield
`Balance Sheet
`
`2,103
`
`
`(367)
`
`1,736
`$5.18
`2%
`F2014A
`
`2,425
`
`
`(330)
`
`2,095
`$6.12
`2%
`F2015E
`
`5,085
`
`
`(220)
`
`4,865
`$14.13
`6%
`F2016E
`
`323
`
`Cash & ST Investments
`20,602
`
`Goodwill & Intangibles
`
`26,353
`Total Assets
`
`15,255
`Debt
`
`20,919
`Total Liabilities
`Shareholder's Equity
`5,435
`
`Source: Company reports and CIBC World Markets Inc.
`
`2,903
`
`18,960
`
`
`38,977
`
`25,521
`
`31,950
`
`7,027
`
`6,768
`
`16,618
`
`
`42,299
`
`24,521
`
`31,876
`
`10,423
`
`
`
`2
`
`
`
`Page 2 of 10
`
`

`
`Solid results; Increased Guidance - July 23, 2015
`
`Q2 Results
`Valeant (VRX-SO) reported strong Q2/15 results that showed good organic
`growth (19%), solid adjusted gross margins (up 500 bps Y/Y) and strong cash
`flow.
`
`Organic growth continues to come in well above expectations: this is the
`fourth consecutive quarter organic growth came in above 15% (we had been
`forecasting 12%). The outperformance was driven by the U.S. business,
`including contact lenses (BioTrue and Ultra), dermatology (Jublia/Luzu),
`ophthalmology Rx (Lotemax/Prolensa), neuro/generics and dental. With Valeant
`adding additional production lines for the contact lenses business and recently
`introducing a larger (8mL) Jublia package, we expect organic growth to continue
`in the near term, offsetting headwinds from the genericization of Xenazine and
`Targretin (expected in August and July, respectively).
`
`IBS-D FDA approval drove increased guidance: As expected, Valeant
`increased its F2015 revenue and cash EPS guidance (by 4% and 5% at the mid-
`point, respectively) to reflect expected uptake of the IBS-D indication post FDA
`approval in May. At this point, the indication is in soft launch and we expect a
`full customer launch in September post approval of Valeant’s marketing plan for
`the drug. We believe peak sales for the indication are in the $1 billion range.
`
`Amoun acquisition strengthens presence the Middle East: The Amoun
`acquisition (announced last week) adds ~$225 mln in revenue, doubling
`Valeant’s business in the Middle East and North Africa. We see the Middle East
`as attractive given limited patent risk, predominantly cash pay markets and
`strong growth (GDP and population). Amoun also brings manufacturing facilities
`and we believe that Valeant may be able to consolidate some operations in the
`region.
`
`Expect tuck-ins to continue: With net leverage of 5.5x, we believe that
`Valeant will focus on tuck-ins as it pays down its debt (target of 4.0x by the end
`of 2016). We view tuck-ins as accretive uses of cash, with little competition for
`most deals (leading to lower multiples) and Valeant’s added scale allowing it to
`significantly reduce costs. For example, Dendreon, which Valeant bought out of
`bankruptcy proceedings in February, achieved a gross margin of 64% and an
`operating margin of 40% in Q2/15.
`
`Our F2015 and F2016 forecasts have risen, primarily due to the roll-out of
`the IBS-D indication and the recent Amoun acquisition (expected to close in
`Q4/15). We expect the IBS-D indication to help with Salix’s inventory levels and
`expect average wholesaler inventory to be below 1.5 months by the end of this
`year (with gross margins approaching 80%).
`
`Exhibit 1. Financial Summary
`
`Revenues ($mln.)
`
`2014A
`8,263
`
`2015E
`10,938
`CIBC est. – new
`10,524
`CIBC est. – prior
`10,494
`Consensus
`2016E
`
`14,068
`CIBC est. – new
`13,844
`CIBC est. - prior
`12,697
`Consensus
`Source: Company reports and CIBC World Markets Inc.
`
`EBITDA ($mln.)
`3,981
`
`5,503
`5,157
`5,454
`
`7,495
`7,372
`7,259
`
`Adjusted EPS
`8.34
`
`11.66
`11.06
`11.15
`
`16.69
`16.09
`15.52
`
`3
`
`
`
`Page 3 of 10
`
`

`
`Solid results; Increased Guidance - July 23, 2015
`
`Price Target Calculation
`We calculate Valeant’s price target of $275 based on a 15x EV/2016E EBITDA
`multiple and the forward-looking capital structure. The 15x multiple is slightly
`higher than Valeant’s historical two-point premium to peers (currently trading at
`~12.5x) given increased growth opportunities. The valuation is supported by our
`discounted cash flow (DCF) calculation, which uses a 9.20% weighted-average
`cost of capital (WACC), a 20% tax rate post 2016, and a terminal growth rate of
`1.5%.
`
`Key Risks To Price Target
` Ability To Scale: Valeant has grown significantly over the past few years.
`While the company has done a solid job managing growth to date, we
`believe a key risk is the company’s ability to manage and support its rapid
`growth, and the challenges and difficulties associated with managing a
`larger, more complex business represent key risks to Valeant.
`
` Ability To Acquire: We see Valeant’s ability to continue finding and
`completing suitably priced acquisitions as a key issue. As the company
`grows, it will have to make more and/or larger acquisitions to maintain its
`pace of growth. If the company is unable to identify suitable acquisition
`partners, the timelines for the execution of the company’s acquisition
`strategy could be extended.
`
`Patent Cliff: The company faces generic competition on a number of its
`drugs. We expect generic competition on Valeant’s products to be a key risk
`to price target.
`
`
`
`
`
`
`
`
`
`
`
`4
`
`
`
`Page 4 of 10
`
`

`
`4 Qtr.
`$1054.5A
`$1152.8A
`$1592.0E
`$1748.3E
`--
`--
`
`4 Qtr.
`$2.15A
`$2.58A
`$3.32E
`$3.82E
`--
`--
`
`Yearly
`$2952.4A
`$3981.3A
`$5156.6E
`$5503.4E
`$7371.8E
`$7494.5E
`
`Yearly
`$6.24A
`$8.34A
`$11.06E
`$11.66E
`$16.09E
`$16.69E
`
`Solid results; Increased Guidance - July 23, 2015
`
`
`
`Our EBITDA ($mln) estimates are shown below:
`
`1 Qtr.
`$571.6A
`$890.0A
`$1026.6A
`$1026.6A
`--
`--
`
`2 Qtr.
`$569.5A
`$933.1A
`$1099.5E
`$1320.7A
`--
`--
`
`3 Qtr.
`$756.8A
`$1005.4A
`$1438.5E
`$1407.9E
`--
`--
`
`
`
`2013 Current
`2014 Current
`2015 Prior
`2015 Current
`2016 Prior
`2016 Current
`
`
`
`Our CASHEPS estimates are shown below:
`
`1 Qtr.
`$1.30A
`$1.76A
`$2.36A
`$2.36A
`--
`--
`
`2 Qtr.
`$1.34A
`$1.91A
`$2.47E
`$2.56A
`--
`--
`
`3 Qtr.
`$1.43A
`$2.11A
`$2.90E
`$2.91E
`--
`--
`
`
`
`2013 Current
`2014 Current
`2015 Prior
`2015 Current
`2016 Prior
`2016 Current
`
`
`
`
`5
`
`
`
`Page 5 of 10
`
`

`
`Solid results; Increased Guidance - July 23, 2015
`
`IMPORTANT DISCLOSURES:
`
`Analyst Certification: Each CIBC World Markets research analyst named on the front page of this research report, or
`at the beginning of any subsection hereof, hereby certifies that (i) the recommendations and opinions expressed herein
`accurately reflect such research analyst's personal views about the company and securities that are the subject of this
`report and all other companies and securities mentioned in this report that are covered by such research analyst and (ii)
`no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the specific
`recommendations or views expressed by such research analyst in this report.
`
`Potential Conflicts of Interest: Equity research analysts employed by CIBC World Markets are compensated from
`revenues generated by various CIBC World Markets businesses, including the CIBC World Markets Investment Banking
`Department. Research analysts do not receive compensation based upon revenues from specific investment banking
`transactions. CIBC World Markets generally prohibits any research analyst and any member of his or her household from
`executing trades in the securities of a company that such research analyst covers. Additionally, CIBC World Markets
`generally prohibits any research analyst from serving as an officer, director or advisory board member of a company that
`such analyst covers.
`
`In addition to 1% ownership positions in covered companies that are required to be specifically disclosed in this report,
`CIBC World Markets may have a long position of less than 1% or a short position or deal as principal in the securities
`discussed herein, related securities or in options, futures or other derivative instruments based thereon.
`
`Recipients of this report are advised that any or all of the foregoing arrangements, as well as more specific disclosures
`set forth below, may at times give rise to potential conflicts of interest.
`
`
`
`Important Disclosure Footnotes for Valeant Pharmaceuticals
`International (VRX)
`
` Valeant Pharmaceuticals International is a client for which a CIBC World Markets company has performed
`investment banking services in the past 12 months.
` CIBC World Markets Inc. has received compensation for investment banking services from Valeant
`Pharmaceuticals International in the past 12 months.
` CIBC World Markets Inc. expects to receive or intends to seek compensation for investment banking
`services from Valeant Pharmaceuticals International in the next 3 months.
` Valeant Pharmaceuticals International is a client for which a CIBC World Markets company has performed
`non-investment banking, non-securities-related services in the past 12 months.
` CIBC World Markets Corp. has received compensation for non-investment banking, non-securities-related
`services from Valeant Pharmaceuticals International in the past 12 months.
` CIBC World Markets Corp., CIBC World Markets Inc., and their affiliates, in the aggregate, beneficially
`own 1% or more of a class of equity securities issued by Valeant Pharmaceuticals International.
` An executive committee member or director of Canadian Imperial Bank of Commerce (“CIBC”), the
`parent company to CIBC World Markets Inc. and CIBC World Markets Corp., or a member of his/her
`household is an officer, director or advisory board member of this company or one of its subsidiaries.
`
`6
`
`
`
`Page 6 of 10
`
`

`
`Solid results; Increased Guidance - July 23, 2015
`
`
`CIBC World Markets Inc. Stock Rating System
`
`Description
`
`Abbreviation Rating
`Stock Ratings
`Stock is expected to outperform the sector during the next 12-18 months.
`Sector Outperformer
`SO
`Stock is expected to perform in line with the sector during the next 12-18 months.
`Sector Performer
`SP
`Sector Underperformer Stock is expected to underperform the sector during the next 12-18 months.
`SU
`Not Rated
`CIBC World Markets does not maintain an investment recommendation on the stock.
`NR
`Restricted
`R
`CIBC World Markets is restricted (due to potential conflict of interest) from rating the stock.
`Sector Weightings (note: Broader market averages refer to S&P 500 in the U.S. and S&P/TSX Composite in Canada.)
`O
`Overweight
`Sector is expected to outperform the broader market averages.
`M
`Market Weight
`Sector is expected to equal the performance of the broader market averages.
`U
`Underweight
`Sector is expected to underperform the broader market averages.
`NA
`None
`Sector rating is not applicable.
`"Speculative" indicates that an investment in this security involves a high amount of risk due to volatility and/or liquidity issues.
`
`Count
`149
`155
`33
`8
`
`Count
`1
`1
`0
`0
`
`Percent
`94.9%
`95.1%
`86.8%
`100.0%
`
`Percent
`100.0%
`100.0%
`0.0%
`0.0%
`
`
`
`Ratings Distribution*: CIBC World Markets Inc. Coverage Universe
` Inv. Banking Relationships
`(as of 23 Jul 2015)
`Count
`Percent
`42.8% Sector Outperformer (Buy)
`Sector Outperformer (Buy)
`157
`44.4% Sector Performer (Hold/Neutral)
`Sector Performer (Hold/Neutral)
`163
`10.4% Sector Underperformer (Sell)
`Sector Underperformer (Sell)
`38
`2.2% Restricted
`Restricted
`8
`Ratings Distribution: Healthcare - Canada Coverage Universe
` Inv. Banking Relationships
`(as of 23 Jul 2015)
`Count
`Percent
`50.0% Sector Outperformer (Buy)
`Sector Outperformer (Buy)
`1
`50.0% Sector Performer (Hold/Neutral)
`Sector Performer (Hold/Neutral)
`1
`0.0% Sector Underperformer (Sell)
`Sector Underperformer (Sell)
`0
`0.0% Restricted
`Restricted
`0
`Healthcare - Canada Sector includes the following tickers: CCT, VRX.
`
`*Although the investment recommendations within the three-tiered, relative stock rating system utilized by CIBC World Markets Inc.
`do not correlate to buy, hold and sell recommendations, for the purposes of complying with NYSE and NASD rules, CIBC World
`Markets Inc. has assigned buy ratings to securities rated Sector Outperformer, hold ratings to securities rated Sector Performer, and
`sell ratings to securities rated Sector Underperformer without taking into consideration the analyst's sector weighting.
`
`Important disclosures required by IIROC Rule 3400, can be obtained by visiting CIBC World Markets Inc. on the web at
`http://researchcentral.cibcwm.com. Important disclosures for each issuer can be found using the "Coverage" tab on the
`top left of the Research Central home page. Access to the system for rating investment opportunities and our
`dissemination policy, can be found under 'Quick Links' on bottom right side of the Research Central homepage. These
`important disclosures can also be obtained by writing to CIBC World Markets Inc., Brookfield Place, 161 Bay Street, 4th
`Floor, Toronto, Ontario M5J 2S8, Attention: Research Disclosures Request
`
`7
`
`
`
`Page 7 of 10
`
`

`
`Solid results; Increased Guidance - July 23, 2015
`
`CIBC World Markets Inc. Price Chart
`
`HISTORICAL PERFORMANCE OF CIBC WORLD MARKETS INC. RECOMMENDATIONS FOR VALEANT
`PHARMACEUTICALS INTERNATIONAL (VRX)
`
`
`
`Change Type
`
`
`
`
`
`
`Closing Price
`130.97
`118.21
`154.10
`198.75
`214.06
`
`Rating
`SO
`SO
`SO
`SO
`SO
`
`Price Target Coverage
`160.00
`Stephanie Price, CFA
`155.00
`Stephanie Price, CFA
`186.00
`Stephanie Price, CFA
`219.00
`Stephanie Price, CFA
`250.00
`Stephanie Price, CFA
`
`Date
`05/20/2014
`08/01/2014
`01/08/2015
`02/23/2015
`04/29/2015
`
`
`8
`
`
`
`Page 8 of 10
`
`

`
`Solid results; Increased Guidance - July 23, 2015
`
`Legal Disclaimer
`
` This report is issued and approved for distribution by (a) in Canada, CIBC World Markets Inc., a member of the
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`Solid results; Increased Guidance - July 23, 2015
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`Legal Disclaimer (Continued)
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