`s1apnan1en1oe,cr=A
`vaunchoyah
`1 (416)594-7047
`1 (416) 9563229
`
`Vam.
`
`Valeant Pharmaceuticals
`
`Inte|"nat|O|"|aI
`
`Solid results; Increased Guidance
`
`What's The Event
`
`Sbd<Rafn9:
`secuweigmg;
`Keynatiosandstatistics
`12-18 mo. Price T3991
`VRX-NYSE (7123115)
`
`Key hfcesj
`Valeant reported solid Q2 results that were ahead of consensus on
`52_weekRame
`all metrics. Organic growth was above expectations, margins were
`strong and cash flow was robust. The only near-tenn headwrnds are shaesoumamim
`F/X and "genen‘cization" (Xenazine and Targretin), which are being
`Float
`more than offset by organic growth.
`Avg‘ Dam “aim Vol‘
`Implications
`33.‘?cmml
`We have increased our F2015 and F2016 forecasts to account for the Fra1:IYeaEr1ds
`roll-out of the IBS-D indication and me recent Amoun acquisifion.
`Bookvalue
`We see continued organic growth (primarily in U.S. dermatology and 2016 ROE (E)
`B+L) and believe the company is poised for additional acquisitions.
`NetDebt
`In the near term, tuck-ins are probable, with another sizeable
`cannon Eqjry
`acquisition becoming more likely as Valeant pays down debt. Valeant
`remains S0—rated with a $275 price target, up from $250.
`
`
`
`[-
`
`EARNINGS UPDATE
`
`July 23, 2015
`HeaIfl1care - Canada
`
`SECTOR OUTPERFORIIER
`MARKET WEIGHT
`
`$275.1!)
`$250.14
`
`sap/rsxso
`3106_o3_325o_14
`344 M
`
`2 275 037
`
`Deoerrlrer
`$21.05 pershr
`33.0%
`$17,752_4M
`$7249_9M
`
`EBI'lDA($IlIn)
`Clnent
`Prior
`Estimates Dec. 31
`E38 (Cash)-Clll’
`E38 (Cal)-Prior
`
`Valuation (Dec. 31)
`EVIEB|TDA—Culr
`EVIEBTIDA-Prior
`PIEPS (Cash}Culr
`PIEPS (Cash)—Prior
`
`2016
`2015
`2014
`2013
`$2952.4A $3!-!81.3A $5503.4E $7494.5E
`$5156.6E $7371.8E
`2015
`2016
`311.6615
`$16.69E
`$11.06E
`$16.09E
`
`2013
`$6.24A
`
`2014
`$8.34A
`
`352x
`
`26.1x
`
`40.1x
`
`30.0x
`
`18.9x
`20.1x
`21 .5x
`22.611
`
`13.9x
`14_1x
`15.0x
`155x
`
`Germany Desorption
`Vdeatisaleaiirgspedrllyplrarratnaliazlprwiiatiteoarpawburses
`orrprotinlsiuillliriadpsterrtrislrsrxilas
`
`www.vdemt.oorn/
`
`‘5‘37‘"5°1°‘5
`All figures in us dollars, unles otherwise stated.
`CIBC World Markets does and seeks to do business wiflr 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.
`Fnd CIBC researdr on Bloorrberg, R1e1k:rs,f1rstcaI.oorn
`and
`
`c BC World Mal-1:esIm,P_o_Bax 510, 161 Bay S1ree1,Brookf1eld Place, Toronlo, Canada M5.I 238 (416) ssuooo
`
`Page 1 of 10
`
`SENJU EXHIBIT 2235
`
`LUPIN V. SENJU
`IPR2015—01100
`
`
`
`250.14
`
`$275.00
`
`Market Weight
`
`Sector Outperiormer
`Stephan ie Price, CFA (416-594-7047) Stephanie.PrioeQcibc.ca
`Varun Choyah, (416-956-3229) Varun.choyah@cibc.ca
`
`Company Profile
`VdealPimrmaimlsisadvase,danrIizedspecia1pImrma£:Jampayaumedin
`heixmlaitx1,ciicdtesiI'|g,re9'st:«iaI, rrr:«rdactreani<xxrIrIerci:«Iiz;itxIdpinrnIat>erlr:al
`mxh:s.fleearpawlasadvaseuodntpuiio,wihaixxsmhaIbd;ianneai(:ds,
`hadedgaaksadwal|ew:taruoax:bhkeyaeasswIIasdarmHogy,ralok)gy,
`
`3,1“)
`
`251!)
`
`ZUX)
`
`1.500
`
`1.0!!)
`
`
`
`Revenue($mlrs)
`
`EBITDA(Smlns)
`
`: ma EETDA Ihgh
`
`FreeCashFlow($mlns)
`
`solid results; Increased Guidance - July 23, 2015
`
`Valeant Pharmaceuticals
`VRX-NYSE
`‘II23I15
`
`12- To 18- Month Price Target:
`Healthcare - Canada
`
`/‘
`
`Sector Weighting:
`AIIlig1esinUSDnrr'fiars, exoegtpershaedda
`Key Statistics
`
`250.14 Net Cash (Debt)
`344.4 Erbprise Vale
`15,1482
`F2014A
`
`F2015E
`
`(17,7524)
`103.5116
`
`F2016E
`
`Shae Price (uss)
`Shaves oumanm;
`Makdcaiflzdm
`Key Multiples
`
`Vdellt
`PIE
`EVIEBITDA
`
`P083 (AV°fl9¢)
`PIE
`EVIEBITDA
`
`P rofitabi I ity
`
`EBITDA Maw‘!
`Net Mag}
`Cash per Sine
`Net DetflEB|TDA
`Income Statement
`
`Sdes
`
`Growl" (Y/Y)
`Operiu Expenses
`Adjusted BITDA
`Arnorizdon
`lrbestau Oher
`EBT
`lneane Tax
`Netlmane
`
`Adj. Net Income
`cash 33
`Free Cash Flow
`
`cash Flow From Opedons
`Cain Expmdires
`Free Cash Flow
`Free Cash Flow Per Shae
`Free Cash Flow Yield
`Balance Sheet
`
`Cash & snnmtnenrs
`
`323
`
`Goodul & Inmgiues
`Total Assets
`Debt
`rota: uauiies
`
`Z),&)2
`3,153
`15,255
`21919
`5,435
`sraermers Eqiiy
`Solace: 0ornparryreportsandClBCWoridMarketshc.
`
`CIBC
`f’
`
`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°/o 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.)
`8263
`
`EBITDA ($mIn.)
`3,981
`
`Adjusted EPS
`8.34
`
`5,503
`
`5,157
`5,454
`
`7,495
`
`7,372
`7,259
`
`11.66
`
`11.06
`11.15
`
`16.69
`
`16.09
`15.52
`
`CIBC
`
`2014A
`201 5E
`
`CIBC est — new
`
`CIBC est. — prior
`Consensus
`201 SE
`
`CIBC est — new
`
`10,938
`
`10,524
`10,494
`
`14,068
`
`13,844
`CIBC est. —
`12,697
`Consensus
`SoI.Ioe:Corrq)aIyrepnI13andC|BCWoIldIhkel5hc.
`
`Page 3 of 10
`
`
`
`Solid results; Increased Guidance - July 23, 2015
`
`Price Target Calculation
`We calculate Valeant’s price target of $275 based on a 15x EV/2016E EBITDA
`multiple and the forward-looking capital structure. The 15x multiple is slightly
`higher than Valeant’s historical two-point premium to peers (currently trading at
`~12.5x) given increased growth opportunities. The valuation is supported by our
`discounted cash flow (DCF) calculation, which uses a 9.20% weighted-average
`cost of capital (WACC), a 20% tax rate post 2016, and a terminal growth rate of
`1.5%.
`
`Key Risks To Price Target
`o
`Ability To Scale: Valeant has grown significantly over the past few years.
`While the company has done a solid job managing growth to date, we
`believe a key risk is the company's ability to manage and support its rapid
`growth, and the challenges and difficulties associated with managing a
`larger, more complex business represent key risks to Valeant.
`
`o
`
`-
`
`Ability To Acquire: We see Valeant’s ability to continue finding and
`completing suitably priced acquisitions as a key issue. As the company
`grows, it will have to make more and/or larger acquisitions to maintain its
`pace of growth. If the company is unable to identify suitable acquisition
`partners, the timelines for the execution of the company's acquisition
`strategy could be extended.
`
`Patent Cliff: The company faces generic competition on a number of its
`drugs. We expect generic competition on Valeant’s products to be a key risk
`to price target.
`
`935
`4 Z Page 4 of 10
`
`
`
`solid results; Increased Guidance - July 23, 2015
`
`Our EBITDA ($m|n) estimates are shown below:
`
`2013 Current
`2014 Current
`2015 Prior
`2015 Current
`2016 Prior
`2016 Current
`
`1Qtr.
`
`3571 _6A
`$890.0A
`$1026.6A
`$1026.6A
`
`2Qtr.
`
`$569.5A
`$933_1A
`$1099.5E
`$1320.7A
`
`3 Qlr.
`
`$756.8A
`$1005_4A
`$1438.5E
`$1407.9E
`
`4 01!’.
`
`$1054.5A
`$1152.8A
`$1592.0E
`$1748.3E
`
`Our CASHEPS estimates are shown below:
`
`2013 Current
`2014 Current
`2015 Prior
`2015 Current
`2016 Prior
`2016 Current
`
`10h.
`
`$1.30A
`$1_76A
`$2.36A
`$2.36A
`
`2Qtr.
`
`31 _34A
`31 _91A
`$2.47E
`$2.56A
`
`3 Qlr.
`
`$1.43A
`$2_11A
`$2_SX)E
`32.91 E
`
`4 Qtr.
`
`$2.15A
`$2.58A
`$3.32E
`$3.82E
`
`Yriy
`
`$2952_4A
`$3981 _3A
`$5156.6E
`$5503.4E
`$7371 .8E
`$7494.5E
`
`Yeariy
`$6.24A
`$8.34A
`$11_06E
`$11_66E
`$16.09E
`$16.69E
`
`Page 5 of 10
`
`CIBC
`\\
`
`
`
`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°/o 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)
`
`0
`
`o Valeant Phannaceuticals 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.
`
`0
`
`0
`
`0 Valeant Phannaceuticals 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°/o 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.
`
`0
`
`0
`
`CIBC
`f’ Page 6 of 10
`
`6
`
`
`
`Solid results; Increased Guidance - July 23, 2015
`
`CIBC World Markets Inc. Stock Rating System
`
`Abbreviation Rating
`
`Description
`
`Stock Ratings
`
`SO
`SP
`
`SU
`NR
`
`R
`
`Sector Outperformer
`Sector Performer
`
`Stock is expected to outperform the sector during the next 12- 18 months.
`Stock is expected to perform in line with the sector during the next 12-18 months.
`
`Sector Underperformer Stock is expected to underperform the sector during the next 12-18 months.
`Not Rated
`CIBC World Markets does not maintain an investment recommendation on the stock.
`
`Restricted
`
`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.)
`
`0
`M
`U
`NA
`
`Overweight
`Market Weight
`Underweight
`None
`
`Sector is expected to outperfonn the broader market averages.
`Sector is expected to equal the performance of the broader market averages.
`Sector is expected to underperform the broader market averages.
`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.
`
`Ratings Distribution*: CIBC World Markets Inc. Coverage Universe
`(as of 23 Jul 2015)
`Count
`Percent
`Inv. Banking Relationships
`
`Sector Outperformer (Buy)
`Sector Performer (Hold/Neutral)
`Sector Underperformer (Sell)
`ReslTicted
`
`157
`163
`38
`8
`
`42.8% Sector Outperfonner (Buy)
`44.4% Sector Performer (Hold/Neutral)
`10.4% Sector Underperfonner (Sell)
`2.2% Restricted
`
`Count
`
`Percent
`
`149
`155
`33
`8
`
`94.9%
`95.1%
`86.8%
`100.0%
`
`Ratings Distribution: Healthcare - Canada Coverage Universe
`
`(as of 23 Jul 2015)
`
`Count
`
`Percent
`
`Inv. Banking Relationships
`
`Count
`
`Percent
`
`Sector Outperformer (Buy)
`Sector Performer (Hold/Neutral)
`Sector Underperformer (Sell)
`Restricted
`
`1
`1
`0
`0
`
`50.0% Sector Outperformer (Buy)
`50.0°/o
`Sector Performer (Hold/Neutral)
`0.0% Sector Underperfonner (Sell)
`0.0°/o
`Restricted
`
`1
`1
`0
`0
`
`100.0%
`100.0°/o
`0.0°/o
`0.0°/o
`
`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:flresearchcentral.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 M5] 2S8, Attention: Research Disclosures Request
`
`Page 7 of 10
`
`CIBC
`
`
`
`..=
`.9
`50
`
`5.
`
`E20>
`
`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)
`
`05000014
`
`07000014
`
`01000014
`
`10000014
`
`11000014
`
`12000014
`
`01000015
`
`03000015
`
`04000015
`
`05000015
`
`00000015
`
`07000015
`
`Restricted
`LEGEND:1loIume — closing Price i Price Target 0 Rating change
`Make: new Provided By RE UTE RS
`Gummy: Us)
`Historical stock price data and corresponding CIBC WM price targets in this graph may have been adjusted to account forsubsequent stock splits.
`
`» coverage change
`
`HISTORICAL PERFORMANCE OF CIBC WORLD MARKETS INC. RECOMMENDATIONS FOR VALEANT
`
`PHARMACEUTICALS INTERNATIONAL (VRX)
`
`Date
`05000014
`00I01001-1
`011080015
`02030015
`04090015
`
`Change Type
`‘Q :1
`‘
`‘
`‘
`‘
`
`Closing Price
`130.97
`11821
`154.10
`198.75
`214.06
`
`Rating
`80
`30
`80
`80
`80
`
`Price Target
`160.00
`155.1!)
`186.(X)
`219.1!)
`250_(X)
`
`Coverage
`Stephanie Price, CFA
`Steplnnie Price, CFA
`Stephanie Price, CFA
`Siephanie Price, CFA
`Stephanie Price, CFA
`
`CIBC
`E" 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
`Investment Industry Regulatory Organization of Canada (“IIROC”), the Toronto Stock Exchange, the TSX Venture
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`Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential
`Regulation Authority, (c) in Australia to wholesale clients only, CIBC Australia Ltd, a company regulated by the ASIC with
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`only to U.S. Major Institutional Investors (“MII") (as such term is defined in SEC Rule 15a-6) or (ii) CIBC World Markets
`Corp., a member of the Financial Industry Regulatory Authority (“FINRA”). U.S. MIIs receiving this report from CIBC
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`Markets in Canada, and does not constitute an offer or solicitation to buy or sell any securities discussed herein in any
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`The securities mentioned in this report may not be suitable for all types of investors. This report does not take into
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`Recipients should consider this report as only a single factor in making an investment decision and should not rely solely
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`Solid results; Increased Guidance - July 23, 2015
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`Legal Disclaimer (Continued)
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