'VALEANT
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`Phnrmncautlclls Internnclonll. Inc.
`
`HEARING FROM OUR INDEPENDENT DIRECTORS.
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`BUILD. INVEST. GROW.
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`2013 Valeant Annual Report
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`PAGE 1 OF 256
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`SENJU EXHIBIT 2236
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`LUPIN v SENJU
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`IPR2015—01105
`
`

`
`company overview
`
`Valeant Pharmaceuticals International, Inc. (NYSE/TSX: VRX) is a multinational specialty pharmaceutical and medical device company
`that develops, manufactures and markets prescription and non-prescription pharmaceutical products that make a meaningful difference
`in patients’ lives throughout more than 100 countries. Valeant’s primary focus is in the areas of dermatology and eye health.
`
`We have an established portfolio of durable products and our strategy is to focus the business on core geographies and therapeutic
`classes that offer growth opportunities. Another critical element of our strategy is business development. We have completed numerous
`transactions over the past few years to expand our portfolio offering and geographic footprint, and will continue to pursue value-added
`business development opportunities as they arise.
`
`We look to strategically expand our product pipeline by adding new compounds or products through acquisitions and will maximize our
`pipeline through strategic partnerships.
`
`Valeant’s strategic markets are primarily in the United States, Canada, Europe, the Middle East, Latin America, Asia Pacific and Africa.
`Headquartered in Laval, Quebec, Valeant has approximately 17,000 employees worldwide.
`
`FORWARD-LOOKING STATEMENTS
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`(cid:90)tate(cid:84)ent(cid:90) are rea(cid:90)ona(cid:73)le(cid:19) (cid:90)u(cid:74)(cid:79) (cid:90)tate(cid:84)ent(cid:90) (cid:80)n(cid:93)ol(cid:93)e r(cid:80)(cid:90)(cid:82)(cid:90) an(cid:75) un(cid:74)erta(cid:80)nt(cid:80)e(cid:90)(cid:19) an(cid:75) un(cid:75)ue rel(cid:80)an(cid:74)e (cid:90)(cid:79)oul(cid:75) not (cid:73)e pla(cid:74)e(cid:75) on (cid:90)u(cid:74)(cid:79) (cid:90)tate(cid:84)ent(cid:90)(cid:21) A(cid:74)tual re(cid:90)ult(cid:90) (cid:84)a(cid:96) (cid:75)(cid:80)(cid:77)(cid:77)er (cid:84)ater(cid:80)all(cid:96) (cid:77)ro(cid:84) t(cid:79)o(cid:90)e e(cid:95)pre(cid:90)(cid:90)e(cid:75) or (cid:80)(cid:84)pl(cid:80)e(cid:75) (cid:80)n (cid:90)u(cid:74)(cid:79)
`(cid:90)tate(cid:84)ent(cid:90)(cid:21) Fa(cid:74)tor(cid:90) t(cid:79)at (cid:84)(cid:80)(cid:78)(cid:79)t (cid:74)au(cid:90)e or (cid:74)ontr(cid:80)(cid:73)ute to t(cid:79)e(cid:90)e (cid:75)(cid:80)(cid:77)(cid:77)eren(cid:74)e(cid:90) (cid:80)n(cid:74)lu(cid:75)e(cid:19) (cid:73)ut are not l(cid:80)(cid:84)(cid:80)te(cid:75) to(cid:19) r(cid:80)(cid:90)(cid:82)(cid:90) an(cid:75) un(cid:74)erta(cid:80)nt(cid:80)e(cid:90) (cid:75)(cid:80)(cid:90)(cid:74)u(cid:90)(cid:90)e(cid:75) (cid:80)n our (cid:84)o(cid:90)t re(cid:74)ent annual or (cid:88)uarterl(cid:96) report an(cid:75) ot(cid:79)er (cid:196)l(cid:80)n(cid:78)(cid:90) (cid:196)le(cid:75) (cid:94)(cid:80)t(cid:79) t(cid:79)e (cid:60)(cid:21)S(cid:21)
`Se(cid:74)ur(cid:80)t(cid:80)e(cid:90) an(cid:75) E(cid:95)(cid:74)(cid:79)an(cid:78)e (cid:42)o(cid:84)(cid:84)(cid:80)(cid:90)(cid:90)(cid:80)on an(cid:75) t(cid:79)e (cid:42)ana(cid:75)(cid:80)an Se(cid:74)ur(cid:80)t(cid:80)e(cid:90) A(cid:75)(cid:84)(cid:80)n(cid:80)(cid:90)trator(cid:90)(cid:19) (cid:94)(cid:79)(cid:80)(cid:74)(cid:79) (cid:77)a(cid:74)tor(cid:90) are (cid:80)n(cid:74)orporate(cid:75) (cid:79)ere(cid:80)n (cid:73)(cid:96) re(cid:77)eren(cid:74)e(cid:21) (cid:64)ou (cid:90)(cid:79)oul(cid:75) (cid:74)on(cid:90)(cid:80)(cid:75)er t(cid:79)e(cid:90)e (cid:77)a(cid:74)tor(cid:90) (cid:15)an(cid:75) ot(cid:79)er un(cid:74)erta(cid:80)nt(cid:80)e(cid:90) an(cid:75) potent(cid:80)al e(cid:93)ent(cid:90)(cid:16)
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`
`Non-GAAP Information
`To (cid:90)upplement t(cid:79)e (cid:196)nan(cid:74)ial mea(cid:90)ure(cid:90) prepare(cid:75) in a(cid:74)(cid:74)or(cid:75)an(cid:74)e (cid:94)it(cid:79) (cid:60)(cid:21)S(cid:21) (cid:78)enerall(cid:96) a(cid:74)(cid:74)epte(cid:75) a(cid:74)(cid:74)ountin(cid:78) prin(cid:74)iple(cid:90) (cid:15)GAAP(cid:16)(cid:19) t(cid:79)e (cid:42)ompan(cid:96) u(cid:90)e(cid:90) non-GAAP (cid:196)nan(cid:74)ial mea(cid:90)ure(cid:90) t(cid:79)at e(cid:95)(cid:74)lu(cid:75)e (cid:74)ertain item(cid:90)(cid:19) (cid:90)u(cid:74)(cid:79) a(cid:90)
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`a(cid:74)(cid:88)ui(cid:90)ition-relate(cid:75) an(cid:75) ot(cid:79)er (cid:74)o(cid:90)t(cid:90)(cid:19) In-pro(cid:74)e(cid:90)(cid:90) re(cid:90)ear(cid:74)(cid:79) an(cid:75) (cid:75)e(cid:93)elopment(cid:19) impairment(cid:90) an(cid:75) ot(cid:79)er (cid:74)(cid:79)ar(cid:78)e(cid:90) (cid:15)(cid:9)IPR(cid:13)D(cid:9)(cid:16)(cid:19) le(cid:78)al (cid:90)ettlement(cid:90) out(cid:90)i(cid:75)e t(cid:79)e or(cid:75)inar(cid:96) (cid:74)our(cid:90)e of (cid:73)u(cid:90)ine(cid:90)(cid:90)(cid:19) t(cid:79)e impa(cid:74)t of (cid:74)urren(cid:74)(cid:96) (cid:197)u(cid:74)tuation(cid:90)(cid:19)
`amorti(cid:97)ation an(cid:75) ot(cid:79)er non-(cid:74)a(cid:90)(cid:79) (cid:74)(cid:79)ar(cid:78)e(cid:90)(cid:19) amorti(cid:97)ation in(cid:74)lu(cid:75)in(cid:78) intan(cid:78)i(cid:73)le a(cid:90)(cid:90)et impairment(cid:90) an(cid:75) (cid:94)rite-(cid:75)o(cid:94)n of (cid:75)eferre(cid:75) (cid:196)nan(cid:74)in(cid:78) (cid:74)o(cid:90)t(cid:90)(cid:19) (cid:75)e(cid:73)t (cid:75)i(cid:90)(cid:74)ount(cid:90) an(cid:75) AS(cid:42) (cid:27)(cid:30)0-20 (cid:15)FSP AP(cid:41) 1(cid:27)-1(cid:16) intere(cid:90)t(cid:19) lo(cid:90)(cid:90) on
`e(cid:95)tin(cid:78)ui(cid:90)(cid:79)ment of (cid:75)e(cid:73)t(cid:19) (cid:15)(cid:78)ain(cid:16) lo(cid:90)(cid:90) on a(cid:90)(cid:90)et(cid:90) (cid:90)ol(cid:75)(cid:22)(cid:79)el(cid:75) for (cid:90)ale(cid:22)impairment(cid:19) net(cid:19) (cid:15)(cid:78)ain(cid:16) lo(cid:90)(cid:90) on in(cid:93)e(cid:90)tment(cid:90)(cid:19) net(cid:19) an(cid:75) a(cid:75)(cid:81)u(cid:90)t(cid:90) ta(cid:95) e(cid:95)pen(cid:90)e to (cid:74)a(cid:90)(cid:79) ta(cid:95)e(cid:90)(cid:21) Mana(cid:78)ement u(cid:90)e(cid:90) non-GAAP (cid:196)nan(cid:74)ial mea(cid:90)ure(cid:90) internall(cid:96)
`for (cid:90)trate(cid:78)i(cid:74) (cid:75)e(cid:74)i(cid:90)ion ma(cid:82)in(cid:78)(cid:19) fore(cid:74)a(cid:90)tin(cid:78) future re(cid:90)ult(cid:90) an(cid:75) e(cid:93)aluatin(cid:78) (cid:74)urrent performan(cid:74)e(cid:21) (cid:41)(cid:96) (cid:75)i(cid:90)(cid:74)lo(cid:90)in(cid:78) non-GAAP (cid:196)nan(cid:74)ial mea(cid:90)ure(cid:90)(cid:19) mana(cid:78)ement inten(cid:75)(cid:90) to pro(cid:93)i(cid:75)e in(cid:93)e(cid:90)tor(cid:90) (cid:94)it(cid:79) a meanin(cid:78)ful(cid:19) (cid:74)on(cid:90)i(cid:90)tent
`(cid:74)ompari(cid:90)on of t(cid:79)e (cid:42)ompan(cid:96)(cid:187)(cid:90) (cid:74)ore operatin(cid:78) re(cid:90)ult(cid:90) an(cid:75) tren(cid:75)(cid:90) for t(cid:79)e perio(cid:75)(cid:90) pre(cid:90)ente(cid:75)(cid:21) Non-GAAP (cid:196)nan(cid:74)ial mea(cid:90)ure(cid:90) are not prepare(cid:75) in a(cid:74)(cid:74)or(cid:75)an(cid:74)e (cid:94)it(cid:79) GAAP(cid:21) T(cid:79)erefore(cid:19) t(cid:79)e information i(cid:90) not ne(cid:74)e(cid:90)(cid:90)aril(cid:96)
`(cid:74)ompara(cid:73)le to ot(cid:79)er (cid:74)ompanie(cid:90) an(cid:75) (cid:90)(cid:79)oul(cid:75) (cid:73)e (cid:74)on(cid:90)i(cid:75)ere(cid:75) a(cid:90) a (cid:90)upplement to(cid:19) not a (cid:90)u(cid:73)(cid:90)titute for(cid:19) or (cid:90)uperior to(cid:19) t(cid:79)e (cid:74)orre(cid:90)pon(cid:75)in(cid:78) mea(cid:90)ure(cid:90) (cid:74)al(cid:74)ulate(cid:75) in a(cid:74)(cid:74)or(cid:75)an(cid:74)e (cid:94)it(cid:79) GAAP(cid:21) Re(cid:74)on(cid:74)iliation(cid:90) of t(cid:79)e non-GAAP
`(cid:196)nan(cid:74)ial mea(cid:90)ure(cid:90) (cid:74)ontaine(cid:75) (cid:79)erein to t(cid:79)e (cid:74)ompara(cid:73)le GAAP (cid:196)nan(cid:74)ial mea(cid:90)ure(cid:90) (cid:74)an (cid:73)e foun(cid:75) in our pre(cid:90)(cid:90) relea(cid:90)e (cid:75)ate(cid:75) Fe(cid:73)ruar(cid:96) 2(cid:30)(cid:19) 201(cid:27)(cid:19) (cid:94)(cid:79)i(cid:74)(cid:79) (cid:74)an (cid:73)e foun(cid:75)(cid:19) alon(cid:78) (cid:94)it(cid:79) re(cid:74)on(cid:74)iliation(cid:90) of ot(cid:79)er (cid:79)i(cid:90)tori(cid:74)al non-GAAP
`(cid:196)nan(cid:74)ial(cid:90)(cid:19) at (cid:94)(cid:94)(cid:94)(cid:21)(cid:93)aleant(cid:21)(cid:74)om(cid:21)
`
`PAGE 2 OF 256
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`

`
`Valeant Annual Report 2013
`
`We listen.
`Build a diversified collection of businesses.
`Invest in durable products. Grow beyond expectations
`and set a new goal for the future.
`
`Navigating a multifaceted company like Valeant through these exceptional times requires an
`exceptional board of directors. In their roles as advisors and in providing oversight, Valeant’s
`independent board members bring a wealth of executive experience that is broad and deep, along
`with a diverse range of backgrounds and experiences. What they have in common however, is
`their collective ability to view Valeant from a 50,000-foot strategic vantage point, as well as their
`understanding of the operational details that are foundational to our business. For this 2013
`Valeant Annual Report, our independent board members were asked to give their perspective
`on the valuable insight they bring to their roles and how they work together in helping drive
`Valeant’s unparalleled success.
`
`1
`
`PAGE 3 OF 256
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`

`
`Build. Invest. Grow.
`
`Fellow shareholders,
`Valeant’s strategy and operating philosophy are both
`simple and powerful and a departure from the traditional
`pharmaceutical business model. Our strategy is anchored
`in ten principles that we use to run the company.
`
`
`
`Valeant’s Operating Principles
`
`1. Put patients and our customers first by maintaining the highest ethical standards in the industry.
`
`2. Select high-growth business segments (therapeutic areas and geographies) where the healthcare professional is still the
`primary decision maker.
`3. Maintain a bias toward durable products that are largely cash pay, or are reimbursed through private insurance.
`4. Focus our resources on bringing new products to the market (output), not R&D spend (input).
`5. Maintain a decentralized operating model to ensure decisions are made close to the customer.
`6. Focus our promotional spending on customer-facing activities.
`7. Measure all of our operating units on organic growth and cash flow generation.
`8. Require Internal Rates of Return (IRR) significantly above our cost of capital, coupled with short-term cash paybacks for
`all of our deals.
`9. Directly link senior management compensation to long-term shareholder returns.
`10. Ensure tight controls and rigorous compliance standards while avoiding overspending.
`
`
`
`
`
`
`
`
`
`
`
`1. Put patients and our customers first by maintaining the highest ethical standards in the industry.
`
` Each member of our management team is required to create an ethical environment for their employees. Our primary
`mission as an organization is to serve the patients and consumers who use our products, as well as the physicians and
`other healthcare professionals who prescribe and recommend them.
`
`2.
`
`
`
`
`3.
`
`
` Select high-growth business segments (therapeutic areas and geographies) where the physician is still the primary
`decision maker.
` Our primary therapeutic focus is in dermatology, aesthetics, ophthalmology, and oral health. Our primary geographic
`focus is in North America and the emerging markets – Asia, Latin America, Central and Eastern Europe, Russia, the Middle
`East, and North Africa. These segments share two attributes – they are growing faster than the global pharmaceutical
`and/or healthcare market; and the physician or healthcare professional still plays an important role in product choices. In
`these markets, the relationship between the physician and the sales representative is critically important. We will continue
`to invest in segments that share these characteristics as we evolve over time.
`
` Maintain a bias toward durable products that are largely cash pay, or are reimbursed through private insurance.
` Over 85% of our product portfolio is composed of durable products – products that do not have a pending patent cliff.
`These include: products used directly in a physician’s practice such as our intraocular lens used in cataract surgery and
`aesthetic products used for facial rejuvenation; physician recommended over-the-counter (OTC) products such as the
`CeraVe® moisturizer line and BioTrue® contact lens solution; devices such as the Ultra™ contact lens and Thermage®
`skin tightener; and our branded generic portfolio and OTC products sold throughout the emerging markets. In our
`Emerging Markets, the branded generic products are primarily cash pay, physician recommended with lives similar to
`OTC products. Over 75% of our product sales are also cash pay or reimbursed through private insurance, helping to
`protect us from government-driven price decreases that are becoming increasingly common around the world. We expect
`to continue our focus on durable products in less price-sensitive markets, which should ensure our longer-term outlook
`mirrors that of a consumer packaged goods company, not a traditional pharmaceutical company.
`
`
`
`
`
`
`
`
`
`
`
`
`2
`
`PAGE 4 OF 256
`
`

`
`Valeant Annual Report 2013
`
`
`
`4. Focus our resources on bringing new products to the market (output), not R&D spend (input).
`
` Traditionally, pharmaceutical companies have pointed to R&D spend as the best metric for predicting new product flow in
`the coming years. More recently, most of these companies have had to resort to in-licensing products and M&A activity to
`fill their new product gaps. By contrast, we have focused our R&D spending on line extensions and higher-probability, late-
`stage development programs. We have also completed over 25 transactions this past year to augment our product portfolio.
`In 2014, we expect to launch over 15 products in the United States alone, and over 300 products in the emerging markets.
`As a large shareholder myself, I am delighted with the output of our R&D and business development teams who have helped
`build one of the richest launch pipelines in the industry.
`
`2014 expected launches
`
`Product
`
`
` Dermatology/Aesthetics
`
`Description
`
`Bensal HP®
`
`
`
`
`
`Luzu®
`
`
`
`Neotensil™
`
`
`
`Topical treatment for inflammation
`and irritation associated with many
`forms of dermatitis
`
`Topical antifungal treatment for
`athlete’s foot
`
`Topical product to reduce
`appearance of under-eye bags
`
`Source
`
`
`Expected launch date
`
`Estimated
`peak sales ($MM)
`
`Licensed
`
`Relaunched
`
`25-75
`
`Medicis
`
`Launched
`
`Licensed
`
`Launched
`
`Obagi360™ System
`
`Skincare kit for women in their 30’s
`
`Internal
`
`Retin-A Micro® .08%
`
`Topical treatment for acne
`
`Jublia®
`
`
`
`Topical antifungal treatment for
`onychomycosis
`
`Ideal Implants
`
`Breast implant
`
`Hyaluronic acid for lips
`
`Small particle filler
`
`Onexton™
`
`
` Eye Health
`
`Topical treatment for acne
`
`
`Internal
`
`Internal
`
`
`Acquired
`
`Internal
`
`Internal
`
`
`Launched
`
`June 2014
`
`Q3 2014 (pending FDA approval)
`
`
`Q3 2014
`
`Q4 2014
`
`December 2014/early Q1 2015
`(pending FDA approval)
`
`Launched
`
`50-75
`
`80-100
`
`10-30
`
`20-30
`
`300-800
`
`25-75
`
`20-30
`
`50-75
`
`40-50
`
`enVista™ inserter (lens)
`
`Further enhancements
`
`PureVision2 for Presbyopia Daily contact lens
`
`Victus™ enhancements
`
`
`
`Multiple enhancements
`
`
`Ultra™
`
`Silicone hydrogel monthly lens
`
`BioTrue® multifocal
`
`Daily contact lens
`
`Trulign™ expanded
`ranges (lens)
`
` Consumer
`
`Broader range of powers
`
`CeraVe® baby line
`
`OTC moisturizer
`
`Peroxiclear™
`
`
` Oral Health
`
`Ossix® Plus
`
`
`
`Onset®
`
`Hydrogen peroxide based
`contact lens solution
`
`Dental membrane
`
`
`Dental analgesic
`
`B&L
`
`B&L
`
`B&L
`
`
`B&L
`
`B&L
`
`B&L
`
`Launched
`
`Corneal incision launched;
`lens fragmentation 2H 2014
`
`Launched
`
`May 2014
`
`Q2 2014
`
`Internal
`
`B&L
`
`Launched
`
`Launched
`
`Exclusive
`distribution
`
`Launched
`
`Acquisition
`
`Launched
`
`20-30
`
`100-200
`
`300-400
`
`60-80
`
`40-60
`
`15-20
`
`50-70
`
`
`
`10-20
`
`40-50
`
`TOTAL
`
`1,255-2,270
`
`
`
`
`
` In addition, we have a number of exciting earlier-stage compounds in development, including Brimonidine (eye whitener),
`Latanoprostene bunod (glaucoma), MIM-D3 (Mimetogen - dry eye) and IDP-118 (psoriasis), which if successful, all
`combined could have multi-billion dollar peak sales.
`
`3
`
`PAGE 5 OF 256
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`

`
`Build. Invest. Grow.
`
`
`
`
`
`
`5. Maintain a decentralized operating model to ensure that decisions are made close to the customer.
`
` When I visit our teams around the world, I am often reminded that healthcare is truly a local business. Most pharmaceutical
`products, OTC medicines, and medical devices are sold with local brand names. Product regulation and physician
`preference vary significantly country-by-country, generating opportunities for specific local products.
`
`
`
` I believe one of Valeant’s most important competitive advantages is our decentralized operating model. Each business
`unit around the world is led by a General Manager (GM) who has direct-line responsibility for sales, marketing, business
`development, manufacturing, R&D, human resources, IT, and legal. Finance, compliance, regulatory affairs, and
`pharmacovigilance report centrally to ensure strict controls.
`
`
`
`
`
` Our sales and marketing models are designed to specifically address the requirements of each market’s unique healthcare
`delivery system. We also tailor our promotional activities on a country-by-country basis depending upon local consumer
`and physician preferences. In every direct market we operate in, our GM and his or her team are perceived as leading a
`local company with the quality standards of an international company.
`
`
`
`
`
`
`
`
`
`
`
`6. Focus our promotional spending on customer-facing activities.
`
` Pharmaceuticals, medical devices, and OTC medicines are highly regulated not only in North America, but around
`the world. Our communications to doctors and patients are tightly controlled. In this highly regulated environment,
`we believe the key to driving organic growth is getting as much time with as many doctors as we can to reinforce the
`messages we are allowed to deliver. We tend to have larger sales forces than most of our competitors, which allows us to
`spend more time with doctors promoting more of our products. Almost 70% of Valeant’s operating expense is dedicated
`to our sales forces who serve as the face of the company every day in every market.
`
`7. Measure all of our operating units on organic growth and cash flow generation.
`
` Valeant has been an active acquirer over the last six years. Deals tend to get headlines and have led some investors to
`assume our senior people spend most of our time on business development. I can assure you that most of my time, and
`the time of my team, is focused on day-to-day operations and driving the organic growth of our business. Each of our
`operating units is measured on achieving organic growth objectives and delivering cash flow targets. Typically, every week
`our GMs around the world are on a call with Howard Schiller, our Chief Financial Officer, and me to discuss the revenue
`trends by market versus target. Given our highly diversified portfolio, every product in every market matters; so these
`calls create both accountability and a motivation to deliver results. Recognizing and delivering strong organic growth
`is critical to our long-term success and, unlike any other company in the industry, we provide this metric publicly on a
`quarterly basis to provide accountability and transparency.
`
`
`
`8. Require Internal Rates of Return (IRR) significantly above our cost of capital coupled with short-term cash paybacks
`for all of our deals.
` A common business belief is that any acquisition or other investment decision that earns a return above a company’s cost of
`capital is a good deal. We have adopted a different standard for our company. We strive to achieve an IRR of at least 20%
`and a maximum cash payback of six years on the deals we do. In addition, we also include restructuring and integration
`costs as incremental purchase price in our deal models. The vast majority of our transactions meet these criteria.
`
` We look at all types of assets with respect to delivering shareholder value. Some of our competitors openly state that they
`are not interested in any product that does not have long-term growth prospects. We consider a broad array of investments,
`including assets with relatively short lives that can provide disproportionately high returns for our shareholders. We track
`every deal against the original deal model that was used to validate the deal decision. Each quarter, updated numbers are
`shared with our board of directors on a transaction by transaction basis. While our track record is not perfect, most of our
`deals are performing well above our original projections and, in aggregate, we are well ahead.
`
`
`
`
`
`
`
`4
`
`PAGE 6 OF 256
`
`

`
`Valeant Annual Report 2013
`
`9. Directly link senior management compensation to long-term shareholder returns.
`When I joined Valeant just over sh: years ago, our compensation committee designed a new compensation model
`for me and the other senior leaders of the company. Today, we continue to use this system for the top 70 people in
`the organization. Performance share grants are the most important component of the plan. Each employee receives a
`multiyear (from three to six years) performance share grant that will only vest if the company delivers a compound annual
`Total Shareholder Return (TSR) of at least 10% over the time period. To earn the full grant, our TSR has to compound
`at 30% per year over the time period. For the most part, our stock-based compensation plan materially differs from most
`of our competitors, which offer annual stock options and stock grants. As a result our senior team is primarily focused
`on multiyear performance, not just making a quarter or trying to earn their annual bonuses.
`
`10. Ensure tight controls and rigorous compliance standards while avoiding overspending.
`The board and management recognize that given our strategy and decentralized operating model, ensuring tight operational
`and financial controls is critical. Howard has direct-line responsibility for every finance employee in the company. He,
`his team, and our Audit and Risk Committee do a superb job of overseeing accounting and reporting practices. Most
`important, we have excellent financial staff throughout the company. Similarly with respect to compliance, regulatory
`affairs, and pharmacovigilance, we have strong leaders and tight practices. However, what really makes it all work, is the
`high-quality people with strong character and ethics that work throughout the company.
`
`In the pages that follow you can review our strong financial performance in 2013. I am pleased to report we are also off to
`an excellent start in 2014. In addition, I asked our independent directors and nominees, as representatives of all of you, to
`share in their own words, their perspective on Valeant’s strategy and operating philosophy. I would like to thank all of our
`employees for their hard work and commitment; our customers, prescribers and patients who use our products; our board
`for their hard work and wise counsel; and finally, all of you for whom we get up every day to work — our shareholders.
`
`With best regards,
`
`<}.xA1{4‘~
`
`]. MICHAEL PEARSON
`Chairman and Chief Executive Officer
`
`PAGE 7 OF 256
`
`

`
`build
`BUILD
`
`PAGE 8 OF 256
`
`PAGE 8 OF 256
`
`

`
`\’.ile.int .-\nnu.il Report 1013
`
`2013 ACQUISITIONS
`
`'
`
`‘
`
`.
`
`Company/Product
`
`Therapeutic Area Region
`
`OTC
`1, Natur Produkt International
`Rx
`2. Targretin“
`Rx/OTC
`3, Ooagi Medical Products
`Rx
`4, Croma
`OTC
`5, LekAm
`Rx
`6. Euvipharm Pharmaceutical
`7, Bausch + Lomb Holdings Inc, Rx/OTC/Device
`8, Ekomir
`OTC
`9, Probioiec Ltd
`Rx/OTC
`
`10. Medico Uno
`11 Solta Medical Inc,
`(Closed 201-1)
`
`OTC/Rx
`Device
`
`Europe
`U S
`U S.
`Europe
`Europe
`SE Asia
`U S,
`Europe
`SE Asia
`
`Europe
`U 8,
`
`,.,,.
`
`E 1
`
`-",.
`*1
`i
`‘~
`
`
`
`THEO NIELAS-KYRIAZI
`
`ROBERT INGRAM
`
`Ro BE RT Pow E R
`
`Rigorous decision making ai1d execution
`has been the secret sauce in Valeant's
`
`I have had the privilege to serve V-aleant
`shareholders since 2003 and the
`
`Our responsibility as a board is to look
`after the interests of the shareholders.
`
`In doing so, and in support of Valeantis
`strategy and culture, we are very active
`and spend a significant amount of time
`at the board and committee level in
`
`understanding the business and interacting
`with management. The majority of
`our board education is focused on
`
`further understanding the business. This
`knowledge. combined with the board
`members‘ mix of skills and competencies.
`allows us to assess benefits and risks on
`
`behalf of shareholders and support that
`which makes Valeant successful — timely.
`fact—based decision making supporting the
`goal of increasing shareholder value.
`
`success. Nowhere is this more apparent
`than in our l\I8c’A execution — the
`thoroughness with which management
`identifies opportunities. negotiates and
`closes deals, and then the speed at which
`a newly acquired business is integrated
`into Valeant. The board is totally aligned
`with management in understanding
`that this offers Valeaiit a competitive
`advantage. It‘s become part