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`Allergan's (AGN) CEO Brent Saunders on Q4 2015 Results -
`Earnings Call Transcript
`Feb. 22, 2016 3:21 PM ET2 comments
`by: SA Transcripts
`
`Q4: 02-12-16 Earnings Summary
`
`10-K
`
`Analysis
`
`News
`
`EPS of $3.41 beats by $0.07 | Revenue of $4.2B (+ 73.6% Y/Y) beats by $10M
`
`Allergan plc (NYSE:AGN)
`
`Q4 2015 Earnings Conference Call
`
`February 22, 2016, 08:30 ET
`
`Executives
`
`Lisa DeFrancesco - VP, IR
`
`Brent Saunders - CEO & President
`
`David Nicholson - EVP & President of Global Brands R&D
`
`Tessa Hilado - CFO
`
`Bob Stewart - President, Global Generics & Commercial Operations
`
`Bill Meury - President, Branded Pharma
`
`Paul Bisaro - Executive Chairman
`
`Bob Bailey - Chief Legal Officer
`
`Analysts
`
`David Risinger - Morgan Stanley
`
`Ken Cacciatore - Cowen and Company
`
`https://seekingalpha.com/article/3917136-allergans-agn-ceo-brent-saunders-q4-2015-results-earnings-call-transcript?part=single
`
`MYLAN - EXHIBIT 1115
`Mylan Pharmaceuticals Inc. et al. v. Allergan, Inc.
`IPR2016-01127, -01128, -01129, -01130, -01131, & -01132
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`Randall Stanicky - RBC Capital Markets
`
`Jami Rubin - Goldman Sachs
`
`Chris Schott - JPMorgan
`
`Liav Abraham - Citigroup
`
`Gregg Gilbert - Deutsche Bank
`
`Jason Gerberry - Leerink Partners
`
`Shibani Malhotra - Nomura Securities
`
`Operator
`
`Good morning. My name is Holly and I'll be your conference operator today. At this time,
`I'd like to welcome everyone to the Allergan Fourth Quarter 2015 Earnings Conference
`Call. [Operator Instructions]. I'd now like to turn today's conference over to Lisa
`DeFrancesco, Vice President of Investor Relations. Please go ahead.
`
`Lisa DeFrancesco
`
`Thank you and good morning, everyone. I'd like to welcome you to the Allergan fourth
`quarter and full year 2015 earnings conference call. Earlier this morning, we issued a
`press release reporting Allergan earnings from continuing operations for the fourth quarter
`and full year, ended December 31, 2015. The press release and our slide deck, which
`we're presenting this morning, are available on our corporate website at
`www.Allergan.com.
`
`We're conducting a live webcast of this call, a replay of which will be available on our
`website after its conclusion. Please note that today's call is copyrighted material of
`Allergan and cannot be rebroadcast without the Company's express written consent.
`
`Turning to slide 2, I'd also like to remind you that during the course of this call,
`management will make projections or other forward-looking remarks regarding future
`events or the future financial performance of the Company. It's important to note that such
`statements and events are forward-looking statements and reflect our current perspective
`of the business trends and information, as of today's date. Actual results may differ
`materially from current expectations and projections, depending on a number of factors
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`affecting the Allergan business. These factors are detailed in our periodic public filings
`with the Securities and Exchange Commission. Allergan disclaims any intent or obligation
`to update these forward-looking statements, except as expressly required by law.
`
`Turning to slide 3 and our agenda this morning, with us on today's call are Brent
`Saunders, our CEO and President, who will provide an overview of our fourth quarter and
`full-year business highlights. David Nicholson, our Executive Vice President and President
`of Global Brands R&D, who will provide highlights from our pipeline achievements in 2015
`and upcoming milestones. And Tessa Hilado, our Chief Financial Officer will then discuss
`the Allergan fourth quarter continuing operations results in more detail.
`
`Also on the call and available during the Q&A are Paul Bisaro, our Executive Chairman;
`Bob Stuart, President of Global Generics and Commercial Operations; Bill Meury,
`President of Branded Pharma; Paul Navarre, President of International Brands; Philippe
`Schaison, President of Allergan Medical and Bob Bailey, our Chief Legal Officer. With
`that, I'll turn the call over to Brent.
`
`Brent Saunders
`
`Thank you, Lisa and good morning, everyone. It great to be with you to review our results
`for the fourth quarter and full year of 2015. It has been a very exciting and successful
`2015 for Allergan, as we continue to transform our business into a Growth Pharma leader.
`
`Allergan's fourth quarter and full-year performance reflects a continued laser focus on
`executing on the four pillars of our growth strategy. First, operational excellence. We
`powered another quarter of exceptional financial performance, while successfully
`integrating Forest and Allergan. With the planned divestiture of our generics business to
`Teva, we're accelerating our transformation into a Growth Pharma leader.
`
`Second, our focus on therapeutic area leadership has led to strong growing branded
`franchises with new product launches serving as a growth accelerator. Third, our
`productive and innovative R&D engine continues to produce at a record pace.
`
`In 2015, we delivered four branded NME FDA approvals. That is nearly 10% of all such
`approvals by the Agency in 2015. With more than 70 mid to late stage programs in
`development, our branded pipeline is poised to continue to delivering innovative products
`for patients across our key therapeutic areas.
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`Our best-in-class generics R&D engine also finished the year strong, with 46 new ANDAs
`filed, including 22 first-to-file applications. And we're continuing to execute on strategic
`business development opportunities. Our Open Science model has helped us build or
`expand number one or two positions in many of our key therapeutic areas and has
`delivered significant R&D assets to build a sustainable pipeline. With our proposed
`combination with Pfizer, we're positioned to create the leading global biopharmaceutical
`company in the world.
`
`Turning to slide 6, this year was highly transformative for Allergan, with the announced
`divestiture of our Global Generics business to Teva. We continue to make great progress
`on our planning efforts and Teva continues to make progress with regulatory authorities.
`We're working towards satisfying all conditions in order to close by the end of the first
`quarter of 2016; however it is possible that closing could slip beyond the end of the first
`quarter. I'm very proud of the tremendous focus and execution of our Global Generics
`team and we look forward to the combination of our two great generics businesses.
`
`Slide 7. Now let me turn to the continuing operations business performance in the fourth
`quarter. Our fourth quarter net revenue grew 74% on a year-over-year basis to $4.2
`billion, as a result of the Allergan acquisition and strong global growth within all of our key
`therapeutic categories.
`
`Strong sales in key products across our businesses drove a 33% increase in non-GAAP
`earnings per share to $3.41. Meanwhile, non-GAAP adjusted EBITDA rose to $2 billion,
`an increase of 115% versus prior year and cash flow from operations was $1.8 billion,
`excluding R&D asset acquisitions, restructuring and integration payments. These results
`illustrate the strong long term growth profile of Allergan and our Growth Pharma model.
`
`Our team continues to drive strong performance. Five of our seven franchises have now
`reached the $1 billion mark. We maintained or expanded our leadership position in all of
`our key therapeutic categories and when you exclude the impact of foreign exchange and
`Namenda IR, all of our therapeutic area businesses delivered double digit growth.
`
`Slide 9. Our branded revenues grew double digits for the year and growth was broad-
`based across our key therapeutic areas. Excluding the impact of foreign exchange, three
`quarters of our top global products grew at double-digit rates. Nine of our top global
`products grew more than 15%. Leading growth drivers included Restasis, plus 19; Fillers,
`plus 20; Botox, plus 14; Linzess plus 55; Viibryd, plus 26 and Lo Loestrin, plus 26.
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`We continue to solidify our leadership in key categories, with strong execution on new
`launches. Our recent launch of Viberzi for the treatment of IBSD is off to a strong and
`early start and is in line with our previous launch of Linzess in IBSC. In anti-infectives, our
`launches of Avycaz and Dalvance had delivered strong results throughout the year and
`are out-pacing competition with an impressive launch trajectory.
`
`The launch of Liletta, our IUD earlier this year, has been very successful, showing
`continued growth momentum in unit sales. Voluma, a key driver within our Fillers line in
`the U.S., continues to drive strong growth for our Allergan medical business. Looking
`ahead, we will continue to drive growth through new approvals and upcoming launches,
`including Vraylar in the first quarter of 2016.
`
`Touching on our international business, our teams delivered continued double-digit
`revenue growth from key products including Botox therapeutic, Ozurdex and our
`glaucoma business. Our international eye care team has led an exceptional rollout of
`Ozurdex in new countries with new indications, driving a 35% growth rate for that product
`year-over-year. In addition, our international team launched several key products in 2015,
`including Juvederm in China and we gained rights to Constella in more than 40 markets,
`which adds another growth driver for this business in 2016.
`
`Turning to slide 11, as noted earlier, we have made tremendous R&D progress this year.
`Our Open Science model seeks to deliver innovation regardless of its source. We have
`utilized this model to acquire or in-license innovative products that expand our therapeutic
`area of leadership and 2015 was a year of impressive productivity on this front.
`
`In eye care, we continue to add shots on goal and development opportunities for dry eye
`disease and glaucoma, with the acquisitions of Oculeve, Mimetogen and Aquesys. In
`aesthetics, we completed the acquisition of Kythera, adding Kybella, a non-surgical
`treatment for submental fullness or double chin. We also acquired Northwood Medical
`Innovation and its less invasive surgery-sparing product, earFold, as well as Anterios and
`its proprietary NDS platform delivery technology that could enable local targeted delivery
`of neurotoxins to the skin without the need for injections.
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`In CNS, we completed the acquisition of Naurex, which added Rapastinel, a breakthrough
`designated treatment in the development for depression and other potential breakthrough
`treatments in depression. We also in-licensed the right to Merck's development stage oral
`CGRP programs for the potential treatment of migraines, which we expect to enter Phase
`III later this year.
`
`And late in the fourth quarter we announced our collaboration with Rugen Therapeutics, to
`support the discovery and development of novel therapies for autism spectrum disorder
`and obsessive compulsive disorders. And in GI, we acquired commercial rights to
`Constella in key international markets. This adds an important flagship product for our
`international GI commercial team and positions us strongly for the potential introduction of
`Eluxadoline in international markets later this year.
`
`Turning to slide 12, a key driver of our future growth is new launches in 2016 and beyond.
`Both in the U.S. and internationally, we're poised to deliver sustainable growth through a
`number of new launches across five different therapeutic categories in 2016 and early
`2017. We will add important new products in the U.S., including Vraylar, multi-dose
`preservative-free Restasis, a new Botox indication, Aczone 7.5, XEN Shunt for glaucoma,
`Oculeve for dry eye and new Fillers including Volbella and Volift.
`
`Internationally, we will drive growth through new products including the XEN Shunt for
`glaucoma; Optive gel drops in the EU; Kybella, also known as Belkyra in Canada and
`Australia and Volite in the EU later in 2017. With more than 70 projects in mid to late stage
`development, we have multiple programs in each of our leading therapeutic areas, to help
`us to sustain strong future growth.
`
`With that I'll turn the call over to David Nicholson, who will provide a more detailed pipeline
`update. David?
`
`David Nicholson
`
`Thanks, Brent. Good morning, everyone. On slide 14, as you see and as mentioned by
`Brent, Allergan's R&D team has had a highly productive year, with more than 100 pharma
`and regulatory approvals worldwide. These strong results included submissions of our
`multi-dose preservative-free formulation of Restasis and Nebivolol/Valtarsan fixed dose
`combination in the United States.
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`We have 25 major drug approvals globally, including Liletta, Viberzi, Kybella and Vraylar
`in the United States and Dalvance in the EU. We had 12 major device approvals, including
`Volite in the EU and Juvederm in China. 45 NMEs were approved in the U.S.A last year.
`Allergan compounds, Vraylar, Viberzi, Kybella and Avycaz accounted for nearly 10% of
`these approvals.
`
`This was a truly remarkable year for Allergan's R&D team and I applaud them for their
`hard work and tremendous success. I do want to take a moment to recognize my
`colleague, Hafrun Fridriksdottir, who heads up the generics R&D. Their team's
`achievements continue to set the industry standard, with 46 new ANDAs filed, which
`included 22 first-to-file applications. Outside the U.S., they filed more than 1000 marketing
`applications to key products in key markets around the world.
`
`On slide 15, I look forward into 2016. Allergan's R&D team is poised for another
`productive year. We expect more than a dozen approvals and regulatory submissions.
`
`I'm not going to talk about everything on this slide, but I do want to go through a few key
`highlights. In medical aesthetics, we expect U.S. approval of Aczone 7.5% in the first half
`of the year and Volbella for lips in the second half. We anticipate international approvals
`for Botox in crow's feet lines and Voluma XC in Japan. We're looking for the approval of
`Kybella or Belkyra, as it is known outside of the U.S. in the EU, in the second half of 2016.
`New Drug Applications for Oxymetazoline in rosacea and Botox for forehead lines are
`expected to be filed with the U.S. FDA in the first and second half of this year respectively.
`
`Moving on to eye care, we're expecting U.S. approvals of a multi-dose preservative-free
`formulation of Restasis in the second half of 2016. We also expect to file 510k
`submissions for XEN 45, our ocular stent to treat glaucoma and the Oculeve Tearbud,
`which is an intranasal neurostimulatory device for dry eye in the second half of 2016.
`We're anticipating the Phase III enrollment for that Bimatoprost SR will be completed by
`the early 2017 timeframe.
`
`In gastroenterology, we expect the second half 2016 EU approval for Eluxadoline for the
`treatment of IBSD. We're also preparing an SNDA submission for low-dose Linzess 72
`micrograms for the treatment of chronic idiopathic constipation for the first half of 2016.
`And we're looking forward to seeing the Phase II-b data for Relamorelin, our
`investigational treatment for diabetic gastroparesis in the second half of 2016, which we're
`working on with Rhythm Health.
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`In women's health, we expect to have top line results from the first Phase III study of
`Esmya in the first half of 2016. In CNS, we expect to submit an NDA for Semprana in the
`U.S. This is an investigational treatment for acute migraine in the second half of the year.
`
`We expect to begin new trials for some of our mid stage compounds. This includes
`initiation of a Phase III study for Cariprazine in bipolar depression. Importantly, Phase III
`studies for Rapastinel, an investigational treatment for major depressive disorder and
`Ubrogepant, a potential treatment for acute migraines, are expected to begin in the
`second half of 2016. Note that Repastinel obtained breakthrough designation from the
`FDA.
`
`Finally, in anti-infectives, urology and cardiovascular, we anticipate receiving FDA
`approval for Nebivolol/Valtarsan fixed dose combination treatment for hypertension in the
`first half of 2016. We have submitted and the FDA has accepted, our SNDA submission
`for chronic intra-abdominal infections for Avycaz and we're planning our further SNDA
`submission utilizing Phase III data for complicated urinary tract infections in the second
`half of 2016.
`
`As I have outlined, we did have an extraordinary 2015 and we're expecting an equally
`exciting 2016 for our brands R&D pipeline. I really thank our more than 2,000 Allergan
`employees R&D colleagues around the world for their tremendous work and dedication in
`achieving these results. Now, I'd like to turn the call over to Tessa to review our fourth
`quarter and full-year financial results. Tessa?
`
`Tessa Hilado
`
`Thank you, David and good morning, everyone. Slide 17 provides overall results for the
`fourth quarter and full year 2015. Please note this discussion of results reflect continuing
`operations only, which we began reporting since the third quarter of 2015, following the
`announcement of the divestiture of our Global Generics business to Teva.
`
`In the fourth quarter, we continued to deliver exceptional year-over-year performance. On
`a non-GAAP basis, consolidated net revenue for the fourth quarter was $4.2 billion, an
`increase of 74% versus fourth quarter 2014. This increase was primarily driven by strong
`performance in our Botox, eye care, medical aesthetics and GI businesses, offset by the
`loss of exclusivity for Namenda IR.
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`On a non-GAAP gross margin basis for the fourth quarter, it was 78.1%, an increase of
`12.1 percentage points versus fourth quarter 2014, which reflects the addition of the
`Allergan business. Non-GAAP R&D investment for the quarter was $338 million compared
`to $203 million in the prior-year period. Non-GAAP SG&A, as a percentage of revenue
`was 24.9%, an increase of 1.4 percentage points versus the prior-year quarter, as a result
`of the launch of Kybella, sales force expansion within our facial aesthetics franchise in the
`U.S. and transactional FX impact of approximately $30 million.
`
`Adjusted EBITDA for the quarter was $1.98 billion, an increase of 115% versus the prior
`year, driven by strong revenues and higher gross margins across our business segments.
`Non-GAAP earnings per diluted share for the quarter increased 33% to $3.41 per share
`compared to $2.57 per diluted share in the fourth quarter of 2014.
`
`Our non-GAAP tax rate was 8.2% in the quarter. This rate was driven primarily by the
`entire interest expense being included in our continuing operations earnings. Cash flow
`from operations for the fourth quarter was $1.6 billion, impacted by recent R&D
`acquisitions Excluding the impact of restructuring and one-time items, cash flows were
`strong at $1.8 billion.
`
`Turning now to our U.S. brand results on slide 18, the business delivered strong
`performance year-over-year. U.S. brands revenue was $2.5 billion for the quarter, up 38%
`versus the prior-year period, driven by the addition of the Allergan businesses and strong
`growth across key products in the GI and women's health franchises, offset by a decline in
`Namenda IR with a loss of exclusivity for that product.
`
`Adjusted gross margin within U.S. brands continued to be strong, with margins of
`approximately 87.8%, up 7.1 percentage points versus the prior-year quarter. SG&A as a
`percentage of revenue decreased to 18.2% versus 21.2% in the year-ago quarter, driven
`by our continued ability to maximize our commercial infrastructure and continued synergy
`capture from recent acquisitions.
`
`Turning to slide 19 and our U.S. medical business, fourth quarter revenues were $490
`million, an increase of 7% versus the prior quarter. There are no prior-year comparisons
`for U.S. medical, as it was acquired as part of the Allergan acquisition in March of 2015.
`On a pro forma basis, the U.S. medical business grew 9.3%, reflecting strong growth in
`Botox, Fillers and breast implants.
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`Our breast implant business had its best quarter to date, driven by the launch of Inspira
`and market share expansion as we were able to capitalize on a competitor being out of
`the marketplace. Fourth quarter gross margins continued to be strong at 93.4% and SG&A
`as a percentage of revenue increased to 23.3%, due to additional Kybella promotional
`spend and sales force expansion related to the launch of that product.
`
`Turning to slide 20 and our international brand results, fourth quarter revenues were $691
`million versus $79 million in the prior-year period, largely due to the Allergan acquisition.
`Excluding foreign exchange on a pro forma basis, international revenues in the fourth
`quarter grew 12%, driven by continued strong growth of Ozurdex, Botox Cosmetic and
`Fillers. Gross margins were 83.7% in the fourth quarter. Segment SG&A increased 1.6
`percentage points to 31.4% versus third quarter 2015, due largely to new product
`expansion for Botox and Fillers.
`
`Turning to our ANDA business on slide 21, revenues decreased 5% to $547 million versus
`$576 million in the prior quarter, driven by lower retail business, primarily from the Target
`merger with CVS, which had some impact in the fourth quarter. The impact in 2016
`revenue will be more significant, in the range of $500 million; however, we expect margins
`to remain stable. Results in all periods include third-party revenues and related expenses
`of generic products manufactured by the Company and distributed through ANDA.
`
`Slide 22 details our debt capitalization. We ended the fourth quarter of 2015 with total debt
`of approximately $42.7 billion and equity of $76.6 billion related to the Allergan acquisition
`and previous financing. At year end, our leverage ratio was 4.09 times debt to pro forma
`adjusted EBITDA, versus 3.98 times in the prior quarter. Since year end, we have repaid
`approximately $500 million of term loan debt and $200 million toward our revolving credit
`facility.
`
`We remain committed to maintaining our investment grade ratings. Following the close of
`the divestiture of our generics business to Teva, we anticipate making a debt repayment
`toward the remaining term loan balance of approximately $8 billion. The remaining
`proceeds will be reflected on the balance sheet until the Pfizer close.
`
`Let me close with a few comments on our preliminary view of 2016 financials. Please note
`this guidance will remain in effect until prior to the filing of the EU prospectus to be filed by
`Allergan, in connection with the Pfizer transaction, subsequent to the U.S. filing. We
`expect full-year net revenues to be approximately $17 billion, including branded business
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`revenues of approximately $15 billion. Our revenue forecast reflects foreign currency
`headwinds of approximately $200 million and lower year-over-year revenue expectations
`for ANDA of approximately $500 million, due to the merger between Target and CVS.
`
`In our branded business, excluding Namenda IR and divestitures, we continue to expect
`double-digit revenue growth, driven by strong sales of key products and new launches in
`2016. Note that revenues will be back-half weighted as a result of contribution from
`launches being greater in the second half and typical pharma seasonality. As a result, the
`first quarter of 2016 will be lower than the fourth quarter of 2015 and will be the lowest
`quarter of the year, with each quarter subsequently increasing. Our gross margin should
`remain strong, with no material change from current levels.
`
`Because of the initiation of the pre-integration planning process with Pfizer, we will no
`longer proceed with our plan for our restructuring following the divestiture of the generics
`business. As a result, SG&A as a percentage of non-GAAP revenue is now anticipated to
`trend above our previous expectations of 21% to 24%, to approximately 25% of total net
`revenue. SG&A as a percentage of revenue will be higher in the first quarter and then
`trend downwards throughout the year as we support a number of important launches this
`year, including Kybella, Viberzi and Vraylar.
`
`R&D spend is expected to be approximately $1.5 billion, reflecting increased investment
`from 2015. The increase is almost entirely project-related as a result of the many
`important late-stage programs advancing our pipeline. Our tax rate should begin to trend
`toward normalized levels in the range of 14%, following the close of Teva.
`
`And now I will turn the call back over to Brent for an update on the Pfizer transaction.
`Brent?
`
`Brent Saunders
`
`Thank you, Tessa. Before we start the Q&A, I wanted to provide a brief update on our
`proposed combination with Pfizer. In late November, we announced with Pfizer the
`proposed combination of our businesses, bringing together two successful pharmaceutical
`companies to create a premier global biopharmaceutical leader, with the resources and
`capabilities to bring more medicines to more people around the world.
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`Together, we will leverage the best of both organizations, matching Pfizer's strong
`infrastructure, broad portfolio and global reach, with Allergan's operating agility, growth
`profile and new therapeutic areas. We will have breadth and depth in key therapeutic
`areas, strengthened by an expanded global footprint, allowing Allergan brands to reach
`more patients in more markets more quickly, including two of the world's largest
`pharmaceutical markets in Japan and China.
`
`We will have an innovative R&D pipeline, consisting of projects sourced from strong
`internal science and Open Science to fuel our future growth. We're two months into the
`planning for this combination and I'm already pleased to see early progress on our
`integration planning efforts, such as the announcement of our proposed executive team.
`
`Both teams are hard at work planning for the integration for what will be the premier
`biopharmaceutical Company in the world. We continue to expect the combination with
`Pfizer to close in the second half of 2016. With that, I'll turn it back to Lisa and we'll open it
`up for Q&A.
`
`Lisa DeFrancesco
`
`Operator, I think we can get started on the Q&A.
`
`Question-and-Answer Session
`
`Operator
`
`[Operator Instructions]. Your first question comes from the line of David Risinger with
`Morgan Stanley.
`
`David Risinger
`
`The first is, Brent, could you just talk at a high level about the outlook for the global
`aesthetics business, in the face of potentially slowing economies ex-U.S.? And then,
`maybe within that answer, you could also comment on the Botox revenue outlook for 2016
`and whether you expect the aesthetics portion of the Botox franchise to grow faster or
`slower than the medical indications? And then just finally, a quick minor question on
`ANDA. You mentioned that the Target/CVS merger impacted ANDA. Could you just
`provide a few more comments on that? Thank you.
`
`Brent Saunders
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`So I think turning to the global aesthetics business, I think we feel good about the
`business. I think when you look at history and even go to the great recession, the
`durability of that business I think was tested and it was proven that even in slower
`economic times, people still look to elective procedures, particularly non-invasive
`procedures over surgery. So we tend to do well and remain strong, even in the great
`recession. So we're very optimistic despite any slowing economic factors around the world
`for the aesthetic business.
`
`With respect to Botox, perhaps Tessa can jump in, but we believe both the aesthetic
`application and the therapeutic indications are going to drive strong growth and not only
`from expanding markets in the U.S. and abroad, but also expanding indications across
`both of the uses. And we continue to, as David outlined, we continue to look for new
`indications. For example, crow's feet outside the U.S. and we continue to study Botox in
`areas like depression and so we think Botox still has a decade or more of strong growth
`ahead. Tessa do you want to touch on those numbers?
`
`Tessa Hilado
`
`Yes, for both medical aesthetics and therapeutic, both are actually growing at a very
`healthy pace and not one of them is outpacing the other. Obviously, slightly higher growth
`for Botox cosmetic internationally.
`
`Brent Saunders
`
`And with respect to ANDA, I don't know if Bob Stewart wants to jump in. I think when CVS
`bought the Target pharmacies, we fully anticipated that CVS, the main reason they bought
`the Target pharmacies, outside of having their brand inside of Target or their capabilities
`inside of Target, was to save on some of the leverage, some of their distribution
`capabilities. So we knew that was coming.
`
`It was a very low margin business for us anyway and so it doesn't impact in any
`substantial way our profitability, but it does impact revenue. And so you're just going to
`see that full-year effect flow through in 2016. Bob, any other comments on that?
`
`Bob Stewart
`
`https://seekingalpha.com/article/3917136-allergans-agn-ceo-brent-saunders-q4-2015-results-earnings-call-transcript?part=single
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`Page 14 of 26
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`I think you said it there, Brent. Really, what we were doing within ANDA was offering
`different services to what we considered our key customers. Target was one of those and
`what we offered them was a virtual warehouse capability that basically moved the product
`through ANDA, but at a very, very low margin. And so what you saw here is the effect of
`that business moving back to CVS and there's a top line impact, but in terms of bottom
`line impact, it's negligible.
`
`Operator
`
`Your next question comes from Ken Cacciatore with Cowen and Company.
`
`Ken Cacciatore
`
`Just a question, Brent. Is it possible you could provide us some nuance on the regulatory
`process, both for Teva and Pfizer, that we might not appreciate, in terms of either how well
`it's going or maybe some of the difficulties?
`
`And then also not sure if you would be willing to do this, but could you give us a
`perspective on the discount that we're observing between your price and Pfizer? Clearly a
`lot of fear. Is there anything you can just help contextualize that could provide some
`perspective around that? Thank you.
`
`Brent Saunders
`
`Sure, Ken. I think with respect to the Teva transaction, I think the team has been working
`incredibly hard. It's a very complex regulatory filing around the world and requires every
`individual product and overlapping product to be analyzed by the regulators.
`
`So I think given the sheer volume of products there, we should be a little understanding of
`the time it takes. We still, as I said earlier, believe that it should close, close to the end of
`this quarter or slip a little bit into the second quarter. But nothing really surprising or
`concerning on our end.
`
`I think it's just a matter of managing complexity and the timeline. And I have to give our
`legal team, but also the team at Teva, a lot of kudos. They are managing through
`complexity with amazing grace, so I'd give them a lot of kudos for that and I wouldn't
`stress too much about that. It's just running its normal but complicated course.
`
`https://see