MYLAN - EXHIBIT 1125
`Mylan Pharmaceuticals Inc. et al. v. Allergan, Inc.
` IPR2016-01127, -01128, -01129, -01130, -01131, & -01132
`
`PROTECTIVE ORDER MATERIAL
`
`

`

`\
`II
`I
`fl
`II Ia I’2 .3
`J
`w. my, V.
`45 "9
`S“
`sv
`$3 if? 8. §“ $11? S‘\
`\
`~
`~‘
`\ \NK‘NQ‘
`1111
`,7
`III]
`”/1 .y» will,/,
`\\_
`\\_§
`\
`\~
`~
`\\\‘\\\
`\
`w xx Q:
`s “\NWK t \w uek‘ S\:\w$\‘\\\\§t\w;\$nsa§\\$
`,
`4:/
`/
`fi
`’v;
`,fl,
`[a
`,/
`III/IA [1”I,
`V4,,r41” /"I!
`v,”z
`7/174;”
`”II/4
`III/IA /0 VIII!
`7aa5
`
`I
`’I
`J
`a?
`~‘
`M \s
`[III]
`A
`’II/m (III
`1.1I,”
`\\\\\\ ¢\\\\\
`fix“ % “bx w
`I
`Ill/1./
`v’I
`/
`24
`//
`’IIIIA
`.5725,,4,? 9,77%
`
`
`Iz
`
`5%
`
`I ,
`
`I'I/Ill0/ I/I
`
`VII/IA
`
`.4
`
`III/4
`
`r (
`
`VII/IA
`
`,
`
`I
`
`We believe this quarter’s results were good, but not great. Botox sales of $212.5 million were
`good, beating our $210 million estimate, as were Alphagan sales of $64.3 million, beating our
`$55 million forecast. Certainly, the strong Restasis launch is impressive. The company’s
`purchase of the Restasis royalty stream from Novartis earlier this year for $110 million will
`likely benefit margins for the remainder of 2005 and 2006. We have thus raised our
`revenue and EPS estimates to reflect the company’s new targets for the third quarter of 2005
`and the full year.
`
`So why do we still remain somewhat concerned about the company’s growth? Well, we
`believe many of the company’s growth prospects still rest with Botox (botulinum toxin type
`A), and while it is still growing by 20% annually, we believe competitive threats could emerge
`in 2006 or 2007 from lpsen/Medicis Dysport (botulinum toxin type A).
`In addition, we believe
`it is important that the company receive a positive nod from the FDA on its Alphagan Z (new
`and improved formulation of Alphagan P). While Alphagan P has been a consistent source
`of upside for the company over the past several years, we believe it could become more
`difficult without another version of the product approved and launched shortly. We think
`Alcon and Bausch & Lomb are slowly making headway with their generic versions of
`Alphagan. Also, Alcon has its own version of Alphagan P filed at the FDA, which over the
`next year could receive approval. Alcon filed a 505b(2) application on Alphagan P in 2004.
`While we are encouraged by the strong ramp being experienced by Restasis, Botox makes
`up 37% of pharmaceutical sales, with Alphagan P making up another 11% of pharma sales.
`More competition arising on almost half of the company’s pharma sales within the next two
`years is the source of our concern.
`
`Still, we believe the company’s management has done an excellent job managing growth
`and investor expectations — over the past year, especially. We believe the company may be
`getting close to making a product or company acquisition. The company expressed an
`interest in the past in purchasing products that would complement Botox (i.e., dermal fillers).
`With the company finishing the quarter with $873 million of cash, and the stock approaching
`a new high for 2005, we believe the company has ample resources to make an acquisition in
`the near term.
`
`The company increased its full year 2005 forecast for total revenue to $2,175-$2,225 million
`(from $2,135-$2,235 million) and EPS of $3.20-$3.23 (from $3.15-$3.20). For 2005, the
`company expects gross margins of 82.5%-83.5%, SG&A/sales of 38%-39%, R&D/sales of
`17.5%, and a 29% tax rate.
`
`For 2005 and 2006, we increased our revenue forecast to $2,276.2 million (from $2,201
`million) and $2,474 million (from $2,460 million), respectively, and our EPS estimates to
`$3.23 (from $3.20) and $3.74 (from $3.72). For 2005 and 2006, we increased our Eye Care
`sales to $1,283 million (from $1,250 million) and $1,379 million (from $1,358 million) and
`Skin Care sales to $105 million (from $81 million) and $100 million (from $81 million).
`Beginning in the fourth quarter of 2005, we are taking contract sales out of our model
`(previously $35 million in 2005 and $26 million in 2006).
`
`Additionally, we have raised our net interest income forecast to $5.3 million (from net interest
`expense of $4 million) in 2005 and $5.6 million in 2006. The increase in revenue and interest
`income is partially offset by a higher SG&A margin forecast of 39.1% (from 37.7%) in 2005
`and 37.1% (from 36.9%) in 2006.
`
`CONFIDENTIAL
`
`PROTECTIVE ORDER MATERIAL
`
`AGN_RESO734286
`
`”affix/J fiéfiéfi¢fi fag.
`
`PROTECTIVE ORDER MATERIAL
`
`

`

`ESTIMATE REVISIONS
`2005
`2005
`2006
`
`AGN New Estimate AGN Old Estimate NB New Estimate NB Old Estimate NB New Estimate NB Old Estimate
`$800-$840
`$800-$840
`$838
`$835
`$995
`$995
`$235-$255
`$235-$255
`$260
`$260
`$240
`$240
`$255-$275
`$255-$275
`$255
`$275
`$290
`$315
`$165-$185
`$140-$160
`$185
`$166
`$231
`$185
`NA
`NA
`$1,283
`$1,250
`$1,379
`$1,358
`NA
`NA
`$105
`$81
`$100
`$81
`$2,175-$2,225
`$2,100-$2,200
`$2,225
`$2,166
`$2,474
`$2,434
`NA
`NA
`$51
`$35
`$0
`$26
`NA
`$2,135-$2,235
`$2,276
`$2,201
`$2,474
`$2,460
`$3.20-$3.23
`$3.15-$3.20
`$3.23
`$3.20
`$3.74
`$3.72
`82.5%-83.5%
`82%-83%
`83.7%
`83.3%
`82.9%
`82.9%
`38%-39%
`37%-38%
`39.1%
`37.7%
`37.1%
`36.9%
`17.5%
`17.5%
`17.7%
`17.7%
`17.4%
`17.0%
`133-134
`133-134
`132.3
`132.6
`132.2
`132.6
`29%
`29%
`29%
`29%
`30%
`30%
`
`($ millions)
`BotoX
`Alphagan P (Z approval needed
`Lumigan
`Restasis
`Eye care
`Skin care
`Total Pharma
`Contract sales
`Net sales
`EF’S
`Pharma Gross Margin
`SG&A
`R&D
`Share Count (millions)
`Tax Rate
`
`
`
`
`
`
`
`\m Q .“Q Q \\\Q “Q Q Q QQQQQQ Q
`Q“
`Q
`.Q“\_ Q
`Q
`Q
`QQ‘Q‘QQ w Q
`Q ““9
`QQQ QQ QQQQ QQ \\\\ \QQQ Q QQQ QQQQQQQQQQ Q Q
`\QQQQQ Q\\\\7¢§X\\Q \QQ\\Q~‘QTQ Q Q Q
`Q .Q\Q\QQ\\\QQ
`QQQ Q Q‘s QQQQ
`QQ‘ §§\\\\\ X\\*
`
`For the quarter, the company reported better than expected Restasis sales of $46.3 million,
`$16.3 million more than our estimate of $30 million. Strong Restasis sales were aided by a
`DTC campaign on cable television focusing on women over the age of 50. Prescriptions for
`Restasis have continued to grow over the past three months, with new and total prescriptions
`reaching new highs. During 2Q05, total prescriptions were up approximately 9% sequentially
`and 62% year over year.
`In addition, as of April 19, Allergan no longer pays Novartis
`royalties for worldwide sales. We expect continued growth for Restasis and have increased
`our sales forecast to $185 million (from $166 million) in 2005 and $231 million (from $185
`million) in 2006.
`
`RESTASIS TRX DATA
`
`TRX’S
`140,000 W
`
`120,000 W
`
`100,000 W
`
`Restasis
`YOY Growth
`77 250.0%
`
`
`,
`
`200.0%
`
`150.0%
`
`100.0%
`
`50.0%
`
`0.0%
`
`
`
`
`
`
`
`
`u Q9Q9Q9Q9Q9QW9Q9Q9Q 6H9696
`9“» 999990" 0° Q° 00° 3°“ x“ Q” Q?WQ
`
`
`
`W“
`
`PROTECTIVE ORDER MATERIAL
`
`AGN_RESO734287
`
`”affix/J fiéfiéfi¢fi fay
`
`PROTECTIVE ORDER MATERIAL
`
`

`

`RESTASIS MONTHLY TRX SHARE AND GROWTH
`Restasis
`YoY Growth
`NRx
`TRx
`TRx
`86.2% 190.6%
`81,006
`71.8% 150.4%
`81,795
`73.4% 127.9%
`88,931
`87.3% 121.4%
`96,599
`75.0%
`99.7%
`102,251
`122.1%
`128.8%
`107,291
`107.0%
`112.9%
`116,787
`65.5%
`87.6%
`114,439
`50.4%
`71.3%
`108,750
`46.0%
`62.0%
`127,459
`51.1%
`58.7%
`123,299
`58.7%
`64.7%
`128,879
`61.2%
`62.3%
`131,473
`
`
`
`J un-04
`J u|-04
`Aug-04
`Sep-04
`Oct-04
`Nov-04
`Dec-04
`Jan-05
`Feb-05
`Mar-05
`Apr-05
`May-05
`J un-05
`
`NRx
`36,156
`37,624
`41,900
`47,494
`50,249
`52,109
`54,595
`53,619
`51,304
`60,033
`56,521
`57,611
`58,298
`
`Refills
`44,850
`44,171
`47,031
`49,105
`52,002
`55,182
`62,192
`60,820
`57,446
`67,426
`66,778
`71,268
`73,175
`
`
`
`/r”’¢w 2"
`
`’/
`r/I/
`
`
`
`/
`I/I/fl "'7"://
`
`I '
`
`YII/IA
`
`\
`9/
`t
`[/4afi2 7%,II” 71112
`0‘
`\ws
`t
`\ n“
`
`/I
`
`d
`
`5 I
`
`M
`\W \“k‘
`II/I4
`ll/I)
`”I,A
`”mm.“ “ t
`
`.I/ 72'0,” III/IA
`
`§\§w3\ 0 m\¢\\o~m 0
`
`a
`
`This quarter, Alphagan P sales were $64.3 million (up 3%), $9.3 million higher than our
`forecast of $55 million. For the week ended July 15, Alphagan P had 90.2% share of total
`prescriptions despite generic competition. For 2005 and 2006, We forecast Alphagan sales
`of $260 million (down 3%) and $240 million (down 8%), respectively. While the company
`continues to hold a major share of the Alphagan market with Alphgan P, we believe Alcon
`and Bausch & Lomb slowly continue to make inroads here. In our view, it is important for the
`company to receive an approval of Alphagan Z in 2005.
`
`ALPHAGAN TRX DATA
`
`TRX's
`350,000 WW
`
`300,000 W
`
`250,000 , :
`
`200,000 ,
`150,000 W
`
`100,000 W
`
`Alphagan Franchise
`
`y
`
`
`
`0
`
`l
`
`l
`
`YoY Growth
`W 4.0%
`WW 2.0%
`WW 0.0%
`+ W -2.0%
`W -4.0%
`W -6.0%
`W -8.0%
`W -10.0%
`W -12.0%
`W -14.0%
`W -16.0%
`-18.0%
`
`
`
`‘1
`
`l
`
`
`
`50,000 ,
`
`
`$¢¢¢$§y
`90
`9% pk
`9% 90.: V65
`9
`0'
`,0 0‘3“
`30“ V09 00 00“ Q0" ge‘
`)0
`0“"a 6"
`0‘?
`3°
`
`
`
`CONFIDENTIAL
`
`”affix/J fiéfiéfi¢fi fag.
`
`PROTECTIVE ORDER MATERIAL
`
`AGN_RESO734288
`
`PROTECTIVE ORDER MATERIAL
`
`

`

`ALPHAGAN MONTHLY TRX SHARE AND GROWTH
`
`
`
`Allergan
`Alphagan Franchise
`90.7%
`90.6%
`90.3%
`90.2%
`89.8%
`89.7%
`89.6%
`89.3%
`89.0%
`88.8%
`88.6%
`88.3%
`88.1%
`
`Alcon
`Alphagan Franchise Bausch & Lomb
`YoY Growth
`Brimonidine Brimonidine
`-10.8%
`6.7%
`2.6%
`-12.7%
`6.7%
`2.7%
`-7.7%
`6.6%
`3.1%
`-7.8%
`6.5%
`3.3%
`-9.5%
`6.7%
`3.5%
`-0.4%
`6.6%
`3.6%
`-5.5%
`6.6%
`3.8%
`-3.4%
`6.7%
`4.0%
`-3.7%
`6.8%
`4.2%
`-2.9%
`6.8%
`4.4%
`-1.5%
`6.7%
`4.7%
`1.5%
`6.7%
`5.0%
`-2.0%
`6.8%
`5.1%
`
`Jun-04
`Jul-04
`Aug-04
`Sep-04
`Oct-04
`Nov-04
`Dec-04
`Jan-05
`Feb-05
`Mar-05
`Apr-05
`May-05
`Jun-05
`
`
`
`
`
`Lumigan (for the treatment of glaucoma) sales this quarter were $61.5 million (up 7%),
`$5.5 million less than our forecast of $67 million. During 2Q05, total prescriptions were down
`approximately 3% sequentially and up 10% year over year. For 2005 and 2006, we lowered
`our forecast
`to $255 million (from $275 million) and $290 million (from $315 million),
`respectively. According to IMS Health, prescription growth for Lumigan in the U.S. has
`slowed. While the product continues to do well outside the U.S., we believe the domestic
`market is still a major source of revenue for the product.
`
`LUMIGAN TRX DATA
`
`
`
`TRX'S
`200,000 ~
`
`Lumigan
`
`YOY Growth
`~ 35.0%
`
`
`
`0.0%
`
`‘
`
`25-0%
`203%
`
`159%
`10.0%
`
`5 0%
`'
`
`1223233
`140,000
`120,000
`100,000
`80,000
`60,000
`
`40,000
`20,000
`0 ’
`
`.0“
`.65
`‘93
`.65
`.65
`9° 0’" 0" o°° 13°
`
`9"
`0"
`0"
`.0“
`.0“
`.0“
`.0“
`.0“
`v‘?‘ 9“ w") 0‘} o°° WV >9" 9“
`
`
`
`
`
`CONFIDENTIAL
`
`PROTECTIVE ORDER MATERIAL
`
`AGN_RESO734289
`
`”affix/J fiéfiéfi¢fi fag.
`
`PROTECTIVE ORDER MATERIAL
`
`

`

`LUMIGAN MONTHLY TRX SHARE AND GROWTH
`Allergan
`Lumigan
`Alcon
`Pfizer
`Lumigan YoY Growth Travatan Xalatan
`17.4%
`17.9%
`13.9%
`68.7%
`17.6%
`12.8%
`14.0%
`68.4%
`17.4%
`16.4%
`14.4%
`68.2%
`17.6%
`13.2%
`14.7%
`67.7%
`17.6%
`8.7%
`14.8%
`67.5%
`17.8%
`18.1%
`15.0%
`67.2%
`18.0%
`8.7%
`15.2%
`66.8%
`18.1%
`10.7%
`15.6%
`66.3%
`18.0%
`10.2%
`16.2%
`65.8%
`18.2%
`9.3%
`16.4%
`65.5%
`18.0%
`10.3%
`16.4%
`65.6%
`17.9%
`12.6%
`16.5%
`65.5%
`18.0%
`8.7%
`16.7%
`65.3%
`
`
`
`Jun-04
`Jul-04
`Aug-04
`Sep-04
`Oct-04
`Nov-04
`Dec-04
`Jan-05
`Feb-05
`Mar-05
`Apr-05
`May-05
`Jun-05
`
`
`
`
`
`
`
`Zymar (anti-infective) switch continues. As a result of the genericization of Ocuflox,
`Allergan has continued to switch patients to the follow-on product Zymar.
`Zymar
`prescriptions have progressed to approximately 98% of the total number of Zymar/Ocuflox
`(branded and generic) prescriptions. During the first quarter of 2005, Allergan entered into a
`co-promotion agreement with PediaMed to market Zymar to pediatricians. For 2005 and
`2006, we forecast Zymar sales of $68 million and $75 million, respectively.
`
`ZYMAR MONTHLY TRX SHARE AND GROWTH
`
`
`
`
`
`Zymar
`Generic
`a
`0
`Generic
`Gigi/£3” 23:22:13}; Ocuflox % of
`Ocuflox % of
`YoY
`Entire Market Ocuflox Market Growth
`85.3%
`14.7%
`13.4%
`51.4%
`176.9%
`90.0%
`10.0%
`14.6%
`63.1%
`83.6%
`92.0%
`8.0%
`14.1%
`67.3%
`59.2%
`93.7%
`6.3%
`13.9%
`72.1%
`43.2%
`94.7%
`5.3%
`14.2%
`75.7%
`29.2%
`94.8%
`5.2%
`16.1%
`78.7%
`41.5%
`94.9%
`5.1%
`18.8%
`81.9%
`34.7%
`95.7%
`4.3%
`17.7%
`83.3%
`27.7%
`96.2%
`3.8%
`19.8%
`86.7%
`22.2%
`96.7%
`3.3%
`19.5%
`88.1%
`14.6%
`97.3%
`2.7%
`18.4%
`89.4%
`11.8%
`97.7%
`2.3%
`18.4%
`90.8%
`14.4%
`97.9%
`2.1%
`17.1%
`90.8%
`11.7%
`
`Jun-04
`Jul-04
`Aug-04
`Sep-04
`Oct-04
`Nov-04
`Dec-04
`Jan-05
`Feb-05
`Mar-05
`Apr-05
`May-05
`Jun-05
`
`Elestat ramping. The company has done well launching Elestat (eye drop for the treatment
`of ocular allergies). Marketed with Inspire Pharmaceuticals, prescriptions for Elestat have
`almost doubled since the beginning of the year.
`
`
`
`CONFIDENTIAL
`
`PROTECTIVE ORDER MATERIAL
`
`AGN_RESO734290
`
`”affix/J fiéfiéfi¢fi fag.
`
`PROTECTIVE ORDER MATERIAL
`
`

`

`ELESTAT RX DATA
`
`YoY Growth
`NRx
`TR
`
`X
`
`
`
`Feb-04
`Mar-04
`Apr-04
`May-04
`Ju n-04
`J uI-04
`Aug-04
`Sap-04
`Oct-04
`Nov-04
`Dec-04
`Jan-05
`Feb-O5
`Mar-05
`Apr-05
`May-05
`
`146.6% Jun-05
`
`NS
`NS
`189.0% 312.2%
`145.8%
`205.9%
`106.0%
`75.5% 109.4%
`
`
`
`Higher Skin Care revenues, but Tazorac prescriptions look flat. While the company
`benefited from higher skin care revenues this quarter, prescription growth for Tazorac has
`declined, according to IMS Health. Tazorac gel and cream is indicated for the treatment of
`psoriasis and acne.
`
`TAZORAC TRX DATA
`
`V
`(1‘
`_«\\‘\H \-\..
`
`
`
`
`YoY Growth
`Tazorac
`TRx's
`100,000 2~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~»7 6.0%
`
`
`
`
`
`, 4.0%
`, 2.0%
`
`, 0.000
`-2.0°.,
`
`-4.0°o
`-6.0°o
`
`'8-0°°
`, 40.0%
`
`90:00”
`80,000
`
`70,000
`60,000
`50,000
`
`40,000
`30,000
`20,000
`
`10,000
`0 7
`
`..
`11a
`
`6
`6
`6
`6
`6
`b:
`b:
`b:
`b:
`b:
`b:
`9999999999»
`\
`x
`3" $9 9°? 0° 9°4 o°° 9“ W‘) 63"
`V‘?‘ 63’“ 9°
`
`
`
`
`
`Additional trials for Botox planned. The company has met with the FDA and reached an
`agreement to enter clinical trials for Botox to treat overactive bladder (OAB). Allergan will
`commence Phase III clinical trials with Botox for the treatment of neurogenic OAB and Phase
`II trials for idiopathic OAB this year.
`
`The company has already established the injection technique for OAB. Currently, annual
`sales of drugs to treat OAB exceed $1.3 billion. Allergan plans to position Botox as a
`second-line therapy to oral medications (Detrol LA, Ditropan XL, etc.) and ahead of surgical
`options. Also, previous OAB studies uncovered Botox’s potential in reducing prostate size.
`Benign prostatic hyperplasia afflicts about half of men over 50. Though currently not a focus,
`this could be another growth driver for the product.
`
`CONFIDENTIAL
`
`”affix/J fiéfiéfi¢fi fag.
`
`PROTECTIVE ORDER MATERIAL
`
`AGN_RESO734291
`
`PROTECTIVE ORDER MATERIAL
`
`

`

`Allergan also intends to begin Phase III studies with Botox for the treatment of migraine
`headache. This could be a $300-$400 million market opportunity,
`in our view.
`In June, the
`company published the results of several exploratory Phase II clinical
`trials. While the
`primary endpoints in the chronic and episodic studies were not met, Botox demonstrated
`statistically significant results in other key measures such as decrease in the frequency of
`headache episodes, decrease of at least 50% in headache days and decrease in acute
`medication use. The company has reached an agreement with the FDA to move fonNard
`with a large Phase III clinical program scheduled to begin in late 2005, expected to enroll 800
`to 1,000 patients.
`
`the FDA issued an approvable letter for
`Alphagan Z. The company announced that
`Alphagan Z (for the treatment of open-angle glaucoma and ocular hypertension). Allergan
`noted that the current outstanding approvable issues are primarily related to manufacturing,
`which the company believes will be resolved in the near future. The company has responded
`and is awaiting a response from the FDA. Allergan submitted an sNDA for its new and
`improved version of Alphagan P in 2004.
`
`Combigan. During the first quarter, the FDA issued an approvable letter for Combigan (for
`the treatment of glaucoma), which stated the conditions the company must meet in order to
`obtain FDA marketing approval. Also,
`the company announced that the Medicines and
`Healthcare products Regulatory Agency granted marketing authorization for Combigan in the
`United Kingdom. The company had already received approval for Combigan in Switzerland,
`and will pursue approvals in other major European markets. Our model does not include any
`US. revenue for Combigan. We note that competitor Alcon filed an NDA for a similar
`combination product (Travatan/timolol) on January 25, 2004.
`
`Tazoral. On June 1, the company announced receipt of a written response from the FDA
`regarding its request for a formal dispute resolution on its non-approvable letter in September
`2004 for oral tazarotene for the treatment of moderate-to-severe psoriasis. The letter from
`the FDA outlined multiple potential options for improving the risk-benefit profile of the
`product. Allergan has submitted a protocol for a special protocol assessment to the FDA.
`Management believes another trial is needed and expects feedback from the FDA during the
`3Q. Currently, our model does not reflect any Tazoral sales.
`\‘\\‘\~.~‘\\‘\
`Q\§\‘“‘
`s \\
`s
`\§\
`u“ s
`:N\ NNQN
`
`Compound
`Alphagan Z
`Combigan
`Diqufosol
`Botox
`Oral Tazorac
`Lumigan/Timidol
`Memantine
`Posurdex
`Androgen Tear
`Botox
`Botox
`
`Next Milestone
`Status
`Indication
`Waiting response from the FDA
`Approvable
`Glaucoma
`Submit development plan
`Approvable
`Glaucoma
`Phase III trials failed to meet endpoints
`Approvable
`Dry Eye
`Marketing product to physicians
`Hyperhidrosis (excessive sweating) Approved
`Psoriasis
`Not approvable Submit development plan
`Glaucoma
`Approvable
`Submitted additional studies
`Glaucoma
`Phase III
`2H05 data release
`Macular degeneration
`Phase III
`3Q04 enrollment of Phase III
`Dry Eye
`Phage Will
`2005 data release
`Migraine headache
`Phase III
`4Q05 patient enrollment
`Overactive bladder
`Phase II
`
`Commence Phase III trials
`
`{ifsttl‘lr’ri ‘_.L‘A:‘.‘.33:‘t\-‘ I'ftt’fifl‘s‘:
`
`of Oculex
`acquisition
`its November 2003
`edema. Via
`Posurdex for macular
`Pharmaceuticals, Allergan has access to a biodegradable implant
`for
`the delivery of
`dexamethasone (a steroid) to the back of the eye for the treatment of macular edema. The
`company is currently enrolling patients for Phase III trials, and expects to conduct two sets of
`trials, one in patients with diabetic macular edema and the other in patients with retinal vein
`occlusion.
`The company plans on filing its NDA with the FDA by the end of 2006.
`Management noted that it would release data from the trials near the expected 2007 launch.
`On March 28, 2005 the company entered into a licensing agreement with Sanwa Kagaku
`Kenkyusho Co., Ltd. to develop and commercialize Posurdex for the Japanese market.
`
`CONFIDENTIAL
`
`”affix/J fiéfiéfi¢fi fag.
`
`PROTECTIVE ORDER MATERIAL
`
`AGN_RESO734292
`
`PROTECTIVE ORDER MATERIAL
`
`

`

`In the 700 pg arm,
`A||ergan reported favorable Phase II data at the time of the acquisition.
`35.7% of the patients experienced 2+ lines of visual acuity improvement versus 19% in the
`control group (p-value = 0.008). This result was fairly consistent with the 90-day outcome
`(36.7% in the 700 pg arm versus 19% in the control group; p-value = 0.005). The proportion
`of patients with 3+ lines of visual acuity improvement at 180 days was better than that at 90
`days and reached statistical significance versus the control group. At 180 days, 19.4% of the
`patients in the 700 pg arm improved 3+ lines as opposed to 8% in the control group (p-value
`= 0.020), versus 90-day results of 16.3% in the 700 pg arm and 9% in the control group (p-
`value = 0.115). Considering the size of the trial, we estimate approximately two to three
`more patients in the 700 pg arm experienced 3+ lines of visual acuity improvement at 180
`days, as compared to the 90-day results, while one patient in the control group dropped out.
`
`Memantine. Currently in Phase III clinical trials for the glaucoma indication, the drug was
`acquired from Merz in February 1997 for its potential neuroprotective effect
`in treating
`patients with glaucoma.
`At present,
`there are no drugs on the market
`that offer a
`neuroprotective effect to the optic nerve. Approved on October 17, 2003 for moderate-to-
`severe Alzheimer’s disease, Memantine is an NMDA receptor blocker and has been found to
`block cell death. We do not expect commercialization of Memantine for glaucoma until 2006.
`
`Triamcinolone reformulation. A||ergan has reformulated triamcinolone injections to be
`more suitable for ophthalmic use. The reformulated drug is currently being tested in two NEl
`(National Eye lnstitute)-sponsored clinical
`trials for
`the treatment of macu|ar edema
`associated with diabetic retinopathy and retinal vein occlusion. The company estimates the
`peak sales potential of this product to be $100 million.
`
`failed to
`lnspire announced that diquafosol
`Diquafosol for dry eye. On February 9,
`demonstrate statistically significant results versus placebo.
`Inspire received an approvable
`letter from the FDA on December 19, 2003 for Diquafosol
`in the treatment of dry eye.
`Though approvable, the FDA requested an additional study. Licensed from lnspire in June
`2001, A||ergan and lnspire are collaborating to bring Diquafosol to market in the US. and
`Europe. The Phase III trial was completed in November 2004. Diquafosol is a P2Y2 receptor
`agonist that activates receptors on the ocular surface and inner lining of the eyelid to
`stimulate the release of water, salt, mucin, and lipids — key components of natural tears.
`A||ergan agreed to as much as $39 million in upfront and milestone payments and to co-
`promote the product ifapproved.
`\
`.
`\
`\
`\
`\
`
`
`“WW. H,\
`,\ 9“,“. \ ,\
`I
`r
`r
`I\
`'I9’
`'1 /
`\‘3
`\\ s s \ \wx
`a".
`k
`:‘M‘w \ ‘\“‘
`\Ԥ
`
`5.
`§m$ .
`T o“\s s & wxvg“ Q“ \“\
`N. \w \\\
`
`\
`
`A||ergan reported 2Q05 EPS (excluding one-time items) of $0.78 (up 24% year over year),
`$0.03 better than our forecast and the consensus estimate of $0.75. One-time items
`included a $10 million restructuring charge related to European operations as well as $59
`million of tax accruals tied to the repatriation of approximately $759 million of cash from
`outside the U.S.
`
`Total sales of $591 million (up 17%) were $44 million better than our estimate of $547
`million primarily due to better than expected Botox, Alphagan and Restasis sales.
`
`Pharmaceutical sales of $567.9 million (up 19%) were $29.9 million better than our
`estimate of $538 million. For the third quarter of 2005, the company expects pharma sales of
`$565-$580 million with EPS of $078-$079.
`
`0
`
`0
`
`Botox sales, contributing 36% of total sales, were $212.5 million (up 20%), $2.5 million
`better than our estimate of $210 million. Strong overseas growth accelerated Botox
`revenues in both the cosmetic and therapeutic segments. Botox continued to gain
`share in Europe and has overtaken Dysport in the U.K. market.
`
`Eye Care sales, contributing 55% of total sales, were $325 million (up 17%), $18
`million better than our estimate of $307 million, primarily due to higher Restasis, Zymar
`and Alphagan sales.
`
`CONFIDENTIAL
`
`PROTECTIVE ORDER MATERIAL
`
`AGN_RESO734293
`
`”affix/J fiéfiéfi¢fi fag.
`
`PROTECTIVE ORDER MATERIAL
`
`

`

`0
`
`Skin Care sales, contributing 5% of total sales, were $30.4 million (up 25%), $9.4
`million better than our estimate of $21 million.
`
`Contract sales were $23.1 million, $14.1 million higher than our estimate of $9 million.
`
`The gross margin as a percentage of pharmaceutical sales was 84.5%, 2.1% more than our
`estimate of 82.4%. For 2005, the company expects gross margins based on pharmaceutical
`sales of 82.5%-83.5% (previously: 82%-83%). The gross margin as a percentage of total
`sales was 81.2%,
`in line with our expectations.
`
`SG&A as a percentage of pharmaceutical sales was 42.4%, compared to our estimate of
`39%. SG&A expenses were $240.7 million (up 22%), $30.9 million higher than our estimate.
`The increase in SG&A expenses was driven by marketing costs including DTC advertising
`for Restasis and Botox as well as regional (Florida, Texas, Missouri) radio advertising for
`Botox. For 2005, the company expects SG&A/sales of approximately 38%-39% (previously:
`37%-38%).
`
`R&D as a percentage of pharmaceutical sales was 16%, slightly lower than our estimate of
`17%. R&D expenses were $90.8 million (up 3%),
`in line with expectations. The company
`expects R&D expenses to ramp up in the second half of 2005 as they commence clinical
`trials for Posurdex (macular degeneration indication) and Botox (OAB and migraine
`indications). For 2005, the company expects R&D/sales of roughly 17.5%.
`
`Balance sheet and cash flow. The company ended the quarter with $873.1 million of cash
`and cash equivalents, up $8.6 million from the prior quarter. Days sales outstanding (DSOs)
`were 43 compared with 51 in the prior year, while days on hand (DOHs) were 73 compared
`with 79 in the prior year.
`
`10
`
`W“
`
`PROTECTIVE ORDER MATERIAL
`
`AGN_RESO734294
`
`”affix/J fiéfiéfi¢fi fag.
`
`PROTECTIVE ORDER MATERIAL
`
`

`

`ACTUAL VERSUS ESTIMATED RESULTS ($ MILLIONS)
`Actual
`Projected foerence
`2005A
`ZQOSE
`
`
`
`Botox
`Alphagan P & Z (70% U.S.. 30% Int'Ij
`Lumigan (70% U.S./ 30% Int'I.)
`Restasis
`
`212.5
`64.3
`61.5
`46.3
`
`210.0
`55.0
`67.0
`30.0
`
`2.50
`9.30
`(5.50)
`16.30
`
`1“,, ~._.
`1h. mi
`{\KQ“\(&\\Q\\‘C\\{'\\
`
`Alphagan P & Z (70% U.S.. 30% Int'l
`Lumigan (70% U.S./ 30% Int'I.)
`Restasis
`
` Botox
`
`19%
`-12%
`17%
`49%
`
`1%
`15%
`-10%
`81%
`
`212.5
`325.0
`30.4
`567.9
`23.1
`591.0
`111.4
`479.6
`240.7
`90.8
`148.1
`6.1
`(4.6)
`0.0
`(0.7)
`148.9
`44.6
`
`0.6
`103.7
`$0.78
`132.2
`
`210.0
`307.0
`21.0
`538.0
`9.0
`547.0
`103.9
`443.1
`209.8
`91.5
`141.8
`2.0
`(3.0)
`0.0
`0.3
`141.0
`40.9
`
`0.3
`99.8
`$0.75
`132.6
`
`2.5
`18.0
`9.4
`29.9
`14.1
`44.0
`7.5
`36.5
`30.9
`0.7
`6.3
`4.1
`(1.6)
`0.0
`(1.0)
`7.9
`3.7
`
`0.3
`3.9
`$0.03
`(0.4)
`
`
`
`Botox
`Eye care
`Skin care
`Pharma sales
`Contract sales
`Net sales
`Cost of sales
`Gross Profit
`SG&A
`R&D
`Operating Income
`Interest income
`Interest Expense
`Gain on investments. net
`Other. net
`Pretax income
`Taxes
`
`§
`
`Minority interest expense
`Net Income
`Earnings per share (fully diluted)
`Average Shares - fully diluted (mi|.)
`
`
`
`
`ikE£\{=.fii§§:&~E\-$sfia§.\
`
`Margins based on net sales:
`Gross Margin - Net sales
`SG&A
`R&D
`Margins based on pharma sales:
`Gross Margin - Pharma sales only
`SG&A
`R&D
`Operating Margin
`Pretax Margin
`Net Margin
`Tax Rate
`
`S&£&&k¢t{t¢i§&e\x
`Botox
`Eye care
`Skin care
`Pharma sales
`Net Sales
`Gross Profit
`SG&A
`R&D
`Operating Income
`Pretax Income
`Net Income
`'
`
`81.2%
`40.7%
`15.4%
`
`84.5%
`42.4%
`16.0%
`26.1%
`26.2%
`18.3%
`
`20.1%
`17.1%
`24.6%
`18.6%
`16.8%
`17.0%
`22.4%
`2.6%
`18.7%
`21.9%
`21.3%
`23.8%
`
`30.0%
`
`CONFIDENTIAL
`
`”affix/J fiéfiéfi¢fi fag.
`
`PROTECTIVE ORDER MATERIAL
`
`11
`
`AGN_RESO734295
`
`PROTECTIVE ORDER MATERIAL
`
`

`

`Fair value estimate raised to $81. Allergan currently trades at 26.4x and 22.8x our new
`2005 and 2006 EPS estimates of $3.23 and $3.74, respectively, a 13% premium to the rest
`of the specialty pharmaceuticals group based on 2005E EPS. We arrived at our $81 fair
`value estimate by applying a 21 .7x multiple to our 2006 EPS estimate of $3.74.
`
`SPECIALTY PHARMACEUTICAL COVERAGE UNIVERSE
`
`Ticks:
`
`7/26m105
`
`5240M
`
`12/31/04
`
`Allergan Inc.
`Barr Pharmaceuticals Inc.
`Columbia Labs
`Connetics
`Forest Laboraton'es
`Hi-TechPhamiacal Co, Inc.
`Kos Phannaceuticals
`KV Phamnaceutica]
`Mylan Laboratories
`Par Phamiaceutical Cos.
`Teva Pharmaceuticals
`Aver-e Covem-eUniveme
`S-cial mew-Meme
`
`.
`
`.
`—
`.
`.
`-
`-
`-
`-
`-
`-
`
`.
`.
`.
`.
`.
`.
`.
`.
`.
`
`.
`.
`.
`.
`.
`.
`.
`.
`.
`.
`
`.
`.
`.
`.
`.
`.
`.
`.
`.
`
`.
`.
`.
`.
`.
`.
`.
`.
`.
`
`.
`.
`
`-
`
`-
`
`
`
`
`Slates Val.“
`(“(11111)
`(limit)
`
`Enis
`
`,
`
`,
`
`,
`
`,
`
`200613
`200513
`2004A
`31.1
`$3 74
`$3.23
`$2.75
`21.2
`$3 13
`$2.62
`$2.21
`.
`($0.13) NM
`($0.20)
`($0.60)
`.
`$0.85
`30.0
`$0.67
`$0.60
`.
`$2.67
`16.0
`$2.10
`$2.47
`.
`$1.08
`39.5
`$1.01
`$0.73
`.
`$3.07
`37.2
`$2.68
`$1.91
`.
`$0.95
`18.1
`$0.46
`$0.86
`.
`$1. 11
`22.4
`$0.93
`$0.80
`.
`$2.40
`13.4
`$1.83
`$2.11
`.
`$1.85
`22.5
`$1.56
`$1.42
`,
`.
`-— 25.1
`-— 27.6
`
`26.4
`17.9
`NM
`26.8
`18.9
`28.6
`26.5
`33.8
`19.2
`15.4
`20.5
`23.4
`22.4
`
`22.8
`1s.0
`NM
`21.2
`14.8
`26.7
`23.1
`16.3
`16.1
`11.8
`17.3
`18.5
`20.4
`
`Z ,
`n J/'5' II /
`[/1]
`
`s \
`
`I /
`
`I/
`JIl/I//A III/I}
`
`
`
`Allergan is leveraged to the growth of Botox and its eye care pharmaceutical products.
`Longer term, we expect more competitors to enter the botulinum toxin market.
`In addition,
`Allergan competes against Alcon and Pfizer in the glaucoma market. Alcon is also trying to
`get a generic version of Alphagan P approved in the United States, and has a Paragraph IV
`patent challenge outstanding.
`
`At any given time, the following additional risks could affect our valuation of Allergan:
`
`Clinical: Failures of late-stage and early-stage products and delays in clinical development
`could occur. Uncertainty regarding the timing, efficacy, and safety aspect of new products
`and long-term safety issues could emerge after approval.
`
`Competition, new health treatments: Newer, better products could displace existing drugs.
`More knowledge about a disease could make a drug less used. A firm could be out-marketed
`by rivals. Generic competition and pricing pressure could erode prices and margins. New
`developments in health treatments or new nondiagnostic products could reduce or eliminate
`demand for a product.
`
`Environmental: Changes in environmental regulations, stringent environmental laws, and
`potential exposure to environmental liabilities could have a negative effect.
`
`Litigation: Outcomes of intellectual property litigation could cause product sales to be halted
`— these lawsuits are common in the medical device industry. Third parties may claim that
`products that a company has sought FDA approval to market or is currently marketing may
`infringe on the third parties’ proprietary rights and patents.
`
`Management/financial: A company could be adversely affected by inability to control costs,
`management’s lack of experience, the discontinuation of partnerships, continued financial
`losses,
`insufficient capital to fund its clinical pipeline,
`inability to raise additional capital or
`favorable terms,
`the influence of large shareholders, and disruptions in connection with
`changes to executive management and board membership.
`
`12
`
`”affix/J %%Mé/%¢/ fag.
`
`CONFIDENTIAL
`
`PROTECTIVE ORDER MATERIAL
`
`AGN_RESO734296
`
`PROTECTIVE ORDER MATERIAL
`
`

`

`Manufacturing: Manufacturing controls may be weak, and manufacturing licenses could
`become suspended.
`If the current Good Manufacturing Practices are not maintained, the
`FDA could refuse to approve marketing applications.
`
`Marketing/R&D: The timing of R&D milestones, failure to successfully commercialize early-
`stage drug candidates, and limited marketing infrastructure could affect sales.
`
`Patents: A generic could enter the market through natural patent expiry or a loss of a
`challenged patent in the courts. A company could be unsuccessful in protecting intellectual
`property and proprietary rights. The government could change patent laws at any time.
`
`Payer: Insurance companies and the government may not pay for a company’s product. The
`success of many products depends on Medicare reimbursement. Should any changes occur
`in Medicare reimbursement codes, product sales could be affected.
`
`Pipeline: There is no guarantee that any investigational product will make it through the
`regulatory process. A company could have insufficient capital to fund its clinical pipeline.
`
`Product launch hiccups: Risks associated with a new product launch include higher than
`expected costs, lower than expected sales/overestimated demand for products, and lack of
`customer acceptance. There could also be limited uptake due to patient non-compliance.
`
`Product liability: All products have side effects, and companies are often liable for damage
`due to side effects, which may emerge after approval. Product liability claims are possible
`related to the testing, manufacturing, marketing, and use ofa company’s products.
`
`Product withdrawal: Unforeseen side effects could cause drugs to be pulled from the market.
`
`Regulatory: The FDA may not approve a product, manufacturing, or an indication, and can
`change a product’s label. The government may not like a firm’s marketing practices and
`penalize it. Manufacturing sites could be deemed unsuitable. Legislative or regulatory reform
`of the healthcare system and drug industry could affect the ability to sell products profitably.
`
`Third party manufacturers: Companies without manufacturing facilities may have to rely on
`contract manufacturers to manufacture their products and product candidates for clinical
`trials and commercial sales. These relationships may be difficult to build and maintain.
`
`CONFIDENTIAL
`
`PROTECTIVE ORDER MATERIAL
`
`AGN_RESO734297
`
`”affix/J fiéfiéfi¢fi fag.
`
`13
`
`PROTECTIVE ORDER MATERIAL
`
`

`

`
`QUARTERLY EARNINGS PROJECTION ($ MILLIONS)
`
`3004A
`2004A
`1004A
`174.6
`176.9
`150.7
`285.4
`277.6
`272.1
`24.8
`24.4
`24.7
`484.8
`478.9
`447.5
`24.9
`27.3
`26.0
`
`556.2 mm 527.2
`472.4
`506.2
`510.8
`Net sales
`103.8
`94.1
`87.6
`96.2
`99.1
`Cost of sales
`384.8
`410.0
`411.7
`452.4
`.
`433.1
`Gross Profit
`183.0
`196.7
`195.5
`206.1
`.
`210.3
`SG&A
`86.1
`88.5
`83.0
`88.0
`.
`82.0
`R&D
`115.7
`124.8
`133.2
`158.3
`.
`140.8
`Operating Income
`2.0
`2.2
`2.6
`7.3
`.
`5.5
`Interest Income
`(3.7)
`(3.7)
`(6.8)
`(3.9)
`.
`(4.5)
`Interest Expense
`0.0
`0.0
`(0.1)
`0.3
`.
`0.1
`Gain on Investments, net
`(0.1)
`(1.2)
`0.0
`0.0
`.
`0.9
`Other, net
`113.9
`122.1
`128.9
`162.0
`.
`142.8
`Pretax income
`34.2
`36.4
`40.3
`46.8
`157.7
`41.7
`Taxes
`
`0.3
`0.2
`0.2
`0.3
`(0.1)
`Minority interest expense
`_m 79.4
`85.5
`88.4
`114.9 m 101.2
`Net Income
`—_m $0.59
`$0.63
`$0.67
`$0.86
`$0.76
`AverageShares-fu||ydi|uted(mi|.)
`132.0
`132.6
`134.3
`135.2
`132.8
`133.0
`132.6
`
`2005A
`212.5
`325.0
`30.4
`567.9
`23.1
`
`591.0
`111.4
`479.6
`240.7
`90.8
`148.1
`6.1
`(4.6)
`0.0
`(0.7)
`148.9
`44.6
`0.6
`103.7
`$0.78
`132.2
`
`40055 mam:
`236.7
`320.0
`21.3
`578.0
`0.0
`
`30055
`2