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`EX-99.1
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`EX-99.1 2 d879266dex991.htm EX-99.1
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`Exhibit 99.1
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`Corrected Transcript
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`23-Feb-2015
`Valeant Pharmaceuticals International, Inc. (VRX)
`Q4 2014 Earnings Call
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`Total Pages: 24
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`ACRUX DDS PTY LTD. et al.
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`EXHIBIT 1600
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`IPR Petition for
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`U.S. Patent No. 7,214,506
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`EX-99.1
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` Corrected Transcript
`23-Feb-2015
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`J. Michael Pearson
`Chairman and Chief Executive Officer
`
`Alex Arfaei
`BMO Capital Markets (United States)
`David A. Amsellem
`Piper Jaffray & Co (Broker)
`Corey George Davis
`Canaccord Genuity, Inc.
`Tim Chiang
`CRT Capital Group LLC
`Gregg Gilbert
`Deutsche Bank Securities, Inc.
`Sachin Shah
`Albert Fried & Co. LLC
`David M. Steinberg
`Jefferies LLC
`Douglas Miehm
`RBC Capital Markets
`Divya Harikesh
`Goldman Sachs International
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`
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`10/30/2017
`Valeant Pharmaceuticals International, Inc. (VRX)
`Q4 2014 Earnings Call
` CORPORATE PARTICIPANTS
`
`Laurie W. Little
`Senior Vice President-Investor Relations
`Howard B. Schiller
`Executive Vice President and Chief Financial Officer
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`OTHER PARTICIPANTS
`
`Umer Raffat
`Evercore ISI
`Irina Rivkind Koffler
`Cantor Fitzgerald Securities
`Annabel E. Samimy
`Stifel, Nicolaus & Co., Inc.
`Christopher Thomas Schott
`JPMorgan Securities LLC
`Andrew J. Finkelstein
`Susquehanna Financial Group LLLP
`Douglas D. Tsao
`Barclays Capital, Inc.
`David R. Risinger
`Morgan Stanley & Co. LLC
`Marc Goodman
`UBS Securities LLC
`Louise A. Chen
`Guggenheim Securities LLC
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`10/30/2017
`Valeant Pharmaceuticals International, Inc. (VRX)
`Q4 2014 Earnings Call
` MANAGEMENT DISCUSSION SECTION
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`
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`EX-99.1
`
` Corrected Transcript
`23-Feb-2015
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`Operator: Good morning. My name is Steve, and I will be your conference operator today. At this time, I would like to welcome everyone to the Valeant
`Pharmaceuticals Q4 and Full Year 2014 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’
`remarks, there will be a question-and-answer session. [Operator Instructions] Thank you.
`
`Head of Investor Relations, Laurie Little, you may begin your conference.
`
`Laurie W. Little
`Senior Vice President-Investor Relations
`Thanks, Steve. Good morning, everyone, and welcome to Valeant’s Investor Conference Call where we will be discussing our fourth quarter and full year 2014
`financial results, as well as the acquisition of Salix Pharmaceuticals. Presenting on the call today are Howard Schiller, Chief Financial Officer, who will present
`our fourth quarter results and first quarter guidance; and J. Michael Pearson, Chairman and Chief Executive Officer, who will cover the recently announced
`acquisitions of Dendreon and Salix; Dr. Ari Kellen, Company Group Chairman, will be available for questions after our prepared remarks. In addition to a live
`webcast, a copy of today’s slide presentation can be found on our website under the Investor Relations section.
`
`Before we begin, our presentation today contains forward-looking information. We would ask that you take a moment to read the forward-looking statements
`mentioned at the beginning of our presentation as it contains important information.
`
`Now, please note that the tender offer in connection with the Salix merger has not yet commenced, and our communication is not an offer or a solicitation of an
`offer to purchase any security. On the commencement date of the offer, an offer to purchase and other related documents will be filed with the SEC, and the
`tender offer will only be made pursuant to those documents. Investors and security holders are urged to read both the tender offer documents and the solicitation
`recommendation statement regarding offer that may become available in our files with the SEC as they will contain important information.
`
`In addition, this presentation contains non-GAAP financial measures. For more information about non-GAAP financial measures, please refer to slide number
`two. Non-GAAP reconciliations can be found in the press release issued earlier today and posted on our website.
`
`And with that, I will turn the call over to Howard Schiller.
`
`Howard B. Schiller
`Executive Vice President and Chief Financial Officer
`Thank you, Laurie. Good morning, everyone, and thank you for joining us. Yesterday, we announced very strong financial results for the fourth quarter and full-
`year 2014, as well as our agreement to acquire all the outstanding stocks of Salix Pharmaceuticals.
`
`We plan to discuss three topics on today’s call. First, discuss our strong fourth quarter financial results. As we have much to talk about today, we will not spend as
`much time on our full-year financial results but will focus our prepared comments on the fourth quarter results which are very strong across all metrics and ahead
`of our
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`10/30/2017
`Valeant Pharmaceuticals International, Inc. (VRX)
`Q4 2014 Earnings Call
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`previous guidance. We have provided additional details of our financial performance at the end of this presentation for you to review at a later time. Second, we
`will provide you with Q1 2015 guidance. And lastly, we will discuss our recent announcement surrounding our acquisitions of Dendreon and Salix.
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`EX-99.1
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` Corrected Transcript
`23-Feb-2015
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`We are pleased to report exceptionally strong results for the fourth quarter. For the quarter, our total revenue was $2.3 billion, an increase of 10% over the prior
`year, largely driven by exceptionally strong growth in many of our U.S. businesses which more than offset the negative headwinds from foreign exchange in our
`ex-U.S. markets.
`
`Our cash EPS was $2.58 a share, an increase of 20% over the prior year. Our GAAP cash flows from operations for the quarter were $816 million, an increase of
`191% over the prior year. This increase included a $287 million gain from the Allergan investment, net of fees, and out-of-pocket expenses, which we realized in
`the quarter. Adjusted cash flow from operations which excludes this gain was $624 million.
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`We’re pleased to have exceeded our Q4 guidance on every metric. Our original forecast projected us to deliver organic growth greater than 12% and we delivered
`16% same-store organic growth. Bausch + Lomb reported 8% organic growth for the fourth quarter, 11% organic growth for the full year. And we expected B+L
`to continue to deliver double-digit growth in 2015.
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`Our total revenue came in almost $100 million greater than our guidance despite significant FX headwinds and cash EPS was $2.58 versus greater than $2.55
`cash EPS guidance, adjusted cash flow from operations excluding the Allergan investment gain was $624 million, in line with our guidance of greater than $600
`million. And, finally, our restructuring and integration charges for the quarter came in at $47 million.
`
`Turning to organic growth, our overall same-store total company organic growth, including generics was 16% for the quarter. If we had excluded generics in Q4,
`total company same-store organic growth would have been 18%. Many of our regions contributed to the strong total company organic growth with our U.S.
`business at 28%, total developed markets at 20% and our emerging market business at 6% same-store organic growth.
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`Our same-store organic growth for the year was 13%, and we expect to continue strong, double-digit same-store growth in 2015. Same-store organic growth
`excludes acquisitions for one year post-close and, therefore, Dendreon and Salix will not be included in this calculation. Dendreon and Salix, however, will be
`included in our pro forma organic growth calculation.
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`B+L continued its strong growth performance delivering 8% organic growth in Q4, 11% for the full year and 10% organic growth since the acquisition in August
`2013. Most of the Bausch + Lomb businesses continued their consistently strong growth patterns. Our surgical business; however, had a weaker quarter due to a
`flat cataract surgery market overall and declining sales of our Excimer lasers.
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`In addition, we switched our Victus commercial model from a sales model to a lease model which contributed to lower sales for the quarter. If you adjusted for
`the change in the Victus commercial model, sales were flat for the quarter. For the quarter and for the year, our surgical businesses continued to gain share in
`premium IOL and in Femtosecond laser placements.
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`As promised, we are continuing to show revenue for the quarter and the year for our top 20 products. We are very pleased to report that all 20 products grew in
`the quarter over the prior year. The two new additions to the list this quarter are Jublia and Carac. It is truly exciting to see that Jublia was our fourth largest
`product in Q4 and recently reported weekly script trend showed 20,000-plus scripts. Carac delivered a very strong quarter based on 40% growth from sales of the
`brand, and from the channel load of the recently-launched authorized generic which we manufacture.
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`10/30/2017
`Valeant Pharmaceuticals International, Inc. (VRX)
`Q4 2014 Earnings Call
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`Also, just to point out, in response to a few questions from investors, we have now included Wellbutrin sales on a global basis on this chart. Earlier in the year,
`the sales in our top 20 chart were U.S. only.
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`EX-99.1
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` Corrected Transcript
`23-Feb-2015
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`As a percentage, our top 20 products represent 36% of total revenue in the fourth quarter with top 20 growing 28% over the fourth quarter in 2013 and 20% on a
`full-year basis.
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`Our top 20 products continue to demonstrate the diversification of our portfolio with no product more than 4% of revenue. Similar to last quarter, the growth of
`our total product portfolio is driven by approximately 50/50 mix of volume and price.
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`Highlights for our U.S. business and the rest of the world are continuing in the next four slides. Revenues for our dermatology business were very strong and
`increased 70% year-over-year. The outstanding work of our sales team’s implementation of innovative marketing and purchase, great leadership and portfolio of
`great products and our four new launched products have contributed to the turnaround in the outstanding result in our dermatology business in Q4 and 2014.
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`Core products such as Zyclara, Elidel and the RAM franchise continued the strong growth and Solodyn grew in Q4 and grew 5% for all of 2014 after a tough
`year in 2013.
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`Jublia continues its rapid growth trajectory and recorded more than 20,000 weekly scripts for the last reported weekly sales report. This yields to annualized run
`rate of greater than $250 million for the product.
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`Our DTC campaign continues to increase awareness with patients as we are seeing primary care physicians representing approximately 40% of the script volume.
`I’d hope that you all saw our Super Bowl ad, which received 1.2 billion digital impressions and it significantly raised the awareness of the product. LUZU and
`Retin - A Micro 0.08% continued to perform well with script trends up 12% and approximately 200% sequentially.
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`Our consumer business revenue grew 6% over the prior year as we continue to outpace the market. CeraVe remains the fastest-growing major skin care brand
`with 49% year-over-year growth. PreserVision also continues its strong growth trajectory with AREDS, the number one selling vitamin SKU, delivering 17%
`growth in the quarter based on consumption. The entire brand grew 14% year-over-year. Finally, our BioTrue Multipurpose Solution delivered 7% growth over
`the prior year.
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`Our Prescription Ophthalmology revenues grew 8% year-over-year with continued strong performance from Prolensa and the Lotemax franchise. Revenues for
`our contact lens business grew 13% year-over-year, our third straight quarter of double-digit growth. We currently have 10% of the U.S. contact lens market, a 3-
`point market share improvement since we acquired B+L.
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`Ultra, while still not a significant contributor to revenues due to production capacity constraints, had $4.2 million in revenues for the quarter. We expect the first
`full production line to be validated in Q2, followed by our second commercial line in Q4. And finally, we recently agreed to a new strategic partnership with
`Vision Source, the largest doctor alliance group with 3,000 locations across all of our contact lens brands and solutions.
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`I’ve already described the reasons behind the revenue decline in Q4 for our surgical business. The cataract market continues to be flat in Q1, but we expect the
`market to rebound to normal growth levels of approximately 5% later this year. As I mentioned earlier, our surgical business continued to gain share in premium
`IOLs and in Femtosecond laser placements. In addition, we are beginning to conduct clinical trials in the U.S. for TENEO Excimer laser, which is already
`approved and selling in Europe, and will enable us to improve our competitive positioning in this important market segment.
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`10/30/2017
`Valeant Pharmaceuticals International, Inc. (VRX)
`Q4 2014 Earnings Call
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`Revenue growth of 28% for our Neuro & Other/Generics portfolio was driven by products, including Xenazine, Wellbutrin and Virazole, while generics business
`continues to benefit from competitor stock outs and authorized generic launches. Finally, our dental business continues with its double-digit growth due to the
`performance of Arestin and the 2014 product launches of Onset and Ossix Plus.
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`EX-99.1
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` Corrected Transcript
`23-Feb-2015
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`Now, turning to the rest of the world. Our emerging markets business in Central and Eastern Europe and the Middle East delivered strong performance with 9%
`growth year-over-year despite significant FX headwinds from negative $60 million in revenues. On a local currency basis, Russia delivered 13% growth and the
`Middle East delivered more than 20% growth.
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`Our acquisition of Medpharma, a brand new generics platform in the Middle East and Northern Africa, is off to a great start and will augment our growth in this
`important region. Revenues for our emerging markets business in Asia grew 12% versus the prior year. We continue to see strong growth in a number of
`countries, as China saw a 12% growth, Korea grew 15% and Malaysia grew 24%, just to mention a few.
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`In Q1 of this year, our Bescon lenses, which we acquired last year, were launched in China, Korea and Japan. And given the expected demand around the world,
`we have recently begun to expand our production capacity. Our recent acquisition of Armoxindo, a brand and generic platform in Indonesia, is also performing
`well in its early stages.
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`In Latin America, we saw a decline of 7% year-over-year which was mainly due to FX. Mexico performed very well and delivered double-digit organic growth of
`11% in the quarter. Brazil continues to struggle to the slower market growth and the weakness in our Probiotica line.
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`The rest of world developed markets declined 13% year-over-year, almost entirely due to a strengthening dollar against the euro, yen, Canadian dollar and
`Australian dollar. The underlying businesses remained strong, both Europe and Japan delivering low-single-digit organic growth, and Canada and Australia
`businesses were flat as both businesses had their last quarter of generic headwinds from Wellbutrin XL in Canada and Aldara, and Tambocor in Australia.
`
`Given the absence of significant business development activity, we have been guiding all year to declining restructuring and integration charges. This quarter, our
`restructuring and integration charges were $47 million, in line with our estimate of less than $50 million. The reported charges were derived of approximately $15
`million for Bausch + Lomb, down from $36 million in Q3; and $29 million related to other deals closed in 2014. Only $3 million of the Q4 charges were from
`acquisitions closed more than 12 months ago and was primarily related to the closure of an Obagi facility. Excluding Dendreon and Salix, restructuring and
`integration charges will continue to trend towards Europe.
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`This quarter, our GAAP cash flow from operations was very robust at $816 million for which $287 million was related do our gain from the Allergan investment,
`net of fees and out-of-pocket expenses.
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`Adjusted cash flow from operations excluding the Allergan gain were $624 million. Our Q4 adjusted cash flow from operations was negatively impacted by the
`acceleration of interest payment in the amount of $33 million following the repayment of $945 million in bonds in the fourth quarter and a large increase in
`prepaid expenses. The prepaid expense balance will be a benefit to cash flow in future quarters.
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`10/30/2017
`Valeant Pharmaceuticals International, Inc. (VRX)
`Q4 2014 Earnings Call
`
`At the time we announced the B+L acquisition, our debt to pro forma adjusted EBITDA ratio was 4.5 times, and we committed to reducing that ratio to below 4
`times. In 2014, we reduced our debt by more than $2 billion, and we ended the year with a 3.5 times debt-to-EBITDA ratio.
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`EX-99.1
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` Corrected Transcript
`23-Feb-2015
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`Our day sales outstanding remained in line with cash orders of 66 days. As we have previously discussed, we believe the calculated DSOs based on gross sales
`and gross accounts receivables may extend given the fact that we have a number of older products and there are a large amount of provisions to gross sales to get
`net sales.
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`As in last quarter, we had disclosed our gross revenue in our 10-K that will allow investors to calculate our day sales outstanding using gross quarterly sales and
`gross accounts receivable.
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`Our overall accounts receivable increased by $196 million this quarter with an offsetting increase in accrued liabilities of approximately $123 million, primarily
`related to rebates, returns and allowances. This is a net increase of approximately $73 million net of the accrued liabilities compared to an increase of
`approximately $224 million in net sales.
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`2015 is off to a very strong start. Given the timing of the recently announced acquisitions of Dendreon and Salix, we will update our 2015 guidance on our first
`quarter earnings conference call. Until then, we thought it would be helpful to give you guidance for Q1 2015.
`
`In Q1, we expect to see same-store organic growth of 10% to 15% due to several factors. This includes a contribution of continued outperformance of many of
`our U.S. businesses including dermatology, contact lens, consumer, dentistry and Obagi and ex-U.S. markets such as China, Thailand, Malaysia, Mexico, Middle
`East and Poland, as well as the continued momentum of our 2014 product launches such as Jublia, Ultra, Retin - A Micro 0.08% and the Onexton launch in Q1
`that is off to a great start.
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`While most of our markets are experiencing robust growth, we do expect some softness in Western Europe and Russia, which will result in low-single-digit
`organic growth for our Europe business unit in Q1. We expect cash EPS of at least $2.30 per share for the first quarter of 2015 as the strong growth in the U.S.
`will continue to offset potential currency headwinds.
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`Now, I would like to turn the call over to Mike.
`
`J. Michael Pearson
`Chairman and Chief Executive Officer
`Thank you, Howard and good morning, everyone. Let me briefly touch on Dendreon acquisition before moving on to Salix. On January 29, we entered into an
`agreement to acquire assets from Dendreon, including a [indiscernible] (19:23) immunotherapy product, Provenge. We expect to close the Dendreon transaction
`later today.
`
`We would like to briefly discuss the strategic and financial rationale for the deal. First, we believe that oncology is a platform that fits well into Valeant’s business
`model, with strong market growth, a concentrated specialists set of prescribers where relationships really matter, a favorable reimbursement regime and a market
`that other pharma companies are beginning to de-emphasize.
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`We also have the opportunity to invest in low-risk targeted R&D projects for additional indications for products that are already approved. Dendreon also fits our
`investment criteria with a durable asset, Provenge. We believe that we can accelerate the growth of Provenge over the coming years. Dendreon also provides us a
`platform for additional tuck-in acquisitions.
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`10/30/2017
`Valeant Pharmaceuticals International, Inc. (VRX)
`Q4 2014 Earnings Call
`
`Initially, we agreed on a purchase price of $400 million. We then agreed to pay an incremental $15 million for a pipeline product and sizeable tax attributes. The
`price paid represents 1.3 times last year’s sales of the company. In addition to growth opportunities, we believe this asset has been undermanaged as it has an
`infrastructure in place built for $1 billion product.
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`EX-99.1
`
` Corrected Transcript
`23-Feb-2015
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`We expect to be able to attract synergies of over $130 million, including manufacturing savings, and this does not include the benefit of our corporate structure.
`We believe that we have the ability to raise the gross margins of this business to more than 65% by the end of 2015, and to reach 80% gross margins in the longer
`term. Finally, the transaction will result in an IRR of approximately 30% at statutory tax rates and with a cash payback period of less than five years.
`
`Now, turning to Salix. Yesterday, we announced that we will be acquiring all the outstanding shares of Salix for $158.00 per share in cash. The total transaction is
`valued at approximately $14.5 billion and we have fully committed financing. We expect the transaction to close in the second quarter of 2015.
`
`This transaction creates an exciting new specialty platform for future growth. Salix has a strong product portfolio with key promoter products delivering double-
`digit volume growth, far exceeding the market growth rate of 5%. The near-term expected approval of the IBS-D indication of Xifaxan provides an additional
`catalyst for growth as do the launches of Uceris Foam and the approval of Relistor Oral and the potential approvals of other key pipeline assets.
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`We also believe that this transaction will offer compelling returns for Valeant shareholders. In our base case model, we assume Salix will spend $750 million in
`OpEx in 2015. OpEx includes SG&A and R&D. This is a pre-synergy number. We expect to achieve run rate synergies of more than $500 million across the
`combined company’s OpEx; $750 million OpEx from Salix and Valeant’s budgeted OpEx for 2015.
`
`We expect to capture these cost savings within six months of closing. We do not include any benefits from our corporate structure and our synergy targets.
`Therefore, in addition to the $500 million in cost savings, we expect the combined companies’ tax rate will be approximately 5%.
`
`We do not plan any reduction to Salix’s specialty sales forces or hospitals, key account and field reimbursement teams. We believe Salix’s sales force is by far the
`strongest in the GI space and has been a key part of their success. We do not have the time to fully determine the optimal size of the primary care sales force but
`will do so between signing closing. We expect an IRR and cash payback in line with our other large transactions.
`
`Slide 23 shows you the criteria that we look for in a therapeutic area and Salix checks all the boxes. From a market perspective, they have a concentrated
`specialist prescriber population and important field force prescriber relationships. GI is a lower priority for most other pharmaceutical companies. The products
`have a favorable reimbursement [indiscernible] (23:58) payers. We also believe Salix’s products and the entire GI therapeutic area provide an opportunity for
`low-risk innovation. GI has above-average prescription growth rate compared to other therapeutic areas.
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`Salix itself has a strong underlying volume growth, well above the market and an attractive near-term pipeline. In addition, there is significant opportunity to
`Valeant’s operating model and deliver financially compelling returns while setting up a platform for value-added tuck-in acquisitions.
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`Valeant Pharmaceuticals International, Inc. (VRX)
`Q4 2014 Earnings Call
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`As mentioned previously, the GI space has very attractive underlying market fundamentals. It is a growing market with attractive sub-segments, a disease state
`that is typically chronic, damaging to someone’s quality of life and is significantly undertreated. We believe we can expand the IBS-D market through DTC and
`other commercial levers. Finally, the opportunity to expand into other underserved indication provides additional avenues of growth.
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`EX-99.1
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` Corrected Transcript
`23-Feb-2015
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`Many of you are familiar with Salix and its portfolio. But for those of you who are not, we wanted to provide an overview of their product portfolio. Salix is a
`mid-sized pharmaceutical company that has a significant leadership position in the GI market. Its sales force has been ranked as the number sales force in the
`space by IMS for three of the past four years.
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`Salix has 22 total products of which they actively promote 13. Xifaxan represents roughly 50% of total revenue and has been approved for HE and traveler’s
`diarrhea. Salix is currently waiting for a PDUFA date in May for additional indications of IBS-D, irritable bowel syndrome-diarrhea. Other major products
`include Apriso, Uceris and Relistor, that all have attractive growth prospects. Salix has a low-risk short-term pipeline with additional indications for currently
`approved products that we believe have strong future potential.
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`Slide 27 shows the recent script trends from Salix’s major products, all which are trending in the right – in a positive direction.
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`The acquisition of Salix further diversifies our U.S. product portfolio. Including Salix, 30% of our portfolio will come from our Neuro & Other, dental and
`generic portfolios, 24% from GI, 22% from dermatology, 12% from eye health and then consumer and oncology at 8% and 4%, respectively. Our total U.S.
`revenue will represent approximately 65% of total revenue. We do believe over time, this ratio will return to roughly 50/50.
`
`On November 6, 2014, Salix reported five to nine-month wholesaler inventory levels for its top four products. We have conducted extensive due diligence on
`Salix inventory estimates, its standalone inventory remediation plan, as well as the associated potential litigation and regulatory exposure. While Salix has made
`strides in executing their plans, we expect to be able to work down the inventory to approximately two months or less by the end of the year. The net impact of
`this on 2015 revenues is expected to be greater than $500 million.
`
`On the next slide, we list each of Salix’s significant products with their projected 2015 demand-based revenue and our 2015 volume-based growth assumptions
`and patent expiry dates. We do not have the time to discuss each product but wanted to provide you with this information for your review later.
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`As in all our past acquisitions, we have a careful plan to achieve cost synergies from the combined products. As we have mentioned earlier, we assumed a
`$750 million OpEx, SG&A and R&D for our base 2015 sales business plan. This number is different than what GAAP – that Salix has reported on a non-GAAP
`basis.
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`For example, depreciation and stock-based comp have not been historically reported in Salix’s non-GAAP operating expenses, whereas Valeant includes these
`numbers in our non-GAAP numbers. Post-close, we will conform Salix’s methodology to our methodology in our non-GAAP disclosures.
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`We have targeted more than $500 million in synergies on a combined-company basis, but we do not plan any reductions to Salix’s Specialty sales forces or
`hospital, key account, and field reimbursement teams, as we believe these customer-facing roles have played and will play a huge role in the success of the
`company.
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`EX-99.1
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`10/30/2017
`Valeant Pharmaceuticals International, Inc. (VRX)
`Q4 2014 Earnings Call
`
`As mentioned earlier, we will determine the optimal size of the primary care sales force. On a run-rate basis, we expect to achieve these synergies within six
`months, and believe it will cost less than 65% of the total annual synergies to achieve these synergies.
`
` Corrected Transcript
`23-Feb-2015
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`We also have additional opportunities through improved combined product portfolio, formulary status, and leveraging the hospital sales force for Valeant
`products that we have not built into our deal model.
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`Lastly, the transaction will be an all-cash deal that will be financed with a combination of bank debt and bonds. We expect the interest rate on our new debt to be
`between 5.5% to 6%. Our pro forma interest rate for the combined company post this transaction will be approximately 5.5%.
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`We have committed financing of $22.2 billion in debt, consisting of $15 billion for the transaction and a $7.5 billion to backstop Valeant’s existing secured debt
`while we seek amendments to our current credit agreement.
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`We are launching the amendment today. And when we receive this amendment, the $7.5 billion backstop will fall away. We fully expect to secure an amendment
`to our current credit agreement within the next two weeks.
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`Our net debt to pro forma adjusted EBITDA will be roughly 5.6 times as we will be negatively impacted by Salix’s artificially low EBITDA due to its plan to
`reduce wholesaler inventory levels. We have an attractive deleveraging profile as we expect to get below 4 times leverage by the second half of 2016.
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`Similar to our B+L acquisition, we are committed to reduce our leverage to under 4 times in this timeframe. In 2016, we expect to have pro forma EBITDA in
`excess of $7.5 billion and free cash flow in excess of $4 billion before any mandatory repayments. In the near term, we would expect that our combined company
`tax rate would be approximately 5%.
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`Finally, our accretion should be more than 20% in 2016 while being modestly accretive at 2015 due to the planned wholesale inventory reductions.
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`We have had quite a few questions post the deal announcement about the $14.5 billion valuation versus the equity component of the deal. On this page, we show
`the bridge between the $10.4 billion equity value and the approximately $14.5 billion enterprise value. The primary additional cost comes from the retirement of
`the 2015 and 2019 convertibles, the repayment of their term loan and the retirement of their bond.
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`In closing we are very pleased about the strong performance of the Valeant operations and the exciting opportunities that we expect to realize from the
`acquisitions of Dendreon and Salix. We will report Salix and Dendreon going forward as two U.S. business units including revenue and restructuring and
`integrating charges as this will enable investors to continue to see the strong organic growth performance of our base business and see the restructuring charges
`again trending to zero.
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`We look forward to updating you on our financial and operational progress and sharing our updated guidance for 2015 on our first quarter call in April.
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`With that