10/31/2017
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`Hold the Valeant Applause - Bloomberg Gadfly
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`BloombergGadfly 5
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` Max Nisen
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`Follow @MaxNisen
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`Nov 2, 2016 10:01 AM EDT
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`s
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`Nothing like a bit of M&A speculation to make people forget about a possible criminal probe of your ex-CEO and ex-CFO.
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`Valeant is reportedly in advanced negotiations with Takeda to sell Salix, a gastrointestinal drug business acquired last year for $11.1
`billion, for as much as $10 billion.
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`It's good news in one sense: It would give Valeant a significant and very badly needed cash infusion to pay off a chunk of its $31 billion in
`debt and cushion itself against further business declines and substantial legal risk.
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`It is also good news in the context of Valeant's particular reality distortion field, where news that would be seen as horrible in any other
`situation is celebrated.
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`Valeant shares bounced more than 30 percent on Tuesday, but only after hitting a six-year low the day before on the news about its former
`executives. Hooray?
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`Valeant shares reached a six year low on Monday, and saw their biggest jump since 1994 on Tuesday
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`Valeant Pharmaceuticals
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`$32
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`30
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`28
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`26
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`24
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`22
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`20
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`18
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`16
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`1
`2 6 7 8 9 12 13 14 15 16 19 20 21 22 23 26 27 28 29 30 3
`4 5 6 7 10 11 12 13 14 17 18 19 20 21 24 25 26 27 28 31 1
`Sep '16
`Oct '16
`Nov '16
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`Source: Bloomberg
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`Here in normal, non-distorted, reality, Valeant may be about to sell a business it bought roughly a year and a half ago at a $1 billion loss.
`The haircut is even larger if you count the Salix debt Valeant assumed, or if you consider the vaporization of millions in wasted
`transaction and integration spending. And the deal's immediate payout may only be $8.5 billion; the rest may come later in the form of
`royalties.
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`Salix is one of Valeant's very few sources of growth. If it must unload what's arguably its most promising portfolio to raise cash, and at a
`discount, then how poorly must its previously declared efforts to sell only "non-core" assets be going? It seems highly unlikely Valeant
`would sell Salix if it could net any kind of return on the laundry list of ancillary businesses rumored to be on the market at various points.
`This also suggests Valeant lacks confidence its business will organically produce enough cash to meet its debt obligations.
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`If this sale goes through, Valeant will have met its $8 billion asset-sale target in one fell swoop. But what's left behind?
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`Xifaxan, the flagship drug Valeant acquired when it bought Salix, is its best-selling product by a huge margin. Most of its other assets are
`old, declining, tainted by scandal, or all of the above
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`•••
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`Take away Salix's GI drugs and Valeant's lineup of products looks pretty ugly
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`https://www.bloomberg.com/gadfly/articles/2016-11-02/valeant-salix-sale-talks-hold-your-applause
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`ACRUX DDS PTY LTD. et al.
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`EXHIBIT 1607
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`IPR Petition for
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`U.S. Patent No. 7,214,506
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`Page 1 of 3
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`Wait, What?
`Wheel of Misfortune
`Hold the Valeant Applause
`By Max Nisen
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`10/31/2017
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`Hold the Valeant Applause - Bloomberg Gadfly
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`Second quarter product revenue
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`Off-patent
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`36% growth y-o-y
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`Bankrupted its creator with its commercial failure
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`-33% growth y-o-y
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`52% growth y-oy
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`-69% growth y-o-y
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`0
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`20
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`40
`
`60
`
`80
`
`100
`
`120
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`140
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`160
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`180
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`200
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`Xifaxan (gone)
`Wellbutrin
`SofLens
`Provenge
`Ocuvite/Preservision
`ReNu
`Xenazine
`Arestin
`Isuprel
`PureVison
`Uceris Tablets (gone)
`Lotetmax
`Nitropress
`Biotrue
`Apriso (gone)
`Jublia
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`Product
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`Source: Bloomberg
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`Letting go of Salix puts a huge dent in Valeant's growth potential. Most of the company's top five businesses saw revenue drop
`substantially in the latest quarter. Salix's gut drugs grew 10 percent year-over-year, but the catch-all neurology/other/generics business
`dropped 11 percent. Dermatology sales fell 55 percent, and eye drugs fell 25 percent. Prescription trends suggest the bleeding might
`continue when Valeant reports third-quarter results on November 8.
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`Selling Salix would give Valeant much-needed cash, but it also hastens the company's transition into a business in decline, where the
`most realistic ambition will simply be keeping the lights on a bit longer.
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`This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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`1. A few low-lights:
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`Antidepressant Wellbutrin is the company's second-biggest drug and grew sales in the second quarter. But there are cheaper versions available, and Valeant has hiked its
`price repeatedly.
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`Cancer vaccine Provenge is the next-biggest drug product, and sales grew 4 percent in the second quarter from a year earlier. But it's expensive to produce and possibly
`ineffective, with little growth potential. Its commercial failure famously bankrupted its creator, Dendreon.
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`Jublia, once a flagship toe drug advertised at the past two Super Bowls, is now a poster child for the collapse of Valeant's dermatology business. It had been artificially boosted
`by Valeant's relationship with the scandal-ridden specialty pharmacy Philidor. Sales fell 69 percent year-over-year in the second quarter.
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`Nitropress and Isuprel are heart drugs that saw triple-digit price increases, provoking a government investigation. They are being discounted, and generic competition is
`imminent.
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`To contact the author of this story:
`Max Nisen in New York at mnisen@bloomberg.net
`
`To contact the editor responsible for this story:
`Mark Gongloff at mgongloff1@bloomberg.net
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`https://www.bloomberg.com/gadfly/articles/2016-11-02/valeant-salix-sale-talks-hold-your-applause
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`10/31/2017
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`Hold the Valeant Applause - Bloomberg Gadfly
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`https://www.bloomberg.com/gadfly/articles/2016-11-02/valeant-salix-sale-talks-hold-your-applause
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