`International, Inc.
`
`Fourth Quarter Preliminary Unaudited Financial
`Results
`2015 Conference Call
`
`March 15, 2016
`
`ACRUX DDS PTY LTD. et al.
`
`EXHIBIT 1611
`
`IPR Petition for
`
`U.S. Patent No. 7,214,506
`
`Page 1 of 29
`
`
`
`Forward-looking Statements
`
`Forward-looking Statements
`Certain statements made in this presentation may constitute forward-looking statements, including, but not limited to, statements regarding
`expected future performance of Valeant Pharmaceuticals International, Inc. (“Valeant” or the “Company”), including guidance with respect to
`total revenue, Adjusted EPS and Adjusted EBITDA and the assumptions used in connection with such guidance, revenue expectations and
`expected revenue growth, debt reduction, future pricing actions, managed care contracting negotiations, anticipated investment in payer
`rebates (including amount and product mix), expected investments in key functions, future acquisitions and divestitures, anticipated
`restructuring of certain businesses and SG&A cost reductions, timing of launch of Brand for Generic Program, the Company’s ability to
`negotiate with its lenders for extension of time to comply with certain financial statement reporting covenants under the Company’s credit
`agreement and bond indentures, the ongoing review of the ad hoc committee of the Company’s Board of Directors, expectations with
`respect to pending litigation and government investigations, expectations with respect to the funding, timing and outcome of development
`programs, and expected product launches for product candidates. Forward-looking statements may generally be identified by the use of the
`words “anticipates,” “expects,” “intends,” “plans,” “should,” “could,” “would,” “may,” “will,” “believes,” “estimates,” “potential,” “target,” or
`“continue” and variations or similar expressions. These statements are based upon the current expectations and beliefs of management and
`are subject to certain risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking
`statements. These risks and uncertainties include, but are not limited to, risks and uncertainties discussed in the Company's most recent
`annual or quarterly report and detailed from time to time in Valeant’s other filings with the Securities and Exchange Commission and the
`Canadian Securities Administrators, which factors are incorporated herein by reference. Readers are cautioned not to place undue reliance
`on any of these forward-looking statements. These forward-looking statements speak only as of the date hereof. Valeant undertakes no
`obligation to update any of these forward-looking statements to reflect events or circumstances after the date of this presentation or to
`reflect actual outcomes, except as required by law.
`
`
`Note About Preliminary Results
`The financial results presented in this presentation are preliminary and may change. This preliminary financial information includes
`calculations or figures that have been prepared internally by management and have not been reviewed or audited by our independent
`registered public accounting firm. There can be no assurance that the Company’s actual results for the period presented herein will not
`differ from the preliminary financial data presented herein and such changes could be material. This preliminary financial data should not be
`viewed as a substitute for full financial statements prepared in accordance with GAAP and is not necessarily indicative of the results to be
`achieved for any future periods. This preliminary financial information, and previously reported amounts, could be impacted by the effects of
`the pending review of the Ad Hoc Committee of the Board of Directors.
`
`
`Note 1: The guidance in this presentation is only effective as of the date given,
`March 15, 2016, and will not be updated or affirmed unless and until the Company
`publicly announces updated or affirmed guidance.
`
`1
`
`Page 2 of 29
`
`
`
`Non-GAAP Information
`
`
`To supplement the financial measures prepared in accordance with U.S. generally accepted accounting principles (GAAP),
`the Company uses certain non-GAAP financial measures including (i) Adjusted earnings per share (“EPS”), (ii) Adjusted
`EBITDA, (iii) Cash Available for Debt Repayment and Other Purposes, (iv) Adjusted Cash Flow from Operations, (v) Cost
`of goods sold (non-GAAP), and (vi) Selling, general and administrative expenses (non-GAAP).
`
`The reconciliations of these non-GAAP measures to the most directly comparable financial measures calculated and
`presented in accordance with GAAP can be found in the tables to the Company’s press release dated March 15, 2016, a
`copy of which can be found on the Company’s website at www.valeant.com. Other than with respect to total revenue, the
`Company only provides guidance on a non-GAAP basis and does not provide reconciliations of such forward-looking non-
`GAAP measures to GAAP, due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary
`for such reconciliations.
`
`Management uses these non-GAAP measures as key metrics in the evaluation of Company performance and the
`consolidated financial results and, in part, in the determination of cash bonuses for its executive officers. The Company
`believes these non-GAAP measures are useful to investors in their assessment of our operating performance and the
`valuation of our company. In addition, these non-GAAP measures address questions the Company routinely receives from
`analysts and investors and, in order to assure that all investors have access to similar data, the Company has determined
`that it is appropriate to make this data available to all investors. However, non-GAAP financial measures are not prepared
`in accordance with GAAP, as they exclude certain items as described in the appendix hereto. Therefore, the information is
`not necessarily comparable to other companies and should be considered as a supplement to, not a substitute for, or
`superior to, the corresponding measures calculated in accordance with GAAP.
`
`Please see the appendix to this presentation for a more detailed description of each non-GAAP financial measure used by
`the Company herein, including the adjustments reflected in each non-GAAP measure.
`
`
`
`2
`
`Page 3 of 29
`
`
`
`Today’s Topics
`• Q4 2015 preliminary unaudited financial results
`
`• Changes in Valeant’s tax presentation for 2016
`
`• Q1 2016 revised guidance
`
`• Current state of the business
`• Observations
`• Steps taken to improve business performance
`•
`2016 revised guidance
`• Next four quarters guidance
`
`•
`
`
`Liquidity and cash flow update
`
`• Additional updates
`• Ad Hoc Committee
`•
`Litigation and investigations status
`
`• Addressing questions by shareholders
`
`• Appendix
`•
`Financial guidance appendix
`•
`2016 revised guidance assumptions
`•
`Top 30 products
`
`3
`
`Page 4 of 29
`
`
`
`What We Can and Cannot Provide Today
`
`• Due to the ongoing review of company financials, we
`cannot provide certain comparative metrics that we have
`historically provided
`
`• Metrics we cannot provide:
`• Organic Growth
`• Business Unit Growth
`• Price/Volume
`
`• Metrics we can provide:
`• Preliminary unaudited Q4 2015 results
`• Top 30 Brands
`
`4
`
`Page 5 of 29
`
`
`
`Preliminary Q4 2015 Unaudited Financial Results
`Versus Guidance
`
`Q4 2015
`Guidance
`
`Q4 2015
`Unaudited1
`
`Total Revenue
`
`$2.7 - $2.8 B
`
`$2.8 B
`
`GAAP EPS
`
`N/A
`
`$(0.98)
`
`Adjusted EPS
`(non-GAAP)2
`GAAP Cash Flow
`from Operations
`Adjusted Cash Flow
`from Operations
`(non-GAAP)3
`
`$2.55 - $2.65
`
`$2.50
`
`N/A
`
`$562M
`
`>$600M
`
`$838M
`
`1 The financial information is preliminary and is subject to change
`2 See page 2 for note on non-GAAP information and appendix
`3 We will no longer report adjusted cash flow from operations (non-GAAP) as announced on December 16, 2015.
`5
`
`Page 6 of 29
`
`
`
`Changes in Valeant’s Tax Reporting for 2016
`
`Reported Tax Rate1
`Adjusted Tax Provision (Table 2a/2b)
`
`Old tax reporting
`
`Current Tax Effect
`
`
`
`
`
`~5%
`
`Q4 2015
`(unaudited)2
`
`Total Tax Effect broken out by:
`- Tax provision plus effects of Non-GAAP
`Adjustments ~10 - 15%
`- Tax effects of use of tax attributes and
`other timing items ~(5%) - (10%)
`
`~5%
`
`2016 forward (new
`tax reporting)
`
`Tax provision plus effect of Non-
`GAAP Adjustments (only)
`
`~10 – 15%
`
`No Impact on Cash Flow or Actual Taxes Paid
`
`1 Used to calculate Adjusted EPS (Non-GAAP)
`2 As shown in press tables
`
`6
`
`Page 7 of 29
`
`
`
`Q1 2016 Revised Guidance
`
`December
`Guidance –
`Old Tax
`Reporting
`
`Revised
`Guidance –
`Old Tax
`Reporting
`
`Revised
`Guidance –
`New Tax
`Reporting
`
`Total Revenue
`
`$2.8 - $3.1 B
`
`$2.3 - 2.4 B
`
`$2.3 - 2.4 B
`
`Adjusted EPS
`(non-GAAP)1
`
`$2.35 - $2.55
`
`$1.30 - 1.55
`
`$1.18 - 1.43
`
`1 See page 2 for note on non-GAAP information and appendix
`
`7
`
`Page 8 of 29
`
`
`
`Current State of the Business
`
`•
`
`Lower revenue trajectory on key businesses
`• More conservative forecasting on Dermatology and Gastrointestinal growth
`• GI: timing and impact of additional sales team and coverage
`• Dermatology: timing and uptake of patient access program
`
`
`• Continued growth in Contact Lens, Dentistry, Oncology, Generics, and Eastern Europe,
`Asia (Emerging Markets)
`
`• Several businesses off to slow starts
`• Western Europe, Ophthalmology Rx, Solta, and Obagi
`
`
`• Walgreens off to a good start
`• Walgreens ~30% of total dermatology volume
`• Brand for generics program on track to launch this summer
`• Walgreens senior management equally excited about program
`
`
`• Given significant reduction in revenues, work needed to align cost base
`
`• Continued focus and improvement on patient access
`• Strengthened managed care organization with new hires
`•
`Investing in managed care relationships and actively negotiating with managed care to
`ensure continued patient coverage and access
`
`8
`
`Page 9 of 29
`
`
`
`Initial Steps Taken
`
` Restructuring smaller businesses
`Solta
`Sprout
`Obagi
`Commonwealth
`
` Beginning to address SG&A cost reductions given revenue
`shortfalls
`
`
` Partially offset by investment in key functions
` Financial reporting
` Public relations
` Government affairs
` Managed care
` Compliance
`
`
` Exploring targeted divestitures of non-core assets
`
`9
`
`Page 10 of 29
`
`
`
`Maintaining U.S. Market Access for our Entire Portfolio
`is Critical to our Success
`
`• Productive negotiations ongoing with national health plans, PBMs, & regional health:
`• 2017 bids for Part D and Commercial
`• Response to therapeutic reviews conducted by payors
`• Requests for price inflation protection across our portfolio
`
`
`•
`
`Investing more in 2016 in payor rebates to enable patients affordable access to our
`portfolio with favorable access to our key growth brands.
`
`• Our current coverage is:
`•
` 88% in commercial lives for Jublia with 59% unrestricted; limited access in
`Medicare Part D
` >98% in commercial lives for Xifaxan with 59% unrestricted; > 94.2% for Part
`D with 22.2% unrestricted
`• > 82% unrestricted commercial access across our ophthalmology portfolio;
`>56% unrestricted access in Part D
`
`•
`
`We continue to have significant coverage of the commercial market and
`are working to improve Part D access
`
`10
`
`Page 11 of 29
`
`
`
`Full Year 2016 Revised Guidance
`
`December
`Guidance –
`Old Tax
`Reporting
`
`Revised
`Guidance –
`Old Tax
`Reporting
`
`Revised
`Guidance –
`New Tax
`Reporting
`
`Total Revenue
`
`$12.5 - $12.7B
`
`$11.0 - $11.2B
`
`$11.0 - $11.2B
`
`Adjusted EPS
`(non-GAAP)1
`
`Adjusted EBITDA
`(non-GAAP)1
`
`$13.25 - $13.75
`
`$9.50 - $10.50
`
`$8.50 - $9.50
`
`$6.9 - $7.1B
`
`$5.6 - 5.8B
`
`$5.6 - 5.8B
`
`1 See page 2 for note on non-GAAP information and appendix
`
`11
`
`Page 12 of 29
`
`
`
`Bridge to Revised 2016 Guidance (adjusted non-GAAP
`EPS)
`
`Q1 under performance (~$1.00/share)
` Higher than expected inventory reductions in retailers and wholesalers
`
` Transition of Philidor to Walgreens
`
` Cancelled almost all planned price increases
` Changes in foreign exchange (Q1)
`
`Full year lower revenue expectations (~$1.00/share)
` More conservative revenue assumptions relative to December guidance:
` Slower rebound of Dermatology
`
` More modest growth in Salix
` Underperformance in other business units (e.g., Women’s Health and Western Europe)
`
`
`Managed care contracting (~$1.00/share)
` Ongoing negotiations to secure 2016 and 2017 formulary status
`
`
`Other items (~$0.50/share)
` Foreign exchange
` Select investments in key functions (e.g., financial reporting, managed care, public relations,
`government relations, compliance)
`
` Continued organizational distraction
`
`Tax change (~$1.00/share)
` New tax reporting, starting in 2016
`
`12
`
`Page 13 of 29
`
`
`
`Bridge to Revised 2016 Guidance (Revenue)
`
`December Guidance
`
`GI, Dermatology, and Neurology
`
`$12.5B -12.7B
`
`~$800M
`
`Other U.S. (e.g., Ophthalmology Rx, Women’s Health)
`
`~$300M
`
`Other Ex-U.S. (e.g., Western Europe)
`
`Foreign Exchange
`
`Other
`Revised Guidance
`
`~$200M
`
`~$110M
`
`~$90M
`$11.0B – 11.2B
`
`1 See page 2 for note on non-GAAP information and appendix
`
`13
`
`Page 14 of 29
`
`
`
`Three Year Growth Profile Outlook
`
`Double Digit Growth
`
`Single Digit Growth
`
`Flat to Declining Growth
`
`• GI
`• Dendreon
`• Dentistry
`• Contact Lens
`• Women’s Health
`
`
`• Neurology/Other
`• Western Europe
`• Generics
`
`
`
`
`• Dermatology
`• Europe – Emerging
`Markets
`• Asia
`• Latin America
`• Consumer
`• Ophthalmology Rx
`• Canada
`• B+L Surgical
`• Obagi/Solta
`
`14
`
`Page 15 of 29
`
`
`
`Leading Growth Platforms
`
`• Xifaxan
`
`• Emerging Markets
`
`• Ultra/Biotrue
`
`• Latanoprostene bunod
`
`•
`
`IDP-118
`
`• Brodalumab
`
`15
`
`Page 16 of 29
`
`
`
`Next Four Quarters Guidance (Q2 2016 - Q1 2017)
`
`Next four quarters
`guidance1 –
`Old Tax Reporting
`
`Next four quarters
`guidance1 –
`New Tax Reporting
`
`Total Revenue
`
`~$11.6 - $11.8 B
`
`~$11.6 - $11.8 B
`
`Adjusted EPS
`(non-GAAP)1
`
`Adjusted EBITDA
`(non-GAAP)1
`
`~$10.75 - $11.25
`
`~$9.65 - $10.15
`
`~$6.0B
`
`~$6.0B
`
`Assumes Q1 2017 in line with Q1 2016
`December guidance
`
`1 See page 2 for note on non-GAAP information and appendix
`
`16
`
`Page 17 of 29
`
`
`
`Liquidity Update
`Current liquidity position
` ~$1.2B cash
`
` $1.45 B drawn revolver
`Key payments made YTD
` Sprout payment of $500 M made in January
`
` Repaid $405 M term loans in Q1
`
`– $145 M mandatory amortization
`
`– $260 M term loan maturities
`Remaining 2016 Mandatory Payments
` $517 M term loans
`
`– $417 M ($139M in each of Q2, Q3, and Q4) mandatory amortization
`
`– ~$100 M mandatory excess cash flow payment (calculated annually per credit agreement)
`Minimal amortization and maturities in 2017 and 2018
` 2017: $631 M term loans
`
` 2018: $2,923 M term loans and bonds + $1,500 M (revolver)
`Exploring targeted divestitures of non-core assets
` Sale of Synergetics contract manufacturing business (expected to close Q2)
`
`17
`
`Page 18 of 29
`
`
`
`Covenant Highlights - Financial
`
` We expect to be in compliance with credit agreement financial maintenance covenants
`for full year 2015 and throughout 2016 based on guidance
`
` Senior secured leverage covenant: 2.5x (secured debt to pro forma adjusted EBITDA
`per credit agreement1)
`
` ~2.1x at year end 20152
`
`
`
`Interest coverage covenant: 2.25x through March 2016, then 3.0x (pro forma adjusted
`EBITDA to pro forma interest coverage per credit agreement1)
`
` ~3.3x at year end 20152
`
` Net leverage to pro forma adjusted EBITDA per credit agreement1 ~5.8x at year end
`2015
`
` Net leverage to pro forma adjusted EBITDA per credit agreement1 expected to be ~5x
`by year end 2016
`
`1 See page 2 for note on non-GAAP information and appendix
`2 Based on preliminary, unaudited 2015 financial information
`
`18
`
`Page 19 of 29
`
`
`
`Covenant Highlights – Financial Statement Reporting
`
` Credit agreement
`
`– March 30th: 10-K due; default if not delivered
`
`– 30 days to cure default by delivering 10-K (if not filed by March 30th)
`
`– April 29th: event of default if 10-K is not delivered
`
` Bond indentures
`
`– March 16th: If 10-K not filed, breach of the reporting covenant in the indentures;
`trustee or holders of at least 25% of any series of notes may deliver a notice of default
`
`– 60 days from the date of receipt of a notice of default to file the 10-K and thereby cure
`the default
`
`Launching process with bank lenders next week to seek to extend
`deadline for filing our 10-K and Q1 10-Q, and waive cross-default arising
`from breach of reporting covenant in the indentures
`
`19
`
`Page 20 of 29
`
`
`
`Cash Available for Debt Repayment and Other Purposes
`
`$M
`
`2016 Adjusted EBITDA (non-GAAP)1 (midpoint of guidance)
`
`~$5,700
`
`Cash Interest Expense
`
`Taxes (net of NOL benefit)
`
`Increase in Working Capital
`
`Cash Restructuring
`
`Contingent Consideration/Milestones/Payments
`(e.g., Sprout, Brodalumab)
`
`Capital Expenditures
`Cash available for debt repayment and other purposes1,2
`
`~$1,625
`
`~$215
`
`~$200
`
`~$175
`
`~$975
`
`~$350
`~$2,200
`
`Committed to minimum permanent debt pay down in 2016 of >$1.7B
`
`1 See page 2 for note on non-GAAP information and appendix
`2 Excludes net asset sale proceeds
`
`20
`
`Page 21 of 29
`
`
`
`'—
`Appendix
`I Appendix
`
`21
`21
`
`Page 22 of 29
`
`'VALEANT
`
`Page 22 of 29
`
`
`
`Non-GAAP Appendix (1/3)
`
`Description of Non-GAAP Financial Measures
`To supplement the financial measures prepared in accordance with U.S. generally accepted accounting principles (GAAP), the Company uses certain non-
`GAAP financial measures, as follows:
`
`Adjusted EPS
`Management uses Adjusted EPS for strategic decision making, forecasting future results and evaluating current performance. In addition, cash bonuses for the
`Company’s executive officers are based, in part, on the achievement of certain Adjusted EPS targets. This non-GAAP measure excludes the impact of certain
`items (as further described below) that may obscure trends in the Company’s underlying performance. By disclosing this non-GAAP measure, management
`intends to provide investors with a meaningful, consistent comparison of the Company’s operating results and trends for the periods presented. Management
`believes this measure is also useful to investors as it allow investors to evaluate the Company’s performance using the same tools that management uses to
`evaluate past performance and prospects for future performance.
`Adjusted EPS reflect adjustments based on the following items:
`Inventory step-up and property, plant and equipment (PP&E) step-up/down: The Company has excluded the impact of fair value step-up/down adjustments to
`inventory and PP&E in connection with business combinations as such adjustments represent non-cash items, and the amount and frequency is not consistent
`and is significantly impacted by the timing and size of our acquisitions.
`Stock-based compensation: The Company has excluded the impact of previously accelerated vesting of certain stock-based equity instruments as such
`impact is not reflective of the ongoing and planned pattern of recognition for such expense.
`Acquisition-related contingent consideration: The Company has excluded the impact of acquisition-related contingent consideration non-cash adjustments
`due to the inherent uncertainty and volatility associated with such amounts based on changes in assumptions with respect to fair value estimates, and the
`amount and frequency of such adjustments is not consistent and is significantly impacted by the timing and size of our acquis itions, as well as the nature of the
`agreed-upon consideration.
`In-Process research and development impairments and other charges: The Company has excluded expenses associated with acquired in-process research
`and development (including any impairment charges), as these amounts are inconsistent in amount and frequency and are significantly impacted by the
`timing, size and nature of acquisitions. Although expenses associated with acquired in-process research and development are generally not recurring with
`respect to past acquisitions, the Company may incur these expenses in connection with any future acquisitions.
`Philidor Rx Services wind down costs – The Company has excluded certain costs associated with the wind down of the arrangement with Philidor Rx Services,
`primarily including write-downs of fixed assets and bad debt expenses. The Company believes it is useful to understand the effect of excluding this item when
`evaluating ongoing performance.
`Other (income) expense: The Company has excluded certain other expenses that are the result of other, unplanned events to measure operating
`performance, primarily including costs associated with the termination of certain supply and distribution agreements, legal s ettlements and related fees,
`Philidor-related and pricing-related investigation and litigation costs, post-combination expenses associated with business combinations for the acceleration of
`employee stock awards and/or cash bonuses, and gains/losses from the sale of assets and businesses. These events are unplanned and arise outside of the
`ordinary course of continuing operations. The Company believes the exclusion of such amounts allows management and the users of the financial statements
`to better understand the financial results of the Company.
`
`22
`
`Page 23 of 29
`
`
`
`Non-GAAP Appendix (2/3)
`
`Restructuring, integration, and acquisition-related expenses: In recent years, the Company has completed a number of acquisitions, which result in operating
`expenses which would not otherwise have been incurred, and the Company may incur such expenses in connection with any future acquisitions. The
`Company has excluded certain restructuring, integration and other acquisition-related expense items resulting from acquisitions (including legal and due
`diligence costs) to allow more accurate comparisons of the financial results to historical operations and forward-looking guidance. Such costs are generally not
`relevant to assessing or estimating the long-term performance of the acquired assets as part of the Company, and are not factored into management’s
`evaluation of potential acquisitions or its performance after completion of acquisitions. In addition, the frequency and amount of such charges vary significantly
`based on the size and timing of the acquisitions and the maturities of the businesses being acquired. Also, the size, complexity and/or volume of past
`acquisitions, which often drives the magnitude of such expenses, may not be indicative of the size, complexity and/or volume of future acquisitions. By
`excluding the above referenced expenses from our non-GAAP measures, management is better able to evaluate the Company’s ability to utilize its existing
`assets and estimate the long-term value that acquired assets will generate for the Company. Furthermore, the Company believes that the adjustments of
`these items more closely correlate with the sustainability of the Company’s operating performance.
`Amortization and impairments of finite-lived intangible assets: The Company has excluded the impact of amortization and impairments of finite-lived intangible
`assets (including impairments of intangible assets related to Philidor Rx Services), as such non-cash amounts are inconsistent in amount and frequency and
`are significantly impacted by the timing and/or size of acquisitions. The Company believes that the adjustments of these items more closely correlate with the
`sustainability of the Company’s operating performance. Although the Company excludes amortization of intangible assets from its non-GAAP expenses, the
`Company believes that it is important for investors to understand that such intangible assets contribute to revenue generation. Amortization of intangible
`assets that relate to past acquisitions will recur in future periods until such intangible assets have been fully amortized. Future acquisitions may result in the
`amortization of additional intangible assets and potential impairment charges.
`Amortization of deferred financing costs and debt discounts: The Company has excluded amortization of deferred financing costs and debt discounts as this
`represents a non-cash component of interest expense.
`Foreign exchange and other: The Company has excluded foreign exchange and other to eliminate the impact of foreign currency fluctuations primarily related
`to intercompany financing arrangements in evaluating company performance.
`Tax: The Company has (i) excluded the tax impact of the non-GAAP adjustments and (ii) recorded adjustments for the use of tax attributes and other deferred
`tax items plus any payments made for settlement of tax audits, in order to reflect an expected tax rate for the current period.
`
`
`Adjusted EBITDA
`Adjusted EBITDA is net income (its most directly comparable GAAP financial measure) adjusted for certain items, as further described below. Management
`uses this non-GAAP measure as part of its guidance and to forecast future results. Management also believes Adjusted EBITDA is a useful measure to evaluate
`current performance. Adjusted EBITDA is intended to show our unleveraged, pre-tax operating results and therefore reflects our financial performance based on
`operational factors, excluding anticipated non-operational, non-cash or non-recurring losses or gains.
`Adjusted EBITDA reflects, as applicable, the adjustments reflected in Adjusted EPS (see disclosure above). In addition, the C ompany excludes the impact of
`costs relating to stock-based compensation. Due to subjective assumptions and a variety of award types, the Company believes that the exclusion of stock-
`based compensation expense, which is typically non-cash, allows for more meaningful comparisons of operating results to peer companies. Stock-based
`compensation expense can vary significantly based on the timing, size and nature of awards granted. Finally, to the extent not already adjusted for, Adjusted
`EBITDA reflects adjustments for interest, taxes, depreciation and amortization (EBITDA represents earnings before interest, taxes, depreciation and
`amortization).
`
`
`
`23
`
`Page 24 of 29
`
`
`
`Non-GAAP Appendix (3/3)
`
`Cash Available for Debt Repayment and Other Purposes
`Cash Available for Debt Repayment and Other Purposes reflects certain adjustments, as further described below, to Adjusted EBITDA. Management uses this
`non-GAAP measure in analyzing the Company’s ability to service and repay debt in the future and to forecast future periods. Cash Flow (non-GAAP) reflects
`adjustments for, as applicable, cash interest expense, taxes, increase in working capital, cash restructuring, contingent consideration and certain capital
`expenditures.
`
`Adjusted cash flow from operations
`Management uses this non-GAAP measure for strategic decision making and evaluating the ability of our businesses to generate cas h. Management believes
`this measure is useful to investors because it is an indication of the amount of cash flow that may be available for future repayment of debt, future investment in
`growth initiatives and other future discretionary and non-discretionary expenditures.
`Adjusted cash flow from operations reflects adjustments primarily based on the following items:
`Restructuring, integration, and acquisition-related amounts: The Company has excluded cash flows related to restructuring, integration, and acquisition-
`related costs as the size, complexity and/or volume of past acquisitions, which often drives the magnitude of such cash flows , may not be indicative of the size,
`complexity and/or volume of future acquisitions, as further described above. The Company may have such cash outflows in connection with any future
`acquisitions.
`Acquired in-process research and development: The Company has excluded cash flows related to acquired in-process research and development as these
`amounts are inconsistent in amount and frequency and are significantly impacted by the timing, size and nature of acquisitions. Although cash flows
`associated with acquired in-process research and development are generally not recurring with respect to past acquisitions, the Company may have such
`cash outflows in connection with any future acquisitions.
`Excess tax benefit from share-based compensation: Company has included an add-back for tax benefits for share-based compensation, which represents the
`benefits arising from the difference between the fair value of the awards at the date of grant and the fair value at the exercise/settlement date. The benefit is
`added-back to reflect the cash benefits (in the form of reduced tax payments) from the tax deductions.
`Working capital changes related to certain business combinations: The Company has excluded certain working capital impacts resulting from post-
`combination bonus payments to acquire employees.
`
`
`
`Cost of Goods Sold (non-GAAP)
`Costs of Goods Sold (non-GAAP) excludes, as applicable, certain costs primarily relating to fair value step-up adjustments to inventory and property, plant and
`equipment and integration-related inventory charges and technology transfers.
`
`Selling, General and Administrative Expenses (non-GAAP)
`Selling, General and Administrative Expenses (non-GAAP) excludes, as applicable, certain costs primarily related to stock-based compensation for the impact of
`modifications to equity awards and accelerations of certain equity instruments and fair value step-up adjustments and impairments to property, plant and
`equipment.
`
`Credit Agreement – Pro Form Adjusted EBITDA and Financial Covenant Calculations
`Pro forma adjusted EBITDA is defined as “Consolidated Adjusted EBITDA” in our Third Amended and Restated Credit and Guaranty Agreement dated February
`13, 2012 (as further amended) (the “Credit Agreement”). Under the terms of the Credit Agreement, the calculation of Consolidated Adjusted EBITDA requires the
`exclusion of certain charges and the inclusion of certain pro forma adjustments for acquisitions and divestitures. Details of the definition of Consolidated Adjusted
`EBITDA definition, including the adjustments thereto, and the financial covenant calculations can be found in our Credit Agreement (and amendments thereto),
`which are filed as exhibits to our most recent Form 10-K and Form 10-Qs, which are publicly filed and can be found in the investor relations section of the
`Company’s website at www.valeant.com. The calculation of pro forma adjusted EBITDA under our Credit Agreement differs from that of the Adjusted EBITDA
`referenced elsewhere in this presentation.
`
`
`
`24
`
`Page 25 of 29
`
`
`
`Key Assumptions for Revised 2016 Guidance
`
` Exchange rates based on spot rates
`
` No further acquisitions
`
` COGS1: ~23%
`
` SG&A1: ~25%, which includes $75M in retention expenses
`
` R&D spend: ~$400-500 M
`
` Adjusted tax rate: ~5% (old reporting), 10-15% (new reporting)
`
` Cash Interest expense: ~$1.6 B
`
` Depreciation: ~$200 M
`
` Capital expenditure: ~$350M
`
` Stock-based compensation: ~$200 M
`
` Non-GAAP Philidor and pricing related expenses
`
`1 See page 2 for note on non-GAAP information and appendix
`
`25
`
`Page 26 of 29
`
`
`
`Q4 2015 Top 30 Brands (1/3)
`
`$M
`
`Product
`1
`Xifaxan
`2
`3
`4
`5
`6
`7
`8
`9
`10
`
`Wellbutrin
`
`Glumetza
`
`Provenge
`
`SofLens*
`
`Jublia
`
`Omeprazole1,2
`
`Ocuvite/Preservision*
`
`Nitropress
`
`Q4 2015 Unaudited Revenue
`
`210
`
`93
`
`86
`
`77
`
`74
`
`68
`
`62
`
`61
`
`58
`
`ReNu*
`54
`Top 30 represent 52% of total company revenue
`
`* Sales depressed on 9 of top 30 products due to F/X impact
`1 Authorized Generic for Zegerid
`2 Omeprazole Q3 2015 revenue was $17M, falling below Top 30 brands list
`
`26
`
`Page 27 of 29
`
`
`
`Q4 2015 Top 30 Brands (2/3)
`
`$M
`
`Product
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`
`Isuprel
`
`Xenazine*
`
`Lotemax
`
`Uceris Tablets
`
`Cerave*
`
`PureVision*
`
`Arestin
`
`Apriso
`
`Biotrue MPS*
`
`Q4 2015 Unaudited Revenue
`
`53
`
`50
`
`43
`
`39
`
`39
`
`38
`
`32
`
`31
`
`28
`
`Cuprimine
`27
`Top 30 represent 52% of total company revenue
`
`* Sales depressed on 9 of top 30 products due to F/X impact
`
`27
`
`Page 28 of 29
`
`
`
`Q4 2015 Top 30 Brands (3/3)
`
`$M
`
`Product
`21
`Solodyn
`22
`23
`24
`25
`26
`27
`28
`29
`
`Elidel
`
`Syprine
`
`Ammonul
`
`Artelac*
`
`Relistor
`
`Carac
`
`Zegerid
`
`Q4 2015 Unaudited Revenue
`26
`
`25
`
`23
`
`23
`
`22
`
`22
`
`21
`
`21
`
`21
`
`20
`
`Anterior Disposables (disposable supplies
`for anterior chamber cataract surgery)*
`
`30
`
`Akreos Advanced Optics (IOLs)
`
`Top 30 represent 52% of total company revenue
`
`* Sales depressed on 9 of top 30 products due to F/X impact
`
`28
`
`Page 29 of 29
`
`