Valeant 2014 Form 10-K
`
`https://www.sec.gov/Archives/edgar/data/885590/000088559015000015/...
`
`10-K 1 valeant2014form10-k.htm FORM 10-K
`
`UNITED STATES
`SECURITIES AND EXCHANGE COMMISSION
`Washington, D.C. 20549
`_____________________________
`
`FORM 10-K
`
`ý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
`For the fiscal year ended December 31, 2014
`OR
`o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
`For the transition period from to
`
`Commission file number 001-14956
`VALEANT PHARMACEUTICALS INTERNATIONAL, INC.
`(Exact Name of Registrant as Specified in its Charter)
`
`BRITISH COLUMBIA, CANADA
`State or other jurisdiction of
`incorporation or organization
`
`98-0448205
`(I.R.S. Employer Identification No.)
`
`2150 St. Elzéar Blvd. West
`Laval, Quebec
`Canada, H7L 4A8
`(Address of principal executive offices)
`
`Registrant's telephone number, including area code (514) 744-6792
`
`Securities registered pursuant to Section 12(b) of the Act:
`
`Title of each class
`Common Shares, No Par Value
`Securities registered pursuant to section 12(g) of the Act:
`
`Name of each exchange on which registered
`New York Stock Exchange, Toronto Stock Exchange
`
`None
`(Title of class)
`Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý No o
`
`Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No ý
`
`Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or Section 15(d) of the Securities Exchange Act of 1934 during the
`preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
`90 days. Yes ý No o
`
`Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
`and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
`files). Yes ý No o
`
`Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s
`knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
`
`Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of
`“large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
`
`Large accelerated filer ý
`
`Non-accelerated filer o
`Accelerated filer o
`(Do not check if a smaller reporting company)
`
`Smaller reporting company o
`
`Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý
`
`The aggregate market value of the common shares held by non-affiliates of the registrant as of the last business day of the registrant’s most recently completed second fiscal
`quarter was $37,219,586,000 based on the last reported sale price on the New York Stock Exchange on June 30, 2014.
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`ACRUX DDS PTY LTD. et al.
`
`EXHIBIT 1630
`
`IPR Petition for
`
`U.S. Patent No. 7,214,506
`
`

`

`Valeant 2014 Form 10-K
`
`https://www.sec.gov/Archives/edgar/data/885590/000088559015000015/...
`
`10-K 1 valeant2014form10-k.htm FORM 10-K
`
`UNITED STATES
`SECURITIES AND EXCHANGE COMMISSION
`Washington, D.C. 20549
`_____________________________
`
`FORM 10-K
`
`ý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
`For the fiscal year ended December 31, 2014
`OR
`o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
`For the transition period from to
`
`Commission file number 001-14956
`VALEANT PHARMACEUTICALS INTERNATIONAL, INC.
`(Exact Name of Registrant as Specified in its Charter)
`
`BRITISH COLUMBIA, CANADA
`State or other jurisdiction of
`incorporation or organization
`
`98-0448205
`(I.R.S. Employer Identification No.)
`
`2150 St. Elzéar Blvd. West
`Laval, Quebec
`Canada, H7L 4A8
`(Address of principal executive offices)
`
`Registrant's telephone number, including area code (514) 744-6792
`
`Securities registered pursuant to Section 12(b) of the Act:
`
`Title of each class
`Common Shares, No Par Value
`Securities registered pursuant to section 12(g) of the Act:
`
`Name of each exchange on which registered
`New York Stock Exchange, Toronto Stock Exchange
`
`None
`(Title of class)
`Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý No o
`
`Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No ý
`
`Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or Section 15(d) of the Securities Exchange Act of 1934 during the
`preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
`90 days. Yes ý No o
`
`Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
`and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
`files). Yes ý No o
`
`Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s
`knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
`
`Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of
`“large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
`
`Large accelerated filer ý
`
`Non-accelerated filer o
`Accelerated filer o
`(Do not check if a smaller reporting company)
`
`Smaller reporting company o
`
`Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý
`
`The aggregate market value of the common shares held by non-affiliates of the registrant as of the last business day of the registrant’s most recently completed second fiscal
`quarter was $37,219,586,000 based on the last reported sale price on the New York Stock Exchange on June 30, 2014.
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`

`Valeant 2014 Form 10-K
`
`https://www.sec.gov/Archives/edgar/data/885590/000088559015000015/...
`
`The number of outstanding shares of the registrant’s common stock as of February 18, 2015 was 336,202,718.
`
`DOCUMENTS INCORPORATED BY REFERENCE
`
`Part III incorporates certain information by reference from the registrant’s proxy statement for the 2015 Annual Meeting of Shareholders. Such proxy statement will
`be filed no later than 120 days after the close of the registrant’s fiscal year ended December 31, 2014.
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`Valeant 2014 Form 10-K
`
`https://www.sec.gov/Archives/edgar/data/885590/000088559015000015/...
`
`TABLE OF CONTENTS
`
`GENERAL INFORMATION
`
`PART I
`
`Business
`Risk Factors
`Unresolved Staff Comments
`Properties
`Legal Proceedings
`Mine Safety Disclosures
`
`PART II
`Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
`Selected Financial Data
`Management’s Discussion and Analysis of Financial Condition and Results of Operations
`Quantitative and Qualitative Disclosures About Market Risk
`Financial Statements and Supplementary Data
`Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
`Controls and Procedures
`Other Information
`
`PART III
`Directors, Executive Officers and Corporate Governance
`Executive Compensation
`Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
`Certain Relationships and Related Transactions, and Director Independence
`Principal Accounting Fees and Services
`
`Item 1.
`Item 1A.
`Item 1B.
`Item 2.
`Item 3.
`Item 4.
`
`Item 5.
`Item 6.
`Item 7.
`Item 7A.
`Item 8.
`Item 9.
`Item 9A.
`Item 9B.
`
`Item 10.
`Item 11.
`Item 12.
`Item 13.
`Item 14.
`
`Item 15.
`SIGNATURES
`
`Exhibits and Financial Statement Schedules
`
`PART IV
`
`i
`
`Page
`
`1
`10
`21
`23
`23
`23
`
`24
`27
`28
`63
`63
`63
`63
`63
`
`64
`64
`64
`64
`64
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`65
`72
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`Valeant 2014 Form 10-K
`
`https://www.sec.gov/Archives/edgar/data/885590/000088559015000015/...
`
`Basis of Presentation
`
`General
`
`Except where the context otherwise requires, all references in this Annual Report on Form 10-K (“Form 10-K”) to the “Company”,
`“we”, “us”, “our” or similar words or phrases are to Valeant Pharmaceuticals International, Inc. and its subsidiaries, taken together. In this
`Form 10-K, references to “$” and “US$” are to United States dollars. Unless otherwise indicated, the statistical and financial data
`contained in this Form 10-K are presented as of December 31, 2014.
`
`Trademarks
`
`The following words are some of the trademarks in our Company’s trademark portfolio and are the subject of either registration, or
`application for registration, in one or more of Canada, the United States of America (the “U.S.”) or certain other jurisdictions: ACANYA®,
`AFEXA®, AKREOS®, ANTI-ANGIN®, ANTIGRIPPIN®, ARESTIN®, ATRALIN®, B&L®, B+L®, BAUSCH & LOMB®, BAUSCH
`+ LOMB®, BAUSCH + LOMB ULTRA®, BEDOYECTA®, BENZACLIN®, BESIVANCE®, BIAFINE®, BIOTRUE®, BIOVAIL®,
`BOSTON®, CALADRYL®, CARAC®, CARDIZEM®, CEFZIL®, CERAVE®, CESAMET®, CLEAR + BRILLIANT®,
`CLINDAGEL®, CLODERM®, COLD-FX®, COLDSORE-FX®, COMFORTMOIST®, CONDITION & ENHANCE®, CORTAID®,
`CRYSTALENS®, DERMAGLOW®, DERMIK®, DIASTAT®, DIFFLAM®, DURACEF®, DUROMINE®, DURO-TUSS®,
`EFUDEX®, ELASTIDERM®, ENVISTA®, ERTACZO®, FRAXEL®, HYPERGEL™, JUBLIA®, LACRISERT®, LIPOSONIX®,
`LOCOID®, LODALIS™, LOTEMAX®, LUZU®, MEDICIS®, MEGACE®, MEPHYTON®, METERMINE®, MOISTURESEAL®,
`MONOPRIL®, NU-DERM®, OBAGI®, OBAGI CLENZIDERM®, OBAGI-C®, OBAGI NU-DERM®, OCUVITE®, ONSET
`DERMATOLOGICS®, ORTHO DERMATOLOGICS®, POTIGA®, PRESERVISION®, PROLENSA®, PUREVISION®, PURPOSE®,
`RENU®, RENU MULTIPLUS®, RETIN-A®, RETIN-A MICRO®, RIKODEINE®, SHOWER TO SHOWER®, SOFLENS®,
`SOLODYN®, SOLTA MEDICAL®, STELLARIS®, SYPRINE®, TARGRETIN®, THERMAGE®, THERMAGE CPT®, TIAZAC®,
`VALEANT®, VALEANT V & DESIGN®, VALEANT PHARMACEUTICALS & DESIGN®, VANOS®, VESNEO™, VICTUS®,
`XENAZINE®, ZIANA®, and ZYCLARA®.
`
`WELLBUTRIN®, WELLBUTRIN XL® and ZOVIRAX® are trademarks of The GlaxoSmithKline Group of Companies and are
`used by us under license. ULTRAM® is a trademark of Johnson & Johnson and is used by us under license. MVE® is a registered
`trademark of DFB Technology Ltd. and is used by us under license. ELIDEL® and XERESE® are registered trademarks of Meda Pharma
`SARL and are used by us under license. VISUDYNE® is a registered trademark of Novartis Pharma AG and is used by us under license.
`BENSAL HP® is a registered trademark and is used by us under license from SMG Pharmaceuticals, LLC. EMERADE® is a registered
`trademark of Medeca Pharma AB and is used by us under license from Namtall AB.
`
`In addition to the trademarks noted above, we have filed trademark applications and/or obtained trademark registrations for many of
`our other trademarks in the U.S., Canada and in other jurisdictions and have implemented, on an ongoing basis, a trademark protection
`program for new trademarks.
`
`Forward-Looking Statements
`
`Caution regarding forward-looking information and statements and “Safe-Harbor” statements under the U.S. Private Securities
`Litigation Reform Act of 1995:
`
` To the extent any statements made in this Annual Report on Form 10-K contain information that is not historical, these statements
`are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
`Securities Exchange Act of 1934, as amended, and may be forward-looking information within the meaning defined under applicable
`Canadian securities legislation (collectively, “forward-looking statements”).
`
` These forward-looking statements relate to, among other things: the expected benefits of our acquisitions and other transactions
`(including the proposed acquisition of Salix Pharmaceuticals, Ltd. (“Salix”)), such as cost savings, operating synergies and growth
`potential of the Company; business plans and prospects, prospective products or product approvals, future performance or results of
`current and anticipated products; exposure to foreign currency exchange rate changes and interest rate changes; the outcome of
`contingencies, such as certain litigation and regulatory proceedings; general market conditions; and our expectations regarding our
`financial performance, including revenues, expenses, gross margins, liquidity and income taxes.
`
` Forward-looking statements can generally be identified by the use of words such as “believe”, “anticipate”, “expect”, “intend”,
`“estimate”, “plan”, “continue”, “will”, “may”, “could”, “would”, “should”, “target”, “potential”, “opportunity”, “tentative”,
`
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`Valeant 2014 Form 10-K
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`https://www.sec.gov/Archives/edgar/data/885590/000088559015000015/...
`
`“positioning”, “designed”, “create”, “predict”, “project”, “seek“, “ongoing”, “increase”, or “upside” and variations or other similar
`expressions. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances
`are forward-looking statements. These forward-looking statements may not be appropriate for
`
`ii
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`Valeant 2014 Form 10-K
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`https://www.sec.gov/Archives/edgar/data/885590/000088559015000015/...
`
`other purposes. Although we have indicated above certain of these statements set out herein, all of the statements in this Form 10-K that
`contain forward-looking statements are qualified by these cautionary statements. These statements are based upon the current expectations
`and beliefs of management. Although we believe that the expectations reflected in such forward-looking statements are reasonable, such
`statements involve risks and uncertainties, and undue reliance should not be placed on such statements. Certain material factors or
`assumptions are applied in making forward-looking statements, including, but not limited to, factors and assumptions regarding the items
`outlined above. Actual results may differ materially from those expressed or implied in such statements. Important factors that could cause
`actual results to differ materially from these expectations include, among other things, the following:
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`the challenges and difficulties associated with managing the rapid growth of our Company and a large complex business;
`
`our ability to retain, motivate and recruit executives and other key employees;
`
`the introduction of products that compete against our products that do not have patent or data exclusivity rights;
`
`our ability to compete against companies that are larger and have greater financial, technical and human resources than we do,
`as well as other competitive factors, such as technological advances achieved, patents obtained and new products introduced by
`our competitors;
`
`our ability to identify, finance, acquire, close and integrate acquisition targets successfully and on a timely basis;
`
`factors relating to the acquisition and integration of the companies, businesses and products acquired by the Company, such as
`the time and resources required to integrate such companies, businesses and products, the difficulties associated with such
`integrations (including potential disruptions in sales activities and potential challenges with information technology systems
`integrations), the difficulties and challenges associated with entering into new business areas and new geographic markets, the
`difficulties, challenges and costs associated with managing and integrating new facilities, equipment and other assets, and the
`achievement of the anticipated benefits from such integrations, as well as risks associated with the acquired companies,
`businesses and products;
`
`factors relating to our ability to achieve all of the estimated synergies from our acquisitions as a result of cost-rationalization and
`integration initiatives. These factors may include greater than expected operating costs, the difficulty in eliminating certain
`duplicative costs, facilities and functions, and the outcome of many operational and strategic decisions, some of which have not
`yet been made;
`
`factors relating to our proposed acquisition of Salix, including our ability to consummate such transaction on a timely basis, if at
`all; the impact of substantial additional debt on our financial condition and results of operations; our ability to effectively and
`timely integrate the operations of the Company and Salix; our ability to achieve the estimated synergies from this proposed
`transaction; and, once integrated, the effects of such business combination on our future financial condition, operating results,
`strategy and plans;
`
`our ability to secure and maintain third party research, development, manufacturing, marketing or distribution arrangements;
`
`our eligibility for benefits under tax treaties and the continued availability of low effective tax rates for the business profits of
`certain of our subsidiaries;
`
`our substantial debt and debt service obligations and their impact on our financial condition and results of operations;
`
`our future cash flow, our ability to service and repay our existing debt, our ability to raise additional funds, if needed, and any
`restrictions that are or may be imposed as a result of our current and future indebtedness, in light of our current and projected
`levels of operations, acquisition activity and general economic conditions;
`
`any downgrade by rating agencies in our corporate credit ratings, which may impact, among other things, our ability to raise
`additional debt capital and implement elements of our growth strategy;
`
`interest rate risks associated with our floating rate debt borrowings;
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`Valeant 2014 Form 10-K
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`https://www.sec.gov/Archives/edgar/data/885590/000088559015000015/...
`
`•
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`•
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`the risks associated with the international scope of our operations, including our presence in emerging markets and the
`challenges we face when entering new geographic markets (including the challenges created by new and different regulatory
`regimes in such countries);
`
`adverse global economic conditions and credit market and foreign currency exchange uncertainty in the countries in which we
`do business (such as the recent instability in Russia, Ukraine and the Middle East);
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`iii
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`Valeant 2014 Form 10-K
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`https://www.sec.gov/Archives/edgar/data/885590/000088559015000015/...
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`economic factors over which the Company has no control, including changes in inflation, interest rates, foreign currency rates,
`and the potential effect of such factors on revenues, expenses and resulting margins;
`
`the introduction of generic competitors of our branded products;
`
`our ability to obtain and maintain sufficient intellectual property rights over our products and defend against challenges to such
`intellectual property;
`
`the outcome of legal proceedings, arbitrations, investigations and regulatory proceedings;
`
`the risk that our products could cause, or be alleged to cause, personal injury and adverse effects, leading to potential lawsuits,
`product liability claims and damages and/or withdrawals of products from the market;
`
`the availability of and our ability to obtain and maintain adequate insurance coverage and/or our ability to cover or insure
`against the total amount of the claims and liabilities we face, whether through third party insurance or self-insurance;
`
`the difficulty in predicting the expense, timing and outcome within our legal and regulatory environment, including with respect to
`approvals by the U.S. Food and Drug Administration, Health Canada and similar agencies in other countries, legal and
`regulatory proceedings and settlements thereof, the protection afforded by our patents and other intellectual and proprietary
`property, successful generic challenges to our products and infringement or alleged infringement of the intellectual property
`of others;
`
`the results of continuing safety and efficacy studies by industry and government agencies;
`
`the availability and extent to which our products are reimbursed by government authorities and other third party payors, as well
`as the impact of obtaining or maintaining such reimbursement on the price of our products;
`
`the inclusion of our products on formularies or our ability to achieve favorable formulary status, as well as the impact on the
`price of our products in connection therewith;
`
`the impact of price control restrictions on our products, including the risk of mandated price reductions;
`
`the success of preclinical and clinical trials for our drug development pipeline or delays in clinical trials that adversely impact
`the timely commercialization of our pipeline products, as well as factors impacting the commercial success of our currently
`marketed products, which could lead to material impairment charges;
`
`the results of management reviews of our research and development portfolio, conducted periodically and in connection with
`certain acquisitions, the decisions from which could result in terminations of specific projects which, in turn, could lead to
`material impairment charges;
`
`negative publicity or reputational harm to our products and business;
`
`the uncertainties associated with the acquisition and launch of new products, including, but not limited to, the acceptance and
`demand for new pharmaceutical products, and the impact of competitive products and pricing;
`
`our ability to obtain components, raw materials or finished products supplied by third parties and other manufacturing and
`related supply difficulties, interruptions and delays;
`
`the disruption of delivery of our products and the routine flow of manufactured goods;
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`the seasonality of sales of certain of our products;
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`declines in the pricing and sales volume of certain of our products that are distributed or marketed by third parties, over which
`we have no or limited control;
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`Valeant 2014 Form 10-K
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`https://www.sec.gov/Archives/edgar/data/885590/000088559015000015/...
`
`•
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`•
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`compliance with, or the failure to comply with, health care “fraud and abuse” laws and other extensive regulation of our
`marketing, promotional and pricing practices, worldwide anti-bribery laws (including the U.S. Foreign Corrupt Practices Act),
`worldwide environmental laws and regulation and privacy and security regulations;
`
`the impacts of the Patient Protection and Affordable Care Act (as amended) and other legislative and regulatory healthcare
`reforms in the countries in which we operate;
`
`interruptions, breakdowns or breaches in our information technology systems; and
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`Valeant 2014 Form 10-K
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`•
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`other risks detailed from time to time in our filings with the U.S. Securities and Exchange Commission (the “SEC”) and the
`Canadian Securities Administrators (the “CSA”), as well as our ability to anticipate and manage the risks associated with
`the foregoing.
`
` Additional information about these factors and about the material factors or assumptions underlying such forward-looking
`statements may be found elsewhere in this Form 10-K, under Item 1A. “Risk Factors” and in the Company’s other filings with the SEC and
`CSA. When relying on our forward-looking statements to make decisions with respect to the Company, investors and others should
`carefully consider the foregoing factors and other uncertainties and potential events. These forward-looking statements speak only as of
`the date made. We undertake no obligation to update or revise any of these forward-looking statements to reflect events or circumstances
`after the date of this Form 10-K or to reflect actual outcomes, except as required by law. We caution that, as it is not possible to predict or
`identify all relevant factors that may impact forward-looking statements, the foregoing list of important factors that may affect future
`results is not exhaustive and should not be considered a complete statement of all potential risks and uncertainties.
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`Valeant 2014 Form 10-K
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`https://www.sec.gov/Archives/edgar/data/885590/000088559015000015/...
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`Item 1. Business
`
`PART I
`
`Biovail Corporation (“Biovail”) was formed under the Business Corporations Act (Ontario) on February 18, 2000, as a result of the
`amalgamation of TXM Corporation and Biovail Corporation International. Biovail was continued under the Canada Business
`Corporations Act (the “CBCA”) effective June 29, 2005. In connection with the acquisition of Valeant Pharmaceuticals International
`(“Valeant”) in September 2010, Biovail was renamed “Valeant Pharmaceuticals International, Inc.”
`
`Effective August 9, 2013, we continued from the federal jurisdiction of Canada to the Province of British Columbia, meaning that
`we became a company registered under the laws of the Province of British Columbia as if we had been incorporated under the laws of the
`Province of British Columbia. As a result of this continuance, our legal domicile became the Province of British Columbia, the Canada
`Business Corporations Act ceased to apply to us and we became subject to the British Columbia Business Corporations Act.
`
`Unless the context indicates otherwise, when we refer to “we”, “us”, “our” or the “Company” in this Annual Report on Form 10-K
`(“Form 10-K”), we are referring to Valeant Pharmaceuticals International, Inc. and its subsidiaries on a consolidated basis.
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`Introduction
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`We are a multinational, specialty pharmaceutical and medical device company that develops, manufactures, and markets a broad
`range of branded, generic and branded generic pharmaceuticals, over-the-counter (“OTC”) products, and medical devices (contact lenses,
`intraocular lenses, ophthalmic surgical equipment, and aesthetics devices), which are marketed directly or indirectly in over 100 countries.
`In the Developed Markets segment, we focus most of our efforts in the eye health, dermatology and neurology therapeutic classes. In the
`Emerging Markets segment, we focus primarily on branded generics, OTC products, and medical devices. We are diverse not only in our
`sources of revenue from our broad drug and medical device portfolio, but also among the therapeutic classes and geographies we serve.
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`Business Strategy
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`Our strategy is to focus our business on core geographies and therapeutic classes that offer attractive growth opportunities while
`maintaining our lower selling, general and administrative cost model and decentralized operating structure. We have an established
`portfolio of durable products with a focus in the eye health and dermatology therapeutic areas. We believe these products have the
`potential for strong operating margins and solid growth and are particularly attractive for a number of reasons including:
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`They are largely cash pay, or are reimbursed through private insurance, and, as a result, are less dependent on increasing
`government reimbursement pressures than other products;
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`They tend to have established brand names and do not rely primarily on patent or regulatory exclusivity;
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`They tend to have the potential for line extensions and life-cycle management programs; and
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`They tend to be smaller on an individual basis, and therefore typically not the focus of larger pharmaceutical companies.
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`Another critical element of our strategy is business development. We have completed numerous transactions over the past few years
`to expand our portfolio offering and geographic footprint, including, among others, the acquisitions of Bausch & Lomb Holdings
`Incorporated (“B&L”) and Medicis Pharmaceutical Corporation (“Medicis”). We will continue to pursue value-added business
`development opportunities as they arise.
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`The growth of our business is further augmented through our lower risk, output-focused research and development model. This
`model allows us to advance certain development programs to drive future commercial growth, while minimizing our research and
`development expense. This is achieved primarily by:
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`focusing on innovation through our internal research and development, acquisitions, and in-licensing;
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`focusing on productivity through measures such as leveraging industry overcapacity and outsourcing commodity services;
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`focusing on critical skills and capabilities needed to bring new technologies to the market;
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`pursuing life-cycle management programs for currently marketed products to increase such products’ value during their
`commercial lives; and
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`acquiring dossiers and registrations for branded generic products, which require limited manufacturing start-up and development
`activities.
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`In addition to selective acquisitions and product development, our strategy also involves deploying cash through debt repayments
`and repurchases, as well as share buybacks.
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`We believe this strategy will allow us to maximize both the growth rate and profitability of the Company and to enhance shareholder
`value.
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`Segment Information
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`We have two operating and reportable segments: (i) Developed Markets and (ii) Emerging Markets. Comparative segment
`information for 2014, 2013 and 2012 is presented in note 22 of notes to consolidated financial statements in Item 15 of this Form 10-K.
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`Our current product portfolio comprises approximately 1,600 products.
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`Developed Markets
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`The Developed Markets segment consists of (i) sales in the U.S. of pharmaceutical products, OTC products, and medical device
`products, as well as alliance and contract service revenues, in the areas of eye health, dermatology and podiatry, aesthetics, and dentistry,
`(ii) sales in the U.S. of pharmaceutical products indicated for the treatment of neurological and other diseases, as well as alliance revenue
`from the licensing of various products we developed or acquired, and (iii) pharmaceutical products, OTC products, and medical device
`products sold in Canada, Australia, New Zealand, Western Europe and Japan.
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`Pharmaceutical Products — Our principal pharmaceutical products are:
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`An Acne franchise, which includes Solodyn®, a prescription oral antibiotic approved to treat only the red, pus-filled pimples of
`moderate to severe acne in patients 12 years of age and older, as well as Ziana®, Acanya®, Atralin®, Retin-A Micro®
`Microsphere 0.08% and ONEXTON™ Gel, a fixed combination 1.2% clindamycin phosphate and 3.75% benzoyl peroxide
`medication for the once-daily treatment of comedonal (non-inflammatory) and inflammatory acne in patients 12 years of age and
`older.
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`• Wellbutrin XL® is an extended-release formulation of bupropion indicated for the treatment of major depressive disorder in
`adults.
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`Jublia® (efinaconazole 10% topical solution), is a topical azole approved for the treatment of onychomycosis of the toenails
`(toenail fungus).
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`Xenazine® is indicated for the treatment of chorea associated with Huntington’s disease. In the U.S., Xenazine® is distributed for
`us by Lundbe