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J.P. Morgan 31st Annual
Healthcare Conference
January 2013
Howard Schiller
Executive Vice President and Chief Financial Officer
Ryan Weldon
Executive Vice President and Company Group Chairman
1
Forward-looking Statements Forward-looking Statements Certain statements made in this presentation may constitute forward-looking statements, including, but not limited to, statements regarding preliminary results and guidance with respect to expected revenues, non-GAAP cash earnings per share, adjusted cash flows from operations, organic product sales growth, integration-related activities and benefits, synergies, launches and approvals of products, assumptions with respect to 2013 guidance, and the 2013 strategic initiatives of Valeant Pharmaceuticals International, Inc. (the “Company”). Forward-looking statements may be identified by the use of the words “anticipates,” “expects,” “intends,” “plans,” “could,” “should,” “would,” “may,” “will,” “believes,” “estimates,” “potential,” 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 filed with the Securities and Exchange Commission ("SEC") and other risks and uncertainties detailed from time to time in the Company's filings with the SEC and the Canadian Securities Administrators ("CSA"), which factors are incorporated herein by reference. Readers are cautioned not to place undue reliance on any of these forward-looking statements. The Company 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.
Non-GAAP Information To supplement the financial measures prepared in accordance with generally accepted accounting principles (GAAP), the Company uses non-GAAP financial measures that exclude certain items. Management uses non-GAAP financial measures internally for strategic decision making, forecasting future results and evaluating current performance. By disclosing non-GAAP financial measures, management intends to provide investors with a meaningful, consistent comparison of the Company’s core operating results and trends for the periods presented. Non-GAAP financial measures are not prepared in accordance with GAAP; 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. The Company has provided preliminary results and guidance with respect to cash earnings per share, adjusted cash flows from operations and organic product growth rates, which are non-GAAP financial measures. The Company has not provided a reconciliation of these preliminary and forward-looking non-GAAP financial measures due to the difficulty in forecasting and quantifying the exact amount of the items excluded from the non-GAAP financial measures that will be included in the comparable GAAP financial measures. Reconciliations of historical non-GAAP financials can be found at www.valeant.com.
Note 1: The guidance in this presentation is only effective as of the date given,
January 4, 2013, and will not be updated or affirmed unless and until the Company
publicly announces updated or affirmed guidance.
2
Valeant Pharmaceuticals Overview Focused, multinational specialty pharma company
~$4.3B* in pro forma 2012 revenue and ~7,000 employees
Headquartered in Montreal, Canada (NYSE/TSX: VRX)
International footprint
Developed Markets - U.S., Canada, Australia, New Zealand
Emerging Markets – Central and Eastern Europe; Latin America; South
East Asia and South Africa
Diversified revenue base
Over 1000 products
Limited generic risk
Minimal exposure to government reimbursement
Low risk R&D model with promising pipeline
Dermatology – efinaconazole, luliconazole, lifecycle management
Branded generics / various OTC line extensions
Experienced, high quality management team, with established
track record for delivering results
* Pro forma revenue adjusted for full year impact of Medicis acquisition
3
Revenue Diversity
United States
60%Canada and
Australia
13%
Emerging Markets
27%
2012 Pro Forma Revenue = ~$4.3 billion*
U.S.Promoted
41%
U.S. Neurology and Other
19%
Canada and Australia
13%
Emerging Markets
27%
* Pro forma revenue adjusted for full year impact of Medicis acquisition
4
Our Strategic Principles 1. Only compete in attractive market segments • Geographies
• Payors
• Competition
• Therapeutic areas
• Product forms
2. Highly disciplined business development driven
growth strategy
• Undermanaged company assets
• In line vs. pipeline
• Cash on cash returns >20%
• Don’t bet on science
3. Decentralized operations and strategy • Attract top talent
• “Insider” in all markets
• No global S&M infrastructure
4. Low cost operating structure
• Generic mindset
5. Diversification • Geographies (>50% outside the U.S.)
• Products (No single product more than
~5% sales)
6. Strong bias towards enduring assets • OTC
• Branded generics
• Topicals
• Life cycle management
5
Investment Focus – Developed
Markets
Niche markets that fit strategy
Dermatology
Aesthetics
Podiatry
Ophthalmology
Oral Health
Avoid primary care
Broad presence given legacy Biovail / Valeant capabilities
Aggressive in-licensing to leverage infrastructure
Build Consumer business
Broad presence given legacy iNova / Valeant capabilities
Bolt-on niche product acquisitions
U.S.
Canada
Australia
Orphan
Physician recommended OTC
Physician dispensed products
Specialty CNS :
~$275 Million(~16%)
Canada:
~$160 Million(~9%)
Emerging Markets / Branded Generics:
~$350 Million
(~20%)
Legacy / Other:
~$600 Million(~34%)
Dermatology:
~$375 Million(~21%)
The New Valeant
6
Investment Focus – Emerging
Markets
Increase critical mass in Brazil and Mexico
Look for new market expansion opportunities (e.g., Colombia)
Growing “anchor markets” – Poland, Serbia
High growth emerging markets – Russia, CIS
New platform from iNova acquisition
Strengthen existing hubs (e.g., Malaysia and Philippines)
Enter new markets (e.g., Indonesia, Vietnam)
New platform from iNova acquisition
Strengthen hub in South Africa
Central/Eastern
Europe
Latin America
South East Asia
South Africa
32%
59%
9%
Latin America
Europe
SE Asia/S. Africa
% Revenue Breakdown
82%
18%Cash Pay
Gov'tReimbursement
% Government Reimbursement
7
Valeant’s Consistent Financial Performance ($ in millions)
Note: Historical financials for Valeant exclude certain pro forma run rate adjustments for completed acquisitions for which financials have not been made
publicly available
Note: Actuals prior to 2010 reflect only Legacy Valeant results and not combined with Biovail. 2010 Actual reflects results as filed under 8KA.
Consistent high double-digit revenue growth and high single-digit organic
growth
Operating margins >50%
$657 $830
$1,928
$2,463
$3.4-$3.6B
FY 2008A FY 2009A FY 2010A FY 2011A FY 2012e FY 2013e*
Revenue
Dec-2012: Acquisition of Medicis
Corp
Sep-2010 Merger of Legacy Valeant
with Biovail
~$4.4 –
$4.8B
A Look Back At 2012
9
2012 Achievements Operations:
Revenue growth vs. 2011 of >$1B1 and >40%1
Overcame ~$200 M decline related to genericization of Cesamet, Cardizem CD, Ultram
ER, Wellbutrin XL
Cash EPS growth vs. 2011 of >50%1
Organic growth of ~8% on a same store basis, ~10% Pro Forma
Business Development:
Completed over 25 acquisitions
Probiotica, Pedinol, OraPharma, Medicis, Gerot Lannach
Majority between 2-3 X sales
Established new growth platforms
Oral Health, Podiatry, Aesthetics , Russia, South East Asia/South Africa
Medicis Acquisition Closed in Mid-December
1Excludes impact of one time items
Strengthened Senior Management Team Marcelo Noll Barboza – President, Valeant Brazil
Jacques Dessureault - President, Valeant Canada
Jason Hanson – Company Group Chairman
Andrew Howden – CEO iNova
Vince Ippolito – SVP, GM Aesthetics
Laizer Kornwasser – Company Group
Chairman
Pavel Mirovsky – President, Valeant Europe
Steve Sembler – SVP, President
OraPharma
Justin Smith – SVP, GM U.S. Rx Derm
10
2012 Achievements (continued)
R&D Productivity and Product Launches:
Filed multiple New Drug Applications
Efinaconazole - Onychomycosis (Valeant)
Luliconazole - Tinea Pedis (Medicis)
Xerese (in Canada) – Herpes Labialis (Valeant)
Launched more than 300 branded generic products in Emerging Markets
Launched multiple patented/OTC products
Regederm in Brazil
Zyclara Pump (Medicis) and Potiga in U.S.
Sublinox and Lodalis in Canada
>25 OTC line extensions in U.S. and Canada (CeraVe, Bedoyecta)
Achieved several regulatory approvals
Dysport (Medicis) in Canada
Restylane-L (Medicis) in U.S.
Balance Sheet Management:
Repurchased 5.3 million common shares at average cost of ~$53 per share
Raised $4.55 billion in high yield notes and loans
11
2012 Full Year Performance
See Note 1 regarding guidance
2011 As
Reported
2011 w/o One-time
Items
2012
Guidance
2012
Guidance w/o One-time Items
Growth
Revenue
$2.46 billion
$2.39 billion
$3.4 - $3.6 billion
$3.3 - $3.5 billion
~40% - 45%
Cash EPS
$2.93
$2.63
$4.48 - $4.53
$4.11 - $4.16
~55% - 60%
Adjusted
Cash Flow
from
Operations
$925 million
$849 million
$1.2 - $1.3 billion
$1.1 - $1.2 billion
~30% - 40%
12
Status of 2012 Initiatives
1) Increase non-US revenues to
approximately 50% of the company
2) Exceed $75M synergy run-rate in Europe
by end of 2012
3) Build / acquire at least once additional
growth platform
4) Exceed $1.5B in emerging market sales
5) Substantially increase the company’s
liquidity and access to capital
6) Become a top 15 global pharma company
by 2013
Medicis Transaction
Ryan Weldon
Executive Vice President and Company Group Chairman
14
Combination Creates A Global Leader in
Dermatology
Strengthens medical dermatology portfolio and brings critical mass in
aesthetic dermatology, creating a leading player in both markets
Ability to leverage strong Medicis reputation by adopting the Medicis name for combined
Dermatology and Aesthetics organizations
Builds leading dermatology and aesthetics sales forces across US and Canada by bringing
together top talent from both Medicis and Valeant
Combined commercial dermatology operations in Scottsdale, AZ with US corporate functions
primarily based in NJ
Research and Development to be located in Laval, QC, Scottsdale, AZ and Petaluma, CA
Highly complementary product portfolio and pipeline to drive growth
In dermatology, oral acne treatment SOLODYN® complements topical acne offerings
In aesthetics, RESTYLANE®, PERLANE® and DYSPORT® add complementary injectables
to our current SCULPTRA™ and PRO THERAPY MD™ offerings
Expanded portfolio in actinic keratosis
Robust pipeline of near-term opportunities
15
Valeant Is Now Largest U.S. Derm Company
2008 - Top 15 (US)
Note: based on gross sales
Source: Wolters Kluwer Health Integrated AWP Dollars for Rx Derm Products Only - May 2012
2011 - Top 15 (US)
Valeant #11
Valeant PF #1
NewCo
Medicis
Valeant
Medicis
Valeant
16
Complementary Dermatology Portfolio Topical Acne Oral Acne Actinic Keratosis Dermatitis OTC Anti-Viral Anti-Fungal
Lau
nch
Pro
du
cts
Efinaconazole
Luliconazole
17
Complementary Aesthetic Portfolio
Collagen Stimulator Dermal Filler Botulinum Toxin Physician dispensed
Lau
nch
Pro
du
cts
18
Medicis Integration Update
Leadership team in place for over one month Nearly all personnel decisions have been made and communicated
Sales incentive programs in place to ensure Q1 success
Sales force product training scheduled for late January
Approximately 350 sales professionals (Dermatology, Aesthetics, Podiatry) in the field
Upsides from Medicis R&D Pipeline 2 recent / scheduled product launches
Zyclara Pump launched Q3 2012
Dysport Canada to be launched Q1 2013
2 late stage products Luliconazole filed Q4 2012
MetroGel 1.3% Hydrogel - Bacterial Vaginosis (to be filed 1H 2013)
Life cycle management opportunities
Synergies We now expect synergies to exceed $275M on a run rate basis by end of 2013
Significant amount of synergies will not occur until back half of 2013 (ie. R&D and Legal)
Restructuring costs expected to be less than full year run rate synergies with the majority incurred in Q4 2012
19
Reflections on Medicis Integration
Extensive efforts made to understand success drivers for each company Retain Medicis success drivers (ie. customer focus, enable sales force) while
integrating with Valeant operating principles (ie. quick decisions, high accountability)
Strong alignment on decisions, made with shared goal in mind “Best of the best” people selection
Pursue the best ideas
Stress speed, transparent communication, minimize customer disruption
Closely monitor restructuring costs and progress toward synergy targets
Excitement around new organization’s potential “Go-forward” team is composed of highly motivated achievers
Teams are working together to meet deadlines
Focus on optimizing organization for success (strategic investments)
Significant upside opportunities being identified Alternative fulfillment
Sculptra
Gross-to-nets / discounts
Loyalty programs in Aesthetics
Orphan drugs
Canadian Graceway portfolio
Looking Forward
Howard Schiller
Executive Vice President and Chief Financial Officer
21
New Executive Organization
Mike Pearson
Chairman &
CEO*
Howard Schiller
EVP, Chief
Financial Officer
• Finance
• Europe
• South East
Asia
• South Africa
Jason Hanson
EVP, Company
Group Chairman
• Latin America
• Oral Health
• Consumer
• Ophthal-
mology
• R&D
Robert Chai-Onn
EVP, General
Counsel
• Corporate
Secretary
• Legal
Brian Stolz
EVP, Chief
Human Capital
Officer
• HR
• Integration
Susan Hall
SVP, Global
R&D
• R&D
• Medical
Affairs
• Regulatory
Ryan Weldon
EVP, Company
Group Chairman
• U.S.
Dermatology
• U.S.
Aesthetics
• Podiatry
Laizer
Kornwasser
EVP, Company
Group Chairman
• U.S. Neuro &
Other
• Canada
• U.S. Managed
Care &
Distribution
* Chief Medical Officer and Chief Compliance Officer report directly to CEO
22
Financial Guidance for 2013*
See Note 1 regarding guidance
2013 % over 2012
Revenue $4.4 - $4.8 billion ~35%
Cash EPS
$5.45 - $5.75
~35%
Cash EPS Including
Royalty to Meda
$5.35 - $5.65
~33%
Adjusted Cash Flow from
Operations
$1.5 - $1.75 billion
~40%
* Excludes potential acquisitions other than Natur Produkt which is expected to close January 2013
23
2013 Guidance Assumptions
Exchange rates are based on current spot rates
Impact from generics to be >$100M in revenues vs. 2012
Retin-A Micro, BenzaClin, and Cesamet
No generic assumption included for Zovirax
~$40-$50M in revenue declines as a result of planned divestitures
Solodyn revenues of ~$250M - $275M
Includes Natur Produkt
No other acquisitions included in guidance
Efinaconazole launch to be breakeven in 2013
Cash EPS expected to be 45%/55% 1H vs. 2H
Q2 expected to be lowest quarter
Q4 expected to be highest quarter
Cash tax rate expected <5%
Leverage reduced to <4x Pro Forma EBITDA by the end of Q3
24
New 2013 Strategic Initiatives
1) Optimize the balance sheet by reducing leverage to less than
4x and driving improvements in working capital
2) Successfully integrate Medicis and achieve run rate synergies
of greater than $275M by year-end
3) Build out key therapeutic areas (Podiatry, Ophthalmology, Oral
Health) and geographic platforms (SEA, SA, LA, Russia)
through tuck-in acquisitions
4) Receive approval for efinaconazole and luliconazole and
launch both in the U.S.
5) Improve gross margins from 2012 to progress towards our
goal of 80%
6) Maintain global government reimbursement levels of less than
20%
25
Long Term Aspirations
Commitment to patients, customers, employees, and the
communities and countries we work in, though ethical and
empathetic decisions supersede all other objectives
We will continue to embrace our core management philosophies
Speed
Decentralization
Diversification (Products/ geographies)
Low cost operating model
Emphasis on in-line, not pipeline
Organic and acquired growth
To become the leading specialty pharmaceutical company as
measured against total returns to shareholders
J.P. Morgan 31st Annual
Healthcare Conference
January 2013
Howard Schiller
Executive Vice President and Chief Financial Officer
Ryan Weldon
Executive Vice President and Company Group Chairman