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Q22015 earnings deck final

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Q22015 earnings deck final

  1. 1. Valeant Pharmaceuticals International, Inc. Q2 2015 Financial Results July 23, 2015
  2. 2. 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 the expected closing of pending acquisitions, the integration of the Dendreon and Salix businesses and the amount and timing of expected synergies, expected future performance, including guidance with respect to revenue, Cash EPS, adjusted cash flow from operations and organic growth, our inventory reduction program, and expectations with respect to the timing of and outcome of development programs, regulatory approvals and commercial plans with respect to 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. Non-GAAP Information To supplement the financial measures prepared in accordance with U.S. generally accepted accounting principles (GAAP), the company uses non- GAAP financial measures that exclude certain items, such as amortization of inventory step-up, amortization of alliance product assets & property, plant and equipment step up, stock-based compensation step-up, contingent consideration fair value adjustments, restructuring, integration, acquisition-related and other costs, In-process research and development, impairments and other charges, ("IPR&D"), legal settlements outside the ordinary course of business, the impact of currency fluctuations, amortization including intangible asset impairments and other non-cash charges, amortization and write-down of deferred financing costs, debt discounts and ASC 470-20 (FSP APB 14-1) interest, loss on extinguishment of debt, (gain) loss on assets sold/held for sale/impairment, net, (gain) loss on investments, net, and adjusts tax expense to cash taxes. 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. Note 1: The guidance in this presentation is only effective as of the date given, July 23, 2015, and will not be updated or affirmed unless and until the Company publicly announces updated or affirmed guidance.
  3. 3. 2  Exceeded top line and bottom line Q2 guidance  Continued outperformance of U.S. businesses, specifically contact lenses, dental, dermatology, neurology/generics and ophthalmology RX  Strong results in Asia, Australia, Canada, Mexico and Middle East/North Africa  Fourth consecutive quarter of >15% same store organic growth  Salix off to fast start  Strong Xifaxan TRx uptake following IBS-D approval  NDA submitted for Relistor Oral on June 23rd  Wholesaler inventory reduced from 4-5 months at April 1st close to 3-3.5 months as of June 30th - progress as planned  $500M in run-rate synergies already achieved, $530M by end of year  Dendreon exceeding expectations on revenue and profitability  Achieved $74M in sales  Revenues grew ~18% percent Q2/Q1  Achieved gross margin of ~64% and operating margin of ~40% Q2 2015 Highlights (1/2)
  4. 4. 3  M&A update  Eight tuck-in deals signed or closed so far this year  Annual update of our M&A performance since 2008  Increasing guidance for 2015  Continued outperformance of legacy Valeant and approval of IBS-D  Total company organic growth > 10% (same store) for the remainder of the year  2015 guidance of $10.7-11.1B revenue, $11.50-$11.80 cash EPS  Q3 guidance of $2.6-2.8B revenue, $2.60-$2.70 cash EPS  Q4 guidance of $3.2-3.4B revenue, $3.98-$4.18 cash EPS Q2 2015 Highlights (2/2) See Note 1.
  5. 5. 4 Q2 2015 Financial Results Q2 2015 Q2 2014 Y/Y% Adjusted Y/Y% (a) Total Revenue $2.7 B (guidance $2.45 - 2.55) $2.0 B 34% 27% Cash EPS $2.56 (guidance $2.40 – 2.50) $1.91 34% 43% a) FX Y/Y Impact: Revenue $173M and Cash EPS ($0.13), Salix impact of $313M and Cash EPS ($0.04)
  6. 6. 5 Same Store Sales – Y/Y growth rates for businesses that have been owned for one year or more Q2 2015 YTD 2015 Total U.S. 32% 29% Total Developed 24% 21% Total Emerging Markets 4% 6% Total Company 19% 17% Pro Forma* – Y/Y growth rates for entire business, including businesses that have been acquired within the last year Q2 2015 YTD 2015 Total U.S. 21% 27% Total Developed 18% 21% Total Emerging Markets 5% 6% Total Company 15% 18% Q2 2015 Organic Growth * Total company pro forma excluding Salix ~20%.
  7. 7. 6 Country/Region Q1 2015 Product Sales Q2 2015 Product Sales Y/Y% YTD% United States $321M $354M 10% 12% Consumer $111M $119M 1% 3% Rx Pharma $116M $128M 21% 26% Surgical $48M $56M 1% 0% Contact Lens $48M $51M 19% 18% Other Developed Markets $240M $261M 4% 0% Emerging Markets $184M $220M 10% 9% Total (a) $745M $836M 8% 7% Bausch + Lomb Organic Growth (a) Excludes Bausch + Lomb generics which are managed and reported with Valeant generics in total company organic growth
  8. 8. 7  Top 20 products revenue of $1.1B in Q2 2015, representing 40% of total revenue  Xifaxan contributed 5% of Q2 revenue  Jublia now our 2nd largest product, with annual run rate sales of ~$450M  Provenge now our 3rd largest product, with annual run rate sales of ~$300M  Top 10 products contributed 28% of Q2 revenue  Growth of Top 20 products  32% same store basis  Excluding new product acquisitions, approximately half of our growth came from volume Q2 2015 Top 20 Brands
  9. 9. 8 Product Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 1) Xifaxan® - - - - $148 2) Jublia® $3 $13 $53 $62 $102 3) Provenge® - - - $30 $74 4) Wellbutrin® $72 $80 $82 $68 $67 5) Xenazine® $54 $56 $52 $57 $66 6) Solodyn® $43 $54 $61 $57 $65 7) Nitropress® - - - $62 $64 8) Ocuvite® /PreserVision® $66 $62 $62 $60 $59 9) Lotemax® Franchise $45 $35 $47 $43 $53 10) Arestin® $30 $30 $38 $32 $52 Q2 2015 Top 20 Brands (1/2) ($M)
  10. 10. 9 Product Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 11) Isuprel® - - - $72 $49 12) ReNu Multiplus® $49 $41 $46 $42 $46 13) Apriso - - - - $31 14) Elidel® $25 $22 $31 $26 $31 15) CeraVe® $26 $21 $27 $30 $30 16) BioTrue® Solution $27 $26 $25 $28 $29 17) Syprine® $18 $20 $30 $18 $28 18) Glumetza® - - - - $26 19) Targretin® Capsules $29 $44 $48 $51 $25 20) Artelac® $27 $25 $23 $19 $24 Q2 2015 Top 20 Brands (2/2) ($M)
  11. 11. 10 U.S. Dermatology Outperforming  Jublia  #1 branded product for onychomycosis  Successful 8mL launch in May  29% of TRx’s are 8mL  TRxs up 37% Q2/Q1; up 55% on a 4mL equivalents basis  Onexton  Launched TV ad campaign April 6th  TRx volume at 8K per week and growing  Luzu  TRxs up 55% Q2/Q1  Base business TRxs continue to grow  Solodyn +24% Y/Y  Ziana + 30% Y/Y  Atralin + 28% Y/Y  Elidel +14% Y/Y  Zyclara +54% Y/Y
  12. 12. 11  Contact Lenses  Bausch + Lomb ULTRA®  ~$9M in net sales  First commercial line operational, with yields tracking to schedule  Second line will commence production in Q4; lines 3&4 in 2016  Lines 5 and 6 approved  Biotrue® ONEday growing 4x category, up 56% Y/Y  Six additional Biotrue® ONEday lines planned  Additional product launches planned  National launch of Biotrue® ONEday for Presbyopia High Add in August  Bausch + Lomb ULTRA® for Presbyopia in Q4  Ophthalmology Rx  Strong growth across promoted brands, driven by Lotemax Franchise and Prolensa  Vesneo 0.024% filed with the FDA  Surgical – continues to gain share as we broaden offering  Continued growth for Stellaris/PC and Victus for both systems and procedures  Crystalens, Trulign, enVista and Monofocals continue to gain share U.S. Eye Health Continues Strong Growth
  13. 13. 12  Neuro & Other/Generics  Continued strong double digit Y/Y growth  Several products now promoted by Salix hospital and pain sales teams (e.g., Ammonul, Bupap)  Continued strong performance of Orphan diseases products portfolio (Syprine, Cuprimine) for treatment of Wilson’s Disease  Consumer  Double digit demand growth for CeraVe, Preservision and BioTrue MultiPurpose Solutions  Dental  Strong double digit Y/Y growth, driven by Arestin  Rapid uptake of recently acquired Neutrasal for treatment of general dry mouth/oral mucositis Other U.S. Business Highlights
  14. 14. 13 Strong Organic Growth in Rest of World China ▪ $72M ▪ 15% Y/Y Canada ▪ $80M ▪ 7% Y/Y Middle East/ North Africa ▪ $42M ▪ 18% Y/Y Russia ▪ $65M ▪ 7% Y/Y Australia ▪ $48M ▪ 6% Y/Y Mexico ▪ $59M ▪ 12% Y/Y South Korea ▪ $15M ▪ 23% Y/Y South Africa ▪ $15M ▪ 12% Y/Y Western Europe ▪ $202M ▪ 5% Y/Y
  15. 15. 14  Key R&D Milestones Achieved  Xifaxan for IBS-D indication  Relistor Oral NDA filed  Revenues and EBITA significantly ahead of deal model  IBS-D update  Immediate Xifaxan script growth uptake post-approval  Soft launch immediately after approval  Sales force trained immediately upon approval  Only package insert being promoted at this time  Revamped salesforce compensation model  Wholesaler inventory reduction on plan (3-3.5 months at end of June 30th from 4-5 months at April 1st close) Salix Off to Fast Start
  16. 16. 15 Strong Xifaxan NRx Uptake following IBS- D Approval Source: Symphony. +33% Y/Y since IBS-D approvalIBS-D approval 5/27/15 4,000 4,500 5,000 5,500 6,000 6,500 7,000 7,500 24-Apr 1-May 8-May 15-May 22-May 29-May 5-Jun 12-Jun 19-Jun 26-Jun 3-Jul 10-Jul 2015 NRx 2014 NRx +15% Y/Y through May
  17. 17. 16 Results of Salix Pipeline Review Project Status Uceris Foam Ulcerative colitis Expected to launch in Q4 Relistor (Oral) Opioid-induced constipation Filed Rifaximin EIR (extended intestinal release) Crohn’s Disease In discussions with partner, Alfa Wassermann Rifaximin SSD (soluble solid dispersion) Early decompensated liver cirrhosis Continuing to fund Sans-300 Rheumatoid arthritis Partner/sell Ruconest Prophylactic treatment of hereditary angioedema Continuing to fund Tablet Prep Bowel Purgative Failed toxicology screen Cycloset Reformulation Type 2 diabetes Continuing to fund
  18. 18. 17 BD Update – Eight Deals Closed/Signed Deal Status Rationale Amoun MENA branded generics Signed Adds to existing business to create ~$500M+ business in MENA region, one of the fastest growing emerging markets Humax Branded generics Signed Entry into Colombia market Paragon Specialty contact lens Closed Strengthens custom contact lens business with Ortho-K lenses for myopia control Commonwealth Diagnostics Signed Diagnostic for IBS, addition to GI platform and platform for future diagnostics Invado Dental Closed Dry mouth addition to dental portfolio (Neutrasal) Unilens Specialty contact lens Signed Entry into custom soft contact lenses Acrivet Animal Health Closed U.S. and European Animal Health portfolio Eyegate Ophthalmic Rx Closed Late stage clinical ophthalmology product for anterior uveitis +26% Y/Y since IBS-D approval ~$225M revenue ~$60M revenue
  19. 19. 18 Amoun at a Glance  Leading local branded generics company in Egypt  Leading brand name with well established brands  ~800 sales reps across Egypt  Strong local product development and manufacturing capability  Strong platform for further expansion across Middle East and North Africa  Adds ~$225M to our existing business in Middle East and North Africa, one of the fastest growing emerging markets. We expect our total business to be ~$500M in 2016  Continued double-digit growth expected  Predominately cash pay markets  Strong fundamentals with GDP and population growth  Portfolio focused at the middle class
  20. 20. 19 Deal Scorecard Since 2008 Deal activity since 2008 ▪ ~140+ acquisitions / licenses / co-promotes ▪ $40B+ in capital deployed Target high hurdle rates ▪ IRRs of at least 20% ▪ Statutory tax rates ▪ Cash payback period of 6 years or less Financial discipline ▪ Track top line and EBITA by quarter for every acquisition ▪ Results shared with Valeant Board every quarter; update provided to investors annually ▪ Senior management compensation tied to past deal performance
  21. 21. 20 M&A Summary (USD) Large ($1B+) Mid ($300M -$1B) Small (< $300M) ~$5,000 $ Deployed ($M) ~$30,000 • 10 of 11 tracking to 20% IRR or higher • ~50 deals in aggregate performing above 20% IRR ~$2,500 • Biovail, Medicis, B+L, and Salix: all in- line or significantly ahead of deal model Deal Performance
  22. 22. 21 USD Millions Cumulative EBITA Cumulative Net Income USD Millions Returns on Acquisitions 2008 - Q2 2015 12.4 Achieved +18%10.5 Deal Model 7.4 11.8 Deal Model Achieved* +59% * Includes corporate tax structure
  23. 23. 22 Cash Payback on Largest Deals 2008 - Q2 2015 2008 2011 2013 2015 2014 2010 Purchase Price($M) Cash PaybackDeal 0 0.1 0.7 0.1 0.2 0.2 0.3 0.2 0.5 0.6 0.4 0.6 0.4 1.3 0.6 1.2 1.1 2.9 2.5 Note: Medicis incorporates sale of Aesthetics business to Galderma 95Coria 285/400Dow 318Aton 2,636Biovail 706Ortho/Dermik 939PSwiss/Sanitas 657iNova 312OraPharma 437Obagi 137Natur Produkt 8,700Bausch + Lomb 395Precision 285Solta 138Croma (2) 415Dendreon 350Marathon 16,000Salix 2012 164GL 2,600Medicis
  24. 24. 23 Global Business Unit 6/30/13 Last 12 Months Y/Y% (Previous Ownership) 6/30/15 Last 12 Months Y/Y% (Valeant Ownership) LTD Valeant Ownership Consumer 5% 5% 6% Rx Pharma 4% 15% 14% Surgical 2% 6% 8% Contact Lens (3%) 8% 6% U.S Generics (2%) 20% 19% Total (a) 2% 9% 9% Bausch + Lomb Organic Growth has Significantly Improved Under Valeant (a) U.S. Generics only included in Bausch + Lomb organic growth through 12/31/14 at which time the business was integrated with the Valeant generics portfolio
  25. 25. 24 Key Observations from 140+ deals since 2008 (1/2)  Large deals have delivered the most upsides  Accelerated growth through decentralized operating model (e.g. Bausch + Lomb: every significant market in the world)  Captured upside from pipeline products that were not built into the deal model (e.g. Medicis: Luzu, BV Metrogel; Biovail: fenofibrate; Bausch + Lomb: Ultra, PeroxiClear)  Accelerated growth of core and under-focused products (e.g. Biovail: Wellbutrin XL, Xenazine; Medicis: Ammonul, Zyclara, Vanos; Bausch + Lomb: BioTrue ONEday, Lotemax Franchise, Trulign)  Unidentified gems (e.g. Bausch + Lomb: specialty lens)  Consistently exceeded synergy forecast  Provided new platforms for growth  Reinvigorated performance of undermanaged assets in mid-to-small sized deals  Notable turnarounds (e.g. Carac, Duromine, Elidel, Arestin, Retin-A- Franchise)  Products taken to new markets (e.g. CeraVe, Obagi, Solta, PharmaSwiss, Sanitas)
  26. 26. 25  Captured unmodeled revenue synergies (e.g., Medicis: alternative fulfillment; Bausch + Lomb: consumer scale; Salix: Hospital and Federal account teams)  Retained key organizational talent and expertise:  Salix: Philippe Adams, Bill Bertrand, John Temperato  Bausch + Lomb: Tom Appio, Joe Gordon, Fred Hainsworth, Deb Jorn, Mark McKenna, Sharon Tonetta, Tracy Valorie, Gaelle Waltinger  Medicis: Erin Browder, Rick Reynolds, Gary Tanner, Dave Wood  Biovail: Tanya Carro, Seana Carson, Alex Matheson  Four deals have not met our IRR hurdle  Neotensil (U.S) - discontinued  Vita Direct (Russia) – trying to resolve  Vital Science (Canada) - divested  PFI (Dr.Lewinn’s) (Australia) - divested Key Observations from 140+ deals since 2008 (2/2)
  27. 27. 26 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Total Revenue $2,041M $2,056M $2,280M $2,191M $2,732M Cost of Goods Sold (% of product sales) 28% 26% 24% 25% 23% SG&A (% of total revenue) 25% 24% 23% 26% 25% R&D Expense $66M $59M $59M $56M $81M Operating Margin (% of total revenue) (excluding amortization) 44% 47% 50% 47% 49% Cash EPS (Reported) $1.91 $2.11 $2.58 $2.36 $2.56 GAAP Cash Flow from Operations $376M $619M $816M $491M $411M Adjusted Cash Flow from Operations $500M $771M $624M $708M $773M Fully Diluted Share Count 341M 341M 342M 343M 351M Financial Summary
  28. 28. 27 Valeant (Ex. Salix) Salix Combined Total Revenue $2,419M $313M $2,732M Cost of Goods Sold (% of product sales) 24% 15% 23% SG&A (% of total revenue) 27% 17% 25% R&D Expense $56M 25M $81M Operating Margin (% of total revenue) (excluding amortization) 47% 61% 49% Interest/Taxes/Other $249M $185M $434M Adjusted Earnings $893M $4M $897M Cash EPS (Contribution) $2.60 ($0.04) $2.56 Fully Diluted Share Count 343M 351M Disaggregation of Q2 Financial Results
  29. 29. 28 Disaggregation of Q2 Adjusted Cash Flow Valeant Excl. Salix Salix Combined Total GAAP Cash Flow $714M ($303M) $411M Add: Restructuring $41M $42M $83M Stock Based Comp $4M $168M $172M Working Capital Related to BD Activity - $96M $96M Legal Settlements / Tax on Stock Options $11M - $11M Adjusted Cash Flow $770M $3M $773M Adjusted Earnings $893M $4M $897M Cash Conversion 86% 75% 86%
  30. 30. 29  Q3 will be about the same as Q2 at ~$300M in sales  Net sales will approach demand as we exit 2015 Impact of Salix Inventory and Drawdown Actual Q2 Estimated Q3 Net Sales (including IBS-D) $313M ~$300M Inventory Reduction $141M ~$200M Net Sales Adj. for Inventory Reduction $454M ~$500M Beginning Months on Hand 4 - 5 3 - 3.5 Ending Months on Hand 3 - 3.5 2 - 2.5
  31. 31. 30 Restructuring and Integration Expenses  Q2 restructuring and integration expenses of $153M  Salix - $122M  Additional $175M expected in remainder of 2015  Dendreon - $18M  Minimal remaining for rest of year (<$5M)  Bausch + Lomb - ~$0M (now complete)  All others including Acrivet, Invado, Marathon, Paragon ~$13M  All others <$20M rest of year (excluding new deals)
  32. 32. 31  Strong liquidity position  $1.5B undrawn revolver  $958M of cash at end of Q2  Repurchased $50M of Valeant shares from Credit Suisse as part of a block offer in Q2 at $223 per share  We remain committed to getting leverage to be below 4.0x by end of 2016  Accounts Receivable DSO* improved versus previous years (calculated using gross sales):  Q2 2014: 66 Days  Q2 2015: 65 Days * Gross revenue is disclosed in 10K for calculation purposes Balance Sheet
  33. 33. 32 Updated 2015 Guidance  Organic growth > 10% (same store) expected for second half of the year Q3 2015 Q4 2015 New 2015 Previous 2015 Revenues $2.6 - $2.8B $3.2 - $3.4B $10.7 - $11.1B $10.4 - $10.6B Cash EPS $2.60 - $2.70 per share $3.98 - $4.18 per share $11.50 - $11.80 per share $10.90 - $11.20 per share Adj. Cash Flow from Operations NA NA >$3.2B >$3.1B See Note 1.
  34. 34. 33  Exchange rates based on current spot rates  Targretin (July) and Xenazine (expected August) genericized  No impact from future acquisitions included in guidance  Signed or closed business development transactions factored into guidance  Amoun assumed to close in Q4  Gross Margins expected to be ~78-80% in Q3/Q4  SG&A spend (as a percentage of revenue) ~23-24% in Q3/Q4  R&D spend ~$375 million for 2015  H2 Cash tax rate expected to be ~5%  Full year Cash Flow Items  Meet 90% cash conversion by end of year  Cap Ex - ~$300M  Depreciation - ~$200 million  Stock Based Comp - ~$100 million H2 2015 Guidance Assumptions  Debt and Shares Outstanding  Weighted average cost of debt: ~5.1%  ~355 million fully diluted shares outstanding Q3 through Q4
  35. 35. Valeant Pharmaceuticals International, Inc. Q2 2015 Financial Results July 23, 2015

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