Bausch Health Companies Inc. · TSX:BHC

Bausch Health Companies — Valeant Pharmaceuticals International — Q2 2014 Earnings Presentation

47 slides from Bausch Health Companies's earnings presentation, Jul 31, 2014

1. Slide 1: Second Quarter 2014 Financial Results Conference Call

   Second Quarter 2014 Financial Results Conference Call July 31, 2014

2. Slide 2: Forward-looking Statements

   Forward-looking Statements This communication may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and Canadian securities laws. These forward-looking statements include, but are not limited to, statements regarding Valeant Pharmaceuticals

3. Slide 3: More Information

   More Information ADDITIONAL INFORMATION This communication does not constitute an offer to buy or solicitation of an offer to sell any securities. This communication relates, in part, to the exchange offer which Valeant has made to Allergan stockholders. The exchange offer is being made pursuant to

4. Slide 4: Agenda

   Agenda 1. Second Quarter 2014 Results 2. Outlook for Remainder of 2014 3. Outlook for 2015 and 2016 4. Allergan Update 3

5. Slide 5: Q2 2014 Highlights

   Q2 2014 Highlights  Q2 2014 continues to demonstrate the fundamental strength of our base business  Organic growth is accelerating - significantly improved from the first quarter, as expected  Bausch + Lomb has continued its double-digit organic growth trend  17 new products launched in the U.S.

6. Slide 6: Q2 2014 Results

   Q2 2014 Results Q2 2014 Q/Q% Total Revenue $2.041 B 86% Cash EPS $1.91 43% Adjusted Cash Flow from Operations $500 M 18% 5

7. Slide 7: Q2 2014 Organic Growth

   Q2 2014 Organic Growth Same Store Sales – Growth rates for businesses that have been owned for one year or more Q1 2014 Q2 2014(a) Q2 2014 Ex Generics(a)(b) Total U.S. 2% 5% 15% Total Developed 1% 2% 11% Total Emerging Markets 3% 8% 8% Total Company 1% 4% 10% Pro Forma – YoY growth rates for entire

8. Slide 8: Medicis Overview

   Medicis Overview  Acquired Medicis for ~$2.6B in December 2012  Two main businesses, Medical Dermatology and Aesthetics  Aesthetics  Owned for 1.5 years and sold business for $1.4B1; recognized a gain of $300M+ in Q3  Accelerated growth performance through Q1 2014 versus prior owners  Sales in

9. Slide 9: Q2 2014 Top 20 Global Brands (1/3)

   Q2 2014 Top 20 Global Brands (1/3) ($ in M)  Top 20 products YTD revenue of $1.2B, representing 31% of total revenue  Top 20 products grew 22% Q2 year over year and 14% YTD  >45% of Q2 growth from volume for top 20 products, excluding declining products 8

10. Slide 10: Q2 2014 Top 20 Global Brands (2/3)

    Q2 2014 Top 20 Global Brands (2/3) ($ in M) Product (a) Q2 2014 Primary Growth Q2 2014 YTD Revenue Driver Revenue 1) Ocuvite®/PreserVision® $65 Volume $125 2) Wellbutrin® $64 Price $124 3) Xenazine® US $54 Price + Volume $104 4) ReNu Multiplus® $49 Flat $104 5) Lotemax® Franchise $45 Volume $71 6) S

11. Slide 11: Q2 2014 Top 20 Global Brands (3/3)

    Q2 2014 Top 20 Global Brands (3/3) ($ in M) Product(a) Q2 2014 Primary Growth Q2 2014 YTD Revenue Driver Revenue 11) CeraVe® $26 Price + Volume $48 12) Elidel® $25 Price $51 13) Thermage® Tips $21 Volume $30 14) Boston Solutions $20 Flat $39 15) Zovirax Franchise $19 Declined $59 16) Syprine® $18 Pr

12. Slide 12: Q2 Business Highlights – Developed Markets

    Q2 Business Highlights – Developed Markets Excluding Bausch + Lomb  U.S. Dermatology +7% growth  YTD market share gains for Acanya, Elidel, Solodyn, Ziana, Zyclara  Continued growth of Acanya, Elidel, Targretin  Launch of Luzu  After four months, Luzu has over 12% share of branded market  Incl

13. Slide 13: Q2 Business Highlights – Emerging Markets

    Q2 Business Highlights – Emerging Markets Excluding Bausch + Lomb  EMENA +12% growth  Rebound in Russia and Poland  Ukraine continues to be challenged – YTD decline in revenues of 22%  Southeast Asia / South Africa +17% growth  Strong growth in all Southeast Asian countries  Flat growth in Sou

14. Slide 14: Bausch + Lomb Q2 – 90% of Growth from Volume

    Bausch + Lomb Q2 – 90% of Growth from Volume County/Region Q2 2014 Q/Q% Growth Drivers Product Sales United States 14%  Consumer $120M 12%  Continued growth in vitamins, and ~35% growth in BioTrue Multipurpose Solution  Rx Pharma $105M 16% (a)  Continued growth in launch products: ~90% Prolensa,

15. Slide 15: Business Development Update

    Business Development Update  Completed PreCision acquisition in early July  Approximately $100M run-rate sales at time of acquisition  Lost revenue ~ $15M in expected 2014 Sales - due to regulatory process, deal closed two months later than anticipated  Lost revenue ~ $10M in expected 2H 2014 Sa

16. Slide 16: 2014 Product Launch Update (1/3)

    2014 Product Launch Update (1/3)  Launched 17 products year to date Highlights Dermatology/Aesthetics  Strong reception to Jublia; plan to substantially increase launch spend Launched given significant market opportunity Bensal HP®(Q1)  1,325 TRx in third week of launch Luzu (Q1) (ending July 18t

17. Slide 17: 2014 Product Launch Update (2/3)

    2014 Product Launch Update (2/3) Eye Health Highlights  Successful start for Ultra Launched  Selling to capacity enVista® BLIS™ lens inserter(Q1)  Accelerating delivery and PureVision ® 2 for Presbyopia (Q1) installation of additional lines Bausch + Lomb Ultra (Q2)  Biotrue ONEday Biotrue® ONEda

18. Slide 18: 2014 Product Launch Update (3/3)

    2014 Product Launch Update (3/3) Consumer/Oral Health Highlights  After 3 months, Peroxiclear has 9% market share in the peroxide Launched segment CeraVe Baby line (Q1)  Strong acceptance of Onset lidocaine pen; over 400 new Peroxiclear (Q2) accounts in last three months Soothe XP (Q3)  Relaunche

19. Slide 19: Investing for Growth: ~$80M in 2H 2014

    Investing for Growth: ~$80M in 2H 2014  Jublia opportunity – larger than expected  Sooner than expected launch with stronger than anticipated label  FDA approval received earlier than expected  Partnered with Kaken on manufacturing: greater capacity and better bottle/delivery than original partn

20. Slide 20: Near-Term Pipeline Update (1/2)

    Near-Term Pipeline Update (1/2) Expected Product Description Update Launch Date Working prototype presented at American 3D Surgical Navigation Cataract and Refractive 2015 Society of Cataract and Refractive Surgery in System Surgery April CeraVe Hydrating Cleansing Bar 2015 Begins production in Nove

21. Slide 21: Near-Term Pipeline Update (2/2)

    Near-Term Pipeline Update (2/2) Expected Product Description Update Launch Date Post-Operative Inflammation Recent completion of positive Phase 3 study; Lotemax Next Gen 2016 and Pain 2nd Phase 3 study on track to start in 2014 Phase 3 enrollment complete; expected data Latanaprostene bunod Glaucoma

22. Slide 22: Early Thoughts on Allergan Integration

    Early Thoughts on Allergan Integration  Apply the Bausch + Lomb Blueprint for the Allergan integration  Learning from our experiences in Medicis and Bausch + Lomb integrations, we will focus on maintaining customer relationships  Global Aesthetics team will be largely retained  Dry eye and Glauc

23. Slide 23: Financial Outlook

    Financial Outlook Howard Schiller

24. Slide 24: Financial Summary

    Financial Summary Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Product Sales $1,064M $1,506M $2,032M $1,851M $1,994M Ongoing Service/Alliance Revenue $32M $35M $32M $35M $47M Total Revenue $1,096M $1,542M $2,064M $1,886M $2,041M Cost of Goods Sold% (% of product sales) 23% 27% 26% 26% 28% SG&A% (% of tot

25. Slide 25: Restructuring and Integration Update

    Restructuring and Integration Update  Excluding the restructuring of the Waterford, Ireland plant, restructuring and integration costs of $87M for Q2, 36% lower than Q1  $53M for Bausch + Lomb plus $34M of other transactions  Successful completion of labor union contract restructuring at Bausch +

26. Slide 26: Cash Flow from Operations

    Cash Flow from Operations $M Q1 Q2 1H Adjusted Net Income 600 651 1,250 Adjusted Cash Flow from Operations 636 500 1,137 Cash Conversion 1.1 0.8 0.9 Working Capital Change (43) (166) (208)  On a YTD basis, cash conversion is in line with guidance of ~90%  Cash conversion in Q1 favorably impacted b

27. Slide 27: Revenue Expectations for Second Half 2014

    Revenue Expectations for Second Half 2014  High single-digit organic growth in second half, including impact of all generics  Total company same store organic growth:  Second half of year high single-digit  Full year same store growth > 6%  Bausch + Lomb organic growth:  Second half of year an

28. Slide 28: Second Half 2014 Guidance Assumptions

    Second Half 2014 Guidance Assumptions  Sold injectables on July 10th , expected $230M in revenues and $.50 Cash EPS in 2H 2014  Closed PreCision two months later than expected and divested two products; combined the delay and divestitures represented a loss of $25M in revenues and $.05 Cash EPS 

29. Slide 29: 2014 Guidance Adjusted for Recent Events

    2014 Guidance Adjusted for Recent Events Q3 and Q4 Revenue Cash EPS Adjusted Cash Flow from Operations Current Guidance (4/22/14) $8.3B – $8.7B $8.55 – $8.80 $2.7B – $2.8B Less: Facial Injectables ($230M) ($0.50) -- Less: PreCision Delay / ($25M) ($0.05) -- Divested Products Less: Incremental -- ($0

30. Slide 30: Outlook for 2015 and 2016 (1/4)

    Outlook for 2015 and 2016 (1/4) Projected Projected Organic Growth 2015 / 2016 Assumptions Revenue 2015 (%) 2016 (%) 2014 ($M) United States Dermatology ~ $940 ~ 25-30% ~ 15-20% • Base business ~5% growth • New/recent product launches: • Jublia: 2015 ($150M), 2016 ($300M) • Luzu: 2015 ($50M), 2016 (

31. Slide 31: Outlook for 2015 and 2016 (2/4)

    Outlook for 2015 and 2016 (2/4) Projected Projected Organic Growth 2015 / 2016 Assumptions Revenue 2015 (%) 2016 (%) 2014 ($M) United States Contact Lenses ~ $175 ~ 15% ~ 20% • Benefit of additional Ultra lines in 2015 and 2016 accelerates organic growth Surgical ~ $225 ~ 10% ~ 10% • Growth consiste

32. Slide 32: Outlook for 2015 and 2016 (3/4)

    Outlook for 2015 and 2016 (3/4) Projected Projected Organic 2015 / 2016 Assumptions Revenue Growth 2014 ($M) 2015 (%) 2016 (%) Other Developed Western Europe Western Europe/Japan • Current growth trends Japan ~$1,780 ~3-5% ~3-5% Australia Australia/Canada • Return to historic growth trend pre- Canad

33. Slide 33: Outlook for 2015 and 2016 (4/4)

    Outlook for 2015 and 2016 (4/4) Gross Margin 74% 2015 Reflects impact of cost 75% 2016 improvement initiatives, improved mix and declining Xenazine revenue SG&A Low-mid 20% as percentage of revenue R&D ~$200 - 250M annual spend Cash Taxes 5 – 6% Adjusted Net Income 32

34. Slide 34: Valeant Standalone Projections (1/2)

    Valeant Standalone Projections (1/2) We reviewed two cases: 1) Debt Repayment and 2) Acquisition 1) Debt Repayment Case:  2015/2016 high single-digit organic growth  Cash EPS growth of > 15% in 2015 and ~20% in 2016  90% of free cash flow used to pay down debt  Leverage decreases to 2.9x in 2015

35. Slide 35: Valeant Standalone Projections (2/2)

    Valeant Standalone Projections (2/2) 2013 2014 2015 2016 Debt Repayment Case Revenue $5.8B ~$8.1B ~$8.9B ~$9.7B Growth 40% 9% 9% Cash EPS $6.24 ~$8.00 ~$9.40 ~$11.25 Growth 28% 17% 20% Adj. Cash Flow from $1.8B ~$2.4B ~$2.9B ~$3.5B Operations Net Debt $17.0B ~$15.4B ~$13.0B ~$9.9B Acquisition Case A

36. Slide 36: Valeant + Allergan Projections

    Valeant + Allergan Projections Valeant’s Assumptions for Allergan  Deal closes December 31, 2014  Assumes midpoint of Allergan’s 7/21/14 guidance for 2014, but does not reflect Allergan guidance for 2015 and 2016  Assumes high single-digit Allergan organic growth in 2015 and 2016  $2.7B in annua

37. Slide 37: Valeant + Allergan Projections

    Valeant + Allergan Projections Acquisition Case  Reflects Valeant’s same Allergan assumptions as Debt Repayment Case  Assumes acquisitions of ~$8B in 2015, ~$10B in 2016  Businesses acquired at ~3.0x sales, mid-year  Leverage of ~3.4x year-end 2015, ~2.8x year-end 2016  Cash EPS growth of > 25%

38. Slide 38: Combination Creates Significant Earnings Accretion for Allergan Shareholders

    Combination Creates Significant Earnings Accretion for Allergan Shareholders % Accretion from 0.83 exchange and cash reinvestment Allergan 2013 EPS $4.77 314% 2016 EPS – Research Earnings 172% Models as of 4/21/14 (1) $7.27 2016 EPS – Allergan Guidance(2) $10.00 98% 2016 EPS – 0.83 Exchange(3) +$72

39. Slide 39: Allergan Update

    Allergan Update

40. Slide 40: Allergan Update

    Allergan Update  Proxy Solicitation for Special Meeting underway  Anticipate requests for Special Meeting to be presented to Allergan in August  If requests for Special Meeting greater than 25%, Allergan required to call a Special Meeting within 10 to 120 days  At Special Meeting, Allergan stock

41. Slide 41: Second Quarter 2014 Financial Results Conference Call

    Second Quarter 2014 Financial Results Conference Call July 31, 2014

42. Slide 42: Appendix: Dermatology Rx

    Appendix: Dermatology Rx Branded Share Among Dermatologists

43. Slide 43: Source: PHAST Prescription Weekly & AF Data

    Source: PHAST Prescription Weekly & AF Data 42

44. Slide 44: Source: PHAST Prescription Weekly & AF Data

    Source: PHAST Prescription Weekly & AF Data 43

45. Slide 45: Source: PHAST Prescription Weekly & AF Data

    Source: PHAST Prescription Weekly & AF Data 44

46. Slide 46: Source: PHAST Prescription Weekly & AF Data

    Source: PHAST Prescription Weekly & AF Data 45

47. Slide 47: Source: PHAST Prescription Weekly & AF Data

    Source: PHAST Prescription Weekly & AF Data 46

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