Bausch Health Companies Inc. · TSX:BHC
Bausch Health Companies — Valeant Pharmaceuticals International — Q2 2016 Earnings Presentation
43 slides from Bausch Health Companies's earnings presentation, Aug 9, 2016
Slide 1: Second Quarter 2016 Conference Call
Second Quarter 2016 Conference Call August 9, 2016
Slide 2: 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 resp
Slide 3: Non-GAAP Information
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 Net Income, (iii) Adjusted EBITDA, (iv) Ad
Slide 4: Today's Topics
Today’s Topics Reconfirming Full Year 2016 Guidance Q2 2016 Financial Results Significant Progress Since Q1 The New Valeant 3
Slide 5: Reconfirming Full Year 2016 Guidance
Reconfirming Full Year 2016 Guidance 2016 Guidance Total Revenue $9.9B - $10.1B Adjusted EPS (non-GAAP)1 $6.60 - $7.00 Adjusted EBITDA (non-GAAP) 1 $4.80B - $4.95B 4 1. See slide 2 for note on non-GAAP information and Appendix for further information
Slide 6: Business Stabilizing Based on Sequential Quarterly Results
Business Stabilizing Based on Sequential Quarterly Results 1H % of 2016 Improvement Q2 2016 Results Q1 2016 Results 2016 Guidance Guide2 Revenue $2,420M $2,372M $9.9B - $10.1B 48% Revenue – $1,923M $1,930M NA NA Developed Markets Revenue – $497M $442M NA NA Emerging Markets Adj. COGS $630M $586M NA
Slide 7: Shortfall vs. Consensus Driven by Dermatology, R&D Investment
Shortfall vs. Consensus Driven by Dermatology, R&D Investment Q2 2016 Results Q2 2016 Consensus2 Variance Rationale Slower recovery in Derm Total Revenue $2,420M $2,474M ($54M) Small misses Total Gross Margin $1,759M $1,828M ($69M) Derm, unfavorable mix (non-GAAP)1 Adj. R&D Investment Increased inve
Slide 8: Investing in R&D While Rebasing Cost Structure
Investing in R&D While Rebasing Cost Structure Q216 Q116 Average 2015 (Q1-Q4) Average 2014 (Q1-Q4) Adj. SG&A $662M $737M $653M $503M (non-GAAP)1 Adj. SG&A (non-GAAP)1 27% 31% 25% 25% % of Sales Adj. R&D Investment $108M $103M $83M $61M (non-GAAP)1 Adj. R&D Investment 4.5% 4.3% 3.2% 3.0% (non-GAAP)1
Slide 9: Path to Adjusted EPS Guidance (non-GAAP)
Path to Adjusted EPS Guidance (non-GAAP)1 ~$0.38 ~$(0.20) ~$6.80 ~$1.15 $2.80 $6.60 – $7.00 Adjusted EPS (non-GAAP)2 $1.40 $1.27 Q1 2016 Q2 2016 2H161 Tailwinds Headwinds Efficiencies - 2H Seasonality - Generic Erosion - COGS Productivity - Derm Growth - Tax / Other - SG&A Rationalization - Salix Ac
Slide 10: Addressed Dermatology Challenges Since June 7th
Addressed Dermatology Challenges Since June 7 th Restored net profitability to new dermatology prescriptions – Aug 5 Enhanced Profitability of Launched coupon for independent pharmacies – June 27 Walgreens and Beyond Launched new prior authorization program at Walgreens – Aug 4 Enhanced pharmacist t
Slide 11: Launched Salix Acceleration Plan Since June 7th
Launched Salix Acceleration Plan Since June 7 th XIFAXAN RETAIL TRX PERFORMANCE1 Grew Xifaxan monthly TRx 28% year-over-year 2014 Xifaxan Growth 65,000 2015 Increased HE refill rate 2016 60,000 Sales leadership Reduced salesforce turnover engagement 55,000 Uceris® TRx growth of 8% Achieved year- 50,
Slide 12: Continued Focus on Debt Reduction
Continued Focus on Debt Reduction • Solid current and forecasted liquidity position – ~$850M cash as of quarter end • $1.29B permanent debt repayment year-to-date (as of August 9th) – Repaid ~$880M permanent debt (since end of Q1) – Completed all 2016 scheduled amortization payments – Repaid Q1 2017
Slide 13: Significant Progress Since Q1
Significant Progress Since Q1 Launched New Prior Authorization Program for Dermatology Partnered with Wilson’s Disease Association Initiated Xifaxan New Formulation Activities Stabilized Salesforce Received Oral Relistor FDA Approval Won 18-0 Vote from Brodalumab FDA Advisory Committee Received Auth
Slide 14: The New Valeant
The New Valeant 1 Mission, Vision, and Five Pillars 2 Five Strategic Imperatives 3 Changes to Management Team 4 New Business Segments 5 New Product Pipeline 6 Strengthening Balance Sheet 13
Slide 15: Mission, Vision, and Five Pillars
1 Mission, Vision, and Five Pillars OUR VISION TO BE YOUR TRUSTED HEALTHCARE PARTNER Quality Customer Healthcare Innovation Efficiency People Focused Outcomes OUR MISSION To Improve People’s Lives With Our Healthcare Products 14
Slide 16: Strategic Imperatives
2 Strategic Imperatives Focus on Specialty Driven Focus on Markets with Build Leadership Position 1 Markets 2 Above Average Growth 3 and Pipeline # Prescribers Market Growth Rates 1 Market Pipeline Share2 Dermatology ~15,000 Dermatology ~15% Dermatology ~16% 18 products (US) GI ~11,000 GI ~10% GI (U
Slide 17: Aligning Management to New Strategy
3 Aligning Management to New Strategy New Hires • Christina Ackermann, EVP, General Counsel • Scott Hirsch, SVP, Business Strategy and Communications • Sam Eldessouky, SVP, Corporate Controller and Chief Accounting Officer Promotions and Expanded Roles • Dr. Ari Kellen, EVP and Company Group Chairma
Slide 18: New Business Segments
4 New Business Segments BAUSCH + LOMB / BRANDED US DIVERSIFIED INTERNATIONAL Rx PRODUCTS • Global Vision care • Salix • Neuro and Other • Global Surgical • Dermatology • Generics • Global Consumer • Canada • Solta • Global Ophthalmology Rx • Dendreon • Obagi • International • Dentistry • Women’s Hea
Slide 19: Bausch + Lomb / International (~50% of Valeant) "Durable Growth"
Bausch + Lomb / International (~50%1 of Valeant) “Durable Growth” • Durable growth business B+L / International Revenue Breakdown – Global Vision care – Global Ophthalmology Rx – Global Surgical – International – Global Consumer 16% Global Vision Care 30% Global Surgical 2016-2018 Profile 14% Global
Slide 20: Branded Rx (~30% of Valeant) "Growth"
Branded Rx (~30%1 of Valeant) “Growth” Branded Rx Revenue Breakdown • Growth Business – Salix – Dentistry <1% – Dermatology – Canada – Dendreon – Women’s Health 10% 5% Salix Dermatology 9% 47% Dendreon 2016-2018 Profile Dentistry Revenue Growth 5-10% 27% Canada EBITA Growth (non-GAAP)2 7-10% Women's
Slide 21: US Diversified Products (~20% of Valeant) "Cash Generating"
US Diversified Products (~20%1 of Valeant) “Cash Generating” Diversified Products Revenue Breakdown • Cash Generating Business – Neuro and Other 3% 1% – Generics 2% – Solta – Obagi Neuro and Other 24% Generics 2016-2018 Profile Solta Obagi Revenue Growth ~(20%)* 70% Other EBITA Growth (non-GAAP)2 ~
Slide 22: Our Path to 2018 Adjusted EBITDA (non-GAAP) Growth
Our Path to 2018 Adjusted EBITDA (non-GAAP)1 Growth Illustrative and not to scale2 $4.95Bn $4.80Bn 2016 LOEs Base Derm & Salix New Annualized 2018 Guidance Business Growth Product Cost Adj. EBITDA Growth Launches Efficiencies We expect key franchise growth, new products, and cost efficiencies to mor
Slide 23: Received Unanimous FDA AdComm Vote for Brodalumab
5 Received Unanimous FDA AdComm Vote for Brodalumab • Dermatological and Ophthalmic Drugs Advisory Committee voted 18-0 in favor of approval • PDUFA Date of November 16, 2016 • Brodalumab showed statistical superiority vs. Stelara (2015 worldwide sales $2.74B) • Brodalumab demonstrated impressive cl
Slide 24: Addressing Latanoprostene Bunod Complete Response Letter
Addressing Latanoprostene Bunod Complete Response Letter • Tampa site inspected by FDA Feb 2016 and received Form 483 observations • We are working to complete activities required for an FDA re-inspection within six months • We expect no disruption to current products Received Complete Response Lett
Slide 25: Strengthening Balance Sheet
6 Strengthening Balance Sheet • Cash flow available for debt repayment and other purposes expected to increase in 2017 – Reduced business development and contingent payments/milestones • $500M 1Q16 Sprout payment does not recur • Reduced contingent consideration/milestones (i.e., Relistor Oral, Brod
Slide 26: Strengthening Balance Sheet
Strengthening Balance Sheet Non-Core Asset Sales • Evaluating strategic alternatives for a number of non-core businesses and geographies that represent revenue greater than $2B • Based on comparable asset sales and/or unsolicited indications of interest we have received, these assets represent a tra
Slide 27: Summary – Creating the "New Valeant"
Summary – Creating the “New Valeant” OUR MISSION Improve People’s Lives STABILIZE TURNAROUND TRANSFORM 3-6 MONTHS 2017-2018 2018+ Paying down debt Focus on specialty driven Lead in our markets categories Attracting new talent Re-recruiting employees Focus on markets with above Launch new average gro
Slide 28: Appendix
Appendix VALEANT
Slide 29: Q2 2016 Top 30 Brands
Q2 2016 Top 30 Brands1 Providing top 30 products under historic reporting segments for comparable purposes Primary % Sold Rank Product Patent Durability Q2 2016 Q2 2015 Y/Y% Business Unit outside US 1) Xifaxan GI 2019-2029 0% 200 148 36% 2) Wellbutrin Neuro & Other Expired 4% 83 67 25% 3) SofLens To
Slide 30: Q2 2016 Top 30 Brands (Continued)
Q2 2016 Top 30 Brands (Continued) 1 Providing top 30 products under historic reporting segments for comparable purposes Primary % Sold Rank Product Patent Durability Q2 2016 Q2 2015 Y/Y% Business Unit outside US 11) Uceris Tablets GI 2031 0% 37 24 52% 12) Nitropress Neuro & Other Expired 0% 34 64 (4
Slide 31: Q2 2016 Top 30 Brands (Continued)
Q2 2016 Top 30 Brands (Continued) 1 Providing top 30 products under historic reporting segments for comparable purposes Primary % Sold Rank Product Patent Durability Q2 2016 Q2 2015 Y/Y% Business Unit outside US 21) Elidel Dermatology 2018 8% 23 31 (25%) Anterior 22) Surgical None 79% 22 21 3% Dispo
Slide 32: Financial Summary – Adjusted (non-GAAP) Presentation Reconciliation
Financial Summary – Adjusted (non-GAAP) Presentation Reconciliation Reconciliation of GAAP to Non-GAAP Cost of Cost of Interest (Recovery of) Total Goods Goods Gross R&D Operating Operating Expense, Provision for Net Revenue Sold Sold % Margin SG&A SG&A % Expense R&D % Income Margin net income taxes
Slide 33: Reconciliation of reported Net Income (Loss) to EBITDA and Adjusted EBITDA ($M)
Reconciliation of reported Net Income (Loss) to EBITDA and Adjusted EBITDA ($M) (a) In-process research and development impairments and other charges for the three months and six months ended June 30, 2016 is $17.4 million and $17.9 million of impairment and other charges, respectively, including a
Slide 34: Reconciliation of reported Net Income (Loss) to EBITDA and Adjusted EBITDA ($M) (continued)
Reconciliation of reported Net Income (Loss) to EBITDA and Adjusted EBITDA ($M) (continued) (d) For the three months ended June 30, 2016, other (income)/expense of ($45.3) million primarily relates to a favorable adjustment of ($39.4) million to the legal accruals recognized as part of Salix acquisi
Slide 35: Reconciliation of reported Net Income (Loss) to EBITDA and Adjusted EBITDA ($M)
Reconciliation of reported Net Income (Loss) to EBITDA and Adjusted EBITDA ($M) (a) ASC 805, Business Combinations, requires inventory to be recorded at fair value, resulting in an inventory step -up whose total impact for the three months ended March 31, 2016 is $28.9 million, primarily due to the
Slide 36: Financial Summary – GAAP Presentation
Financial Summary – GAAP Presentation Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Total Revenue $2,732M $2,787M $2,757M $2,372M $2,420M Cost of Goods Sold (% of product sales) 25% 23% 26% 27% 27% SG&A (% of total revenue) 25% 25% 27% 34% 28% R&D Investment $81M $102M $96M $103M $124M GAAP EPS (diluted)
Slide 37: Financial Summary – Adjusted (non-GAAP) Presentation
Financial Summary – Adjusted (non-GAAP) Presentation 1 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Total Revenue (non-GAAP, where indicated) $2,732M $2,787M $2,753M1,2 $2,370M1,2 $2,420M Adj. Cost of Goods Sold (non-GAAP)1 23% 22% 24% 25% 26% (% of product sales) Adj. SG&A (non-GAAP)1 25% 24% 25% 31% 27
Slide 38: Financial Summary – Adjusted (non-GAAP) Presentation Reconciliation
Financial Summary – Adjusted (non-GAAP) Presentation Reconciliation 37
Slide 39: Financial Summary – Adjusted (non-GAAP) Presentation Reconciliation
Financial Summary – Adjusted (non-GAAP) Presentation Reconciliation Reconciliation of GAAP to Non-GAAP Cost of Cost of Total Goods Goods R&D Operating Operating Revenue Sold Sold % SG&A SG&A % Expense Income Margin Net Income EPS* Qtr 2 2015 GAAP $ 2,732.4 $ 669.9 24.9% $ 685.5 25.1% $ 81.1 $ 341.5
Slide 40: Non-GAAP Appendix (1/4)
Non-GAAP Appendix (1/4) 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. Other companies may use similarly titled non-GAA
Slide 41: Non-GAAP Appendix (2/4)
Non-GAAP Appendix (2/4) Restructuring, integration, acquisition-related expenses and other costs: In recent years, the Company completed a number of acquisitions, which resulted in operating expenses which would not otherwise have been incurred. The Company has excluded certain restructuring, integr
Slide 42: Non-GAAP Appendix (3/4)
Non-GAAP Appendix (3/4) Adjusted Cost of Goods (COGS) Management uses this non-GAAP measure (the most directly comparable GAAP financial measure for which is Cost of Goods Sold) for a more consistent period-to-period comparison. Adjusted Cost of Goods Sold excludes certain costs primarily relating t
Slide 43: Non-GAAP Appendix (4/4)
Non-GAAP Appendix (4/4) Interest Expense (non-GAAP) Management uses this non-GAAP measure (the most directly comparable GAAP financial measure for which is Interest expense, net) for a more consistent period-to-period comparison. Interest expense (non-GAAP) reflects adjustments for amortization of d
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