VALEANT PHARMACEUTICALS INTL (VRX) Earnings Report ...Our US market access team, led by Sandy...

CompanyName:ValeantPharmaceuticalsInternationalIncCompanyTicker:VRXSector:HealthCareIndustry:Drugs

EventDescription:Q42015EarningsCallMarketCapasofEventDate:23.69BPriceasofEventDate:33.4293

©2014TheStreet,Inc.Al l R ightsReserved Page1of31

VALEANTPHARMACEUTICALSINTL(VRX)EarningsReport:Q42015ConferenceCallTranscriptThefollowingVALEANTPHARMACEUTICALSINTLconferencecalltookplaceonMarch15,2016,08:00AMET.Thisisatranscriptofthatearningscall:

CompanyPart icipants

LaurieLittle;ValeantPharmaceuticalsInternationalIncorporated;HeadofIRMikePearson;ValeantPharmaceuticalsInternationalIncorporated;CEORobRosiello;ValeantPharmaceuticalsInternationalIncorporated;CFOLindaLaGorga;ValeantPharmaceuticalsInternationalIncorporated;TreasurerAnneWhitaker;ValeantPharmaceuticalsInternationalIncorporated;CompanyGroupChairmanAriKellen;ValeantPharmaceuticalsInternationalIncorporated;CompanyGroupChairman

OtherPart icipants

LouiseChen;Guggenheim;AnalystAnnabelSamimy;StifelNicolaus;AnalystMarcGoodman;UBS;AnalystAndrewFinkelstein;SusquehannaFinancialGroup;AnalystTimChiang;BTIG;AnalystDavidAmsellem;PiperJaffray&Co.;AnalystDavidRissinger;MorganStanley;AnalystAlexArfaei;BMOCapitalMarkets;AnalystDavidMerrill;WellsFargo;AnalystAlanRidgeway;Scotiabank;AnalystDavidSteinberg;Jefferies;AnalystRandyRaisman;MarathonAssetManagement;AnalystIrinaKoffler;Mizuho;AnalystDavidCommon;JPMorgan;AnalystCynthiaWong;GoldmanSachs;AnalystHenryReukauf;DeutscheBank;AnalystDavidMaris;WellsFargo;AnalystChrisSchott;JPMorgan;AnalystCoreyDavis;CanaccordGenuity;AnalystShibaniMalhotra;NomuraSecurities;Analyst

MANAGEMENTDISCUSSIONSECTION

Operator:Thisisconference#66610318.

Operator :

Goodmorning.MynameisHeidiandIwillbeyourconferenceoperatortoday.Atthistime,IwouldliketowelcomeeveryonetotheValeantfourthquarter2015unauditedfinancialresultsconferencecall.




Thankyou.HeadofInvestorRelations,LaurieLittle,youmaybeginyourconference.

LaurieLitt le (HeadofIR):

ThanksHeidi.AndgoodmorningeveryoneandwelcometoValeant'sinvestorconferencecall.Participatingontoday'scallareMikePearson,ChiefExecutiveOfficer;RobRosiello,ChiefFinancialOfficer;Dr.AriKellen,CompanyGroupChairman;AnneWhitaker,CompanyGroupChairman;andLindaLaGorga,ourTreasurer.Inadditiontoalivewebcast,acopyoftoday'sslidepresentationcanbefoundonourwebsite,undertheInvestorRelationssection.

Beforewebegin,ourpresentationtodaycontainsforward-lookinginformation.Wewouldaskthatyoutakeamomenttoreadtheforward-lookingstatementlegendatthebeginningofourpresentation,asitcontainsimportantinformation.

Inaddition,thispresentationcontainsnon-GAAPfinancialmeasures.Non-GAAPfinancialreconciliationscanbefoundinthepressreleaseissuedearliertodayandpostedonourwebsite.Finally,thefinancialguidanceinthispresentationiseffectiveonlyasoftoday.Itisourpolicytoaffirm--toupdateoraffirmguidanceonlythroughbroadlydisseminatedpublicdisclosureandwiththat,IwillturnthecallovertoMike.

MikePearson (CEO):

Goodmorning,everyone.Andthankyou,Lori.Thanksforjoiningus.Today,wewouldliketocoverthefollowingtopics.First,wewilldiscussourpreliminaryunauditedfourth-quarter2015results.Second,wearegoingtotakeyouthroughournewtaxpresentation.Third,we'regoingtoproviderevisedQ12016financialguidance.

Fourth,I'dliketotakeafewminutestoprovidemyperspectiveonthecurrentstateofthebusinesssinceI'vebeenbackacoupleweeks,includingarevised2016guidanceandotherkeybusinessupdates.Fifth,LindaLaGorga,ourTreasurer,willprovidealiquidityandcashflowupdate.Andfinally,I'mgoingtoaddresssomequestionsthatwe'vegottenaheadofthecall.AndthenwewillopenituptoQ&A.

We'veaddedanumberofslidesintheAppendixaroundassumptionsandourtop30productswhichwewillnotbegoingthroughbutare--willbemadeavailabletoyou.Aswe'vepreviouslydisclosed,thereisanongoingreviewofour2014financialsandassuch,we'renotabletoprovideyear-over-yearcomparisonstoday.

Financialmetricsthatareimpactedbythisincludetheorganicgrowth,businessunitgrowth,andpricevolumedetail.Whatwecanprovidetodayarepreliminaryunaudited2015fourth-quarterresults.Withthis,letmeturnthecallovertoourCFO,RobRosiello,tocoverQ1and--Q4andQ1.

RobRosiello (CFO):

OnPage5,forthequarter,ourtotalrevenuewas$2.8billionversusourguidanceof$2.7billionto$2.8billion.GAAPEPSwasalossof$0.98.Adjustednon-GAAPEPSwas$2.50,whichfallsbelowtheguidancerangeof$2.55to$2.65weprovidedinDecember.Theshortfallwascausedbyunexpectedreductionsinhighermarginproductsales,driveninpartbychanneldestockingandnegativereactiontoouragreementwithWalgreens.

Cashflowfromoperationswas$562million.Adjustedcashflowfromoperationscameinat$838million,aboveourexpectedtargetofgreaterthan$600million.Asareminder,wehavelistedadjustedcashflowfromoperationsonthisslidebutaswereportedpreviously,wewillnolongerprovidethismetricgoingforward.




Onthenextslide,IwouldliketodiscusschangesinValeant'staxreportingfor2016.Historically,Valeanthasreportedournon-GAAPtaxprovisiononTable2aand2bofthepresstablesthatcombinedthetaxeffectsofnon-GAAPadjustmentsandtheuseoftaxattributesandothertimingissues.

Thisnumber,approximately5%,matchedtheactualcashtaxthatValeantpaideachyear.Goingforward,wewillnolongerincludethetaxeffectsfromtheuseoftaxattributesandothertimingissues,whichwill,inturn,raiseourreportedtaxratetobetween10%and15%.Thisnewreportingmetrichasnochangetoeithercashfloworactualtaxespaid.

Onthenextpage,wearealsoupdatingourpreviousguidancefor2015Q1fromrevenueof$2.8billionto$3.1billionto$2.3billionto$2.4billion.WeexpectadjustedEPSwillnowbe$1.30to$1.55from$2.35to$2.55,ascomparedtotheguidanceweprovidedinDecember.

Withthenewtaxpresentationshownonthefarright,adjustedEPSwillbe$1.18to$1.43forthefirstquarter.Whilemostofourbusinessesremainstrong,thereareafewareasthatchangedsinceDecemberthatwillimpactourfirstquarter.First,wearerealizingadecreaseofroughlyapproximately$0.80persharecomingfromtheunderperformanceinseveralbusinesses.

Thisincludesslower-than-expectedgrowthinGI,includingadditionalproductdestocking.Wearealsorealizingaslower-than-expectedreboundindermatologythatincludesadditionalproductdestockingandlossrefillsfromthePhilidortransitiontoWalgreens.

Finally,wearealsoseeingunderperformanceinseveralotherUSbusinesses,suchasOphthalmologyRx,Obagi,SoltaandWomen'sHealthaswellasinWesternEurope.Wehavealsoexperiencedheadwindsfromcurrencyfluctuations,henceourguidancewasfirstset.

Wealsoexpectthatanother$0.20roughlycomesfromthefactthatevenasrevenuewasbroughtdown,wetooklittleexpensereductiondespitethislowerrevenueforecast.LetmeturnitbacktoMike.

MikePearson (CEO):

Thanks,Rob.Soasyouallknow,I'vebeenbackfrommymedicalleaveforabouttwoweeks.I'vehadachancetoreviewwhat'shappeninginthebusinessesandthere'samixedcombinationofsomegoodnewsandsomebadnews.

Ijustwanttotakeafewminutestosortofgiveyoumyassessmentandwhatweplantodoaboutit.Whileourbusinessescontinuetogrowwearenowforecastingalowergrowthrateincertainbusiness,suchasdermatology,giventhecontinuedexternalpressurefrommanaged-care,thepricingenvironmentandourslower-than-expectedstartin2016.

WecontinuetoexpectstronggrowthinGI,contactlenses,oralhealth,oncology,genericsincertainemergingmarkets.Thisstronggrowthwillbesomewhatoffsetbysomeofourotherbusinesses,includingWesternEurope,OphthalmologyRx,SoltaandObagi.

ManyofourbusinessunitshaveloweredtheirrevenueforecastsfortheyearfromwhentheyfirstputthemtogetherintheFall.WehavelaunchedourBrandedAccessProgramwithWalgreensandthisisapieceofthegoodnewsinmid-Januarywithourdermatologyportfolio,followingthemid-FebruarywithOphthalmologyRxandAddyi.Negotiationsontoaddnetworksofindependentpharmacies.

Theprogramitselfisofftoaterrificstart.Withintwomonthsoflaunchindermatology,approximately30%ofourdermatologyscriptsareflowingthroughWalgreens.Thisisapproximately2timesthevolumeflowingthroughWalgreensfromwhenwestarted.Moreimportantly,wellover90%ofourdoctorswhowereusingPhilidorarenowusingWalgreensandmanynewdoctorsarealsousingthischannel.




Walgreen'sseniormanagement,whomwemetwithlastweek,isequallyexcitedabouttheprogramandwecontinuetofine-tuneittobetterserveourphysiciansandpatientsandimprovetheeconomics.Ourbrandforgenericprogramisontracktolaunchsometimethissummer.

Finally,anotherpieceofgoodnews,wearecontinuingtofocusonimprovingpatientaccessaswellasimprovingourrelationshipswithourchannelpartners.Wehavestrengthenedourmanaged-careorganizationwithseveralkeyhiresandwehavebeeninactivediscussionswiththepayerstoensurecontinuedpatientcoverageandaccess.Iwilladdressthispointinmoredetailinaminute.

Duringthepasttwoweeks,wehavealreadytakenstepstorestructureanumberofourunderperformanceofoursmallerbusinessesandwearetakingstepstolaunchabroad-basedcostreductionprogram.Theseactionswillbepartiallyoffsetbyincreasedinvestmentinkeyfunctions,suchasfinancialreporting,publicandgovernmentrelations,andourmanaged-careorganization.Wearealsocurrentlyexploringdivestituresofnon-coreassetswhichwillenhanceourliquidity.

Returningtomarketaccess.MaintainingUSmarketaccessiscriticalforourentireportfolioandiscriticaltooursuccess.Toachievethisgoal,weareinvestingmoreinrebatesandbuildingourorganization'smanaged-carecapability.Theincreasesinrebatesareduetomorecompetitivepressureinresponsetoourstorepriceincreasesforourlatelifecycleproducts.

OurUSmarketaccessteam,ledbySandyLoreaux,whojoinedusinJanuaryofthisyear,continuestohaveproductivedialogueandnegotiationsconcerningaccessforourentireportfoliowithnationalhealthplans,PBMsandregionalplans.ThesenegotiationsincludeourPartDandcommercialbidsfor2017,responsetoadhoctherapeuticareareviewsbypayers,andrequestsforpriceinflationprotectionagreements.

Throughthesenegotiations,beginninglatelastFallthisyear,wehavebeenabletomaintaingoodcoverageofcommercializedforourkeybrandsandfranchisesincludingdermatology,GIandophthalmologyfranchise.Weareworkinghardasateam,includingtheseniormanagementteamsittinghereinthisroomtoday,tocontinuetoimproveourrelationshipswithPBMsandhealthplansaswellasaccessforourcurrentportfolioandimportantly,futurelaunchproducts.

Wehavemadeagreatdealofprogressandfeelconfidentthatwewillimproveouraccessin2016and2017andarelayingthestrongfoundationforaccesstoourexpectednewproductlaunches.Wearecommittedtoengagingwiththeseimportantcustomersmorebroadlyacrossourorganizations,buildingbacktrustthroughouractionsandstrengtheningourcapabilitytocollaboratewiththemoninitiativesinvolvingourproducts.

Turningtoourrevisedguidance.Withthefirstquarternowupdated,ournewfullyear2016guidanceascomparedtowhatwepreviouslyreported,isexpectedtobe$11billionto$11.2billioninrevenueandadjustedEPSof$9.50to$10.50.Withourchangetoadifferenttaxpresentation,weexpecttoreportadjustedEPSof$8.50to$9.50.

Aswearemovingawayfromadjustedcashflowfromoperations,wewillnowreportanexpectedadjustedEBITDAnumberof$5.6billionto$5.8billionfor2016.AswelookatthebudgetwepreparedinDecember,severalfactorshavechangedouroutlookfor2016.

First,asRobcovered,thekeyoneunderperformanceisexpectedtoreduceadjustedEPSby$1duetothehigher-than-expectedinventoryreductionsthattransitionfromPhilidortoWalgreensandthecancellationofalmostallpriceincreases.Inaddition,therehasbeennegativeimpactfromFX.

Next,wearetakingamoreconservativeapproachtoourrevenueassumptionsandweareassuminglowergrowthratesformostofourfranchisesandgeographies,includingaslowerreboundin




dermatology,moremodestgrowthinGIandunderperformanceinWomen'sHealth,CommonwealthandWesternEuropebasedoncurrentexpectationsfromeconomicfactorsandthecurrentmanaged-careenvironmentintheUS.

ThisconservatismisexpectedtoreduceadjustedEPSofapproximately$1in2016.Aspreviouslymentioned,anyfuturepriceincreaseswillbemoremodestandinlinewithindustrypracticesandmanaged-carecontracts.Wehaveexperiencedincreasedcompetitivepressureatthepayerlevel,resultinganincreasedrebatesforaccessforourkeygrowthproducts,likeJublia,andthisaccountsforafurther$1reductionfromourbudgetintheFalloflastyear.

Otheritemsthathavereducedouroutlookfor2016includeincreasedinvestmentsinselectfunctions,FXheadwindsandcontinuedorganizationaldistractionsthatwillbecauseof--weestimateanother$0.50in2016.

Finally,thenewtaxpresentationwillreducereportedadjustedEPSbyanother$1,althoughithasnoimpactoneithertheactualtaxespaidorthecashflow.ToassistinthewalkdownfromourrevenueguidanceinDecembertotoday,wehavebucketedthemainareas:GI,dermatologyandneurologyportfoliosrepresentthebulkofthechangeduetotheitemsalreadymentioned.

UnderperformanceincertainUSbusinessunitsaccountsforapproximately$300millionandex-US,$200millioninrevenuereduction.IntermsofFX,weestimatethattobe$110millionandtheremaining$90millioncoverstherestofthedecrease.

Aswelookouttothenextseveralyears,wewantedtohighlightourgrowthexpectationsforourmajorbusinessunits.Weexpectdouble-digitgrowthfromGI,Dendreon,dentistry,contactlensesandWomen'sHealthoverthenextthreeyears.

Single-digitgrowthshouldberealizedindermatology,emergingmarketsinEurope,Asia,LatinAmerica,USconsumer,OphthalmologyRxCanada,surgicalandouraestheticsbusinesses.Finally,weexpectourneurologyandotherWesternEuropeandUSgenericunitstohaveflattodecliningrevenuegrowthoverthisthree-yearperiod.

Idowanttohighlightthatwedohavesomeveryexcitingproductsthatareeitherinthemarketandarenewlaunchesorwehopetogetapprovedoverthenextyearorso.WecontinuetobeveryexcitedabouttheprospectsforXifaxanandyou'veseenthiscontinuethescriptgrowth.

We'realsoexcitedaboutgrowthopportunitiesinanumberofouremergingmarketsandareUltraandBiotruecontactlenslines.PotentialopportunitiesliewithseveralR&DprojectssuchasLatanoprostenebunodforglaucoma,whichwehopetogetapprovedlaterthisyear;IDP-118,atopicalformoderatetoseverepsoriasis,whichwehopetogetapprovednextyear;andBrodalumabformoderatetoseverepsoriasis,whichwehopetogetapprovedattheendofthisyear.Anumberofthesegrowthproductshave$1billion-pluspotential.

Intermsofthenextfourquarters'guidance.Withtheweakresultsforthefirstquarterof2016,weareprovidingaforward-lookatthenextfourthquarters,takingusthroughthefirstquarterof2017.

Onaroll-forwardbasis,weexpecttorealizebetween$11.6billionand$11.8billionintotalrevenues,andapproximately$9.65to$10.15onadjustedEPSunderthenewtaxreporting.Weexpecttorealizeapproximately$6billioninadjustedEBITDAoverthistimeperiod.Atthispoint,letmeturnthecallovertoLindaLaGorga,ourTreasurer,todiscussourbalancesheet.

LindaLaGorga(Treasurer):

Thankyou,Mike.First,focusingonourliquidity.Wearecomfortablewithourcurrentliquidityandexpect




strongcashflowgenerationfromourbusinessfortheremainderoftheyearandbeyond.Currently,wehaveapproximately$1.2billionofcashonhand,includingtheproceedsfromrecentrevolverdraws.

Ourrevolveriscurrentlydrawnat$1.45billion.Wemostrecentlydrewourrevolvertofundcashtimingrelatedtoordinarycourseneedsforoperations,includinganticipatedupcomingdebtpayments.

WeareexpectingtoclosethesaleoftheSynergeticscontractmanufacturingbusinessinthesecondquarter,providingadditionalcash.Todateinthefirstquarter,wehavecompletedtheSproutpaymentof$500millioninJanuaryandhaverepaid$405millionintermloans,includingourQ1$145millionmandatoryamortizationand$260millionintermloanmaturities.

Wehaveapproximately$520millionofremainingmandatorytermloanrepaymentsin2016,including$417millionofmandatoryamortizationandanestimated$100millionmandatoryexcesscashflowpayment,whichisanannualcalculationunderourcreditagreement,whichwillbedueattheendofMarch.Webelieveourtermloanamortizationandtermloanandbondmaturitiesin2017and2018aremanageable.

Next,turningtosomecovenanthighlights.Basedonpreliminaryunaudited2015financialinformationandour2016guidance,weexpecttoremainincompliancewiththefinancialmaintenancecovenantsandourcreditagreementforyear-end2015andthroughout2016.Therearenofinancialmaintenancecovenantsinourindenturesgoverningourbonds.

Ourcreditagreementincludestwomaintenancecovenants,asecuredleverageratioandaninterestcoverageratio.Fortheyear-end2015,weexpectoursecuredleverageratiotobeapproximately2.1timesandourinterestcoverageratiotobeapproximately3.3times,bothwithincreditagreementrequirements.

OurnetleveragetoproformaadjustedEBITDAforthecreditagreementexpectedtobeapproximately5.8timesatyear-end2015.AcoupleofkeyfactorscontributedtotheincreaseofourQ4leverageratiorelativetoourQ3leverageratio.First,forourlast12monthsadjustedEBITDAperourcreditagreement,wenolongerhavethebenefitoftheAllergangainfromQ42014ofapproximately$287million.

Second,alsoforouradjustedEBITDAperourcreditagreement,ourQ4adjustedEBITDAwasimpactedby$100millionbyourBrodatransactionwhichistreatedascashIPR&DandreducesadjustedEBITDAinourcreditagreement.Basedonour2016guidance,weexpectournetleveragetoproformaadjustedEBITDAperourcreditagreementtobeapproximately5timesbyyear-end2016.

Nowmovingtosomecovenanthighlightsrelatedtofinancialstatementreporting.Bothourcreditagreementandourbondindenturecontainfinancialreportingrequirementswhichareimpactedbythedelayinthefilingofour10-K.

Ifwedonotfileour10-KbyMarch30,adefaultwilloccurunderourcreditagreement.Wewillhave30days,oruntilApril29,tocurethisdefaultbyfilingour10-K.Ifour10-KhasnotbeenfiledbeforeMarch16,abreachofreportingcovenantoccursunderourbondindentures.

Atanytimeafterthisbreach,thetrusteeorholdersofatleast25%ofanyseriesofnotesmaydeliveranoticeofdefault.Fromreceiptofthisnotice,wewouldhave60daystofileour10-Kandthat'stocurethedefault.Whilethefailuretofilethe10-KbeforeMarch16doesnothaveanyimmediateimplicationsunderourbondindentures,itdoesresultincross-defaultunderourcreditagreement.

Thecreditagreementrendereddonotimmediatelyhavetherighttoaccelerateonaccountofthiscross-defaultbutourabilitytoborrowundertherevolverisrestrictedwhilethedefaultcontinues.Wenow--nextweek,weintendtolaunchanamendmentprocesswithourlenderstowaivethiscross-defaultand




alsotoextendthetimeperiodfordeliveryofour10-KandourQ110-Q.

Movingnowtocashavailablefordebtrepaymentandotherpurposes.Oneofourkey2016prioritiesistofocusonourbalancesheet.Weremaincommittedtousingthevastmajorityofourcashflowtopaydowndebt.AtourInvestorDayinDecember,wesaidweexpecttopaydownmorethan$2.25billionofpermanentdebtin2016.

Basedonourrevisedguidance,weremaincommittedtodebtrepaymentandnowexpecttopaydownmorethan$1.7billionofpermanentdebtthisyear.Relativetoourpriorguidance,thereductionincashavailablefordebtrepaymentandotherpurposesislessthanthereductioninadjustedEBITDA.

Thisisprimarilyduetolessuseofcashfromworkingcapandlesstaxesbasedonourreducedsalesexpectations.IwillnowturnitbackovertoMike.

MikePearson (CEO):

Wehavereceivedseveralkeyquestionsfrommanyofyousowethoughtwewouldaddressanumberofthemduringourpresentation.First,ourapproachtopricing.Wehavealreadycommittedtoreducingpricingonourbrand-newdermatologyandophthalmologyproductswithintheWalgreens'portfolio,onaverage,10%.

ThispricereductionisonWACandwillimpactandwillbetakenacrossallchannels,notjustWalgreens.Otherpriceincreaseswillbemodestandinlinewithmarketandpayercontracts.Intermsofdivestitures,asapubliccompany,wecontinuetoreviewourassetsinordertomaximizeshareholdervalue.

Wehavenocurrentplanstodivestanymajorplatform;however,wewillcontinuetolookatnon-strategicassetsandmakeappropriatedecisions.

Theadhoccommittee.Theadhoccommitteehasprovidedthefollowingstatement.Iquote--theadhoccommitteehascompletedasubstantialamountofworkrelatedtoPhilidorandcertainaccountingandfinancialreportingmatters.Thecommitteeanditsadvisorsareworkingdiligentlyandhopetocompletethecommittee'sworkinthenearfuture--endquote.Asnoted,inlightoftheongoingnatureofthesematters,wewillnotbeprovidinganyfurthercommentsontheadhoccommitteeatthistime.

Finally,wehaveasubjecttoseveralongoinginvestigations.TheseincludeinvestigationsbytheUSAttorney'sOfficeforMassachusettsandtheSouthernDistrictofNewYork,theSECandCongress.Wearecooperatingintheseinvestigationsandhaveprovidedandwillbeprovidingdocuments,informationandtestimonyinthesevariousinvestigations,whetherpursuanttosubpoenasorotherwise.

We'realsosubjecttoshareholderlitigationinboththeUnitedStatesandCanada,whichweintendtodefendvigorously.Giventheongoingnatureoftheinvestigationsandlitigation,wedonotintendtocommentfurtheratthistime.

Soinsummary,ourbusinessisnotoperatingonallcylindersbutweandIarecommittedtogettingitbackontrack.Wehaveasetofterrificproductsandbrandsandaloyalsetofphysicians,patientsandcustomers.

Throughbothrevenueenhancementandcostreduction,weareconfidentthatwecanand,again,willbeabletobegintodeliverthecashflowsourshareholdersanddebtholdersareaccustomedto.Withthat--withthis,Iwillopenthelinetoquestions.

QUESTIONS&ANSWERS

Operator :




(OperatorInstructions)

LouiseChen (Analyst-Guggenheim):

LouiseChen,GuggenheimSecuritiesLLC-Analyst

Hi.Thanksfortakingmyquestions.Ihadafewhere.SofirstquestionIhadwasonyourweakGIsalesinthefourthquarterrelatedtoWalgreens.Iwaswonderingifyoucouldgivemorecolortheresinceourfocuswasonderm,asyoumentionedbefore,onWalgreens.Therewasonly15daysleftinthequarterandtherewasalreadysomedestockingfromtheSalixdeal.

Andthensecondthing,Iwaswonderingifyoucouldtalkaboutthechangesinyourmanagedcarecontractsthatyoumentionedinyourpressrelease.Andthelastthing,maybemorecoloronthegrossmarginandhowwethinkaboutgrosstonetfortheWalgreensdrugs?Thanks.

MikePearson (CEO):

Sure.LetmetalkabouttheweakGIsales.I'llhaveAnneWhitakertalkaboutthechangesinmanagedcare.IwillcomebackandaddresstheWalgreenseconomics.Soattheendofthefourthquarter,anumberoforderswerecanceledofSalixproducts.

Thiswassortofatleast--weweretold,basedonreducinginventoriesinsomedistributorsandsomeretailers,therewasanegativereactioninitiallytotheWalgreensprogramandsomeaspectsofit.ThemanagedcareteamhasdoneaterrificjobworkingwiththepayerstomodifytheWalgreensprogramtomakeitsortofacceptableandsowefeelgoodaboutthat.YoucannoticethescripttrendsintheGIfranchisewillcontinuetobeverystrongsowethinkthatwillevenoutovertime.Anne,managedcare?

AnneWhitaker (CompanyGroupChairman):

Sure.AsMikementioned,withregardtoourcontractingsincelastFall,wehavebeeninvolvedwithsubmittingourbidsforthePartDprogramfor2017.We'vebeengoingthroughtheprocessofrenewingcontractsfor2017andsomeofthose,wehave--didextensionsfor2016,evenlastFall.

Payers,onaroutinebasiseachquarter,pickcategoriesthattheydoreviewsoftherapeuticareas--theydoreviewsofanndsowe'vebeenrespondingtosomeofthosereviews.Dermatologyisoneofthosereviewsthatmanyofthepayersareundertakingbecauseastheylookbackandtheirclientslookbackatlastyear,dermatologywasoneofthebiggesttrenddriversforthem.

Sothey'vepickedthatcategorytofocusonthisyear.Wealsohavebeenengagingindiscussionsaspartoftheprocessofourcontractingintheseadhocreviewsonpriceinflationprotection.We'vehadpriceprotectionagreementsinplacewithpayers.We'vebeennegotiatingthroughthatprocessonspecificratesandthoserangedependingonthevolumeandtheparticularproduct.

SoIwilljustechowhatMikesaid.IfeelverygoodabouttheprogressthatwearemakingasaCompany,withreallyrebuildingourrelationshipswiththepayersandworkingthroughthisnegotiationsprocess.AndIthinkwe'rebuildingastrongteamhereatValeantwithsomeofthenewfolksthatwehavebroughtin.

WehavebroughtanumberofmanagersoverthepastfewmonthstoreallybeefupthatcapabilityandI'mconfidentwehavegoodprospectsforlayingfirmfoundationforthelaunchproductsthatMikementionedaswell.

MikePearson (CEO):

LetmeaddresssortofthewaytheWalgreenseconomicsworkandthus,thegrossmargins,grosstonet,




etcetera.Thewaythecontractisnegotiated,it'sanactivity-basedfeethatwepayWalgreens.WhatImeanbyactivity-basedisthattheygetpaiddifferentamountsbasedondifferentscripts.

Ifit'sacashpaidscripts,it'sonefee;iftheyadjudicateinsurance,wepayalittlebitmore.Iftheydoapriorauths,wedoalittlebitmore;iftheydoworkaroundrefills,wepayalittlebitmore.Soit'sanactivity-basedfee.

TheearlyexperiencewithWalgreenscomparedtoPhilidoristhatthereismorecashpaythanwhatwehad--whatwesawwithPhilidor,butthat'slargelyafunctionofpriorauths.That'snotacapabilitythatWalgreenscurrentlyhassowhatwe'llbedoingisusingathird-party.Weagreedwiththemlastweek.Weuseathird-partyuntiltheyeitherbuildthatcapabilityorwe'llcontinuetouseathirdparty.

Weexpecttheeconomics,asImentioned,toimproveovertime.Whatwe'vebeenfocusedprimarilyonisvolume.Thekeyistogetscripts,andthroughWalgreensandtomakesurethephysicianshaveagoodalternativetoPhilidorandmanyphysiciansreallylikethePhilidorprogram.

Andagain,asImentioned,wellover90%ofthephysiciansthatwereusingPhilidorarecurrentlyusingWalgreensbutperhapsmoreimportantlyisthenumberofnewdoctorsthat,givenWalgreens'greatreputationandnationalbrand,arenowusingWalgreensthatweren'tusingPhilidor.

Sowe'vebeenfocusedongettingourphysicianscomfortablewithWalgreensandthenwewillcontinuetotweaktheprogramwithWalgreenstobetterservepatientsanddoctorsandalsoimprovetheeconomicstobothcompanies.Nextquestion.

Operator :

AnnabelSamimy,Stifel.

AnnabelSamimy(Analyst-StifelNicolaus):

Thanksfortakingmyquestion.First,IwanttogobacktotheadjustmentsthatyoumadeforGIwithregardtotheWalgreensprogram.Originally,itwassupposedtobeonlydermandophthalmology,socanyoujustexplainalittlebitmorewhattheissueswerethattheywereupsetwithandwhatspecificchangesyoumadeforGIwithinWalgreensbecauseoriginally,itwasnotgoingtobeincluded.

AlsotherewerealotofinventorychangeswithinGIinthefirstquarterandIguessinthepast,itwasthoughtthattheSalixinventoriesweregoingtobe--thedestockingforSalixwasgoingtobefinishedattheof2015soisthisdestockingnowrelatedtothosecancelledordersandthatcontinuesintothefirstquarteranddoyouseemorenormalgrowthafterthatsecondquarterforward?Andthenfinallyonthedivestitures,canyoujustdetailwhatbusinessesyougenerallybelievearenon-coretoValeantandhowmuchthatmightbeabletocontributetodebtpaydowngoingforward?Thankyou.

MikePearson (CEO):

So,firstofall,toclarifythatis--GIisnotpartoftheWalgreensprogram.ButIthinkthatmaybeweweren'tclearonthat.Therefore,itdidhave--theannouncementwithWalgreensdidhaveanimpactonGI,becauseIthinkjustlikeyouprobablyassumedGIwasgoingtobepartofit,sodidotherplayers.

Weprobably--weshouldtakeresponsibility,IwilltakeresponsibilityandprobablydidnotcommunicatetheWalgreensprogramaswellaswecouldhavetopayersandchannelpartners.We'vedonethat.Theyhadsomesuggestionsintermsofhowwecanmodifyitthattheygetmorecomfortable.I'mnotgoingtogointothespecificsofthose.

Wehaveacceptedtheirsuggestions.Walgreensandushave--we'vebeenworkingwelltogethersothe




comfortlevelismuchhighernow.So,butGIisnotpartoftheWalgreensprogram.InDecember,we--Ithinkwetriedtobeclearandifweweren'tclear,Iapologizebutintermsofdestocking,wetalkedaboutdestockingtakingplace,bothinthefourthquarterandfirstquarter.

Forexample,wedidn'tturnontheWalgreensprogramuntilJanuary15.Atthatpoint,alltheinventoryinWalgreensthattheywerecarryingconvertedtoconsignment.Sobydefinition,therewasadestockingelement.Wedoexpectthatboththedermatologyandophthalmologyfranchiseswillreturntogrowthinthesecondquarteroncethedestockingwilloccur.

WewereunabletomeasurepreciselyhowmuchwouldhappeninfourthquarterandhowmuchwouldhappeninfirstquartersowegaveourbestestimateinDecember.Turnsoutalittlebitmorehappenedinthefourthquarter.We'vegivenyouourfirst-quarterestimatesbutgoingforward,inthesecondquarter,weexpectthatdestockingtooccur.

Intermsofthedivestituresofnon-core,wedonotwanttogivespecifics.Weareindiscussionswithotherparties.Wehaveconfidentiallyaroundthat.ButitwillbethingslikeSynergeticswherewhenweboughtSynergetics,thepartthatwewereinterestedinandthatwasstrategicwastheophthalmologyversusthefranchise.Whatwesoldwasacontractmanufacturingandsurgicalneurology,whichisnotanareathatwecompetein.

Wehadnosalesforceandratherthanbuildasalesforceandgetintoanentirelynewarea,weendedupsellingittoacompanythatwasinthatarea.Thenifyoulookthenetprice,weendeduppayingfortheophthalmologyassets,itwaslessthan$50million.

Sothatitisanexampleofsortofanon-strategicassetthattherewewereabletomonetize.Again,wewillonlydothisifwebelievethatthecashflowsthatwewouldexpectfromourfranchisearelessthanwhatsomeone'swillingtopayfortheassets.Nextquestion,please..

Operator :

MarcGoodman,UBS.Mr.Goodman.

MarcGoodman (Analyst-UBS):

Hi,Mike.Acouplethings.Numberone,Ididn'tseeyoutalkabouttheemergingmarketsatall.Canyoutalkalittlebitaboutwhat'shappeningthereandobviously,thosemarketshaveweakenedalittlebit.Youdidn'treallytalkaboutthem.Second,whathappenedwithSoltaandObagi?Relativetohowyouwerethinkingaboutthistwoorthreemonthsago,didthesebusinessesjustslowdownjustdramaticallyoristheresomethinggoingonthere?

Thirdthingis,canyougiveusanupdateonthecontactlenscapacity?Iknowthisisimportanttoyouasyourampupcapacity,areyougoingtobeabletosellyourlensesjustintheUSoristhenewlensstilljustgoing--isitstilljustgoingintheUS?AreyouabletosellitinEuropethisyear?I'mjusttryingtogetasenseofhowmuchcapacityisrampingup?Andthenlastontax,canyoujustexplaintous,like,whythechangeintaxnow?Thankyou.

MikePearson (CEO):

Sure.So,emergingmarkets.Twothingsarehappeninginemergingmarkets.One,FXcontinuestoworkagainstus,whichinasense,doesn'tnecessarilyhaveanimpactonmarketdemandbutdoeshaveanimpactintermsofgrossmargins,becauseasyouguysknow,mostoftheAPIissourcedeitherfromtheUSorEurope.

Sothere--it'seitherEuro-denominatedordollar-denominatedandasthedollarcontinuestostrengthen




relativetotheemergingmarkets,itputspressureontheprofitability.Intermsof--it'ssortofbymarket.Russiacontinuestobeachallenge.SomeoftheEasternEuropeanmarketsare--continuetobeinfluencedbyEuropeandtheycontinuetobechallenged.

Therearesomebrightspots--ourMiddleEast,inparticular,ourAmounacquisitioncontinuestogrowveryrobustly.Mexicancontinuestobeastrongmarketforus.AndAsiacontinuestodoverywell,inparticular,China,whichisarealstrengthforus.SoIthinkemergingmarketswillalwaysbeamixandIthinkoneoftheadvantagesofbeinginmanyoftheemergingmarketsisthere'salwayssomethatareoutperformingandsomethatarenotperforming.

Sowedocontinuetoexpecttohavehighsingle-digitgrowthintheemergingmarkets.Butintermsofactualdollars,asFXcontinuestostrengthen,bothontherevenueside,thedollarswill--itwillbedepressedandthenintermsofprofitability,becauseoftheAPIissue,itwillcontinuetohurtusifthedollarstayswhereitisoritcontinuestostrengthenversuswherewewereinDecember.

MaybeI'llhaveAritalkalittlebitaboutSoltaandObagi,whichhejusttookoverrecentlyandmaybehecanalsotalkabouttheUltracapacity.AndthenRob,maybeyoucanaddressthetaxissues.

AriKellen (CompanyGroupChairman):

Yes,Marc,onthecontactlenscapacity,we'vesaidbeforethatwewillhavethreetofourlinesofUltraupandrunningthisyear.We'reoutofcapacitythroughQ1andQ2butwehavecapacitycomingonlineQ3andQ4.SoweactuallyaregoingtobeexpandingsalesintoEuropeandotherpartsofAsiaandwearefortunatetohaveadditionalcapacityonthesphericals.We'vealsolaunchedamulti-focalandthat'sgainingalotoftractionintheUS.

SotherewillbeagoodamountofUltrathatwillbeabletoexpandoutsidetheUSinQ3andQ4whilestilldoublingsalesofUltraintheUSthisyear.OnBiotrue,we'readdingseverallines.Therewe'restilltightforcapacity;thedemandhasbeenverystronginNorthAmericaandelsewhereintheworld.Sothere,it'sreallycatch-upbutwe'reinvestingheavilyincapacity.

TurningtoSoltaandObagi.Obagiisanicelyprofitablebusiness.WewereattheAmericanAcademyofDermatologylastweek,spentseveraldaystheretalkingtomanykeyopinionleadersacrossmedicaldermatologyandanestheticsandweactuallyhavealotofpublicsuggestionsandencouragementacrossbothofthesebusinesses.

SoObagiisprofitable.Ithinkwhatweneedtodoabetterjobonisexpandingourfocusacrossthenationalaccounts,bolsteringleadershipandbasicsalesexecution.Wehaveaterrificteamacrossmarketingandsales.Ithinkweprobablyhavenotputenoughfocusagainstthisbusiness.Thisisagreatsetofproductswithagreatbrandandwethinkwecoulddoabetterjobandweareaccountableforthatandwe'lldothejobthatweneedto.

LikewiseonSolta,wehadourmachinesondisplayattheAAD.Weactuallyhadagoodnumbersalesthere.Again,wehaveaterrificteamwithVlad,whoiswell-knowninthebusiness.Therewehaveworktodo.Wehavetorestorethisbusinesstoprofitability.ThegoodnewsiswehaveanewThermagesystemcomingonline.Wehavealsorecentlylaunchedthepelohairloss--hairremovalsystem,whichagain,weexpecttodowellinNorthAmerica.

ButwealsohaverepresentativesfromtheLatinAmericanregionandwe'regoingtobesettingthissystemacrosstheworld.Thereagain,it'sjustrestoringprofitability,gettingfocusedinthefield,improvingsalesexecutionandagain,we're--webelievewehaveagoodsetofproductsandit'sourjobtomakesurethatwesupporttheappropriatedemandinthefield.




RobRosiello (CFO):

Hey,Mark,onthetaxissue.WehavehadongoingdialoguewiththeSEC.Ithasbeenquiteproductivefromourperspective.Wethinkthisisanappropriatepresentation.Ipointoutthatithasnoimpactonthecashfloworactualtaxespaid.

MikePearson (CEO):

Nextquestion,please.

Operator :

AndrewFinkelstein,Susquehanna.

AndrewFinkelstein (Analyst-SusquehannaFinancialGroup):

Goodmorning.Thanksfortakingthequestion.Couldyoutalkabitmoreaboutthecashflowguidancefortheyearandsomeofthelevelofclarityaroundtheindividualmovingparts,givenboththeoperationalfactorswithdestockinganduncertaintiesonpricingaswellastheadditionaladjustments?Youtalkaboutrestructuringandtheotherthingsthatdon'taffectthenon-GAAPP&L.

Whatisthelevelofconfidenceinachievingthatlevelofcashgenerationin2016?Andthenasyouapproachthesepayernegotiationsparticularlyfor2017,canyoutalkalittlebitmoreabouttheprocess,inparticular,towhatextentareyouabletoleverageyourportfolioofproductsintryingtomaintainaccessforsomeofthecategoriesthathavebeenmoreofafocusforpayerstoshowsavingstotheirclients?Thanksverymuch.

MikePearson (CEO):

Sure.Iwilltakeashotatthese,butI'mgoingtoaskLindaandAnneandtoexpandifImissanything.Intermsofcashflowguidance,we'vetriedtobeconservative.Youcandothemath.Youcantakeourguidanceanddothearithmeticandseehowmuchcashflowwe--thatguidancelevels.

Andwe'vetriedto--Ithinkwefeelquitecomfortableatthe$1.7billionthatwenowhavegoodlineofsightonpriceforourentireportfoliofortheyear.Managedcare,wehavegoodsight,lineofsight.Mostofthesenegotiationshaveeitherbeencompletedintermsofmanagedcareorclosetocompletion.We'renotembarkingonthenegotiations.We'refinalizingthemandwe'reinfinalroundsandthey'vebeenveryconstructive.

We'vedonealotoflisteningtothepayers.WehavetriedtobeveryaccommodatingandAnneandherteamhasjustdoneaterrificjobsortofchangingthemomentumfromamanagedcarestandpoint.AndaswetalkedaboutthewholeCompanyisinvolvedandinonthis.

It'smovedfromsortofsignthatwasloweredoutintheorganizationtothe--withAnne'sjoiningtheCompanytoatop-levelpriorityfortheCompany.That'sthehighestlevel.Iknow,Linda,anyothercommentsonthecashflow?AndthenAnne--


Justtobeclear,ifIcaninterrupt,whenyou'retalkingaboutthevisibility,you'retalkingaboutvisibilityfor2017?

MikePearson (CEO):

Correct.2016and2017.




LindaLaGorga(Treasurer):

Sotomakeacoupleofquickcomments,youaskedaboutcashrestructuring.Thisisourestimateatthistime.Wehadpreviouslyestimated$200million.Wereduceditto$175millionbasedongettingtotheendoftheyearandhavingmoreinformationnowthatit'sMarch.

Asyoumightrememberfromapriorcall,ormorethanapriorcall,theSalixseveranceisabigpieceofthat.There'salotofSalixchargesthatwerepaidoutforoveryear.Sothatisstillflowingthroughjustbasedonhowtheseverancewasstructured.Oncontingentconsiderationmilestonesandpayments,again,thatnumberdoesincludethesproutpayment,whichisdone.

Theotherbigpaymentisthereisthe$150millionmilestonepaymentforthedrugthat'slistedonthepage.WhatIwouldsayisdepending,there'ssomethingsthat'sscheduledforfourthquarterandiftheydon'thappeninfourthquarter,theycouldhappeninfirstquarterbutthat'sourbestestimate.


SoI'lladd--thisisAnne.I'lladdafewcommentsjustonmanagedcare,toaddtowhatMikehadsaid.SoIdowanttoemphasize,asMikesaid,thepayernegotiationsaregoingverywell.TheprocessisyouusuallygetyourPartDbidsinthefirstquarteroftheyearandthenyouhavethenegotiationprocessuntiltheplanshavetosubmitintoCMSandyou'reusuallynotifiedinthethirdquarterofthedecision.

Sowefeelgoodaboutoursubmissions.We'vebeengoingbackandforthwiththepayers.ThecommercialcontractsareondifferentschedulebasedonthetermsofourcontractandImentionedtheadhocs,ortherapeuticreviews.

Withregardtoyourquestionaroundportfolioandhowourportfoliohelpsus,well,numberone,ValeanthasasizableportfolionowintheUSwithover$8billioninsalessoweareimportantpayers,astheyareimportanttous.Weevaluatewitheachpayerhowwebuildourcontractwiththembasedontheirneedsandhowtheygoaboutit.

Whereitmakessense,weareleveragingourportfolioslikeinophthalmologyordermatologyandGIandvariousformats.SoIthinkthatkindofcoversyourquestionsonthepayers.


Thankyou.

MikePearson (CEO):


Operator :

TimChang,BTIG.

T imChiang (Analyst-BTIG):

Hi,Mike.Couldyoutalkalittlebitmoreaboutthenon-coreassetsthatyouwouldconsiderselling?Imean,certainly,you'vegotalotofdebtonyourbooks.You'retryingtorevampthebusinessandIrealizeyou'vejustgottenbackbutitjustseemslikegivenhowthestocksreactinginthepre-marketandalltheinvestors'concerns--wouldn'tthatdebt--bepaymentbeoneofyourlargestprioritiesrightnow?

MikePearson (CEO):

Itis.Fullyagree.Weareverycommitted,asLindasaid,in2016and--toreduceourdebt.Thatwehave




notchangedthatcommitment.Wewilldothatthroughgeneratingcashflow.

Wehopetogeneratemorecashthisyearthanwhatwe'reprojectingatthispoint,butprojectionsareprojections.We'llbelookingatrevenueenhancement.Wewillbelookingatfurthercostreductionbecausewhatwe'vedoneistakenrevenuedownsignificantly.Wehavenotattackedthatspaceinanymajorway.Andthat'ssomethingwewilldo.

We'llcontinuetolookatopportunitiestoraisecashwiththevestigesasImentionedI'mnotgoingtogetintospecificsbutyoushouldexpectthattherewillbeaseriesofnon-coredivestiture'soverthecourseoftheyear.Whichwewillusethecashtopaydowndebt.Andtoacceleratethedebtpaydown.


Mikeisthefactthatyourtaxrateisgoinguporyouchangingyourreportingonyourtaxrateisthatpartofortiedtothefactthatyourdeleveragingthebalancesheetatall?

MikePearson (CEO):

No.EveryyearthereisacommentletterfromtheSEC.Itisnottheinvestigation.Itisacomment,letter.Allcompaniesget.WesitdownwiththeSECinthechangeasRobsaidtheysuggested.Theirsuggestionmadealotofsense.ButIthinkthekeyfromanequityinvestorstandpointandfromadebtstandpointithaszeroimpactonourcashflows.ThereportedtaxratewillchangebecausetheNOLwillbepre-NOLintermsofwasreportedbutintermsoftheactualtaxespaidourpreviousguidancestillstands.Weexpecttosortstayinthe5%range.It'strulyapresentation.Differencethathaszeroimpactinatallintermsofgenerationofcashflows.

Whydon'tyougetbackinqueue.Wehavealotofnamesontheboardhere.

Operator :

ChrisSchottJPMorgan

ChrisSchott (Analyst-JPMorgan):

Great.Thanksverymuch.Astwoquestionshere.FirstIknowyouwentintoalotaboutdetailthereasonsfortheupdatedguidance.Butmorebroadlyhowdidsomuchchangesoquicklywiththebusiness.Ithinkwhatinvestorsareputtingtheirhandsaroundhowmuchofthisguidanceisconservatismorjustdifferentapproachtoguidance.Giventhemanagementdisruptionsandcontroversiesascomparedtodeteriorationoffundamentalsoverthelastthreemonths.Anycolortherewouldbereallyhelpful.Thesecondquestioniscomingbacktothedivestitures.IknownotplanningtodivestcoreassetsbutjustthinkingabouttheevolutionofValeantkindofaddresssomeofthesenear-termchallengesifthestockdoesn'trecoverwhatwouldcausethecompanytogodownapathandconsiderabroaderbreakupoftheValeantbusinessunit.Thanksverymuch.

MikePearson (CEO):

Sure.Intermsofifyoulookatwhat'shappeningoneofthebigdifferencesinthereductioninguidanceQ1.Inasensewelostaquarter.ForQ1which--iswhywetriedtoshowsortQ2throughQ1ofnextyearwherewemadeveryconservativesubstanceonQ1ofnextyear.AllwedidwastookQ1ofthisyearwithweexpectedandaddedittoit.Onagoingforwardbasisandnothingthere'sbeenabigdeteriorationatallthebusiness.IfyouguysseethescripttrendsthingslikeFXyoujustlivewith.Thatisapieceofit.Ithinkwehavethemanagedcareenvironmentcertainlyneededtoaddress.Thatcertainlyishasledustoamoreconservativeoutlookonrevenuesthanwhatwehadbefore.Hopefullythosearenumbersthatwecanmeet.




Therewasaprettyhighdeductibletimeimpactedinthefirstquarter.Therewasstoppedattwiceatpercentofourlivessothatincreaseoffirstquarterwillalwaysbetough.Ithinkit'safirst-quarterphenomenon.Wefeelgoodabouttherestoftheyearfundamentalsaregood.Andprobablywehavetakenalittlebitmoreconservativeapproachonforecasting.IntermsofifthestockpricesnotrecoveredIthinkthat'llbeafunctionofnotdeliveringthecashflowsthatwe'repromisingand/orexceeding.Thecashflows.Andonthecompanyshouldthinkaboutothermovesaswe'retoserveshareholders.IknowtheboardiscommittedtothatandIknowmanagementiscommittedtoitbutwedothinkwehaveaplan.Thatwillgeneratestrongcashflowsandallowustoreducedebtandwecandemonstraterealgrowth.Organicgrowthinourbusinesses.Ithinkwebelieveweresuccessfuldoingthat.Thestockpricewillstarttotrademoreonfundamentals.Whichisnotrightnow.ThanksforthequestionsChriswe'llmoveon.

Operator :

CoreyDavis,CanaccordGenuity.

CoreyDavis (Analyst-CanaccordGenuity):

Thanksverymuch.Twoquestions.Numberone,wouldyoubewillingtogiveasXifaxinnormalizedrunrateXinventoryonannualizedbasis210andQ4butIsuspectonceinventoriesarenormalizedstartinginQ2ofthisyearisgoingtobemuchhigherthanthat.

MikePearson (CEO):

Andthesecondquestion


Thesecondquestionishowdoyouthinkyourretentionprogramisgoingnowandwillbegoingoverthenextsixmonthstoensurethatyoukeepretainandpowerallyourkeyemployeesnotjustattheupperlevelsbutallawaydowntheranks.

Unidentif iedPart icipant :

LetmetalkaboutretentionandthatAriwilltalkalittleaboutXifaxan.Sofartheretentionprogramisworking.We'vehadveryfewlosses.We'veobviouslylostDebandwe'redisappointed.ItwasinterestingontheEMTattheveryseniorlevelwedon'thavearetentionprogram.WedonotputthatinplaceandnothinginplacecurrentlyfortheEMT.Shewasamember.WhatwehaveisbelowtheEMTwehaveabout70peoplethatarewhatwecalltheAIP.Whicharesortofnextlevelkey.We'vehadminimalifanylossesthere.WejustpaidbonusesfortheyearonFriday.Wewillseewhathappensinthenextfewweeks.Thereisasortofa—wehavemeetingwithanAIPgroupeveryweekwherehaveanopendiscussionandtheleadersofthecompanyandthere'saverypositiveattitudeinthegroupthatwerecommitted.

Theyknowhowstrongourbrandsareandhowstrongourproductsare.Theyspentalotoftimewithourcustomersviapositionsbeitretailersandmanyofthemhavebeenopenedothercompanieshavegottentypeofexperiences.Sothere'sa(spirited)corewe'rehopefultheboardwasverysupportiveofwhatwebelieveistobeapretty(inaudible)retentionprogramforthislevel.Sofarsogood.Butasyoupointoutit'stough.It'satoughcompanytoworkfor.Ireallythankouremployeesfortheircommitmentanddedication.Ari?


OnXifaxanwesaidbackinDecemberweexpecttobegreaterthana$1billionindrugsthisyear.Weobviouslyexpectthattobethecase.Wehaveover400repsinthefieldpromotingXifaxanandwe




continuetobelievethatwewillseegrowthacrossIBDSandincreasinglyAGaswe'vesaidbeforethemedicalindicationsforpermanentuseofXifaxanwith(inaudible)isintheguidelinesandwereputtinginother100repsintothefield.Theyhavegonethroughtraining.WehaveputtingalotofenergybehindthedrugscriptsareasMikesaidyouseethemthererunningnorthof12,000aweek.Intotalthisyearweexpecttoseeinaround50%growthofXifaxanscripts.Thankyou.


Thankyou.

Operator :

ShibaniMalhotra,NomuraSecurities.

ShibaniMalhotra(Analyst-NomuraSecurities):

Thanksforthequestions,I'vegotacouplethefirstis.MikecanyoujustkindclarifyyouweresayingthatthereasontheSalixrevenuehasbeenbroughtdownbecausemanagedcaredidn'treadtheWalgreenspressreleasecorrectly.Isthatcorrectabitdifficulttokindoffathomthat,thatwouldhavesuchabigimpactonyoursales.Andthensecondoverthelastsixmonthswe'vebeentalkingtoyouIguessinvestorshaveaswellaboutthefactthatmanagementneedstorebuildcredibilitywithinvestorsandwe'vebeenthroughastateofnegativenewsthatstartedwithpricingandthenPhilidorandthengeneralcommunicationandnowtheguidancewhichIwouldsayisloweredfarmorethananyinvestorkindofanticipated.Iguessthequestionishowcanwebeconfidentinwhatyou'resayingtodayaboutthebusinessgiventhatyouwerepositiveinDecemberandJanuary.HowdowegetcomfortablethatValeantisabletoexecuteanddeliverforshareholders.Thanks.

MikePearson (CEO):

MaybeImisspoke.Intermsofthefirstone.It'snotmanagedcarepersebecausemanagedcare(inaudible).Distributorsandretailers.Whichleadtorevenuerecognition.AgainIthinkWalgreensdidnotdoaverygoodjobexplainingandtheaspectsoftheWalgreensprogramsthatpeopledidn'tlike.Ithinkwe'vedoneabetterjobexplaining.We'vemodifiedtheprogramtoaccommodateimportantchannelpartners.Idon'tthinkitwouldbe.AndthentherewassomelackofclarityofwhetherGIwaspartoftheprogramarenot.Iwouldn'tnecessarilyagreedthatitwascompletelyunexpectednegativeresponsetotheGIbutIwouldpointtothescriptandtheondemandisbasedonscriptswrittenandfilled.IsortofpointwecontinuestronggrowthacrosstheSalixportfolioasbeingtheleadingindicatorofhowthat'sdoingandwe'requitepleasedwiththegrowththatwecontinuetosee.AsArisaidweareputtingmoreresourcesbehinditbecausewethinkthere'salotofuntappedgrowinXifaxanEGindication.

Intermsofmanagementcredibility.Wehavetoearnit.Youraisedsometerrificpoints.IwouldargueJanuaryIdon'tthinkIsaidawholelotinJanuary.IthinkIwasinthehospitalbed.ButIdoacceptyourpointandstartswithme.Ourteamshavebeenworkinghardandweobviouslyhavetodeliveronourcommitments.Theworldhaschanged.TosomedegreesinceDecemberbutwehavetodoabetterjob.We'vegotsomeunderperformingbusinessesthat'sonus.Right.That'stotallyonus.WehavetoearnbackthecredibilitywehadtodeliverontheresultsandwehavetomeetorexceedthisguidanceandIthinkweallrecognizethat.It'sabitofastartingoverpointatthispointformeandthecompany.Clearlyifwedon'tdeliverthenagainthat'sonme.IcanassureyouI'mcompletelycommittedtomakingsurethatwedodeliverasIdothinkwehavealotmorelineofsightintermsofmanagedcareatthispoint.We'vealotmorelineofsightintermsofpricingatthispoint.Ithinkwehavebetterlineofsightintermsofscript.Ithinkallthreeofthosehelps.Therearecertainthingswedon'tcontrollikeFXbutwe(havefilledourguidance)sowehopethat'smanageableaswell.Thankyouforthequestion.




Operator :

(inaudible)EvercoreISI


ThanksfortakingmyquestionIhaveafewtoday.IreallywanttofocusinonsomeofthechangesandfundamentalbusinessofthescenecomingoutinthefirstquarterthefirstoneforMike.Howdifferentisaguidancenumbertodayversuswhatyoucameoutwith--whenyoufirstcamebackacoupleweeksago.AndthenontheXifaxanwhatI'mtryingtounderstandis,iforderswerecanceledtowardstheendoffirstquarterbuttheTRXcontinuetogrow,thatwouldimplytomethatthere'smoreinventoryinthechannelthanexpectation.AmIintherighttrackthere?AndonOphthalmologyRXIdon'tseedisruptionon(INS)andI'mtryingtounderstandwhatisitthatyourseeingdisruptionwiseinthefirstquarterbasis(inaudible)howdoestheJanuaryplusFebruarycomparedtowhatyou'reseeinginMarchandthenRobI'msorryifImayacouplethingsnumberonefreecashonEBITDAfreecashflowblitzyoubasicallymentionworkingcapitalchangeof$600millionyounowmention$200millionwhat'sdrivingthat?IsitjustWalgreens?SecondlyRobtaxratesHowardpreviouslysaid,thatifyoudodelivercashtaxesgoingtothelowteensversusthemid-singledigitsthatitusedtobesomyquestionisifyouguysdodelevercashtaxisgoingtolowteensversusmidsingledigitthatitusedtobe.Somyquestionis,ifyoudodelever,willthenon-GAAPtaxrateapproach20%?AndthenfinallyonEBITDAfor20--forthenextfourquarterssothepressreleasesaysthatadjustedEBITDAforthenextfourquarterswillbe6.2to6.6billionbuttheslide16saysitis6billionsoIjustwantunderstandthatthankyou.

MikePearson:That'salotofquestionsLetterquestionsthere(Umer).(I'mnotsureIpickedthemoff.)I'llstart(inaudible).Wehavebeenhavingalotofdebatewithamanagementandwiththeboardintermsofwherewetakeguidanceandquitefranklywecontinuedourdiscussionsandmadealotofprogresswithmanagedcareoverthelastcoupleofweeks.Someofthenegativeshaveincreased.But(inaudible).Thefirstquarterwe'vegotalotmoreclarificationonfirst-quarterasthequarterhasprogressed.Wefeelcomfortablewiththeguidancethatwegaveoutthismorning.Intermsofinventory.Asyousaidscriptcontinuetogrowbutpeoplearen'torderingasmuchproductit'soneoftwothings.

Onethereismoreinventoryotherthanwethought.Thesecondispeopleareholdinglowerlevelsofinventory.Thosearethetwopossibleexplanationsandactuallywethinkisalittlebitofthelatter.Intermsofbothdistributorsandretailersarefocusedoncashmanagementandwedothinkinventoriesthroughoutthechannelcontinuetogodownbutbydefinitioniscontinuetogrow.Thatissomepointwedobelieveaswegetintothesecondquartereverythingwillbenormalized.OphthalmologyagainIdon'tthinkwesaidthere'sanymajorchange.Whatwehaveisasetofolderpartsthataloneexperienceslowdecline.Thisisnotouractuallybrandedsharesisincreasingthisislargelyduetomoregenericsiswithgrowing.Sortofthepoolofbrandedophthalmologyproductsaswecompeteisgoingdown.Nowwehavenotincludedinourguidanceanynewlaunches.IfwegetapprovalonourGlaucomadrugthenweacceptthatwouldbehelpfulbolsterophthalmology.Certainlyindermatologyifwegetapprovalonsomeofourpipelineproductsthatwillmanagetherewhatwereforecastingnowinourguidanceisproductsthatarecurrentlyonthemarket.Wedon'thavelaunchproductsinthere.IntermsofprogressionJanuaryFebruaryMarchwasalwaysamuchlargermonththanJanuaryorFebruary.It'sevenmoreinthefirstquarter.Becauseofthesehighdeductibleplansit'sevenmoreacuteintermswhatweseeinMarch.SoclearlyMarchisamuchbettermonththanJanuaryFebruary.Rob?

RobRosiello (CFO):

Letmetakeofcareofthe(internal).Withrespecttotheworkingcapitalonslide20thereductionreflectsthelowergrowthintheupdatedguidanceanditsimply30%ofthechangeinrevenue.IntermsofthetaxrateIagreethatovertimeitwillincreaseifweweretodeleverthe10to15%thatweareshowingistotry




toshowitonacomparablebasistothe5%thatwewereshowing.Ithinkwe'vealwayssaidthatourlonger-termourtaxratewouldincreaseandlikewiseandcommensuratethe10to15%wouldincrease.AndwithrespecttothefourthquarterguidancewhichMikepresentedonpage16.Thechartiscorrect.TheadjustedEBITDAofnon-GAAPguidanceis$6billionandwewillcorrectthat.


RobtobeclearthenextforquarterstheEBITDAissixbillion?Or6.2to6.6

RobRosiello (CFO):

6billion

Operator :

DavidRissinger,MorganStanley.

DavidRissinger (Analyst-MorganStanley):

Thanksverymuch.Ihave13questionsalso.I'llkeepitalittlebitbriefer.FirstwithrespecttodivestituresshouldweexpectthemtobedilutedtoEPSgiventhefactthatyou'llbepayingofflowinterestratethat.SecondwithrespecttotherebatesdiscountsandchannelfeesincludingWalgreenscouldyoujustexplaintousI'massumingmostofthosearenettedoutofrevenueandarereflectedinthatrevenuebutanyofthosechannelpaymentsetc.reflectedinCOGSorSG&A.AndthenfinallywithrespecttolaunchesMikeyoumentionedthatyourexcludinglaunchesfromrevenueguidanceareyoualsoexcludinglaunchexpensesfromyourguidanceaswell.Thankyou.

MikePearson (CEO):

ThankyouDavidforprioritizingyourquestions.Ihopeyourcolleaguestakefromyourlead.Thankyouverymuch.Dependingonourdivestitures.Somecouldbedilutedsomecouldbeactuallymaynotbeitkindofdependsontheasset.Ifit'sanearlystageassetobviously--asyouknowit'sreallydependsontheassetandthepriceweget.IfwedoanythingmajoritcouldbelowerourEPS.Thereisnoquestionaboutthat.Butwewillbeclearinthepastwemadeacquisitionswhetherwhatitwouldbeyearwillbedilutive.Intermsofthelaunchexpensesarealsonotincludedinthebudget.ButIwillnotethatlaunchesintheareaofdermatologyandophthalmologywedon'tanticipatemajorchangestoourinfrastructure.IthinkwewouldprioritizeourcallpatternsdifferentlybutthelaunchwedohavegoodstrongcriticalmassanddermatologyandophthalmologyandinGIintermsofoursalesforcecapabilities,etcetera.Idon'tanticipatewewillbeaddinglotsofpeopleasfarastheselaunches.IntermsofWalgreens.IntermsofrevenuereductionsversusCOGSwearetakingtheWalgreenscostsforSG&AintermsofourretrievingWalgreens.Theyaredoingwe'rebasicallypayingthedispensingfeebasedonactivity.Andthatwillrunthroughitwillnotbeinthereductionofrevenueitwillbeflow-throughSG&A.


Thankyouforyourquestions,David.Nextquestion,please.

Operator :

DavidAmsellem,PiperJaffray.

DavidAmsellem(Analyst-PiperJaffray&Co.):

Ijusthavetwo.Sofirstonthetaxreporting.Thenewtaxreporting.AndIknowyoumadeitclearthatthere'snoimpactoncashfloworactualtaxespaid.ButIguesswhatI'mtryingtounderstandhereis




undertheoldreportingyouhadcharacterizedyourEPSguidancerangesandyourreportedEPSascashEPSsoundertheoldreportingforpastEPSisthatcashEPSnotreallycashEPS.I'mjusttryingtounderstandifthere'saninconsistencyhere.Secondlythisisahigh-levelquestion.Ithinkoneofmypeershadaskedaboutretention.Earliermaybecanyouspeaktomoraleinthecompanyandyoutalkedaboutdistractionscanyouspeaktothatandhowthatpotentiallyimpactsthebusinessandisthereanissueinternallyinyourviewintermsofconfidenceinyourabilitytoleadthecompanygoingforwardgivenwhat'stranspired.Thankyou.

MikePearson (CEO):

I'mgoingtoasktotakeyoursecondquestionfirstandthenwecouldtalkabouttax.I'mgoingtoaskedAriandAnneasI'vealreadycommented(inaudible)I'dliketogettheirtakesalargeportionsofthecompanyreporttobothofthemintermsofthepeopleside.Iwilladdressthepersonalquestions.ButAriandAnnewhydon'tyou—Arigofirstandtalkaboutmorale


LookIthinkasyousaidthesearechallengingtimesaswetrulyhaveanamazingbenchofgeneralmanagersandleadersoffunctionsinthebusinessesandyou'veheardtheirnamesrepeatedagainandagain.IthinkwehavestrongandtalentedleadershipandpeoplewhoarecommittedtoGItoophthalmology(inaudible)LatinAmericatheBNLbusinessandthinkingacrosstheteamsandtheseincrediblytalentedpeople.Wecometoworkeverydayobviouslywehavetoreturnmoneytoshareholdersbutwecometoworkworryingaboutpatientsandqualityproductsintothemarketandservingourdoctorcustomerscompliantlyintothebestofourability.Ithinkthat'swhatmotivatesourteamIthinkwebelieveinourmission.Webelieveinwhatourcompanyistryingtoachieve.That'swhatwedoday-to-day.Theissuessurroundingusaredistractingandittakescouragetoforgeaheadtoexecuteourmissionday-to-dayinthefaceofallthat.AllIcansayisthatwearefabulouspeoplewe'reblessedtohavethemwebelieveinthemandwethinktheywilldotherightthingforthebusiness.


Iwilljustaddafewcomments.TowhatArihassaid.Ithinkyoudescribeditwell.WhenyoutalkaboutmoraleIthinkpeoplehavesortofworkedthroughtheprocessinternally,adifficultchangeprocessandpeoplenowareangrymoreaboutattheoutside.TheyseethecompanybeingdescribedinawaythattheyknowisnotwhattheyexperienceatValeant.I'mencouragedthatI'vereallyseenpeoplemovedtoaction.Theywanttohelp.TheywanttohelpchangetheimageofthecompanyandwehavereallystrongleaderswhoIthinkarechannelingthatenergyintothebestthingthateveryonecandoandthisorganization.Toreallychangeandshifttheorganizationandperformeveryday.Andthat'swhatweareemphasizingeachandeveryday.Reallydeliveringperformanceistogetusoutofthesituationthatwearein.IthinkthetenetthatValeanthasbuilttheorganizationaroundadecentralizedapproachhelpsushere.BecausewehavesomenewbusinesseswhohaveanidentitywithaselectsetofcustomerswhobuildingtheirimageandownbrandasaValeantcompany.Oneofthosebeing)whichisdoingverywell.Coupleofotherpoints.Ithinkwehaveoneofthebest(inaudible)compprogramintheindustry.Foroursalesrepresentativessothatkeepsthemmotivatedoncleargoalsthattheycanachieveandwe'reworkingtoshaketheenvironmentsuchthattheycandothat.AndIwilljustendwithIthinkAri'spointaroundpeoplereallybelievingintheproductsthatthey'reselling.WhenItalkedtooursalesRepresentativewhenItalktoaremarketersandourR&Dfolkstheyareverycommittedthattheseproductsthatwebroughttomarketandarebringingtomarketmakearealdifferenceinpatientslives.Ithinkkeepingthatcommitmentthatconvictionandthatdeterminationtoreallychangeourimageandperformourwayoutofthiswillkeepourorganizationandthemoralegoingintherightdirection.





Thatisagoodpoint.IfIcouldjustaddthis.It'simportantfunctionsthatenableourcurrentpeopletodotheirworkandthatspecificallymanufacturingandR&DandIthink(PageandhisteaminR&Darecrankingourproductsthataregoingtofillpipeline.Wetalk(aboutinaudible)IDP-118(inaudible)thesethingsarebeingworkedonbythisterrificteamwhileremainingfocusonthefuture.IthinkDennis(inaudible)manufacturingaswetravelaroundtotheoperationsyoucouldn'thopetohaveateamofpeoplemorefocusedonjustdrivingqualityandefficiencyday-to-day.

MikePearson (CEO):

Davidyou'rebeingpolitetoguessthequestionisamIappropriatetoleadthiscompany.It'sclearlyuptotheboard.Idothinkwehaveagreatboardwe'vemadeanumberofnewadditionstoourboardwillprovideevenmoreindependence.WebasicallyhavemorerepresentationfromtwoactivistinvestorsPershingSquareand(ValueX).Ithinkwehavetwomajorinvestorsalso.Onourboard.OurboardinteractwithinvestorsandsoIcan'tcommentorI'mnotgoingtochoosetocomment,intermsofthatisuptotheboard.Idothinkourboardisalotclosertotheinvestorsthanmanyboards.Bothgiventhecompositionthenewindependentdirectorsaswellassortofrepresentationfromacoupleactivists.Tax?


Historicallyourtaxpresentationtable2Aand2Bshowedthatsinglenumberitisacombinedtaxeffectofanon-GAAPadjustmentaswellasthetaxattributesandothertimingissues.SuchasNOLs.Whatwe'vedoneintheQ4onauditedpreliminarypresentationistobreakthatoutintotwopiecesthetaxprovisionplustheeffectsofthenon-GAAPadjustmentsaswellasthetaxeffectofuseoftaxattributesandothertimingitems.We'rereportingcombinedamountofthatas5%.Goingforwardwerejustgoingtoreportthetaxprovisionplustheeffectsofthenon-GAAPadjustmentonlyontable2Aand2B.Wewillcontinuetonoteinaseparatetablethetaxeffectoftaxattributesandothertimingaffectsothersasyoumentionedthere'snoimpactoncashfloworactualtaxespaid.OurapproachhasbeentomatchtheactualcashtaxthatValeantpaideachyearbutagainit'sbeenmadeupofthosetwotermswhichwehistoricallycombined.


Nextquestion,please..

Operator :

Solvatru)HCWainwright


Thanksverymuchfortakingmyquestion.Ijusthavetwo.Oneisinageneralsensewhetheryoucancommentonyouphilosophyofcurtailingpriceincreasesversuswhatyourpeersandinthespecialtypharmaarenaaredoingandhowhighyourconvictionisthatgoingforwardthisisthebestapproachtotakegivenchangesinthemanagedcareenvironment,i.e.,getridofasmanypriceincreasesaspossibleversuspursuingajudiciousapproachtomaybeincreasingpricesonsomeproductsornot.AndinthesecondquestionisspecifictowhatyoupreviouslycommentedonbackinDecemberregardingconvertingwrittenprescriptionstofilledprescriptions.OnAddyicouldyougiveusanupdateonthatplease.

MikePearson (CEO):

Sure.IthinkweretryingtobeveryclearonourapproachtopricingwhichisgoingforwardandthisisbeeninplacesinceSeptember.Wewilltakesingle-digitpriceincreasesacrosssomeofourportfolioinlinewithmanagedcarecontracts.WewillbemadewiththecommitmentasfarastheWalgreensdeal,




thisyeartoreduceprices(ondermatologyandophthalmologythebrandedproductsis10%thisyear).Wearenolongerinthemarketforunderpricedassetsoutthere.Ifyouactually—backpriceincreasesarepublicknowledge.Ifyouactuallylookatusversuscompetitorsbothinthespecialtyandinthebigpharmaonspacethe(black)priceincreaseshavebeenthisyearyouwillseethatwe'reactuallybelowwhatmostifnotalltheothercompanieshavedone.

Ithinkwe'vetalkedaboutthatandIguessthequestionishowcommittedarewe.Weareverycommitted.Infactthatsomeoneofthekeysinthemanagedcare.Isthatcommitmentandtheyareplottinginappreciatingtheapproachwe'retakingandthey'reusingthatwhentheytalktoothercompanies.IthinkoneoftheverysmartthingsthatAnneandourteamhasdoneis(offersomething)thattheresttheindustryhasnotoffereditandthathasplayedabigroleintermsofimprovingoverallrelationships.Isitfair?


Thatisveryaccurate.Whatthepayers(inourlead)andtheyareveryclearandIunderstandthisfrombeingintheindustryfor25yearswithotherPharmacompaniestheywantpredictability.Weareworkingwitheachofthepayerswhethertheyahealthplanora(PDM)oncontractsaroundpriceinflationprotectionandasMikesaidaligningourpriceincreaseswithmoremodestindustrystandards.SoIthinkyouhadthatAddyiquestion?

SowithAddyiyou'rerightweseethenumberofwrittenprescriptionversusfilled.Inthebeginningbackinthefourthquarterwewereonlyseeing25and30%oftheprescriptionsgetpaidfororfilled.Thatnumberisnowuptointhemostrecentweeks57%ofthoseprescriptionsarebeingfilledandpaidfor.Reallythatsortoframpupwithanumberofprescriptionsisbeingimpactedbyonehavingacomplexriskprogramthisisthefirsttimethatwhereaccordingtoourknowledgethattherebeenapharmacistandphysiciancertificationprocessandsoreallyworkingthroughthat.Hasbeenachallengebutwecertainlyaddresseditwiththepharmacieswe'redowntoaround10to12%ofscriptsbeingkickbackfrompharmacists.

We'restillworkingthroughthephysiciancertificationandmakingsurethatthosethatarewritingarecertified.Andpartofthathastodowiththisisanewproductandwewanttomakesureexactlywhothetargetsandthewritersoftheproductwouldbe.Wehavemuchmoreclearinformationnowonwhothetargetsareandwhosetreating(HSDD)andotherdiseaseslikethatandweretakingmoretargetedeffect.Andthenlastlythemanagedcareprocesshaschangeddramaticallyjusteventhispastyear.AllofthelargePDMsknowinmostcasesfromlaunch.TheytakesixtoninemonthstoactuallydotheclinicalreviewandthenenterintonegotiationandsoithastakenusthattimeaswetransitionfromSprouttoValeantandourmanagedcareteamhere.Pickingitup.ToreallyworkthroughthatprocessandIfeelveryconfidentbymidyearwewillhaveimprovedaccessforAddyiandwillstarttoseetheprescriptionsthatarecomingthroughbeingfilledandbasedontheenhancementswemadetoourpromotionalorganizationandfilingofactualmarketingmaterialsthismonthtoOPDP.Thatsecondhalfwillbeamuchbettertimeperiodtoreallyjudgetheperformanceofthisproduct.

MikePearson (CEO):

Thatbeingsaidwetakefullresponsibilityforreduction—weprobablydidn'tmovequickenoughupandthat'smyfaultbutIthinktoAnne'spointwearenotgivenuponthisproduct.Clearlywehavetodemonstrateourabilitytohavesuccessandwehavenotdonethatyet.Sothat'sonus.Weareworkinghardtodeliver.


Andalastcomment.Thetestimonialsthatwehearfromphysiciansandpatientseachdayinspireusand




everydaytokeepgoingwithAddyiandreallyeducatingaroundHSDD.AsMikesaidwehaven'tgivenupIhavealotofconfidenceinthisproduct.

MikePearson (CEO):


Operator :

AlexArfaeiBMOCapitalMarkets

AlexArf aei(Analyst-BMOCapitalMarkets):

Thankyoufortakingthequestionsmostofmyquestionshavebeenaskedandanswered.Lookingatsomeofyourtop30productsspecifically(inaudible).Itlookslikemuchofthe(solobusiness)isbeingmadeupfromotherchannelscouldyouprovideyouroutlookfortheseproductsspecifically(Juvia)whichwasthoughttobeagrowthdriver.Andjustafollow-uponAddyidoyoustillexpectittobea100andmilliondollars$250milliondrugin2016thankyou.

MikePearson (CEO):

IntermsofAddyinowedon'texpecttobe100betterthan15',in2016.That'soneoftheproductsthatwereducedtheforecastsignificantlyon.Whatweareishopefulwewillgettothatlevelbutcertainlynotin2016.IntermsofJubliaitisoneoftheproductsthatis—therewasaquestionearlyaboutleverage.Canyouleverageyourportfolio?AndasAnnesaidormentionthat(derm)hasbeenoneofreviewsthemanagedcarecompanieshavereallyfocusedonJubliainparticular.SothenetofmanyofournegotiationsisthatwesacrificethepriceonJubliatoensureaccesstotherestofourportfolio.WewouldexpectandwehavebetteraccessforJubliathanwehadbefore.SowewouldexpectscriptstocontinuetogrowonJubliabuttheaveragepricewillcomedown.Inordertoreturntogrowthwe'rereallyneedtoexpandthenumberofscriptsbutithasbeendisproportionatelyhitintermsofmanagedcareinordertoprotectbecausethat'swhatmanymanagedcareplanswerelookingfor.AgainasAnneWhitakersaideachnegotiationisspecificit'snotthecasewitheverymanagedcareplanandeveryonehastheirownneedsbutthat'swhatwe'reseeinginJublia.Nextquestion,please..

Operator :

DavidMerrill,WellsFargo.

DavidMerrill(Analyst-WellsFargo):

MorningIhaveafewquestions.FirstRobwhynoGAAPguidanceandthenabridgetonon-GAAPsincetheinvestorscouldmakeadecisiononwhattoincludeandwanttoinclude?.Secondonthetaxassessment,useoftaxattributesandothertimingissues.Iknowafewquestionshavebeenaskedaboutthisbutdoesthisrelatetodeferredtaxliability'sanduseofrecoveryofincometaxoranythingelselikethat.IknowIaskedthatwhenImetwithyouaboutamonthago.Iwasjustwonderingifthat'srelatedtothat.AndthenthesecondhalfguidanceseemstobeadramaticincreaseotherthantheinventorydrawdownisthereanythingelsethatweshouldexpectthatshouldaccountforthatandlastlyIthinkMikejustmentionedthatlaunchexpensesforacoupleoftheselaunchesarenotincludedintheguidance.Whywouldtheynotbeincluded?

MikePearson (CEO):

Wehavenolaunchuntilproductsapprovedwedon'tincludedandourguidancesowedon'tincludetherevenues.Orthelaunchexpenses.Nowbecausemostofourproductsare--areincategorieswherewe




alreadyhavestrongsalesandmarketingthenetimpactoflaunchingtheseproductswebelievewillbeneutralatworstintermsofourEPS.Thisisthewaywetreatit.Wedon'tputintherevenuesandwedon'tputinthecostsbecauseisnotapprovedit.Andthat'salwaysbeenwhattheapproachwe'vetakentoguidanceandatleastfromourvantagepointthatmakesense.Toincluderevenuesnotcostwouldn'tmakesensetoimprovethecostswithouttherevenueswouldn't'makesenseofwechoosenottoincludeeither.

DavidMerrill(Analyst-WellsFargo):

Justasafollow-uptothatisafairtosayifthereimprovedsinceproductsaren'tusuallyprofitableinthefirstyearortwothatwe'dseeanincreaseintheexpensesjustforthelaunchexpensesnotfortheinfrastructureorthenewsalespeoplebutasforlaunchexpenses

MikePearson (CEO):

Ourbelieffortheproductsthisyearwewouldnotexpecttohaveanimpactonoverallguidanceforexampleifthat'sthequestion.Wewillhaveophthalmologywehopegetapproved--July.WebelievewillhaveenoughrevenuestocoveranyofthelaunchexpensesandfurtherwedonotexpecttogetapprovedtoNovemberDecember.Andsoagain,itshouldhaveminimalimpactonourguidance.Sowedon'texpecttobetakingthatguidanceuntilweproductsapproved.Rob

RobRosiello (CFO):

TakeyoursecondquestionfirsttaxeffectsarelargelyNOLs.Andtheuseofdeferredtaxassetsandnotliabilities.WithrespecttotheGAAPguidanceasweexplainedinthefootnoteforpressreleaseduetotheinherentdifficultyinforecastingandquantifyingcertainamountsthatarenecessarytodoitwefinditmoreaccurateandbetterforourinvestorstoguidetothenon-GAAPmeasuresthatwedo.

MikePearson (CEO):

Nextquestion,please..

Operator :

(Lucas)Unioncapital



Operator :

AlanRidgeway;Scotiabank

AlanRidgeway(Analyst-Scotiabank):

Higoodmorningthanksfortakingthequestions.Idecidedquestionaboutthebridgetothe2016guidance.Intryingtogetafeelforreducedrevenueexpectationsforboththe(derm)andtheSalixbusinessandthemanagedcarecontractingpieceaswell.Canyouspeaktosortofinyourreducedexpectationsfromarevenueperspectivethisyearwhatthesortofsplitbetweenvolumedeclinesordeclineinyourexpectationsfordemandversusyourexpectationsonpricing.Andthenhowthatmayhavechangedinthelastlittlewhileasyou'vecontractedwithmanagedcareandI'llleaveitatthat.Thanks.

MikePearson (CEO):




Great.Themanagedcareisjustallprice.Right.We'vequantifiedthat.Hopefullywhatwehopetobeabletodoistogiveusbetteraccesstodrivemorevolume.Wehavenotbuiltalotofthatandoftoourforecastandthatshouldbetheupside.Butintermsofmanagedcarethatisbasicallyprice.Intermsaswethinkaboutpriceiscapturedthereandobviouslythereissomepriceandtherevenueside.Nottomanaged-carepiecepartlythroughthepricereductionsthatwe'regivingandophthalmologyindermatologyaswellasthefactthatwearesortofpriceincreasesweremorelimitedandwhatwecandoinsomecasessomeofthecommitmenttomanaged-carewastokeeppriceincreaseslowerthanwehavehistoricallysoasapriceelement.Weactuallyinthefirstquarterwheredemandhasbeenlower.Wedoexpectifyouactuallylookatthescriptswe'rerunningaheadoflastyearindermatologyandsowearequitepleasedwiththat.WeareexperiencinggreatscriptgrowthintheG.I.franchise.Intermsofophthalmologyagaintherewehaveadecreaseinscriptsthatwereincreaseandshareinthebrandedportionandthosearethethreemainfranchises.Overallweexpectdemandtocontinuetoincreaseoverthecourseoftheyear.

Operator :

GregGilbertfrom(VB)


Thankyou.FirstMikewhenyoutalkaboutscriptgrowthfordermareyoutalkingaboutscriptsof(IMS)orplus(Philidor)I'ErealsprescriptionsorjustthosethatweseeonIMSwhichmightbeinflatedduetotheWalgreensshiftawayfromPhilidor.Secondlywhenyouexpecttobeabletofilethe10KandcanyousureyourgameplanwithIEwhatisinyourcontrolwhatisintheboardcontrolorgatedbytheboardandareyourauditorsinagreementwithyourgameplaninyourtimeline.IsuspectsalotoffolksaregoingtowonderafterthecallwhenyouexpecttogettheKdone..Andalltheimplicationsthatcomewiththat.AndlastlyMikewhenyoucommentonthesituationspecificallywithDebandTanyagivenweonlyhavemediareportstorelyonandclearlyyouknowatapersonallevelwhathappenedinthosecases.Thanksverymuch.

MikePearson (CEO):

Soscriptgrowth.


Dermisrunningroughly10%aheadoflastyearallin.Wearenowusingsymphony(inaudible)datatoseeyouknowthat'swhatweregoingtobetracking.SofarallindermisgrowingtheaccessprogramisstillrelativelynewasMikedescribedandwe'reexpandingintonetworksandindependentsandsoitcontinuedtoexpectgoodTRXgrowththroughthecourseoftheyear.

MikePearson (CEO):

Intermsofthe10K.Certainthingsarewithinourcontrolandcertainthingsaren'tasmanagement.Wehavetheadhoccommitteecontinuetodotheirreview.Sopartlydependsonthanapartlydependsonus.Wehavetodoourworkintermsofsubmittinga10K.WeareinconstantconversationswithPWCintermsofthemtodotheirwork.ThebestestimatethatIcangivebutagainwedon'tcontrolitishopefullygetthis10KfiledsometimeinApril.Ican'tcommittothat.ThatwouldbemybestestimateiftheybasedoneverythingthatIknow.IntermsofDebandTanya.Debresigned.Shewasavaluedemployee.Shedidalotofthemarketingsheledourdermbusinessanddidagreatjob.Weweredisappointedthatsheleft.AsImentionedshewaspartoftheEMTwherewehadnoretentioninplace.Becauseofourexecutiveofficersofthecompany.Wewishherwellandwe'requiteclearthathadnothingdowiththeadhoccommitteeoranythingelseitwasadecisionthatshemade.AndTanya.AgainthathappenedwhenI




wasn'theresoIcan'tcommentIdon'thaveinformationonthatIcan'tcommentonthat.

Operator :

DavidSteinberg,Jefferies

DavidSteinberg (Analyst-Jefferies):

Thankyou.Youmentioneddestockingquiteafewtimesonthecallinparticularforsomeyourkeybrands.Iwaswonderingifyoucouldhelpuswithinventorylevels.IbelieveinthepastnormallevelsintheUSwereabout2to6weeksand2to4monthsglobally.Canyouconfirmyourwithinthatnormalrange.AndperhapsperpointintheUnitedStatesgiventhelastpublicforumareyouhigherorlowerthanyouwerelasttimeyouspoketotheinvestmentcommittee.SecondlyValeantbenefittedfromthelowesttaxrateinyourindustryandIwasjustwonderingcanyouremindushowlongthattaxrateisironcladthere'sataxtreaty.Ifthere'saperiodoftimewhenitwillbereviewedandwhenthattimeis.AndthenlastlybiggerpicturequestionMikeonyourcorporatecultureyouthinkelementsofitneedtochangedoyouthinkthere'ssomecomponentincentivizesuboptimalbehaviorandcouldyoucommentwhetheranychangesthatthetop-levelmanagementwasnotpartoftheretentionplanhasn'tbeenanychangestothecompensationpackage..

MikePearson (CEO):

Sointermsofcompensationpackagethere'sbeennochanges.Intermsoftheseniormanagement.Intermsofinventorylevels.Thosecontinuetobesortofourguidelines2to6andfouroutsideofthatvariesbycountry.IthinkwebeencompletelyflatintermsofourinventorylevelsintermsoftheUS.OutsidetheusIthinkactuallyinventorieshavebeendownalittlebit.NochangesininventorylevelssincethevolumehasincreasedthroughWalgreensintermsofabsolutedollarsthatmeansourinventorylevershavecomedownbecausewhatweretalkingaboutthatweretalkingabouttermsofweeks.

SinceWalgreensisconsignmenttheabsolutelevelofdistributorinventoriesintheUSfordermatologyforexamplehascomedown.Althoughtheweekshaveremainedinthesame.Hopefullythat'sclear.Intermsoftaxrate.Wedonotknowofanyimminentoranychangesthatarecomingdown.Againwewillseethatspaceuncovered.We'reunawareofanythingthatwouldchangeourtaxrate.Intermsof--talkedaboutbolsteringcorporateculture.Itisinterestingoneweekwiththere'sacouplevariablesthatweareinvestingitwillcontinuetotrytoupgradeourfinancialreporting.

CertainlyfromaPRandgovernmentrelationsside.Wearecommittedtoinvestingintheprocessofinvestinginthosefunctions.AswesaidinthepressreleaseweareallPharmacompaniesdocontinuetoemphasizecompliancewearecontinuetoemphasizefromaqualitystandpointandcontinuingtofillthatcapabilityquiteabit.Ithinkwe'vealmostdoubledourqualitydepartmentcorporateintheUSwillmaketheinvestmenttermsofheadcountandcapabilitywouldfeelverygoodaboutthat.Wehavegrownprettyquickly.We'regoingtocontinuetoinvestinthecorefunctionstomakesurethatwedeliverhigh-qualityproductstophysiciansandtopatientsandworkinthemostcompliantway.IntheUSandbeyondtheUS.Nextquestion,please..

Operator :

RandyRaisman,MarathonAssetManagement

RandyRaisman (Analyst-MarathonAssetManagement):

Heyguys.Howareyoudoingcouldyouprovideusalittlebitofabridgeonthecashbalance.Becausewhenwelookatitweseethatyouhadroughly$600millionofcashatQ4lookslikeyoudodown$1billionontherevolver.Takeyouto1billion8,youpaid900millionbetweentheforthetermloanand




therewasanotherpaymentthatyoumade.Thatshouldleftyouwithabout$900millionincashinandyoursayingyouhave1.2billionincashthatwouldimplythatyougenerated$300millionofcashinthefirstquarter.Andthatdoesn'treallylineupwiththeguidancefor2.2billionofcashflowfortheyear.Howdowegetcomfortablethatyou'regoingtogenerateanotherbilliondollarsofcashthanwhereyouarecurrentlyrunning?


Ontherevolverweendedtheyearwith$250milliondrawnontherevolverandwerenowat$1.45billion.Weareobviouslyaregeneratingcashinthefirstquarter.Wedidhavehoweversomelargepaymentsinthefirstquarterthatwediscussed.$500millionforSproutthatwetalkedabout.WepaidearlytheywerenotdueuntilApril20.$260millionofmaturitiesandImentionedtheexcesscashflowpaymentofabout$100millionwhichwillbedueattheendofMarch31.Andthosearesomeofthebigpayments.Butagainwithouttheselargepaymentsweweregeneratingcashthisquarter.


Butmyquestionisbasedonmymathitlookslikeyougeneratedmaybe$300millionincashquartertodatefromwhatyoudisclosedandyou'retellingusweshouldthinkyou'regoingtogenerate$2.2billionfortheyear.WhereistheramptocomefromQ1that'sabigjump.

MikePearson (CEO):

ItisbutwetookdownrevenueinQ1considerablybecauseofthatexplanationandQ2andQ3andQ4.CashgenerationwillbestrongerthanithasbeeninQ1.


Thatiscorrect.Obviouslycashgenerationdependsonworkingcapsowerenotquitedonewiththequartersothat'sgoingtoimpact.Ican'tconfirmspecificallybutexactly$300millionbutyoushouldthinkofitascashgenerationbeforethesetypesofpayments.


Thenjustontheleveragecovenantsifyou'relookat2.1timesandthecovenantis21/2isitsomethingyou'regoingtolooktoamendaswellwhenyougoouttothebankgroupisnotthatbigofacushionthere.


Rightnowperwhatwespokeaboutbeforewerethinkingaboutamendingaregoingtoamendforthecostdefaultaswellastiming.


Okay.


We'vedonesuchcases.Onourcovenantsbasedonourguidance.Andwearecomfortableaswesaidinthepast.

Operator :

IrinaKoffler,Mizuho




Ir inaKof f ler (Analyst-Mizuho):

Thankyoufortakingthequestion.Justcuriousandhavingphoneissues.Whatwouldyoudointhefutureonceyourbusinessisnormalized.Imeanisitmorebacktobuyingadditionalassetsyoumentionedyou'renotgoingtobuyexpensesormispricedassetsinthefuture.Butwhatcanwelookforfromthecompanyoncethisperiodblowsover.Thanks.

MikePearson (CEO):

Wearegoingtoworkhardtogetthisperiodtoblowover.We'regoingtoreduceourdebt.We'vemadeacommitmenttogetunderfourtimes.Untilwegetunderfourtimeswearenotlookingtomakeanyacquisitionssothat'sour—we'reexcitedaboutourlaunchproductswereexcitedaboutmanyofourproductsthatwe'verecentlylaunchedlike(alsoBiotrue)andwewanttodemonstratewecandrivegrow.

WithourcurrentportfolioinourR&Dpipelinewhichwefeelthatwecan.Ifwefastforwardtothatperiod.Throughthatperiodwhichisalongtimefromnowthatwecontinuetolookforassetsthatfitintoprobablyareaswherewehavestrengthstoday.WhichwillbedermatologyophthalmologyG.I.andemergingmarkets.Butasyoumentionedwewillnotbelookingatacquisitionsthatinvolvesortofamisplacedassetsthatwillnotbepartofouragenda.


Operator :

DavidCommon,JPMorgan

DavidCommon (Analyst-JPMorgan):

Terrific.Thanks.Forthefixedincomequestionopportunity.Myquestionrelatestoanynon-coreassetssold.Canyoutelluswhetheryouarecurrentlyrequiredorexpectedtoberequiredtopayoffsecureddebtwiththoseassets?Totheextentthatyou'vegivenusanexpecteddebtreductionfor2016doesthatpresumeanyassetsales?AndalsoyoupreviouslyIbelieveplantopayoffIthinkitwas$800millionyouhadinyourrevolveratDecemberinadditiontoabelieve$2.25billionofotherdebt.Couldyoutelluswhatyourexpectationsareforreductionintherevolverbalanceoverthenext12monthsorthisfiscalyear.Thankyou.


Davidfirstonassetsalesperourcreditagreementwehave365daysthatwecouldreinvesttheproceeds.ButasMikesaidweareveryfocusedondebtpaydown.Iexpectthatwewillusesomeofthoseproceedstopaydowndebtfurther.Secondlythe$1.7billionthatImentionedintheslideispermanentdebtreduction.Itdoesn'tincludeanyadditionaldebtreduction.Wewouldreducesomeassetsales.AndtoansweryourthirdquestiongoingbacktotheJPMorganslideandIknowexactlywhatyou'rereferencingontheA25thatA25waspayingdownyearendrevolverbalanceaswellasdiscretionarycash.Theyearendrevolverbalancewas250soIdidwanttoclarifythatthatwasn'timplyingwe'retopaydowna25asrevolver.Lastlywearecommittedtothe$1.7billionofpermanentdebt.Wealsowanttobringtherevolverdownbalancedown.SignificantlybutthroughthecourseoftheyearbutIdon'twanttocommitrightnowthat'llbezeroattheendoftheyear.

DavidCommon (Analyst-JPMorgan):

Perfect.Thankyou.




Operator :

TimChiangBTIG


HelloMike.IhadonefollowupIknowyouguysandsaidyou'regoingtoloweryourcoststructureontheSG&Asideforsomeofthesenichedivisionswhetherit's(Solta,Aubagio).Iknowthatthesegroupsallthesehavebeenprettyleanalready.I'mjustwonderinghowmuchadditionalcostscuttingcanyoureallydointhesetypesofgroupshere.

MikePearson (CEO):

Ithinkwetalkedaboutcost-reductionbothintermsofsomeofthesmallerbusinessesbutwealsohadtostepbackandlookattheoverallSG&Awhichasapercentofincreaseandwehavetotakealookatthat.Withthecaveatreinventingcorefunctionsthatwewanttobuildcapabilitiesin.Someoftheseexpenseshavegrowninsomeofthesmallerbusinesses.AndasArimentionedwe'renotinthebusinessofrunningunprofitablebusinessessoSoltawearetakingstepstomakesurethatitisprofitableanddeliveringcashflowtoourinvestors.On(inaudible)therewillbecost-reduction.WearespendingtoomuchintermsofrelativetotherevenuesintheUS.(Aubiagio)isadifferentissueismorearoundsales.It'smakingmoneyandthere(folksseeing)nonincreasinggrowthratesthewehaveagreatfranchisethereetcetera.

IntermsofbusinesseslikeCommonwealthwehadaplantoexpandsalesandmarketingquiteabit.Thedemandisslower.Itisgrowing.Itcontinuestogrowwhichispositive.Butwearenotgoingtoincreasespendingatthesameratethatweareplanningonincreasingspendingwearegoingtobemoremoderateintermsofourapproachandastherevenuesbuildthatwe'llcontinuetoinvest.Butwe'lldoitinaprofitableway.Itsortofthesameapproachaslaunchinganynewproduct.Youcanchoosetospendalotofmoneyintheshort-termandhopesofacceleratingrevenueoryoucouldtakeamoremeasuredapproachandthat'swhatwe'regoingtodointhesebusinessestoensurethatwecontinuetogrowthebusinessisbutwealsocontinuetoputdollarstothebottomline.


Mikejustonefollowup.BackinDecemberyouguyshadoriginallythoughtthisisonXifaxinbytheway,thatyouguysweregoingtohireinanotherhundredrepstosupportXifaxin'sgrowthinAGisisstillpartoftheplan?

MikePearson (CEO):

Yes,andasAriIthinkmentionedearlier.Thoserepshavebeenhiredandtrained.(inaudible)


Inthenextcoupleweeks

MikePearson (CEO):

Certainlyinthenextquarter.Bytheendofthesecondquarterofrunningandfullytrained.Thathasnotchanged.

Operator :

(DerrickMcGurkMarathon)





Thankyou.Myauntsquestionhasbeenanswered.

Operator:CynthiaWongGoldmanSachs

CynthiaWong (Analyst-GoldmanSachs):

Hithankyou.Iwantedtoaskhaveyouboughtbackanybondsin4Qor1Qtointheopenmarket.IthinkIsawtheseniornotebalanceisabout$35millionlowerfrom3Qbutisthatjustcompletionfortheeuroortrendsorwasanydebtbuybackseniornoteside.Thanks.


Cindynodebthasbeenboughtbackintheopenmarketforbondsandyou'reabsolutelycorrect.Thatitwouldbetranslation.TheEurobondneedstobemarkedtothosecurrentaffectrates.

CynthiaWong (Analyst-GoldmanSachs):

Anycommentand1Qiftherewasanydebtboughtback.


No.Therehavebeennobondsboughtbackin1Qtodate.

Operator :

DavidMaris,WellsFargo

DavidMaris (Analyst-WellsFargo):

Sorryaboutthatoneofthequestionsthataninvestoraskedtometoaskhastodowiththespeedofthebusinessandthedeclineofthemarketcapandalltherest.TheyhadseenthatanewsreportthattheboardhadthoughtofbringinganewCEOanewmanagementteamtostartthingsafreshbutoneofthepushbackswasthattherewasalargeparachuteordownstreampayments.Isthattruetoyourknowledge?AndsecondgiventhewaythePhilidorandalltheresthasplayedoutsofarareyouwillingiftheboardsaidtothattheywantedtobringanynewmanagementteamtoforgothosesometimescalledgoldenparachutepayments.

MikePearson (CEO):

Idon'thaveagoldenparachutepayment.


Anyterminationrelatedpayments.

MikePearson (CEO):

AgainIdon'tthinkI'mnotsure.Idon'tknowifeverythinginthatarticlewascorrectIwasn'tinontheboard.Ican'tspeaktothat.MaybeIshouldwishIcouldgettwohundredmilliondollarsifIleavebutunfortunatelyIdon'tthinkthat'sthecase.Fortunatelyfromaninvestorstandpoint.It'snotthecase.ActuallyIthinkI'mprettymodest.IfIgotfireditisprettymodest.Itmaybereferringtosomestockthatisvestedthat'snotdeliveredtillthefuturebutthat'sbeendivestedourthat'sthensoDavidI'mnotawareofanygoldenparachutethatIhave.





Okay.Thankyouforclearingthatup.

Operator:HenryReukauf,DeutscheBank

HenryReukauf (Analyst-DeutscheBank):

Quickquestionontheforward-lookingguidanceforthenext12months.Ithinkyousaidit'sgoingtobe$6millioninsteadof6.2to$6.4billioninthepressreleasetoday.DidIhearthatcorrectly?IfIdidwhat'sthereasonforthechange?Andonemoreafterthat.

MikePearson (CEO):

Thechartwascorrectwasinthepressreleasewasanerror.


Itdefinitelylookslikeitwasswitchkindofintentionallywasoranyotherfurthercommentonthatorno.

MikePearson (CEO):

Itwasnotswitchedintentionallyitwasawrongnumberandweapologize.


OK.Andthelastonesjustonthedebtyouwanttogettothattofourtimes.Youmentionednomoreacquisitionsdoesitalsoincludesharerepurchasessocanweassumethatbasicallyallthefreecashflowisgoingtorepaydebt

MikePearson (CEO):

Againthat'sourcurrentintentistodothat.Wereservetherighttochangethatbutwhatwearehundredpercentcommittedtoisreducingdebtto1.7.Andourfocusisondebtrepaydown.

Operator :

(DimitriKomensky)Veritas


HelloMikethanksfortakingmycall.Ihavetwoquestions.Onerelatestothe$68millionrestatementIwaswonderingifyoucouldelaboratewhetherthatrestatementprimarilyrelatedtoQ4andifyoucouldbreakoutthedetailsbyproductswhatproductsit'srelated.Ifyoucanquantifythat.

Andtheotherquestionhastodowiththechangeintaxpresentation.CanyoupleaseclarifyonslidesixwhenyoutalkaboutQ42015unauditedresultsthere.Isthistheoldpresentationoristhisthenewpresentationtalkingaboutthemiddlesectionoftheslide.Andifyoucanalsoelaboratewhatyoumeanbytaxprovisionthere.Isthattaxprovisionthatincludesbothdeferredaswellascurrentincometaxes?Orisitsomethingelse?AndthesamethingalsoappliestoFXanon-GAAPadjustmentsisitrelatedtodeferredorcurrenttaxes.Thankyouverymuch.

MikePearson (CEO):

Sointermsoftheadhoccommitteeputoutapressreleasethattalkedaboutthetimingand2014whatwas$68million.I'msorry$58millionintermsofQ42014versusQ12015.




(Crosstalk)

Thesecondhalf.ButisprimarilyQ4.Intermsofamixofproductswetookalookatthatit'snormalmix.Youmaybereferringtotherewassomespeculationthatitwasall(Solodyne)orsomethinglikethat,whichisnottrue.Itwasanormalmixacrossourdermatologyprimarilyourdermatologyproductportfolio.

RobRosiello (CFO):

Twothingsthemiddlepartofthechartisthewaywearepresentingthepresstablesthatwerereleasedthismorning.We'rewerebreakingoutforthefirstthetaxprovisionplustheeffectsofthenon-GAAPadjustmentswhicharetherebothcurrentanddeferred.Onanongoingbasis.Fromthatgoingforwardwhatwewillreportisjustthatfirstterm.Ifyoulookattables2Aand2bit'sthefirsttermthatwewillreportandwewillapplythattocalculateouradjustedEPS.AndsothereforearereportedtaxrateagainonacomparablebasisinthiswillchangeifwereduceourNOLswouldmovefromapproximately5%toapproximately10-15%.

MikePearson (CEO):

Myunderstandingthatthelastquestion.Weappreciateeveryone'spatience.Welookforwardtoournextcall.Thankyou.

Operator :

Thisconcludestoday'sconferencego.Youmaynowdisconnect.

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