First Quarter 2012
Financial Results
Conference Call
May 3, 2012
1
Forward-looking Statements Forward-looking Statements
Certain statements made in this presentation may constitute forward-looking statements, including, but not limited to, statements regarding the closing of pending transactions, expected revenue and synergies, product approvals and launches and financial guidance for 2012. Forward-looking statements may be identified by the use of the words “anticipates,” “expects,” “intends,” “plans,” “could,” “should,” “would,” “may,” “will,” “believes,” “estimates,” “potential,” or “continue” and variations or similar expressions. These statements are based upon the current expectations and beliefs of management and are subject to certain risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties include, but are not limited to, risks and uncertainties discussed in the Company's most recent annual or quarterly report filed with the Securities and Exchange Commission ("SEC") and other risks and uncertainties detailed from time to time in the Company's filings with the SEC and the Canadian Securities Administrators ("CSA"), which factors are incorporated herein by reference. Readers are cautioned not to place undue reliance on any of these forward-looking statements. The Company undertakes no obligation to update any of these forward-looking statements to reflect events or circumstances after the date of this presentation or to reflect actual outcomes.
Non-GAAP Information To supplement the financial measures prepared in accordance with generally accepted accounting principles (GAAP), the Company uses non-GAAP financial measures that exclude certain items, such as amortization of inventory step-up, stock-based compensation step-up, restructuring and acquisition-related costsTBD, acquired in-process research and development ("IPR&D"), legal settlements, amortization and other non-cash charges, amortization of deferred financing costs, debt discounts and ASC 470-20 (FSP APB 14-1) interest, loss on extinguishment of debt, and (gain) loss on investments, net, and adjusts tax expense to cash taxes. Management uses non-GAAP financial measures internally for strategic decision making, forecasting future results and evaluating current performance. By disclosing non-GAAP financial measures, management intends to provide investors with a meaningful, consistent comparison of the company’s core operating results and trends for the periods presented. Non-GAAP financial measures are not prepared in accordance with GAAP; therefore, the information is not necessarily comparable to other companies and should be considered as a supplement to, not a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP.
Note 1: The guidance in this presentation is only effective as of the date given,
May 3, 2012, and will not be updated or affirmed unless and until the Company
publicly announces updated or affirmed guidance.
2
Agenda
1. First Quarter Results
2. Emerging Market Overview
3. Specialty Pharmaceuticals Update
4. Finance Update
5. 2012 Guidance Update
3
Strong 1Q Earnings and Cash
Generation Performance
Q1 2011*
Q1 2012*
Q1 2012
vs
2011
Product Sales $500 M $768 M 54%
Cash EPS $0.56 $0.99 77%
Adjusted Cash Flow $204 M $255 M 25%
*First quarter 2011 excludes $36 M from the out-license of Cloderm and first quarter of 2012 excludes $66 M from divestiture of
IDP-111 and generic Efudex
4
Strong Organic Growth
Organic Growth
24%
-10%
22%
12%
First Quarter 2012
Emerging
Markets Canada/
Australia
U.S Neurology
& Other U.S
Dermatology
Total Company
Organic Growth
11%
5
Deal Update Announced YTD 2012
Probiotica (Brazil) – Closed
EyeTech (U.S.) – Closed
Pele Nova (Brazil) – Closed
Pedinol (U.S.) – Closed
Natur Produkt (Russia) – (Expected to Close mid-year)
Gerot Lannach (Russia) – Closed
Atlantis (Mexico) – (Expected to Close 2Q12)
AcneFree (U.S.) – (Expected to Close mid-year)
Other transactions
Divested Bioskin
Acquired assets - Ortho Dermatologics – Canada
Acquired assets – Ortho Dermatologics - Brazil
Total Purchase Price = ~$600 million
Expected 2012 Revenue Run Rate = ~$280 million
Sales Multiple Paid = ~2.1 X
6
Progress on 2012 Synergy Program
Run rate
expected by
mid-year Run Rate May 3, 2012 $200 million
$165 million
Run Rate Feb 23, 2012
$135 million
Run rate
expected by
Year-end
$230+ million*
* Includes acquisitions announced and closed in 2012
7
Emerging Markets
Total Run Rate (After deals closed)
Brazil
Mexico
Latin America
All Other
Serbia
Russia
Central/Eastern Europe
Poland
South Africa
Thailand
Malaysia
Philippines
South East Asia/South Africa
Export
Asia - Other
Additional Updates:
Europe – 76 new launches year-to-date
Brazil – Regederm launched in April
>$1.2 billion
~$350M
~$100M ~$750M
Specialty
Pharmaceuticals
Update
9
US Neurology Performance
Q1 2012 Net Sales Q1 2012 vs. Q1 2011
Wellbutrin XL
Cardizem CD
Ultram ER
Core
Neuro & Other
Total
All Other
Wellbutrin XL
Cardizem CD
Ultram ER
Total
$48M
$135M
$183M
6%
(10)%
(37)%
10
Strong Continued Performance on Key
Dermatology Growth Assets
2012 vs. 2011 Volume Growth (MAT)
Source: Wolters Kluwer Health; IRI Scan data; Retailer data
37%38%
28%
12%
0%
10%
20%
30%
40%
50%
60%
70%
Acanya* Atralin Zovirax** CeraVe***
*Acanya impacted by unusually high March 2011 TRx volume
**Zovirax volume in TRx grams
***CeraVe scan volume growth
11
Strong Dermatology Brand Performance
Despite Weak Market Growth in March
Source: Wolters Kluwer Health
Market
Growth 2012 vs. 2011
Q1 2012 March 2012
Topical Calcineurin Inhibitors
(Derm only) – e.g., Elidel 6.9% (0.2%)
Fixed Dose Acne Combo
(BPO / Clindamycin) – e.g.,
Acanya
(4.5%) (10.6%)
Tretinoins – e.g., Atralin 5.6% (3.9%)
Anti-Viral – e.g., Zovirax 3.9% (0.4%)
12
Other Portfolio Updates
Canada
Product Launches
Lodalis; Sublinox
Generic competition for Cesamet
U.S. Neuro & Other
Potiga U.S. launch
U.S. Dermatology
IDP-108 Update
Financial Update
Howard Schiller
14
Financial Summary Q1 2011* Q2 2011 Q3 2011 Q4 2011 Q1 2012*
Product Sales $500M $530M $570M $654M $790M
Total Revenue $565M $609M $601M $688M $856M
Cost of Goods Sold% 27% 29% 28% 25% 26%
SGA% 21% 22% 21% 21% 19%
R&D Expense $14M $18M $18M $17M $22M
Operating Margin 50% 53% 50% 57% 55%
(excluding amortization)
Cash EPS $0.62 $0.73 $0.66 $0.94 $1.14
Adjusted Cash Flow from
Operations $204M $260M $208M $253M $322M
Fully Diluted Share
Count 333 M 331 M 323 M 317 M 316 M
* Includes out-licensce of Cloderm in Q1’11 and divestiture of dermatology products in Q2’12
15
Revenue by Segment Q1 2012 vs Q1 2011
38%
27%
12%
23%
Neuro
Derm
Canada / Australia
Emerging Markets
U.S. ~52% U.S. ~65%
Q1 2011 Q1 2012
24%
28%17%
31%
16
Cost of Goods Sold (COGS)*
Sequential increase due to:
Increased Canada contract
manufacturing
Product Mix (U.S. & Europe)
Unfavorable Exchange Rates
(Europe)
Delayed plant consolidations
* COGS based on product sales only
Q4’11 Q1’12
U.S. Neuro 17% 18%
U.S. Derm 11% 10%
Can/Aus 23% 26%
Emerg Mkts 42% 47%
Total COGS 25% 26%
17
Q1’12 Cash Flow
$164
$322
$350 $113
$302
$11 $87$8 $330
Cash
December
2011
Securities
Repurchases Acquisitions Cap
Ex
Restructuring/
Integration/
Legal
Settlements
Other2 Cash
March
2012
Net Issuance
LT Debt
Adjusted
CashFlow
from
Operations1
2Includes payment of withholding tax upon vesting of share based awards, one-time working capital adjustments, proceeds from the
exercise of stock options and other miscellaneous cash outflows
1Includes impact of divestiture of IDP-111 and 5FU
18
Financial Updates
FX Impact
Resulted in a ~$20 million reduction to revenue
Working Capital Improvement
Improved from 35% of LTM revenue in Q4 11 to 30% of LTM revenue in Q1 12
Inventory increased vs Q4 due to stock build related to tech transfers (Brazil,
U.S.)
Securities Repurchase Program
Repurchased over 2 million common shares for an aggregate purchase
price of $108.7 million
316 million fully diluted share count as of March 31, 2012
Currency Poland Serbia Hungary Russia Australia Canada Mexico Brazil South
Africa
Q1’11
vs
Q1’12
-11%
-8%
-12%
-3%
5%
-2%
-7%
-6%
-10%
2012 Guidance
J. Michael Pearson
20
Annual Financial Guidance for 2012
Previous Guidance
Revenue $3.1 - $3.4
billion
$3.95 - $4.20 Adjusted
Cash EPS
> $1.2 billion in
Adjusted Cash Flow
from Operations
As of May 3, 2012
Revenue > $3.4 - 3.6 billion
$4.45 - $4.70 Adjusted Cash
EPS
> $1.4 billion in Adjusted
Cash Flow from Operations
See Note 1 regarding guidance
First Quarter 2012
Financial Results
Conference Call
May 3, 2012