First Quarter 2012 Financial Results Conference Call May 3, 2012 - PowerPoint PPT Presentation

First Quarter 2012 Financial Results Conference Call May 3, 2012

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. 1

Agenda 1. First Quarter Results 2. Emerging Market Overview 3. Specialty Pharmaceuticals Update 4. Finance Update 5. 2012 Guidance Update 2

Strong 1Q Earnings and Cash Generation Performance Q1 2012 Q1 2011* 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 3

Strong Organic Growth First Quarter 2012 24% 22% Total Company Organic Growth 11% 12% -10% Organic Growth U.S Neurology Emerging U.S Canada/ & Other Markets Dermatology Australia 4

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 5

Progress on 2012 Synergy Program Run rate expected by Run rate Year-end expected by $230+ million* mid-year Run Rate $200 million May 3, 2012 Run Rate Feb 23, 2012 $165 million $135 million * Includes acquisitions announced and closed in 2012 6

Emerging Markets Total Run Rate >$1.2 billion (After deals closed) Latin America South East Asia/South Africa Central/Eastern Europe Mexico Poland Philippines Brazil Malaysia Russia Export Thailand Serbia ~$350M South Africa All Other Asia - Other ~$750M ~$100M Additional Updates:  Europe – 76 new launches year-to-date  Brazil – Regederm launched in April 7

Specialty Pharmaceuticals Update

US Neurology Performance $183M $48M $135M Total (10)% All Other 6% Wellbutrin XL Cardizem CD Ultram ER (37)% Wellbutrin XL Total Core Cardizem CD Neuro & Other Ultram ER Q1 2012 Net Sales Q1 2012 vs. Q1 2011 9

Strong Continued Performance on Key Dermatology Growth Assets 2012 vs. 2011 Volume Growth (MAT) 70% 60% 50% 38% 37% 40% 28% 30% 20% 12% 10% 0% Acanya* Atralin Zovirax** CeraVe*** *Acanya impacted by unusually high March 2011 TRx volume **Zovirax volume in TRx grams ***CeraVe scan volume growth 10 Source: Wolters Kluwer Health; IRI Scan data; Retailer data

Strong Dermatology Brand Performance Despite Weak Market Growth in March Growth 2012 vs. 2011 Q1 2012 March 2012 Market Topical Calcineurin Inhibitors 6.9% (0.2%) (Derm only) – e.g., Elidel Fixed Dose Acne Combo (BPO / Clindamycin) – e.g., (4.5%) (10.6%) Acanya Tretinoins – e.g., Atralin 5.6% (3.9%) Anti-Viral – e.g., Zovirax 3.9% (0.4%) Source: Wolters Kluwer Health 11

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 12

Financial Update Howard Schiller

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 14 * Includes out- licensce of Cloderm in Q1’11 and divestiture of dermatology products in Q2’12

Revenue by Segment Q1 2012 vs Q1 2011 Q1 2011 Q1 2012 23% 24% 31% 38% Neuro 12% Derm Canada / Australia 28% 17% 27% Emerging Markets U.S. ~65% U.S. ~52% 15

Cost of Goods Sold (COGS)* Sequential increase due to: Q4’11 Q1’12 Increased Canada contract  U.S. Neuro 17% 18% manufacturing Product Mix (U.S. & Europe)  U.S. Derm 11% 10% Unfavorable Exchange Rates  Can/Aus 23% 26% (Europe) Emerg Mkts 42% 47% Delayed plant consolidations  Total COGS 25% 26% * COGS based on product sales only 16

Q1’12 Cash Flow $350 $113 $302 $322 $11 $87 $330 $8 $164 Cash Adjusted Cash Restructuring/ Net Issuance Other 2 Securities December CashFlow March Cap Acquisitions Integration/ LT Debt Repurchases 2011 from 2012 Ex Legal Operations 1 Settlements 1 Includes impact of divestiture of IDP-111 and 5FU 2 Includes 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 17

Financial Updates  FX Impact  Resulted in a ~$20 million reduction to revenue Currency Poland Serbia Hungary Russia Australia Canada Mexico Brazil South Africa Q1’11 vs -11% -8% -12% -3% 5% -2% -7% -6% -10% Q1’12  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 18

2012 Guidance J. Michael Pearson

Annual Financial Guidance for 2012 As of May 3, 2012 Previous Guidance Revenue > $3.4 - 3.6 billion Revenue $3.1 - $3.4   billion $3.95 - $4.20 Adjusted  $4.45 - $4.70 Adjusted Cash  Cash EPS EPS > $1.2 billion in  > $1.4 billion in Adjusted  Adjusted Cash Flow Cash Flow from Operations from Operations See Note 1 regarding guidance 20

First Quarter 2012 Financial Results Conference Call May 3, 2012