Fourth Quarter and Year Results Conference Call End 2011 Financial - PDF document

Fourth Quarter and Year Results Conference Call End 2011 Financial February 27, 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 guidance with respect to integration-related activities, product candidates in development, timing of product launches and expected benefits from acquisitions by the Company. 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. 1

2 1. Fourth Quarter & Year End Results 2. U.S. Dermatology Update 3. Financial Update Agenda

Fourth Quarter 2011 Results � Total Revenue = $688 million � 34% revenue growth over 2010 � Product sales = $654 million � 34% product sales growth over 2010 � 10% organic product sales growth over 2010 � Cash EPS = $0.94 � 88% Cash EPS growth over 2010 � Adjusted Cash Flow from Operations = $253 million � 22% adjusted cash flow from operations growth over 2010 � Excluding changes in working capital - adjusted cash flow from operations grew at >50% over 2010 3

2011 Financial Summary $0.94 $688 $609 $601 $569 $565 $0.73 $529 $0.66 $0.62 $0.57 $0.54 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Reported Cash EPS Adjusted Cash EPS Reported Product Sales Adjusted Product Sales � Total 2011 Revenue = $2.46 Billion � Total Cash EPS = $2.93 * Adjusted for Cloderm divestiture (Q1 2011) and Trobalt milestone (Q2 2011) 4

Strong Organic Growth Fourth Quarter 2011 Full Year 2011 39% 32% 14% 13% 13% 10% 10% 9% 7% 3% -5% -4% Organic Growth Organic Growth Branded U.S U.S Neurology Canada/ Branded Generics - EU Dermatology & Other Australia Generics - LA Total Organic Growth 5

Adjusted Cash Flow From Operations $260 $253 $208 $204 Excluded Items: • Legal Settlements • Restructuring/Acquisition Related Costs • Working Capital Changes • Tax Benefit from Stock Options • Effect of ASC 470-20 1st Qtr 2nd Qtr* 3rd Qtr 4th Qtr � Total 2011 Adjusted Cash Flow from Operations = $925 Million * Includes $40 M Milestone payment from GSK 6

2011 Performance v. Guidance Final Results Original Expectations � Revenue $2.46 billion � Revenue $2.1-$2.3 billion � Organic Growth 9% � Organic Growth ~8% � Cash EPS $2.93 � Cash EPS $2.25 - $2.50 � $925 million in � >$800 million in Adjusted Adjusted Cash Flow Cash Flow from from Operations Operations 7

Deal Update � Completed in Q4 2011 � Ortho � Dermik � Afexa � iNova � Announced YTD 2012 � Probiotica � EyeTech 8

9 Progress on 2012 Synergy Program expected by Run rate $200 million mid-year $135 million Run Rate YTD

U.S. Dermatology Rajiv De Silva Update

U.S. Dermatology Integration Status Completed Ongoing � Sales and Marketing � Sales force optimization/restructuring � � Marketing combination � � A&P rationalization � � R&D � Program rationalization � � People reduction � � Supply Chain / Manufacturing � � Supply agreements � Long-term tech transfers � � Finance � Order to cash � � Information Technology � Commercial � � Manufacturing plant � 11

Maintaining Growth During Acquisitions in U.S. Dermatology 2011 vs. 2010 Volume Growth 70% 60% 54% 50% 40% 29% 27% 25% 30% 20% 10% 0% Acanya Atralin Zovirax* CeraVe** * Zovirax volume in TRx grams; **Cerave Scan Volume growth Source: Wolters Kluwer Health; IRI Scan data; Retailer data 12

Acanya and Atralin Showing Sustained Prescription Volume Growth Revamping of Co-Pay Cards 100,000 Acanya 90,000 Atralin 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 13 Source: Wolters-Kluwer; Data for all prescribers

Promotional Efforts Turning the Elidel Growth Curve Elidel YOY TRx Growth All Prescribers Elidel YOY TRx Growth Dermatologists 0% 15% 10% 9% -5% -7% 5% -10% 0% -2% -15% -14% -5% -16% -7% -10% -20% FY 2011 Q4 2011 Jan-12 FY 2011 Q4 2011 Jan-12 14 Source: Wolters Kluwer Health

Zovirax Franchise Rejuvenated Through New Strategy 47% 50.0% TRx Grams vs. Prior year % Growth 43% 45.0% 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 12% 10.0% 5.0% 0.0% -1% -5.0% Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 15 Source: Wolters-Kluwer; Data for all prescribers

Driving CeraVe Growth Through New Product Introduction +361% +332% +101% +34% +26% +27% Hydrating Lotion Cream Facial PM Lotion AM Foaming Cleanser Cleanser Original SKUs Newer SKUs Proportion of 70% 30% Business 16 Source: IRI Scan data; Retailer data

U.S. Dermatology Pipeline Update # of Projects Key Projects Onychomycosis (IDP-108) Psoriasis (IDP-118) New Products 4 Acne (IDP-107 / MC5) Acanya Lifecycle ~15 RAM Management Sculptra 3 Undisclosed Generics ~20+ 17

Financial Update Howard Schiller

Financial Summary Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 2011 Product Sales $489m $500m $530m $570m $654m $2,255m Total Revenue $515m $565m $609m $601m $688m $2,463m Cost of Goods Sold %* 31% 24% 29% 28% 25% 27% SG&A % 22% 21% 22% 21% 21% 21% R&D Expense $18m $14m $18m $18m $17m $66m Operating Margin (excluding amortization) 45% 50% 53% 50% 57% 51% Cash EPS $0.50 $0.62 $0.73 $0.66 $0.94 $2.93 Adjusted Cash Flow from Operations $187m** $204m $260m $208m $253m** $925m * Excludes fair value step-up adjustment to inventory and other non-GAAP items ** Q410 & Q411 includes the impact of working capital changes of $22 million and $62 million respectively 19

Segment Trends Q4 10 Q4 11 FY 11 FY 12 e U.S. Dermatology 103.9 174.2 568.3 900-925 U.S. Neurology & Other 213.0 202.8 829.3 675-750 Canada/Australia 80.5 101.3 340.1 550-625 Branded Generics Latin America 69.0 65.8 254.9 >275 Branded Generics Europe 48.3 144.4 470.9 >625 South East Asia/South Africa N/A N/A N/A ~100 Emerging Markets N/A N/A N/A >1.0 B Total Revenue $ 514.6 $ 688.5 $ 2,463.5 $3.1 - $3.4 b 20

Price vs. Volume Trend 4Q 4Q 4Q 2011 2011 2011 Price Volume Total Price Volume Total U.S. -6% 45% 39% -1% 33% 32% Derm U.S. 8% -11% -3% 8% -12% -4% Neuro Canada/ 2% 12% 14% 2% 11% 13% Australia Branded Generics 2% 1% 3% 1% 12% 13% - LA Branded Generics 0% 7% % 0% 10% 10% – Europe 21

COGS Trend Q4 10 Q4 11 FY 11 U.S. Neuro & Other 24% 17% 17% U.S. Dermatology 35% 11% 15% Canada/Australia 28% 23% 28% Branded Generics - Europe 38% 47% 48% Branded Generics - Latin America 42% 37% 39% Total 31% 25% 27% 22