 An
Unrivaled Platform for Growth & Value Creation in
Healthcare
Valeant Pharmaceuticals International, Inc. +
Allergan, Inc.
April 22
nd
, 2014
Filed by Valeant Pharmaceuticals International, Inc.
(Commission File No. 001-14956) pursuant to Rule
425 under the Securities Act of 1933 and deemed
filed pursuant to Rule 14a-12 under the Securities
Exchange Act of 1934
Subject Company: Allergan, Inc.
Commission File No.: 001-10269
To be used in connection with Investor Presentation |
 Speakers
2
J. Michael Pearson
Chairman of the Board and Chief Executive Officer
Howard Schiller
Executive Vice President and Chief Financial Officer
Dr. Ari Kellen
Executive Vice President and Company Group Chairman |
 Forward-looking statements (1/2)
the
ultimate
outcome
of
any
possible
transaction
between
Valeant
and
Allergan
including
the
possibilities
that
Valeant will not pursue a transaction with Allergan and that Allergan will reject a
transaction with Valeant; if
a
transaction
between
Valeant
and
Allergan
were
to
occur,
the
ultimate
outcome
and
results
of
integrating
the
operations of Valeant and Allergan, the ultimate outcome of Valeant’s pricing
and operating strategy applied to Allergan and the ultimate ability to
realize synergies; the
effects
of
the
business
combination
of
Valeant
and
Allergan,
including
the
combined
company’s
future
financial condition, operating results, strategy and plans;
3
This communication may contain forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995 and Canadian securities laws. These
forward-looking statements include, but are not limited to, statements regarding Valeant
Pharmaceuticals International, Inc.’s (“Valeant”) offer to acquire Allergan,
Inc. (“Allergan”), its financing of the proposed transaction, its expected future performance (including
expected results of operations and financial guidance), and the combined company’s future
financial condition, operating results, strategy and plans. Forward-looking
statements may be identified by the use of the words “anticipates,”
“expects,” “intends,” “plans,” “should,” “could,” “would,” “may,” “will,” “believes,” “estimates,”
“potential,” “target,” “opportunity,” “tentative,”
“positioning,” “designed,” “create,” “predict,” “project,” “seek,”
“ongoing,” “upside,” “increases” or “continue” and variations
or similar expressions. These statements are based upon the current expectations and beliefs of
management and are subject to numerous assumptions, risks and uncertainties that change over
time and could cause actual results to differ materially from those described in the
forward-looking statements. These assumptions, risks and uncertainties include, but are not
limited to, assumptions, risks and uncertainties discussed in the company’s most recent
annual or quarterly report filed with the Securities and Exchange Commission (the
“SEC”) and the Canadian Securities Administrators (the “CSA”) and
assumptions, risks and uncertainties relating to the proposed merger, as detailed from time to time in
Valeant’s filings with the SEC and the CSA, which factors are incorporated herein by
reference. Important factors that could cause actual results to differ materially from
the forward-looking statements we make in this communication are set forth in other reports
or documents that we file from time to time with the SEC and the CSA, and include, but are not
limited to: |
 Forward-looking statements (2/2)
the effects of governmental regulation on our business or potential business
combination transaction; ability to obtain regulatory approvals and meet
other closing conditions to the transaction, including all necessary
stockholder approvals, on a timely basis;
our ability to sustain and grow revenues and cash flow from operations in our
markets and to maintain and grow our customer base, the need for innovation
and the related capital expenditures and the unpredictable economic
conditions in the United States and other markets;
the impact of competition from other market participants;
the development and commercialization of new products;
the availability and access, in general, of funds to meet our debt obligations
prior to or when they become due and to fund our operations and necessary
capital expenditures, either through (i) cash on hand, (ii) free cash flow,
or (iii) access to the capital or credit markets; our ability to comply with
all covenants in our indentures and credit facilities, any violation of which, if not cured in
a timely manner, could trigger a default of our other obligations under
cross-default provisions; and the
risks
and
uncertainties
detailed
by
Allergan
with
respect
to
its
business
as
described
in
its
reports
and
documents filed with the SEC.
All forward-looking statements attributable to us or any person acting on our
behalf are expressly qualified in their entirety by this cautionary
statement. Readers are cautioned not to place undue reliance on any of these
forward-looking statements. These forward-looking statements speak only as
of the date hereof. Valeant undertakes no obligation to update any of
these forward-looking statements to reflect events or circumstances
after the date of this communication or to reflect actual outcomes.
4 |
 Additional information
Information regarding the names and interests in Allergan and Valeant of Valeant and
persons related to
Valeant
who
may
be
deemed
participants
in
any
solicitation
of
Allergan
or
Valeant
shareholders
in
respect of a Valeant proposal for a business combination with Allergan is available
in the additional definitive proxy soliciting material in respect of Allergan
filed with the SEC by Valeant on April 21, 2014.
Information
regarding
the
names
and
interests
in
Allergan
and
Valeant
of
Pershing
Square
and
persons related to Pershing Square who may be deemed participants in any solicitation
of Allergan or Valeant shareholders in respect of a Valeant proposal for a
business combination with Allergan is available in additional definitive proxy
soliciting material in respect of Allergan filed with the SEC by Pershing
Square. The additional definitive proxy soliciting material referred to in this paragraph can
be obtained free of charge from the sources indicated above.
5
This communication does not constitute an offer to buy or solicitation of an offer to sell any
securities. This communication relates to a proposal which Valeant has made for a business
combination transaction with Allergan. In furtherance of this proposal and subject to future
developments, Valeant and Pershing Square Capital Management, L.P. (“Pershing Square”)
(and, if a negotiated transaction is agreed, Allergan) may file one or more registration
statements, proxy statements or other documents with the U.S. Securities and Exchange Commission
(the “SEC”). This communication is not a substitute for any proxy statement,
registration statement, prospectus or other document Valeant, Pershing Square and/or Allergan may
file with the SEC in connection with the proposed transaction. INVESTORS AND SECURITY
HOLDERS OF VALEANT AND ALLERGAN ARE URGED TO READ THE PROXY STATEMENT(s), REGISTRATION STATEMENT,
PROSPECTUS AND OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY IN THEIR ENTIRETY IF AND WHEN THEY
BECOME AVAILABLE AS THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION.
Any definitive proxy statement(s) (if and when available) will be mailed to stockholders of
Allergan and/or Valeant, as applicable. Investors and security holders will be able to obtain
free copies of these documents (if and when available) and other documents filed with the SEC by
Valeant and/or Pershing
Square through
the
web
site
maintained
by
the
SEC
at
http://www.sec.gov. |
 Valeant +
Allergan An unrivaled platform for growth and value creation in
healthcare 6 |
 Valeant +
Allergan – strategically compelling transaction
Unrivaled portfolio in Ophthalmology, Dermatology, and Aesthetics
Great for patients & physicians around the world
High single-digit organic growth rate for foreseeable future
25%-30% pro forma 2014* Cash EPS accretion, year 2 and beyond expected
15-20%+ Cash EPS growth depending on deployment of free cash flow
$2.7B+ in annual operating cost synergies, not including significant revenue
synergies ~80% in first 6 months with the remaining ~20% in the following
12 months Maintaining $300M+ in annual R&D spend to complete
high-probability projects High single-digit tax rate for combined
company in addition to cost synergies Pershing Square is Allergan’s
largest shareholder with a 9.7% stake, supporting the transaction and will
elect for 100% stock Delivered merger agreement, no antitrust uncertainty,
committed financing for $15.5B Flexible with any and all social issues
Valeant 1
st
quarter Cash EPS will meet/beat analyst consensus expectations,
outlook for
rest of year strong, raising Cash EPS guidance from $8.25-$8.75 to
$8.55-$8.80, despite negative FX headwinds of ~$0.15 Cash EPS since
budget 7
* Assumes January 1
2014 close with full synergies day 1
Source for analyst consensus: Thompson/First Call
st |
 Contents
Financial Rationale
Strategic Rationale
Synergy Overview
Potential Social Issues
Antitrust, Due Diligence & Contract
Pershing Square Involvement
Valeant 2014 Outlook
Next Steps
8 |
 Proposed
Transaction
Review
-
consideration
9
Cash/Share*
$48.30
+ Exchange Ratio
0.83
Allergan
Ownership*
43%
*based off of diluted shares of 306.7M
Offers a substantial
premium to unaffected $116.63
share price as of April 10
th
, 2014 the day before Pershing
Square crossed the 5% Schedule 13D ownership level
and commenced its rapid accumulation program |
 Proposed
Transaction
Review
–
key
transaction
features
Significant immediate value to shareholders
For each Allergan share:
$48.30 in cash
0.83 Valeant shares
Sustainable
long-term value to shareholders
$2.7B+ in annual operating cost synergies
Additional significant revenue synergies
Additional tax synergies
Combined company expected to initiate $0.20/share annual dividend at close, equal
to current Allergan dividend
No hurdles to closing
No financing contingency, committed financing from Barclays and RBC Capital
Markets No antitrust uncertainty as Valeant will accept antitrust risk
Support from Allergan’s largest shareholder
Pershing Square with 9.7% stake in Allergan
Agreed to elect to take all stock
Intends to be a significant long-term Valeant shareholder
10 |
 Financially Compelling Transaction
2014E
Valeant
Allergan
Valeant +
Allergan
Revenue ($B)
$8.3-$8.7
$6.8-$7.1
$14.8-$15.5
Adj. Cash Net
Income ($B)
$2.9-$3.0
$1.6 -$1.7
$6.6-$6.7
Cash EPS
$8.55-$8.80
$10.95-$11.20
Accretion
25%-30%
11
Full year 2014 Pro Forma financials
Assumes Jan 1
st
2014 close with full synergies day 1
Source
for
Allergan
amounts:
based
on
Allergan
earnings
release
February
5
2014
Note: assumes Dysport, Restylane, and Perlane are divested
th |
 Financially Compelling Transaction
12
2014+ Combined Company Outlook
25%-30% pro forma 2014* Cash EPS accretion, year 2 and beyond
expected 15-20%+ Cash EPS growth depending on deployment of free
cash flow
High single-digit organic revenue growth for foreseeable future
80% gross margins, improving over time
$2.7B+ annual operating cost savings
High single-digit tax rate
$300M+ annual R&D spend
Avg. interest expense of ~5.3% across total net debt of ~$28B at
closing
$6B+ in annual free cash flow and growing
Ability to leverage a strong balance sheet (expected net leverage of ~3.0x)
Source: Valeant management estimates
* Assumes Jan 1 2014 close with full synergies day 1
Accretive business development
Debt reduction
Share buybacks |
 Financing and Balance Sheet Impact
13
Financing
Commitment
Strong Cash
Flows
$15.5B committed financing from Barclays and RBC Capital
Markets
Take out financing a combination of secured bonds,
unsecured bonds, and bank debt
Expected interest rate of ~5.5% on new debt (subject to
market conditions)
Annual free-cash-flow generation in excess of $6B and
growing
Capacity for continued business development
Dividend
Expect to initiate a dividend of $0.20/share per year at
close, in-line with current Allergan dividend
Credit
Profile
~$28B net debt at closing
Expected pro forma leverage of ~3.0x
Expect investment grade rating over time |
 Contents
Financial Rationale
Strategic Rationale
Synergy Overview
Potential Social Issues
Antitrust, Due Diligence & Contract
Pershing Square Involvement
Valeant 2014 Outlook
Next Steps
14 |
 Valeant
Operating Principles 1. Put patients and our customers first by
maintaining the highest ethical standards in the industry 2.
Select high-growth business segments (therapeutic areas and geographies) where the healthcare
professional is still the primary decision maker
3. Maintain a bias toward durable products that are largely cash pay,
or are reimbursed through private insurance
4. Focus our resources on bringing new products to the market (output),
not R&D spend (input) 5. Maintain a decentralized operating
model to ensure decisions are made close to the customer 6. Focus
our promotional spending on customer-facing activities 7.
Measure all of our operating units on organic growth and cash flow generation
8. Require Internal Rates of Return (IRR) significantly above our cost
of capital, coupled with short-term cash paybacks for all of our
deals 9. Directly link senior management compensation to
long-term shareholder returns 10. Ensure tight controls and rigorous
compliance standards while avoiding overspending 15
|
 ~$3.8B
Valeant + Allergan, An unrivaled platform for growth and
value creation in healthcare
Ophthalmology
Dermatology Rx
Aesthetics
Consumer
Neurology/Dental/Other
Emerging Markets
Note: Therapeutic area revenue estimates exclude revenue from emerging
markets 6-7%
~$1.5B
6-7%
~$2.1B
11-12%
~$1.3B
6-7%
~$2.8B
4-6%
~$3.8B
10-13%
Valeant +Allergan
2014E rev
5 year market growth rate
Source: IMS, EvaluatePharma
16 |
 Valeant
+ Allergan a leading portfolio in Eye Health 17
Leading
pharmaceutical
portfolio
Complete surgical
offering
High-growth contact
lens business
Leading consumer
business
•
Leading player
with complete
Eye Health
offering
•
5-year category
growth CAGR:
6-7% vs. 3-4% for
overall pharma
market
Source: IMS, EvaluatePharma |
 Eye
Health leaders (Global Rx, Device, and Consumer) #2 player in global Eye
Health Rank
Company
2013 Sales
($B)
1
Alcon
10.2
2
Valeant + Allergan
6.3
3
Johnson & Johnson
2.9
4
Regeneron
1.6
5
Roche
1.5
6
CooperVision
1.3
7
Santen
1.2
8
Abbott (AMO)
0.8
9
Zeiss
0.8
10
Bayer
0.7
18
Source: EvaluatePharma, Euromonitor |
 Product
Launch
Est Peak Sales
($MM)
Product
Launch
Est. peak sales
($MM)
enVista™
inserter
(lens)
Launched
560-820
Brimonidine
2016
1,150-2,500
PureVision2 for
Presbyopia
Launched
Latanoprostene
bunod
2016
Victus™
enhancements
Lens
fragmentation 2H
2014
MIM-D3
2017
Ultra™
Launched
Ultra Multi Focal,
Toric, and Plus
Powers
2015/2016
BioTrue®
multifocal
May-14
Trulign™
expanded ranges
(lens)
Q2 2014
Product
Launch
Est Peak Sales
($MM)
Product
Launch
Est. peak sales
($MM)
Ozurdex (DME)
Expected 2014
100-150
Restasis EU
2015
100-200
Launch Products
Phase III
Eye Health pipeline
19
Source: analyst estimates for Allergan, Valeant management estimates
|
 Valeant
+ Allergan a leading portfolio in Dermatology 20
Leading acne
portfolio
Leading anti-infective
and anti-fungal
portfolio
Strong dermatoses
and skin barrier
franchise
Complementary
immune business
•
5-year category
growth CAGR of
6%-7% vs. 3%-
4% for overall
pharma market
•
Major US player
with strong
portfolio offering
across
categories
•
Most launches in
the industry in
2014
Source: IMS, EvaluatePharma |
 Product
Launch
Est Peak Sales
($MM)
Product
Launch
Est. peak sales
($MM)
Bensal HP®
Re-launched
445-1,055
IDP-118
2017
200-300
Luzu®
Launched
Retin-A Micro®
.08%
Jun-14
Jublia®
Q3 2014 (pending
FDA approval)
Onexton™
Early Q1 2015
(pending FDA
approval)
Product
Launch
Est Peak Sales
($MM)
Product
Launch
Est. peak sales
($MM)
None
Aczone X
2016
50-100
Launch Products
Phase III
Dermatology pipeline
21
Source: analyst estimates for Allergan, Valeant management estimates
|
 Valeant
+ Allergan a leading portfolio in Aesthetics 22
Leader in toxins and
fillers
Leader in physician
skin care
Comprehensive
energy-based device
portfolio
#2 globally in breast
aesthetics
•
5-year category
growth CAGR of
11-12% vs. 3%-
4% for overall
pharma market
•
Creates global
leader across
categories
•
Only
comprehensive
portfolio in the
industry
Source: IMS, EvaluatePharma |
 Product
Launch
Est Peak Sales
($MM)
Product
Launch
Est. peak sales
($MM)
Neotensil™
Launched
135-235
Emervel
2015
100-200
Obagi360™
System
Launched
Ideal Implants
Q3 2014
Hyaluronic acid for
lips
Q4 2014
Product
Launch
Est Peak Sales
($MM)
Product
Launch
Est. peak sales
($MM)
Botox (Crow’s
Feet)
Launched
50-100
Latisse EU
2015
200
Latisse (Brow)
2017
Launch Products
Phase III
Aesthetics pipeline
23
Source: analyst estimates for Allergan, Valeant management estimates
|
 Valeant
Emerging Market portfolio Diversified geographic mix including Poland,
Russia & CIS, Turkey, China, Brazil, Mexico, Indonesia, South Africa,
Vietnam, and Middle East Extensive experience selling branded generics,
OTCs, and innovative products
Tailored local market strategies
Sales forces with strong physician and pharmacy relationships
Augment selling efforts with direct to consumer advertising
Branded generic products are equivalent to US Healthcare OTCs (i.e., Advil
vs. Perrigo Ibuprofen)
Recommended by physicians & largely cash-pay
Typically 10-20% premium over pure generics
Products targeting the growing middle class
Doctors recommend and patients make brand decisions based on
perceptions of quality, value, and brand loyalty
No patent cliffs, launching 300+ branded generic products per year
across markets
24 |
 Valeant
leading local brands in emerging markets Leading flu & virus medication
in Russia ~$40M in 2013 revenue with ~10%+ growth
Beta-blocker to treat hypertension & angina in Poland
~$30M in 2013 revenue with 5% growth
Vitamin B injection, injected at doctor/pharmacy in Mexico
~$45M in 2013 revenue with 10%+ growth
#1 Brazilian sports nutrition line
~$60M in 2013 revenue with 20%+ growth
Leading line of aesthetic contact lenses in Asia
~$40M in 2013 revenue with 30%+ growth
Leading weight loss product in SE Asia & South Africa
~$14M in 2013 revenue with 15%+ growth
25 |
 Opportunity to apply Valeant emerging market success
to Allergan
26
Distributor of Botox in Poland for Allergan
from 2005-2008
Drove significant Y/Y growth: topline 60%,
volume 40%
Gained over 70% market share in aesthetics
Post V growth slowed to single digit CAGR
over the next 4 years
Built leading
brand position,
growing both
product sales and
overall market
sales
Leveraged
existing sales
infrastructure and
physician
relationships
Developed local
commercial plan:
engaging local
KOLs, physicians
and consumers
Current distributor of Dysport in Serbia for
Ipsen
#1 sales position in toxin market (Botox #2)
Continuing to grow overall market and
product sales (20% growth 2013 over 2012)
Distributor of Aloxi in Croatia for Eisai
Captured 30% market-share by year 2, 50%
market-share by year 4
Doubled overall market from launch to year 4 |
 Valeant’s Emerging Market Success will Drive Growth
~950
~850
2011
+11%
p.a.
2013
~1,050
2012
~980
~670
~2,500-2,700
+55%
p.a.
2014
2013
~1,480
2012
2011
Valeant Emerging Market Growth
Allergan Emerging Market Growth
Growth USD
12%
11%
46%
51%
Revenue ($M) (includes acquisitions)
Revenue ($M) (includes acquisitions)
27
76%
Source for Allergan: 2013 annual report
Expectation to drive significant revenue synergies with Valeant commercial footprint |
 Valeant
+ Allergan a leading portfolio in Consumer Healthcare
28
Leading eye health
portfolio
Strong dermatology
portfolio
Global portfolio of
local brands
•
5-year market
growth CAGR of
6-7% vs. 3%-4%
for overall
pharma market
•
Accelerate
Allergan’s
Refresh growth
by leveraging
Valeant’s top 15
consumer
infrastructure
Valeant Products
Allergan Products
Source: IMS, EvaluatePharma |
 Valeant
+ Allergan a leading portfolio in Dental 29
Anti-infective and
tissue regeneration
Fast professional
whitening option
Fast-acting lidocaine
•
5-year market
growth CAGR of
6-7% vs. 3%-4%
for overall
pharma market
•
Largest Rx sales
force and
presence
•
Significant
opportunity to
add products
•
Significant
aesthetics
opportunity
Source: IMS |
 What is
a durable healthcare product? Products with similar characteristics to branded
consumer products Established brand names with brand equity
Lack of reliance on patent or regulatory exclusivity
Physicians or patients are making the purchasing decision
Mostly cash or 3 party commercial pay
Within consumer goods, healthcare OTCs offer the most attractive
margins
Included product categories
Physician-dispensed products (e.g., aesthetics, IOLs, contact lenses,
dental products)
Consumer products (e.g., Biotrue, Renu)
Emerging market branded generics, OTCs, and innovative products
(e.g., Bedoyceta, Bioscard, Monopril)
Off-patent brands & generic drugs (e.g., Virazole)
30
rd |
 85% of
Valeant products are durable 31
Total 2014E
8.5
1.3
On-Patent
Rx Pharma
Off-Patent
Rx Brands
1.7
Emerging
Markets
3.1
Consumer
Products
1.0
Physician
Dispensed
1.5
Revenue ($B)
Non durable
Durable
Source: Valeant management estimates |
 Attractive Mix of Durable Products
Durable product portfolio
Durable
Valeant = $8.5B
Allergan = $6.9B
Non-Durable
32
Combined company
Non-Durable
Durable
15%
60%
40%
Durable
Non-Durable
74%
26%
PF = $15.4B
Source: Valeant management estimates
85% |
 Attractive Payor Mix
Manageable government pay
Cash/Privately
Reimbursed
25%
Government
Reimbursed
75%
Valeant = $8.5B
35%
65%
Allergan = $6.9B
Government
Reimbursed
Cash/Privately
Reimbursed
33
Combined company
Cash/Privately
Reimbursed
Government
Reimbursed
70%
30%
PF = $15.4B
Source: 2013 annual reports and Valeant management estimates
|
 Dr. Ari
Kellen Executive Vice President and Company Group Chairman
34 |
 Respective R&D portfolios
Valeant
Allergan
Upcoming US
launches
Number of launches
Peak sales potential
19
$1.3-2.3B
3
$350-500M
Late-stage pipeline
Number of projects
Peak sales potential
7
$1.5-3.5B
6
$500-750M
R&D spend
Expected 2014
$250M -
$300M*
$1.1B
35
Source for Allergan: analyst estimates
*2014 exit run-rate of $200M |
 Valeant
US Launch Products (1/2) – derm and aesthetics
Product
Category
Description
Expected launch date
Est. peak sales ($M)
Bensal HP®
Derm
Dermatitis, wound
healing
Re-launched
25-75
Luzu®
Derm
Topical antifungal for
athlete’s foot
Launched
50-75
Neotensil™
Aesthetics
Topical product for
under-eye bags
Launched
80-100
Obagi360™
System
Aesthetics
Skincare kit for women in
their 30’s
Launched
10-30
Retin-A Micro®
.08%
Derm
Topical treatment for
acne
Jun-14
20-30
Jublia®
Derm
Topical antifungal for
onychomycosis
Q3 2014 (pending FDA
approval)
300-800
Ideal Implants
Aesthetics
Breast implant
Q3 2014
25-75
Hyaluronic acid for lips
Aesthetics
Small particle filler
Q4 2014
20-30
Onexton™
Derm
Topical treatment for
acne
Q4 2014
50-75
36
Source: Valeant management estimates |
 Valeant
US Launch Products (2/2) – eye health,
consumer, and oral health
Product
Category
Description
Expected launch date
Est. peak sales ($M)
enVista™
inserter (lens)
Eye Health
Further enhancements
Launched
40-50
PureVision
Presbyopia
Eye Health
Daily contact lens
Launched
20-30
Victus™
enhancements
Eye Health
Multiple enhancements
Lens fragmentation
2H 2014
100-200
Ultra
™
Eye Health
Silicone hydrogel
monthly lens
Launched
300-400
BioTrue®
multifocal
Eye Health
Daily contact lens
May-14
60-80
Trulign™
expanded
ranges (lens)
Eye Health
Broader range of powers
Q2 2014
40-60
CeraVe®
baby line
Consumer
OTC moisturizer
Launched
15-20
Peroxiclear™
Consumer
Peroxide based contact
lens solution
Launched
50-70
Ossix®
Plus
Oral Health
Dental membrane
Launched
10-20
Onset®
Oral Health
Dental analgesic
Launched
40-50
Total
$1,255M-2,270M
37
Source: Valeant management estimates
2 for |
 Allergan
Launch Products Product
Category
Description
Expected launch date
Est. peak sales ($M)
Ozurdex
Eye Health
DME
Expected 2014
100-150
Levadex
Neurology
Migraine
Late 2014/2015
200-250
Botox
Derm/Aesthetics
Crow’s Feet
Launched
50-100
Total
$350M-500M
38
Source: analyst estimates |
 Valeant
Phase III portfolio Product
Category
Description
Expected launch year
Estimated peak sales
($M)
Brimonidine
Eye Health
Eye Whitening OTC
2016
300-400
Latanoprostene bunod
Eye Health
Glaucoma
2016
400-1000
MIM-D3
Eye Health
Dry Eye
2017
400-1000
Ultra Multi Focal, Toric,
and Plus Powers
Eye Health
Contact Lens
2015/2016
50-100
IDP-118
Derm
Psoriasis
2017
200-300
Emervel
Aesthetics
Fine lines and wrinkles
2015
100-200
Emerade
Allergy
Anaphylaxis
2016
100-500
Total
$1,550M-3,500M
39
Source: Valeant management estimates |
 Allergan
Phase III portfolio Product
Category
Description
Expected launch year
Estimated peak sales
($M)
Restasis EU
Eye Health
EU Approval
2015
100-200
Botox
Neurology
Juvenile Cerebral Palsy
2015/2016
100
SER-120
Urology
Nocturia
2016
50-150
Aczone X
Derm/Aesthetics
Acne
2016
50-100
Latisse EU
Derm/Aesthetics
Eye lash
2015
100
Latisse
Derm/Aesthetics
Brow
2017
100
Total
$500M-$750M
40
Source: analyst estimates |
 Our
observations on Allergan R&D ~80%+ of Allergan current revenue was
sourced externally and ~50% was originally sourced prior to 1998
Based on our project-by-project estimates (verified by 3 party
consultants), bringing Allergan line extensions and lower-risk
development (since 1998) to market would have cost ~$2B (approx.
$125M per year) under the Valeant model
Over this time period, Allergan spent $9.5B, including on higher-risk
programs
Allergan R&D track record includes ~35 failures over this same time
frame The industry track-record on R&D over the past two decades is
also not impressive
41
Source: annual reports
rd |
 Despite
$9.5B in Allergan company’s R&D since 1998, ~80% of 2013 revenue is
externally acquired Product
Launch Date
2013 Sales
($M)
Origin
Botox
1989
~1,990
Purchased in 1987 from physician originator,
developed as a treatment for Strabismus
Alphagan
1996
~220
Acquired from Pfizer
Tazorac
1997
~90
Developed in house
Juvederm
2000
~300
Acquired in Inamed purchase in 2005
Lumigan
2001
~630
Developed in house
Restasis
2002
~940
UGA in 1993; subsequently co-licensed, co-
developed, and co-marketed with Inspire
Pharmaceuticals
Aczone
2005
~140
Bought from QLT in 2008
Combigan
2007
~250
Combination product leveraging Alphagan
Latisse
2008
~100
Fortunate side effect of existing product (Lumigan)
Breast implants
NA
~420
Acquired in Inamed purchase in 2005
Other dermal fillers
NA
~140
Acquired in Inamed purchase in 2005
SkinMedica
NA
~80
Acquired in SkinMedica purchase in 2012
Source: annual reports, FDA, EvaluatePharma, press searches
42 |
 Opportunity to deliver same R&D output at lower cost
Cumulative Allergan
R&D spend since 1998
$9.5B
~$2.0B
Estimated cost of
delivering line extensions
and lower-risk products
under Valeant model
Examples
43
Source:
annual
reports,
Valeant
management estimates,
3
party consultant estimates
~10 Botox indications
Restasis
Combigan
Latisse
Tazorac
rd |
 Allergan
has had at least 35 R&D failures since 1998 44
Source: EvaluatePharma
5
11
3
10
6
Pre-Clinical
Phase II
Research project
Phase III
Phase I
Abandoned / Suspended R&D Projects by Phase
•
Ophthalmic RNAi
•
Retinoic Acid Metabolism
•
AGN / NRX 194310
•
AGN 197075
•
AGN 199981
•
PS388023
•
AGN –
207281
•
AGN 195795
•
AGN 201781
•
AGN 210669
•
AGN 210676
•
AGN818
•
NRX 195183
•
Sima-027 (AGN 745)
Examples |
 Source:
“Diagnosing the decline in pharmaceutical R&D efficiency”, Jack W. Scannell, Alex Blanckley, Helen Boldon & Brian Warrington, Nature Reviews Drug
Discovery 11, 191-200 (March 2012); Allergan 10Ks, annual reports
Industry R&D productivity vs. Allergan spending
1000
100
10
1.0
0.1
2010
2000
1990
1980
1970
1960
1950
Overall trend in R&D efficiency
Allergan R&D spend trend ($B)
1.5
15E17E
1.2
2010
0.8
1.1
05
0.4
0.8
2000
0.2
95
0.1
1990
0.1
13
1.0
45 |
 Howard
Schiller Executive Vice President and Chief Financial Officer
46 |
 Operating model differences (1/2)
47
Valeant
Allergan
Benefits of Valeant
model
Commercial
Direct customer-
facing promotion
(70% total
headcount)
Heavy investment in
marketing
Clear ROI and
value of dollars
spent
Organization
Decentralized,
local,
empowered
business owners
Rapid-decision
making at
local/customer
level
Centralized, global
& regional
organizations
Heavy corporate
focus and spend
“Gold-plated”
approach
Quicker, better-
informed decisions
made close to the
customer
Small, lean and
focused corporate
center |
 Operating model differences (2/2)
48
Valeant
Allergan
Benefits of Valeant
model
Capital
Allocation
Low risk, in-line
and late-stage
assets
Strict price
discipline
Higher-risk, earlier-
stage assets
Less sensitive to
price paid
Higher returns on
capital and faster
paybacks
Easier to
understand success
and track record
R&D
Low-risk, late-
stage projects
(line-extensions)
2-3% of revenue
Early-stage, risky
programs (limited
success)
Similar emphasis on
line-extensions but
at ~4-5x the cost
Low-risk
investments
(eliminates risky
early stage
research)
Focus on outputs |
 Valeant
focuses on selling over marketing Over 70% of non-manufacturing
employees in sales-based roles (# of
reps)
North America: 1,700
Asia: 1,900
Europe: 2,300
LATAM: 800
Major sales forces (# of reps):
US Eye Health: 700
Russia/CIS: 660
China: 640
Mexico: 550
Poland: 400
US Aesthetics: 340
Canada: 238
US Derm: 200
Dental: 150
•
Investment in sales
professionals to drive long-
term relationships & create
brand equity with medical
stakeholders
•
Lower emphasis on Rx
marketing due to industry
dynamics:
•
Narrow option on
marketing messaging
(e.g., on label)
•
Strict regulatory and
compliance requirements
•
Different focus & commercial
model for consumer products
•
Detail to physicians for
professional
recommendation
•
Supplement with high-ROI
DTC campaigns (e.g.,
Occuvite TV ads)
49 |
 Recent
Investments in field force to drive organic growth US Aesthetics
340 reps in 2014 up from 49 reps in 2012
Dental
150 reps in 2014 up from 100 reps in 2013
Russia/CIS
660 reps in 2014 up from 500 reps in 2013
Poland
400 reps in 2014 up from 360 reps in 2012
Philippines
85 reps in 2014 up from 49 reps in 2012
50 |
 Contents
Financial Rationale
Strategic Rationale
Synergy Overview
Potential Social Issues
Antitrust, Due Diligence & Contract
Pershing Square Involvement
Valeant 2014 Outlook
Next Steps
51 |
 Overview
of combined company cost synergies Annual
cost
synergy opportunity of $2.7 billion +
tax +
revenue synergy
52
Value
Source of Synergy
SG&A Synergies
~$1,800 million
Rationalize US & Corporate HQ
Eliminate regional HQ
Decentralize organization by eliminating unnecessary global functions
Reduce duplicate external spend
Align to Valeant advertising and promotion model and spend
Maintain strong field force presence
R&D Cost
Synergy
~$900 million
Apply Valeant approach to on
going R&D
Focus on output not input
Target low
-risk projects
Continue high-probability programs such as line extensions
Continue to in-license late stage/launch products (e.g. Emerade,
Neotensil, Luzu)
Rationalize core R+D infrastructure
Tax Synergy
Combined high single-digit
tax rate
Revenue Synergy
Acceleration of Allergan in emerging
markets
Acceleration of Allergan OTC
Acceleration of Valeant Aesthetic assets ex-US
Additional product growth opportunities |
 Synergy
breakdown 2014 Combined Cost
($M)
Synergies
($M)
% Reduction
SG&A
~$4,500
~$1,800
40%
R&D
~$1,300
~$900
69%
Manufacturing
(COGS)
~$3,200
$0
0%
Total
~$9,000
$2,700
30%
Note: Each company may categorize costs differently
53
One-time cost of synergies is assumed to be 40% or
~$1.1B, not including transaction fees and expenses
Source for Allergan: analyst estimates |
 Contents
Financial Rationale
Strategic Rationale
Synergy Overview
Potential Social Issues
Antitrust, Due Diligence & Contract
Pershing Square involvement
Valeant 2014 Outlook
Next steps
54 |
 Flexible
and willing to discuss any social issues Flexible on all social issues
Board composition
Senior management team
US HQ location
Company name
Shareholder value is our primary consideration
55 |
 Contents
Financial Rationale
Strategic Rationale
Synergy Overview
Potential Social Issues
Antitrust, Due Diligence & Contract
Pershing Square Involvement
Valeant 2014 Outlook
Next Steps
56 |
 Antitrust, Due Diligence, and Contract
Antitrust
Antitrust
overlap
analysis
performed
by
Skadden
Arps,
Sullivan
&
Cromwell,
and
Osler, Hoskin & Harcourt (Canadian counsel)
Identified areas of overlap
No overlap areas material to transaction
Willing to accept all antitrust risk
Dysport and Restylane/Perlane identified as key potential divestitures
Status: Engaged in active discussions with multiple parties regarding
divestitures
Timing: Deal expected pre-closing
Due diligence
We know the businesses well due to overlapping business segments
Conducted significant outside-in market research and due diligence
Conducted public company legal and corporate due diligence
Merger contract
Provided merger contract to Allergan and publicly filed
Fair and reasonable deal protection provisions (e.g., break-up fee)
Standard public company closing conditions
57 |
 Contents
Financial Rationale
Strategic Rationale
Synergy Overview
Potential Social Issues
Antitrust, Due Diligence & Contract
Pershing Square Involvement
Valeant 2014 Outlook
Next Steps
58 |
 Pershing
Square: Allergan’s largest shareholder supporting deal
Pershing Square with 9.7% stake in Allergan
Will elect to take all stock in the transaction
Pershing Square has done extensive due diligence on
Valeant and is committed to the deal
Committed to be a significant long-term shareholder
of combined company
59 |
 Contents
Financial Rationale
Strategic Rationale
Synergy Overview
Potential Social Issues
Antitrust, Due Diligence & Contract
Pershing Square Involvement
Valeant 2014 Outlook
Next Steps
60 |
 Guidance
Update Q1 expectations:
Continued strong performance
Cash EPS expected to meet/beat analyst consensus
Negative FX impact vs. budget of $20M+ in top-line
revenue and ~$0.04 in Cash EPS
Full year guidance
We are updating guidance based on performance to date
and expectations for the remainder of the year including
PreCision close
Cash EPS increased to: $8.55-$8.80, from: $8.25-$8.75
Revenue
increased
to:
$8.3B-$8.7B,
from
$8.2B
-
$8.6B
Cash flow from operations increased to: $2.7B –
$2.8B,
from $2.4B -
$2.6B
Negative FX impact vs. budget of ~60M in revenue and
~$0.15 in Cash EPS based on current rates
61
Source for analyst consensus: Thompson/First Call |
 Contents
Financial Rationale
Strategic Rationale
Synergy Overview
Potential Social Issues
Antitrust, Due Diligence & Contract
Pershing Square Involvement
Valeant 2014 Outlook
Next Steps
62 |
 Next
Steps We would expect to engage in discussion with the
company to negotiate the transaction
We intend to meet with shareholders from both Valeant &
Allergan
We encourage Allergan shareholders to communicate
views to both Valeant and Allergan management
63 |
 Why the
transaction is compelling for Allergan shareholders
Compelling premium and expected long-term returns through continued
ownership Each Allergan share receives: $48.30 in cash + 0.83 Valeant shares
43% ownership
Continued high single-digit organic growth
$2.7B+ in annual cost synergies + additional revenue synergies
High single-digit tax rate
Yearly $0.20 per share dividend expected
19 US launches in 2014 with estimated peak sales potential:$1.6B-2.8B
Shareholder friendly capital allocation: accretive business development, debt
reduction, and share buybacks
Diversification
Greater portfolio diversification with increased durability
Reduced reliance on blockbuster patents
Low risk R&D
Focus on output vs. input
Development of line extensions and reformulations
Strong late-stage pipeline with estimated peak sales potential of
$2.0B-3.2B High-return approach to business development
Strong track record of high-return business development
Target 20%+ IRRs at statutory tax rates and quick payback periods
Multi-billion dollars per year in free cash flow to deploy
64 |
 Valeant
+ Allergan – strategically compelling transaction
Unrivaled portfolio in Ophthalmology, Dermatology, and Aesthetics
Great for patients & physicians around the world
High single-digit organic growth rate for foreseeable future
25%-30% pro forma 2014* Cash EPS accretion, year 2 and beyond expected
15-20%+ Cash EPS growth depending on deployment of free cash flow
$2.7B+ in annual operating cost synergies, not including significant revenue
synergies ~80% in first 6 months with the remaining ~20% in the following
12 months Maintaining $300M+ in annual R&D spend to complete
high-probability projects High single-digit tax rate for combined
company in addition to cost synergies Pershing Square is Allergan’s
largest shareholder with a 9.7% stake, supporting the transaction and will
elect for 100% stock Delivered merger agreement, no antitrust uncertainty,
committed financing for $15.5B Flexible with any and all social issues
Valeant
1
st
quarter
Cash
EPS
will
meet/beat
analyst
consensus
expectations, outlook for
rest of year strong, raising Cash EPS guidance from $8.25-$8.75 to
$8.55-$8.80, despite negative FX headwinds of ~$0.15 Cash EPS since
budget 65
*
Assumes
January
1
2014
close
with
full
synergies
day
1
Source for analyst consensus: Thompson/First Call
st |