Second Quarter 2012 Financial Results Conference Call August 2, 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 our gross margin improvement initiatives, the effectiveness of such initiatives and our ability to achieve such improvements, the closure and consolidation of certain of our plants and the cost and timing thereof, closing of pending transactions, the expected impact of currency rates, and financial guidance for 2012, including expected revenues, cash EPS and adjusted cash flow from operations. Forward-looking statements may generally be identified by the use of the words “anticipates,” “expects,” “intends,” “plans,” “could,” “should,” “would,” “may,” “will,” “believes,” “estimates,” “potential,” “targets,” 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. These forward-looking statements speak only as of the date hereof. 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, amortization of alliance product assets & pp&e step up, stock-based compensation step-up, contingent consideration fair value adjustments, restructuring, acquisition- related and other costs, acquired in-process research and development ("IPR&D"), legal settlements outside the ordinary course of business, the impact of currency fluctuations, 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, (gain) loss on assets held for sale/impairment, net, (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, August 2, 2012, and will not be updated or affirmed unless and until the Company publicly announces updated or affirmed guidance. 1
Agenda 1. Second Quarter Results 2. Recent Events 3. Financial Update 4. 2012 Guidance Update 2
2Q Revenue and Earnings Growth Q2 2012 Q2 2012 Q2 2011 vs 2011 Product Sales $749 M $530 M 41% Total Revenue (w/o $775 M $569 M 36% one-time items) Cash EPS $1.01 $0.73 38% Cash EPS (w/o one- $0.87 $0.54 61% time items) 3
Improving Cash Flow Generation Q1 2011 Q2 2011 Q3 2011 Q4 2011 Total 2011 GAAP Cash Flow $86.3 M $190.7 M $173.7 M $189.8 M $640.5 M from Operations Adjusted Cash Flow $203.6 M $259.5 M $208.4 M $253.1 M $924.6 M from Operations Q1 2012 Q2 2012 YTD 2012 GAAP Cash Flow $167.2 M $254.6 M $421.8 M from Operations Adjusted Cash Flow $321.6 M $307.5 M $629.1 M from Operations 4
2Q 2012 Organic Growth Same Store Sales* Q2 U.S. Derm 33% U.S. Neuro -10% Canada / Australia 4% Emerging Markets 12% Total 6% Pro Forma* Q2 U.S. Derm 29% U.S. Neuro -10% Canada / Australia 2% Emerging Markets 16% Total 10% * Adjusts for the impact of the impact from foreign exchange, acquisitions and divestitures/discontinuations 5
Organic Growth Comparison Same Store Sales* Q1 Q2 LTM 2012 Product Sales 5% 6% 8% 2011 Product Sales 6% 3% n/a 2012 Product Sales excl. Neuro & Other 16% 15% 19% Pro Forma* Q1 Q2 LTM 2012 Product Sales 10% 10% 11% 2012 Product Sales excl. Neuro & Other 18% 17% 19% * Adjusts for the impact of the impact from foreign exchange, acquisitions and divestitures/discontinuations 6
Gross Margin Improvement Initiatives Multiple Plant Consolidations Improve plant capacity utilization Negotiate / renegotiate with third party contractors Move to third party manufacturing where appropriate Reposition representation business Preference is to license or own products De-emphasize partnered product business Legacy Biovail contracts up for renewal 7
Plant Consolidations Country Objectives Action Items and Status • Down to 2 plants by YE 2012 Brazil Consolidate 3 plants • Complete shut down of 1 plant by YE 2013 into 1 Australia Shut down owned • Inventory build completed Q1/Q2 manufacturing facility, • Completed shut down June 2012 transfer to 3PC’s • Completed shut down of 2 plants Mexico Consolidate 5 plants into 2 • Down to 2 plants by YE 2013 • Down to 3 plants by YE 2012 CEE Consolidate 4 plants into 3 • Canada Consolidate 3 Rx plants into Down to 2 plants by mid-year 2013 2 Puerto Rico Shut down legacy Valeant • Inventory build completed Q1 plant - move to 3 rd Party • Completed shut down March 2012 Mfg / VRX Canadian plants Incremental Cap Ex spend expected to be $50-$60m next 18 months 8
Litigation Update Since Merger Ongoing Non-Deal External Legal Spend Case Settled Entity (millions) $46 Abbott (Fenofibrate) Biovail AWP (Multiple Products) Biovail Cambridge Labs (Xenazine) Biovail $27 Eli Lilly (Permax) Valeant Gradient (Malicious Prosecution) Biovail High Crane (Xenazine) Biovail $14 Mylan (Wellbutrin Canada) Biovail $4 Paddock (Aplenzin) Biovail Par (Aplenzin) Biovail S.A.C. (Malicious Prosecution) Biovail 2009* 2010* 2011 2012 - 1H Sandoz (Section 8 Damages) Biovail Wellbutrin XL Class Action Biovail *Pro forma for legacy companies 9
Recent Events Filed NDA for IDP-108 (efinaconazole) NDA submitted July 2012 Filed Citizen’s Petition for acyclovir ointment (Zovirax) CP filed July 2012 Potiga U.S. Launch progressing Recent trends positive Acquisitions Update Atlantis (closed) Swiss Herbal (closed) University Medical (closed) OraPharma (closed) Pedinol (closed) Natur Produkts (close by YE) 2 additional deals Vita Direct – OTC products in Poland Russian diabetes products from BC Pharma 10
Financial Update Howard Schiller
Financial Summary Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Product Sales $530M $570M $654M $758M $749M Ongoing Service/Alliance Revenue $39 M $31M $34M $32M $26 M Total Revenue excl. “one - timers” $569M $601M $688M $790M $775M One-time items $40 M N/A N/A $66 M $45 M Total Revenue $609M $601M $688M $856M $820M Cost of Goods Sold% (% of product sales) 29% 28% 25% *25% 24% SG&A% (% of total revenue) 22% 21% 20% 19% 22% R&D Expense $18M $18M $17M $22M $18M Operating Margin (% of total revenue) (excluding amortization) 53% 50% 57% 55% 52% Cash EPS (Reported) $0.73 $0.66 $0.94 $1.14 $1.01 w/o one-time items $0.54 $0.66 $0.87 $0.91 $0.87 Adjusted Cash Flow from Operations $260M $208M $253M $322M $307M Fully Diluted Share Count 331 M 323 M 317 M 316 M 313 M 12 * Q1 2012 COGS has been restated to show impact of contract mfg moved to Service/Alliance (previously stated at 26%)
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