UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
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Securities Exchange Act of 1934
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EXPLANATORY NOTE
In light of the Preliminary Solicitation Statement of PS Fund 1, LLC, a Delaware limited liability company, filed with the Securities and Exchange Commission (the SEC) on June 2, 2014 (the Preliminary Solicitation Statement), Allergan, Inc. (the Company) is filing the attached press releases, presentations and other communications (together, the Prior Communications) as soliciting material pursuant to Rule 14a-12 under the Securities Exchange Act of 1934, as amended. Each of the Prior Communications was issued publicly by the Company and/or filed with the SEC by the Company before the date of filing of the Preliminary Solicitation Statement.
Important Additional Information
The Company, its directors and certain of its officers and employees are participants in solicitations of Company stockholders. Information regarding the names of the Companys directors and executive officers and their respective interests in the Company by security holdings or otherwise is set forth in the Companys proxy statement for its 2014 annual meeting of stockholders, filed with the SEC on March 26, 2014 and as supplemented by the proxy information filed with the SEC on April 22, 2014. Additional information can be found in the Companys Annual Report on Form 10-K for the year ended December 31, 2013, filed with the SEC on February 25, 2014 and its Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, filed with the SEC on May 7, 2014. To the extent holdings of the Companys securities have changed since the amounts printed in the proxy statement for the 2014 annual meeting of stockholders, such changes have been reflected on Initial Statements of Beneficial Ownership on Form 3 or Statements of Change in Ownership on Form 4 filed with the SEC. These documents are available free of charge at the SECs website at www.sec.gov.
STOCKHOLDERS ARE ENCOURAGED TO READ ANY COMPANY SOLICITATION STATEMENT (INCLUDING ANY SUPPLEMENTS THERETO) AND ANY OTHER RELEVANT DOCUMENTS THAT THE COMPANY MAY FILE WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Stockholders will be able to obtain, free of charge, copies of any solicitation statement and any other documents filed by the Company with the SEC at the SECs website at www.sec.gov. In addition, copies will also be available at no charge at the Investors section of the Companys website at www.allergan.com.
FOR IMMEDIATE RELEASE
Allergan Acknowledges Revised, Unsolicited Proposal from Valeant and Pershing Square
Advises Stockholders to Take No Action at This Time
Irvine, Calif., (May 30, 2014) Allergan, Inc. (NYSE: AGN) (Allergan or the Company) today acknowledged that Valeant Pharmaceuticals International, Inc. (Valeant) and Pershing Square Capital Management, L.P. (Pershing Square) have made a second revised, unsolicited proposal to acquire all of the outstanding shares of the Company for a combination of 0.83 of Valeant common shares, $72.00 in cash per share of common stock of the Company, and a Contingent Value Right (CVR) related to DARPin® sales (the Re-Revised Proposal).
Allergan has not yet received the Re-Revised Proposal from Valeant and Pershing Square. When the Company receives the Re-Revised Proposal, the Allergan Board of Directors (the Board) will carefully review and consider it and pursue the course of action that the Board believes is in the best interests of the Company and all of its stockholders. No action by Allergans stockholders is required at this time.
The Company noted that on April 22, 2014, Valeant proposed acquiring all of the outstanding shares of Allergan for 0.83 shares of Valeant stock and $48.30 in cash (the Original Proposal). On May 12, 2014, after a comprehensive review conducted in consultation with its financial and legal advisors, the Board unanimously concluded that the Original Proposal substantially undervalued Allergan, created significant risks and uncertainties for the stockholders of Allergan, and was not in the best interests of the Company and its stockholders. Todays proposal is a re-revised proposal by both Valeant and Pershing Square updating the offer made by Valeant two days ago on May 28th, 2014 that the Board had not yet responded to.
In a May 27, 2014 investor presentation, Allergan noted a number of important issues regarding the sustainability of Valeants business model and stock value that Allergan believes are highly relevant considerations for Allergans stockholders.
Goldman, Sachs & Co. and BofA Merrill Lynch are serving as financial advisors to the Company and Latham & Watkins, Richards, Layton & Finger, P.A. and Wachtell, Lipton, Rosen & Katz are serving as legal counsel to the Company.
About Allergan
Allergan is a multi-specialty health care company established more than 60 years ago with a commitment to uncover the best of science and develop and deliver innovative and meaningful
treatments to help people reach their lifes potential. Today, we have approximately 11,600 highly dedicated and talented employees, global marketing and sales capabilities with a presence in more than 100 countries, a rich and ever-evolving portfolio of pharmaceuticals, biologics, medical devices and over-the-counter consumer products, and state-of-the-art resources in R&D, manufacturing and safety surveillance that help millions of patients see more clearly, move more freely and express themselves more fully. From our beginnings as an eye care company to our focus today on several medical specialties, including eye care, neurosciences, medical aesthetics, medical dermatology, breast aesthetics, and urologics, Allergan is proud to celebrate more than 60 years of medical advances and proud to support the patients and customers who rely on our products and the employees and communities in which we live and work. For more information regarding Allergan, go to: www.allergan.com
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to statements regarding a proposed offer or proposal by Valeant and/or Pershing Square. These forward-looking statements are made as of the date they were first issued and are based on current expectations as well as the beliefs and assumptions of management. Forward-looking statements are subject to a number of risks and uncertainties, many of which involve factors or circumstances that are beyond Allergans control. Allergan expressly disclaims any intent or obligation to update these forward-looking statements except as required by law. Additional information concerning these and other risks can be found in press releases issued by Allergan, as well as Allergans public filings with the U.S. Securities and Exchange Commission, including the discussion under the heading Risk Factors in Allergans most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q. Copies of Allergans press releases and additional information about Allergan are available at www.allergan.com or you can contact the Allergan Investor Relations Department by calling 1-714-246-4636.
Allergan Contacts
Bonnie Jacobs, Allergan (714) 246-5134
Joele Frank, Dan Katcher, and Scott Bisang, Joele Frank, Wilkinson Brimmer Katcher (212) 355-4449
FOR IMMEDIATE RELEASE
Allergan Confirms Receipt of Revised, Unsolicited Proposal from Valeant
Advises Stockholders to Take No Action at This Time
Irvine, Calif., (May 28, 2014) Allergan, Inc. (NYSE: AGN) (Allergan or the Company) today confirmed that it has received a revised, unsolicited proposal from Valeant Pharmaceuticals International, Inc. (Valeant) to acquire all of the outstanding shares of the Company for a combination of 0.83 of Valeant common shares, $58.30 in cash per share of common stock of the Company, and a Contingent Value Right (CVR) related to DARPin® sales (the Revised Proposal).
The Allergan Board of Directors (the Board) will carefully review and consider the Revised Proposal and pursue the course of action that the Board believes is in the best interests of the Company and all of its stockholders. No action by Allergans stockholders is required at this time.
The Company noted that on April 22, 2014, Valeant proposed acquiring all of the outstanding shares of Allergan for 0.83 shares of Valeant stock and $48.30 in cash (the Original Proposal). On May 12, 2014, after a comprehensive review conducted in consultation with its financial and legal advisors, the Board unanimously concluded that the Original Proposal substantially undervalued Allergan, created significant risks and uncertainties for the stockholders of Allergan, and was not in the best interests of the Company and its stockholders.
Following that decision and in order to address questions and concerns raised by Allergans stockholders, the Company retained two nationally-recognized financial consultants and forensic accountants, Alvarez & Marsal and FTI Consulting, to evaluate the inherent value of Valeants business model and stock. As part of this review, Allergan filed an investor presentation with the Securities and Exchange Commission on May 27, 2014 detailing the analysis of publicly-available data on Valeant and, among other things, the opaque nature of Valeants pro-forma driven financial reporting. The presentation addresses a number of important issues regarding the sustainability of Valeants business model and stock value that Allergan believes are highly relevant considerations for Allergans stockholders.
Goldman, Sachs & Co. and BofA Merrill Lynch are serving as financial advisors to the Company and Latham & Watkins, Richards, Layton & Finger, P.A. and Wachtell, Lipton, Rosen & Katz are serving as legal counsel to the Company.
About Allergan
Allergan is a multi-specialty health care company established more than 60 years ago with a commitment to uncover the best of science and develop and deliver innovative and meaningful treatments to help people reach their lifes potential. Today, we have approximately 11,600 highly dedicated and talented employees, global marketing and sales capabilities with a presence in more than 100 countries, a rich and ever-evolving portfolio of pharmaceuticals, biologics, medical devices and over-the-counter consumer products, and state-of-the-art resources in R&D, manufacturing and safety surveillance that help millions of patients see more clearly, move more freely and express themselves more fully. From our beginnings as an eye care company to our focus today on several medical specialties, including eye care, neurosciences, medical aesthetics, medical dermatology, breast aesthetics, and urologics, Allergan is proud to celebrate more than 60 years of medical advances and proud to support the patients and customers who rely on our products and the employees and communities in which we live and work. For more information regarding Allergan, go to: www.allergan.com
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to statements regarding a proposed offer or proposal by Valeant and/or Pershing Square. These forward-looking statements are made as of the date they were first issued and are based on current expectations as well as the beliefs and assumptions of management. Forward-looking statements are subject to a number of risks and uncertainties, many of which involve factors or circumstances that are beyond Allergans control. Allergan expressly disclaims any intent or obligation to update these forward-looking statements except as required by law. Additional information concerning these and other risks can be found in press releases issued by Allergan, as well as Allergans public filings with the U.S. Securities and Exchange Commission, including the discussion under the heading Risk Factors in Allergans most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q. Copies of Allergans press releases and additional information about Allergan are available at www.allergan.com or you can contact the Allergan Investor Relations Department by calling 1-714-246-4636.
Allergan Contacts
Bonnie Jacobs, Allergan (714) 246-5134
Joele Frank, Dan Katcher, and Scott Bisang, Joele Frank, Wilkinson Brimmer Katcher (212) 355-4449
Allergan Files Investor Presentation Detailing Concerns About the Sustainability of Valeants
Business Model
Presentation Raises Significant Issues to be Considered
When Evaluating the Value of Valeants Equity
Irvine, Calif., (May 27, 2014) Allergan, Inc. (NYSE: AGN) (Allergan or the Company) today announced that it has filed an investor presentation with the Securities and Exchange Commission (SEC) and posted the presentation under the Investors section of the Companys website detailing its initial concerns about the sustainability of Valeant Pharmaceuticals International, Inc.s (Valeant) business model.
Allergan retained two nationally-recognized financial consultants and forensic accountants, Alvarez & Marsal and FTI Consulting, to evaluate certain concerns about the inherent value of Valeants business model and stock. With the assistance of these two independent firms, and in response to feedback from numerous Allergan stockholders and analysts, Allergan and its legal and financial advisors carefully analyzed publicly available data on Valeant and the opaque nature of Valeants pro-forma driven financial reporting.
The presentation raises a number of important issues about Valeants business model and stock value that Allergans stockholders need to be aware of.
¡ | What is Valeants real organic growth? |
Allergan believes that Valeants organic sales growth, which is primarily driven by price increases, is overstated based on changing definitions and classifications with no disclosure of key products. The pro-forma revenue growth from Valeants SEC filings paints a picture far different from what is communicated to investors. Valeants pro-forma revenue growth including acquisitions for fiscal year 2013 was -0.5%. In the first quarter of 2014, the growth rate declined to -1.4%.
¡ | How have the two largest Valeant acquisitions (Bausch & Lomb and Medicis) performed under Valeants ownership? How have other acquisitions performed? |
Analysis based upon data acquired from IMS FIRST, a provider of top-line information about pharmaceutical companies and the largest vendor of U.S. physician prescribing data, raises concerns about the source of Bausch & Lombs growth. This analysis indicates substantial erosion in units sold for three out of four of Bausch & Lombs largest prescription ophthalmic products, for which Valeant compensates with significant list price increases.
The Medicis business is losing market share and increasing prices at, we believe, an unsustainable pace. Since Valeant acquired Medicis, Allergan has rapidly accelerated its capture of market share. Over this
same timeframe, Valeant increased prices for Medicis six largest products by a significant and, we believe, unsustainable amount.
¡ | Does Valeant have any experience promoting products of Allergans scale? |
Valeants limited experience with large, global scale products represents a material execution risk attempting to grow Allergans categories and launching significant new large products through existing channels. Allergan would be Valeants largest acquisition and the synergies proposed by Valeant are the most aggressive to date. Botoxs annual sales are more than seven times greater than each of Valeants largest products, Zovirax and Wellbutrin, which are declining or stagnant.
¡ | How stable is Valeants management team? |
The only executive officers continuing to serve at Valeant since 2011 are J. Michael Pearson and Robert R. Chai-Onn. Seven executive officers have departed over this period. In addition, three Board members, Fred Hassan, G. Mason Morfit and Lloyd M. Segal, recently resigned, with two citing potential conflicts - one of whom withdrew after a tenure of less than a year.
¡ | Can Valeant cut $2.7bn of Allergans expenses without disrupting the performance of the business? |
Valeant will only be able to achieve a fraction of its stated SG&A and R&D synergies without destroying Allergans near-term and long-term value. Valeant has indicated it will maintain R&D required for post-approval and maintenance, product line extensions and late phase projects, but drastically underestimates the spend required by approximately $350 million. Moreover, Valeants purported SG&A synergies are unrealistic given Valeants goals, as communicated in numerous letters to its customers: I want to reassure all of you that we remain committed to investing in you and in the fields of Dermatology, Aesthetics and Eye Care.1
¡ | What is the relative distribution strength of Allergan vs. Valeant in important emerging markets (BRICs)? |
In the BRIC Countries, Allergans sales are approximately 4 times larger than Bausch & Lombs prescription ophthalmic sales. While Valeant boasts market growth in emerging markets, it is important to clarify that these are smaller markets with less revenue potential.
¡ | Is Valeants low tax rate sustainable? |
Valeants multiple off-shore tax deferral structures are aggressive, difficult to sustain and compound risk in multiple jurisdictions. No other pharmaceutical or healthcare peers that have recently re-domiciled outside the U.S. have achieved tax rates nearly as low as Valeant, which suggests that Valeants tax strategies are abnormally aggressive.
¡ | Are Valeants accounting practices clearly consistent with others in the industry? |
Valeants management team, which seems to change reporting methodology when convenient, has realigned Valeants segment reporting structure three times in the past three years, decreasing the level of disaggregation each time. Furthermore, in a survey conducted by an independent consultant, Valeant was the only company that organizes segments on a geographic basis.
1 Permission to use quotations was neither sought nor obtained.
¡ | Is a business model centered on a serial acquisition and cost cutting strategy sustainable? |
Valeants model of taking on debt to serially acquire companies will become incrementally harder to do as interest rates move higher. While appearing on CNBC on May 15, 2014, Jim Chanos, president and founder of Kynikos Associates, noted many of the same issues other Allergan stockholders expressed, stating, Roll ups are generally accounting-driven, and we certainly think thats the case in [Valeant]. We think [Valeant] is playing some very aggressive accounting games when they buy companies, write down the assets, and also engaged in what we call spring-loading.1 Allergan expressed these concerns as well.
Alvarez & Marsal and FTI Consulting are acting as Allergans financial consultants and forensic accountants.
Goldman, Sachs & Co. and BofA Merrill Lynch are serving as financial advisors to the Company and Latham & Watkins, Richards, Layton & Finger, P.A. and Wachtell, Lipton, Rosen & Katz are serving as legal counsel to the Company.
About Allergan
Allergan is a multi-specialty health care company established more than 60 years ago with a commitment to uncover the best of science and develop and deliver innovative and meaningful treatments to help people reach their lifes potential. Today, we have approximately 11,600 highly dedicated and talented employees, global marketing and sales capabilities with a presence in more than 100 countries, a rich and ever-evolving portfolio of pharmaceuticals, biologics, medical devices and over-the-counter consumer products, and state-of-the-art resources in R&D, manufacturing and safety surveillance that help millions of patients see more clearly, move more freely and express themselves more fully. From our beginnings as an eye care company to our focus today on several medical specialties, including eye care, neurosciences, medical aesthetics, medical dermatology, breast aesthetics, and urologics, Allergan is proud to celebrate more than 60 years of medical advances and proud to support the patients and customers who rely on our products and the employees and communities in which we live and work. For more information regarding Allergan, go to: www.allergan.com
Important Information
Information contained in this press release regarding Valeant is taken directly from the information publicly disclosed by Valeant and we do not make any representations or warranties, either express or implied, with respect to such informations accuracy or completeness. In addition, certain other information contained in this press release is based on publicly available sources as of the date of this press release, and while we have no reason to believe that such information is not accurate, we can provide no such assurances with respect thereto. IMS data used in this press release has been purchased from IMS Health, a provider of healthcare information. The information in this press release represents the opinions of Allergan and investors and stockholders should make their own independent investigations of the matters referenced in this press release and draw their own conclusions.
Allergan Contacts
Bonnie Jacobs, Allergan (714) 246-5134
Joele Frank, Dan Katcher, and Scott Bisang, Joele Frank, Wilkinson Brimmer Katcher (212) 355-4449
1 Permission to use quotations was neither sought nor obtained.
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May 27, 2014 Certain Potential Business Risks And Issues With Valeant Pharmaceuticals International, Inc.
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Important Information
Information contained in this presentation regarding Valeant Pharmaceuticals International, Inc. (Valeant) is taken directly from the information publicly disclosed by Valeant and we do not make any representations or warranties, either express or implied, with respect to such informations accuracy or completeness. In addition, certain other information contained in this presentation is based on publicly available sources as of the date of this presentation, and while we have no reason to believe that such information is not accurate, we can provide no such assurances with respect thereto. IMS data used in this presentation has been purchased from IMS Health, a provider of healthcare information. The information in this presentation represents the opinions of Allergan and Investors and stockholders should make their own independent investigations of the matters referenced in this presentation and draw their own conclusions.
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Introduction
As Allergans Board of Directors stated on May 12, 2014, the Valeant/Pershing Square unsolicited proposal of April 22, 2014 substantially undervalues Allergan - regardless of the consideration mix
Over the course of the past several weeks since the Valeant/Pershing Square proposal, we have met with many of our stockholders and stock analysts
During those conversations, many stockholders and stock analysts expressed serious concerns about the sustainability of Valeants business model. Some of the key themes included:
Valeants low organic sales growth (driven mostly by price increases)
Sustainability of acquisitions strategy
Low R&D investment and the impact on future growth
Market share erosion due to lack of sales and marketing infrastructure and investment
Lack of transparency in financial reporting and sustainability of tax structure
Given that the Valeant unsolicited proposal includes a substantial amount of Valeant stock in exchange for acquiring Allergan, this is a serious concern for Allergan stockholders
In order to respond to concerns expressed by some of our stockholders, Allergan engaged two independent, third party consultants and forensic accountants to conduct an initial review of Valeant based on publicly available information
Alvarez & Marsal and FTI Consulting have reviewed this analysis and confirmed key components presented herein
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Key Questions About Valeant That All Of Allergans Stockholders Should Consider
What is Valeants real organic growth?
How have the two largest Valeant acquisitions (Bausch & Lomb and Medicis) performed under Valeants ownership? How have other acquisitions performed?
Does Valeant have any experience promoting products of Allergans scale?
How stable is Valeants management team?
Can Valeant cut $2.7bn of Allergans expenses without disrupting the performance of the business?
What is the relative distribution strength of Allergan vs. Valeant in prescription ophthalmology in significant emerging markets (BRIC)?
Is Valeants stated tax rate achievable and sustainable?
Are Valeants accounting practices consistent with others in the industry?
Is a business model centered on a serial acquisition and cost cutting strategy sustainable?
What do Allergans stockholders gain by merging with Valeant?
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What is Valeants Real Organic Revenue Growth Dissecting Organic Growth Rates
Q1 2014 Revenue FY 2013 Revenue Growth Rates Growth Rates
Organic Growth Ex-Generics
8.0% 10.0%
Impact (As Reported by Valeant)
Organic Growth Including Generics
1.0% 0.0%
Impact (As Reported by Valeant)
Pro-Forma
Revenue (1.4%) (0.5%)
Growth
(5.0%) 0.0% 5.0% 10.0% 15.0% (5.0%) 0.0% 5.0% 10.0% 15.0%
Pharma peers generally do not exclude the impact of generics from organic growth
Given the impact of generics on the Zovirax franchise, Retin-A Micro, and BenzaClin, we thought it would be
more useful to our investors to show organic growth excluding these products to demonstrate the growth of the underlying business.
As we move forward we will continue to show organic growth without the impact of significant generics.
Michael Pearson Valeant CEO Q3-2013 Earnings Conference Call
We are going to show, as reported, with the impact of all of the generics. We have not made a decision going
forward as to whether we are going to show it both with the impact of generics and then backing them out.
Howard Schiller Valeant CFO Q4-2013 Earnings Conference Call
The pro-forma revenue growth from Valeants SEC filings paints a picture far different from what is communicated to the investors and management seems to change reporting methodology when convenient
Source: Valeant SEC public filings.
Note: Permission to use quotes was neither sought nor received.
Note: Proforma revenue reviewed by independent consultants and forensic accountants. Presents unaudited consolidated results of operations, as if the acquisitions had occurred at the beginning of the fiscal period as disclosed in the 10-Ks and 10-Qs. From footnotes to Valeant 10-Q, first quarter 2014 pro-forma revenue of $1,889.9mm decreased from first quarter pro-forma 2013 revenue of $1,917.1mm. From footnotes to Valeant 10-K, full year 2013 pro-forma revenue of $7,665.9mm decreased from 2012 full year pro-forma revenue of $7,700.6mm.
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What are the Drivers of Valeants Top-Line Growth and How Transparent is the Sales Reporting?
Acquisitions are driving Valeants top-line growth
Revenue Bridge - FY11 - FY13
$7,000
$6,000 $2,489
($85) ($68) ($47) $5,000
$4,000 $198 $1,023
($70) ($99) $3,000 $5,770
$2,000 $3,480 $2,427 $1,000
$0
(1) (1)
FY11 Acquisitions Base Business Divest., FX impact FY12 Acquisitions Base Business Divest., FX Impact FY13 discont. and discont. and other other
Valeant realigned its segment reporting structure 3 times in the past 3 years, decreasing the level of disaggregation each time
In a survey conducted by an independent consultant, Valeant was the only pharmaceutical company that organizes segments on a geographic basis with no product detail
2011 2012 2013
US Neurology and OtherUS Neurology and OtherDeveloped Markets US Dermatology US Dermatology Emerging Markets Canada and Australia Canada and Australia Branded Generics Europe Emerging Markets Branded Generics Latin America
Source: Valeant 8-Ks Table 6 Organic Growth by Segment.
Note: Reviewed by independent consultants and forensic accountants. 2012 acquisitions include: Medicis, certain assets of Johnson & Johnson Consumer Companies, certain assets of QLT Inc. and QLT Ophthalmics, OraPharma Topco Holdings, certain assets of University Medical Pharmaceuticals, certain assets of Atlantis Pharma, certain assets of Gerot Lannach and Probiotica Laboratorios. 2013 acquisitions include: B&L, Obagi Medical products, Certain assets of Eisai and Natur Produkt International.
(1) Base business includes amounts Valeant categorizes as organic, developed markets, and other.
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How Has The Prescription Ophthalmology Business of Bausch & Lomb Performed In The U.S. Post Acquisition?
This morning we reported Valeants fourth quarter results for 2013, which were driven by strong sales growth and
profitability across all our regions, including continued outperformance from Bausch & Lomb, since the August 5 close.
Michael Pearson, CEO, 02/27/14
Overall Business Shows However, Significant Erosion In With Price Being The Key Growth (IMS Dollars) Units Sold Driver Of Growth
LOTEMAX® 16.0% (21.0%) 46.0%
BESIVANCE® 30.0% 12.0% 16.0%
ALREX® 5.0% (12.0%) 20.0%
BEPREVE® (3.0%) (21.0%) 23.0%
U.S. B&L 2.0% (19.0%) 11.0%
(20.0%) 0.0% 20.0% 40.0% (40.0%) (20.0%) 0.0% 20.0% 0.0% 20.0% 40.0% 60.0%
IMS Data Suggests That Most Of Bausch & Lombs Growth Is Attributable To What We Believe Are Unsustainable Price Increases
Source: Analysis based upon IMS FIRST Q4 2013 vs. Q4 2012. Total U.S. Bausch & Lomb sales represents Eye Care.
Note: Individual products listed denote products that were launched after 2012. Note: Permission to use quotes was neither sought nor received.
Note: Reviewed by independent consultants and forensic accountants.
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How Has Medicis Performed Post Acquisition?
U.S. Aesthetic Neuromodulator Market Share U.S. Filler Unit Market Share
100% 100%
PreAcquisition April 2014
RESTYLANE ® #1 Brand #3 Brand
80% 80%
Filler Franchise #1 Brand #2 Brand
Dysport Market Share
60% 60% (Despite January 2014 sales force increases)
Pre-acquisition: ~17%
April 2014: ~14% #1 #1 #1 #1 #1 #1
40% 40%
#2
#2 #2
20% 20%
0% 0%
Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 April 14 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 April 14
BOTOX® DYSPORT® XEOMIN® Allergan Valeant (Medicis) (1) Merz / BioForm Others (Valeant) (Merz)
Medicis U.S. Pricing Per Product Trends(2) FY12 to FY 13 Price and Volume Changes(3) (Global)
+14% 80% (27%) (6%) 43% (27%)
+11% $541 $527 60% $475 $479 $432 +11% 40% 72% +11% +16% 20% $293 23% 2% $266 $265 0% 9% $240 Variance $175 (36%) (29%) (29%) (29%) $151 % (20%) (40%) (60%)
DYSPORT® RESTYLANE® RESTYLANE® RESTYLANE® PERLANE® PERLANE® SOLODYN® ZIANA® LIDEMOL® / ALDARA®
0.5mL 1.0mL 2.0mL 1.0mL 2.0mL VANOS® Pre-Acquisition Post-Acquisition Price Volume
Rapid erosion of durable Medicis business within a short time following acquisition
Products listed are registered trademarks. Source: Guidepoint Global (historical figures Q114 and prior based upon the March 2014 panel). April 2014 figures based on April 2014 panel.
(1) Includes all Valeant (Medicis) fillers, including the RESTYLANE® brand. (2) Pre-Acquisition indicates pricing data prior to Medicis acquisition by Valeant. Post-Acquisition indicates pricing data for 01-Mar-2013 for all products except DYSPORT® (01-Apr-2014). Price per vial / syringe.
(3) |
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Source: IMS per list pricing. |
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Does Valeant Have Any Experience Promoting Products Of Allergans Scale?
2013 Revenue ($mm)
Key Allergan Products and Key Valeant Products Globally
$2,500
$2,000 $1,982
Allergan would be Valeants largest acquisition $1,500
$1,000 $940
$625 $478 $474
$500 $378
$277 $240 $168 $150 $124 $115 $114 $100 $104 $102 $93 $88 $81 $77 $77 $76 $74 $72
$63 $62 $59 $57 $54 $50 $49 $46 $44
$0
Allergan At Net Prices
Valeant At Gross Prices
Valeants limited experience with large, global scale products represents a material execution risk attempting to grow Allergans categories and launching significant new large products through existing channels
Note: Allergan data represents 2013 reported net sales per SEC filings.
Note: Valeant data per IMS NPA data, IMS Analytic Link, IMS FIRST which is at WAC pricing and is reported at gross.
* |
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Based on industry sources. $425mm at gross but affected by alternative fulfillments. |
(1) LUMIGAN® and ALPHAGAN® represent both franchises, respectively. (2) LOTEMAX® sales include LOTEMAX® solution and LOTEMAX® gel.
(3) DYSPORT® , RESTYLANE® and SCULPTRA® represent net sales, based on Allergan estimates triangulated with Guidepoint Global data.
9
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How Stable is Valeants Management Team?
Significant Management Turnover Lack of Reimbursed Pharmaceutical Experience Lack Of Experience Managing Complex Global Businesses
2011 Executive Officers * 2012 2013 Present Executive Officers
J. Michael Pearson J. Michael Pearson J. Michael Pearson J. Michael Pearson Robert R. Chai-Onn Robert R. Chai-Onn Robert R. Chai-Onn Robert R. Chai-Onn Rajiv De Silva Rajiv De Silva Rajiv De Silva Rajiv De Silva PhilipW. Loberg PhilipW. Loberg PhilipW. Loberg PhilipW. Loberg Mark Durham Mark Durham Mark Durham Mark Durham Richard Masterson Richard Masterson Richard Masterson Richard Masterson Howard B. Schiller Howard B. Schiller Howard B. Schiller Dr. Susan Hall Dr. Susan Hall Dr. Susan Hall Brian M. Stolz Brian M. Stolz Ryan H. Weldon Ryan H. Weldon Jason D. Hanson (1) Jason D. Hanson Daniel Wechsler (2) Ari Kellen Laizer D. Kornwasser Dr. Pavel Mirovsky
In Addition, Recently Three Board Members (3) Replaced, Citing Potential Conflicts For Two Of Them, One Of Them Withdrawing After A Tenure Of Less Than A Year
Source: Company Filings, press releases.
* As disclosed on 2011 proxy. (1) Entered into a separation agreement with Valeant on May 8, 2013. Remained as consultant for a period of two months.
(2) |
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Previously at Bausch & Lomb, left after <1 year. |
(3) |
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Left Valeant Board due to having full-time investment jobs that could limit their professional effectiveness. |
10 |
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How do Valeants Announced Synergies for Allergan Compare to Other Transactions that Valeant has Announced?
Synergies as a % of Target Operating Expenditure
80%
73% 70%
60%
49% 50%
40% 36% 30% 20% 20% 10%
0% (1) (2) (3)
Cephalon Medicis Bausch & Lomb Allergan
Valeants Synergy Estimates for Allergan Are Much Higher Than What It Has Announced for Other Acquisitions Valeant Is Incentivized To Overstate Synergies Given Significant Stock Component In Its Offer
Source: Company Filings, Wall Street research, the Wall Street Journal and FactSet as of 05/02/14.
(1) Indicates a failed hostile bid. 11
(2) Based on 2012A Operating expenditures per B&L filings and announced synergies of $800mm. (3) Based on mid-point of Allergans guidance as of 05/07/14.
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Is Allergans Core Business At Risk Under Valeant Ownership?
Allergan 2013 Actual Standalone vs. Allergan Under Valeant Cost Cuts(1)
~39 % ~17 %
~10 %
~2 %
SG&A Ratio R&D Ratio
Allergan 2013 Actual Valeant Target
Observations and Considerations
Valeant will only be able to achieve a fraction of stated SG&A and R&D synergies without destroying Allergans long-term value Valeant drastically understates R&D spend required for post approval and maintenance, product line extensions and late phase projects Valeants purported SG&A synergies are unrealistic given the companys stated goals:
I want to reassure all of you that we remain committed to investing in you and in the fields of Dermatology, Aesthetics and Eye Care
Michael Pearson Letter to customers on 5/19/14
Investment in sales professionals to drive long-term relationships and create brand equity with medical stakeholders. Valeant focuses on selling over marketing.
Per Presentation Made on 4/22/14
A Significant Portion of Valeants Proposed Synergies are Already Captured in Allergans Strategic Plan, But in a Measured Way That Will Enable Sustainable Growth
Source: Allergan management projections, Valeant management investor meeting, 22-Apr-2014. 12 (1) As a % of FY 2013 Allergan sales.
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Are Valeants Purported R&D Synergies Achievable?
Valeants CEO has Committed to More R&D Projects than it Can Afford Under the Purported R&D Budget
.What we will do is formulation work, line extension work, and with BOTOX® well try to get as many indications as we possibly can
(Source: 22-Apr-2014 Valeant Investor Presentation)
As weve mentioned to you all, were going to spend around $300 million [on R&D] this year. But as we told you, wed be at a $200 million run rate at the end of the year.
(Source: 22-Apr-2014 Valeant Investor Presentation)
We will focus on developing late-stage compounds and evolving our products through lifecycle management.
(Source: 13-May-2014 Valeant Customer Letter)
As we have shown following our acquisitions of Bausch + Lomb and Medicis, we expect to maintain all late-state development programs in both companies and all new indication work for BOTOX®.
(Source: 13-May-2014 Valeant Customer Letter)
We recognize the value of Investigator-Initiated Studies (IITs) and we expect to increase our activities in this area across Dermatology, Aesthetics and Eye Care to further our understanding of the benefits of our products in clinical practice.
(Source: 19-May-2014 Valeant Customer Letter)
We intend to retain their key programs like Brilliant Distinctions®, maintain investment in direct to consumer campaigns that bring patients into your offices, and invest in those R&D programs across both companies that will deliver new products for your patients and practices.
(Source: 19-May-2014 Valeant Customer Letter)
We remain committed to support high potential R&D programs and new product launches
(Source: 19-May-2014 Valeant Customer Letter)
Valeant Purported R&D Savings
Mid-Point of Allergan R&D
~ $1,140mm
Guidance for 2014¹
Valeant Purported R&D $900mm
Savings
Implied Valeant R&D Spend
~$240 mm
Post-Closing
Illustrative 2015E Cost of R&D Programs that Valeant Claims to Continue Post-Closing
Post Approval and Maintenance ~$200mm
Valeant
All Phase III Programs would need (excluding DARPin®), Botox® to spend an Phase II programs, Medytox®, ~$350mm additional Late-Stage Filler Programs and ~$310mm
IITs to complete the
Total Estimated 2015E R&D projects Spend According to Valeants ~$550mm purported
Statements in its plan
Valeants Purported $900mm of R&D Cuts is Unrealistic Given Its Stated
Objectives in Continuing Certain R&D Projects Post-Closing
Source: Valeant company filings. Allergan management. 13 Note: Permission to use quotes was neither sought or received.
(1) |
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As per R&D guidance issued on 7-May-2014. |
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What is the Relative Distribution Strength of Allergan vs. Valeant for Eye Care (1) In The Important Emerging Markets?
Relative performance in BRIC: FY 2013 Allergans Sales In BRIC Countries Are $184mm Compared To $43mm Of Valeant (2)
Bausch & Lomb Has a Significantly Weaker Market Share Valeant Has Consistently Experienced Much Slower Growth in Russia Position Relative to Allergan in the Brazil Ophthalmic Market (3) Quarter over Quarter Relative to Allergan (4)
33.5 % 33.8 % 544.6 %
30.6 %
28.7 %
21.3 %
281.3 %
169.4 %
6.1 % 116.0 %
87.6 % 1.7 % 1.9 % 1.7 % 0.0 % 18.9 % 13.9 % (0.8)%
14.0 % 13.4 %
Glaucoma Tears STAC Others Total
Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Ophthalmic Allergan Bausch & Lomb Allergan Valeant
Valeants Presence is Immaterial in Indias Ophthalmology Market Bausch & Lombs Market Position in Chinas Ophthalmic Market While Allergan is a Market Share Leader (5) Continues to Deteriorate as Allergan Gains Market Share (6)
22 % 18%
21 % 21 % 17%
20 % 20 % 20 % 20 % 20 %
20 % 19 % 20 % 19 %
19 %
13%
14 % 14 % 11%
13 % 13 %
11 % 12 % 13 %
12 % 12 % 12 % 12 %
11 % 11 % 11%
12 % 12 %
12 % 12 % 11 % 12 % 9%
11 % 11 % 11 % 11 % 11 % 11 %
11 %
8%7%
Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Mar-12 Feb-13 Jan-14
Allergan Novartis Sun Allergan Bausch & Lomb
Allergan Has a Significantly Stronger Market Share Position in the Largest, Fastest Growing, Emerging Markets
(1) Excludes Retina.
(2) Source: IMS market data. Eye Care excluding Retina. (3) Source: IMS market share data YTD as of Mar-2014.
(4) Source: IMS market share data YTD as of Mar-2014. US$ @ 2014
Budget Rates, Ex-Manufacturer Prices.
(5) Source: IMS market share data YTD as of Mar-2014. (6) Source: IMS market share data YTD as of Mar-2014.
14
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Is Valeants Stated Tax Rate Achievable and Sustainable?
Tax Deferral Structures and Audit Risk
Undisclosed Cash Tax Cost to Achieve Tax Synergies
Tax Treatment of Transaction to Shareholders
Significantly Lower Tax Rate vs. Re-domiciled Pharma Peers (1)
Tax Observations Headlines For Investors Based on Analysis Conducted by Independent Consultants
Valeants recent spate of acquisitions and restructurings appear to have resulted in multiple off-shore tax deferral structures
Although some companies can manage the heavy burden and heightened scrutiny of one deferral structure, using so many is provocatively aggressive, difficult to sustain and compounds risk in multiple jurisdictions
Taxing authorities are likely to heavily scrutinize Valeants tax-deferral structures and transfer pricing
Valeants offer indicates that certain tax synergies can be achieved to obtain a high single digit cash tax rate for the combined group
Valeant has not publicly disclosed the potential cash tax cost of achieving these synergies but it is likely that Valeant anticipates migrating certain Allergan IP into one of its offshore tax-deferral structures
The upfront cash tax cost of migrating IP could be substantial and such cost could take over a decade to recover through the low-taxed earnings of the migrated IP. The cash tax cost could also have a significant impact on the cash flows of the combined company while it is highly levered, which calls into question the true benefit and viability of obtaining and sustaining a high single digit combined tax rate
Valeants offer as currently structured will result in the transaction being fully taxable to Allergans shareholders
Legislators in both the House and Senate have recently proposed changes to current US tax law which could make the resulting Valeant/Allergan entity a US tax resident, regardless of its place of incorporation, subjecting the combined Valeant/Allergan group and all of their subsidiaries to the US worldwide tax regime
Company Tax Rate Company Tax Rate
Endo ~20% Actavis ~16% Jazz 18.5% Valeant / Allergan High Single-Digit Perrigo High Teens Valeant Standalone Low Single-Digit
15
Source: SEC filings.
(1) Per respective investor presentations.
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What Is The Difference Between Valeants Reported And Adjusted Cash Flow?
($mm) $1,822mm cumulative differential between Adjusted Cash Flow and GAAP Cash Flow $1,000 from 2010 2014
$743
$750
$571
$500
$284
$250
$224
$0
2010
2011
2012
2013
Incrementally growing difference between Adjusted Cash Flow and GAAP Cash Flow points towards eroding cash flow generating abilities
Source: SEC filings. 16 Note: Reviewed by independent consultants and forensic accountants.
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How Does Valeant Bridge the Significant Gap Between Reported and Adjusted Earnings?
FY12 to FY13 Reported vs. Pro Forma vs. Valeants Adj. Net Income
($mm)
Reported net income $2,500 (1)
Pro forma net income $2,043 Non-GAAP adjusted cash earnings (2) $2,000 $1,412 $1,500
$1,000
$500
$0
($116)
($500)
($1,000) ($710)
($866) ($821)
($1,500)
FY12 FY13
Valeants adjusted earnings represent a much rosier picture than reported earnings
Source: Valeant 10-K and 10-Q.
Note: Reviewed by independent consultants and forensic accountants.
(1) This calculation of pro forma net income as disclosed in the 10-Ks and 10-Qs presents unaudited pro forma consolidated results of operations, as if the 2013 acquisitions had occurred as of January 1, 2012 and the 2012 acquisitions had occurred as of January 1, 2011. 17
(2) Valeants non-GAAP adjusted cash earnings disclosure reflects reported net income plus addbacks for certain expenses which Management claims to be either non-cash or non-recurring.
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Are Roll Ups Sustainable
Were short [Valeant] because its a rollup. And roll ups present a unique set of problems. Roll ups are generally accounting-driven, and we certainly think thats the case in [Valeant]. We think [Valeant] is playing some very aggressive accounting games when they buy companies, write down the assets, and also engaged in what we call spring-loading.
But really, for us, and we were short before the [Allergan] announcement, a roll up is a roll up. And you have to analyze a company thats not growing organically and has to deliver value by doing bigger and bigger acquisitions, and usually the companies do an acquisition too far.
Jim Chanos (Kynikos Associates), CNBC May 15, 2014
What about the business? Managing the business gets half of managements time; M&A opportunities absorb the rest, according to the Chief Financial Officer, Howard Bradley Schiller.
Grants Interest Rate Observer, March 7, 2014
Note: Permission to use quotes was neither sought nor received.
18
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The Tyco Roll Up Did Not End Well Is History Repeating Itself?
Significant Acquisitions During Dennis Kozlowskis Tenure as CEO of Tyco (Jul-1992 to Jun-2002)
Announced Market Cap @ Close Target Size ($bn) Date ($bn)
Jul-1994 Kendall International $ 1.4bn $ 6.5bn Mar-1997 ADT Limited $ 5.3bn $ 11.8bn Dec-1997 American Home Products $ 1.8bn $ 28.7bn May-1998 United States Surgical Corp $ 3.3bn $ 29.9bn Nov-1998 AMP Incorporated $ 12.5bn $ 60.3bn May-1999 Raychem Corporation $ 3.3bn $ 81.8bn Sep-1999 Siemens Electromechemical $ 1.1bn $ 70.8bn Jun-2000 Mallinckrodt $ 4.2bn $ 76.0bn Nov-2000 Lucent Technologies $ 2.5bn $ 93.5bn Dec-2000 Simplex Time Recorder Co. $ 1.2bn $ 94.4bn Mar-2001 CIT Group $ 9.2bn $ 99.4bn Aug-2001 Sensormatic Electronics $ 2.3bn $ 104.7bn Oct-2001 TyCom $ 0.9bn $ 108.5bn
May-2001: Dennis Kozlowski (former CEO) outlines a five-year plan of adding another $50bn of acquisitions and reaching $100bn in sales
Following its tumultuous decline, Tyco eventually split into three companies
Significant Acquisitions During Michael Pearsons Tenure as CEO of Valeant (Feb-2008 to Present)
Announced Market Cap @ Close Target Size ($bn) Date ($bn)
Jun-2010 Biovail Corporation $ 3.8bn $ 7.7bn Feb-2011 PharmaSwiss $ 0.5bn $ 11.9bn May-2011 Sanitas AB $ 0.5bn $ 11.9bn Jul-2011 Dermik Laboratories $ 0.4bn $ 13.5bn Jul-2011 Ortho Dermatologics $ 0.3bn $ 13.8bn Nov-2011 iNova $ 0.7bn $ 13.5bn Jun-2012 OraPharma $ 0.4bn $ 13.8bn Sep-2012 Medicis Pharmaceutical $ 2.6bn $ 17.7bn Mar-2013 Obagi Medical Products $ 0.4bn $ 22.4bn May-2013 Bausch & Lomb $ 8.7bn $ 31.8bn Dec-2013 Solta Medical $ 0.3bn $ 45.0bn
>100 Total Acquisitions
N/A (1) N/A Announced?
And Continuing
We did set an aspirational target to be a top five pharma company by the end of 2016 that would be about $150 billion market cap roughly.
Michael Pearson, CEO of Valeant, 07-Jan-2014
Privately Michael Pearson has suggested that he may break Valeant into smaller companies Is this true?
Source: Bloomberg, Company Filings, Wall Street Research
Note: Permission to use quotes was neither sought nor received. 19 (1) Source: Michael Pearson on Bloomberg Television, 23-Apr-2014.
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What do Allergan Stockholders Gain by Merging with Valeant?
Allergan Currently Has
Strong, long-term organic growth fueled by innovation and marketing excellenceAn extensive R&D engine that has a longstanding track record of producing a +25x return on cumulative R&D spendPromotion, sales and marketing effort focused on physician customer loyalty and service Consumer awareness campaigns Potential to commercialize rich pipeline with billions of revenue and profit potential Long-tailed blockbuster products Leading positions in some of the largest and fastest growing emerging markets Strong and stable management team and Board of Directors A positive net cash position and investment grade credit rating of A+ / A3An effective tax rate of ~26%
By Merging With Valeant, Allergan Gains
Anemic growth driven by what we believe are unsustainable price increases not volumeSubscale Valeant products losing their market shareA depleted R&D engine cut by $900mm; abandonment or sale of pipeline Thin sales coverage focused on detailing only Elimination of value added marketing programs A decreased P/E multiple driven by reduced growth prospects and increased uncertainty Neglected coverage of key specialty areas including urology and plastic surgery, among others Emerging market growth in smaller countries with less revenue potential Increased pro forma debt and a high yield credit rating Lower tax regime with questionable sustainability
20
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May 27, 2014 Certain Potential Business Risks And Issues With Valeant Pharmaceuticals International, Inc.
ALLERGAN |
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2525 Dupont Drive, P.O. Box 19534, Irvine, California, USA 92623-9534 Telephone: (714) 246-4500 Website: www.allergan.corn |
May 21, 2014
William A. Ackman
Pershing Square Capital Management, L.P.
888 Seventh Avenue, 42nd Floor
New York, NY 10019
Dear Mr. Ackman:
We confirm receipt of your latest letter which has been distributed to the entire Board. As we have previously indicated, the Board is well aware of its fiduciary duties to all stockholders and is being well-advised by its independent advisors as it responds to Valeant and Pershing Square. The entire Board will carefully review any revised proposal that Valeant makes and compare it to numerous other options, with a focus on enhancing the long-term value of Allergan for all stockholders. Mr. Pyott is an essential element in any such evaluation. The Board has complete confidence in David and his objectiveness.
On behalf of the Board of Directors,
/s/ Michael Gallagher |
Michael Gallagher Lead Director |
FOR IMMEDIATE RELEASE
Allergan Physician Customers Voice Strong Support Following Allergans Rejection of
Unsolicited Proposal to Acquire Company
Irvine, Calif., (May 20, 2014) Allergan, Inc. (NYSE: AGN) (Allergan or the Company) today announced that it has received a strong outpouring of support from its physician customers, their nurses and office staff members, as well as from patient advocacy groups and medical associations, following the Companys rejection of Valeant Pharmaceuticals International, Inc.s (Valeant) unsolicited proposal to acquire Allergan.
In more than 500 letters sent to Allergan, these physician customers, patient advocacy groups and medical associations express their appreciation for the Companys many contributions in the fields of research and development, product innovation, market creation, and physician support and services. In these letters, some of which have been posted to the www.allergan.com website, members of the healthcare community also share their encouragement for Allergan to remain an independent company and their concerns regarding Valeant, noting, among other things, that:
| Allergan leads the industry in terms of a commitment to research and development and to introducing innovative new products that address unmet patient needs. |
| Allergan provides unparalleled support for its physician customers and their practices; including physician education and training, consumer education, and building new markets. |
| The physician customers have grave concerns about Valeants proposal to reduce Allergans research and development expenditure by about $1 billion per year. This proposed reduction would have enormous impact on many areas such as future innovation in key medical specialties, patient care and treatment options, and the ability to conduct scientific research for future clinical development and post-approval product studies. |
| The physician customers share a high regard for Allergans innovative products and customer support services and expressed their concern that Valeants proposal would result in the same degradation of quality that physicians have experienced with other assets acquired by Valeant. |
Allergan is extremely grateful for the hundreds of letters of support we have received from our customers during the past few weeks, said David E.I. Pyott, Allergans Chairman of the Board and Chief Executive Officer. For more than 60 years, Allergan has been successful because we have made it our priority to serve our customers and their patients by providing innovative new products, customer support and services, and training, as well as creating new markets and providing assistance with access and reimbursement. All of us at Allergan are deeply touched that our customers have taken the time to write to tell us that our work has mattered to them and their patients, and to publicly share their support and encouragement for our companys business model and our promising future.
As previously announced on May 12, 2014, the Allergan Board of Directors unanimously concluded that Valeants proposal substantially undervalues Allergan, creates significant risks and uncertainties for the stockholders of Allergan based on, among other things, the unsustainability of Valeants acquisition-based strategy, and is not in the best interests of the Company and its stockholders.
Given the strength of its business, Allergan expects to increase earnings per share by 20 to 25 percent and continue to generate double digit revenue growth in 2015. Additionally, the Company expects to produce double digit sales growth and produce earnings per share compounded annual growth of 20 percent over the next five years. The Company believes this is achievable as a consequence of strong business momentum driven by a wide array of recent approvals and anticipated near term approvals, as well as an expectation that it is in a position to produce meaningful additional leverage and scale across both the SG&A and R&D categories without negatively impacting its commitment to deliver the highest quality outcomes to customers and their patients.
To access these physician customer letters of support, please visit the Our Customers section on the allergan.com homepage. Please note that certain personal identifying information has been redacted.
About Allergan
Allergan is a multi-specialty health care company established more than 60 years ago with a commitment to uncover the best of science and develop and deliver innovative and meaningful treatments to help people reach their lifes potential. Today, we have approximately 11,600 highly dedicated and talented employees, global marketing and sales capabilities with a presence in more than 100 countries, a rich and ever-evolving portfolio of pharmaceuticals, biologics, medical devices and over-the-counter consumer products, and state-of-the-art resources in R&D, manufacturing and safety surveillance that help millions of patients see more clearly, move more freely and express themselves more fully. From our beginnings as an eye care company to our focus today on several medical specialties, including eye care, neurosciences, medical aesthetics, medical dermatology, breast aesthetics, and urologic, Allergan is proud to celebrate more than 60 years of medical advances and proud to support the patients and customers who rely on our products and the employees and communities in which we live and work. For more information regarding Allergan, go to: www.allergan.com
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to statements regarding a proposed offer or proposal by Valeant and/or Pershing Square. These forward-looking statements are made as of the date they were first issued and are based on current expectations as well as the beliefs and assumptions of management. Forward-looking statements are subject to a number of risks and uncertainties, many of which involve factors or circumstances that are beyond Allergans control. Allergan expressly disclaims any intent or obligation to update these forward-looking statements except as required by law. Additional information concerning these and other risks can be found in press releases issued by Allergan, as well as Allergans public filings with the U.S. Securities and Exchange Commission, including the discussion under the heading Risk Factors in Allergans most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q. Copies of Allergans press releases and additional information about Allergan are available at www.allergan.com or you can contact the Allergan Investor Relations Department by calling 1-714-246-4636.
Allergan Contacts
Bonnie Jacobs, Allergan (714) 246-5134
Dan Katcher, Joele Frank and Scott Bisang, Wilkinson Brimmer Katcher (212) 355-4449
ALLERGAN |
| |
2525 Dupont Drive, P.O. Box 19534, Irvine, California, USA 92623-9534 Telephone: (714) 246-4500 Website: www.allergan.corn |
May 19, 2014
William A. Ackman
Pershing Square Capital Management, L.P.
888 Seventh Avenue, 42nd Floor
New York, NY 10019
Dear Mr. Ackman:
We confirm receipt of your letter which has been distributed to the entire Allergan, Inc. Board of Directors (the Board of Directors). The Board of Directors is well aware of its fiduciary duties to all stockholders and is being well-advised by its independent advisors. That being said, we strongly disagree with your statements and tactics including your blatant attempt to isolate David Pyott, who has created enormous value for the Allergan stockholders and who is keenly focused on the best interests of all stockholders. The entire Board of Directors, including David Pyott, is open to all options that will significantly enhance the long-term value of Allergan for all stockholders.
On behalf of the Board of Directors,
/s/ Michael Gallagher |
Michael Gallagher Lead Director |
To: | All Allergan Employees | |
From: | David E. I. Pyott, Chairman of the Board and CEO | |
Re: | Allergan Update |
Colleagues:
As you know, on Monday, May 12th, we announced the decision of the Allergan Board of Directors to unanimously reject Valeants unsolicited proposal after concluding that it substantially undervalues Allergan and is not in the best interest of our company, our stockholders, our customers, and our employees.
Since that time, Jeff Edwards and I, together with our Investor Relations team and our banking advisors, have traveled all over the United States to meet with many of our stock analysts, and, especially, most of our largest stockholders. These meetings have been extremely productive as they provided us with the opportunity to share our plans for continued growth moving forward. As part of our ongoing review of our business needs, Allergan senior management had started work on a new enhanced growth plan about 9 months ago, and hence, we were able to rapidly finalize this plan, have it approved by the Allergan Board of Directors, and present it to the investment community last week.
Our growth plan details an outlook for double digit sales growth and compound annual growth of Earnings per Share of 20% for the coming years up to 2019. Given our long term track record of delivering on our objectives, we have credibility with most investors and they responded favorably to our plan. In addition to delivering these strong performance metrics, we also expect to generate about $14 billion in Free Cash Flow. We listened carefully to investors perspectives and heard that they would like to see us harnessing this financial strength to create even more stockholder value by, among other suggestions, either purchasing growth oriented companies or technologies that fit our strategy and operating model, and/or buying back Allergan stock.
From the conversations with investors, it was also apparent that many share our belief, as well as that of our advisors and industry experts, that Valeants business model with low organic sales growth, serial acquisitions and cutting of R&D, sales and marketing, and overheads is not sustainable. Given that the Valeant proposal includes a substantial amount of Valeant stock in exchange for acquiring Allergan, this is a serious concern for the Allergan Board of Directors, who have a duty to protect the interests of all Allergan stockholders.
In the coming months, you may see a lot of activity in the media, with attacks launched on Allergan by Valeant and Pershing Square. You will also see announcements on several Allergan initiatives. I would ask that you avoid distraction and continue to believe that we have built a unique company and culture that is focused on putting customers and patients first and investing in innovation. You should be prepared that this battle may continue throughout the remainder of 2014, and perhaps even into early 2015. Obviously, the best strategy is extraordinary performance. I am proud of our incredibly strong team and delighted that 2014 will be probably the strongest growth year in Allergans long and successful history.
Valeant has announced its intention to hold a webcast on May 28th to improve the terms of its offer to acquire Allergan. You can be assured that the Allergan Board of Directors, and the small team of Allergan employees who are dedicated to dealing with Valeant and Pershing Square, will be ready.
In conclusion, it is critical that the Allergan team around the world remains focused on delivering great results against all of our company priorities. Thank you all for your dedication and belief in our culture.
David
FOR IMMEDIATE RELEASE
Allergan Board Unanimously Rejects Unsolicited Proposal from Valeant
Valeant Proposal Substantially Undervalues Allergan
and is Not in the Best Interests of Stockholders
Allergan Expects to Increase EPS by 20 to 25 Percent in 2015 and
by 20 Percent CAGR over Next Five Years
Irvine, Calif., May 12, 2014 Allergan, Inc. (NYSE: AGN) (Allergan or the Company) today announced that its Board of Directors has unanimously rejected the unsolicited proposal (the Proposal) announced by Valeant Pharmaceuticals International, Inc. (Valeant) on April 22, 2014. After a comprehensive review, conducted in consultation with its financial and legal advisors, the Allergan Board concluded that the Proposal substantially undervalues Allergan, creates significant risks and uncertainties for the stockholders of Allergan, and is not in the best interests of the Company and its stockholders.
The Company also announced that, given the strength in its business, Allergan expects to increase earnings per share by 20 to 25 percent and continue to generate double digit revenue growth in 2015. Additionally, the Company expects to produce double digit sales growth and produce earnings per share compounded annual growth of 20 percent over the next five years. The Company believes this is achievable as a consequence of strong business momentum driven by a wide array of recent approvals and anticipated near term approvals, as well as an expectation that it is in a position to produce meaningful additional leverage and scale across both the S,G&A and R&D categories without negatively impacting its commitment to deliver the highest quality outcomes to customers and their patients.
After careful review and consideration, our Board of Directors has unanimously determined that Valeants unsolicited proposal substantially undervalues Allergan and does not reflect the value of the Companys leading market positions, sales and marketing foundation, industry-leading research and development efforts, as well as future revenue and earnings growth, said David E.I. Pyott, Allergans Chairman of the Board and Chief Executive Officer. Allergan has a long history of producing consistent growth and delivering solid results through a combination of innovation, execution and discipline. We are confident in our ability to extend our track record, enthusiastic about the opportunities before us, and believe Allergan is well positioned to deliver compelling value to our stockholders. Furthermore, the Board has determined that Valeants proposal creates significant risks and uncertainties for Allergans stockholders and believes that the Valeant business model is not sustainable.
1
The following is the text of the letter that was sent on May 12, 2014, to Valeants Chairman and CEO, Michael Pearson:
May 12, 2014
Mr. Michael Pearson
Chairman & Chief Executive Officer
Valeant Pharmaceuticals International, Inc.
Dear Michael:
The Board of Directors of Allergan has received your letter dated April 22, 2014 proposing that Valeant acquire all of the outstanding shares of Allergan for 0.83 shares of Valeant stock and $48.30 in cash (the Proposal). The Allergan Board carefully reviewed your companys proposal with the assistance of its financial advisors, Goldman, Sachs & Co. and BofA Merrill Lynch, and its legal counsel, Latham & Watkins, Richards, Layton & Finger, P.A. and Wachtell, Lipton, Rosen & Katz. After thorough consideration, it is the unanimous view of the Allergan Board that your unsolicited proposal substantially undervalues Allergan, creates significant risks and uncertainties for the stockholders of Allergan, and is not in the best interests of the Company and its stockholders. Accordingly, the Allergan Board unanimously rejects the Proposal.
As you know, Allergan has a long history of producing consistent growth and delivering solid results through a combination of innovation, execution and discipline. We are confident in our ability to extend our strong track record of innovation, which has yielded unique expertise and insights that drive innovation and value. The Board is determined to continue to create value for Allergan and its stockholders.
In addition to substantially undervaluing our Company, your Proposal includes a large stock component, which we believe is a risk for Allergan stockholders due to the uncertainty surrounding Valeants long term growth prospects and business model. Valeants strategy runs counter to Allergans customer focused approach. In particular, we question how Valeant would achieve the level of cost cuts it is proposing without harming the long term viability and growth trajectory of our business. For those reasons and others, we do not believe that the Valeant business model is sustainable.
For the reasons stated above, we believe that your proposal substantially undervalues our Company. Allergan has a strategic plan in place that we believe is the right path forward to deliver value to our stockholders.
On behalf of the Board of Directors, |
/s/ |
David E.I. Pyott, CBE |
Chairman & Chief Executive Officer |
2
Allergan will host a telephone conference call and a Webcast on Monday, May 12, 2014 to discuss the unsolicited proposal from Valeant Pharmaceuticals International, Inc. Presentation slides will accompany the live Webcast, which will be available on the Allergan Website. You may participate in this call by dialing 1-888-790-1916 for domestic locations or 1-517-319-9297 for international locations. A passcode, Allergan, will be required. David Pyott, Chairman of the Board and Chief Executive Officer, and Jeff Edwards, Executive Vice President, Finance and Business Development, Chief Financial Officer, will comment on the unsolicited proposal beginning promptly at 5:30 a.m. Pacific Time (8:30 a.m. Eastern Time) before answering questions. The live Webcast and accompanying presentation slides can be accessed through the Allergan Website, www.allergan.com, beginning at 5:15 a.m. Pacific Time (8:15 a.m. Eastern Time).
A replay of the discussion will be available shortly after the call and can be accessed through www.allergan.com, or by dialing 1-888-277-5031 for domestic locations or 1-203-369-3598 for international locations. A passcode will not be required. The replay will be available for one week following the live call.
Goldman, Sachs & Co. and BofA Merrill Lynch are serving as financial advisors to the Company and Latham & Watkins, Richards, Layton & Finger, P.A. and Wachtell, Lipton, Rosen & Katz are serving as legal counsel to the Company.
About Allergan
Allergan is a multi-specialty health care company established more than 60 years ago with a commitment to uncover the best of science and develop and deliver innovative and meaningful treatments to help people reach their lifes potential. Today, we have approximately 11,600 highly dedicated and talented employees, global marketing and sales capabilities with a presence in more than 100 countries, a rich and ever-evolving portfolio of pharmaceuticals, biologics, medical devices and over-the-counter consumer products, and state-of-the-art resources in R&D, manufacturing and safety surveillance that help millions of patients see more clearly, move more freely and express themselves more fully. From our beginnings as an eye care company to our focus today on several medical specialties, including eye care, neurosciences, medical aesthetics, medical dermatology, breast aesthetics, and urologics, Allergan is proud to celebrate more than 60 years of medical advances and proud to support the patients and customers who rely on our products and the employees and communities in which we live and work. For more information regarding Allergan, go to: www.allergan.com
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to statements regarding a proposed offer or proposal by Valeant and/or Pershing Square. These forward-looking statements are made as of the date they were first issued and are based on current expectations as well as the beliefs and assumptions of management. Forward-looking statements are subject to a number of risks and uncertainties, many of which involve factors or circumstances that are beyond Allergans control. Allergan expressly disclaims any intent or
3
obligation to update these forward-looking statements except as required by law. Additional information concerning these and other risks can be found in press releases issued by Allergan, as well as Allergans public filings with the U.S. Securities and Exchange Commission, including the discussion under the heading Risk Factors in Allergans most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q. Copies of Allergans press releases and additional information about Allergan are available at www.allergan.com or you can contact the Allergan Investor Relations Department by calling 1-714-246-4636.
Allergan Contacts
Bonnie Jacobs, Allergan (714) 246-5134
Joele Frank, Dan Katcher, and Scott Bisang, Joele Frank, Wilkinson Brimmer Katcher (212) 355-4449
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|
ALLERGAN
Our pursuit. Lifes potential.®
May 2014
Allergan
A Specialist in the Biopharmaceutical
& Medical Device Industries
|
Forward-Looking Statements
This presentation contains forward-looking statements, including statements regarding product acquisition and development, regulatory approvals, market potential, expected growth, efficiencies, and Allergans expected, estimated or anticipated future results, including Allergans earnings per share and revenue forecasts, among other statements. All forward-looking statements herein are based on Allergans current expectations of future events and represent Allergans judgment only as of the date of this presentation. If underlying assumptions prove inaccurate or unknown risks or uncertainties materialize, actual results could vary materially from Allergans expectations and projections. Therefore, you are cautioned not to rely on any of these forward-looking statements and Allergan expressly disclaims any intent or obligation to update these forward-looking statements except as required to do so by law.
Actual results may differ materially from Allergans current expectations based on a number of factors affecting Allergans businesses, including changing competitive, market and regulatory conditions; the timing and uncertainty of the results of both the research and development and regulatory processes; domestic and foreign health care and cost containment reforms, including government pricing, tax and reimbursement policies; revisions to regulatory policies related to the approval of competitive generic products; technological advances and patents obtained by competitors; the ability to obtain and maintain adequate protection of intellectual property rights; the performance of new products, including obtaining government approval and consumer and physician acceptance, the continuing acceptance of currently marketed products, and consistency of treatment results among patients; the effectiveness of promotional and advertising campaigns; the potential for negative publicity concerning any of Allergans products; the timely and successful implementation of strategic initiatives, including expansion of new or existing products into new markets; the results of any pending or future litigation, investigations or claims; the uncertainty associated with the identification of, and successful consummation, execution and integration of, external corporate development initiatives and strategic partnering transactions; potential difficulties in manufacturing; and Allergans ability to obtain and successfully maintain a sufficient supply of products to meet market demand in a timely manner. In addition, matters generally affecting the U.S. and international economies, including consumer confidence and debt levels, changes in interest and currency exchange rates, political uncertainty, international relations, the status of financial markets and institutions, impact of natural disasters or geo-political events and the state of the economy worldwide, may materially affect Allergans results.
These and other risks and uncertainties affecting Allergans businesses and operations may be found in Allergans most recently filed
Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q, including under the heading Risk Factors. These filings, as well as Allergans other public filings with the U.S. Securities and Exchange Commission (SEC), can be obtained without charge at the SECs web site at www.sec.gov. These SEC filings are also available at Allergans web site at www.allergan.com along with copies of Allergans press releases and additional information about Allergan. For further information, you can contact the Allergan Investor Relations Department by calling 714 -246-4636.
© 2014 Allergan, Inc. All rights reserved.
ALLERGAN
Our pursuit. Lifes potential.®
® & Marks owned by Allergan, Inc.
JUVÉDERM® is a registered trademark of Allergan Industrie SAS
All other products are registered trademarks of their respective companies
2
|
Update on Selected Recent Developments
On April 22, 2014, Valeant and Pershing Square proposed an acquisition of Allergan
The proposal consisted of $48.30 / share in cash and 0.83 Valeant shares / Allergan share in stock
On May 10, 2014, the Allergan Board of Directors reviewed Valeants unsolicited proposal in consultation with financial and legal advisors
It is the unanimous view of the Allergan Board of Directors that Valeants unsolicited proposal substantially undervalues Allergan, creates significant risks and uncertainties for the stockholders of Allergan, and is not in the best interests of the Company and its stockholders
Allergan has a long history of producing consistent growth and delivering solid results through a combination of innovation, execution and discipline
We are confident in our ability to extend our strong track record of innovation, which has yielded unique expertise and insights that drive innovation and value
We do not believe Valeants proposal reflects value due to our leading market positions, future growth prospects, and industry-leading research and development efforts. In addition, we do not believe that the Valeant business model is sustainable
Allergan Board of Directors is confident that our plan will create significantly more value than Valeants hostile, unsolicited proposal
Allergan management team is best equipped to deliver this value our track record speaks for itself
ALLERGAN
Our pursuit. Lifes potential.®
3
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Highlights of Business
Allergan Now
We have built a pre-eminent specialty pharmaceutical and medical device company based on a track record of innovation and shareholder value creation
#1 or #2 positions in high growth markets, based on premium high quality products
Taking advantage of market dislocation and weakening competitors
Targeted expansion into high value geographies and new specialty areas
Innovation in products and marketing drives our success
Prolific R&D generates products that customers want and make us a market leader
Sophisticated and proprietary sales, support and marketing infrastructure
Allergan in the Future
Our management team is best positioned to drive growth through innovation and operational excellence
Continue to maximize value through market expansion and new market creation
In mid-2013, management and our Board of Directors began working on a plan to further enhance sales and earnings performance
Capitalize on value of critical mass built over past five years
Strong pipeline and continued delivery of product flow driving top line growth
Operational efficiency and leveraging commercial infrastructure accelerating bottom line growth
ALLERGAN
Our pursuit. Lifes potential.®
4
Updated Guidance Based on Strong Performance to Date
1Q 2014* 2Q 2014E*
Updated Quarterly
Product Net Sales $1.61bn $1.73bn - $1.8bn
Non-GAAP Diluted EPS $1.18 $1.41 - $1.44
Non-GAAP Diluted EPS Growth (yoy) 20% 16% - 18%
Previous Guidance Current Guidance
Revised FY 2014
Product Net Sales $6.65bn - $6.95bn $6.78bn - $7.00bn
Non-GAAP Diluted EPS $5.36 - $5.48 $5.64 - $5.73
Non-GAAP Diluted EPS Growth (yoy) 12% - 15% 18% - 20%
Guidance
Revenue Growth: Double digit
FY2015 Non-GAAP Diluted EPS Growth: 20% - 25%
Note: * For additional details, please refer to 1Q 2014 results
ALLERGAN
Our pursuit. Lifes potential. ®
5
Promising Outlook on Long-Term Growth
Double Digit Revenue Growth 20% 5-year EPS CAGR
Long-term growth driven by new product innovation and operational excellence
2013A 2014 E Guidance 2015 E Guidance 2016E 2017E 2018E 2019 E
Revenue
$6.2bn
EPS
$4.77
Revenue
$6.8bn - $7.0bn
EPS
$5.64 - $5.73
EPS Growth
18% - 20%
Revenue Growth
Double Digit
EPS Growth
20% - 25%
5-Year Target
Revenue Growth Double digit
R&D* 14% - 15%
SG&A* Mid-to High 20%
EPS Growth 20% CAGR
ALLERGAN
Our pursuit. Lifes potential. ®
Allergans management team is best equipped to deliver value for stockholders, as our track record speaks for itself
* As a percentage of sales.
6
Introduction to Allergan
ALLERGAN
Our pursuit. Lifes potential. ®
7
Allergan is a Global Market Leader Driven by a Long Track Record of Innovation
David Pyott is 3rd CEO in 63 year history
Approximately 11,600 employees worldwide
Power and sustainability of growing markets
Balanced growth across geographies and specialties
40 direct/selling subsidiaries in No. America, Europe, Asia-Pacific, Latin America
Leading market share positions in its key specialty areas
Streamlined, efficient manufacturing and R&D facilities
Plants
R&D Facilities
ALLERGAN
Our pursuit. Lifes potential. ®
8
Allergan Has Delivered Outstanding Growth Over Time
Sales Performance Over Time
ALPHAGAN® , TAZORAC® Launch, BOTOX® Investment
RESTASIS® (US) Approval
BOTOX® Cosmetic Approval
Inamed Acquisition
BOTOX® Chronic Migraine (US) Approval
+25% +25% +26% +18% +21% +20% +15% +16% +28% +23% +11% +6% +8% +11% +10% +12%
Multiple Product Approvals Accelerating Growth
$0.7 $0.8 $1.0 $1.1 $1.4 $1.7 $2.0 $2.3 $2.9 $3.6 $4.0 $4.2 $4.6 $5.1 $5.5 $6.2
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
EPS Performance Over Time
Re-structuring
+32% +18% +25% +27% +22% +20% +20% +18%(3) +19% +18% +8% +14% +16% +15%(4) +16%(5)
$0.38 $0.50 $0.59 $0.74 $0.94 $1.15 $1.38 $1.65 $1.83 $2.18 $2.57 $2.78 $3.16 $3.65 $4.04 $4.77
Leveraging Critical Mass
1998(1) 1999(1) 2000 2001 2002 2003 2004 2005(2) 2006 2007 2008 2009 2010 2011 2012 2013
Denotes periods of accelerated growth
ALLERGAN
Our pursuit. Lifes potential. ®
EPS adjusted for non-GAAP items and 2002 spin-off of Advanced Medical Optics, Inc. Includes the effect of EITF 04-8. Historical EPS adjusted for Q2 2007 stock split. A reconciliation of non-GAAP items may be found under the heading Non-GAAP Financial Reconciliations in the investor relations section of the www.Allergan.com website. 1 Excludes estimated diluted earnings per share impact of pro-forma AMO spin-off adjustment. 2 Pre IRS Tax Settlement. 3 2006 EPS growth excludes FAS 123R stock option expense. 4 2012 EPS growth includes the 2012 Obesity impact of $0.10 and the 2012 R&D Tax Credit impact of $0.06. 5 2013 EPS Growth Restating 2012 to exclude the 2012 Obesity impact of $0.10 and including the 2012 R&D Tax Credit impact of $0.06.
9
Delivering Consistent Outperformance and Driving
Long-Term Shareholder Value
$180.00
160.00
140.00
120.00
100.00
80.00
60.00
40.00
20.00
0.00
04/15/02
FDA approved BOTOX® for cosmetic use
12/24/02
FDA approved RESTASIS®
11/15/05
Announced acquisition of Inamed for ~$3bn
10/15/10
FDA approved BOTOX® (ChronicMigraine)
10/23/13
FDA approved JUVÉDERM® VOLUMATM XC
Allergan 2,027%
NBI 689%
S&P500 94%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Allergan S&P 500 NASDAQ / Biotechnology
Exceed / Meet Guidance Missed Guidance
Performance Against Company Guidance:
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Allergan Has Exceeded Its Guidance Virtually Every Year For the Past 15 Years
ALLERGAN
Our pursuit. Lifes potential.®
10
Durable Business Model Continues To Create
Tremendous Shareholder Value
Recession Proof Business Model
Sales ($bn) R&D Ratio
$7.0 20.0%
$6.2
$6.0
$5.5
19.0% $5.1 $5.0 $4.6 $4.2 $4.0
18.0% $4.0 $3.6 $3.0 $2.9
16.8%
17.0%
16.7%
16.7%
16.5%
$2.0
16.0%
15.8%
15.8%
16.0%
$1.0
15.2%
$0.0
15.0%
2006
2007 2008 2009 2010 2011 2012
2013
Unique & Durable Product Portfolio
Product Patent Expiration Date
ALPHAGAN® P 0.10% 2022
COMBIGAN® 2022
LUMIGAN® 0.01% 2027
RESTASIS® 2024
LASTACAFT® 2029
ACZONE® 2016
TAZORAC® GEL 2014(1)
LATISSE® 2024
BOTOX® & Neuromodulators over 100 use and process patents, expiring out to 2031
Complexity and size of molecule
Manufacturing and regulatory barriers
ALLERGAN
Our pursuit. Lifes potential.®
(1) Requirement for bio-equivalence study has created a barrier for Gx entry
11
Our Investments in Human Capital Are Focused On
Generating Sustainable Sales Growth
Over 50% Personnel Focused on Innovation & Sales
Strong productivity gains
Sales growth up ~11x (1) (19972013)
Employees up ~2.4x (2) (19972013)
18%
25%
23%
34%
1997 (2) 2013
Sales $0.6bn $6.2bn +930%
Sales Force 750 3,800 +410%
R&D 700 2,100 +200%
Company 4,700 11,400 +140%
R&D
Sales
Production
Finance & Marketing
(1) Excludes Obesity Intervention which was divested in Q4 2013.
(2) Includes estimated adjustment for 2002 Advanced Medical Optics, Inc. spin-off.
ALLERGAN
Our pursuit. Lifes potential.®
12
Targeted Expansion into High Value Geographies
$ billion
$1.2 $1.0 $0.8 $0.6 $0.4 $0.2 $0.0
Indonesia
Vietnam
Represents The Start of
Direct Operations Russia
Philippines
South Africa
China
Poland
Turkey
Korea
+29% +11% +9% +26% +22% +17% +15%
2006 2007 2008 2009 2010 2011 2012 2013
18% CAGR*
Emerging Markets: Latin America, Asia (excluding Australia and New Zealand), EAME Emerging Markets Growth in Local Currency
* CAGR calculated on sales in Dollars
ALLERGAN
Our pursuit. Lifes potential. ®
13
Starting With a Small Footprint Nearly 15 Years Ago
2000 Footprint in Our Pillars
Glaucoma
- ALPHAGAN®
Dry Eye
- REFRESH®
Ocular Surface
Disease
- OCUFLOX®
- ALOCRIL®
- ACULAR®
- PREDFORTE®
BOTOX® Therapeutic
- Blepharospasm
Ophthalmics
TAZORAC®
- Cream
- Gel
AZELEX®
- Cream
Medical Dermatology
Pillar did not exist in 2000
Medical Aesthetics
BOTOX® Therapeutic
- Cervical Dystonia
Neurology
Pillar did not exist in 2000
Urologics
ALLERGAN
Our pursuit. Lifes potential.®
14
Allergan Is Now The Market Leader In Multiple Therapeutic Areas
Current Footprint In Our Pillars
Glaucoma
- LUMIGAN®
- ALPHAGAN®
- GANFORT
- COMBIGAN®
- IOP lowering
-Bimatoprost Sus. Release (Ph 2)
Retina
- OZURDEX®
- NOVADUR ® (Brimonidine) (Ph 2 Confirmatory)
- AGN 150998 (Anti-VEGF DARPin® (Ph 2))
- Anti-VEGF-A / PDGF-B
DARPin® (Pre-Clinical)
- TKI (Pre-Clinical)
Dry Eye
- RESTASIS®
- REFRESH
- OPTIVE®
Ocular Surface Disease
- ACUVAIL®
- ZYMAXID®
- LASTACAFT®
Ophthalmics
BOTOX® Cosmetic
- Glabellar Lines
- Crows Feet Lines
Dermal Fillers
- JUVÉDERM®
- VOLUMA
- VOLBELLA®
- VOLIFT®
Breast Aesthetics
- NATRELLE®
Soft Tissue Support (Plastic Surgery)
- SERI®
LATISSE®
- Eyelash Growth
- Brow (Ph 3)
- Scalp (Ph 2 - POC)
Physician Dispensed Creams
- SkinMedica®
- VIVITÉ®
- M.D. FORTE®
Medical Aesthetics *
TAZORAC®
- Cream
- Gel
ACZONE®
- Topical Acne
BOTOX® Therapeutic
- Hyperhidrosis (Axillary)
AGN-199201 (Oxymetazoline) (Ph 3)
- Rosacea
Medical Dermatology
BOTOX® Therapeutic
- Spasticity, CD, Chronic Migraine, JCP, Osteoarthritis (Ph 2), Pain (Ph 2), Depression (Ph 2), etc.
LEVADEX® (Registration)
- Migraine (Acute Therapy)
TEM
- Pain (Ph 2)
Neurology
BOTOX® Therapeutic
- Overactive Bladder
BOTOX® Therapeutic
- Neurogenic Detrusor Overactivity
BOTOX® Therapeutic
- Premature Ejaculation (Ph 2)
Nocturia
- Ser-120 (Ph 3)
Urologics
* Plastic surgery & dermatology
ALLERGAN
Our pursuit. Lifes potential.®
15
Allergan Today
16
ALLERGAN
Our pursuit. Lifes potential.®
Allergan Operates in Large, Growing Markets
WW Ophthalmic Market ($bn)
8% CAGR
$20.9
$14.7
$26.6
2009A 2013A 2017E *
WW Neuromodulator
Therapeutic Market ($bn)
14% CAGR
$1.5
$0.9
$2.6
2009A 2013A 2017E *
WW Aesthetics Market ($bn)
10% CAGR
$3.6
$2.3
$5.0
2009A 2013A 2017E *
Allergans Product Offerings
LUMIGAN 0.01%
(bimataprost ophthalmic solution) 0.01%
RESTASIS®
(Cyclosporine Ophthalmic Emulsion) 0.05%
Alphagan P0.1%
(brimonidine tartrate ophthalmic solution) 0.1%
Refresh Lubricant Eye Drops
Botox
Botox
Skin Medica
Juvederm XC
SERI®
Natrelle
Latisse
(bimataprost ophthalmic solution) 0.03%
* Market projections based on Allergan estimates 17
ALLERGAN
Our pursuit. Lifes potential.®
Focus And Commitment Resulting In Leading Market Share Positions
Ophthalmics
Valeant acquired Bausch & Lomb
Novartis acquired Alcon AGN #2 $20.9 12%
AGN #2 $14.6
AGN #2 $19.3 11%
AGN #2 $17.9 9%
AGN #2 $16.5 6%
Worldwide Market ($bn)
2009 2010 2011 2012 2013
Others PFE VRX/BOL ROG STN Alcon NVS AGN
Fillers
Valeant acquired Medicis
AGN #1 $1.2 23%
AGN #1 $1.1 7%
AGN #1 $1.0 28%
AGN #1 $0.8 30%
AGN #2 $0.6
2009 2010 2011 2012 2013
Others VRX/MRX Merz/Bioform AGN
Neuromodulators *
Valeant acquired Medicis
AGN #1 $2.8 12%
AGN #1 $2.5 11%
AGN #1 $2.2 12%
AGN #1 $1.9 8%
AGN #1 $1.7
2009 2010 2011 2012 2013
Others VRX / MRX Merz AGN
Breast
J&J acquired Mentor AGN #1 $0.9 0%
AGN #1 $0.9 8%
AGN #2 $0.8 10%
AGN #2 $0.8 11%
AGN #2 $0.8
2009 2010 2011 2012 2013
Others JNJ / Mentor AGN
Note: Percentages denote growth rates of Allergans franchises for Neuromodulators, Fillers and Breast. Percentages for Ophthalmics including Retina denote IMS growth rates.
Sources: Ophthalmics IMS Global (53 countries) at Q4 2013 constant exchange rates. Neuromodulator/Filler/Breast/Bannding Mixture of public information and AGN data
* Neuromodulators include Therapeutic and Cosmetic
18
ALLERGAN
Our pursuit. Lifes potential.®
Differentiated Portfolio And New Product Offerings To
Address A Large, Growing Ophthalmic Market
Glaucoma
Worldwide market in units continues to grow, especially outside the U.S.
Allergan portfolio includes 1st line, adjunctive and fixed combination products
Bimatoprost Sustained Release to address patient compliance
Therapeutic Dry Eye
Large underserved patient population
New branded products expected to stimulate market growth
RESTASIS® X in development and other candidates to enter clinic in 2014 and 2015
Retina
OZURDEX®
Retinal Vein Occlusion and Uveitis entry points into larger markets
Diabetic Macular Edema1 represents larger market opportunity
DARPin®1 (Anti-VEGF) in Phase II for AMD
WW Ophthalmic Market ($bn)
$30.0 8% CAGR
$26.6* $20.9 $14.7
$25.0
$20.0
$15.0
$10.0
$5.0
$-
2009 2013 2017 E
Other Glaucoma Dry Eye 2 Retina
* Market projections based on Allergan estimates
1 Indications/Compounds under investigation
2 Dry Eye includes Therapeutic Dry Eye and OTC Tears
ALLERGAN 19
Our pursuit. Lifes potential.®
Allergan Has Established The Neuromodulator Market And Is
The Market Leader
Originally established with movement disorders
Establishing markets for new indications where BOTOX® is the only approved neuromodulator
Chronic Migraine, Overactive Bladder and Neurogenic Detrusor Overactivity
Estimate 5-7 years of high growth period, followed by prolonged moderate growth
Overseas markets establishing reimbursement and pricing can take an additional 2 years
Majority of current neuromodulator market is represented by BOTOX® sales in movement disorders, migraine and bladder
BOTOX® for therapeutic indications is cited in scientific literature almost 3x competitors combined
BOTOX® is being studied in 7 additional indications
Extremely high market barriers to entry (regulatory, clinical studies, physician training)
WW Neuromodulator Therapeutic Market ($bn)
$3.0
14% CAGR $2.6* $1.5 $0.9
$2.5
$2.0
$1.5
$1.0
$0.5
$-
2009 2013 2017 E
* Market projections based on Allergan estimates
ALLERGAN 20
Our pursuit. Lifes potential.®
Leading Aesthetics Franchise With Multiple New Offerings
And Customer Loyalty
BOTOX® Cosmetic Franchise
Favorable demographics
Power of brand recognition
Patient loyalty
Crows Feet Lines approved in 2013
- JUVÉDERM® Franchise
VOLUMATM U.S. Launch late 2013
VYCROSSTM Technology -VOLIFT® / VOLBELLA® / VOLUMATM stimulating market growth
Breast Aesthetics
NATRELLE® 410 shaped silicone U.S. approved in 2013
Continued penetration in premium priced reconstruction market
WW Aesthetics Market ($bn)
$6.0
10%CAGR
$5.0*
$5.0
$4.0
$3.6
$3.0
$2.3
$2.0
$1.0
$-
2009
2013
2017 E
Neuromodulators
Fillers
Breast
LATISSE®
* Market projections based on Allergan estimates 21
ALLERGAN
Our pursuit. Lifes potential.®
Our Investments Are Focused On Generating
Sustainable Sales Growth
Worldwide DTC Investment (in $bn)
In $bn
0.25
0.2
Urology
Market
Creation
JUVÉDERM®
0.15
Market
BOTOX®
Expansion
Chronic
Migraine
LATISSE®
Market
Market
RESTASIS®
Expansion
Creation
BOTOX®
Market
0.1
Chronic
Expansion
Migraine
ACZONE®
Market
Market
Creation
Expansion
0.05
0
2008
2009
2010
2011
2012
2013
2014 Est.
Allergan Creates And Builds Markets With Focused Investment
Note: Sales CAGR calculated on 2008-2014 Est. sales. 2014 Est. sales based on mid-point of guidance provided on May 7, 2014.
22
ALLERGAN
Our pursuit. Lifes potential.®
Allergan Maintains Market Leadership By
Putting Customers First
Patient Focused
Direct-to-consumer advertising
Restasis use twice a day 12 hours apart
Award winning campaigns driving significant patient education ad
RECLAIM YOUR TIME
disease/product awareness
CALM YOUR BLADDER
TV, Print, Online
Comprehensive Patient Savings and CRM
Maybe its Chronic Migraine.
Brilliant Distinctions® with over 1.4 million
MYCHRONICMIGRAINE.COM
U.S. women enrolled
Customer Savings
Brilliant DISTINCTIONS® PROGRAM
Feedback to Practices (over 13,000 accounts)
Helping patients get the treatment
BOTOX Partnership for Access
they need
5431 0300 1000 0080 MasterCard 12/10
BOTOX® /OZURDEX® PATIENT ASSISTANCE®
JOHN A. SAMPLE
covering cost for insured and uninsured
Co-Pay foundation support
BOTOX® Partnership for Access offering co-pay assistance for out-of-pocket expenses
Physician Focused
Industry leading disease state education in Ophthalmology
FORGETM Focusing Ophthalmology on Reframing Glaucoma Evaluation
Didactic/Live physician training programs for injection paradigm/technique
OPTOMETRY JUMP STARTTM
Extensive programs in Optometry including Jumpstart for Teaching
NPS Neuroscience Practice Specialist
Institutions
Practice consultation
Dedicated teams helping to enhance
BOTOX REIMBURSEMENT SOLUTIONS
office flow and logistics
Comprehensive reimbursement support
Allergan Retina Coverage Connection
BOTOX® Reimbursement Solutions
23
ALLERGAN
Our pursuit. Lifes potential.®
Allergans Multi-Faceted Sales & Marketing Approach Builds Value for Customers
Classic detailing
is only one component of a successful marketing effort
Sales Force Detailing
Classical pharmaceutical detailing
Portfolio of Products
Marketing
Exposure to and options for products patients want
Managed Care
MANAGED CARE ORGANIZATIONS
Reimbursement & Access
Customer Service
Foundation Supporting Sales Force
Increasing access to product
Medical Affairs
Medical Education
Physician Training
Institutional Training
OPTOMETRY JUMP START
In-Practice Consultation
NPS Neuroscience Practice Specialist
Helping physicians build their practice
Sophistication of sales and marketing is an integral part of Allergans success and differentiation
24
ALLERGAN
Our pursuit. Lifes potential.®
Product Innovation Allows Allergans Sales Infrastructure To Be Highly Successful
Creating new markets where none existed
Often targeting larger market opportunities
Higher margin products, cash pay and reimbursement markets
Toxin Type A Botox Cyclosporine Ophthalmic Emulsion 0.05% Restasis Latisse (bimatoprost ophthalmic solution) 0.03% Juvederm
Develop differentiated, commercially successful products
Drives customer loyalty
Optimizes better products for patients
Pipeline in a product
Alphagan P (brimonidine tartrate ophthalmic solution) 0.1% Juvederm VOLUMATM XC
Employ efficient R&D model with probability of success higher than the industry
Specialty focused
Local drug delivery Ozurdex (dexamethason intravitreal implant) 0.7mg aczone 30g
ALLERGAN 25
Our pursuit. Lifes potential.®
Allergan Innovation Has Created New
Therapeutic Markets
Restasis®
(Cyclosporine Ophthalmic Emulsion) 0.05%
BOTOX®
onabotulinumtoxinA injection
The first and only therapeutic product indicated for the treatment of dry eye
The first and only product indicated for prophylaxis of headaches in patients with Chronic Migraine
Sales (in $bn)
Sales (in $bn)
Global Dry Eye Market
U.S. BOTOX® Chronic Migraine Sales
$3.0
$1.2
Rx
$1.8
Tears
~$0.5
Pre-RESTASIS®
Post-RESTASIS®
2010
2014 E
(Tears only)
(Tears and Rx)
(BOTOX® Chronic
2002
2013
Migraine Launch)
ALLERGAN
Our pursuit. Lifes potential.®
1. 2007 Report of the International Dry Eye WorkShop (DEWS). Ocul Surf. 2007; IMS HEALTH Confidential and Proprietary; Source: IMS MAT Q3 -13 + CE Mark Data from 11 European Countries at Q3-13 Constant Exchange Rate.
26
...And Also Led In The Creation Of The Aesthetic Market
Toxin Type A BOTOX (Cosmetic)
BOTOX® single handedly expanded the aesthetic market
Sales (in $bn)
Global Neurmodulator Cosmetic Market
$1.3
$0.1
Pre-BOTOX®
2013
Cosmetic
Approval
(2001)
Juvederm 2x1.0 ml VOLUMATM XC
First and only FDA approved to instantly add volume to the cheek area
Sales (in $bn)
Global Filler Market
$1.2
$0.5
2006
2013
27
ALLERGAN
Our pursuit. Lifes potential.®
Successful Customer First Approach
Sustains Market Leadership in Neurotoxins Builds Shares in Fillers
Global Neuromodulator Market Share - Quarterly
100%
80%
60%
40%
20%
0%
Q2-12
Q3-12
Q4-12
Q1-13
Q2-13
Q3-13
Q4-13
BOTOX® / Vistabel®
Dysport® / Azzalure®
(Valeant / Galderma / Ipsen)
others*
Global Fillers Market share - Yearly
40%
30%
20%
10%
0%
Valeant announces Medicis Acquisition 09/03/12, completed 12/11/12
2009
2010
2011
2012
2013
AGN
VRX / MRX / Dermik
GLD
Merz / BioForm
JNJ
others
With Multiple Global And Regional Competitors, Allergan Still Maintains ~80% Market Share
* Others includes Xeomin / Bocouture (Q4-13 share 5.3%), Neuronox / Meditoxin (1.2%), Prosigne / C-BTX-A (1.2%), Botulax (0.8%) and NeuroBloc / Myobloc (0.7%). Products listed are registered trademarks of their respective companies.
ALLERGAN
Our pursuit. Lifes potential. ®
28
Successful Customer First Approach In Key US Franchises
US Aesthetic Neuromodulator Market Share
100%
80%
60%
40%
20%
0%
Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 Q3/13 Q4/13 Q1/14
BOTOX® Dysport® (Valeant) Xeomin® (Merz)
US Filler Market Share
100%
80%
60%
40%
20%
0%
Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14
Allergan Valeant (Medicis) Merz / BioForm Others
Allergan is gaining market share (e.g. Fillers) in key franchises
* others includes primarily Xeomin / Bocouture (Q4-13 share 5.5%), Neuronox / Meditoxin (2.3%), Prosigne / C-BTX-A (2.3%) and Botulax (1.6%), but also NeuroBloc / Myobloc. Products listed are registered trademarks of their respective companies.
ALLERGAN
Our pursuit. Lifes potential.®
29
New Products Driving Allergan Ophthalmic Growth Global Eye Care Excluding Retina
YoY Growth Among Top Ophthalmology Players
Valeant acquired Bausch & Lomb
Constant Currency Growth
40
30
20
10
0
-10
-20
-30
-40
2009 2010 2011 2012 2013
NVS AGN PFE MRK VRX / BOL
Market Share 2013 Sales ($bn) 2013 Growth 4Q12-4Q13 QoQ Growth
NVS 30% $4.3 7% 9%
AGN 22% $3.2 11% 12%
VRX/BOL 8% $1.2 8% 4%
PFE 5% $0.7 (13%) (7%)
MRK 3% $0.5 0% (2%)
Recent weakness of principal competitors
Sources: Eye Care - IMS Global (53 countries) at MAT Q4-13 constant exchange rates. Excludes retina.
ALLERGAN
Our pursuit. Lifes potential.®
30
Unique Innovative Insights Have Built Pipeline Within A Product
BOTOX® Worldwide Sales And R&D Spend US Product Approvals
Sales (in $bn)
BOTOX® Worldwide Sales (incl. Tx & Cos)
BOTOX® Total R&D Spend
$2.0
$1.5
$1.0
$0.5
$0.0
1989:
Blepharospasm
Strabismus
2000:
Cervical Dystonia
2002:
Glabellar Lines
2004:
Hyperhidrosis
2010:
Upper Limb Spasticity
Chronic Migraine
2013:
Crows Feet Lines
Idiopathic Overactive Bladder
2011:
Neurogenic Overactive Bladder
Total Sales:
$15.7bn
Cumulative R&D: $1.6bn
1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 E
Since 1989, 28 BOTOX® Indications Have Been Approved Across 87 Countries Cumulative BOTOX® Sales Through 2013: $15.7bn
Source: IMS US$MMs Sales @ actual rates (1996 to 2013) 53-country rollup (Eye Care).
Note: R&D cumulative between 1992 - 2013. Revenue cumulative between 1997 - 2013
ALLERGAN
Our pursuit. Lifes potential.®
31
Investment in R&D for BOTOX® Has Created Blockbuster Franchise
($Bn)
$2.0
$1.5
$1.0
$0.5
$0.0
If R&D stopped before Cervical Dystonia Approval, BOTOX® would be a $0.4bn product (2013)
If R&D stopped before Glabellar lines Approval, BOTOX® would be a $0.9bn product (2013)
If R&D stopped before UL Spasticity & Chronic Migraine Approval, BOTOX® would be a $1.5bn product (2013)
If R&D stopped before Neurogenic Overactive Bladder Approval, BOTOX® would be a $1.7bn product (2013)
BOTOX® Current Sales (2013): $2.0bn
R&D Saved
$ 0.3
$ 0.5
$ 1.0
$ 1.5
Cumulative Sales Foregone
$0.4 (1*)
$0.8 (3*)
$5.0 (11*)
$10.6 (13*)
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
* Denotes number of years the new indication has been on market
ALLERGAN
Our pursuit. Lifes potential.®
32
Strong Innovative R&D is a Formula Repeatable in Other Allergan Assets
JUVEDERM® WORLDWIDE SALES & R&D SPEND US & Key OUS Product Approvals
Sales (in $bn)
WW JUVEDERM® Revenue
WW JUVEDERM® R&D
0.6
0.5
0.4
0.3
0.2
0.1
0
US 2006:
JUVEDERM® Ultra, Ultra Plus
Europe 2009:
VOLUMATM XC, Ultra Smile, Ultra XC, Ultra Plus XC - with lidocaine
US 2010:
JUVEDERM® Ultra XC , UltraPlus XC - with lidocaine
Asia Pacific 2010:
JUVEDERM® Ultra XC , UltraPlus XC - with lidocaine
Canada 2011:
VOLUMATM XC
VOLBELLA® & VOLIFT®
US 2013:
JUVEDERM® VOLUMATM XC
Cumulative Sales: $2.2Bn
Cumulative R&D: $0.2Bn
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Note: Allergan R&D cumulative between March 2006- 2013.
ALLERGAN
Our pursuit. Lifes potential.®
33
BOTOX® Is The Undisputed Leader In Neuromodulators
More Approved Indications vs. Competing Toxins...
Major Indications BOTOX® DYSPORT® XEOMIN®
Cervical Dystonia
Blepharospasm
Hemi Facial Spasm
JCP
Spasticity
Chronic Migraine
OAB
NDO
Hyperhidrosis
Glabellar Lines
Crows Feet Lines
...With Better Awareness and More Established Studies in the Medical / Academic Community
Peer-Reviewed Literature on Commercially Available Botulinum Toxins
Therapeutic Use
3,000
2,000
1,000
0
2,854
BOTOX®
974
DYSPORT®
131
XEOMIN®
Cosmetic Use
500
400
300
200 100
0
405
BOTOX®
127 DYSPORT®
36
XEOMIN®
28 Worldwide indications
ALLERGAN
Our pursuit. Lifes potential.®
34
BOTOX® Growth Well Diversified as Therapeutic Growth Outpaces Cosmetic Growth
WW BOTOX®
Revenue ($Bn)
US therapeutic represents >70% of WW Sales
Significant international opportunity
Therapeutic indications require multi-faceted sales and marketing program
Therapeutic indications typically require more units per treatment than cosmetic indications
$2.5 $2.0 $1.5 $1.0 $0.5 $0.0
USA: Cosmetic Europe: Adult Spasticity $0.4 60% 40% 2002
Europe: Cosmetic $0.6 60% 40% 2003
Europe: Hyperhidrosis, Europe: Cosmetic USA: Hyperhidrosis $0.7 58% 42% 2004
$0.8 57% 43% 2005
$1.0 52% 48% 2006
$1.2 50% 50% 2007
$1.3 50% 50% 2008
Japan: Cosmetic $1.3 52% 48% 2009
US: Adult Spasticity US: Chronic Migraine $1.4 51% 49% 2010
Europe1, Asia1, LA: Chronic Migraine USA, LA1, Europe1: Neurogenic Detrusor Overactivity $1.6 51% 49% 2011
Europe1, Asia1, LA1: Chronic Migraine Asia1, LA1, Europe1: Neurogenic Detrusor Overactivity Europe1: Overactive Bladder $1.8 52% 48% 2012
USA: Overactive Bladder, Crows Feet Lines Europe: Crows Feet Lines Asia: Overactive Bladder $2.0 54% 46% 2013
ALLERGAN
Our pursuit. Lifes potential.®
Cosmetic Therapeutic Denotes Approvals
1 Approved in several countries within Latin America (LA), Europe (EUR) and Asia (ASIA).
35
Prudent R&D Investment Across All Stages of R&D
R&D Breakdown By Stage of Development
~$1.0bn Spent on R&D in 2013
55% 16% 13% ~$0.2bn 16%
Discovery / Research Pre-Clinical / Phase 1 Phase 2 / 3 Post-Approval / Maintenance
Early stage research makes up only 29% of Allergans R&D
Most new therapeutic indications require Phase 2 and Phase 3 clinical trials
ALLERGAN
Our pursuit. Lifes potential.®
36
Consistently Outperforming Peers in R&D Innovation
Products launched by company1 X Average
2000 2005 2010 2015E2
Co. A 20 Co. D 17 Co. D 16 AGN 13
Co. B 17 Co. A 16 AGN 15 Co. D 11
Co. C 16 AGN 15 Co. B 14 Co. K 11
Co. D 16 Co. F 14 Co. H 14 Co. H 11
Co. E 16 Co. H 14 Co. E 14 Co. I 10
Co. F 15 Co. J 14 Co. K 13 Co. E 9
Co. G 15 Co. E 14 Co. A 13 Co. A 9
Co. H 13 Co. I 13 Co. G 12 Co. B 9
Co. I 13 Co. B 11 Co. J 12 Co. J 8
AGN 13 Co. K 11 Co. I 11 Co. G 7
Co. J 12 Co. C 11 Co. C 11 Co. C 6
Co. K 11 Co. G 11 Co. F 10 Co. F 6
15 14 12 9
ALLERGAN
Our pursuit. Lifes potential.®
Source: Independent Global Consultant
1 Includes products launched in the 20 years preceding given year and in the year itself
2 Based on consensus analyst forecasts
37
Based on a Development Strategy That Delivers Success Higher Than Industry Average (2000-2012)
Local therapy vs. systemic administration improves approval POS
Probability of Success (POS) to Market
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
1.7x Better than Industry (Ph. 1 to Market)
17%
10%
22%
18%
83%
64%
Phase I to Market Phase II to Market Phase III to Market
Allergan Industry
ALLERGAN
Our pursuit. Lifes potential.®
Data provided by CMR (Thomson Reuters)
38
Waves Of Innovation Are The Key To
Multi-Pronged Value Creation
LUMIGAN® 0.03%
ALPHAGAN® 0.2%
JUVÉDERM®
GANFORTTM
LUMIGAN® 0.01%
ALPHAGAN® 0.15%
JUVÉDERM® XC
GANFORTTM
Unit Dose
LUMIGAN®
Unit Dose
ALPHAGAN® 0.1%
COMBIGAN®
VYCROSS®
VOLBELLA®
VOLUMATM XC
VOLIFT®
Optimized Products For Patients
Portfolio Of Products Drives Customer Loyalty
BOTOX® Blepharospasm
BOTOX® Glabellar Lines
BOTOX® Chronic Migraine
BOTOX® Bladder
Pipeline In A Product
ALLERGAN
Our pursuit. Lifes potential.®
39
Substantial Sales Return On Relentless Product
Optimization / Life Cycle Extension Products
($ in bn)
$1.8
$1.6
$1.4
$1.2
$1.0
$0.8
$0.6
$0.4
$0.2
$0.0
ALLERGAN
Alphagan®
0.2% Sterile
5 mL
Return on R&D: 24x $0.1 $1.4
ALLERGAN
NDC 0023-9177-05
Alphagan® P
(brimonidine tartrate ophthalmic solution)
0.15% 5 mL Rx Only sterile
Return on R&D: 18x
$0.1 $0.8
Alphagan® P
(brimonidine tartrate ophthalmic solution) 0.1%
Return on R&D: 32x
$0.1
$1.7
Combigan
brimonidine tartrate
2 mg/mL and
5 mg/mL eye drops
STERILE 5 mL
ALLERGAN
Return on R&D: 21x
$0.1 $1.1
Alphagan® 0.2% Alphagan® P 0.15% Alphagan® P 0.1% Combigan®
Cumulative R&D (19922013) Cumulative Total Rev (19972013)
Improvements:
Reduced ocular allergies
Improved efficacy Better tolerated Less systemic exposure
Improved efficacy
Much lower ocular allergies
ALLERGAN
Our pursuit. Lifes potential.®
40
Value Created Through Investments in
All Pre-Phase III Projects
All currently approved and ongoing development projects required or require pre-phase 3 work
If Allergan were to stop DARPin® development today ...
Sales Return +25x ~$120bn
~$7bn ~$50bn $0.35bn $0.40bn ~$20bn
Cumulative R&D Spend 19922013
Cumulative Sales 19972013
2014 2024 Potential Additional Sales Associated with R&D Spent
Potential Phase 3 R&D Savings *
Potential Cumulative 10-year DARPin® Sales*
Abandoning pre-phase III projects will be value destructive
ALLERGAN
Our pursuit. Lifes potential.®
Note: All projections based on Allergan estimates.
* R&D investments and potential sales figures exclude Dual DARPin®.
41
Key Recent Approvals will Drive Growth in the Medium Term
US 11 FDA Approvals
BOTOX® Chronic Migraine
BOTOX® Cosmetic Crows Feet Lines
BOTOX® Overactive Bladder
BOTOX® Neurogenic Detrusor
Overactivity
BOTOX® Spasticity (UL)
JUVÉDERM® + Lidocaine
JUVÉDERM VOLUMA XC
LUMIGAN® 0.01%
NATRELLE® 410 Highly Cohesive
Anatomically Shaped Silicone-Filled
Breast Implants
OZURDEX® Uveitis
ZYMAXID®
EU
BOTOX® Chronic Migraine
BOTOX® Idiopathic Overactive Bladder
(Positive Opinion)
BOTOX® Neurogenic Detrusor
Overactivity
GANFORT Unit Dose
LUMIGAN® 0.01%
LUMIGAN® 0.03% Preservative Free Unit Dose
OZURDEX® RVO
VISTABEL® Crows Feet Lines (Positive Opinion)
ROW
ALPHAGAN® P 0.01% (Japan)
BOTOX® Chronic Migraine (Canada, LA & Asia)
BOTOX® Overactive Bladder (Canada & Asia)
BOTOX® Neurogenic Detrusor
Overactivity (Canada, LA & Asia)
BOTOX® Spasticity (Japan)
LATISSE®*
Canada
Brazil
Parts of East Asia
NATRELLE® Round Silicone Gel-Filled Breast Implants and Style 133 Tissue Expanders (Japan)
RESTASIS® (Canada)
Pipeline success has further positioned Allergan for sustained medium-term growth with enhanced returns on investment
ALLERGAN
Our pursuit. Lifes potential.®
42
Market Leadership, Improving Performance and Critical Mass
2000 2013 Gross Margin
Quality of Sales and Manufacturing Efficiency Driving Margins
90%
85%
80%
75%
70%
2000 2002 2004 2006 2008 2010 2012
2000 2013 EBITDA Margin
Operational Efficiency Continues to Improve Over Time
40%
35%
30%
25%
20%
2000 2002 2004 2006 2008 2010 2012
Allergan is poised to leverage critical mass to deliver significant growth with new opportunities
ALLERGAN
Our pursuit. Lifes potential.®
43
Investment In Infrastructure Now in Place, Ready to be Leveraged
2000 2013 R&D Ratio
Consistent R&D Investment to Drive Long-term Growth
50%
40%
30%
20%
10%
2000 2002 2004 2006 2008 2010 2012
2000 2013 SG&A Ratio
Leveraging Existing Promotional, Sales and Marketing Infrastructure
50%
40%
30%
20%
10%
2000 2002 2004 2006 2008 2010 2012
Allergan is poised to leverage critical mass to deliver significant growth with new opportunities
ALLERGAN
Our pursuit. Lifes potential.®
44
Allergan Tomorrow
ALLERGAN
Our pursuit. Lifes potential.®
45
Sales Growth is Accelerating
Local Currency y-o-y Sales Growth
18.0%
16.0%
16.0% 15.0%
14.0% 14.0%
12.0% 11.0% 11.0%
10.0% 10.0% 9.0%
8.0% 8.0%
6.0%
4.0%
2.0%
0.0%
2010 2011 2012 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14
Note: 2010 2012 retrospectively adjusted to exclude Obesity Intervention Business.
ALLERGAN
Our pursuit. Lifes potential.®
46
Anticipated Near-Term New Value Drivers
BOTOX® Depression entered Phase II Q2 2014
LEVADEX® U.S. FDA expected approval Q2 2014
OZURDEX® DME U.S. FDA expected approval Q2 2014
DARPin® Phase II Stage III data 2nd half of 2014
Bimatoprost Sustained Release Glaucoma Phase II Data late 2014 / early 2015
ALLERGAN
Our pursuit. Lifes potential.®
47
In the Next Five Years, Allergan Expects Multiple Major Product Drivers of Growth
1 BOTOX® Therapeutic
2 BOTOX® Cosmetic
3 RESTASIS®
4 JUVÉDERM® / VYCROSS® Franchise
5 OPTIVE®
6 OZURDEX®
7 Bimatoprost Sustained Release (Glaucoma)
8 LEVADEX®
ALLERGAN
Our pursuit. Lifes potential.®
48
Recently Approved BOTOX® Therapeutic Indications Offer
Substantial Growth Opportunities
Estimated Global Market Size for the Next 3 - 5 Years
($ in bn)
Estimated in 2013
Estimated in 2011
Estimated in 2012
$3.5 - $4.6
$3.7 - $4.8
$4.1 - $5.2
Neurology
Neurology
Neurology
$1.8 - $2.2
$1.8 - $2.3
$2.0 - $2.5
Movement
Disorders
Spasticity
Chronic
Migraine
OAB
Other
Hyperhidrosis
Cosmetic
Therapeutic
55% - 60%
Aesthetic
40% - 45%
URO $0.2 - $0.5
URO $0.3 - $0.5
URO $0.3 - $0.5
Dermatology
Dermatology
Dermatology
$1.6 - $1.9
$1.7 - $2.0
$1.8 - $2.2
2013 Market Size
Estimate: $2.8bn
Allergan poised to further drive market size with depression, osteoarthritis, premature ejaculation
Market size projections have consistently increased over time
*Source: Allergan Market Estimates
ALLERGAN
Our pursuit. Lifes potential.®
49
Rich, Highly Diversified Pipeline Merits Significant Value Recognition
As of Apr 29, 2014
Pre-Clinical Phase I Phase II - POC Phase II - Confirmatory Phase III Registration Post Approval
Derma-
tology
1 rosacea programs® ph1
2 acne programs ® ph1
One early preclinical acne program
One early pre-clinical derm program for a new indication
Bim Hair Growth
BTX Masseter
Medytox Aesthetic
BTX CFL Asia
BTX Forehead Lines
LATISSE® Brow
Oxymetazoline Rosacea
ACZONE® X
BTX CFL
LATISSE® US
LATISSE® Japan
Urology
BTX PE
SER-120
BTX OAB
BTX NDO
Neurology & Pain
AGN-1857 Migraine® ph1
BTX X with potential for higher
dose and/or longer duration ® ph1
Senrebotase (TEM) Pain BTX Depression BTX OA Pain BTX New Indication
Medytox Therapeutic
BTX Spasticity Adult LL, Adult UL, Ped LL, Ped UL
AGN-1763 BTX LL Spasticity LEVADEX® Headache
BTX Headache
Retina
Dual anti-PDGF/VEGF DARPin® AMD ® ph2 1 retina program ® ph1 2 early preclinical retina programs
DARPin® AMD DARPin® DME Brimo DDS Dry AMD
OZURDEX® RVO China
OZURDEX® DME
OZURDEX® RVO OZURDEX®DME 3B
Anterior Segment
1 NCE for Dry Eye® ph1 1 cpd for new indication® ph2 1 cpd for new indication® ph1
NCE Dry Eye
Androgen Front of Eye RESTASIS® X
LASTACAFT® Japan RESTASIS® EU 1 cpd for front of eye indication
Glaucoma NCE Glaucoma ® ph2 Combo glaucoma Japan® ph3
Bimatoprost SR
LUMIGAN® UD LUMIGAN® 0.01% EU GANFORT UD GANFORT China
Bold Italic = Top-Tier Projects
Highlight indicates new programs not previously disclosed
ALLERGAN
Our pursuit. Lifes potential.®
50
Balance Sheet Strength Allows Strategic Flexibility
Operating 2010* 2011 2012 2013
Cash Flow $1.1B $1.2B $1.7B $1.7B
$0.00
$0.40
$0.80
$1.20
$1.60
$2.00
$0.5B
$0.9B
$1.5B
$1.8B
Cash Flow Deployment ($B)
Business Development
Share Repurchase
Capital Expenditures
Dividend
Cash Flow Deployment
Business Development - Priority is to
bring in commercial products and
technologies to drive growth (4 year total
- $1.6B)
Capital Expenditures - Expect to peak
at $200 - $250M (4 year total - $0.5B)
Share Repurchase - Offset employee
options (4 year total - $2.3B)
Dividends - Expect to maintain current
levels (4 year total - $0.2B)
* Operating Cash Flow adjusted to exclude payment of $594M to DOJ
ALLERGAN
Our pursuit. Lifes potential.®
51
Promising Outlook on Long-Term Growth
Additional Free Cash Flow of ~$14Bn to Drive Strategic Options and Financial Flexibility
Long-term growth driven by new product innovation and operational excellence
2013A
Revenue
$6.2bn
EPS
$4.77
2014 E
Guidance
Revenue
$6.8bn -
$7.0bn
EPS
$5.64 -
$5.73
EPS Growth
18% - 20%
2015 E
Guidance
Revenue
Growth
Double Digit
EPS Growth
20% - 25%
Double Digit Revenue Growth
20% 5-year EPS CAGR
2016E
Revenue Growth
R&D*
SG&A*
EPS Growth
2017E
5-Year Target
Double digit
14% - 15%
Mid-to High 20%
20% CAGR
2018E
2019 E
Allergans management team is best equipped to deliver value for stockholders, as our track record speaks for itself
*As a percentage of sales.
ALLERGAN
Our pursuit. Lifes potential.®
52
Allergan in the Future
We have built a pre-eminent specialty pharmaceutical company
Investments over long period yielding consistent flow of regulatory approvals, revenue growth and margin expansion
Consistent delivery of results leading to share price outperformance
Longevity and depth of expertise in our specialties
In mid-2013, management and our Board of Directors began working on a plan to further enhance sales and earnings performance
Poised to leverage critical mass
Operational efficiency and leveraging commercial infrastructure will accelerate bottom line growth
Which has produced an enhanced and attractive outlook
Our management team is best positioned to drive future growth through innovation and operational excellence
Continue to maximize value through market expansion and new market creation
Further increase productivity in clinical development
Optionality of High Peak Revenue R&D Projects
DARPin® / dual DARPin®
Brimonidine Sustained Release - Dry AMD
BOTOX® Depression
Scalp Hair Growth
Bimatoprost Sustained Release (Glaucoma)
ALLERGAN
Our pursuit. Lifes potential.®
53
Reconciliation of Selected Non-GAAP Financial Measures
GAAP refers to financial information presented in accordance with generally accepted accounting principles in the
United States.
In this presentation, Allergan included historical non -GAAP financial measures, as defined in Regulation G promulgated by the Securities and Exchange Commission, with respect to estimates for the year ended
December 31, 2013, and the corresponding periods for 1999 through 2012. The information for 2012 and 2011 has been retrospectively adjusted to reflect the obesity intervention unit, which was sold on December 2, 2013, as discontinued operations. Allergan believes that its presentation of historical non -GAAP financial measures provides useful supplementary information to investors. The presentation of historical non -GAAP financial measures is not meant to be considered in isolation from or as a substitute for results prepared in accordance with GAAP.
In this presentation, Allergan reported certain financial measures including Adjusted Sales, Adjusted SG&A,
Adjusted R&D, Adjusted EPS, Proforma Growth and Sales Growth at constant exchange rates as adjusted for
Non-GAAP items. Allergan uses these financial measures to enhance the investors overall understanding of the financial performance and prospects for the future of Allergans core business activities. Specifically, Allergan believes that a report of these financial measures provides consistency in Allergans financial reporting and facilitates the comparison of results of core business operations between its current, past and future periods. Adjusted Sales, Adjusted SG&A, Adjusted R&D, Adjusted EPS, Proforma Growth and Sales Growth are the primary indicators management uses for planning and forecasting in future periods. Allergan also uses Adjusted Sales, Adjusted R&D and Adjusted EPS for evaluating management performance for compensation purposes.
A reconciliation of non -GAAP items may be found under the heading Non -GAAP Financial Reconciliation in the investor relations section of the www.Allergan.com website.
ALLERGAN
Our pursuit. Lifes potential.®
54
ALLERGAN
Our pursuit. Lifes potential.®
May 2014
Allergan
A Specialist in the Biopharmaceutical
& Medical Device Industries
55
To: | All Allergan Employees | |
From: | David E. I. Pyott, Chairman of the Board and CEO | |
Re: | Allergan Update |
Colleagues:
As promised, I want to provide you with an update regarding the unsolicited proposal we received from Valeant on April 22, 2014.
This morning, we communicated to Valeant that, following a comprehensive review, in consultation with our financial and legal advisors, the Allergan Board of Directors has unanimously rejected this proposal after concluding that it substantially undervalues our Company and is not in the best interest of our Company, our stockholders, our customers, and our employees.
Allergan and Valeant are very different companies with very different philosophies. The Allergan path has been one of consistent growth and success rooted in customer service, research and development, innovation, creating new markets, training and education, and valuable product support services. This has been our focus in the past and must continue to be our focus going forward.
This morning, we are in New York City to hold a conference call with investors to inform them of the Board of Directors decision and share our plans for continued future growth and will be meeting with many investors. I will also be speaking with members of the financial and business press. I recognize that, during the past few weeks, it has been difficult to see our Company discussed in the media by others. As you all know, I have always welcomed the opportunity to speak with the media when appropriate and today is such an occasion.
Many of us have been touched by the messages of support we have received from our customers. They have emphatically told us that they value our products, the long-term relationships we have built with them, the high-quality service we have provided, and the innovation we have consistently delivered to them over six decades and will continue to deliver.
I would like to thank all Allergan employees around the world for your determination to avoid the distraction of the recent developments and for coming to work every day with a focus on meeting and exceeding the expectations of our customers and delivering innovative products that help to improve the lives of their patients. I recognize that you may have some questions
about todays announcement and invite you to participate in a Town Hall Meeting that Doug Ingram, President and Scott Whitcup, M.D., Executive Vice President, Research & Development, Chief Scientific Officer will be hosting at our headquarters in Irvine at 9 a.m. PT, which you can attend in a variety of waysin person in Irvine, via webcast on the Inside Allergan home page, or dial-in on the phone. An invitation containing more information will be sent via email shortly.
I would also like to acknowledge the small team of Allergan employees who have been working to address this unsolicited proposal and who will continue to work to address any future developments. I want to assure you that the Allergan Board of Directors and management team remain focused on doing what is best for our Company, our stockholders, our customers, and our dedicated employees. And you have my commitment that we will continue to keep you informed as we move forward.
David
May 12, 2014
To our valued customers:
During the past few weeks, following our receipt of an unsolicited proposal from Valeant, we have received many phone calls and emails from physicians and healthcare providers around the world. They have told us that our work has made a difference to them, the medical community, and their patients; and they have shared their concerns about the potential impact of a Valeant transaction on Allergan, particularly research and development and future innovation. We truly appreciate all these words of encouragement and support.
This morning, the Allergan Board of Directors unanimously rejected this proposal. The Board believes the proposal substantially undervalues Allergan and is not in the best interest of our company, our stockholders and of you, our customers, and your patients.
Since our company was founded more than 60 years ago, we have remained committed to serving our customers by focusing on a core set of priorities: investing in research and development, bringing a steady stream of innovative products to market, building new markets through physician education and training, informing and educating consumers, and offering valuable product support services. In the case of products reimbursed by private or Government payors, we have also strived to ensure access and help with reimbursement issues.
Allergan and Valeant have different business strategies. I want to assure you that our company and our employees will remain focused on the same priorities that have served our customers and our shareholders so well over the years. We recognize that, in a competitive marketplace, you have a choice in those products that you prescribe or recommend. I hope we can count on your continued support of our company, our employees and our products. Your vote of confidence in us by continuing to choose Allergan products helps keep us strong.
We will keep you informed of further developments related to this matter. In the meantime, please feel free to contact me at Pyott.David@allergan.com or your local sales representative with any questions or concerns or you can find additional information on www.allergan.com.
Sincerely, |
David E.I. Pyott, CBE |
Chairman of the Board & Chief Executive Officer |