Actavis (ACT) Earnings Report: Q4 2014 Conference Call ...s.t.st/media/xtranscript/2015/Q1/13051711.pdf · Saba Hekmat; New York Life Investment Management; Analyst MANAGEMENT DISCUSSION

CompanyName:ActavisPLCCompanyTicker:ACTSector:HealthCare

Industry:DrugsEventDescription:Q4 2014 EarningsCall

©2014TheStreet,Inc.AllRightsReserved Page1of 48

Actavis(ACT)EarningsReport:Q42014ConferenceCallTranscriptThefollowingActavisconferencecalltookplaceonFebruary18,2015,08:30AMET.Thisisatranscriptofthatearningscall:

CompanyPart icipants

LisaDeFrancesco;Actavis;VP-IRBrentSaunders;Actavis;President&CEOTessaHilado;Actavis;CFOBobStewart;Actavis;COOHafrunFridriksdottir;Actavis;SVP-GenericsR&DBillMeury;Actavis;EVP-Commercial,NorthAmericanBrandsDavidNicholson;Actavis;EVP-BrandsR&DPaulBisaro;Actavis;ExecutiveChairman

OtherPart icipants

ChrisSchott;JPMorgan;AnalystMikeFaerm;WellsFargoSecurities;AnalystRonnyGal;SanfordC.Bernstein;AnalystLiavAbraham;Citigroup;AnalystJasonGerberry;LeerinkPartners;AnalystLouiseChen;GuggenheimSecurities;AnalystDaveRisinger;MorganStanley;AnalystUmerRaffat;EvercoreISI;AnalystRandallStanicky;RBCCapitalMarkets;AnalystJamiRubin;GoldmanSachs;AnalystSumantKulkarni;BankofAmericaMerrillLynch;AnalystHimaInguva;BankofAmericaMerrillLynch;AnalystCoreyDavis;CanaccordGenuity;AnalystDavidAmsellem;PiperJaffray;AnalystShibaniMalhotra;Sterne,Agee&Leach;AnalystElliotWilbur;Needham;AnalystSabaHekmat;NewYorkLifeInvestmentManagement;Analyst

MANAGEMENTDISCUSSIONSECTION

LisaDeFrancesco (VP-IR):

Goodmorning,everyone.MynameisLisaDeFrancesco,VicePresidentofInvestorRelationsforActavis,andIwouldliketowelcomeyoutoourfourth-quarter2014earningsandbusinessupdatemeetinginNewYorkCity.Iwouldalsoliketoextendawarmwelcometothoseofyoujoiningusremotelyviawebcast.

Duringtoday'spresentationandQ&Amanagementwillmakeprojectionsorotherforward-lookingstatementswhicharedependentuponfuturemattersorevents.Iwouldliketodirectyoutotheforward-lookingstatementregardingourprojectionsinourpresentation,aswellasinourearningsreleaseandbusinessupdatepressreleasesissuedearlierthismorningincludingourimportantinformationfor




shareholders.

Turningnowtoslide3,theagenda,Iwouldliketotakeamomenttoreviewtoday'sagendaforyou.

First,BrentSaunders,ourCEOandPresident,andTessaHilado,ournewChiefFinancialOfficer,willreviewourfourth-quarterandfull-year2014businessperformance.BobStewart,ourChiefOperatingOfficerandfutureheadofourGlobalGenericsbusiness,andHafrunFridriksdottir,ourSeniorVicePresidentofGlobalR&DforActavisGenericsandInternational,willprovideanoverviewofNorthAmericangenericsandinternationalandglobaloperations,andourgenericspipeline.

BillMeury,ExecutiveVicePresidentofGlobalBrands,andDavidNicholson,SeniorVicePresidentofR&DforNorthAmericanbrands,willprovideanupdateoverviewofourNorthAmericanbrandscommercialbusinessandbrandspipeline.BrentwillconcludethemeetingwithadiscussionofgrowthpharmaandareviewofourcombinedcompanyfollowingthecloseoftheAllerganacquisition.AttheconclusionofthemeetingwewilltakeQ&Afromtheaudience.

AndIwouldnowliketoturnitovertoBrenttoopenupthemeeting.Brent?

Brent Saunders (President&CEO):

Goodmorning,everyone.Thankyouforjoiningustodayforourinvestorday,wherewewillspendagoodportionoftodayfocusedonourR&Dpipeline.

It'salittledifferentthanwefirsthadanticipateddoing.Obviously,whenwefirstsetthedateforthismeetingitwaspriortoouracquisitionofAllerganandsothatcausedustochangecourseabitandmakethemeetingslightlydifferentthanitwouldhavebeen,becauseobviouslywewillhaveafullportfolioreview.

Sotoday'smeeting,justtokeepitinperspective,willbeActavisstandalone.ThiswillbeanActavisstandalonefinancials,Actavisstandalonebusinessreview,andActavisstandaloneR&Dpipelinereview.

Iwouldalsoliketowelcomeallofourshareholders.Alloftheanalysts,sell-sideanalyststhatarehere,ourmembersofmanagementthathavejoinedusaswell,andinparticularIwouldliketowelcomeafewselectdignitariesthathavejoinedus.

FromourBoardourchairman,ExecutiveChairman,PaulBisaro,ishere.IthinkmanyofyouknowPaul.CathyKlema,ourLeadDirectoroverhere,andthenwehavethreeAllerganBoardmemberswhohavejoinedus:PeterMcDonnelloverhere,RussRay,andofcourse,verypleasedtoannouncethatalsojoiningusisthefounderofAllergan,GavinHerbert.Gavin,thankyouforjoiningus.

SoIamgoingtomovetothehighlightsforthemeetingandsoIthinkyouhavealreadyseenthenumbers.2014wasanexceptionalyearforActavis.Wesawextraordinarygrowthacrossourbasebusinessandtransformationalbusinessdevelopment,includingtheproposedacquisitionofAllergan,whichwillcreatealeadingcompanyingrowthpharma.Iwouldliketotouchbrieflyonthehighlightsofourperformance,andthenTessawillcomeupandprovidemoredetailsonthestrongfinancialresults.

InQ4wereporteda46%increaseinnetrevenuesto$4billion,adjustedEBITDAincreased80%to$1.5billion,andnon-GAAPearningspershareincreased23%to$3.91pershare.Ourcashfromoperationswas$812million.

Inthefourthquarter,ourglobalbusinessperformancewasexceptional.InNorthAmericaBrandsquarteroverquarter,salesforourtop10productswereupand6ofthetop10weregrowingindoubledigits.OurNamendaconversionisontrack.AsofFebruary6wehaveachievedaconversionrateofapproximately43%,andifourcurrenttrendscontinue,weshouldachieveourgoalofapproximately65%orsoconversionbyJuly.




OurNorthAmericanGenericandInternationalbusinesscontinuestofireonallcylinders.USgenericresultsweredrivenbycontinuedstrongsalesofgenericversionofLidodermandConcerta,andduringthefourthquarterwelaunchedgenericversionsofIntunivandCelebrexintheUnitedStates.Ourinternationalbusiness,welaunchedmorethan500productsduringtheyearandkeymarketslikeRussiaandtheUKcontinuetoperformasstars.

Forthefullyearof2014wedelivered$13billioninrevenueand99%growthinadjustedEBITDAanda47%increaseinnon-GAAPEPS.Andcashfromoperationswas$2.2billion.

Weinvestednearly$1billioningenericandbrandR&Dduringtheyearandtheresultsspeakforthemselves.TheFDAapprovedNamzaric,ourfixeddosecombination.WehadapositiveAdCommforAvycazandwesubmittedfilingsforCariprazine,Saphris,andTeflaro.

OurgenericsR&Dorganizationcontinuedtoleadtheentireindustry.Wefiled44ANDAsfortheyear,18inthefourthquarteralone.Wehavemorethan220ANDAspendingattheFDAandanindustry-leading66firsttofiles.OutsidetheUnitedStatesmorethan1,200marketingauthorizationsarepending.

Ourbusinesscontinuestofireonallcylindersandsimultaneouslywecontinuetopursueourstrategicacquisitionstodrivelong-term,sustainablegrowthintheyearsahead.WeacquiredFuriexandDurata,addingimportantproductstoourkeytherapeuticcategories.

WeannouncedanoptiontoacquirerelamorelinfromRhythmHealth,apotentialnewtreatmentforpatientswithdiabeticgastroparesis.AndatjustthebeginningofthisyearweannouncedourintentiontoacquireAudenMckenzie,acrownjewelthatwillmakeusthenumberonegenericscompanyintheUK.And,ofcourse,wealsodivestedafewnon-coreassetsaswell.

SoofcoursethebignewswastheannouncementoftheproposedacquisitionofAllergan.Pre-integrationplanningisgoingextremelywell.Wearemovingrapidlytobereadytooperateasonecompanyondayone.

WehaveannouncedthecombinedleadershipteamfortheCompany.Wehavedefinedsynergiesandareplanningforacceleratedsynergycaptureandaremovingthroughthevariousregulatorystepstobringthistransactiontoclose.OurshareholdervoteisscheduledforMarch10andwewillplantolaunchourdebtandequityofferingsoon.

ClearlyIthink--whenIthinkaboutQ4andthefull-yearnumbers,theydemonstratethatwehavebeenabletomaintainourbusinessmomentumwhilepreparingtocombineourtwocompanieseitherlaterthisquarterorearlynext.

NowIwouldliketoaskTessatocomeupandprovidemoredetailonourfourth-quarterandfull-yearperformance.Tessa?

TessaHilado (CFO):

Goodmorning,everyone.IamTessaHilado,theChiefFinancialOfficer.Ijoinedtwomonthsago,somyonlyrequesttoallofyoumild-manneredinvestors,bankers,andshareholdersistorememberwhatyourmotherstoldyouwhenyouwerelittle,bekindandgentletothenewkidintheroom.

Myson,whoisateenager,likeanyothersmartaleckteenager,saidtomeonedaythatbasicallymy26careerinfinancehasspannedmanyindustries.Sincewewerehavingbreakfastonedayandhewaswonderinghistoastslowlywithabutterknifehebasicallysaidtome,Mom,youhavemovedfromcarstodrugstosodaandchipsandbacktodrugsagain.AndIlookedathimandIsaid,son,myonlycorrection:atActavisourCEOwouldsayit'snotdrugs,it'snotpharma,it'sgrowthpharma.

Somovingontomoreseriousmatters,Icouldn'thavejoinedtheActavisteamatabettertime.Iwouldliketo




walkyouthroughmypresentation.Ipromiseitwillbebriefsinceyouhavealreadytheearningsrelease.

Oneisourexceptionalperformanceforthequarterandtheyear;two,drilldownthroughthebusinesssegmentsthatcontributedtothisexceptionalperformance;andlastly,walkusthroughourcashflowandsayalittlebitaboutourplannedfinancingfortheAllerganacquisition.

Iwouldliketofocusyourattentiontothenon-GAAPearningspershareof$3.91,up23%fromtheprior-yearperiod.Thisisreallylargelydrivenbystrongsalesofabout$4billion,up44%,drivenbyourbasebusiness.Andinadditiontothat,ifyouwillrecall,thisisthesecondquarterofwhichwehaveincludedsalesforForest.

BothBobStewartandBillMeurywilltellyouaboutourthreebusinesssegmentslateron.OnanadjustedEBITDAbasisouradjustedEBITDAgrewbyabout80%andnon-GAAPR&Dinvestmentincreasedby76%to$321million.Weinvested$117millioninourgenericsbusiness,$182millionintheNorthAmericanbrandsbusiness,and$22millioninbiosimilars.Asaresultofallthis,cashflowfromoperationswasup25%to$811million.

Tonote,youwillnoticethatournon-GAAPtaxrateactuallyimprovedby3.9percentagepointsto14.8%drivenbytwothings:theextensionoftheR&Dcreditthatnormallygetsbookedinthefourthquarterand,secondly,theinclusionofForestproductsthatareactuallyinlow-taxjurisdictions.

Onafull-yearbasisournon-GAAPEPS,againfocusingonthat,was$13.98pershare,up47%.Thisperformancewasdrivenbynetrevenues,whichincreasedby48%to$12.846billion,whichwereagainattributedtoForestproductsthatarereflectedinourQ3andQ4results.WehadR&Dinvestmentfortheyearofapproximately$987million,asBrenthadmentionedearlier,andwespent$465millioninourgenericsbusiness,$423millioninourNorthAmericanbrands,andtheremainingbalancewasspentonbiosimilars.

Asaresultofallthese,adjustedEBITDAfortheyearincreased99%to$4.4billioncomparedto$2.2billionintheprioryear.OurtaxratewasalsofavorableduetotheimpactofourtaxstructurerelatedtotheWarnerChilcottacquisitiononafull-yearbasisandtwoquartersofForest,whoseproductsareinlow-taxjurisdictions,asImentionedearlier.

Finally,cashflowfromoperationsfortheyearwasalsoatarecordofapproximately$2.2billion.

Turningtoourresultsacrossourdivisions,youcanseethatourNorthAmericangenericsandinternationalbusinesscontinuedtoachievestrongperformanceinthequarterwithrevenuesofapproximately$1.782billion,up1%fromtheprior-yearperiod.ThisreflectsthedivestitureofourWesternEuropeanassetstoAurobindoinAprilof2014.

Onaproformabasis,growthwouldhavebeen6%ratherthanthe1%iftheWesternEuropeanassetsareremovedfromQ42013.Weexperiencedstrongsalesofkeyproducts,likethegenericversionsofLidodermandConcerta.WealsolaunchedgenericversionsofIntunivandCelebrexinthatsamequarter.

Onanon-GAAPbasis,adjustedgrossmarginincreasedto57.2%inthefourthquarterof2015--2014from50.7%intheprior-yearperiod,primarilyasaresultofourstrongbasebusinessandnewproductlaunchescoupledwithincreasedrevenuesresultingfromtheForest-acquiredproductssoldinternationally.

Oursecondsegment,ActavisAndabusiness,completedarecordquarter,withrevenuesof$443millioninthefourthquarter2014,upfrom$383millionintheprior-yearperiod,representinga16%increase.Grossmargininthissegmentwas13%comparedto15.4%intheprior-yearperiodprimarilyduetoproductmixyear-over-year.Segmentcontributionwas$17.3millioncomparedto$24millionintheprior-yearperiodduetothestronglaunchofthegenericversionofCymbaltainthefourthquarterof2013aswellashigherfreightcosts.

HereyouwillseeasnapshotofourNorthAmericanbusinessrevenuesforthequarter.NorthAmericanbrandsincreased188%to$1.8billionforthequarter,primarilydrivenbytheacquisitionofForestandstrong




salesofkeyproductsincludingNamenda,Linzess,LoLoestrin,andEstracecream.AdjustedgrossmarginasapercentageofadjustednetrevenuesfortheNorthAmericanbrandswas80.4%,downfromtheprior-yearperiodof86.5%duetotheacquisitionofForest,whichhasroyaltypaymentsoncertainlegacyproductslikeNamendaandco-promotionalpaymentsonLinzess.

BeforeIclose,letmetalkaboutourcashflow.Asaresultofourstrongsalesandprofitability,netcashflowfromoperationsgrew85%to$2.2billionfortheyear.Also,notethatcashflowgrewsequentiallyeachquarter,andfromaleverageperspectiveweendedtheyearinafavorablepositionwithdebttoEBITDAof2.77times.

Finally,onthetopicoffinancingfortheAllerganacquisition,weintendtocompleteourfinancingpriortoourexpectedclose.Asyouallknow,ActaviswillbeofferingdebtandequitysecuritiestofinancetheAllerganacquisition.Weexpecttobefilingmaterialstosupportthatofferingsoon.

Asaresult,weareactuallyrestrictedfromprovidinganydetailsregardingtheofferingtoday.Thosedetailswillbepresentedwiththeofferingmaterials.However,asyouthinkabouttheimpactoftheofferingontheCompanyasawhole,youshouldconsiderthefollowingdevelopmentssincetheannouncementoftheAllerganacquisitiononNovember17.

First,bothActavisandAllerganhavereportedstrongbusinessperformanceforthefourthquarterof2014resultinginbetter-than-expectedearningsandcashflow.Second,Actavishasseenapproximatelya17%riseinoursharepricesinceweannouncedtheAllerganacquisition.Weexpectthesefavorabledevelopmentstohaveamodest,positiveimpactontheofferingversuspriorassumptions.Detailswillbeprovidedinthesecuritiesofferingmaterials,whichwillbefiledinthenextcoupleofdays.

Earlynextweek,andsubjecttomarketconditions,wewillbeembarkingonanequitydebtroadshowtosecurethatfinancing.WeexpecttocompletethefinancinginearlyMarchand,ofcourse,expectallofyoutosupportthistransaction.

IwouldnowliketoturntoBrenttosummarizeour2014performance.


Great,soonastandalonebasisletmetalkaboutoursituation.Asyousaw,clearly2014wasexceptionalandasastandalonecompanyweareconvincedthat2015willbeanotherverystrongyearforActavis.Sotodaywearepleasedtoincreaseourstandaloneforecastfor2015.

Weareincreasingour2015Actavisstandalonefull-yearforecastfornon-GAAPEPSto$16.30to$17.30.Ourpreviousforecastwas$15.60to$16.80onanon-GAAPEPSbasis.

Weexpecttotalnetrevenuetobeapproximately$15billionfollowingadjustmentsfortheDurataandAudenMckenzieacquisitionsandtherespiratoryDoryxandPharmatechdivestitures.Weexpectthatournon-GAAPR&Dinvestmentwillbeapproximately$1.1billionandSG&Aasapercentofrevenueswillbeapproximately19%byyear-end.

Soaswecontinuedtodeliveronourfinancialcommitments,wealsobelievewehavemanyleversforfuturegrowth.Weareahighlydiversifiedcompany.Wehaveastrongcommitment,asyouwillseeinjustafewmoments,toR&Danddrivingbothourgenericandbrandedpipelines.

Youwillseethatwehaveapipelineonourbrandbusinessthatcouldhavesalesover$6billioninthecomingyears.YouwillseethatourleadinggenericR&Dproductivityhascreatedmanyopportunitiesforfuturegrowth,reallyleadingtheindustry,notjustbyalittlebit,butbytrulyblowingourcompetitorsaway.Wetendtostayveryfocusedonourcoretherapeuticareasinthebrandsideandwecontinuetoinveststrategicallyinoursupplychain,makingsurethatwecandeliverhigh-qualitymedicinesaroundtheworld.




Wealsoareveryopportunisticinbusinessdevelopmentandperhapsthisyeartherewasjustalotofopportunity,butwealsolookateverydealfromastrategicandfinancialdisciplinetomakesurethatitisaccretivetogrowthforthelong-term.

And,finally,wehaveamanagementteamandsoonacombinedmanagementteamwithkeyexecutivesfromAllerganthatarefocusedonexecution.AndIthinkourfourthquarterandtheexceptionalAllerganfourthquarter,whichwasreportedafewweeksago,areproofpointsthatthesemanagementteamscancontinuetodeliver,evenwhiledoingheavyliftinginapre-integrationperiod.

NowletmejustquicklytalkaboutR&Dbeforewemoveintotheheartoftoday'smeeting.IstronglybelievethatR&Disthelifebloodofourcompany,bothonthegenericandonthebrandside.Wehaveaverystrongcommitmenttoinvestinourorganicportfolioandtomakesurethatwecomplementourinvestmentswithexternallicensingandbusinessdevelopment.

Webelievehavingthatnot-invented-herementalityispartofourstrategicstrengthtomakingsurethatweinvestbehindtherightprogramsattherighttimetomakesurethatwecansolveforunmetmedicalneedandcontinuetodriveorganicgrowth.Wealsobelievethatweneedtomakesurethatweactuallybringdrugstomarket.Andthatrequiresacertainsenseoffocusanddisciplineandmakingsureyoutakethetoughdecisionstokillprogramsthataren'tgoingtoeithersatisfyunmetmedicalneed,accesstoreimbursementorprovideaccesstoreimbursementaroundtheworld,orformularycoverage.

And,lastly,Ihavesaidthismanytimes,particularlyforthesell-sideanalystsherethatliketorunmodels,Iknowwe'regoingtodriveyoucrazy.WewillnothaveaconstantspendofR&Dasapercentageofsales.Thatisjustnotwhoweare.

We'regoingtolookatourportfolioeveryyearandmakesurethatwearespendingagainsttheprojectsandprogramsthatmakesense.Insomeyearstheremaybemoretospendandinsomeyearstheremaybeless,butspendingitasapercentageofsalesmakesnosensetome.Itcausescompaniestospendonthingsthatdon'tmattertoreachthatlevelornotspentonprogramsthatneedtocomethroughbecausetheyareafraidtogooverthatnumber.

Wewillalwaystakeaverypractical,prudent,anddisciplinedapproachtoR&Dtomakesurethatwearedrivingstrongorganicgrowth,andIthinkyouwillseegoodevidenceofthattodayfrombothHafrunandDavidastheygothrougharegenericandbrandedpipeline.

SoatthistimeIwouldliketoturnthepodiumovertoBobStewart,whoisourChiefOperatingOfficer,butatcloseofourtransactionwillbecometheheadofourGlobalGenericsbusiness.

BobStewart (COO):

Goodmorning.It'sgreattobebackherewithallofyouanditisexcitingformetotalk,notonlyaboutoperations,butalsoaboutourgenericsbusiness.

OurgenericsbusinessisreallytheDNAofthecompanyandouroperationsgroupisreallythechassisofthiscompany.Itenablesustodoallthethingsthatwehavebeenabletodoandexecuteoverthelastseveralyears.

Somypresentationisgoingtofocusonour2014resultsinbothourgenericbusinessaswellasglobaloperations.ThenI'mgoingtoturnthemicovertoHafrun,whowillwalkthroughabitaboutourR&Dprograms.AndthenIwillcomebackupandfinishitupwith2015outlookandsomeofthestrategicdriversforusintheyearstocome.

Whenyouthinkaboutourbusinessacouplethingscometomind.ThefirstisthatwereallyoperateourbusinessinthreedifferentsegmentswhenIthinkaboutourgenericsbusiness.




Thefirstiswe'vegotacommercialorganizationthatisverydiversified.WehavetheabilitytocommercializeproductsandOTCproducts,hospitalsegments,aswellasgenericsandbrandedgenerics.AndI' lltalkthroughthatalittlebitmoreasIgothroughmyslideslaterinthepresentation.

Butalsowe'vegotanintegratedmodelwithourMedisbusinessaswellasourAndaDistributionbusiness.OurMedisbusinessallowsustoparticipateinmarketsaroundtheworldwherewedon'thaveourowncommercialpresence,soitallowsustogetbetterreturnsonourinvestment,andIwilltalkthroughthatalittlebitinthepresentationaswell.

AndAndaisjustanincredibleassetthatwehavethatonlysupportsourgenericsbusinessbutalsoprovideshigh-touchopportunitiesforourbrandedbusinessaswell.Deliveringonallofthisiswehavegotadiversifiedportfolio,asBrentmentioned,abest-in-classR&Dorganization,world-classsupplychain.Andwhenyouputallofthattogetherwehaveanabsolutepowerhouseofthegenericsbusinessandanindustry-leadingcompany,andIcouldn'tbemoreproudtobepartofthat.

Movingontothewaythatwehavethisorganized.AndIthinkusingthebutterknifeexamplethatTessabroughtup,Ithinkourorganizationhasthatsamebutterknifebecausewecanslicethroughissueswiththewaythatweareorganized.WehaveacompleteintegratedbusinessmodelherefromR&Dstraightthroughtothesupplychain.

Ourcommercialorganizationhastheabilitytoexecuteinalloftheimportantmarketsaroundtheworldandit'sintegratedwithouroperationsgroup,whichallowsustocapitalizeonmarketopportunitieswhentheypresentthemselves.Sowhenthereisamarketshortageorwhenthereisanopportunityforustolaunchaproduct,wehavegotaboundarylessorganizationthathastheabilitytoexecutethat.

Theotherpartofthisisthattheteamthatisinplacetodayisthesameteamthathasbeendrivingsuccessofthisbusinessoverthelastseveralyears.We'vegotthebest-in-classcommercialorganization,we'vegotabest-in-classR&Dorganization,andwecontinuetoexecuteamazingresultswithinouroperationsgroup.Andtheleadershipteamthathasrunthesebusinessesandrunthesesegmentsforusoverthelastseveralyearscontinuetobeinplacetodrivethesuccessofthisbusinessinthefuture.

2014wasanincredibleyearacrossallofourbusinesseswithinthegenericssegment.WefurtherstrengthenedourUSgenericsbusiness.It'snowa$4billionbusiness,anincrediblereturnfromtheinvestmentsthatwehavemade.

WehavebeendisciplinedinmakingsurethatwecontinuetoinvestintheUSmarket.Youhaveseenuslaunchedjustrecentlyahospitalbusinesssegmentandtheperformanceofthisorganizationisfantastic.TheyareabletogetthemarketsharethattheyneedandweareoneofthemostprofitablebusinessesintheUS.

OurinternationalbusinesshasperformedincrediblywelldespitetheFXheadwind.WhenyoulookatthebusinessperformanceincountrieslikeRussiaandtheUK,despitetheheadwindswehavebeenabletogrowonaconstantcurrencybasisaswellaswhenFXisconsidered.Wehaveshiftedourfocusinternationallyawayfromtheunprofitablemarketsandmoretowardsgrowthmarkets,andIwilltalkthroughthatwhenIgetintoalittlebitoftheinternationalstrategy.

WehavehadoutstandingperformanceinR&Dnotonlylastyearbuttheyearbeforethat,theyearbeforethat.Andalreadyweareofftoastrongstartin2015.Hafrunandherteamjustdeliveramazingresults.

OurAndaDistributionbusinesshadstellarresultslastyear,bothontoplineaswellasonbottomline,anditisthefourth-largestdistributorofgenericproductsintheUS.Butalsoitgivesusalotoflaunchcapabilityandisanextensionofourbusinesses,bothinbrandandgenerics.



©2014TheStreet,Inc.AllRightsReserved Page8 of 48

Ouroperationsgroupcontinuestodeliver.Wehavehighcustomerservice,highqualitystandards,andwecontinuetoexecuteincrediblywellacrosstheglobeinallofourmanufacturingassets.Andwealsohaverecordcomplianceperformanceaswell.Thatisahistorythatwehavehadnowforthelastfiveyearsandsomethingweareincrediblyproudof.

UtilizingM&Atocomplementourbusiness,wedidtwodealsjustrecentlywithSilomMedicalinThailandlastyearaswellastheAudenMckenziedeal,whichweannouncedashortwhileago.Thatisgoingtogiveustheabilitytocontinue,notonlygrowth,butitcomplementsourorganicgrowththatweareinvestinginontheR&Dside.

OurUSgenericsbusiness,asImentioned,isincrediblystrong.It'sthenumbertwoinmarketsharewithintheUS.Wearereallybenefitingfromthefactthatwehavegotanintegratedsupplychainwiththecommercialorganization.Weoffercustomervalueandexclusiveproductofferings.

Ourfirst-to-fileportfoliothatHafrunisgoingtowalkthroughnotonlyispayingdividendstoday,butitalsomakessurethatwearerelevanttoourcustomersinthefuture.Asourcustomersareglobalizing,itisimportantthatourUSbusinessremainsstrongbecausewecancreatewin-winopportunitieswithourcustomersastheylookatexpandingtheirbusinesseswithglobalalliancesaswellasexpandingtheirfootprint.

Thebreadthofourportfoliothatwehaveisthebestinclass.Hafrunwilltalkthroughthat,butit'sanamazing,amazingresultsthatthisgroupisdelivering.

Andnowwe'veenteredintothehospitalproductbusiness.WerepatriatedproductsbackfromSagent,ifyourecall,andwelaunchedthatbusinessthisyearandit'salreadyofftoagreatstart.Butthemostimportantthingisthatwehavetheabilitytosellhighcustomerserviceandhighqualityandthatmattersinthismarketplace.Youcannotsellabackorder;youcannotsellastockoutandwehavetheabilitytoalwaysreliablymeetourcustomerneeds.Thatisanimportantdistinctionthatwehavewithinthisgroup.

LookingattheUSgenerics,andIknowthattherehasalwaysbeenthisdiscussionabouttheFDAslowdown,butwhenyoulookatthelaunchesthatwehavehadbothin2013and2014,wearecreating$1.6billionworthofsalesfromtheproductsthatwelaunchedin2013and2014.Wehadsomesignificantlaunchesinthefourthquarterthatwillrolloverinto2015suchasIntunivaswellasCelebrex.

ItisimpressivetolookatthoseresultsgiventhattherehasbeenaslowdownwithintheFDA,butitshowsthatweareinvestingintherightproductsandwearemakingsurethatwecangetandexecutetheseproductsultimatelytothemarket.Anditdemonstratesthatwedohaveastrongreturnoninvestmentfromwhatweputintoourgenericsbusinessyearinandyearout.

International,justsomehighlightsfromsomeofthekeyregions.Again,ourfocushereisnotgoingtobetobeineverysinglemarketwithacommercialpresence.Wewanttomakesurethatweareinmarketswherewecanbetheleaderinthosemarkets.Andthatisourgoal,tobealeaderinthemarketsthatwearegoingtocompete.

IntheUKwehad12%salesgrowthwithstronggrowthacrossallofourcorebusinesssegments.We'veenteredintotheOTCbusinesswithSudocrem,aproductthatweacquiredthroughWarnerChilcott.Wehavecontinuedsuccessdrivingmarket-leadingpositionportfoliosandthefactthatwehavealocalmanufacturingfacilitythereallowsustobeabletohaveaquickresponsetomarketopportunitiesaswellasupsides.Andweareabletoexecutebecauseofthefactthatwehavethatintegrationacrossthebusiness.

InRussiawehad44%salesgrowthonaconstantcurrency,buta21%salesgrowthdespitetheFXheadwind.WearethefastestgrowingbusinessbyIMSfortheretailsegmentandsowearegoingtocontinuetoinvestinRussia.Itisanimportantbusinessandthatiswhatourfocusisgoingtobeisinvestingin




marketsthataregrowing,investinginportfoliosthatcanbedifferentiated,andkeepdrivingthoseresults.

Polandisanotherexamplewherewehad14%salesgrowth,pluswealsohadmarginimprovement,whichcontributeduptoaverysignificantcontributionoutofPoland.Thosearethekindofstrategiesandmarketopportunitiesthatwearegoingtocapitalizeonandcontinuetoinvestin.

Wearetheninth-largestgenericcompany,upfrom14th.Ourgoalhereagainisnottojustgoaftermarketshareforthesakeofmarketshare.Wearegoingafterprice-disciplinedapproachesinthesemarkets,butwewanttobecompetitivewithgoodportfoliosandgoodsalesexecution.

Italkedaboutthetuck-intransactionsandyoucanexpectthatwearegoingtocontinuetolookfortheseopportunitiesonthegenericside,becausewearecommittedtoinvestinginit.AndyousawusdothatjustrecentlywiththeAudenMckenziedeal.

Well,theThailandexpansionwasmoreofageographicexpansionbecauseweseeopportunitiesinsomeofthesemarketsandwewillcontinuetolookatmarketexpansionopportunitiessuchasthat.Itexpandedourgeographicfootprint.ItalsoleveragedtheActavisportfoliowherewecantakesomeoftheseassetsthatwehadsittingontheshelfandnowhaveacommercialopportunitytopushthesethrough.Itdelivered20%growthin2014.

Conversely,ontheUKsidewelookedatthatasaverylocalopportunitytocomplementourexistingbusinesswithinourUKbusinesstoday.Itwasaportfolioofproductsthatwecallthecrownjewels.Itaddsmoredimension,moreportfolioopportunitiesforthatbusiness.

Wearenow--whenweclosethatdeal,whichwillbeintheearlypartofsecondquarter,wewillbethenumberonegenericcompanywithintheUK.Soitgivesusarobustpipelinethatwewillcontinuetotryandoffervaluetoexpandingcustomerbases.

Ourinternationalbusiness,andthismayactuallysurpriseyouintermsofwhenyouthinkaboutourbusinessinternationally,it'snotjustagenericsbusiness.ItisanOTCbusiness.Itisahospitalbusiness.Itisagenericbusinessandabrandedgenericbusiness.

Sowehavetheabilitytoofferportfoliosinallofthesedifferentsegmentsacrossourinternationalbusiness,aswellasthatwehavenichematureRXbrandsaswellthatwecancontinuetodrivevaluein.AndIwillshareaslideonthatonwhatwearedoinginRussia.

WehaveacommercialmodelthatallowsustotailorproductsthatwearebringingthroughourR&Dorganizationandtailorthemtocertainmarkets.Forexample,rosuvastatinisaproductthatwewoulddevelopforourgenericsbusinessandlaunchitasagenericintheUSaswellasintheUK,butthatsameproductwewouldpushintoabrandedgenericmarketinRussia.

Wehaveover2,000salesrepsthatwehaveincertainmarketsinEasternEuropeandothermarketsthatareoutdetailingproductsandactuallydevelopingthemarket,asopposedtojustgenericizingthemarket.AndIthinkthatisanimportantaspectthatpeopleshouldrealizeaboutourinternationalbusiness,becauseofthediversitythatithasandthebreadthanddepththatithas.Andthatwetailorourapproachtomarketsbasedonwhatweseeasthemarketopportunities.

ThencomplementingthisistheOTCbusiness,thehospitalbusiness,aswellasthenichebrandsandmaturebrands.

Westillseealotofgrowthinthisbusiness.ByIMSdata,50%ofthegrowthinPharmaisstillgoingtocomeoutofthegenericsbusiness,andsothisisanareathatwearegoingtocontinueinvesting.YoucanseeontheIMSchartaroundtheglobeonwherethemarketopportunitiesareandwhereweseethegrowthratesare.




Wearecommittedtothisbusinessandwearecommittedtoinvestinginthisbusinessbecausewewanttoparticipateinthatgrowth.It'spartofourgrowthpharmastoryandgenericsactuallyfitsthatgrowthmarketstory.

OurOTCbusiness,andthisissomethingthatIdon'tthinkwegetenoughrecognitionabout,itisa$0.5billionbusiness.WearenotinOTCsacrosstheworldbecauseit'sdifferentindifferentmarkets,butourbusinessisaviablebusiness.

It'sagrowingbusinessandwearecontinuingtoinvestmoreinit.Wewillinvestmoreinitincertainmarketswhereagainwehaveabreadthofportfolio.AndoncewehaveestablishedbrandswithinthatOTCbusinessit'seasiertoaddadditionallineextensionsaswellascomplementaryproductstoit.

Andsowearehavinggreatsuccess.Youcanseethetrajectoryhereofthisbusinessinthelastthreeyears,butitisimportanttonotethatwehavea$0.5billionbusinessherethat'sgrowingandwe'regoingtocontinuetoinvestinittomakesurethatit'ssuccessfulgoingforward.Ourbrandedgenerics,andparticularlyinRussiawhereweareabsolutelyshapingthemarketplace,thisisaproduct,valsartan,whereweweredevelopingtheproductasageneric,launcheditasagenericintheUSaswellasintheUKandothermarkets,butinRussiawesellitasabrand.

We'vegotsalesrepsthatareoutpromotingincardiologyandcardiovascularsegments.Wearepromotingthisproductandweareseeinggreatgrowthrates.Andthatisgoingtocontinueonandwewillcontinuetoinvest.

Thisisalsoimportanttonotethattheseareproductsthatarealreadyoffpatentsothereisnotapatentcliffthatcomesbehindthis.TheseareproductsthatarealreadylaunchedinitwheretheIPhasalreadyexpired.Weareinvestingandgrowingthemarketandexpandingthemarketbecauseofthefactthatweareofferinglower-pricedproductsandgrowingthesegment.

Overtheyearswehavebeenmovingourselvesupthefoodchainintermsofthetechnologiesandintermsoftheareasthatweinvested,andIampleasedtosaythatyouareseeinggreatresultsinallsegmentsofourdevelopment.Wehave--ineveryoneoftheseclasseswehavenotonlytargets,butinmanycasesalreadyfiled.Andthisisgoingtocontinuetodrivevalueforusinthelong-term.

Sothisisnotabusinessthatisdeclining.Thisisabusinessisgrowingandwe'regoingtocontinuetoinvestinit.Andhowwearegoingtoinvestinitisalongthiscontinuum,wherewearemovingourselvesupintotransdermalsandwe'vealreadylaunchedanumberoftransdermals.

Weareinvestingininhalationproductsandwewilltalkmoreaboutthatinthefuture.BiosimilarswearealreadyinvestedwithourpartnerwithAmgenandDavidisgoingtotalkthroughourbiosimilarstrategy.

Butimportanttonotehereisthatwehavegotprogramsandtargetsineachoneoftheseareas,butwearedoingitinawaythatitdoesn'tcannibalizealloftheothereffortsthatwehavebecauseinthesmallmoleculeit'sstilldrivingvalueforus.Weseethatwithsomeoftheproductlaunchesthatwehavehadin2013to2014.Theseareareasthatwewillcontinuetoinvestin,butwearegoingtobeverycarefulintermsofwhereweplaceourinvestmentsandwhatmarketsthatwewanttoinvestin.

Ourthird-partybusinessisreallyastrategicweaponforusbecauseitagainallowsustogetcommercialvalueoutofR&Deffortsthat--formarketsthatwedon'tnecessarilyhaveaG&Astructure.Sothisallowsustoofferproductstocompetitorsandallowustogetreturn,notonlyonthatR&Dinvestmentthatwe'vemade,butalsocontinuedbenefitonmarginfromthesupplyagreementsthatweprovidetocustomers.

Wehaveover200activecustomerstoday.It's9%salesgrowthin2014.Wearein130marketsandwehavelocal--wehavesmallsalesforceinthesedifferentgeographiesaroundtheworldthatarebuildingthe




relationshipswithcustomerssothatwecanofferexpansiveportfoliostopeoplewhenwedon'tnecessarilyhavethecommercialpresence.Sothere'sgrowthopportunitiesalsointheemergingmarkets.

It,again,maximizesourROIfromourR&Dinvestmentsanditgivesusalsobetterscaleinourmanufacturingorganizationthatallowsustodriveourcostsloweraswell.Sothisisaprofitable,growingbusinessandit'sanextensionofallowingustoparticipateinmarketsthatwedon'tnecessarilywanttomakethefullinvestmentin.

OurAndabusiness,again,isthefourth-largestdistributerofpharmaceuticalsintheUS.We'vegotstate-of-the-artdistributioncapabilityinanumberoflocations.Wehit85%ofourpharmacieswithnext-daydelivery.

ThewayIcoinedAndayearsagowaswewanttobetheprimarysecondary.Weconsciously,yearsago,shiftedourstrategytoincludethebrandedproductsaswelltocomplementthegenericportfoliosandthatisenablingusnowtobeaprimarysecondary.Sowhenthewholesalersarenotabletosupplyandweneedtobeabletoprovideproductthenextday,wehavetheabilitytodothat.

Italsogivesusnowtheabilitytoputsomehigh-touchservicesinconnectionwithourbrandbusinesssothisissomethingthatwewillcontinuetoexplore.BrentandIareactuallygoingtobetalkingwiththeteamlaterthisweektolookathowcanwecreatecomplementaryservicesforourbrandbusiness.It'sanexcitingopportunity.

ItalsohastherapidlaunchcapabilityandIwillusethePulmicortexample,andit'sprobablytheworstexampletouserightnowbecausewegotenjoinedagainlastnight,butwhenwetook--whenwewonthedecisionlastweek,thatsamedaywewereshippingproduct.AndthatisoneofthevaluesofAndaisthatwecanrapidlylaunchproducts.Wecangetproductstostoredoornextdayandthatmatterswhenyouareinacompetitivegenericmarketlikewearein.

Ourglobalmanufacturingnetworkhasjustincrediblediversityintermsofitstechnologyaswellasitsscale,aswellasitscapabilityandgeographicreach.Wehaveover12,000employees,40manufacturingfacilities.Ialwaysputthisgraphupeveryyearandeverybodyteasesmeaboutthenumberofdotsthatwehaveonthemap.

Andeverytimethatweannouncedanumberofrestructuringsandwecloseanumberoffacilities,wedoanacquisitionandweaddfivebackin.Sotheneteffectisthattheslidedoesn'treallychangeexceptforthelocationschangealittlebit.Butit'sjustanincredibleorganizationthathasthecapabilitytomanufacturevirtuallyeverydosageformthat'soutthere.

LookingathowtheAllerganpiececomplementsthis,twoareasthatwedidn'thaveactualmanufacturingcapabilityin-housewasontheinhalationside.WehadR&Dcapability,butwewererelyingonthirdpartiestobeabletoproducetheproductsforus.NowwehavethecapabilitywithAllerganonceweclosethetransactionlater.WehavetheabilitynowtoleveragethatmanufacturingscalethattheyhaveandnowbringthatR&Deffortin-housethroughourownlaunchcapabilityinternally.

Andtheotherareawouldbeophthalmology.Wehavetheabilitynowtotakethat--whatwasreliantonthirdpartiestodoforus,wenowhavethecapabilityinternallytolaunchandexecuteR&Dstrategiesthere.SoAllerganreally,trulydoescomplementourmanufacturingnetworkvery,veryeffectively.

Iwanttoendmyremarkshereonquality,becausethishasbeenanareathatwehaveinvestedinconsiderablyoverthelastseveralyearsandweareseeingthebenefitofthat.Wehavenothadtheissuesthatyouseealotofourcompetitorshaveintermsofwarningletters,intermsofconsentdecrees,andthingslikethat.WehavebeenabletoaddressourconcernsveryquicklyandwealsohaveverygoodinspectionperformancewithnotonlytheFDA,butEMAandotherregulatorybodiesaroundtheworld.




Iampleasedtosaythatallofourmanufacturingfacilitieshavebeenauditedwithinthelasttwoyearsandmostofthemajormanufacturingfacilitieshavebeenauditedwithinthelastyear.AndallofthemareonsatisfactoryGMPratingswithintheAgencyandthatisenablingustotakeadvantageofthecommercialopportunitiesthatexistinthemarketplace,inparticulararounddrugshortagesandsupplychallenges.

ButthisreallystartsinR&D.Youheardlastweek,thosethatwereattheGPhAmeeting,JanetWoodcocktalkaboutthefactthatsheislookingforqualitybydesign,criticalqualityattributesintheactualregulatoryfilings.AndIampleasedtosaythatHafrunisalreadywellaheadofthis.Wehavebeendesigningourproductsalreadywiththatmindset,whichiswhyweareabletosuccessfullybringthesetothemarket.

SowiththatI'mgoingtoturnitovertoHafruntowalkthroughtheR&Dpiece.

HafrunFridriksdot t ir(SVP-GenericsR&D):

Goodmorning.HappytobehereandgiveyouanupdateonthegenericR&D.

Soit'snotonlyaboutdevelopment,it'saboutthepeoplewhicharedoingthework.It'saboutthepeopleinallfunctions.Weneedtohavetherightpeopleinportfoliotoselecttherightproductontherighttime.

Weneedtobeabletodesigntherightlegalstrategyaroundourproducts.WeneedtohavetherightAPIandthen,ofcourse,weneedtodeveloptherightformulation,analyticalmethods,andthen,ofcourse,weneedtohavetherightclinicalstrategy.AsBobmentioned,qualityisextremelyimportant.

Thenmanufacturingandregulatory.Allthosefunctionsareequallyimportantwhenwearedevelopingagenericproduct.

Sowherearewelocated?Wearelocatedallaroundtheworld.All-in-allwehavearound1,800peopleingenericR&D,600hereinUS,600inIndia,andthen600inEurope.MostofourR&Dsites,theyareco-locatedwithamanufacturingsiteandsomeofthemarealsoinlow-costcountrieslikeIndiaandother--RomaniaandItaly.WithdoingthatwegetthemostoutofourR&Ddollars.

Sowhatcanwedo?Wecanbasicallydowhateverisoutthere.ItsometimesscaresmybrandcolleagueswhenIsaythat,butwecanbasicallydevelopwhateverformulationisoutthere.Wehaveanextremelystrongcapabilityinsolidoraldosageforms.Probablysomeofyoudon'tevenknowwhatsolidoraldosageformmeans,butthat'sallkindsoftabletsandcapsules.

Wehaveanextremecapabilityinsemisolidandliquids,cream,ointment,foams,andbasicallyinallarea;ininjectables,inhalations.Andifwecannotdoitourselves,thenwecomplementthatwithsettingupcontractwithsomepartners.Basically,wearedevelopingallkindsofformulations,notonlyforthegenericpartofthebusiness,butwearealsosupportingDavidandhisteaminthebrandpartofthebusiness.

Soifheneedssomeonetodeveloptemplatesorcapsulesforhim,thenwearethefirstteamwhichhecomesto.Sowithdoingthat,ofcoursewetrytogetthemostoutofallofthefunctionswhichwehave.

Andthenlastbutnotleast,ourclinicalcapability,thathasbeenaverybigpartofoursuccess.Allinall,wehavesixclinics.FiveofthemareinIndiaandoneisinFlorida,600beds.Andwearedosingaround25to30studiespermonth.

Solastyear,wedidrun340studies,orwecompleted340PKstudies.AndIthinkthereisnocompanyintheworldindependentfromifyouarelookingatabrandedcompany,genericcompanyorthecombinationofboth,whichcanbragaboutanynumbersimilartothat.Butthishasbeenaverybigkeytooursuccess.

Ifyoulookatthegenericdevelopmenttimelines,ittakesfrom9to36monthstodevelopagenericformulation.Ofcourse,it'sdependentonifyouneedaclinicalendpointstudy,ifthat'spartofthedevelopmentornot.And




ofcourse,it'salsodependentonhowcomplextheformulationis.

Buthereyoucansee--youseethebenefitofthosedevelopmentprogramsquitequickly.Soifwesayyouarefilingsomething,forexample,inEuropeinendof2015,inmanycasesyoucanlaunchthatproductinearly2017.Well,theregulatorytimelinesarequitewell-defined.

Ofcourse,it'salittlebitdifferentinUS,eventhoughthingsarechangingbyFDAaswell,asBobmentioned.Butifwefileanyhow,wecanfileaParaIVfilinginUS,thenyoualwayshavetowaitforthe30-months[legal]date.Sotheearliestwecanlaunchproductwhichwearefilingin2015inUSissometimein2018.

Butthisisjusttohighlightthatweseethebenefitofourdevelopmentprogramquitequickly,soit'snotlikethatwehavetowaitformany,manyyears.

Soourportfolio;howisourportfolio?Areweonlydevelopingimmediate-releasesolidoraldosageforms,orarewedevelopingwhateverisoutthere?AsImentionedearlier,wecanofcoursedowhateveryoucanthinkabout.Butifyoulookatourportfolioanyhow,itisquitewelldiversified.

Whatwehaveinthemarkettodayisaround65%solidoraldosageform,meaningtablets,capsules,modifiedrelease,extendedrelease,delayedrelease,whateveryouhaveoutthere.Butifyoulookatwhatwearedevelopingtodayit'sstillprobablycloseto35%solidoraldosageform,buthalfofthataremodifiedreleaseandhalfofitisimmediaterelease.

Andthentheotherformsaremuch,muchbiggerpartofthepieifyoulookatwhatwehaveindevelopmentcomparedtowhatwehaveinthemarkettoday.AndyoucanseethechangefromendmarkettowhatwehavefiledwithFDAandthennowindevelopment.

Ofcourse,webelievethatandwearewellaheadofthecurve.Sowestartedtodevelopthosecomplexformulationsquiteafewyearsago,andthat'swhywearesowelladvancednow.

Soifyoulookattheperformancelastyear,allinallwecompleted114newdevelopmentprogramsand44ANDAfilesinUS,whichisquiteanicenumber,andIamveryproudofthatnumber.Thenwecompleted29dossiersfortheEuropeanmarket.ButifyoulookatdossiersfortheEuropeanmarketandifyoucountthecountrieswhichareintheEuropeanUnion,Ithinkit's28now.

It'salwayschanging,ofcourse,asyouknow.Butifyoucountedpermoleculepercountry,thenthose29dossierswillenterwitharound1000filingsonlyintheEuropeanUnion.ButmanyofthoseEuropeandossiers,wecanleveragethosedossiersinothercountriesaswell,sometimeswithsomeadditionalworklikeadditionalbiostudy,additional[batches],whateverhaveyououtthere.Butstillthisisthebasisformanyofourfilingsinothercountriesaswell.

Thenwefiled--becauseBobmentionedRussia--wefiledthe9dossiersinRussia,andIthinkthisisrecordbecausetheyearbefore,weprobablyfiled5dossiersinRussia.Russiaisoneofourimportantinternationalmarkets.

Ifyoulookatourfirst-to-fileperformance,bothBrentandBobhavementionedofcoursehowwellwedidlastyearonourconfirmedfirsttofiles.Butin2012,wehad12confirmedfirsttofiles.Thereafter,therewere9exclusivefirsttofilesand3sharedfirsttofiles.

Andwewerequitedamnhappywiththat,andwefiledthat.Imean,ofcourseweweretheindustryleaderthatyear,sowewereveryhappywiththatnumber.Lastyearin2013,wehad18confirmedfirsttofiles.Andthemajorityofthose18wereexclusivefirsttofilesaswell.Andagain,wewerealsoquitehappywiththatnumber.

Butlastyear,whichwasarecordyearforus,wehad25confirmedfirsttofiles.AndIwillgointothatalittlebitlaterinmoredetails.Butifyoulookatthelistoftheproductlistedbelow,thosearesomeoftheproductswe




arefirston.Andthesplitbetweenexclusiveandsharedis--themajorityisbasicallyexclusivefirsttofile.

Butifyoulookatthebrandvalueforthoseproductsin2012,those12products,thebrandvaluewas$2.3billion.Butthose25whichweareexclusiveon--orwhichweareconfirmedfirston,sorry--lastyearthebrandvalueofthoseproductsis$6.1billion.Sowehad33%ofthenumberofproductsthatwerelistedonthatFDAParaIVWebsite,but46%ofthevalue.

Sohowdidwedocomparedtoourcompetitors?Wedidquitewell,orwedidverywell,actually.So17exclusivefirsttofilesand8sharedfirsttofiles.

Andifyoutakethethreenextcompanies,Mylan,Teva,andAmneal,andifweputallofthemtogethertheywillbeclosetous.Butstillmajorityoftheirconfirmedfirsttofilesaresharedfirsttofiles,notexclusivefirsttofiles.SothisisaslidewhichweareveryproudofandAndyandhisteamareusingthisslidealotwhentheygototheircustomers,sothisissomethingwhichweareveryproudof.

Thisisalistofproductswhichweareconfirmedfirstonandwith30-monthstayin2015and2016.The30-monthstaymeansthatthisisthefirstpossiblelaunchdateforthoseproducts.

Thosewhicharehighlightedingreen,theproductswhichwewereconfirmedfirstonlastyear.Ofcourse,thisisnotthefulllist.Thisisjustsomeexamplesjusttoshowyouafewexamplesoftheproductswhichhavealreadybeenpublicorarealreadypublic.

Sowhatareourprioritiesmovingforward?Itisallaboutpeople.Ifyoudon'thavegoodR&Dpeople,thenofcoursethereisnowaytowinthegame.Soweneedtocontinuetoretainthetoptalentfromallthelegacyorganizationswhichwehave.Wehavehadalotofmergersandalotofacquisitions,aseveryoneknowshereinthisroom,forthelastfewyearsandweneedtomakesurethatwekeepthoseimportantpeople.

Andweneedtocontinuetodeliveronnewproductfilings.Wecannotslowdown;wehavetomakesurethatwecontinuetobefirstinclassandfile,evenadayortwoafterthebrandcomesout,evenwithtwoorthreebuyerslikethis.Iknowthatthatissomethingthatisalsodifficultforpeopletounderstand,butthatissomethingwhichwehavebeendoing.

Myteamandourteamhasbeendoingextremelywellandweneedtomakesurethatwecontinuetokeepthem--keepingthemmotivatedandthereisnodisruptionwhichweshouldallowthere.ThenweneedtofocusonmaximizingthereturnontheR&Dinvestment.Soweneedtocontinuetofocusonchallenginghigh-barrierproducts,high-barrierformulationsasIshowedyouearlier.

Andthereisnoshortageofproductopportunities,eventhoughthestoryoutthereevenin2010,2012wasthatthenumberofopportunitiesweregoingdownandthereislessandlessoffirsttofileopportunitiesoutthere.Butthat'snotsomethingwhichwehaveseen.Wehaven'tseenanyshortness.

AndIdidseeyoualittlebitearlier,having25confirmedfirsttofile,itmeansthatthere'salotofopportunitiesoutthere.Sobeingmorecreativewithproductideas,patentchallenges,speedtothemarket,andanexampleofthisour505(b)(2)filings.

Weareworkingnowonquiteafew505(b)(2)filings.Someofthemwillbefiledthisyear;someofthemwerefiledlastyearandmanyofthemwillalsobefiledin2016.Thosearemainlyinjectableproducts,butthisisquiteimportantforourbusinesstodaytobecreativewithallkindsofideas.

Then,ofcourse,lastbutnotleast,weneedtomakethemostoutofnewActavis.WeneedtoworkverycloselywiththebrandedR&Dandweneedtoleveragetheirexpertisewheneverwecan.Andifthereissomethingwhichtheycandobetterthanwecan,thenofcourseweseekguidanceandseekhelpfromthem.

Andofcoursetheydothesame.Soiftheyhave--ifthereissomethingwhichwecandoforthem,thenthey




leverageourexpertise.Sowetrytoworktogetherasoneteam,asmuchaspossible.

Andwiththis,Bob,I'mgoingtogiveitbacktoyou.Thankyou.

BobStewart (COO):

SoIthinkyoucanseeinthoseresultsit'sjustaphenomenalteam.Itstartswithportfolio,makingsurethatyoupicktherightproducts,andthenyouexecuteflawlessly.AndthisteamhasjustdoneityearafteryearandIamincrediblyproudoftheirresults.

Thisiswhat'sgoingtodriveusvalueintheoutlyingyearsaswemonetizethesefirst-to-fileopportunities.Wehaveproventhatwehavetheabilitytodothis.Wehavedoneitforyearspreviouslyandwewillcontinuetodoitgoingforward.

Soprioritizingouropportunitiesisreallythemessageherein2015andbeyond.It'sfocusingwherewearestrongandmakingsurethatwecontinuetomoveourselvesupthescaleandbeingaleaderinthemarketsandinthetherapeuticareasthatwe'regoingtocompetein.

Marketswithsignificantgrowthpotential;thatiswherewearegoingtofocusourefforts.Andwhatwearegoingtolookatisgettingoutofmarketsthat,frankly,don'tlookliketheyaregoingtobemarketsthataregoingtofitourprofilegoingforward.

Businessesthatoffer--ourbusinessofferspotentialrevenuesynergies.Noneofthosearedialedintoourassumptionshere,butaswethinkaboutcross-sellingopportunitiesincertainmarkets,becauseofthebreadthofourportfolioandthebreadthoftheAllerganportfolio,wearegoingtofindopportunitiestocreaterevenuesynergies.

Wearefocusingontherightsegments;INNgenerics,whereit'sprofitable.WearenotgoingtofocusonbeinganINNgenericcompanyforcommoditytypeproducts.Wewanttomakesurethatweareinvestingintherightproductswiththerighttechnologiestobuilddurableassetsthataregoingtooffervalueforthelong-term.

WearebuildinganOTCbusinessquitenicely,asyousawintheresults.Wearegoingtocontinuetomakesurethatweinvestinthatsegment,aswellasourbrandedgenericfranchisebusinessaswellinkeymarketsaroundtheworld.AndthenselectRXbrandswheretheyfitthetypeofportfoliothatwecanoffer.Again,leveragingthatsalesinfrastructurethatwehaveinmanymarketsacrosstheglobe.

Thenwearegoingtooptimizeflatordecliningbusinesses.YouhaveseenusdothatwithWesternEurope.Wearecontinuingtolookatothermarkets.Wherethereisextremepricesensitivityandwherewedon'tseegrowthopportunities,we'regoingtodevelopplanstoeitherexitorjustholdthem,butbeverycostconsciousintermsofhowweinvestandmakesurethatwemaximizethemarginoutofthoseresources.Andthenshiftresourcesagainfromtheseunderperformingmarketsintohigherperformingmarkets,andthatiswhatwewillcontinuetodo.

Ourkeybusinessdriversinourplan,wehaveassumedcompetitionforbothlidocaineaswellasConcerta.Totheextentthatthosedonothappen,wouldbeupsidestowhatwehaveinourmodel.

Productlaunches.Itwasinterestingwhenweputthisslidetogether,alloftheproductlaunchesthatwehadinourplanwebasicallyhadapprovalsforandalreadylaunched.Pulmicortwedid,butwewillbeback.Butwealsohaverisk-adjustedopportunitiesinthere;very,veryhighrisk-adjustedopportunitiesinthere.Andthenwealsohaveotherundisclosedlaunchesthatcouldbeupsidestoourplan.

Ourbusinessinitiatives.WearegoingtoclosetheAudenMckenzietransactioninearlysecondquarter.WealsohavelaunchedourhospitalproductsbusinessunitandweareaddingmoreportfoliosintothatbusinesswithallthependingapplicationsthatwehavewithintheAgencyaswellasnewdevelopmentopportunities




thatwehaveaswell.AndthencontinuetoexpandourinternationalOTCbrandedstrategy.

Again,upsideopportunitiesherewouldberevenuesynergieswiththeAllerganbusinessthatwehavenotquantifiedordialedintotheplan.Lowergenericpriceerosion.WearehearingaboutthefactthatthereisimprovementwithinthebacklogwithintheAgencythathascreatedobviouslyastablepricingenvironment.Wewillseehowthatplaysout.

WearecautiouslyoptimisticthatwearegoingtoseeproductivityimprovementoutoftheAgencyandwe'veseenthateveninjustrecentweeks,butthatisawinforus.Becauseoftheportfolioofproductsthatwehaveandtheexclusivesthatwehave,wewanttoseethatefficiencytakeplace.Thenagain,wehaveotherParagraphIVchallengesandotherundisclosedlaunchesthatareupsideopportunitiesthatwehavenotdialedintoourplan.

Soinsummary,Ijustwanttomakesurethateverybodyunderstandsthatwehavegotaproventeamherethatwillcontinuetodeliver.Wehavegotgreatportfoliosofproductsandacommercialteamthathasproventhattheyhavetheabilitytoexecute.

Andourpipelineisgoingtoofferlong-durationanddurableassets.ThathasbeenourpriorityinourR&Dinvestmentsovertheyears.Itisgoingtocontinuetopaydividendsforusinthefutureandwehavegotateamofpeoplethatcanabsolutelyexecuteonit.

WearegoingtocontinuetoinvestinR&Dorganically.Youseetheresultsandtheopportunitiesthathavecomeinoutofourpipelineandwewanttomakesurethatwecontinuetofeedthat.Brentiscommittedtothat;Iamabsolutelycommittedtothatandwewillcontinuetofindopportunitiestoinvest.

Businessdevelopmentopportunitiesstilldoexistinthisconsolidatingindustryandwearegoingtolookforthose.Andwheretheymakesense,wheretheyarestrategic,wheretheyarefinanciallycompelling,wewillgoandlookatthemaggressivelyandexecutethem.

Wearealwaysadaptingtoachanginglandscape.Youwillseeusdothatwithourportfolio.Youseeusdothatwithourcommercialexecutionandyouseeusdothatinourbusinessdevelopmentstrategiesandallofourdifferentmarkets.

Sowiththat,I'mgoingtopassitovertomycounterpart,Mr.Meury,togothroughthebrandpiece,butthanksforyourattention.

BillMeury(EVP-Commercial,NorthAmericanBrands):

Goodmorning,everyone.IalwayswatchBob'spresentationverycloselytomakesurethatnoneofmyproductsareonhislist.

Sowhatisthebestwaytothinkaboutourbrandedbusiness?Whatarethethingsthatwilldrivegrowthin2015andbeyond?Andwhatisthepipelineworth?Iwillcoversomeofthosequestionsnowandotherslaterinthesession.

WhatwehaveatActavisisafully-integratedprimarycarespecialtyoperationthat'sperhapshasthebestnewproductlaunchcapabilitiesintheindustry.Veryfewcompanieshavethedepthanddiversityofproductsandcapabilitiesthatwehave.Andrightherearethecorecomponentsofouroperation.

Wehaveproductlinedepthinseventherapeuticareaswhichwethinkgivesusastrategicadvantage,whichIwillcovershortly.Ourbusiness,fromaproviderperspective,isbalancedbetweenprimarycareandspecialty.Andfromapayorperspective,itisbalancedbetweencommercialandPartD.

Inotherwords,wearenotoverlydependentononemarketsegmentorcustomer.Inotherwords,weare




diversebutwearenottoodiverse.

Thefundamentalsofourbusinessarestrong.Marketshare,growthrates,physicians'attitudestowardsourproducts,usagepatterns,formularycoverage,pricingareall,generallyspeaking,wherewewantthemtobeorheadedintherightdirection.

Nextwehaveoneofthetopperformingsalesandmarketingteamsintheindustryandagreatdealoforganizationalmomentumrightnow.WhatdoImeanbyorganizationalmomentum?Imeanwehavebuy-in.Theemployeesandcommercialoperationsbelievethattheyarepartofsomethingimportantandthattheyarepartofbuildingsomethingthatwilllast.

Rightnowthereisagreatdealofenergybeingdirectedtowardscustomersandnewproductlaunchesandinnovation,whichisexactlywhatwewant.We'vespentagreatdealoftimethinkingabouthowandwhywedocertainthingsandifwethinkwecandothemdifferently,wewilldothat.Weknowthatgrowthandessentiallymaintainingthestatusquo,generallyspeaking,can'tcoexist.

Then,finally,wehaveaverypromisinglate-stagepipelinethatwewillgetintodetailaboutshortly.WhatIwillsayisit'saperfectfitwithourmarketedproducts.Inotherwords,weareenteringcategoriesoverthenextthreeyearswithnovelcompoundswherethecustomersknowusandweknowthem.Andthathelpsusmanageexecutionalriskanditcanactuallyspeedtheuptakeofcertainnewcompounds.

Hereisasnapshotofourproductline,movingfromlefttoright.CNS,GI,women'shealthareourlargestproductlinesintermsofsalesandnumberofproducts.Theotherfouraresmaller,butgrowingandveryprofitable.

Ouraimhereistobeinthetopthreeineachoneoftheseareasaswellastobuildouteachproductline,becausetherearestrategicandpromotionalandeconomicadvantagesassociatedwithproductlinedepth.Strategically,forexample,wecangivephysiciansamorecompleteviewofpharmacotherapythanothercompaniescanandthat'sespeciallytrueinCNS,GI,andwomen'shealth.

Promotionally,wegetgreateraccess.Thereisn'tapsychiatristoragastroenterologistoranOB/GYNinthecountrythatdoesn'tuseatleastoneortwo,ormorelikelythreeofourproducts.

Andeconomicallythisisaveryefficientmodel.Theincrementalcostassociatedwithintroducingasecondorthirdorfourthproductissignificantlylessthantheincrementalcostofthefirstone.Theseproductlinescangetveryprofitableveryquickly.

Hereisourperformanceinthefourthquarter.Brenttouchedonthis.Whatyouseehereisthatsalesforeachoneofourtop10productswereupinthefourthquarteroverthethirdquarter.Salesforsixofthe10increasedatadouble-digitrateandthegrowthinthefourthquarterwasfueledbyahealthymixofvolumeandprice.

Thebiggestgainersonthislist:Namenda,Bystolic,Linzess,ourtwolargestproducts,followedbyEstrace,Carafate,andTeflaro.Itwasavery,verygoodquarterandIwillpointoutthatthiswasroughlysixmonthsafterweintegratedActavisandForest.Ifweweregoingtoseedisruptionduetotheintegration,whichIthoughtwasmanagedverywellbyallgroups,wewouldhaveseenitinthefourthquarter.

Iwilldigintoeachoneofthekeyproductsrightnow.NamendaXRandNamzaric,whichisacombinationofNamendaandAricept;ourfocuscanbeboileddowntotwowordsrightnow,conversionandcoverage.OnJanuary6welaunchedanationwideDTCcampaignforNamendaXR.ItwasthefirstDTCinitiativeforNamendaandyoucanseeontheslideintheupperrightthattheresultsarevery,veryencouraging.

OurconversionrateatthestartoftheDTCcampaignwasroughly37%.Roughlyfourweekslateritwasover43%,sowehavepickedupsixmarkets--6conversionpointsinaboutfourorfiveweeks.Atthecurrentrate,theconversionshouldreachsomewherebetween60%and70%.




TheentirecommercialoperationatActavisrightnowisincentivizedandcompletelyfocusedonthisinitiative.

Intermsofcoverage,it'sgoingtocomedowntocoverageforXRandNamzaricin2016.Itisgoingtocomedowntoonething,whichiscriticalmass.Ifourconversionrateaswefinish2015isbetween60%and70%,webelievethatwecanobtaingoodcoveragewithseveral--notall,butseveralofthetopPartDplansintheUnitedStates.

Wehaveopenedadialoguewithallofthem.Weknowwhereweneedtobeandweknowhowtogetthere.Ultimately,ouraimwiththisproductlineisoverthenextseveralyearstomaximizevolumeatapricethatisattractivetohealthplansandthatisacceptabletous.

(videoplaying)

Thecommercialwasdesignedtodotwothings.OneistosimplyraiseawarenessforXRanddrivetheconversionrate.Theotherone,theotherobjectiveistoincreasedemandforNamendaXRinmoderatestagesofAlzheimer'sdisease.

Historically,Namendahasbeenusedextensivelyinmoreseverepatients,buttoalesserextentinmoremoderatepatients.Andsoweget--weachievetwoobjectiveshere:oneisdriveconversionandtheotherisdriveactuallygrowthfortheproductline.

Linzess,wehadaverygood2014.Prescriptionsandsalesincreasedatadouble-digitrate.WepassedtheZelnormintermsofprescriptionvolume,whichforthoseofyouwhodon'tknow,wasaproductthatwasintroducedbyNovartisseveralyearsagoandwasvery,verysuccessful.

Wereachedamilestoneinusers.Therearenowover100,000physiciansacrosstheUnitedStatesthatareusingLinzess.SatisfactionwiththeproductisveryhighrelativeAmitizaaswellasafewover-the-counterproducts.Thatwas2014.

In2015,wearefocusedontwothings,theOTCmarketandproductdevelopment.Wehaveconvertedsincelaunchroughlyjustunder5%oftheOTCcategory.Webelievethatnumbercouldclimbto10%andthereareseveralanalogsthatsupportthatkindofprojection.

TakealookatwhatthePPIsdidtotheH2antagonistsorwhattheCOX-2sdidtotheNSAIDsorwhatthenon-sedatingantihistaminesdidtothesedatingantihistamines.Ineachoneofthosecases,theprescriptionclassconvertedroughly10%to20%oftheOTCmarket.

NowwelaunchedaDTCcampaigninAprilof2014andtheresultswerevery,verygood.NewprescriptionvolumeforLinzessclimbedover40%.

Toputthatintosomecontext,weanalyzed58differentDTCcampaignsacrossninedifferenttherapeuticareas.Theindustryaveragefornewprescriptionliftwasjustunder30%.Wearegoingtocontinuetoinvestheavilyindirect-to-consumeradvertisingaslongaswecontinuetoseeagoodfinancialreturn,whichwemonitorregularly.

Intermsofproductdevelopment,Linzesshasgotanexclusivityperiodthatextendswellintothe2020s,whichallowsustomakecertaindevelopmentdecisionsthatweotherwisecouldn'tmakeonaproductthat,forexample,mighthavealimitedexclusivityperiod.Wearelookingatnewformulations,newdosingstrengths,andnewindicationsthatwillnotonlystrengthenthepositionofthedrugforitscoreindications,IBS-CandCIC,butalsoexpanditsutilityintoothermarkets.

WeareworkingcloselywithIronwoodonthatfront.Wehaveaverygoodpartnershipwiththem.TheguysovertherearerealprofessionalsandIwouldexpectthatoverthenextseveralyearstherewillbeasteadystreamofinnovationsonLinzess.




Bystolichasbeenavery,veryconsistentperformerandthatisbecauseitisanovelcompoundwithanicheinaverylarge,commodity-likehypertensionmarket.Eightoutofthe10healthplans,PartDorcommercial,intheUnitedStateshaveBystoliconformularyforonereason.That'sbecausetheyhavemembersintheirplanwhoneedabetablockerbutcan'ttolerateatenololandmetoprolol.

Ifyoulookatthebottomrightofthisslide,youcanseethatphysiciansrate--excuseme,thebottomleft--physicianratetheperformanceofBystolicontolerabilityandefficacyashighastheyrateDiovanandBenicar.Forthoseofyouwhoknowsomethingabouthypertension,thoseareperhapsthetwomosteffectiveandwell-toleratedantihypertensivesintheworld.

OurplanrightnowwithBystolicistocultivateouruserbase.Weareoneofthefewcompaniesstillactivelypromotinginhypertension.Wehaveagreatfollowingincardiologyandprimarycareandouraimistomaximizevolumeattheverybestpricepossible.

Teflaro,onewordsumsupthisslideandthatismomentum.Ittakestimetobuildahospitalantibioticandweknowthat.Teflarowasnodifferent,but2014wasaverygoodyearandIthinktheprospectsforgrowthforthisproductareverygood.

Volumewasup15%.Ifyoulooktotheleft-handsideofthisslide,youcanseethatinfectiousdiseasespecialistsrateTeflaroonkeyattributesofefficacyandtolerabilityandmicrobiologyspectrum.VeryhighrelativetoVanco,Cubicin,Tygacil,andZyvox,whicharetheothermorewidelyusedMRSAagents.And60%ofinfectiousdiseasespecialistsexpecttoincreasetheiruseofTeflaro.

Wehavealotofmomentum.Thisisahigh-marginbusinessandin2015weexpecttolaunchtwonewclaims,afive-minuteinfusionandaclaimforbacteremia,whichwewilltalkaboutshortlyafterDavid'spresentation.Goodbusinessrighthere.

LoLoestrinandEstrace,thesearetheanchorsofourwomen'shealthbusiness.LoLoestrinisthelowestdoseoralcontraceptiveonthemarket,whichisconsistentwithFDAguidelinesthatrecommendminimizingtheexposuretoEstrin.Estraceisacreamforthesymptomsofmenopause.

Thesearehighlypromotionally-responsiveproducts.ShortlyaftertheintegrationofForestandActavis,wepracticallydoubledthedetailingeffortonbothproducts.Thesalesforbothincreasedatadouble-digitratein2014.WeregainedleadershipintheestrogenreplacementmarketwithEstrace.

Ourformularycoverageissolid.Wedon'texpectanysurprisesasitrelatestothatin2015andIwouldexpectourperformanceinthenext12monthswilllookasgoodasourperformanceinthepastseveralmonths.

BeforeIturnitovertoDavid,Iwanttomakeafewpointsaboutourcommercialmodel.TherearetwotrendsthatareimpactingthewaywedobusinessandtheyarenotimpactingActavisanymorethantheyare--moreorlessthantheyareimpactingothercompanies.Thefirstoneisconsolidationandthenextisstandardization.

Intermsofconsolidation,individualphysicianpracticesareturningintogrouppracticesandgrouppracticesareturningintointegratedhealthsystems.Sothefaceofthecustomerischanging.Iamsuremostofyouareawareofthestatthat60%to70%ofallphysiciansintheUnitedStatesarenowemployed.Trendone.

Trendtwoisstandardization.Guidelines,protocols,andformulariesarebeingusedmoreandmoretocontrolchoiceandmanagecosts.Nowthesearen'tnewtrends,buttheyaremorewidespreadandtheyareacceleratingincertainpartsofthecountry.Andsowearetakingthefollowingstepstorespondandtostaycompetitive.

First,wehaveacompletely--unlikeayearago,wehaveacompletelycustomizedsalesforce.Ratherthanaone-size-fits-allapproachwhereeachterritoryorstateorevenregionhasanequalnumberofActavis




representatives,eachoneisnowstaffedbasedonaccessandestimatedreturnonourinvestment.Notallcompanieshavegottentoacustomizeddeploymentplan,butwehave.

Soforexample,inthestateofMassachusettswemayhavetworepresentatives,butinthestatesofTexasandMississippiwemayhave20.IhavenothingagainstthestateofMassachusetts--althoughIhatetheRedSox,Mike--butit'sjustamoreintelligentwaytodeploythefieldforce.Itgivesusflexibilityanditmakesitamuchmoreefficientinvestment,andit'soneofthebiggeronesthatwehave.

Othercompaniesarereducingthesizeoftheirfieldforcesandevenexitingprimarycare.Wearenotdoingthat,butbystayingwehavetothinkverydeeplyabouthowtomakethatgroupasproductiveasitpossiblycanbe.

Ouraccountmanagementteamtodayisbiggerthanitwaslastyear,muchbiggerthanitwasayearbeforethat.Andthispartofourbusinesswillprobablyevolvemoredramaticallyandrapidlythananyothertodealwithdifferenttypesofcustomers--healthsystems,clinics,amongothers.

WearerelyingmoreonDTC,Internet,andsocialmedia.Wehaveacompletelyintegratedmultichannelcross-channelapproachtomarketingtheseproducts.TheInternetcanbeusedtonotjustaugmenttheactivitiesofthefieldforce,buttoalsoextendreach.

Andthere'sgreateremphasisonreal-worldeffectivenessdatathatbridgesthegapbetweentheresearchsettingandthecriticalpracticesetting.Infact,righthereinNewYorkCitywehaveacollaborativeresearchprogram,twoactually,withColumbiaUniversityinAlzheimer'sdiseaseandintheanti-infectivestolookattheoutcomesassociatedandthecostbenefitsassociatedwithtreatment,NamendaandAvycaz,whichisournovelantibioticwhichwewilltalkaboutshortly.

Intermsofourfieldforce,thisgrouphasagreatdealofhorsepoweranditisanextremelywell-runteamintermsofsellingskills,deployment,training,andcompensation.Weviewthisasacompetitiveadvantage.

Simplyput,wehaveaprimarycaredivisionoffourteamsthatcancoverroughly100,000physiciansormoreacrosstheUnitedStates.Wehaveaspecialtydivisionwithseventeamsandwehaveaninstitutionalteamthatcovershospitals,long-termcarefacilities,andclinics.There'salmostnocustomerwiththisorganizationwecan'tcoverorreach.

Howdoesoursalesforcestackuptothetop10?Whatyouseehereisthreedifferentmeasuresofsalesforceactivityorproductivity:callsperday,salesforcesize,totalsalescalls.Inmyopinion,themostimportantmeasureontheslideiscallsperday.

Onaverage,anActavisrepresentativedelivers10callsperday.Theindustryaverageinthetop10isroughlyseven.Soourteamisproducing35%morecallseachdaythantherest.Thatistheequivalentofhaving500morepeople.

Nowwhycanwegetto10?There'sthreereasons.First,weaskforit.Itisanexpectation.Next,wehaveaverybroadanddeepproductlineandsophysiciansoftenareusing,asIsaidearlier,atleastacoupleormoreofourproducts.Andthen,finally,theyareextremelywelltrainedandextremelywellpaid.

Withthat,Iwanttothankyouforyourattention.IwillaskDavidNicholsontocomeupandreviewtheR&Dportfolio.Thanks.

DavidNicholson(EVP-BrandsR&D):

Goodmorning,everyone.It'sagreatpleasuretobeheretodayandtohavetheopportunitytodiscusswithyouthebrandsR&Dpipeline.




WhatisourR&Dstrategy?Asastandalonecompany,Actavisfocusesenergyonfourkeytherapeuticareas:gastrointestinaldisorders,CNS,infectiousdisease,andwomen'shealth.Andweareopportunisticinurology,dermatology,andcardiology.

Ofcourse,thisisActavisasastandalonecompany.WearealllookingforwardtoboltingontothistheAllerganareasofexpertiseinophthalmology,dermatology,andaesthetics,aswellastheircoreresearchgroupinareasofophthalmologyandselectagents.

Actavisasastandalonecompanyhasbuiltandwecontinuetobuildourpipelinethroughcollaborationsandin-licensing.

BeforeIleavethisslide,IdojustwanttocomebacktosomethingthatHafrunpointedoutandthatistheabilityofActavis,theratheruniqueabilitywithinActavistoworkcollaborativelyacrossthegenericsR&Dorganizationandthebrand'sR&Dorganization.Somethingthatinmyexperienceintheindustryisindeedunique.

WhenIlookinparticularattheexpertisethattheypossessinperformingPhase1trialsinprocesschemistryandinpharmaceuticaltechnologythatisarealstrengththatweareutilizingwithinbrandsR&D.It'snotjustatheoreticalexample.Icanthinkofatleastoneexampleinthesecondhalfoflastyearwherewehadamajorissuewiththeformulationofoneofourbrandsdevelopmentprojectswhichwassolvedbythecolleaguesinourgenericsorganization.

TouseTessa'sanalogy,thebrandsR&DorganizationandthegenericsR&Dorganizationareverycapableofusingthesamebutterknife.

Letmecomeback--letmenowtalkaboutourpipeline.Don'tworry,I'mnotgoingtogothroughalltheboxesonthisslide,muchasIwouldliketo,butIdojustwanttofocusyourattentiononafewkeyissueshere.

MidlastyearwewentthroughtheForest/Actavismergerandwecombinedthepipelinesofthosetwocompanies.Aswecombinedthepipelines,weterminatedatleastsix--terminatedorreturnedtoourpartnersatleastsixofourprojects.Wedidthattomakecertainthatwehadapipelinewith--whichgivesusthemaximumreturnonourinvestmentdollar.

AndIgobacktoBrent'spointthathemadeearliertodaythatwespendtherightamountofmoneyonR&D.Wedon't,bydefinition,justspendacertainproportionofourturnover.

OtherpointsthatIwouldliketomakeisthatweaddedtoourpipelinein2014;forinstance,throughthecollaborationwithRhythmHealthcare.AndIwilltalkmoreaboutthatlater.Wealsomovedfiveprojectsthroughintotheregulatoryphaseandyoucanseethatwiththegoldenarrowsonthisslide.AndwereceivedapprovalfromtheFDAfortwonewmolecularentities.

SoaswewentthroughtheForestActavismerger,wecontinuedtomaintainmomentuminourpipeline.

Ibelieveourpipelineissufficientlystrongtoallowustomaintaintheindustry-leadingR&DproductivityofthelegacyActaviscompanies.Thisslidemightcomeasabitofasurprisetoyou,butifyoudolookatthenumberofNMEandBLAapprovalsfromthelegacyActaviscompanies,itbeatsGSK,Pfizer,Novartis,Roche,etc.,intermsofnumbersofnewproductapprovals.Andweaimtomaintainthisproductivityintheyearstocome.

Howarewegoingtodothat?Well,ofcourse,bycompletingthedevelopmentofourpipelineproducts.

Duringthesubsequentslides,I'mgoingtowalkyouthroughtheprojectssummarizedonthisPowerPoint.Toeachoftheseprojects,I'mgoingtodescribetheproject.I'mgoingtotellyouabouttheunmetneedandtherelevanttherapeuticarea.




I'mgoingtoshowyousomedata--thisisR&Dafterall--somedataslidesshowinghowwemeetthatunmetneed.AndthenIwilltalktoyoualittlebitabouthowwearegoingtocontinuetobuildabrand.

Firstofall,GIdisorderswithafocusonlinaclotide,Linzess,andeluxadoline.

Linzess,whatisLinzess?Linzessisaguanylatecyclase-Cagonist.Togetherwithourpartner,Ironwood,weownthismechanismofaction.Guanylatecyclase-CstimulationintheGItractmodulatescellularhomeostasisincreasingfluidsecretionintothelumenoftheintestine.Obviously,ifyouincreasefluidsecretion,thisgivesyoutheopportunitytoalleviateconstipation.

Inaddition,cyclicGMPdirectlyorindirectlyattenuatesnociceptorreceptoractivationintheGItract,reducingthepainassociatedwithirritablebowelsyndrome.

Approximately13millionpeopleintheUSsufferfromIBSandtherearerelativelyfewagentsthatareapprovedforthisdisorder.Thebigneedsareuniformandsustainedreliefofsymptomsandthesymptomshavetoincludereliefbothinbowelmovementsaswellastheassociatedpain.

IfwelookatthedatathatwegeneratedduringthePhase3developmentoflinaclotide,youseeinthetophalfoftheslidewherewe'relookingatchangeinabdominalpain,sustainedandconsistentreliefofabdominalpain,andinthebottomhalfoftheslideincreaseinspontaneousbowelmovements.Soit'sthissustainedefficacyandalleviationofpain,aswellasincreasingbowelmovements,thatisahallmarkoflinaclotidetherapy.

Howarewegoingtobuildabrand?Well,wehearfromsomephysiciansthatthereisaneedforalowerdoseformulationoflinaclotide.Andtogetherwithourpartner,Ironwood,wearepresentlyperformingthestudiestodefinethelowdosethatsomepatientsappeartoneed.

We'relookingatadditionalindications,opioid-inducedconstipation,andwearealsolookingatadelayed-releaseformulation.Wefeelthatthedelayed-releaseformulation,whichreleaseslinaclotideinthecolon,couldmaximizethebenefitofpainreliefaswellasstillgivingassufficientefficacyintermsofreductioninconstipation.

Eluxadoline,forIBS-D,IBSassociatedwithdiarrhea.Eluxadolineisafirst-in-classagentbecauseitcombinesnewopioidreceptoragonismsometogetherwithdeltareceptorantagonism.Thedeltareceptorantagonismoffsetssomeoftheunwantedeffectsofunopposednewagonism.EluxadolineactslocallyintheGItract.Ithasnegligiblesystemicbioavailability.

Ifapproved,wewillgetapprovalforeluxadolineinadultsandImentionthatbecauseit'sratherimportantinthistherapeuticareatomakecertainthatyouhaveefficacyacrossbothgenders.Iwillcomebacktothatinamoment.ThePDUFAdateforeluxadolineisexpectedtobeinthe--orisinthesecondquarterofthisyear.

ImentionedearliertheincidenceofIBSintheUnitedStatesandthereisnoapprovedagentatthemomentforIBS-Dinmales,andIwillshowyousomedatashowingtheefficacyofeluxadolineacrossbothgenders.AndasinIBS-C,thereisabigneedforagentswhichhavesustainedefficacyalsointhisindication.

Twodataslideswitheluxadoline.ThedatashownonthisslidecomefromthePhase3studiesthatweperformedtoget--tomakethesubmissionforapprovalintheUnitedStates.IntheUnitedStatesyouneedtoshowefficacyovera12-weekcourseoftherapy.

Weperformedtwostudies:3001,3002.Theendpointthatwewerelookingatwasacompositeofpainandbowelmovement.Andyouseeherethatboth75and100milligramsontheseFDA-mandatedendpointsgaveusconsistentefficacyinbothofthePhase3studies.

InEurope,incontrasttotheStates,theEMArequirestudiesof26weeksduration.Soonthisslideonthetop




halfyourlookattheFDAendpointsandonthebottomhalf,weeks1to26,youarelookingattheEMAendpoint.Andyouarelookingatefficacyinmalesontheleftandfemalesontheright-handsideoftheslide.Again,we'relookingatthecompositeendpointofbowelmovementsandpain.

Whatthisslideshowsyouisthatregardlessofwhetherwe'relookingatFDA-mandatedendpointsorEuropean-mandatedendpoints,wegetconsistentefficacyonthisendpointatboth75and100milligrams.Therehasbeensomediscussionwitheluxadolinewhetherornotwedogetefficacyonthepainsymptomsindependentofthecompositeendpoint,andIassureyouthatinthreeoutofthefourmeasuresthatweutilizedtolookatabdominalpaineluxadolineiseffective.

Oneofthequestionswedogetaskedratheroftenabouteluxadolineiswhataboutpancreatitisandwhataboutscheduling?SoIthoughtI'dbetterincludeaslidetopreemptsomequestionsthere.

Theeluxadolineclinicaltrialprogramwaslarge,almost2,500patients,andweonlyhadninecasesofpancreatitis.Allofthoseninecasesresolvedwithoutanyclinicalconsequences.Eightoftheninecasesinvolvedpatientswithknownalcoholabusewhodrankexcessivelyorwhohadacholecystectomyorhad[bowel]problems.Theninthcaseoccurredafterthepatientstoppedreceivingeluxadoline.

Iwouldalsopointoutthatopioidsareclasslabelingforthiseffectandwecanexpectthatclasslabelingforeluxadoline.

Intermsofscheduling,ofcourseduringthedevelopmentofeluxadolineweperformedthenecessaryclinicaltrials.Weperformedwithdrawalstudiesinanimalsandsawnosymptomsofwithdrawal,andweperformedabusestudiesinpatientsfollowinganoraladministrationofeluxadolineandsawnothingofanyconcern.

FromanFDAperspective,schedulingfollowsapproval.PDUFAdateisquartertwothisyear.AndofcoursetheFDAandtheDEAhaveanumberofoptionsforscheduling,butIwouldliketopointoutthedatathatweincludedinoursubmissionistheonesthatIjustdescribedintermsoflackofeffectinwithdrawalinanimalsandlackofoxycodone-likeactivityatallinpatients.

Howarewegoingtobuildabrand?WehavethePDUFAdate;I'vealreadymentionedit.WewillbesubmittinginEuropelaterthisyearandwearepresentlyevaluatingotherpotentialindicationsforeluxadoline.

Movingontotalkabitaboutouranti-infectivefranchise,twoagents,Avycazanddalbavancin.Avycazforcomplicatedurinarytractinfectionsandintra-abdominalinfectionsanddalbavancinforskinandskinstructureinfections.

Avycaz,whatisit?It'sacombinationofratherwell-known,third-generationcephalosporins,ceftazidime,withanovelbeta-lactamaseinhibitor.AndIwilldescribethenoveltyofthebeta-lactamaseinhibitorinalaterslide.

Intra-abdominalinfectionsandurinarytractinfectionsafflictalargeproportionoftheUSpopulation,between1millionand3millionpatientsayearsuffer.Andofcourse,thereisanurgentneedfornewantibioticsingeneral.There'salotofnewsaboutthatinthepress.There'sbeenapresidentialcommissionlookingatthisand,ofcourse,theFDAthemselvesaretryingveryhardtomakeitsomewhateasiertodevelopandregisterantibioticsinthiscountry.

ThisisaslideIpromisedyou,whichdescribesthenoveltyofavibactamasabeta-lactamaseinhibitor.Ifyoucompareitwiththeoriginalagent,clavulanicacid,ormorerecentagent,tazobactam,youseethatavibactumhasadifferentprofile.Itsimplyinhibitsmoreofthebeta-lactamaseisoenzymesthaneitherofthesetwoagents.Sowhenyoucombineitwithanantibioticyoucanexpectittobeeffectiveagainstabroaderpopulationofthepathogensdevelopingresistancetothatantibiotic.

Onedataslide.ThisistakenfromthestudiesthatwepresentedtotheFDAlastyear.Whatyouseehere,andIjustwanttohighlighttheyellowbarhere,itshowsthatintheceftazidime-resistantpathogens,thatthe




additionofavibactumtoceftazidimeallows90%--resultsin90%pathogenkill.Soaverycompellingresultshowingthatavibactumrestoressusceptibilitytopathogenswhenyoucombineitwithceftazidime.

Attheendoflastyear,therewasanFDAadvisorycommitteewhichdiscussedthedata,thePhase2datawepresentedonAvycaz.RatheruniquetogotoanadvisorycommitteewithjustPhase2data.TheadvisorycommitteevotedinfavorofapprovalofAvycazforthetreatmentofurinarytractinfectionsandintra-abdominalinfectionswhennoothertreatmentoptionexists.AndsowehopeandexpectNDAapprovalinthenot-too-distantfuture.

WewillbebuildingthebrandbecausewewillbesubmittingasupplementalNDAbasedonPhaseIIIdatatogiveusabroaderlabelinglaterthisyear.AndwearelookingatAvycazinothercarbapenem-sparingregimensandagainstceftazidimeandmoresusceptibleorganisms.AndBillinsubsequentpresentationgoesintosomewhatmoredetailonthatpoint.

Dalvance,dalbavancin;weacquiredthisantibioticlatelastyearwhenweacquiredDurata.Whatisdalbavancinandwhatdoesitofferintheantibioticarmamentarium?Themost--perhapsthemostimportantthingisthehighlightedbulletonthisslide,thefactthatdalbavancingivestheopportunitytoprovideoneweek'sworthoftreatmentwithoneintravenousinfusion.

Themostimportantthingtotakehomeaboutdalbavancinisitslongdurationofaction.Whyisthatimportant?Well,doctorsarelookingforantibioticswhichsimplifypatientcare,whichmakeiteasiertotreatthesickestpatients,butalsotheantibioticswhichprovideanoptiontogetpatientshomeandtoreduceexposureofpatientswithinthehospitalsetting.

Soclearly,ifyoucangiveasimpleinfusion,evenintheoutpatientsettingorin-hospitalbutallowpatientstogohomeimmediately,theantibioticisgoingtomeetmanyoftherequirementsthatdoctorsarecryingoutfor.

Atthemomentdalbavancin,thetreatment--thedosingregimenistwoinfusions,two30-minuteinfusionsofdalbavancingivenoneweekapart.Wearepresentlyperformingaclinicaltrialtodemonstratethatyouonlyneedtogiveonesingleinfusion,onesingle30-minuteinfusionofdalbavancintofurthersimplifythedosingregimen.Wehavealmostcompletedthattrialandthelastpatient,lastvisitlaterthismonth.

Inaddition,we'rebuildingthedalbavancinbrandbylookingattheefficacyofthisantibioticinpediatricandadultosteomyelitis.WewillinitiatethosePhase3studieslaterthisyear.

Sothisslidesummarizeshowwearebuildingthisbrand.WeexpectEuropeanapprovalfordalbavancininMarchthisyear.Weexpecttosubmitthesingledosing,theonce-and-donestudythatIhavejustdescribed,asasupplementalNDAlaterthisyearaswell.Andwearelookingattheadditionalindicationsinosteomyelitis.WeareconsideringPhase4programstolookatearlydischarge,reductionofpatientadmission,andtoensurethatweareindeedachievinghigherratesofpatientsatisfaction.

Biosimilars.BobmentionedbiosimilarsinhispresentationandpromisedthatIwouldcomebackandtalkaboutit.BiosimilarsisinmypresentationratherthanHafrun'sbecauseitiskindofabridgebetweenthegenericsorganizationandthebrandsorganizations.Biosimilarsarebiologicalgenerics.

SlowlybutsurelyIseemomentumgaining,buildingupintheUnitedStatesaroundbiosimilars.WefinallyhaveguidelinesfromtheFDAhowtodevelopbiosimilars.Whenisabiosimilarasimilarandwhenit'snotasimilarandwealsohavetheEuropeanguidelines.Soforthefirsttimewehaveguidelinesfromregulatoryauthoritiesaroundtheworldwhichallowsustodeveloptheseagents.

AndActaviswithitsbrandedandgenericsorganizationsisratheruniquelypositionedtodevelopbiosimilars.Weestimatethatby2020some$70billionworthofsalesofbiologicswilllosepatentexclusivity.It'sahugeopportunityforanybodywhocanstepinanddevelopbiosimilars.




OneofthefoundationstonesofourbiosimilarsstrategyisourcollaborationwithAmgen.Amgen,ofcourse,verystronginbiologicaldrugdevelopments.Wehaveourspecialty,ourbranded,andourgenericsbusiness,andwefindthiscombinationtobeaverycompellingcollaborationbetweentwoverystrongcompanies.

Ourbiosimilarpipelineconsistsoffiveproducts.Thefirstfour--Herceptin,Avastin,Rituxan,andErbituxbiosimilars--arepartneredwithAmgen.WehavetwoofthoseprojectsinPhase3development,sowecanexpectAmgen-Actavisbiosimilarstobegoingtotheregulatoryauthoritiesinthenot-too-distantfuture.

Wehaveafifthproduct.We'renottalkingatthemomentaboutthetargetforthatproduct,whichisourownbiosimilardevelopmentbeingrunoutofourlaboratoriesinLiverpool.Youcanexpectmorebiosimilarsandbiobetterstobeaddedtoourpipelineintheimmediatefuture.

Women'shealth.Twobigproductsinwomen'shealth,Liletta,anintrauterinesystem,contraceptiveagent,andEsmya,aselectiveprogesteronereceptormodulator.

Liletta,itislevonorgestrel-containing,intrauterinesystem.Itusedtobecalledintrauterinedevices.Wehavetogetusedtothenewnomenclature.Itreleasesprogestin.

Atthemomentwehaveshowncontraceptiveefficacyoverthreeyears.Thatwillbeextendingouttofiveyearsaswecontinuethelong-termdevelopmentofthisagent.

Itdoesn'tcontainanyestrogen.It'sprogestinonly.Itworksprimarilybythickeningthecervicalmucusandinhibitingspermpenetration.Veryusefulagenttocomewithcontraceptiveswhichareestrogenfree.

Levosert,brandnameforLilettainEurope,hasbeenapprovedinEuropefortreatingmenorrhagiasince2012andpresentlyhasreceivedapprovalinsomecountriesforcontraceptionandwillberolledoutinEuropelaterthisyear.WesubmittedtheNDAforLilettalastyearandweexpect--well,thePDUFAdateisinthefirstquarterofthisyearandweexpectapprovalandsubsequentlaunchofthisIUD.

Esmyainuterinefibroids.OneoftheholygrailsofR&Dinwomen'shealthhasbeentofindawell-toleratedselectiveprogesteronereceptormodulator.Iassureyoumanycompanieshaveworkedlongandhardtocomeupwiththesetypeofcompounds.

WehaveulipristalindevelopmentinUnitedStatesforthetreatmentofuterinefibroids.Itisaselectiveprogesteronereceptormodulator.Whatdotheydo?Well,theyacttoreducebleeding,theexcessivebleedingcausedbytheuterinefibroidsandtheyalsocauseshrinkageofthetumorsize.

Uterinefibroidsareverycommon.Asymptomaticallytheyaffectsome40%ofthefemalepopulation.Whentheyaresymptomatic,theycauseveryheavyuterinebleeding,abdominalpressure,pain,andincreasedurination.

Whenwomensufferfromsymptomaticuterinefibroids,themaintherapyissurgeryandsurgeryisnotwithoutdifficulty.Somemajorcompanieswhohaddevicesthatwereusedinthesurgicalprocedurerecentlyhadtowithdrawthosedevicesfromthemarketplace.ThereisaneedforsaferandmoreeffectivepharmacologicalagentsoverandabovetheGnRHagonist,Lupron.

Ulipristal,Esmya,hasbeenevaluatedinEuropeanstudies.TheFDAisaskingustorepeatthosestudiesintheUnitedStates,butIcansharewithyouthedatacomingoutofthoseEuropeanstudies.

PBACisthebleedingparameterthat'susedinthesetrialsandyoucanseeonthisPowerPointaverydramaticreductioninbleedingasopposedtoplacebo.ProgesteronereceptormodulationworksincontrollingheavybleedingassociatedwithuterinefibroidsandwearepresentlyrunningthePhase3studiesthattheFDAhavemandated.




Sowearerunningthetrials.WeexpectNDAsubmissiontobein2017andwearecurrentlyconsideringotherindicationsforthesetype--forthisagent.

CNS,oneagentIwanttofocusoniscariprazine.Cariprazineisanatypicalantipsychoticwhichcanbelookedatinschizophrenia,bipolarmania,bipolardepression,andMDD.

WhatdoImeanbyanatypicalantipsychotic?Intheparticularcaseofcariprazine,itisadopamineD2,D3receptorpartialagonist.Thatistheprimarymechanismactionofcariprazine.Itdoeshavesomeaffinityforothermonoaminereceptorsanditdistinguishesitselffromotheratypicalantipsychoticsbytheprecisereceptorbindingprofile.

Sofarwithcariprazinewe'veseenrobustefficacyacrossmultipleindications.WeresubmittedtheNDAfortreatmentofschizophreniaandbipolarmaniaattheendoflastyearandthePDUFAdateismidthisyear.WeareinthemiddleofPhase3forrelapsepreventionandforadjuncttherapytomajordepressivedisorder,andweareinPhase2forbipolardepression.

Iwilltalkinafewminutestimeaboutatrialthatourpartner,GedeonRichter,recentlyreportedinthenegative--controllingthenegativesymptomsofschizophrenia.

Whatisthebigunmetneedinschizophrenia?People--sometimespeoplesay,hey,there'salotofatypicalantipsychoticsoutthere.Iassureyouthere'sstillabigunmetneed.Weneedimprovedefficacyonnegativesymptoms.

Whatarenegativesymptoms?Thosearethesymptomsassociatedwithsocialwithdrawalinschizophrenia,aninabilitytointeractinsociety.Itisthenegativesymptomsthatarethebiggestproblemforschizophrenia--forpeoplesufferingfromschizophreniaiftheywanttoleadindependentlifestyles.Andthepresentlyavailableantipsychoticsdonotcontrolthenegativesymptomsofschizophrenia.

Weneedantipsychoticsthathavelesssideeffects--effectonprolactinlevels,metabolism,andEPS--andweneedantipsychoticsthatcontrolothersystemsofschizophrenialikeanxietyanddepression.Theseneedsarenotmetwiththepresentlyavailableatypicals.

Adataslide;thisshowstheeffectsofcariprazine1.5to9milligramsadayonthepositiveandnegativesymptomscaleofschizophrenia.Itsimplyshowsthatcariprazineworks.Asyoucansee,incomparisontoplacebo,wegetaverysignificantreductioninthePANscore,thepositiveandnegativesymptomsscaleforschizophrenia.Cariprazineisaneffectiveantipsychotic.

Morerecentdatathatwehavejustgeneratedthesedatalooksattheabilityofcariprazinetoreducerelapse.Doesitworklong-term?Doesitstoprelapsing/recurrentepisodesofschizophreniaonceyou'vegot--whenyou'vegotpatientsonmaintenancetherapy?

Ifyoulookatthe--theseareKaplan-Meiercurves.Ifyoulookatthegreencurveasopposedtothebluecurve,youseethatthereisasignificantlower--asignificantlylowerrateofrelapsesonpatientswithcariprazinethanonpatientswithreceivingplacebotreatment.

IalsosaidIwouldtalktoyouaboutnegativesymptoms.This--forsomebodylikemethisisanexcitingpieceofdata.I'veworkedinCNSR&Dformany,manyyearsandI'veneverseenanythinglikethistrial.

GedeonRichterperformedastudywheretheylookedattheeffectofcariprazineintreatingthenegativesymptomsofschizophreniaincomparisontorisperidone.Thesewerepatientswhopredominantlyhadnegativesymptoms,sothesewerepatientswithverylittleofthefloridhallucinogenicsymptomsassociatedwithschizophrenia.Andindeedrisperidoneandcariprazinehadlittleeffectonpositivesymptomsinthistrial.

Bothresultedinsomereductioninnegativesymptoms,butcariprazineproducedamuchbiggerreductionin




negativesymptomsthanrisperidone.Andthisisthefirsttimethatoneatypicalantipsychotic--theveryfirsttimethatoneatypicalantipsychotichasdistinguisheditselffromanotheratypicalantipsychoticonnegativesymptomsinatrialperformedundertheseconditions.Wewillbelookingatthesedataingreaterdetail,talkingtotheFDAaboutthem,andseeingwherethistakesusforward;cariprazineisaratheruniqueantipsychotic.

Sohowarewebuildingthebrand?ThePDUFAdatelaterthisyearforschizophreniaandbipolarmania.We'regoingtoinitiatePhase3developmentinbipolardepressionlaterthisyearandwewillbemakingasupplementalNDAsubmission.

Dermatology,sarecycline;itisatetracyclinederivativeindevelopmentforthetreatmentofacne.Itisanovelagentinsolidoraldoseformulationandpotentanti-inflammatoryactivity.

Whyisit--?Whereistheunmetneed?Well,wesimplyneedagreaterrangeofagentsforthetreatmentofacne.Thepresentlyavailableagents,betheyanti-inflammatoryorantibacterial,offerlimitedefficacyinthisdisorder.Weneedagreaterrangeoftherapeuticoptions.

Sarecycline,inouropinion,willaddtothetherapeuticoptionsavailableforthetreatmentofacnefortwobigreasons.Oneis,ifwelookatthemicrobiologicalprofileofsarecycline,ithaslimitedantimicrobialactivityagainstthebacteriainthegutsoweshouldhavelessGIsideeffectsthanothertetracyclines.Andalsothephysicochemicalattributesofsarecyclinewithenhancedlipophilicityincomparisontoothertetracyclineswillallowforgreaterpenetrationintothesebaceousglands,whichiswherethebacteriaresidethatfeedonthesebumcausingtheprobleminacne.

SofarwehaveperformedaPhase2bdosestudyofsarecyclineandweseethat1.5milligramsgivendailyproducesastatisticallysignificantreductioninacneasassessedusingtheinvestigator'sglobalassessment.Basedonthesedata,wearegoingintoPhase3at1.5milligramsofsarecyclineadayincomparisontoplacebousingtheFDA-mandatedendpointsoftheIGA,theinvestigativeglobalassessment,andlesioncount.

WestartedthesePhase3trialsattheendoflastyear.Weexpecttop-lineresultsfromthatstudyin2016withsubsequentNDAsubmissionwe'relookingforwardtoultimateNDAapproval.

Ourearlyormid-stagepipeline;Ididwanttotalkalittlebitaboutrelamorelin,acompoundthatwearedevelopingtogetherwithourpartner,RhythmHealthcare,indiabeticgastroparesis.

Whatisrelamorelin?Well,itisapeptide.Itisaghrelinreceptoragonist.Itisaprokinetic,improvinggastricemptying.Incomparisontothefirst-generationagents,relamorelinmaintainspotencyandselectivityoftheghrelinreceptor.Theproblemwithmanyofthefirst-generationagentswasthattheylostpotency.

Diabeticgastroparesisaffects2millionto3millionindividualsintheUnitedStates.Therearelimitedtherapeuticoptions.Metoclopramideisused,butwithalltheproblemsandsideeffectsassociatedwithmetoclopramide.Diabeticgastroparesisassociatedwithdelayedgastricemptyingresultinginnauseaandvomiting.

Phase2astudieswereperformedbyourpartner,RhythmHealthcare,andtwodataslidesshowingtheresultsoftheirPhase2astudies.Incomparisontoplacebo,relamorelincausedasignificantreductioninweeklyvomitingepisodesandinvomitingseverity.

ThisisadataslidethatIpersonallyfindparticularlyimpressive.InthisdataslidewearelookingataprospectivelydefinedsubgroupinthePhase2astudy.Thisisthesubgroupofpatientswithseverevomiting.

Andwhatyouseeinthissubgroup--andwearelookingatplacebo-treatedpatientsinblueandrelamorelin-treatedpatientsingreen--isyouseeaverymarkedreductioninabdominalpain,nausea,bloating,and




satietyinthissubgroup.ItwastheserathercompellingdatathatencouragedustoenterintocollaborationwithRhythmHealthcareandweveryrecentlyinitiatedthePhase2bstudieswiththiscompound.

Finaltwoslides,almosthome;thanksforstayingwithme.Thisisanillustrationofhowweseethenewlaunchesandpipelineopportunitiesaregoingtoallowustoachievea9%CAGRbetweennowand2020.

ThisisaprojectionasActavisasastandalonecompany,butofcourseActavisisunlikelytoremainstandalonefortoolong.WeareverymuchlookingforwardtothemergerwithAllerganandforsomebodylikemeitis,ofcourse,tremendouslyexcitingtothinkofmergingourtwopipelines.

WhatyouseehereistheActavispipeline.I'vewalkedyouthroughmanyofthesecompoundsoverthelastfewminutes.Ilookforwardtocomingbackonthatsubsequentoccasionandwalkingyouthroughthemanycompoundscomingfromourfuturepartner,Allergan.

ThankyouverymuchforyourattentionandI' llhandbacktoBill.


Allright.Morningagain.Fromacommercialpointofview,hereisawaytothinkaboutourpipeline.Davidjustreviewedninemid-tolate-stageassetsinseventherapeuticareas.

AsIsaidearlier,we'reenteringcategorieswiththesecompoundsthatweknowvery,verywell.Customersknowus;weknowthem.

Next,weestimatethatthisproductlinepipelinecouldthrowoff$6billioninsales,withfourproductshavingthepotentialtoreachablockbusterstatus.Thecompoundsinthepipelinearenovel,butnottoonovel;sothattheprobabilityofscientificandregulatorysuccessismediumtohigh.

Wehaveamixofproductsinprimarycareandspecialtymarketswherethereisanunmetneed,whichinourviewmeansthepricingandreimbursementdynamicsaroundthispipelineinthefuturearepositive.AndthenfinallywehavegoodIP,whichmeanseverystrategicdecisionthatwemakearounddevelopmentandpromotionandpricingwillbemadeinthecontextofanextendedexclusivityperiod.

I' lltouchonsomeofthekeycompoundsrightnow.EluxadolineistheflipsideofLinzess:it'stheperfectcomplementfromacommercialstandpoint.

IBSisacontinuum.YouhaveIBS-Cononeend,constipation;IBS-Dontheotherend,diarrhea.Thefactis,thereisnotabrightwhitelinebetweenthesetwoconditions,andwithtwoproductswe'llbetheonlycompanythatcantalkaboutbothendsofthecontinuum.Webelievethat'sacompetitiveadvantage.

Whatyouseeonthisslidearemarketingattributes,andthereareseveral.Davidtalkedaboutthem.Painreliefonmultiplemeasuresatmultiplethresholds,unlikeanyover-the-countermedication;sustainedefficacyoversixmonths,againunlikeanyover-the-countermedication.

Ithinkthemostmarketableattributehererelatestourgency-freedays.Inourstudies,20%to40%ofpatientswereurgency-free50%to75%ofthetime.Ifyouaskanygastroenterologist,theywilltellyouthat,ifyouwanttotreattheconditionsuccessfullyandeffectively,youhavetodealwiththisaspectofit.

ThemarketissimilartotheIBS-Cmarketintwoways,andit'sdifferentintwoways.Similarities:it'sbig.Thenumber-onereasonpeoplearereferredtoagastroenterologistisbecauseofIBS.

ThereisalsoalargeOTCcomponenttothismarket,justliketheIBS-Cmarket.Weknowhowtonavigatethattypeofadynamic.

Differences?Thisconditionismuchmoredisruptive.PatientswithIBS-Dfeellikeprisonersbecauseofthe




unpredictabilityofthedisease.TheunmetneedhereishigherthanitiseveninIBS-CorCIC.

Andtherearefeweralternatives,fewerOTCalternatives,andvirtuallynoRxalternativeswhenyouthinkaboutthefactthatLotronexisonlyavailableonalimitedbasisduetosafetyrisks.

IntermsofXifaxan,it'sofcoursedifferentthaneluxadoline.Eluxadolineworksontransit;Xifaxanworksonbacterialovergrowth.

Therearenohead-to-headstudies.Thedrugsmaybeusedincombination.Ourfocusrightnowisoneluxadoline;andthereismorethanenoughroomfortwoproductsinthemarket.

Relamorelin.Ifyousurveyed1,000gastroenterologistsandyouaskedthem,whatkindofmedicationdon'tyouhavetodaythatyouwant?There'sareallygoodchanceoneoftheiranswerswouldbeapro-motilitydrug.

Thelastpro-motilitydrug,Propulsid,waspulledoffthemarket;wasabillion-dollarproduct.Reglan,atitspeak,wasabillion-dollarproduct.ThedataonthiscompoundinPhase2,whichDavidjustreviewed,areimpressive.

Thereductionshereinvomitingandvomitingseverityareimpressive.It'sworthnotingthatpatientsinthestudyweresufferingfromvomiting3to4timeseachweek.

Thisisaverydifficultconditionforpatientswithdiabetestodealwith,andthisproducthasthepotentialtohavearealimpactonthedisease.Thecategoryindollartermscouldapproach$6billion.

Whatyouseeherearealotofmarketingangles.Andwe'regoingtoneedthembecauseasyouknow,Davidalludedtoit,thereareover10atypicalantipsychoticsonthemarketandmostofthemaregeneric.Cariprazineispharmacologicallyandclinicallydifferentthanotherantipsychotics.Youcanseeintheupperright-handcolumnofthisslide,itisaD3/D2partialagonist;differentthantheolderatypicals,Risperdal,Zyprexa,Seroquel,andevenAbilify,althoughitismoresimilartoAbilifythanitistheotheratypicals.That'smarketingpointnumberone.

Second,cariprazineisbeingdevelopedforfourindications.Onlyoneotherantipsychotichasfourindications;andthat'sSeroquel,ofcourse,nolongerbeingpromotedbyAZ.We'llstartwithschizophreniamania,whichwillbethejumping-offpointfortheproduct,andthenexpecttoaddbipolardepressionandMDD.

Then,takealookatthebenefit/riskratioofcariprazinebasedonourPhase3datarelativetootherantipsychotics.Theotherdrugshavehadabigimpactonmanypatients'lives;there'snoquestionaboutit.Buttheyarenotwithoutlimitations.

Sideeffectsisabiglimitation;namely,weightgain.Insomestudieswiththeolderatypicals,20%ormoreofpatientscanexperienceagreaterthan7%increaseinweight.That'sabigincreaseinweight.

EPS;impactsonmetabolicsandglucose,lipidsorsugar;andthensomnolence.Ifyoutakealookatcariprazine,thedatalookmoresimilartoaripiprazoleorLatuda,whicharearguablythebest-toleratedatypicalantipsychoticsonthemarketascomparedtosomeoftheolderones.

Asitrelatestonegativesymptoms,I' llsecondwhyDavidsaid.70%ofpatientswithschizophreniahavesignificantnegativesymptoms,andit'sapuzzlethatthepsychiatrycommunityhasbeentryingtosolve.Ifwecanmapoutaregulatorydevelopmentpath,itwouldbearealsalesmultiplier.

Intermsofthemarket,itcanbedefinedtwoways.Large--thereisoveraprescriptionwritteneverysecondintheUnitedStatesforanantipsychotic;anditcanbedefinedbyhighfailureandswitchrates.




Over50%ofpeopleonsecond-linetherapywilldiscontinueduetolackofefficacyorasideeffect.Andagaintheunmetneedhereintermsoftolerability,andtheprofileforcariprazinemakesagreatdealofsense.

Schizophreniaandbipolardepressionarethelargestsegmentsofthisfour-segmentmarket.BipolardepressionandMDDarethefastestgrowing.

ThisisalogicalextensionoftheclaimsetforTeflaroanditturnsatwo-indicationantibioticintoathree-indicationantibiotic.Bacteremiaisabloodstreaminfection,usuallysecondarytoaprimaryinfection,oftenskin.Today,Teflaroisusedtoacertainextentinpatientswhoarebacteremic.

It'sa$4billionsegment.ThiswillbeagreatdriverofgrowthforTeflarointhefuture.Andyoucanseeifyoulookatthebottomrightoftheslide,40%ofphysiciansexpecttosignificantlyincreasetheiruseofTeflaro,assumingwegetapprovalforbacteremia.

Avycazworksagainstafamilyofbacteriathathavebecomeresistanttosomeofthemostwidelyusedantibioticsintheworld.ThefamilyofbacteriaareidentifiedbytheacronymCRE,whichstandsforcarbapenem-resistantEnterobacteriaceae.Itcausesseriousrespiratoryandbloodstreaminfections,extendshospitalstays,increasescosts,and,leftuntreated,canresultinamortalityratebetween35%and50%.

Sothisisaprettyspecialproduct.It'sgoingtobeareservedcompoundforaspecificinfectionandpatienttype,ahigh-riskpatientandinfectiontype.ThecategoryforinfectionscausedbyCRE,knownorsuspected,isapproximately$2billionto$3billion.

Anexcellentadditiontoourcurrentantibioticproductline,itwillbepromotedrightalongsideTeflaroandDalvance.Theproductscompletelycomplementeachother:Dalvanceisanoutpatientdrug;TeflaroisaGram-positiveIVforthehospital;andAvycazisaGram-negativeantibioticforawholedifferentarrayofinfections.

Ourwomen'shealthproductlinewillconsistoftwonewproductsoverthenextcoupleyears.WehaveanIUD,Liletta,andaprogesteronereceptormodulatorcalledEsmya.

Lilettaisaboutturningwhat'seffectivelyaone-productIUDmarketintoatwo-productIUDmarket.Bayer'scompoundMirenaisthemostwidelyused.Lilettahasallthefeatures,thebenefitsofMirenaintermsofprogestinlevelsandreleaserate.

Ithastwootheradvantages.Itcanbeadministeredinrealtimeatanypointduringamonthlycycle.Andit'sbeenusedintwopopulationsofpatients:womenwhohavehadchildrenandwomenwhohavenothadchildren.Additionally,we'llbeintroducingwhatIwouldcallawhite-glovecustomerserviceprogram,whichwillmaketheproducteasytoorder,stock,andbuy.

AsitrelatestoEsmya,Davidtalkedagreatdealaboutthisproduct.Thiscouldbeagame-changer.

Uterinefibroidsaffectaverylargepopulationofwomen.Nooneknowsforsurewhatcausesthem.

Theyaregenerallybenign;mayberelatedtogeneticsorhormonelevels.TheimpactthatEsmyahasonbleeding,pain,andtumorsizeisvery,veryreal.Thiswillbeanexcellentadditiontoourwomen'shealthproductline,andit'saveryrealalternativetosurgery.

Tosumitup,nineproductsbetweennowand2019inareasthat,again,weknowextremelywell.You'llseethatthereisarangeforeachcompoundbasedondifferentassumptions.

Pricingandreimbursementdynamicshereare,inmyopinion,veryencouraging.Andtheprobabilityofregulatory,technical,andcommercialsuccessisveryhigh.SowiththatIwanttothankyouforyourattentionandreintroduceBrent.





Thanks,Bill.SoreallyI'dliketocongratulatemycolleaguesforprovidingalotofdetailedinformationinafairlycompactperiodoftime.WhatIthoughtIwoulddoisbringthemmeetingtoconclusionjustbygoingthroughacouplethoughtsaswethinkaboutourcombinationwithAllerganthat'scoming,andthenopenituptoQ&Aquickly.

WhenyoulookatActavis'sperformanceoverthelastfewquarters,youcanseethemomentuminthebusiness.Wecontinuetomaintainstrongmomentuminourbrandbusiness,strongmomentuminourgenericbusiness,strongmomentumineachofourR&Dorganizations,andmaintainabest-in-classsupplychain.

WhenyoulookatAllerganandtheirreportedresultsforthefourthquarter,youcanseethatthatbusiness,underDavidPyott'sleadership,hasalsoexperiencedgreatmomentum.Ibelievetheirfourthquarterwastheirbestquarterintheircompany'shistory.

Sowe'retakingtwobusinessesthatarefiringonallcylinders,andwe'reputtingthemtogether.Aswedothat,IthinkwehavecreatedagreatstrengthincreatingwhatwehopetocallGrowthPharma.

You'veseenthisslidebefore;weuseditwhenweannouncedthecombinationofActavisandAllergan.WedobelievethatwehaveauniqueopportunityinthecombinationofActavisandAllergantocreateaspecialcompanythat'sfocusedonhighgrowth;that'sfocusedoninnovation;that'sfocusedonprovidinghigh-quality,reliably-supplied,low-costmedicinestopatientsaroundtheworld.Wethinkwecandothisdifferentlyandbetterthananybodyinourindustry.

Asyouknowwehaveanaspirationortargettogrowourtopline10%inourbrandedbusinessand--afteryoubackoutgenericsandourAndaDistributionbusiness,whererevenueisnotagoodincentive--an8%growthrates.Wethinkthatthat'sabsolutelyattainableandsomethingthatwillallowustomanageourCompanyverydifferentlythanourpeergroup.

SowhenwethinkaboutGrowthPharma,wespendalotoftimethinkingabout:whatarethecharacteristicsofGrowthPharma?Wespendalotoftimethinkingaboutourowncharacteristics:WhatmadeActavisgrowsoquickly?WhatweresomeofthecharacteristicsatAllerganthatmadeAllergansuchagrowthcompany?

Andwhataresomeofthedataintheacademicliterature,whetheritcamefromMcKinsey,HarvardBusinessReview,orBCGandthelike?Andlookforcommonthemesaroundwhatcausedcompaniestodrivetop-linegrowth.

Thesewerethefiveattributesthatweidentified.I' llgothroughthemveryquickly.

Intermsofadiverserevenuefranchise,whenyoulookatthecombinationofActavisandAllergan,youcanseetrueleadershipintherapeuticcategories:aroughly$3billiondermatologyandaestheticmedicineportfolio;aroughly$3billionCNSportfolio;aroughly$3billioneyecareoreyehealthportfolio;andthenbillion-dollarfranchisesinwomen'shealth,urology,andGI,cysticfibrosis,andcloseincardiology;andthenofcourse,emergingpresenceinaveryimportantarealikeanti-infectives.

WealsohavegoodIPprotection.Asyouheardfromourpresentationtoday,weplaybothsidesofthehouse.Weunderstandthegenericworld;weunderstandthebrandedworld.

Weusethattomakesurethatweareontopofourintellectualpropertyforourbrands,thatwehaveourteam,likeHafrun'sorganization,continuouslychallengeustomakesurethatwearethinkingofalltherightthingsthatweneedtodotomaintainourexclusivityandintellectualproperty.WhenyoujusttaketheaverageOrangeBook--thisisacrudewayoflookingatit,admittedly,butitgivesyouasenseforwhatwe'reupagainst.




WehavetremendousIPprotectionforourkeyfranchises,wellintothemid-2020sandofcoursesomeevenlongerthanthat.Someoftheoneswhere--forexample,thelowestone,women'shealth,whilewehavesomeOCsthatwillbegoingoffpatent,ourmostimportantproduct,LoLoestrin,hadaCourtofAppealsapprovalsupportingourintellectualpropertyuntil2029.Sowehaveverylongrunwayononeofourmostimportantproductsinthatcategory.

Wealsohaveinnovation.YouheardabouttheActavispipelinetoday;yousawthepublishedlistoftheAllerganpipeline.Butwhatyoucanseeasyoulinetheseup--andwe'lltalkmoreaboutthisafterweclosethetransaction--butineachverticalinwhichwecompetewehaveastrongpipelineofprograms.Someblockbuster,somelifecyclemanagement;butoverall,quiteabitofinnovationtosustainthatgrowthandtocontinuetodrivethat10%brandedtop-linegrowthCAGR.

WealsoaregoingtostayfocusedonourgenericD&AinthisnewcombinedCompany.ThatmeansflatSG&Aspending.

YouheardBobStewarttalkaboutourgenericDNAbeingthechassisfromwhichwebuiltthisCompany.Whatthatmeansiswedon'thavealotofbureaucracy;wedon'thavealotofcommittees;wedon'thavealotofstaffpositions.

Westayveryfocusedinputtingourmoneybehindourproducts,behindoursalesorganization,andbehindourR&Dorganization.That'swherewewanttoinvest.That'swherewewanttospend,notinG&A.WearecommittedtomaintainingaleadingquartileSG&Aspendversusourpeergroup.

ThismorningwealsoannouncedthatwewouldbekeepingtheAllerganequity.It'sanhonortoannouncethatthismorning,giventhatGavinHerbert,thefounderofAllergan,iswithustoday.Butafter65yearsofthebrandstandingforinnovation,customerservice,andexcellence,wethinkthatAllerganisanexcellentnametorepresentthenewcombinedCompany.

Thatdoesn'tmeanwedon'tvaluetheActavisname.TheActavisnameisveryvaluabletousincertainpartsoftheworldandforcertainproductlines;andwewillmaintainthat,becausethat'swhatourcustomerswantinthoseareas.ButoverallourcorporatenamewillbeAllerganandourbrandedportfoliowillgounderthenameAllergan.

OnepointIwanttomake:whilewewillmaintaintheActavisandAllergannames,wewilloperatetheCompanyasoneCompany,oneculture,andoneteam.Youheardfrommycolleaguestodayhowwellweworktogether--brand,generics,manufacturing,finance.WealloperateasoneCompany.

OurincentivestructureforourcompensationisaroundoperatingasoneCompanyforourtopteam.SoweareabsolutelycommittedtomakingsurethatweleverageourstrengthsandshoreupourweaknessesbyworkingtogethertomakeActavisthemostsuccessful,fastest-growingcompanyinourcategory.

Finally,beforewestartQ&A,I'dliketocloseontheslidewhichweusedfromthedealshow.Wearegoingtobeanexceptionalgrowthpharmaceuticalcompany.ThiscombinationwithAllerganandallthewonderfulworkthatwasdonetocombineActavisandForest,andthedealsthatcamebeforethatunderPaul'sleadership,haveputusinthecatbirdseattoreallydosomethingtrulyspecial.

$23billioninrevenue.AsIsaid,atargetof10%top-linegrowthinourbrandedbusiness.30,000employeesaroundtheworldfocusedonourcustomersandprovidinghigh-quality,reliably-suppliedmedicines.

Thedealitselfisdouble-digitaccretioninthefirstyear.R&Dspendfor2015isestimatedtobeabout$1.7billiontosupportthispipelinethatyousawtodayfromthebrandsandgenericsteamaswellastheAllerganportfolio.

Weshouldgenerateabout$8billionoffreecashflowin2016,allowingustobothdeleverandalsocontinueto




doopportunistictuck-inBDand(technicaldifficulty)$5.00EPS.(technicaldifficulty)

Iwouldliketoinvitemycolleaguestojoinmeuphereandwe'llstartaQ&A.Ithinktherewillbesomemicrophonesthatwillberoamingaround.Weareonwebcast,soit'simportantthatweusethemicrophones;andIthinkminejustwentoffandcamebackon.

Butwhydon'tyouguysjoinmeuphere,andwe'llgetthequestionsgoing?Chris,youwanttoleadoff?

QUESTIONS&ANSWERS

ChrisSchot t (Analyst-JPMorgan):

Great,thanks.It'sChrisSchottatJPMorgan.Ihadtwoquestions.Thefirst,justelaboratingonthoselastcommentsonbusinessdevelopment,canyoujustputalittlebitmorecoloraroundtheprioritiesaswethinkaboutthat$8billionoffreecashflow?

Whenwethinkaboutthepipelineyoujustlaidout,thelaunchesoverthenextfewyears,therateofchangetheorganizationexperiencedin2014:reallywhatarethepriorities?Whatverticalsdoyouseethemostwhitespace?Wouldyouaddverticals?Ithinkwearetryingtounderstandthatelementofthestory.

Thesecondquestionwasonthebiosimilaropportunity.Obviouslyalotmorefocusonthat.Canyouelaboratealittlebitmoreonthecommercialopportunityyouseehere?

Howareyouthinkingaboutprice?Howquicklycantheseproductsgaintraction?AndwhendoweseebiosimilarsasbeingarelevantcontributortotheActavisorAllerganP&Laswethinkaboutthelonger-termprofile?


Yes,sure.Onbusinessdevelopmentandtheuseofcash,clearlyintheshorttermourtoppriorityistodelever.Weareabsolutelycommittedtoourinvestment-graderating.Wewanttomakesurethatweactveryresponsibly.

Thatdoesn'ttakeusoutofthegameintermsofdoingtuck-indealsliketheAudenMckenziedealthatwedidjustrecently.Weareevaluatingdozensofthosetypesofdealsallthetime.Butintermsoftransformationaldeals,wearegoingtotakeapauseandcertainlydeleverandallowourorganizationtofocusonthiscombinationforsometime.

Ithinkintermsofareasoffocus,they'rereallytheareasthatwearein.Soit'sthosesevenoreighttherapeuticareasIjusthadononeofthepreviousslides.

Theideathereistoeitherlookforcomplementarymarketedproductthatcanbesoldthroughthesamechannelthatalreadyexists.Itwillbelookingforpipelineopportunities,higher--climbingtheinnovationcurve,lookingforcomplementarypipelineopportunitiestosupportthetherapeuticareasthatwe'realreadyin.Oritwillbegeographicexpansionorstrengtheningtypeoftuck-insliketheAudenMckenziedeal.

ChrisSchot t (Analyst-JPMorgan):

CanIjustaskonefollow-uponthat?Justwhenyousaytransformational,isthereathresholdatwhichyou'redefiningthat?GivenhowlargetheCompanynowis,isa$10billion--isthatatransformationaldealforyouguysatthispoint?


Yes,Ithinktransformationalformeislessaboutdollarsize;it'smoreaboutdoingsomethingthatwedon't




currentlydotoday.Somovingintoanothertherapeuticarea,forinstance;oradifferent--perhaps--I'mnotsuggestingwe'regoingtodothis,butintodevicesorsomethinglikethatwouldbetransformational.

Certainlytherearesomedealspurelyonscalethatyoucouldarguewouldbetransformational,eveniftheywerecomplementary.ButIthinkonallfrontswe'renotgoingtobedoingthoseintheshorttermuntilwehavedelevered.

Ithinkonbiosimilars,Idon'tknowifBillorDavidwanttochimeinhereaswell,butIhaveaviewthatinvestinginbiosimilarstodayiscriticaltothefuture.It'salonger-termbet.

Ithinkyou'renotreallygoingtoseethebiosimilarmarketdevelopprobablyintotheearly2020s.Ithinkit' lltakesometime.

Ultimately,thesewillbebigmarkets.Thepayerpressureandthecostpressuresinhealthcarewillforcethesetobeveryrobustmarkets.

SoIalwaysanalogizethistobackintheInternetboombackin1999orbefore2000.Peoplehadsomereallygreatideas,buttheyjusttimedthemwrong.

Andthesame--youhavetobethoughtfulaboutthiswithbiosimilarsaswell.Youhavetomaketheseinvestments;theytakeawhiletodevelop;butyouwanttohavethesethingslaunchingtowardstheendofthisdecade,2018,2019,2020,sothatyoukeepthatmomentumandcancapitalizeonthemarketwhenitreallyIthinkmaturesordevelopsintheearly2020s.

Idon'tknow,BillorDavid,doyouhaveanotherview?


Icertainlydon'thaveanotherview.Completelyagreewithwhatyou'resaying,Brent.Perhapsjustacoupleofadditionalremarks.

BiosimilarshavebeenoutinEuropeforawhile,andtheyarejuststartingtogetintotheUSmarket.FirstapprovalforabiosimilarintheUSveryrecently.Thefactthatwenowhaveguidelinesisgoingtohelp.

Butit'salsoapparentthatit'sturnedouttobehardertodevelopbiosimilarsthanmanypeoplethoughtafewyearsago.Ithinkweareseeingasmallernumberofcompaniesnowworkingonbiosimilars,whichisgoingtoincreasethesizeoftheopportunityforcompaniesthatdohavethestaminaandthetechnicalexpertisetostayintheareatoreallydothings.ButbiosimilarsaregoingtobeasignificantpresenceonthemarketalsohereintheUSeventually.

MikeFaerm(Analyst-WellsFargoSecurities):

MikeFaermwithWellsFargo.Myquestionisaboutpotentialdivestituresandportfoliorationalization.We'veseenyoudivest,forexample,fromrespiratory.Nottoosurprisinggiventhescaleofthatbusinessrelativetosomeofyourothers.

Soaswelookatthesevenoreighttherapeuticareasthatyoulaidout,shouldwebesurprisedtoseepotentialfurtherrationalizationinsomeofthoseareasthatmaybeareabitsmallerinsalesornumberofproductsnow?Suchascardiovascularorurology,forexample.


Yes,Ithinkit'sunlikely.We'llneversaynever.OneofthethingsthatIthinkwewanttobeevaluatedasisgoodcapitalallocators.Andthatdoesn'tjustincludebuyinggoodthings;italsomeansdivestingthingswhenappropriate.




IthinktheflipsideofthatistomaintainingtheGrowthPharmaconcept.Youalsomanagethingsdifferently.Youdon'tnecessarilyjustkeepthingstomilkthem;ifyou'renotgoingtoinvestbehindthem,thenyouhavetoevaluate:shouldyoubetheownerofthem?

That'sacontinuousprocessthatwe'llgothrough.Ithinkaswesittodayandwelookattheportfolioofourproducts,weareverysatisfiedthatwehavetherightmix.

Onthemargin,couldsomethingchangeandwouldwelooktodivestit?That'scertainlypossible,butnothingelseisintheworks.


Justonefollow-upontheNamenda/Ariceptcombination.AlotoftheconversationtherehasbeenabouttheopportunityfromNamenda.CouldyoutalkalittlebitabouttotheextenttowhichyouseetherebeinganopportunityfromthegenericAriceptpoolandtheabilitytotapintothat?


Yes.Bill,youwantto--youdon'tneedthatmicrophone;you'remic'd.


Yes,Mike,couldyourepeatthequestion?


Sure.AlotofthetalkontheopportunityforNamenda/AricepthasbeenpotentialfromconvertingNamenda.CouldyoutalkabouttheextentthatyouseeanopportunityfromthegenericAriceptRxpopulation?


Yes,IthinkIunderstandyourquestion.OurmarketsharerightnowwithNamendaorNamendaXRtradessomewherejustnorthof30%.For10years,thecombinationtherapymarkethasbeenprettystable.

Mysenseiswithafixed-dosecombination,thenumberofpatientswithmoderatetosevereAlzheimer'swhoaretakingtwoproductsasopposedtoonecouldincrease.Wetreatthatasupsiderightnow.OurfocusisonsimplymovingIRtoXR.Butitwouldn'ttakemuchofamovementinthefrequencyofcombinationtherapytoadd10%or15%tosalesin2015and2016.

RonnyGal(Analyst-SanfordC.Bernstein):

Goodmorning.RonnyGal,SanfordBernstein.Ihadtwoquestions.

Itlookslikein2016you'llbegenerating$0.35offreecashflowforevery$1.00ofrevenueyoucreate.Thatisafabulousfreecashflowyieldfromrevenue.

Thequestionis,Allerganisalreadypaying,Iguess,asmalldividend.Asyoucompetewithotherbigpharmacompanies,someofthemaregrowingquickly;wouldyoubethinkingaboutincreasingthedividendtocompeteforthesame--withdividendnewsaswell?Thereseemstobejustenoughmoneythere.

Second,you'vediscussed,Bill,theissueoftheMassachusettsModelandthelessaccessyounowhaveforthedoctorandmoreformularyrestriction.Canyoudiscussthisalittlebitfurther?

Whatwillhappen?Hasthisbecomeamorepopularmodelaroundthecountry?Iguessoneoftheargumentsisthatabroad-basedUScompanyisinherentlymoreexposedtothosepressuresthanacompanywithalotofemergingmarketexposureororphandrugs.




SoIguessit'satwo-partquestion.Firstofall,areyouasprofitableinmarketslikeMassachusettsasyouareinTexas?Andsecond,isActavisconsideringexpandingfromaUSbroad-basedprimarycaremarketfocustoorphandrugs,toemergingmarkets,andsoforth?


Youwanttotakethatonepartofthequestionfirst?


Sure.Weareasprofitable,forexample,inNewEnglandasweareintheSouth.Wemaygettheredifferently,butpartofmanagingthesebusinessesissimplymanagingthelevelofinvestmentrelativetothesalesreturn.

Mysenseaboutconsolidationisthatit'sgoingtohappenatavery,veryslowpace.Integratedhealthsystemsarestilltryingtofigureouthowtheywanttoruntheirbusiness,muchlesshowtheyaregoingtointeractwithpharmaceuticalcompanies.

Ouraccessrates--andwe'velaunchedperhapsmorenewproductsoverthepastyearandwilllaunchasmanyinthenextyearasanyCompany--arestillinthe80%,85%range.It'struethatsomeregionsofthecountrywehavemoreaccessthaninothers.

Butattheendoftheday,theonlywaythehealthcarecommunity--providersandpayers--findoutaboutnewproductsisthroughsalesandmarketing.It'sgoingtolookalittlebitdifferent,butfundamentallyitwillbethesame.

Ibelieveacompanythatwantstobeaseriousplayerisgoingtoneedaprimarycareandaspecialtycomponent,whichwe'llhave.Wemayadjustthesizeofitovertime,orredistributeit;butIwouldsayfortheforeseeablefuture,noradicalchangeinhowwedoourbusiness.


Justtoansweryourothertwoquestions,intermsoffocus,clearlyoneofthethingstheAllergandealdoesorthecombinationdoesisgiveusaverystrongglobalfootprint.SoIthinkyou'llseeuscontinuetousethatasasourceofpotentialrevenuesynergies.

TakeamarketlikeLatinAmerica,whereAllerganenjoysinmanycountriesanumber-onepositionineyecare.WehavelotsofdossiersandproductsthatwecouldbringintoLatinAmerica,butwedidn'thaveaninfrastructure.

Yes,wemayhavetobuildadifferentsalesforce,butthat'sverydifferentthangettingalegalentity,rentinganofficespace,puttinganITperson,anHRperson,ageneralmanagerandsoon.SoIseethatasoneofourbiggestrevenuesynergyopportunities,istoreallycompletetheglobalizationofthenewcombinedCompany.

Thenfinallywithrespecttoadividend,Ithinkintermsofourpolicyofcapitalallocation,rightnowwehavebeenfocusedoninvestingourmoneyingrowthassets,long-durationgrowthassets,andIthinkwe'vedonethatfairlyeffectively.Thatwillremainourpriorityafterwedelever.

Sototheextentthatwecan'tdothatorwedon'tseemanyopportunities,ourBoardisverythoughtfulandwillcontinuetoevaluateotherwaystoreturnmoneytoshareholders,whetherthatbeadividendorasharerepurchase,dependingonthesituation.Butthoseareclearlyprioritiesnumbertwoandthree.

LiavAbraham(Analyst-Citigroup):

Goodmorning.LiavAbrahamfromCiti.FirstquestiononNamzaric.Canyoutalkalittlebitaboutpricingandmarketaccessdynamicsofthiscompoundasyouheadintoarollout?Andanycommentsyoucanmakeon




netpricingversusNamendaXRwouldbehelpful.

Thensecondquestionisonbiosimilars.Howdoyouthinkaboutpotentiallylaunchingatriskinthisspace,giventhattheregulatoryenvironmentisevolvingprobablyquickerthantheIPenvironment?Orthisisuptoyourpartner,Amgen,forthoseproductsthatarebeingthere?


Yes,maybeI' llanswerthatquestionandthenaskBilltotalkaboutNamzaric.Ithinklaunchingatriskisprobablyunlikelyorunnecessary,particularlyforthebiologicsthatwearegoingafter.AsIsaid,Ithinkmostofthesehavepatentissuesthatgouptoabout2018.Thesemarketsreallywilldeveloptill2019,2020,2021,orbeyond.

SoIthinktheideaoflaunchingatriskgiventheslowadoptionofbiosimilarsprobablyjustdoesn'tmakealotofsense.Buteachonewillhavetobeevaluatedonacase-by-case,situation-by-situationanalysis.


IntermsofNamzaric,webelievethatthereisaprice/volumepointthatwecanobtainoverthenextsixto12monthsthatisgoingtomakesenseforhealthplansandisgoingtobeacceptabletous.Theseareverypopularproducts.

Oneofourprioritiesistomakesurethatpatientsandphysicianshaveaccesstothem.Ourviewismid-tolong-termasitrelatestobothXRandNamzaric.

OurplanistoessentiallygiveAriceptaway,andthecombinationwilllikelybeatadiscounttoXR;butagain,notanunacceptablediscount.AsIsaidearlier,we'reinopendialogrightnow,andweknowwhereweneedtobeandhowtogetthere.IthinkI'mencouragedbywhatwesee.

JasonGerberry(Analyst-LeerinkPartners):

Hi.JasonGerberry,LeerinkPartners.First,thanks,Brentandteamforthedetailedpresentation.Justacouplequestions.

Firstonpricingtrendsforspecialtybrands,that10%CAGR.Maybe,Bill,ifyoucanjusttalkaboutyouroperatingassumptionsregardinganydownwardpressureongross-to-netbothforbasebusinessproductsandforthepipeline.

Thenmysecondquestion,justoneluxadoline:aprettywidegapjustintermsofpeaksalesguidance.Justcuriouswhatyouthinkarethekeyvariables.IsitDTCincreatingawarenessinthatmarket?Orisitreallysomeofthelabelingvariablesthatareoutthere,eitherbeittheDEA'scontrolorthepancreatitis?Thanks.


Intermsofpricingdynamics,they'relargelybuiltintoourplancertainlyfor2015andbeyond.Whateverycompanyisexperiencingrightnowarelowerpricepoints,andlessfrequentandsmallerpriceincreases.Mostofourcontracts,likemostcompanies,havepriceprotection.

Wehaveamixofprimarycareandspecialtyproducts.IwilltellyouourcustomersIthinkingeneralconsiderusapredictablepricingcompanyintermsofwherewesetourpriceandthenthewayweincreaseourpriceovertime.Generally,we'reatthemidpoint,andourpriceincreasesareinthemidtohighsingledigits.

That'sbecausemostofourproductshavestrongpatentsandlongexclusivityperiods.Soit'saplayforthelongterm.




Asitrelatestosomeofthespecialtyproductsinourpipeline,Iwouldthinkaboutthemdifferentlythanourmarketedproducts.Theseareproductsforpopulationswherethereisahighunmetmedicalneed.

Gastroparesisisanexcellentexample;uterinefibroidsisanexcellentexample.Avycazisanexamplewheretherearenootheralternatives;Therearecertainlynogenericalternatives.

Soourpricepointforachronictherapyisusuallyseveraldollarsaday.Thoseproductsare,ofcourse,goingtobeatahigherlevelthanthat.

Andweareprettyconservativewhenitcomestobuildingmajorpriceassumptionsintoour,let'scallit,five-yearplan,simplybecausethemarketisshiftingandthereisagreatdealofpressureonpayerstocontrolcosts.Andweunderstandthat,andourpricingapproachhastoreflectthat.

LouiseChen(Analyst-GuggenheimSecurities):

LouiseChenfromGuggenheim.Thanksfortakingmyquestions.FirstquestionIhadwasthat--doyouthinkthatsalesandearningsgrowththatwesawfromAllerganin2014issustainable?Andifso,whatgivesyouconfidencethatitis?

ThesecondquestionIhadwas:whatkeepsyouinterestedinthegenericsbusiness?Youtalkedabout50%growthrate.Couldyouprovidemorecolorbehindthat?Thanks.


Yes.MyviewofAllergan'sperformanceisthatitissustainable.IthinkwhereyousawalotofthegrowthwasintheexpansionofBotoxtherapeutic,particularlymigraine.YousawinoneoftheareasIknowquitewell,theeyehealthcategory,particularlyRestasis,Lumigan,otherproductsgrowverynicely.Andthosearelargeandgrowingmarketsstill.

Thefillerlaunch,theVoluma,JuvedermVolumaexperiencedthebestlaunchinaesthetichistorybecauseit'sagreatproductandthereisgreatdemand.SoIthinkaslongaswecancontinuetofocusondrivingthosebrands,tocontinuetodriveinnovationtosupporttheproductflow,thosebusinessesshouldmaintainorevenexperiencemorerobustgrowth.

TakeadruglikeDARPinthattheyhaveinearlyPhase2.IfwecangettheprofilewewantforDARPin,thatmaybethebiggestdruginthepipelineofthecombinedcompaniesintermsofsalespotential.SotherearelotsofaspectstothisverydynamicAllerganbusiness.

IthinkDavidPyottandDougIngram

andthemanagementteamthereisjustfirst-class.Theseguyshavereallybuiltsomethingveryspecialthere.Andwe,Ithink,havedemonstratedawillingnesstobringtheirveryspecialandtalentedpeopleintothecombinedleadershipofthenewCompanyataveryhighsuccessrate;andthatcontinuestoflowdownaswearebuildingouttheproposedorganizationinlayertwoandthreeandfourandbeyond.

Soweareveryexcitedaboutit.Andobviously,we'llknowmorewhenweclose;butIhavenoreasontobelieveanythingbutstrongperformance.

DaveRisinger(Analyst-MorganStanley):

Thanksverymuch.DaveRisingerfromMorganStanley.Thankyouforthedetailsonthepipelinetoday.Ihaveafewquestions.

First,oneisregardinganopportunityonthegenericsside.Withrespecttomethylphenidate,thereisamid-MaydeadlineforMallinckrodtandKudcotodemonstratebioequivalence.Iftheyfailtodoso--andsincethe




FDAhasdonethetestsandseemstobelievethattheyhaveorwillbefailing--butiftheyfailtodemonstratethebioequivalence,howwillActavisrespondfromacommercialstandpoint?

Andalso,howcanActavisgettheDEAtochangeovertheallocationofscheduleddrugsfromcompetitorstoActavis?Thatseemslikeaconstraint,sincetheallocationsaremadeannually,Bob.

ThenmysecondquestionisonNamenda.Whenonethinksofthefranchise,whatevertherunrateisinXdollars,let'ssay,inJuly,obviouslyifweputasidethetwice-dailyNamenda--whichwillgooffacliffwhenthegenericshit--howshouldwethinkaboutthebrandedportionthatremainsintheformoftheXRplusthecombination?

Meaningshouldwethinkaboutthatdeclininginthefuture,becauseyouhavetogivemuchgreaterrebatesontheNamendaXR;andalsosomeprovidersthatarealreadygivingpatientsmultipledrugstwiceadaywillpushvolumetothetwice-daily?Orshouldwethinkofthatbrandedlinethatremainsgrowingbecauseofthecombo?Justtryingtounderstandhowtothinkaboutwherethatremainingbrandedlinewillgoovertime.Thankyou.


Yes,maybewewilltaketheNamendaquestionandthenI' llpassthe(technicaldifficulty)theIRgenericsenterthemarket,thefranchisewillgointodecline.SoIthinkyouhaveto--andwemodelandIthinkyouhavetothinkaboutNamendagoingintodecline;andit'sjustaquestionoftherateofdeclinethatitgoesat.

Thehighertheconversionrate,thebetterthatpictureis.Themorewedrivepeopletofixed-dosecombination,thebetterthatis.AndasweexpandthemarketwiththeDTC,thebetterthatis.

Sotherearesomeleverstobepulledintermsofslowingorretardingsomeofthatdecline,butitwillneverbeenoughtostopthedecline.SoIthinkyoudohavetothinkaboutitasadecliningfranchise.Isthatfair,Bill?


That'sexactlyright.Justthinkabouttherateatwhichithappens.IfwearesuccessfulwithXRandthefixed-dosecombination,andwecanmanagepriceandvolume,theratewillbe(technicaldifficulty)


Ourmodelassumesthatwewillgothroughtheconversionvoluntarily,thatwewillreachsomewherebetween60%and70%onourown.

Obviously,wehaveacourtpotentialdecisioninMarchthatcouldchangethat.That'snowbecomePlanBversustheoriginalPlanA;sothatcouldchangethingsquiteabit.Butthat'snothowwe'remodelingitatthispoint.

Intermsofthegeneric,beforeIpassittoBobtoansweronConcerta--Ididn'tanswerthepreviousquestion.Weloveourgenericsbusiness.

Thereasonwelikeourgenericsbusinessisbecausewearethebestintheworldatit.Itisasourceofgrowth,sustainable,long-termgrowth.

Anditalso,Ithink,hastheaddedadvantageofbeingverystrategic.Ithelpsusthinkofourownportfolioinasharperway.Ithelpsusdobusinessdevelopmentinasharperway.

AndtheexpertiseintheR&DgroupisincrediblycomplementaryandbeneficiarytotheR&Dgroup.Sothere's--welikeallbusinessesthatwearethebestat,andwe'rethebestatglobalgenerics.




BobStewart (COO):

Onmethylphenidate,there'sanumberofthingsthatwearedoing.RightnowtodaywearenotifyingphysiciansthatthereisanAB-ratedgenericoutthere,anditisours;andmakingitclearthattheothertwocompetitorsouttherehavebeenflippedtoaBXrating.

Ipersonallythinkit'sirresponsibletocontinuetomarketthatproductgiventhatitwasdrivenbyadverseeventsanditwasdrivenforlackofefficacy.Sowe'remakingphysiciansawareofthataswellaspractitioners.

Theotherthingwe'redoingiswe'reworkingwithJ&JaswellaswithDEAtobuildupenoughinventoryinanticipationoftheMay11date.Andwearemakingtheassumptionthattheyarenotgoingtobeabletocontinuetostayinthemarket.

Sowewillhavetheinventory.Weactuallyhavetheinventorynow,wherewecanstartconvertingtheentirepatientpopulationover.

DEAandFDAhavereallydone,Ithink,andincrediblygoodjobatworkingcollaborativelytotryanddealwithdrugshortageissues,inparticulararoundADHDmedications.IfyourecalltherewasacoupleyearsagowheretherewasshortagesofAdderallinthemarket,shortagesofConcertainthemarketbecauseofthefactthattheywerenotresponsiveintermsofquotaallocation.

Whatthey'venowdoneisthey'vebuiltenoughaggregatequotathatgivesthemnowmoreflexibilitytoawardquotaasneeded.Andwe'retakingadvantageofthatwithJ&Jtobeabletorampupourinventorylevelstosupportthemarket.

UmerRaf fat (Analyst-EvercoreISI):

Thanksfortakingmyquestion.UmerRaffatfromEvercoreISI.Maybeacoupleofquickones.

Numberone,onthe2017$25aspirationalearningstarget,isthereanymanagementcompensationtiedtothat?

Thenseparatelyonproductsidemaybe,oneluxadoline,arewehavinganydiscussionswithFDAyetonlabeling?

Andalsoonrelamorelin,theongoingPhase2b:ifitdoesconfirmthevomitingeffectthatwasseeninthelasttrial,wouldthatpotentiallyqualifyforanFDABreakthroughdesignation?Thankyou.


Yes.Onthefirstquestion,onthe$25aspirationcompensation,it'ssomethingourCompCommitteeofourBoardisevaluatingandispossible.Managementwouldlikethat,though.Wewillsee.

OurBoardleaddirector'soverthere,soI'mlookingather.ButIthinkthatwe'dputinaplantotieourcompensationtoit.Butobviously,theCompCommitteehasthefinalsay.

Youwanttotaketheothertwoquestions?


Yes.Eluxadoline,yes,we'retalkingtotheagencyaboutoursubmission,soweareindialogwiththem,absolutely.

Andregardingrelamorelin,yes,wehaveFastTrackdesignationfromtheFDA.Bill,youwantedtoadd?





TherewasaquestionaskedearlierwhichIforgottoansweraboutthesalesrangeoneluxadoline.It'sbasicallyafunctionofourabilitytoconverttheover-the-countermarket.Andofcourselabelingalwayscomesintoplay.

RandallStanicky(Analyst-RBCCapitalMarkets):

It'sRandallStanicky,RBCCapitalMarkets.Bob,oneforyou,biggerpicture.

YouandIwerebothatGPhAlastweek.WetalkedorsawtheFDATargetActionDateInitiativeof1,000forthisyearontopofGDUFAtimeline.Sohowdoyouthinkabout--giventhesizeofyourguys'ANDAportfolio,whichisthebiggest,howdoyouthinkaboutthevolumeopportunityforthisyearagainstwhatcouldbeperhapsforthefirsttimeinacoupleyearssomenewvariableinthepricingdynamic?

BobStewart (COO):

Well,Ithinkit'sgoingtobeinterestinghowthatplaysoutcompanyTocompany.Becausewhenyoulookatthebreadthofourportfolio,thenumberofexclusivefirst-to-files,thevolumedynamicofmorecompetitorscominginversustheexclusivefirst-to-filesthatwearegoingtostartdrivingthrough,theneteffectofthatisstillpositiveforus.SoIlookatitinthecontextthatourportfolio,beingasdiverseasitisandhowmuchofitisdrivenbyfirst-to-files,theneteffectIthinkisfavoringus.

ButtheFDAhasmadesomeprettyloftypromisesatGPhA,andwe'veheardsomeofthesepromisesbefore.Weareseeingsomedefiniteimprovementwiththeagencyintermsofitsacceptancerates.

WefiledtheproductonFebruary9andwegotanacceptanceforfiletoday,thismorning.ItjustshowsthatFDAisclearlygettingmoreefficientinhowtheyareprocessingthese.

Whatthey'redoingintermsofthebacklog,ifthey'regoingtoget1,000applicationsthrough,I'mcautiouslyoptimisticonthat.Butoneofthebenefitsthatwehavethisyearisall--themajorityofthelaunchesthatwehadplannedforthisyearhavealreadybeenapprovedandalreadyareoutinthemarket.SoforusI'mlookingatitasapositivefor2015.

RandallStanicky(Analyst-RBCCapitalMarkets):

Thefollow-uptothat,Brent,ontheonehandyouhavethebrandbusiness;ontheotheryouhavethegenericbusiness.Howdoyouthinkaboutthemiddle,the505(b)(2)opportunity,giventhatyou'vegotthese--thecapabilitiesfromadeliveryperspective;you'vegotthecompoundknow-how.

Isthatsomethingthat,asyouthinkaboutthenextthreetofiveyears,itcouldbeabigopportunityasyouthinkaboutthehospitalspace,injectables,andothers?


Itis.Ithinkit'ssomethingthatcertainlyexcitesme,notjustinthehospitalinjectableswhereit'sprettyintuitivethat505(b)(2)strategywouldmakealotofsense.ButIthinkasyouthinkabouttheothertherapeuticcategorieswherewe'rein,wherewehavestrongcommercialcapabilities,supportingthosebusinessesalsowithselect505(b)(2)programscouldmakealotofsense.

Wehaveafewthatweareworkingon.HafrunknowstheonethatI'mmostinterestedinthat,ifitworks,wouldbeterrific.

Butabsolutely.It'sacorecapabilityofputtingagenerics--orstrategicrationaleforputtingagenericandbrandedbusinesstogetherandoperatingitasonecompany,whichnooneelsedoes.




JamiRubin(Analyst-GoldmanSachs):

Rightoverhere.JamiRubinwithGoldmanSachs.Tessa,aquestionforyou;IpromiseI' llbenice.

TessaHilado (CFO):

Iknowyou'renice,Jami.


Ifnot,I' llhitherwithherbutterknife.

JamiRubin(Analyst-GoldmanSachs):

Lastyeartherewasobviouslyfuroroverpotentialtaxinversionplays;andthatcametoahaltwiththechangesintheTreasuryrules.Areyouconfidentthatanypotentialdiscussionsaboutearningsstrippingisnowover?

Andifnot,canyouquantifywhattheexposurewouldbetoyourtaxrateshouldthatcomeintoplayagain?NotsayingI'mhearinganything,butjustwhatyou'rehearing.

Also,justasthecombinedCompanywithAllergan,howshouldwethinkaboutthetaxrategoingforward?Isthereanopportunitytobringitevenlowerthan15%assomeofthatIPismovedtoIreland?

TessaHilado (CFO):

Letmetrytofigureoutallthequestions.Thefirstonewaswithregardstoincomestripping.IthinktheObamaannouncementfairlyrecentlyhasmadeitcertainthatanyrulingoninversionswouldhavetobedealtwithatCongress;sowedon'tthinkthat'sgoingtohappenintheforeseeablefutureatthispointintime.

Withregardstotheinversionandourtaxstructure,Ithinkwe'reincompliance.We'reinprettygoodstead.Thatinversionhasnowbeenthroughlikeabouttwoyears.


Octoberwillbetwoyears.

TessaHilado (CFO):

Octoberwillbetwoyears.Sowedon'tfeelthereisanyrisk.Soatthispointit'sgoingtobeverydifficultforustoquantifywhatthatactuallymeans.

WithregardstoAllergan,atthispointintime,theyalsohaveproductsthataresoldinlow-taxjurisdictions.Soourbestestimatesatthemomentisreallythetaxrateweprovidedtoyou,whichis15%post-close.

DidIanswereverything,Jami?Great.


Havetogetyouwiththeknife.(laughter)

HimaInguva (Analyst-BankofAmericaMerrillLynch):

HimaInguvafromBankofAmerica.Thanksforallthecolorandtakingmyquestion.ForBrent,thinkingaboutfuture,lookingatfive,sevenyearsoutyearsfromnow,doyouseeActavisasastandaloneCompany,especiallygiventhehighgrowthrates,lowtaxstructurefrominversions?Ifthereweretobeabigpharmacompanythatwasinterestedinjoiningforces,willyoubereceptivetotheidea?





Yes,soIthinkasyouthinkfive,sevenyearsout,we'reinsuchadynamicindustryit'shardtopredictwhatwillhappen.Idobelieve--I'vesaidthisbefore--thisindustrystillhasalotofconsolidationtogothrough.

There'sjusttoomuchinefficiencyinthecommercialcapabilitiesofthisindustry,intheR&Dcapabilitiesandtargetingandfocusofthisindustry.SoIthinkyou'llseeacontinuedconsolidationoverthenextseveralyears.

Thatbeingsaid,whenyoulookatthechartthat'sonthisslideIthinkwe'vebecome,inmyopinion--andobviouslyIhaveabias--themostdynamicCompanyintheindustry.Sowillwecontinuetobeanacquirer,orwillwe--willpeoplelookatbuyingus?Ican'tpredictwhatotherswilldo.

ButIthinkitwouldtakeanawfullargepremiumtoacquireaCompanythisspecial.I'djustleaveitatthat.

Sumant Kulkarni(Analyst-BankofAmericaMerrillLynch):

SumantKulkarnifromBankofAmericaMerrillLynch.Ihavethreequickquestions.

Thefirstoneisonbiosimilars.DoesyouragreementwithAmgenatleastconceptuallyallowforauthorizedbiosimilarsorABs,asIthinkweshouldcallthematsomepoint?

Secondly,oninjectableswe'veseenalotofmovesinthemarketsincludingM&Aactivity.HowspecificallydoesActavisplantotargetthatorgetbigger?

Andfinally,onRestasis,howistheCompanythinkingaboutthetimingofpotentialgenericcompetition,giventhatstandaloneActavismayhavebeenafilerthere?Thanks.


Yes,maybeI' lltakeRestasisfirst.Obviouslythatwassomethingthatweweretargeting,totrytocreateagenericRestasisbeforewedidthedeal.Obviously,we'renotdoingthatanymore.

And,look,Imean,theFDAchangedtheguidance.Ourbeliefisthatthatprobablyknockedmostofthepeopleoutthataregoingafterittoday.

That'sourintelligence;it'snotperfectvision,butIthinkwebelievethattobethecase.Butwealsothinkthereisapathwayforwardforacompanytodoit.

SoourviewisthatRestasishassomethingontheorderofmagnitudeofafour-tosix-yearlifeaheadofit.Veryhardtopredictexactlywhen.

Wehavegoodintelligence,sowewillkeepoureartotheground.ButenoughtimeforustoimplementalotoftheplanstheAllerganteamhadforproductimprovementandproductextension,whetherthatbeRestasisXorotherdryeyemolecules.

SouponclosewewillbeabsolutelyfocusedonmakingsurethatthedurationofthedryeyeleadershipatAllerganremainsintact.Andtherearemultipleleverstopullonthat.

ToyourotherquestionsontheAmgenagreementwithrespecttoauthorizedbiosimilars,Iactuallydon'tknow.Idon'tknow,Paul,ifyou--

PaulBisaro (ExecutiveChairman):

Weactuallydohave.





Wedo.Yes,wedohavethatintheagreement.I'mnotsurethatmeansawholelot,inmyhumbleopinion;Ithinkwe'llseehowthesethingsultimatelygetcommercializedandsold.Wehavesomeflexibilityinouragreementdependingonhowthatactuallyplaysout.

Butmysenseiswhatyou'llseeasbiosimilarsenterthemarketisthebrandsjustdropthepricetocompetewiththebiosimilars.Theywillprobablystayatasmallpremiumforthosepatientsanddoctorswhowanttheoriginaldrug.Butthedistributionchannelmaynotlookentirelydifferent.

CoreyDavis (Analyst-CanaccordGenuity):

Thanks.It'sCoreyDavisatCanaccord.Ihavetwoquestions.

Thefirstone:nowwithnineproductsinmid-tolate-stagedevelopmentandstillalotofproductsthatarestillinlaunchphase,probablyaluxuryofriches.ButcanyoureallykeepthatSG&Amarginat24%,notaddsalesreps?Ordoyouneedtoaddsalesreps,nothavetheproblemthatForesthadawhileago,andlaunchtheseproductseffectivelyoverthenextcoupleyears,andkeepthatSG&Amarginintactandlaunchthemproperly?

QuestionnumbertwoforDavid,backtorelamorelin.IfyouonlygetanindicationinDBforpatientswithseverevomiting,canthisreallybeabillion-dollardrug?Yes,itwouldbegreattohaveapro-motilityagent;butifyouonlyget--ifitonlyreallyworksinthosepatients,becausethat'swhatthePhase2adatashowed,wouldyouneedanindicationin,like,dyspepsiatogetittobeabillion-dollarproduct?


Bill,youwanttotakethefirst--?


Yes,Imean,Corey,theissueraisedaboutthefieldforceisonethatwemanageeveryday.Itrequiresconstantcalibration.

Iwillsaythatifthenineproductswereviewedtodaywereincompletelydifferentcategories,thenwewouldhaveSG&Aproblemtosolve.Asproductsmovethroughtheirlifecyclefromyearonetoyeartwotoyearthree,wehavetohavetheabilitytomoderateourinvestmentsothatwecanincreaseitonnewproducts.Giventheoverlapbetweenthenineandourmarketedproducts,Ithinkwe'regoingtobeabletomanageourSG&Ainawaythatwouldbeverydifferentifwewereenteringninecompletelynewcategories.

Westilloperatebytheprinciplethatweshouldbe,inshareofvoice,numberonewhenwelaunchaproduct.Ithinkwestillhavethecapacitytodothat.Butifwedon't,Ithinkit'sjustlikeR&D:ifweneedtomakeaninvestmenttosupportcreatinglong-termvalueforanasset,thenwedothat.

TessaHilado (CFO):

IguessfromanSG&Aperspective,ifyourecallin2014,wealreadyendedtheyearatroughly21%.Sowehaveroomintheforecastintermsofspendingthemoneyeventogetupto24%.Sowethinkthat'smanageable,asBillpointedout.


Regardingrelamorelin,whatItriedtododuringthecourseofmypresentationwastodescribehowforallofourproductsweaimtobuildabrandbyultimatelygoingformultipleindications.Ireallydoliketoseeduringthecourseofdevelopmentefficacyinawell-definedsubgroup,becausethat'ssomethingthat--itobviously




makesthewholedevelopmentprogrammucheasierifyouarelookingatawell-definedsubgroupwhereyougetaclearindicationofefficacyandsafetyearlyon.

Thatwasthepointaboutmypresentationforrelamorelin.That'swhatreallydroveit;butwedoseepotentialforrelamorelininabroaderrangeofthelargerpatientpopulation.

DavidAmsellem(Analyst-PiperJaffray):

DavidAmsellemfromPiperJaffray.Justacoupleofquestions.

Firstonlinaclotide,youtalkedaboutexpansionopportunities,particularlythelow-doseversion.IsthissomethingthatcouldeventuallybecomeanOTCavailableproduct,similartohowthelow-doseprotonpumpinhibitorseventuallywenttoOTC?That'snumberone.

Thensecondly,ontheOTCbusiness,what'syourappetiteforgrowingthissegmentviafurtheracquisitions?AndwouldthatcontemplateacquisitionactivityintheUS?Thanks.


Yes,IthinkontheOTCbusiness,wedolikethebusiness.Itdoeshaveareallygood,sustainableprofile.

Ithinktheonethingyoushouldrecognize,too,inthecombinationofAllerganwedopickupaveryniceUSOTCbusinessintheRefreshtearbusiness,whichisthemarketleaderoramongthemarketleadersintheOTCmarket.SoIthinkwe'regoingtocontinuetoevaluatehowdowegainstrengthbothgloballyanddomesticallyinOTC.

Ithinkyou'llseeusmaneuververystrategicallyandopportunisticallyaroundOTCassetsinthemarketplace.WanttotalkaboutLinzessOTC?


Yes.Imeantheaimwithalowdose,one,istoprovidephysicianswithsomedosingflexibility;butit'sreallydesignedtoaccessamoremild,moderate,intermittentOTCcategory,whichisreallywherethevolumeis.IntermsofintroducinganOTCversionofLinzess,thatisanoptionthatwewouldconsiderifitmadegoodeconomicsense,andespeciallyifwearesuccessfulwithdevelopinganext-generationLinzess,whichisthe[colonic]deliveryconceptthatDavidtalkedabout.


Justtohelpyouout,Bill,yousaidmildtomoderateOTC.Youmeantmildtomoderatechronicidiopathicconstipation,CIC,right?Yes.Justtohelpyouout.Alltheseabbreviations.


Ijustsaybutterknife.

ShibaniMalhotra (Analyst-Sterne,Agee&Leach):

Hi,ShibaniMalhotrafromSterneAgee.QuickquestionforDavidandBilloneluxadoline.One,areyouexpectingapanel,giventhisisanewproduct?

Andthen,commerciallyhowdoyouexpectthisproducttobeused,giventhatIBS-Dismultifactorial?Wouldyouexpectthistobethefirstline?Howdoyouthinkdoctorsaregoingtodifferentiatebetweenpatientsthathavebacterialovergrowthversusnot?

Thensecond,aquestionforBob.You'vementionedAdvairmany,manytimesnowandyouhaven'tgivenus




mucharoundtimelines,etc.,forwhenyouthinkyoucouldbeonthemarketifyouthinkyouarefirstinthemarket.Soifyoucouldgiveusanupdateonthat,thatwouldbegreat.

AndifBrentcouldtelluswhichproductsheisexcitedabout,thatwouldbegreataswell.


Letme--


Yes,youwanttostart?


Yes,Icanstartonthecommercialquestionabouteluxadoline,andIthinkDavewilltaketheotherone.Wedon'treallyknowhowXifaxanisgoingtobeusedrelativetoeluxadoline.Whatwedoknowisthereisarealabsenceoftreatmentoptions.

Weknowthattheconsensus,frankly,onbacterialovergrowthandthelinktoIBSisnotcompletelyclear,noristhereconsensusontheprevalence.Xifaxan,don'tgetmewrong,isaveryeffectiveproduct.Oursenseiswe'llpositioneluxadoline,givenitseffectontransit,asafirst-linetherapy--orIwouldsayafirst-linetherapyafterpatientshavetriedOTCmedications,whichvirtuallyallofthemhave.

Butagainthereisplentyofroomforbothoftheseproducts.Wemayfindoutatsomepointinthefuturethattheycanbeusedincombinationalongsideeachother.Butofcourse,thosedatadon'texistrightnow.


Andwhatwasthefirstpartofyoureluxadolinequestion?Sorry.

ShibaniMalhotra (Analyst-Sterne,Agee&Leach):

Areyouexpectingapanel?


Panel?


Oh,apanel?Actually,wedon'tbelieveso,buttheFDAcanofcoursechangetheirminds.


So,Bob,yougettoansweryourAdvairquestion.

BobStewart (COO):

SoonAdvair,whatI' llsayisthatwearebecomingincreasinglymoreconfidentinourapplicationprocess.We'renotgoingtobethecompanythat'sgoingtogooutanddoapressreleasewhenweenrollinclinicalstudies.Ifwedidthat,Charliewouldhavetotriplethesizeofhisorganization,becauseyoucanseehowproductiveHefrun'sorganizationis.

ButasIsaidbefore,that--withAdvairthere'sthreethingsthathavetocometogether.It'sthedevice;it'spassingaPKstudy;andultimatelyperformingaclinicalendpointstudy.Theclinicalendpointistheeasiestofthethree,andyouneedtohaveallthreeofthosethingscometogetherbeforeyouultimatelycanhavean




AB-ratedsubstitutableproductinthemarketplace.

Andthatiswhatourgoalis.It'snottogodownthe505(b)(2)route;it'stogodowntheABsubstitutabilityroute.SoallI' llsayisthatwe'rebecomingincreasinglymoreconfident.


Timeline?That'swhathe'sconfidentabout.

BobStewart (COO):

That'swhyI'mconfident.

Ellio t Wilbur(Analyst-Needham):

Goodmorning.ElliotWilburfromNeedham&Company.Ihavetwoquestions;thefirstisforBob.

Asyouthinkaboutroundingoutyourgenericbookofbusiness,movingbackintoinjectables,andthenrearmingintopicals,andIguessenteringophthalmics,areyouconfidentthatyouhavetheinternalcapabilitiesorthepartnerrelationshipstobecomeameaningfulsuppliertothetradewithoutmakingastrategicmoveinthoseareas?

ThensecondquestionisforTessa.Wouldbepossibleatthispointtogetsomesenseofthelevelofinterestexpenseexpectedin2015andembeddedinyourearningspershareguidance?

BobStewart (COO):

Yes,I' llabsolutelyanswerthefirstpartofyourquestion.Intermsofconfidence,noquestionaboutit.I'mabsolutelyconfidentthatwe'vegottheteaminplacethat'sultimatelygoingtobeabletodelivervaluetothedifferentsegments,bothinhospitalaswellasinother--intopicalsandthelike.

So,noquestionaboutit.We'vebuiltupaninfrastructure.We'veinvestedinit.We'vegotgoodsalesteamsthatarereadyandhavealreadylaunchedthesebusinesses.

TheotherthingI'dsayisthatwearereallyfocusingonbeingdisciplinedonthetypeofportfolioswe'regoingtobringtothisbusinessaswell.Sowe'regoingtodifferentiateourselvesontheportfoliosideofthingsandberelevanttoourcustomersbasedonwhatthatoffering'sgoingtobe,versustryingtoconvinceourselvesthatweneedtohavethefullbreadthofproducts.

Soit'sgoingtobereallymoreopportunisticintermsofhowweapproachthebusinessandreallycompetingonmoreofaportfolioapproach,asopposedtotryingtohavethefullbreadthofportfolio,ifyouwill.

TessaHilado (CFO):

Onyourquestion,giventhatwewillbefilingourS-3inthenextcoupleofdays,we'rereallyrestrictedfromtalkingabouttheofferingatthispointintime.Sojuststaytunedinthenextcoupleofdays.

Obviously,giventhefactthatrateshavemovedlowersinceNovember17,spreadshavewidenedalittlebit;sothere'sputsandtakesthere.Italkedaboutthetwodevelopmentsaswellrelativetotheequityoffer,whichisbetterthanexpectedearningsandcashflow.BothAllerganandActavisreportedforQ4,andthenobviouslythestockpricehasrunupalittlebitsincetheannouncementitself.Butstaytunedinthenextcoupleofdays.

SabaHekmat (Analyst-NewYorkLifeInvestmentManagement):

Thankyou.SabaHekmatfromNewYorkLife.AquestionforTessa.Tessa,asyoulookat--asyoujointhis




Company,it'smuchlargerinsizenowandcomparabletosomeofthebigpharmacompaniesoutthere.What'stheappropriatecapitalstructurethatweshouldthinkaboutleverageandcreditratingsfortheintermediateandlongterm?

TessaHilado (CFO):

We'rebasicallycommittedtotheinvestment-graderatingaswelookatvariousacquisitions.Obviouslywealwayshaveaplantodeleverrapidlyinordertoobtainthat.

Caseinpoint,wewereverydisciplinedwhenweannouncedtheAllerganacquisition.Fromaleverageperspective,we'veindicatedthatwebelievepost-closewewouldbedownto3.5timesandwewouldcontinuetomaintainourinvestment-graderating.

LisaDeFrancesco (VP-IR):

Okay.That'sallwehavetimefortoday.I'dliketoturnitbackovertoBrentformaybesomeclosingremarks.


Yes,IwouldjustliketofirstthankeveryonewhoattendedlivehereinpersoninNewYork.Andthoselisteninginonthewebcast,thankyouforyourtimeandattention.

IhopeyouseeourenthusiasmforourCompanyandourfutureandourcombinationwithAllergan,andwelookforwardtokeepingyouupdatedasweprogressbothontheofferingaswellasthecloseofthecombinationinthecomingweeksandmonths.Thankyou.

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Documents

Actavis (ACT) Earnings Report: Q4 2014 Conference Call ...s.t.st/media/xtranscript/2015/Q1/13051711.pdf · Saba Hekmat; New York Life Investment Management; Analyst MANAGEMENT DISCUSSION