Valeant Pharmaceuticals International (VRX) Q1 2017

Joseph C. Papa – Valeant Pharmaceuticals International, Inc.

“So obviously, we believe our share price is not where it should be. It should be higher, to be clear. But the fact is, that’s what – where it is today. I think what we’re doing is working very hard every day, as Paul said, to reduce our debt, and we think as we reduce our debt, we think that’s going to help us tremendously with the share price going forward.”

Paul S. Herendeen – Valeant Pharmaceuticals International, Inc.

Reduction in debt underappreciated by the market

“We think that completing the debt transactions was a significant event that, in my opinion, was underappreciated by the markets. By refinancing the debt, we now have a very manageable debt paydown schedule for the next several years. We shifted to about 75% fixed versus floating rate debt and, finally, we substantially improved our covenant position.”

They aim at maintaining a good credit profile

“I’ve heard chatter in the markets that Valeant doesn’t have the ability to repay all of its debt. Let me respond. We can meet all of our financial obligations through a combination of cash generation from our business, asset sales, and importantly, refinancings. There’s a permanent role for debt in our capital structure. The goal is not to repay all of our debt and operate debt-free. The goal is to maintain a credit profile that will enable us to access the capital markets when necessary to fund our future capital requirements, including to refinance maturing debt.”

Johnson & Johnson (JNJ) Q1 2017

Dominic Caruso – EVP and CFO

Acquisition of Actelion almost complete

“…we have had many positive developments concerning the steps needed to close the Actelion transaction and we expect to complete our acquisition of Actelion by the end of the second quarter. ”

Cost management bearing fruit

“Cost of goods sold decreased by 20 basis points, primarily due to manufacturing cost improvements which were partially offset by transactional currency impacts. Selling, marketing and administrative expenses were 26.6% of sales, or 20 basis points lower as compared to the first quarter of 2016 due to cost management.”

On taxation

“With respect to tax reform and what we expect to happen, I was actually just in Washington last week and one of the things that I think is very clear is that the House has a plan that they want to move forward which includes the border adjustment tax, that has not yet been adopted by the Senate, although everyone agrees that some innovation in the way jobs will be created in the U.S. is important and I would say the grand summary from my takeaway was that both the House and the Senate are waiting for guidance from the White House on whether they prefer the border adjustment tax or whether they have another vehicle that they would like to implement. And while everyone is waiting for that, things have in fact stalled…, but I am confident that we’re talking about the right things, we’re talking about a lower U.S. tax rate, we’re talking about a territorial system and we’re talking about some innovation and some incentive for job creation in the U.S.”

Price trends

“I would say no significant acceleration or change in the pricing dynamics that we’ve been seeing. So steady as she goes with respect to slightly negative price across the industry”


GlaxoSmithKline Plc (GSK) Q4 2016 Earnings Call

Andrew P. Witty – CEO

Regulations need to be simplified

“…I suspect it’s going to require some simplification of some of the regulatory thicket which exists in the U.S. pricing environment. As you think about in any given zip code in the U.S., you’ve got every single piece of legislation which touches Medicare, Medicaid, Veterans, private, all over superimposed on each other. And so to try and drive a new pricing model through that thicket of regulation, sometimes they’re quite inhibitory in the way in which you might want to innovate your pricing approach.”

…and transparency increased.

There needs to be more transparency. If you look at the University of [California] Berkeley data showing that of $100 paid to an innovative drug company at list, only $63 on average makes it through to the company. That’s $37 out of the $100 are being paid to non-innovators in a system which thinks it’s paying high prices for innovation. So that’s really, that’s something that’s going to have to start to be addressed.”

They are taking a sustainable focus beyond price to volume

“I think on a global basis the countervailing pressure is the enormous expansion of volume opportunity. And I think what we’ve seen at GSK over the last few years in the Vaccine, Consumer, and even the Pharma business is that with judicial adjustments to price, we’ve been able to open up gigantic volumes. And what we’ve shown in these results and certainly the last couple of years’ results is that you can drive your margin up even if your prices are not quite at the leading edge of price but at a level which can open up volume. And that’s a model which I like a lot. I think it’s more sustainable than being preoccupied just with price. And it’s certainly evident that in today’s world if you want to accelerate the arrival of your product into a marketplace, price is potentially an accelerator or a break to that decision making.”

It is never dull over here

“So I’ve had 30 years in this industry, and there’s never been a dull year. And there’s never been a year where it hasn’t felt challenging and interesting. And I suspect the next 30 years won’t be any different. But the reality is the industry does something quite amazing for people around the world. And as long as we keep doing that, it will be a very vibrant industry.”


Simon Dingemans – CFO

Pharma performing better

“Elsewhere in the Pharma portfolio, 2016 saw a better performance from our established products business, as improved supply and mix partly offset the impact of biennial price revisions in Japan and the reshaping of our China business away from older products. ”


Johnson & Johnson’s (JNJ) Q4 2016 Earnings Call

Alex Gorsky – Chairman and Chief Executive Officer

They want a modernized tax code

“…we also are advocating for the modernization of the US tax codes. As both sides in the aisle in the Washington have noted, the US tax code for business is outdated and in many cases makes the US a more costly place to do business leaving US workers and the US economy at a disadvantage. We are very encouraged by the proposals currently in discussion and we will support business tax policy that is competitive with most developed countries and encourages innovation and growth. 

..and they are confident it would spur growth

“so far, I remain very confident in discussions that we’ve had that ultimately we will make changes to the overall tax system that will be a stimulus for growth and that ultimately will help Johnson & Johnson and many other companies grow at an even faster rate going forward.”

Thinking of your portfolio as your children when divesting

“it’s always a difficult decision and when you look at your portfolio and as I frequently describe, it is little bit like your children, you love all of them just from time-to-time we are trying to make decisions that we think ultimately are in the best long-term interest of our customers, stakeholders and our shareholders and we think diabetes is clearly an area of a lot of unmet medical need….That being said, we do feel that based upon the broader market dynamics, particularly things such as pricing in certain areas has led us to the point where we say the right thing for us to do is to consider strategic options for these three particular areas of the business.”

Dominic Caruso – Executive Vice President and Chief Financial Officer

On the Affordable Care Act

We did not see any significant impact uptick in business as a result of the implementation of the Affordable Care Act. Certainly there was not much of an impact at all in the Pharma business on our Device business because of the nature of the type of device products we have, we did not see much of an impact. So therefore, any change going in the opposite direction, we don’t think will be negative. We did see an impact in terms of the cost associated with the Affordable Care Act, but as we said before, we’ve incurred approximately $1.4 billion between the pharmaceutical fee, increased rebates et cetera even excluding the currently postponed medical device tax. So we’ll have to see when new legislation is announced, whether or not these fees and cost associated with the Affordable Care Act remain or if they are authored at any way. But those have already been incorporated in our business. ”


Pfizer (PFE) at Guggenheim Conference Notes

Ian C. Read – Chairman and CEO


Delegation is a necessary evil, and the reason company culture is important

“they told at business schools we have delegations great, and I say it is not, it is the worst thing in the world. The only reason I delegate it is because I can’t do everything. So, you suddenly realize that the only way you are going to move the company is through the culture.”


In fact, company culture is the determinant of success in the pharmaceutical industry

“I have always finished by saying the only thing that in the end will make a difference is our culture. We all in the pharmaceutical industry most of us have capital, most have bright people, we all have the tools we need to be successful but we will make the difference if our culture is better than the culture of the other companies. And so when I took over I wanted to instill a culture.”


Mechanisms and procedures for deciding when to end product development are crucial

“you don’t want to spend money on something that is going to fail so you really want to be very critical as you put things into Phase 2. You don’t certainly want to get what we got to in Phase 3 with our PCSK9 and have it fail. That’s a very expensive failure. Now that’s a drug that started this development eight years ago, nine years ago so, you really want to make sure that you have made very hard and critical decisions in Phase 1. And you don’t let this sort of lingering syndrome of repurposing or staying around…  we need to know the mechanism…  we are not going to bring a product for development unless it’s first in class or best in class and within two years of the first in class. Because that’s the competitor dynamic you need to force yourself to”


95% of research is done outside the company

“research is driven by you believe you need experts inside the company and you need the most brilliant scientists. But you certainly — we certainly have forced ourselves to understand that 95% of the research is outside of the company. And the trick is to get the scientist focused early on, on outside opportunities. So we have a partnership with about 19 universities. We get some 300 submissions on things that our clinicians and our research scientists wants to develop. We go through them, we pick about 16, we put our scientists in their labs, they come to our labs. We are trying to cut out that five to six period where it sort of swims around in universities and doesn’t really go anywhere in the Academy. And then some VC picks it up. What we’re trying to do is get ahead of the VC”


Current US tax policy allows foreign companies to buy US assets at zero tax, putting PFE at a disadvantage

“I think for the US companies there are multinationals, that is the biggest competitive reset against our European competitors if we get an effective tax policy. Suddenly they can’t buy U.S. assets at a zero tax rate because they have no profit in the U.S. and they take it away outside. So your ability to buy U.S. assets compared to Europeans become equalized and all of a sudden they’ll end up paying at least the corporate tax rate or the import tariff on everything they sell in the United States. So I think it’s the biggest level there for us in that sense competitively.”


Responsibility for long-term healthcare costs is best handled by providers

“So I think the long-term risk needs to be with the providers. The providers, the hospitals have formed chains, they’ve formed semi monopolies in geographic areas. So they hold the patient for the patient’s life other than people who leave the area to go to another area. But 90% of their population is theirs for their whole life. So these are the individuals, these are the institutions that you should be able to incentivate to look after long-term healthcare costs. Work on smoking, work on lipids, work on diabetes, work on obesity. Work on smoking cessation where you can pay these institutions to lower and bend the cost curve and they are the natural holders of that. You need to be able to have rewards and incentivate them to hold those risks.”

McKesson FY 2Q17 Earnings Call Notes

McKesson (MCK) Q2 2017 Results

Lowering outlook due to moderating branded pharma inflation trends

“we now provide an update to our expectation of a lower profit contribution, resulting from recent customer pricing activities, and lower operating profit as a result of further moderating branded pharmaceutical inflation trends, compared to previous expectations, both of which affect our U.S. pharmaceutical business within Distribution Solutions.”

Witnessed some evidence of inflation and pricing softness in line with original assumptions

“In our first quarter, we witnessed some evidence of inflation and pricing softness in line with our original assumptions. However, this softness became much more pronounced in our second quarter, first around brand inflation and later, around customer pricing. While we generally do not provide specific assumptions around customer pricing activity, we do operate in a competitive environment. And though competitive, we’ve always been focused on delivering value to our customers, value not just defined by price, but by service, innovation that helps our customers partner, manage, and run their operations, and manage their capital more effectively, and innovation that helps our customers connect with patients in a more informed and intimate way.”

Average price increases don’t necessarily capture price change dynamics

“branded inflation, it’s plus or minus what you’ll see from published sources of inflation. But it is also important to point out that those averages sometimes don’t necessarily tell the whole story, because of the mix, or the relationship, or the individual products that are going up or going down in the portfolios can be materially different. And so I do think the economics aren’t always necessarily driven with the direct correlation to the average price increases that everybody talks about.”

Pricing wont improve market share because our customers don’t want to change

“And that’s where we plan to stay. And I know at McKesson, at least, we think growing market share through a price-oriented approach ultimately will not be successful, because customers don’t want a change. Our customers, when they get a better deal, come to us and say, hey, listen, can you match this deal because I’d like to stay with you. And so that customer pressure to remain with us because they like us always provides McKesson an advantage when we’re in these discussions.”

Johnson & Johnson (JNJ) at Morgan Stanley Notes

JNJ’s 24 billion dollar brands–and its diverse portfolio in general–gives it insight and connections with large customers that are increasingly consolidating.

“You take we’ve got 24 brands that are billion dollar platforms at Johnson & Johnson, the first and best in many different areas. And we think that that provides a certain financial stability as we think about the long-term future and really investing for the long-term. We think that that diversified portfolio, however, provides us a number of other benefits. It provides us certain insights… We think it gives us breadth and depth with large customers that are increasingly consolidating, whether it’s large independent healthcare systems, whether it’s governments outside of the United States, particularly in emerging markets where the diversified and even consumer branded Johnson & Johnson is very important. It’s a philosophy and it’s a strategy that’s also grounded in competitiveness.” Alex Gorsky – Chief Executive Officer


Growth is split about 50-50 between organic and inorganic.

“In about slightly over 50% of the time, depending on the timeframe, it can range from 55% to 60% of the time, we tend to benefit from organic growth opportunities, things that we develop within our labs. About 40% to 45% of the time it’s been through inorganic growth.” Alex Gorsky – Chief Executive Officer


Over the next 30 years, 350 million people worldwide are aging past 65. This will create opportunity for the healthcare industry, but will also create pricing pressure.

“I think absolutely we should be expecting ongoing pricing pressures in the industry. It’s just the fact that if you look at the macroeconomic issues around the world, given aging populations, the fact that each of us are getting there faster by the minute. But about 12% of the population is over the age of 65, that number is probably going to go to 25% certainly here in the United States. If you’re in Japan, you’re already at 25%, but if you’re in Germany and places like that, you’re rapidly approaching that same number. When you consider the fact that once you turn 65 you tend to consume about 5 to 7 times the amount of healthcare you consumed before you were 65. And then if we go to emerging markets, China, Brazil, India, Russia, other areas, you’ve got two dynamics. One, you have an aging population in many of those places. I think there’s about 150 million people over the age of 65 in China. That number will go to 350 million over the next 30 years.

So imagine a population the size of the United States. And then you combine that with an increasing middle class and once people get shelter, food, what’s the third thing they want to consumer more of as they move up the economic ladder? Healthcare. So we think all of those are going to being a lot of pressure on payers and healthcare systems and therein lies the opportunity I think for us. But I think clearly that will result in pricing pressure” Alex Gorsky – Chief Executive Officer


Large acquisitions focus on synergy, smaller acquisitions focus on innovation

“Large acquisitions by definition are more complex, they’re messier. Rather than focusing on innovation, they frequently focus on synergies. And so that’s what we would prefer.” Alex Gorsky – Chief Executive Officer


As the hospital and pharmaceutical ecosystems evolve, they prefer to deal on a broader basis.

“We see that as systems get larger in the United States that there’s a preference to talk across category. Now it’s fair to say that hospital systems are still evolving in this area. There’s some of them that still need to mature, that need to build their systems to deal on that kind of basis. But we’re seeing a greater and greater appetite for that as we speak. We certainly see it outside the United States in dealing with places like the UK, Germany and in emerging markets where they want to deal on a broader basis.” Alex Gorsky – Chief Executive Officer


The JNJ brand is associated with the smell of baby shampoo.

“We believe the consumer business at J&J is an absolute integral part of our company. And it starts with what you just said. I mean wherever I go around the world, if you say what do you think of with Johnson & Johnson, I mean people smell baby shampoo. And it brings an affinity to the brand of Johnson & Johnson, it makes us different.” Alex Gorsky – Chief Executive Officer

Valeant 1Q16 Earnings Call Notes

Joseph Papa

We will file timely SEC filings from now on

Based on our guidance, we have a solid position with our liquidity, and I expect to be in compliance with the debt covenants throughout 2016 and beyond. Also, we are now planning or to file our quarterly information in a timely fashion for the regulatory SEC filings.

We have good franchises still

as I was doing my due diligence in joining the company. I believe that Valeant has a diverse collection of leading healthcare franchises and brands, such as Bausch & Lomb, CeraVe, and Salix. As I did my due diligence, I discovered Valeant had a very broad geographic global footprint. I believe that our commitment to bring innovative products to the market through an exciting new product pipeline continues to be undervalued and misunderstood and I hope to change that perception.

Negative attention continues to impact business

Unfortunately, negative external attention come – continues to adversely impact the business and our reputation with patients, physicians, and all of you, our shareholders as well as our distracted organization.

Turnaround strategy

Number one, we need to drive engagement in the company. We need to re-recruit Valeant employees back to the company. We need to add some additional outside talent and we’re going to work very hard to reengage with our partners, the patients, the prescribers, the payers, and investors.
Number two, we want to reallocate strategic resources at Valeant to fix the dermatology business, accelerate Salix growth, which is already quite good as Rob mentioned. But I just want to clearly reaccelerate that growth.
Number three, we want to refocus R&D dollars into investment for core assets of ophthalmology, dermatology, GI, and consumer. We want to manage the neuro and other business for cash generation and to pay down debt.

There are some good core assets here

based on 30 days and I have to put it a caveat, it’s only been 30 days now. My review of the business is that really there are some very important core assets within the company.
The core assets that we see are clearly the Bausch & Lomb franchise, the Salix franchise, the derm franchise, and the consumer franchise. We view those as core assets, where we want to spend behind those, spend behind both in R&D, capital expenditures, in terms of what we’re looking at.

There are also non core assets

there are some areas of the company that I would refer to as non-core. I don’t want to go into the specifics of them, but the non-core area are places where we will look to potentially look at asset sales. We think those asset sales there can help do two things. Number one, it can certainly generate cash to pay down debt. But number two, and I think this is also very important one, is that it can reduce some of the complexity of our business by selling off some of these assets that are good assets, but they are complex and they do result in a more complex business for us.

Valeant 4Q15 Earnings Call Notes

Valeant Pharmaceuticals’ (VRX) CEO Michael Pearson on Q4 2015

There’s some good news and some bad news

“So as you all know, I have been back from my medical leave for about two weeks and I have had a chance to review what is happening in the businesses and there is a mixed combination of some good news and some bad news, and I just wanted to take a few minutes to sort of give you my assessment and then what we plan to do about it.”

Committed to reducing prices

“First, our approach to pricing. We have already committed to reducing pricing on our brand in dermatology and ophthalmology products, within the Walgreens portfolio an average 10%. This price reduction is on lack, and will impact and will be taken across all channels, not just Walgreens. Other price increases will be modest and in line with market and payer contracts.”

No plans for divestitures

“In terms of divestitures, as a public company, we continue to review our assets in order to maximize shareholder value. We have no current plans to divest any major platform. However, we will continue to look at our non-strategic assets and make appropriate decisions.”

Subject on ongoing investigation

“Finally, we are the subject to several ongoing investigations. These include investigations by the U.S. Attorney’s Office for Massachusetts in the Southern District of New York, the SEC, and Congress. We are cooperating in these investigations and have provided and will be providing documents, information, and testimony in this various investigations; whether pursuing to subpoenas or otherwise.”

Business is not operating in all centers

“So, in summary, our business is not operating in all centers, but we and I are committed to gain it back on track. We have a set of terrific products and brands and a loyal set of physicians, patients, and customers, to both revenue enhancement cost reduction, we are confident that we can and again will be able to begin to deliver the cash flows or shareholders and debt holders are accustomed to.”

We have to earn back credibility

“In terms of management credibility, we have to earn it. And you raised some terrific points, I would argue January, I don’t think we said a whole lot in January, I think it was in a hospital but I do accept your point and it starts with me. So, our team has been working hard and we are deliver on our commitments. So, the world has changed to some degree since December but we have to do a better job. We’ve had some underperforming businesses; that’s on us. Right that’s totally on us. So we have to earn back the credibility we have to deliver on the results, we have to meet or exceed this guidance and I think we are all recognize that. And so it’s a bit of a starting over point at this point for me and the company. And clearly if we don’t deliver, then again that’s on me. And but I can assure you, I am completely committed to making sure that we do deliver and I do think we knew we have a lot more line of sight in terms of managed care at this point.”

I’m not aware of any golden parachute if I get fired

“actually I think I am pretty modest if I got fired. It’s pretty modest they maybe referring to some stock that is invested that’s not delivered until in the future but that’s been divested, I mean, that was. So, David I am not aware of any golden parachute that I have.”

Linda LaGorga

Balance sheet is key priority for 2016

” One of our key 2016 priorities is to focus on our balance sheet. We remain committed to using the vast majority of our cash flow to pay down debts. At our Investor Day in December, we said we expect to pay down more than 2.25 billion of permanent debt in 2016.”

Robert Rosiello

We believe in our mission

“And I think that’s what motivates our team. I think we believe in our mission. We believe in what our company is trying to achieve and that’s what we do day-to-day. The issues surrounding us are distracting and it takes courage to forge ahead to execute our mission day-to-day in the face of all that. So, all I can say is we have fabulous people we are blessed to have them, we believe in them and we think they’ll do the right thing for the business.”