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.”

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.”