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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the Quarterly Period Ended September 30, 2015
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OR
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from
to
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British Columbia, Canada
(State or other jurisdiction of incorporation or organization) |
98-0448205
(I.R.S. Employer Identification No.) |
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2150 St. Elzéar Blvd. West, Laval, Quebec
(Address of principal executive offices) |
H7L 4A8
(Zip Code) |
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Large accelerated filer
x
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Accelerated filer
o
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Non-accelerated filer
o
(Do not check if a smaller reporting company) |
Smaller reporting company
o
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Part I.
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Financial Information
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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Part II
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Other Information
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Item 1.
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Item 1A.
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Item 2.
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Item 3.
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Item 4.
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Item 5.
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Item 6.
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•
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the challenges and difficulties associated with managing the rapid growth of our Company and a large complex business;
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•
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our ability to retain, motivate and recruit executives and other key employees;
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the introduction of products that compete against our products that do not have patent or data exclusivity rights;
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our ability to compete against companies that are larger and have greater financial, technical and human resources than we do, as well as other competitive factors, such as technological advances achieved, patents obtained and new products introduced by our competitors;
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our ability to identify, finance, acquire, close and integrate acquisition targets successfully and on a timely basis;
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•
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factors relating to the acquisition and integration of the companies, businesses and products acquired by the Company, such as the time and resources required to integrate such companies, businesses and products, the difficulties associated with such integrations (including potential disruptions in sales activities and potential challenges with information technology systems integrations), the difficulties and challenges associated with entering into new business areas and new geographic markets, the difficulties, challenges and costs associated with managing and integrating new facilities,
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factors relating to our ability to achieve all of the estimated synergies from our acquisitions as a result of cost-rationalization and integration initiatives. These factors may include greater than expected operating costs, the difficulty in eliminating certain duplicative costs, facilities and functions, and the outcome of many operational and strategic decisions, some of which have not yet been made;
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factors relating to our acquisition of Salix, including the impact of substantial additional debt on our financial condition and results of operations; our ability to effectively and efficiently integrate the operations of the Company and Salix; our ability to achieve the estimated synergies from this transaction; our ability to further reduce wholesaler inventory levels of certain of Salix's products and the timing of such reduction; and, once integrated, the effects of such business combination on our future financial condition, operating results, strategy and plans;
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•
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our ability to secure and maintain third party research, development, manufacturing, marketing or distribution arrangements;
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•
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our eligibility for benefits under tax treaties and the continued availability of low effective tax rates for the business profits of certain of our subsidiaries, including the impact on such matters of the recent reports published by the Organization for Economic Co-operation and Development (OECD) respecting base erosion and profit shifting (BEPS) and the potential enactment in law of such measures by individual countries;
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our substantial debt and debt service obligations and their impact on our financial condition and results of operations;
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our future cash flow, our ability to service and repay our existing debt, our ability to raise additional funds, if needed, and any restrictions that are or may be imposed as a result of our current and future indebtedness, in light of our current and projected levels of operations, acquisition activity and general economic conditions (including capital market conditions and a lack of liquidity therein);
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any downgrade by rating agencies in our corporate credit ratings, which may impact, among other things, our ability to raise additional debt capital and implement elements of our growth strategy;
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interest rate risks associated with our floating rate debt borrowings;
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the risks associated with the international scope of our operations, including our presence in emerging markets and the challenges we face when entering new geographic markets (including the challenges created by new and different regulatory regimes in such countries);
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adverse global economic conditions and credit markets and foreign currency exchange uncertainty and volatility in the countries in which we do business (such as the recent instability in Brazil, China, Russia, Ukraine and the Middle East);
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economic factors over which the Company has no control, including changes in inflation, interest rates, foreign currency rates, and the potential effect of such factors on revenues, expenses and resulting margins;
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the introduction of generic competitors of our branded products;
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our ability to obtain and maintain sufficient intellectual property rights over our products and defend against challenges to such intellectual property;
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the expense, timing and outcome of legal proceedings, arbitrations, investigations, tax and other regulatory audits, and regulatory proceedings and settlements thereof (including the matters assumed as part of our acquisition of Salix, the pending investigations by the U.S. Attorney's Office for the District of Massachusetts and the U.S. Attorney's Office for the Southern District of New York, the recent shareholder class action suits and other matters relating to our distribution and pricing practices);
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the risk that our products could cause, or be alleged to cause, personal injury and adverse effects, leading to potential lawsuits, product liability claims and damages and/or withdrawals of products from the market;
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the availability of and our ability to obtain and maintain adequate insurance coverage and/or our ability to cover or insure against the total amount of the claims and liabilities we face, whether through third party insurance or self-insurance;
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the difficulty in predicting the expense, timing and outcome within our legal and regulatory environment, including with respect to approvals by the U.S. Food and Drug Administration (the "FDA"), Health Canada and similar agencies in
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the results of continuing safety and efficacy studies by industry and government agencies;
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ongoing oversight and review of our products and facilities by regulatory and governmental agencies, including periodic audits by the FDA, and the results thereof;
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the availability and extent to which our products are reimbursed by government authorities and other third party payors, as well as the impact of obtaining or maintaining such reimbursement on the price of our products;
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the inclusion of our products on formularies or our ability to achieve favorable formulary status, as well as the impact on the price of our products in connection therewith;
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the impact of price control restrictions on our products, including the risk of mandated price reductions;
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the success of preclinical and clinical trials for our drug development pipeline or delays in clinical trials that adversely impact the timely commercialization of our pipeline products, as well as factors impacting the commercial success of our currently marketed products, which could lead to material impairment charges;
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the results of management reviews of our research and development portfolio, conducted periodically and in connection with certain acquisitions, the decisions from which could result in terminations of specific projects which, in turn, could lead to material impairment charges;
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negative publicity or reputational harm to, or other adverse impacts on, our Company, products and business, including as a result of the recent public scrutiny of our pricing and distribution practices, recent statements made by a short seller respecting our business practices and financial accounting and the pending investigations by the U.S. Attorney's Office for the District of Massachusetts and the U.S. Attorney's Office for the Southern District of New York;
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the outcome of the review of the Company's business relationship with Philidor Rx Services, LLC and the negative publicity or reputational harm to, or other adverse impacts on, the Company that could derive therefrom;
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the uncertainties associated with the acquisition and launch of new products, including, but not limited to, the acceptance and demand for new pharmaceutical products, and the impact of competitive products and pricing;
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our ability to obtain components, raw materials or finished products supplied by third parties and other manufacturing and related supply difficulties, interruptions and delays;
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the disruption of delivery of our products and the routine flow of manufactured goods;
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the seasonality of sales of certain of our products;
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declines in the pricing and sales volume of certain of our products that are distributed or marketed by third parties, over which we have no or limited control;
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compliance by the Company or our third party partners and service providers (over whom we may have limited influence), or the failure of our Company or these third parties to comply, with health care “fraud and abuse” laws and other extensive regulation of our marketing, promotional and pricing practices, worldwide anti-bribery laws (including the U.S. Foreign Corrupt Practices Act), worldwide environmental laws and regulation and privacy and security regulations;
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the impacts of the Patient Protection and Affordable Care Act (as amended) and other legislative and regulatory healthcare reforms in the countries in which we operate;
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potential ramifications, including possible financial penalties, relating to Salix's restatement of its historical financial results and our ability to address historical weaknesses in Salix's internal control over financial reporting;
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interruptions, breakdowns or breaches in our information technology systems; and
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other risks detailed from time to time in our filings with the U.S. Securities and Exchange Commission (the “SEC”) and the Canadian Securities Administrators (the “CSA”), as well as our ability to anticipate and manage the risks associated with the foregoing.
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As of
September 30, 2015 |
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As of
December 31,
2014
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Assets
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Current assets:
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Cash and cash equivalents
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$
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1,420.0
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$
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322.6
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Trade receivables, net
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2,696.3
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2,075.8
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Inventories, net
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1,199.2
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950.6
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Prepaid expenses and other current assets
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953.0
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650.8
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Deferred tax assets, net
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727.2
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193.3
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Total current assets
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6,995.7
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4,193.1
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Property, plant and equipment, net
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1,351.4
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1,310.5
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Intangible assets, net
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22,382.1
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11,255.9
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Goodwill
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17,374.7
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9,346.4
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Deferred tax assets, net
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114.6
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54.0
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Other long-term assets, net
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236.1
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167.4
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Total assets
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$
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48,454.6
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$
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26,327.3
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Liabilities
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Current liabilities:
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Accounts payable
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$
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476.8
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$
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398.0
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Accrued and other current liabilities
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3,293.5
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2,179.4
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Acquisition-related contingent consideration
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161.6
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141.8
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Current portion of long-term debt
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707.0
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0.9
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Deferred tax liabilities, net
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11.6
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10.7
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Total current liabilities
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4,650.5
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2,730.8
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Acquisition-related contingent consideration
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600.2
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167.0
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Long-term debt
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30,176.3
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15,228.0
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Pension and other benefit liabilities
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221.9
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239.8
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Liabilities for uncertain tax positions
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109.3
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102.6
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Deferred tax liabilities, net
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6,022.6
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2,227.5
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Other long-term liabilities
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209.1
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197.1
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Total liabilities
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41,989.9
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20,892.8
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Commitments and contingencies (Note 16)
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Equity
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Common shares, no par value, unlimited shares authorized, 343,094,009 and
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||||
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334,402,964 issued and outstanding at September 30, 2015 and December 31, 2014, respectively
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9,899.6
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8,349.2
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Additional paid-in capital
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244.6
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243.9
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Accumulated deficit
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(2,338.5
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)
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(2,365.0
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)
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Accumulated other comprehensive loss
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(1,463.4
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)
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(915.9
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)
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Total Valeant Pharmaceuticals International, Inc. shareholders’ equity
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6,342.3
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5,312.2
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Noncontrolling interest
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122.4
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122.3
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Total equity
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6,464.7
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5,434.5
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Total liabilities and equity
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$
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48,454.6
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$
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26,327.3
|
|
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Three Months Ended
September 30, |
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Nine Months Ended
September 30, |
||||||||||||
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2015
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2014
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2015
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2014
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||||||||
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Revenues
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||||||||
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Product sales
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$
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2,748.2
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$
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2,022.9
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$
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7,590.1
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$
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5,868.1
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Other revenues
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38.6
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33.3
|
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|
120.0
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115.4
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||||
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2,786.8
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2,056.2
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7,710.1
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5,983.5
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||||
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Expenses
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Cost of goods sold (exclusive of amortization and impairments of
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||||||||
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finite-lived intangible assets shown separately below)
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634.6
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545.8
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1,864.9
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1,619.5
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Cost of other revenues
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13.6
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15.0
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43.1
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45.3
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Selling, general and administrative
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697.6
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504.1
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1,956.9
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1,501.8
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Research and development
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101.6
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59.1
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238.5
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186.9
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Amortization and impairments of finite-lived intangible assets
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679.2
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393.1
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1,629.8
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1,113.9
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Restructuring, integration and other costs
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75.6
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61.7
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274.0
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337.4
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||||
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In-process research and development impairments and other charges
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95.8
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19.9
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108.1
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40.3
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Acquisition-related costs
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7.0
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1.6
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26.3
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3.7
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||||
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Acquisition-related contingent consideration
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3.8
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4.0
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22.6
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14.8
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Other expense (income)
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30.2
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(232.0
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)
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213.2
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(275.7
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)
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||||
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2,339.0
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1,372.3
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6,377.4
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4,587.9
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Operating income
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447.8
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683.9
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1,332.7
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1,395.6
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Interest income
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0.7
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|
0.8
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2.5
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3.8
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||||
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Interest expense
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(420.2
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)
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(258.4
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)
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(1,130.7
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)
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(746.1
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)
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||||
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Loss on extinguishment of debt
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—
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—
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(20.0
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)
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(93.7
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)
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||||
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Foreign exchange and other
|
(34.0
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)
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(53.0
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)
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|
(99.5
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)
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(63.0
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)
|
||||
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Gain on investments, net
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—
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|
3.4
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—
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|
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5.9
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|
||||
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(Loss) income before (recovery of) provision for income taxes
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(5.7
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)
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|
376.7
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|
85.0
|
|
|
502.5
|
|
||||
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(Recovery of) provision for income taxes
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(57.4
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)
|
|
100.3
|
|
|
10.4
|
|
|
124.4
|
|
||||
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Net income
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51.7
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|
|
276.4
|
|
|
74.6
|
|
|
378.1
|
|
||||
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Less: Net income (loss) attributable to noncontrolling interest
|
2.2
|
|
|
1.0
|
|
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4.4
|
|
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(0.5
|
)
|
||||
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Net income attributable to Valeant Pharmaceuticals International, Inc.
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$
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49.5
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|
$
|
275.4
|
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|
$
|
70.2
|
|
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$
|
378.6
|
|
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Earnings per share attributable to Valeant Pharmaceuticals International, Inc.:
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Basic
|
$
|
0.14
|
|
|
$
|
0.82
|
|
|
$
|
0.21
|
|
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$
|
1.13
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Diluted
|
$
|
0.14
|
|
|
$
|
0.81
|
|
|
$
|
0.20
|
|
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$
|
1.11
|
|
|
|
|
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Weighted-average common shares (in millions)
|
|
|
|
|
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|
||||||||
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Basic
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344.9
|
|
|
335.4
|
|
|
340.8
|
|
|
335.2
|
|
||||
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Diluted
|
351.0
|
|
|
341.3
|
|
|
347.2
|
|
|
341.4
|
|
||||
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
|
Net income
|
$
|
51.7
|
|
|
$
|
276.4
|
|
|
$
|
74.6
|
|
|
$
|
378.1
|
|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
||||||||
|
Foreign currency translation adjustment
|
(173.2
|
)
|
|
(446.8
|
)
|
|
(548.3
|
)
|
|
(440.4
|
)
|
||||
|
Unrealized gain on equity method investment, net of tax
|
—
|
|
|
4.0
|
|
|
—
|
|
|
22.5
|
|
||||
|
Net unrealized holding (loss) gain on available-for-sale equity securities:
|
|
|
|
|
|
|
|
||||||||
|
Arising in period
|
—
|
|
|
(0.9
|
)
|
|
—
|
|
|
1.8
|
|
||||
|
Reclassification to net income
|
—
|
|
|
(1.8
|
)
|
|
—
|
|
|
(1.8
|
)
|
||||
|
Pension and postretirement benefit plan adjustments
|
(0.5
|
)
|
|
(0.6
|
)
|
|
(1.4
|
)
|
|
(1.8
|
)
|
||||
|
Other comprehensive loss
|
(173.7
|
)
|
|
(446.1
|
)
|
|
(549.7
|
)
|
|
(419.7
|
)
|
||||
|
Comprehensive loss
|
(122.0
|
)
|
|
(169.7
|
)
|
|
(475.1
|
)
|
|
(41.6
|
)
|
||||
|
Less: Comprehensive income (loss) attributable to noncontrolling interest
|
0.4
|
|
|
2.2
|
|
|
2.2
|
|
|
(1.0
|
)
|
||||
|
Comprehensive loss attributable to Valeant Pharmaceuticals International, Inc.
|
$
|
(122.4
|
)
|
|
$
|
(171.9
|
)
|
|
$
|
(477.3
|
)
|
|
$
|
(40.6
|
)
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
|
Cash Flows From Operating Activities
|
|
|
|
|
|
|
|
||||||||
|
Net income
|
$
|
51.7
|
|
|
$
|
276.4
|
|
|
$
|
74.6
|
|
|
$
|
378.1
|
|
|
Adjustments to reconcile net loss (income) to net cash provided by operating activities:
|
|
|
|
|
|
|
|
||||||||
|
Depreciation and amortization, including impairments of finite-lived intangible assets
|
726.4
|
|
|
439.3
|
|
|
1,768.4
|
|
|
1,248.1
|
|
||||
|
Amortization and write-off of debt discounts and debt issuance costs
|
20.5
|
|
|
34.6
|
|
|
123.7
|
|
|
58.1
|
|
||||
|
In-process research and development impairments
|
95.8
|
|
|
19.9
|
|
|
108.1
|
|
|
20.3
|
|
||||
|
Acquisition accounting adjustment on inventory sold
|
27.2
|
|
|
12.4
|
|
|
97.7
|
|
|
21.9
|
|
||||
|
Loss (gain) on disposal of assets, net
|
5.3
|
|
|
(254.5
|
)
|
|
9.2
|
|
|
(254.5
|
)
|
||||
|
Acquisition-related contingent consideration
|
3.8
|
|
|
4.0
|
|
|
22.6
|
|
|
14.8
|
|
||||
|
Allowances for losses on accounts receivable and inventories
|
19.6
|
|
|
12.0
|
|
|
46.4
|
|
|
47.6
|
|
||||
|
Deferred income taxes
|
(91.4
|
)
|
|
74.6
|
|
|
(79.0
|
)
|
|
63.2
|
|
||||
|
Additions (reductions) to accrued legal settlements
|
25.6
|
|
|
(0.9
|
)
|
|
31.9
|
|
|
(48.2
|
)
|
||||
|
Payments of accrued legal settlements
|
(26.2
|
)
|
|
(0.2
|
)
|
|
(32.1
|
)
|
|
(1.2
|
)
|
||||
|
Share-based compensation
|
50.5
|
|
|
20.2
|
|
|
111.4
|
|
|
60.6
|
|
||||
|
Excess tax expense (benefits) from share-based compensation
|
3.9
|
|
|
(15.9
|
)
|
|
(21.7
|
)
|
|
(17.1
|
)
|
||||
|
Foreign exchange loss
|
31.0
|
|
|
55.1
|
|
|
96.6
|
|
|
62.4
|
|
||||
|
Loss on extinguishment of debt
|
—
|
|
|
—
|
|
|
20.0
|
|
|
93.7
|
|
||||
|
Payment of accreted interest on contingent consideration
|
(7.7
|
)
|
|
(1.3
|
)
|
|
(19.8
|
)
|
|
(9.5
|
)
|
||||
|
Other
|
0.2
|
|
|
9.7
|
|
|
(13.7
|
)
|
|
15.8
|
|
||||
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
||||||||
|
Trade receivables
|
(347.2
|
)
|
|
(121.4
|
)
|
|
(656.0
|
)
|
|
(205.2
|
)
|
||||
|
Inventories
|
(45.6
|
)
|
|
(41.5
|
)
|
|
(132.4
|
)
|
|
(122.8
|
)
|
||||
|
Prepaid expenses and other current assets
|
(88.5
|
)
|
|
5.5
|
|
|
(252.0
|
)
|
|
34.5
|
|
||||
|
Accounts payable, accrued and other liabilities
|
281.6
|
|
|
90.7
|
|
|
334.1
|
|
|
18.4
|
|
||||
|
Net cash provided by operating activities
|
736.5
|
|
|
618.7
|
|
|
1,638.0
|
|
|
1,479.0
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
|
Cash Flows From Investing Activities
|
|
|
|
|
|
|
|
||||||||
|
Acquisition of businesses, net of cash acquired
|
(115.8
|
)
|
|
(606.8
|
)
|
|
(14,001.7
|
)
|
|
(981.1
|
)
|
||||
|
Acquisition of intangible assets and other assets
|
(0.1
|
)
|
|
(74.3
|
)
|
|
(58.1
|
)
|
|
(105.8
|
)
|
||||
|
Purchases of property, plant and equipment
|
(51.1
|
)
|
|
(39.6
|
)
|
|
(163.7
|
)
|
|
(211.2
|
)
|
||||
|
Proceeds from sales and maturities of short-term investments
|
32.5
|
|
|
—
|
|
|
50.2
|
|
|
—
|
|
||||
|
Net settlement of assumed derivative contracts (Note 3)
|
—
|
|
|
—
|
|
|
184.6
|
|
|
—
|
|
||||
|
Settlement of foreign currency forward exchange contracts
|
—
|
|
|
—
|
|
|
(26.3
|
)
|
|
—
|
|
||||
|
Purchases of marketable securities
|
(24.2
|
)
|
|
—
|
|
|
(24.5
|
)
|
|
—
|
|
||||
|
Purchase of equity method investment
|
—
|
|
|
—
|
|
|
—
|
|
|
(75.9
|
)
|
||||
|
Proceeds from sale of assets and businesses, net of costs to sell
|
2.5
|
|
|
1,477.0
|
|
|
2.8
|
|
|
1,479.8
|
|
||||
|
Decrease (increase) in restricted cash and cash equivalents
|
—
|
|
|
—
|
|
|
(5.2
|
)
|
|
—
|
|
||||
|
Net cash (used in) provided by investing activities
|
(156.2
|
)
|
|
756.3
|
|
|
(14,041.9
|
)
|
|
105.8
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
|
Cash Flows From Financing Activities
|
|
|
|
|
|
|
|
||||||||
|
Issuance of long-term debt, net of discount
|
—
|
|
|
555.0
|
|
|
16,925.8
|
|
|
963.4
|
|
||||
|
Repayments of long-term debt
|
(29.0
|
)
|
|
(1,629.8
|
)
|
|
(1,387.2
|
)
|
|
(2,184.0
|
)
|
||||
|
Repayments of convertible notes assumed
|
—
|
|
|
—
|
|
|
(3,122.8
|
)
|
|
—
|
|
||||
|
Issuance of common stock, net
|
—
|
|
|
—
|
|
|
1,433.7
|
|
|
—
|
|
||||
|
Repurchases of common shares
|
—
|
|
|
—
|
|
|
(50.0
|
)
|
|
—
|
|
||||
|
Proceeds from exercise of stock options
|
7.0
|
|
|
3.8
|
|
|
29.1
|
|
|
10.9
|
|
||||
|
Excess tax benefits from share-based compensation
|
(3.9
|
)
|
|
15.9
|
|
|
21.7
|
|
|
17.1
|
|
||||
|
Payment of employee withholding tax upon vesting of share-based awards
|
(24.3
|
)
|
|
(2.0
|
)
|
|
(85.8
|
)
|
|
(38.5
|
)
|
||||
|
Payments of contingent consideration
|
(48.4
|
)
|
|
(14.4
|
)
|
|
(129.4
|
)
|
|
(96.6
|
)
|
||||
|
Payments of financing costs
|
—
|
|
|
(10.2
|
)
|
|
(101.7
|
)
|
|
(18.8
|
)
|
||||
|
Other
|
(9.9
|
)
|
|
(0.4
|
)
|
|
(10.2
|
)
|
|
(14.9
|
)
|
||||
|
Net cash (used in) provided by financing activities
|
(108.5
|
)
|
|
(1,082.1
|
)
|
|
13,523.2
|
|
|
(1,361.4
|
)
|
||||
|
Effect of exchange rate changes on cash and cash equivalents
|
(9.8
|
)
|
|
(15.3
|
)
|
|
(21.9
|
)
|
|
(14.9
|
)
|
||||
|
Net increase in cash and cash equivalents
|
462.0
|
|
|
277.6
|
|
|
1,097.4
|
|
|
208.5
|
|
||||
|
Cash and cash equivalents, beginning of period
|
958.0
|
|
|
531.2
|
|
|
322.6
|
|
|
600.3
|
|
||||
|
Cash and cash equivalents, end of period
|
$
|
1,420.0
|
|
|
$
|
808.8
|
|
|
$
|
1,420.0
|
|
|
$
|
808.8
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Non-Cash Investing and Financing Activities
|
|
|
|
|
|
|
|
||||||||
|
Acquisition of businesses, contingent and deferred consideration obligations at fair value
|
$
|
(108.7
|
)
|
|
$
|
(16.0
|
)
|
|
$
|
(783.3
|
)
|
|
$
|
(65.1
|
)
|
|
Acquisition of businesses, debt assumed
|
(6.1
|
)
|
|
(4.5
|
)
|
|
(3,129.2
|
)
|
|
(8.5
|
)
|
||||
|
1.
|
DESCRIPTION OF BUSINESS
|
|
2.
|
SIGNIFICANT ACCOUNTING POLICIES
|
|
3.
|
BUSINESS COMBINATIONS
|
|
(In millions except per share data)
|
|
Conversion
Calculation
|
|
Fair
Value
|
||||
|
Number of shares of Salix common stock outstanding as of acquisition date
|
|
64.3
|
|
|
|
|
||
|
Multiplied by Per Share Merger Consideration
|
|
$
|
173.00
|
|
|
$
|
11,123.9
|
|
|
Number of outstanding stock options of Salix cancelled and exchanged for cash
(a)
|
|
0.1
|
|
|
10.1
|
|
||
|
Number of outstanding restricted stock of Salix cancelled and exchanged for cash
(a)
|
|
1.1
|
|
|
195.0
|
|
||
|
|
|
|
|
11,329.0
|
|
|||
|
Less: Cash consideration paid for Salix’s restricted stock that was accelerated at the closing of the Salix Acquisition
(a)
|
|
|
|
(164.5
|
)
|
|||
|
Add: Payment of Salix’s Term Loan B Credit Facility
(b)
|
|
|
|
1,125.2
|
|
|||
|
Add: Payment of Salix’s 6.00% Senior Notes due 2021
(b)
|
|
|
|
842.3
|
|
|||
|
Total fair value of consideration transferred
|
|
|
|
|
$
|
13,132.0
|
|
|
|
(a)
|
The purchase consideration paid to holders of Salix stock options and restricted stock attributable to pre-combination services was included as a component of purchase price. Purchase consideration of
$165 million
paid for outstanding restricted stock that was accelerated by the Company in connection with the Salix Acquisition was excluded from purchase price and accounted for as post-combination expense within Other expense (income) in the second quarter of 2015.
|
|
(b)
|
The repayment of Salix’s Term Loan B Credit Facility has been reflected as part of the purchase consideration as the debt was repaid concurrently with the consummation of the Salix Acquisition and was not assumed by the Company as part of the acquisition. Similarly, the redemption of Salix’s
6.00%
Senior Notes due 2021 has been reflected as part of the purchase consideration as the indenture governing the
6.00%
Senior Notes due 2021 was satisfied and discharged concurrently with the consummation of the Salix Acquisition and was not assumed by the Company as part of the acquisition.
|
|
•
|
amounts for intangible assets, property and equipment, certain liabilities, and other working capital balances pending finalization of the valuation;
|
|
•
|
amounts for income tax assets and liabilities, pending finalization of estimates and assumptions in respect of certain tax aspects of the transaction; and
|
|
•
|
amount of goodwill pending the completion of the valuation of the assets acquired and liabilities assumed.
|
|
|
|
Amounts
Recognized as of
Acquisition Date
(as previously
reported)
(a)
|
|
Measurement
Period
Adjustments
(b)
|
|
Amounts
Recognized as of
September 30, 2015
(as adjusted)
|
||||||
|
Cash and cash equivalents
|
|
$
|
113.7
|
|
|
$
|
—
|
|
|
$
|
113.7
|
|
|
Inventories
(c)
|
|
233.2
|
|
|
—
|
|
|
233.2
|
|
|||
|
Other assets
(d)
|
|
1,400.3
|
|
|
14.3
|
|
|
1,414.6
|
|
|||
|
Property, plant and equipment, net
|
|
24.3
|
|
|
—
|
|
|
24.3
|
|
|||
|
Identifiable intangible assets, excluding acquired IPR&D
(e)
|
|
6,756.3
|
|
|
—
|
|
|
6,756.3
|
|
|||
|
Acquired IPR&D
(f)
|
|
5,366.8
|
|
|
(90.1
|
)
|
|
5,276.7
|
|
|||
|
Current liabilities
(g)
|
|
(1,764.2
|
)
|
|
(140.8
|
)
|
|
(1,905.0
|
)
|
|||
|
Contingent consideration, including current and long-term portion
(h)
|
|
(327.9
|
)
|
|
(45.3
|
)
|
|
(373.2
|
)
|
|||
|
Long-term debt, including current portion
(i)
|
|
(3,123.1
|
)
|
|
—
|
|
|
(3,123.1
|
)
|
|||
|
Deferred income taxes, net
(j)
|
|
(3,512.0
|
)
|
|
92.5
|
|
|
(3,419.5
|
)
|
|||
|
Other non-current liabilities
|
|
(7.3
|
)
|
|
(9.0
|
)
|
|
(16.3
|
)
|
|||
|
Total identifiable net assets
|
|
5,160.1
|
|
|
(178.4
|
)
|
|
4,981.7
|
|
|||
|
Goodwill
(k)
|
|
7,971.9
|
|
|
178.4
|
|
|
8,150.3
|
|
|||
|
Total fair value of consideration transferred
|
|
$
|
13,132.0
|
|
|
$
|
—
|
|
|
$
|
13,132.0
|
|
|
(a)
|
As previously reported in the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015.
|
|
(b)
|
The measurement period adjustments primarily reflect: (i) a reduction in acquired in-process research and development ("IPR&D") assets, specifically for the Oral Relistor® program based mainly on revised cost projections (see further discussion of IPR&D programs in (f) below), (ii) an increase in assumed contingent consideration resulting from further assessment of assumptions related to the probability-weighted cash flows and (iii) the tax impact of pre-tax measurement period adjustments as well as reclassifications of certain tax balances. The measurement period adjustments were made to reflect facts and circumstances existing as of the acquisition date, and did not result from intervening events subsequent to the acquisition date. These adjustments did not have a significant impact on the Company’s previously reported consolidated financial statements and, therefore, the Company has not retrospectively adjusted those financial statements.
|
|
(c)
|
Includes an estimated fair value step-up adjustment to inventory of
$108 million
.
|
|
(d)
|
Primarily includes an estimated fair value of
$1.27 billion
to record the capped call transactions and convertible bond hedge transactions that were entered into by Salix prior to the Salix Acquisition in connection with its
1.5%
Convertible Senior Notes due 2019 and
2.75%
Convertible Senior Notes due 2015. These instruments were settled on the date of the Salix Acquisition and, as such, the fair value was based on the settlement amounts. Other assets also includes an estimated insurance recovery of
$80 million
, based on estimated fair value, related to the legal matters discussed in (g) below.
|
|
(e)
|
The following table summarizes the amounts and useful lives assigned to identifiable intangible assets:
|
|
|
|
Weighted-
Average
Useful Lives
(Years)
|
|
Amounts
Recognized as of
Acquisition Date
|
||
|
Product brands
|
|
10
|
|
$
|
6,088.3
|
|
|
Corporate brand
|
|
20
|
|
668.0
|
|
|
|
Total identifiable intangible assets acquired
|
|
11
|
|
$
|
6,756.3
|
|
|
(f)
|
A multi-period excess earnings methodology (income approach) was used to determine the estimated fair values of the acquired in-process research and development (“IPR&D”) assets from a market participant perspective. The projected cash flows from these assets were adjusted for the probabilities of successful development and commercialization of each project, and the Company used risk-adjusted discount rates of 10%-11% to present value the projected cash flows.
|
|
(g)
|
Primarily includes an estimated fair value of
$1.08 billion
to record the warrant transactions that were entered into by Salix prior to the Salix Acquisition in connection with its
1.5%
Convertible Senior Notes due 2019 (these instruments were settled on the date of the Salix Acquisition and, as such, the fair value was based on the settlement amounts), as well as accruals for (i) the estimated fair value of
$336 million
(exclusive of the related insurance recovery described in (d) above) for potential losses and related costs associated with legal matters relating to the legacy Salix business (See Note 16 for additional information regarding these legal matters) and (ii) product returns and rebates of
$374 million
.
|
|
(h)
|
The contingent consideration consists of potential payments to third parties including developmental milestone payments due upon specified regulatory achievements, commercialization milestones contingent upon achieving specified targets for net sales, and royalty-based payments. The range of potential milestone payments (excluding royalty-based payments) is from
nil
if
none
of the milestones are achieved to a maximum of up to approximately
$650 million
(the majority of which relates to sales-based milestones) over time if all milestones are achieved, in the aggregate, to third parties, including up to
$250 million
in developmental and sales-based milestones to Progenics Pharmaceuticals, Inc. related to Relistor® (including Oral Relistor®), and various other developmental and sales-based milestones. The total fair value of the contingent consideration of
$373 million
(including current portion of
$11 million
) as of the acquisition date was determined using probability-weighted discounted cash flows. Refer to Note 6 for additional information regarding contingent consideration.
|
|
(i)
|
The following table summarizes the fair value of long-term debt assumed as of the acquisition date:
|
|
|
|
Amounts
Recognized as of
Acquisition Date
|
||
|
1.5% Convertible Senior Notes due 2019
(1)
|
|
$
|
1,837.1
|
|
|
2.75% Convertible Senior Notes due 2015
(1)
|
|
1,286.0
|
|
|
|
Total long-term debt assumed
|
|
$
|
3,123.1
|
|
|
(1)
|
The Company subsequently redeemed these amounts in full in the second quarter of 2015, except for a nominal amount of the
1.5%
Convertible Senior Notes due 2019.
|
|
(j)
|
Comprises deferred tax assets (
$288 million
) and deferred tax liabilities (
$3.71 billion
).
|
|
(k)
|
Goodwill is calculated as the difference between the acquisition date fair value of the consideration transferred and the values assigned to the assets acquired and liabilities assumed. None of the goodwill is expected to be deductible for tax purposes. The goodwill recorded represents the following:
|
|
•
|
the Company’s expectation to develop and market new product brands, product lines and technology;
|
|
•
|
cost savings and operating synergies expected to result from combining the operations of Salix with those of the Company;
|
|
•
|
the value of the continuing operations of Salix’s existing business (that is, the higher rate of return on the assembled net assets versus if the Company had acquired all of the net assets separately); and
|
|
•
|
intangible assets that do not qualify for separate recognition (for instance, Salix’s assembled workforce).
|
|
•
|
On February 23, 2015, the Company, completed via a "stalking horse bid" in a sales process conducted under the U.S. Bankruptcy Code, acquired certain assets of Dendreon Corporation ("Dendreon") for a purchase price of
$415 million
, net of cash received (
$495 million
less cash received of
$80 million
). The purchase price included approximately
$50 million
in stock consideration, and such shares were issued in June 2015. The assets acquired from Dendreon included the worldwide rights to the Provenge® product (an immunotherapy treatment designed to treat men with advanced prostate cancer).
|
|
•
|
On February 10, 2015, the Company acquired certain assets of Marathon Pharmaceuticals, LLC ("Marathon"). The assets acquired from Marathon comprised a portfolio of hospital products, including Nitropress®, Isuprel®, Opium Tincture, Pepcid®, Seconal® Sodium, Amytal® Sodium, and Iprivask® for an aggregate purchase price of
$286 million
(which is net of a
$64 million
assumed liability owed to a third party which is reflected in the table below). Also, as part of this acquisition, the Company assumed a contingent consideration liability as described further below.
|
|
•
|
During the nine-month period ended September 30, 2015, the Company completed other smaller acquisitions which are not material individually or in the aggregate. These acquisitions are included in the aggregated amounts presented below.
|
|
•
|
amounts for intangible assets, property and equipment, inventories, receivables and other working capital adjustments pending finalization of the valuation;
|
|
•
|
amounts for income tax assets and liabilities, pending finalization of estimates and assumptions in respect of certain tax aspects of the transaction; and
|
|
•
|
amount of goodwill pending the completion of the valuation of the assets acquired and liabilities assumed.
|
|
|
|
Amounts
Recognized as of
Acquisition Dates
|
|
Measurement
Period
Adjustments
(a)
|
|
Amounts
Recognized as of
September 30, 2015
(as adjusted)
|
||||||
|
Cash
|
|
$
|
81.6
|
|
|
$
|
—
|
|
|
$
|
81.6
|
|
|
Accounts receivable
(b)
|
|
38.3
|
|
|
—
|
|
|
38.3
|
|
|||
|
Inventories
|
|
118.9
|
|
|
(0.3
|
)
|
|
118.6
|
|
|||
|
Other current assets
|
|
18.2
|
|
|
—
|
|
|
18.2
|
|
|||
|
Property, plant and equipment
|
|
85.6
|
|
|
(14.3
|
)
|
|
71.3
|
|
|||
|
Identifiable intangible assets, excluding acquired IPR&D
(c)
|
|
999.3
|
|
|
7.4
|
|
|
1,006.7
|
|
|||
|
Acquired IPR&D
|
|
57.4
|
|
|
(1.5
|
)
|
|
55.9
|
|
|||
|
Other non-current assets
|
|
2.8
|
|
|
—
|
|
|
2.8
|
|
|||
|
Current liabilities
(d)
|
|
(117.0
|
)
|
|
—
|
|
|
(117.0
|
)
|
|||
|
Long-term debt
|
|
(6.1
|
)
|
|
—
|
|
|
(6.1
|
)
|
|||
|
Deferred tax liability, net
|
|
(14.9
|
)
|
|
3.2
|
|
|
(11.7
|
)
|
|||
|
Non-current liabilities
(d)
|
|
(117.4
|
)
|
|
—
|
|
|
(117.4
|
)
|
|||
|
Total identifiable net assets
|
|
1,146.7
|
|
|
(5.5
|
)
|
|
1,141.2
|
|
|||
|
Goodwill
(e)
|
|
86.7
|
|
|
(0.9
|
)
|
|
85.8
|
|
|||
|
Total fair value of consideration transferred
|
|
$
|
1,233.4
|
|
|
$
|
(6.4
|
)
|
|
$
|
1,227.0
|
|
|
(a)
|
The measurement period adjustments primarily relate to the Dendreon acquisition and reflect: (i) a reduction in the estimated fair value of property, plant and equipment driven by further assessment of the fair value of a manufacturing facility, (ii) refinements of the estimated fair value of intangible assets, and (iii) the tax impact of pre-tax measurement period adjustments. The measurement period adjustments were made to reflect facts and circumstances existing as of the acquisition date, and did not result from intervening events subsequent to the acquisition date. These adjustments did not have a significant impact on the Company’s previously reported consolidated financial statements and, therefore, the Company has not retrospectively adjusted those financial statements.
|
|
(b)
|
The fair value of trade accounts receivable acquired was
$38 million
, with the gross contractual amount being
$39 million
, of which the Company expects that
$1 million
will be uncollectible.
|
|
(c)
|
The following table summarizes the provisional amounts and useful lives assigned to identifiable intangible assets:
|
|
|
|
Weighted-
Average
Useful Lives
(Years)
|
|
Amounts
Recognized as of
Acquisition Dates
|
|
Measurement
Period
Adjustments
|
|
Amounts
Recognized as of
September 30, 2015
(as adjusted)
|
||||||
|
Product brands
|
|
7
|
|
$
|
713.4
|
|
|
$
|
0.5
|
|
|
$
|
713.9
|
|
|
Product rights
|
|
3
|
|
42.7
|
|
|
0.4
|
|
|
43.1
|
|
|||
|
Corporate brands
|
|
9
|
|
0.7
|
|
|
—
|
|
|
0.7
|
|
|||
|
Partner relationships
|
|
8
|
|
7.8
|
|
|
—
|
|
|
7.8
|
|
|||
|
Technology/know-how
|
|
10
|
|
232.7
|
|
|
6.5
|
|
|
239.2
|
|
|||
|
Other
|
|
6
|
|
2.0
|
|
|
—
|
|
|
2.0
|
|
|||
|
Total identifiable intangible assets acquired
|
|
8
|
|
$
|
999.3
|
|
|
$
|
7.4
|
|
|
$
|
1,006.7
|
|
|
(d)
|
As part of the Marathon acquisition, the Company assumed a contingent consideration liability related to potential payments, in the aggregate, of up to approximately
$200 million
, for Isuprel® and Nitropress®, the amounts of which are dependent on the timing of generic entrants for these products. The fair value of the liability as of the acquisition date was determined using probability-weighted projected cash flows, with
$41 million
classified in Current liabilities and
$46 million
classified in Non-current liabilities in the table above. As of
September 30, 2015
, the assumptions used for determining the fair value of the contingent consideration liability have not changed significantly from those used as of the acquisition date. Through September 30, 2015, the Company has made contingent consideration payments of
$22 million
related to the Marathon acquisition.
|
|
(e)
|
The goodwill relates primarily to the Marathon and other smaller acquisitions. Goodwill is calculated as the difference between the acquisition date fair value of the consideration transferred and the values assigned to the assets acquired and liabilities assumed. Substantially all of the goodwill is expected to be deductible for tax purposes.
The goodwill represents primarily the cost savings, operating synergies and other benefits expected to result from combining the operations with those of the Company.
|
|
•
|
On July 7, 2014, the Company acquired all of the outstanding common stock of PreCision Dermatology, Inc. (“PreCision”) for an aggregate purchase price of
$459 million
. Under the terms of the merger agreement, the Company agreed to pay contingent consideration of
$25 million
upon the achievement of a sales-based milestone for 2014.
The fair value of this contingent consideration was determined to be nominal as of the acquisition date, based on the sales forecast. As the sales-based milestone was not achieved, no such payment was made. The Company recognized a post-combination expense of
$20 million
within Other (income) expense in the third quarter of 2014 related to the acceleration of unvested stock options for PreCision employees. In connection with the acquisition of PreCision, the Company was required by the Federal Trade Commission (“FTC”) to divest the rights to PreCision’s Tretin-X® (tretinoin) cream product and PreCision’s generic tretinoin gel and cream products. PreCision develops and markets a range of medical dermatology products, treating a number of topical disease states such as acne and atopic dermatitis with products such as Locoid® and Clindagel®.
|
|
•
|
On January 23, 2014, the Company acquired all of the outstanding common stock of Solta Medical, Inc. (“Solta Medical”) for
$293 million
, which includes
$2.92
per share in cash and
$44 million
for the repayment of Solta Medical’s long-term debt, including accrued interest. Solta Medical designs, develops, manufactures, and markets energy-based medical device systems for aesthetic applications, and its products include the Thermage CPT® system, the Fraxel® repair system, the Clear + Brilliant® system, and the Liposonix® system.
|
|
•
|
During the year ended December 31, 2014, the Company completed other smaller acquisitions, including the consolidation of variable interest entities, which were not material individually or in the aggregate. These acquisitions are included in the aggregated amounts presented below. Beginning in December 2014, the Company has consolidated Philidor Rx Services, LLC (“Philidor”) pharmacy network, which includes R&O Pharmacy, LLC. The Company determined that based on its rights, including its option to acquire Philidor, Philidor is a variable interest entity for which the Company is the primary beneficiary, given its power to direct Philidor’s activities and its obligation to absorb their losses and rights to receive their benefits. As a result, since December 2014, the Company has included the assets and liabilities and results of operations of Philidor in its consolidated financial statements. Net sales recognized through Philidor represent approximately
7%
and
6%
of the Company's total consolidated net revenue for the
three-month and nine-month periods ended September 30, 2015
, respectively, and the total assets of Philidor represent less than
1%
of the Company's total consolidated assets as of September 30, 2015. The impact of Philidor as a consolidated entity on the Company's net revenues for 2014 was nominal.
|
|
•
|
amounts for income tax assets and liabilities, pending finalization of estimates and assumptions in respect of certain tax aspects of the transaction; and
|
|
•
|
amount of goodwill pending the completion of the valuation of the income tax assets and liabilities.
|
|
|
|
Amounts
Recognized as of
Acquisition Dates
|
|
Measurement
Period
Adjustments
(a)
|
|
Amounts
Recognized as of
September 30, 2015
(as adjusted)
|
||||||
|
Cash and cash equivalents
|
|
$
|
33.6
|
|
|
$
|
1.1
|
|
|
$
|
34.7
|
|
|
Accounts receivable
(b)
|
|
87.7
|
|
|
(5.9
|
)
|
|
81.8
|
|
|||
|
Assets held for sale
(c)
|
|
125.7
|
|
|
(0.8
|
)
|
|
124.9
|
|
|||
|
Inventories
|
|
170.4
|
|
|
(15.9
|
)
|
|
154.5
|
|
|||
|
Other current assets
|
|
19.1
|
|
|
(4.9
|
)
|
|
14.2
|
|
|||
|
Property, plant and equipment, net
|
|
58.5
|
|
|
(0.6
|
)
|
|
57.9
|
|
|||
|
Identifiable intangible assets, excluding acquired IPR&D
(d)
|
|
697.2
|
|
|
26.2
|
|
|
723.4
|
|
|||
|
Acquired IPR&D
(e)
|
|
65.8
|
|
|
(2.8
|
)
|
|
63.0
|
|
|||
|
Other non-current assets
|
|
4.0
|
|
|
(2.1
|
)
|
|
1.9
|
|
|||
|
Current liabilities
|
|
(152.0
|
)
|
|
(16.9
|
)
|
|
(168.9
|
)
|
|||
|
Long-term debt, including current portion
|
|
(11.2
|
)
|
|
0.3
|
|
|
(10.9
|
)
|
|||
|
Deferred income taxes, net
|
|
(116.0
|
)
|
|
40.5
|
|
|
(75.5
|
)
|
|||
|
Other non-current liabilities
|
|
(13.4
|
)
|
|
(0.1
|
)
|
|
(13.5
|
)
|
|||
|
Total identifiable net assets
|
|
969.4
|
|
|
18.1
|
|
|
987.5
|
|
|||
|
Noncontrolling interest
|
|
(15.0
|
)
|
|
(4.9
|
)
|
|
(19.9
|
)
|
|||
|
Goodwill
(f)
|
|
410.4
|
|
|
49.0
|
|
|
459.4
|
|
|||
|
Total fair value of consideration transferred
|
|
$
|
1,364.8
|
|
|
$
|
62.2
|
|
|
$
|
1,427.0
|
|
|
(a)
|
The measurement period adjustments primarily reflect: (i) a net increase in the fair value of contingent consideration related to smaller acquisitions based on assessment of probability and timing assumptions for potential milestone payments, related to factors that existed as of the respective acquisition dates, (ii) a decrease in the net deferred tax liability primarily related to the PreCision and Solta Medical acquisitions, (iii) adjustments to the estimated fair value of intangible assets related to smaller acquisitions, (iv) an increase in current liabilities primarily related to the PreCision acquisition and other smaller acquisitions, and (v) a decrease in inventory primarily related to the Solta Medical acquisition and other smaller acquisitions.
The measurement period adjustments were made to reflect facts and circumstances existing as of the acquisition date, and did not result from intervening events subsequent to the acquisition date. These adjustments did not have a significant impact on the Company’s previously reported consolidated financial statements and, therefore, the Company has not retrospectively adjusted those financial statements.
|
|
(b)
|
The fair value of trade accounts receivable acquired was
$82 million
, with the gross contractual amount being
$88 million
, of which the Company expects that
$6 million
will be uncollectible.
|
|
(c)
|
Assets held for sale relate to the Tretin-X® product rights and the product rights for the generic tretinoin gel and cream products acquired in the PreCision acquisition, which were subsequently divested in the third quarter of 2014.
|
|
(d)
|
The following table summarizes the provisional amounts and useful lives assigned to identifiable intangible assets:
|
|
|
|
Weighted-
Average
Useful Lives
(Years)
|
|
Amounts
Recognized as of
Acquisition Dates
|
|
Measurement
Period
Adjustments
|
|
Amounts
Recognized as of
September 30, 2015
(as adjusted)
|
||||||
|
Product brands
|
|
10
|
|
$
|
506.0
|
|
|
$
|
5.7
|
|
|
$
|
511.7
|
|
|
Product rights
|
|
8
|
|
95.2
|
|
|
(3.3
|
)
|
|
91.9
|
|
|||
|
Corporate brand
|
|
15
|
|
28.9
|
|
|
4.0
|
|
|
32.9
|
|
|||
|
In-licensed products
|
|
9
|
|
1.5
|
|
|
(0.3
|
)
|
|
1.2
|
|
|||
|
Partner relationships
|
|
9
|
|
37.5
|
|
|
13.6
|
|
|
51.1
|
|
|||
|
Other
|
|
9
|
|
28.1
|
|
|
6.5
|
|
|
34.6
|
|
|||
|
Total identifiable intangible assets acquired
|
|
10
|
|
$
|
697.2
|
|
|
$
|
26.2
|
|
|
$
|
723.4
|
|
|
(e)
|
The acquired IPR&D assets primarily relate to programs from smaller acquisitions. In addition, the Solta Medical acquisition includes a program for the development of a next generation Thermage® product.
|
|
(f)
|
The goodwill relates primarily to the PreCision and Solta Medical acquisitions. Goodwill is calculated as the difference between the acquisition date fair value of the consideration transferred and the values assigned to the assets acquired and liabilities assumed. Substantially all of the goodwill is not expected to be deductible for tax purposes. The goodwill recorded from the PreCision and Solta Medical acquisitions represents the following:
|
|
•
|
cost savings, operating synergies and other benefits expected to result from combining the operations of PreCision and Solta Medical with those of the Company;
|
|
•
|
the Company’s expectation to develop and market new products and technology; and
|
|
•
|
intangible assets that do not qualify for separate recognition (for instance, PreCision’s and Solta Medical’s assembled workforces).
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
|
Revenues
|
$
|
2,786.8
|
|
|
$
|
2,538.4
|
|
|
$
|
7,737.7
|
|
|
$
|
7,593.5
|
|
|
Net income (loss) attributable to Valeant Pharmaceuticals International, Inc.
|
57.8
|
|
|
14.1
|
|
|
(258.2
|
)
|
|
(338.7
|
)
|
||||
|
|
|
|
|
|
|
|
|
||||||||
|
Income (loss) per share attributable to Valeant Pharmaceuticals International, Inc.:
|
|
|
|
|
|
|
|
||||||||
|
Basic
|
$
|
0.17
|
|
|
$
|
0.04
|
|
|
$
|
(0.75
|
)
|
|
$
|
(0.99
|
)
|
|
Diluted
|
$
|
0.16
|
|
|
$
|
0.04
|
|
|
$
|
(0.75
|
)
|
|
$
|
(0.99
|
)
|
|
•
|
growth from the existing business, including the impact of recent product launches;
|
|
•
|
negative foreign currency exchange impact; and
|
|
•
|
lower sales resulting from the July 2014 divestiture of facial aesthetic fillers and toxins.
|
|
•
|
elimination of the historical intangible asset amortization expense of these acquisitions;
|
|
•
|
additional amortization expense related to the fair value of identifiable intangible assets acquired;
|
|
•
|
adjustments to depreciation expense related to fair value adjustments to property, plant and equipment acquired;
|
|
•
|
additional interest expense associated with financing obtained by the Company in connection with the Salix Acquisition; and
|
|
•
|
the exclusion from pro forma earnings in the
three-month and nine-month periods ended September 30, 2015
of the acquisition accounting adjustments on these acquisitions’ inventories that were sold subsequent to the acquisition date of
$25 million
and
$7 million
for the three-month periods ended
September 30, 2015
and
2014
,
$94 million
and
$15 million
for the
nine-month periods ended September 30, 2015 and 2014
, and the acquisition-related costs incurred for these acquisitions, and the inclusion of those amounts in pro forma earnings for the corresponding comparative periods.
|
|
4.
|
DIVESTITURES
|
|
•
|
On July 10, 2014, the Company sold all rights to Restylane®, Perlane®, Emervel®, Sculptra®, and Dysport® owned or held by the Company to Galderma S.A. (“Galderma”) for approximately
$1.40 billion
in cash. These assets were included primarily in the Company’s Developed Markets segment. As a result of this transaction, the Company recognized a net gain on sale of
$324 million
in the third quarter of 2014 within Other expense (income) in the consolidated statement of income. The costs to sell for this divestiture of approximately
$43 million
were included as part of the net gain on sale (netted against the proceeds in the consolidated statement of cash flows).
|
|
•
|
On July 1, 2014, the Company sold the worldwide rights in its Metronidazole 1.3% Vaginal Gel antibiotic product, a topical antibiotic for the treatment of bacterial vaginosis, to Actavis Specialty Brands for upfront and certain milestone payments of
$10 million
, in the aggregate, and minimum royalties for the first
three
years of commercialization. This asset was included in the Company’s Developed Markets segment. In addition, royalties are payable to the Company beyond the initial three-year commercialization period. The FDA approved the NDA for Metronidazole 1.3% in March 2014. In connection with the sale of the Metronidazole 1.3%, the Company recognized a loss on sale of
$59 million
in the third quarter of 2014, as the Company’s accounting policy is to not recognize contingent payments until such amounts are realizable. The loss on sale was included within Other expense (income) in the consolidated statement of income.
|
|
5.
|
RESTRUCTURING, INTEGRATION AND OTHER COSTS
|
|
•
|
workforce reductions across the Company and other organizational changes;
|
|
•
|
closing of duplicative facilities and other site rationalization actions company-wide, including research and development facilities, sales offices and corporate facilities;
|
|
•
|
leveraging research and development spend; and/or
|
|
•
|
procurement savings.
|
|
|
|
Severance and
Related Benefits
|
|
IPR&D
Termination
Costs
|
|
Contract
Termination,
Facility Closure
and Other Costs
|
|
Total
|
||||||||
|
Balance, January 1, 2015
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Costs incurred and/or charged to expense
|
|
82.4
|
|
|
—
|
|
|
—
|
|
|
82.4
|
|
||||
|
Cash payments
|
|
(25.7
|
)
|
|
—
|
|
|
—
|
|
|
(25.7
|
)
|
||||
|
Non-cash adjustments
|
|
2.2
|
|
|
—
|
|
|
—
|
|
|
2.2
|
|
||||
|
Balance, June 30, 2015
|
|
$
|
58.9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
58.9
|
|
|
Costs incurred and/or charged to expense
|
|
4.8
|
|
|
—
|
|
|
0.7
|
|
|
5.5
|
|
||||
|
Cash payments
|
|
(21.0
|
)
|
|
—
|
|
|
—
|
|
|
(21.0
|
)
|
||||
|
Balance, September 30, 2015
|
|
$
|
42.7
|
|
|
$
|
—
|
|
|
$
|
0.7
|
|
|
$
|
43.4
|
|
|
|
|
Employee Termination Costs
|
|
IPR&D
Termination
Costs
|
|
Contract
Termination,
Facility Closure
and Other Costs
|
|
|
||||||||||||
|
|
Severance and
Related Benefits
|
|
Share-Based
Compensation
(1)
|
|
|
|
Total
|
|||||||||||||
|
Balance, January 1, 2013
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Costs incurred and/or charged to expense
|
|
155.7
|
|
|
52.8
|
|
|
—
|
|
|
25.6
|
|
|
234.1
|
|
|||||
|
Cash payments
|
|
(77.8
|
)
|
|
(52.8
|
)
|
|
—
|
|
|
(7.8
|
)
|
|
(138.4
|
)
|
|||||
|
Non-cash adjustments
|
|
11.4
|
|
|
—
|
|
|
—
|
|
|
(6.8
|
)
|
|
4.6
|
|
|||||
|
Balance, December 31, 2013
|
|
$
|
89.3
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
11.0
|
|
|
$
|
100.3
|
|
|
Costs incurred and charged to expense
|
|
46.0
|
|
|
—
|
|
|
—
|
|
|
23.7
|
|
|
69.7
|
|
|||||
|
Cash payments
|
|
(110.7
|
)
|
|
—
|
|
|
—
|
|
|
(24.9
|
)
|
|
(135.6
|
)
|
|||||
|
Non-cash adjustments
|
|
(5.7
|
)
|
|
—
|
|
|
—
|
|
|
(5.4
|
)
|
|
(11.1
|
)
|
|||||
|
Balance, December 31, 2014
(2)
|
|
$
|
18.9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4.4
|
|
|
$
|
23.3
|
|
|
Costs incurred and charged to expense
|
|
3.0
|
|
|
—
|
|
|
—
|
|
|
0.9
|
|
|
3.9
|
|
|||||
|
Cash payments
|
|
(12.6
|
)
|
|
—
|
|
|
—
|
|
|
(1.3
|
)
|
|
(13.9
|
)
|
|||||
|
Non-cash adjustments
|
|
(1.5
|
)
|
|
—
|
|
|
—
|
|
|
(1.2
|
)
|
|
(2.7
|
)
|
|||||
|
Balance, March 31, 2015
|
|
$
|
7.8
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2.8
|
|
|
$
|
10.6
|
|
|
Costs incurred and charged to expense
|
|
(0.5
|
)
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|
(0.4
|
)
|
|||||
|
Cash payments
|
|
(3.7
|
)
|
|
—
|
|
|
—
|
|
|
(0.1
|
)
|
|
(3.8
|
)
|
|||||
|
Non-cash adjustments
|
|
0.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.3
|
|
|||||
|
Balance, June 30, 2015
|
|
$
|
3.9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2.8
|
|
|
$
|
6.7
|
|
|
Costs incurred and charged to expense
|
|
0.4
|
|
|
—
|
|
|
—
|
|
|
0.4
|
|
|
0.8
|
|
|||||
|
Cash payments
|
|
(1.1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1.1
|
)
|
|||||
|
Non-cash adjustments
|
|
(0.2
|
)
|
|
—
|
|
|
—
|
|
|
(0.1
|
)
|
|
(0.3
|
)
|
|||||
|
Balance, September 30, 2015
|
|
$
|
3.0
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3.1
|
|
|
$
|
6.1
|
|
|
(1)
|
Relates to B&L’s previously cancelled performance-based options and the acceleration of unvested stock options for B&L employees as a result of the B&L Acquisition, which were recognized in Other expense (income).
|
|
(2)
|
In the
nine-month period ended September 30, 2014
, the Company recognized
$64 million
of restructuring charges and made payments of
$123 million
related to the B&L Acquisition.
|
|
6.
|
FAIR VALUE MEASUREMENTS
|
|
•
|
Level 1 — Quoted prices in active markets for identical assets or liabilities;
|
|
•
|
Level 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and
|
|
•
|
Level 3 — Unobservable inputs that are supported by little or no market activity and that are financial instruments whose values are determined using discounted cash flow methodologies, pricing models, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.
|
|
|
|
As of September 30, 2015
|
|
As of December 31, 2014
|
||||||||||||||||||||||||||||
|
|
|
Carrying
Value
|
|
Quoted
Prices
in Active
Markets for
Identical
Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Carrying
Value
|
|
Quoted
Prices
in Active
Markets for
Identical
Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
||||||||||||||||
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
Cash equivalents
(1)
|
|
$
|
856.5
|
|
|
$
|
855.7
|
|
|
$
|
0.8
|
|
|
$
|
—
|
|
|
$
|
4.6
|
|
|
$
|
2.8
|
|
|
$
|
1.8
|
|
|
$
|
—
|
|
|
Restricted cash and cash equivalents
|
|
$
|
4.0
|
|
|
$
|
4.0
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
9.1
|
|
|
$
|
9.1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Acquisition-related contingent consideration
|
|
$
|
(761.8
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(761.8
|
)
|
|
$
|
(308.8
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(308.8
|
)
|
|
(1)
|
Cash equivalents include highly liquid investments with an original maturity of
three
months or less at acquisition, primarily including money market funds, reflected in the balance sheet at carrying value, which approximates fair value due to their short-term nature.
|
|
|
Balance,
January 1,
2015
|
|
Issuances
(a)
|
|
Payments
(b)
|
|
Net
Unrealized
Loss
(c)
|
|
Foreign
Exchange
(d)
|
|
Release from Restricted Cash
|
|
Balance,
September 30,
2015
|
||||||||||||||
|
Acquisition-related contingent consideration
|
$
|
(308.8
|
)
|
|
$
|
(586.1
|
)
|
|
$
|
149.2
|
|
|
$
|
(22.6
|
)
|
|
$
|
2.5
|
|
|
$
|
4.0
|
|
|
$
|
(761.8
|
)
|
|
(a)
|
Primarily relates to contingent consideration liabilities assumed in the Salix and Marathon acquisitions, as well as the impact of measurement period adjustments, as described in Note 3.
|
|
(b)
|
Primarily relates to payments of acquisition-related contingent consideration related to the OraPharma Topco Holdings, Inc. acquisition consummated in June 2012, the Elidel®/Xerese®/Zovirax® agreement entered into with Meda Pharma SARL in June 2011 (the "Elidel®/Xerese®/Zovirax® agreement"), the iNova acquisition consummated in December 2011, the Targretin® agreement entered into with Eisai Inc. in February 2013, and the Marathon acquisition.
|
|
(c)
|
For the
nine-month period ended September 30, 2015
, a net loss of
$23 million
was recognized as Acquisition-related contingent consideration in the consolidated statements of income, primarily reflecting accretion for the time value of money for the Elidel®/Xerese®/Zovirax® agreement and the Salix Acquisition.
|
|
(d)
|
Included in other comprehensive loss.
|
|
7.
|
INVENTORIES
|
|
|
|
As of
September 30, 2015 |
|
As of
December 31, 2014 |
||||
|
Raw materials
(1)
|
|
$
|
267.3
|
|
|
$
|
191.1
|
|
|
Work in process
(1)
|
|
117.2
|
|
|
94.2
|
|
||
|
Finished goods
(1)
|
|
814.7
|
|
|
665.3
|
|
||
|
|
|
$
|
1,199.2
|
|
|
$
|
950.6
|
|
|
(1)
|
The components of inventories shown in the table above are net of allowance for obsolescence.
|
|
8.
|
INTANGIBLE ASSETS AND GOODWILL
|
|
|
|
As of September 30, 2015
|
|
As of December 31, 2014
|
||||||||||||||||||||
|
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization,
Including
Impairments
|
|
Net
Carrying
Amount
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization,
Including
Impairments
|
|
Net
Carrying
Amount
|
||||||||||||
|
Finite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Product brands
|
|
$
|
21,634.9
|
|
|
$
|
(4,700.9
|
)
|
|
$
|
16,934.0
|
|
|
$
|
10,320.2
|
|
|
$
|
(3,579.8
|
)
|
|
$
|
6,740.4
|
|
|
Corporate brands
|
|
1,012.6
|
|
|
(90.4
|
)
|
|
922.2
|
|
|
364.2
|
|
|
(65.2
|
)
|
|
299.0
|
|
||||||
|
Product rights
|
|
3,223.6
|
|
|
(1,594.7
|
)
|
|
1,628.9
|
|
|
3,225.9
|
|
|
(1,263.8
|
)
|
|
1,962.1
|
|
||||||
|
Partner relationships
|
|
221.1
|
|
|
(121.5
|
)
|
|
99.6
|
|
|
223.1
|
|
|
(107.5
|
)
|
|
115.6
|
|
||||||
|
Technology and other
|
|
525.7
|
|
|
(148.0
|
)
|
|
377.7
|
|
|
275.5
|
|
|
(124.3
|
)
|
|
151.2
|
|
||||||
|
Total finite-lived intangible assets
(1)
|
|
26,617.9
|
|
|
(6,655.5
|
)
|
|
19,962.4
|
|
|
14,408.9
|
|
|
(5,140.6
|
)
|
|
9,268.3
|
|
||||||
|
Indefinite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Acquired IPR&D
(2)
|
|
722.2
|
|
|
—
|
|
|
722.2
|
|
|
290.1
|
|
|
—
|
|
|
290.1
|
|
||||||
|
Corporate brand
(3)
|
|
1,697.5
|
|
|
—
|
|
|
1,697.5
|
|
|
1,697.5
|
|
|
—
|
|
|
1,697.5
|
|
||||||
|
|
|
$
|
29,037.6
|
|
|
$
|
(6,655.5
|
)
|
|
$
|
22,382.1
|
|
|
$
|
16,396.5
|
|
|
$
|
(5,140.6
|
)
|
|
$
|
11,255.9
|
|
|
(1)
|
In the third quarter of 2015, the Company recognized an impairment charge of
$26 million
related to Zelapar® (Developed Markets segment), resulting from declining sales trends. This charge was recognized in Amortization and impairments of finite-lived intangible assets in the consolidated statements of income.
|
|
(2)
|
The Company acquired certain IPR&D assets as part of the Salix Acquisition, as described further in Note 3.
|
|
(3)
|
Represents the B&L corporate trademark, which has an indefinite useful life and is therefore not amortized.
|
|
|
|
2015
|
|
2016
|
|
2017
|
|
2018
|
|
2019
|
||||||||||
|
Amortization expense
(1)
|
|
$
|
2,212.4
|
|
|
$
|
2,546.2
|
|
|
$
|
2,479.0
|
|
|
$
|
2,348.3
|
|
|
$
|
2,212.6
|
|
|
(1)
|
Estimated amortization expense shown in the table above does not include potential future impairments of finite-lived intangible assets.
|
|
|
|
Developed
Markets
|
|
Emerging
Markets
|
|
Total
|
||||||
|
Balance, January 1, 2015
|
|
$
|
7,115.0
|
|
|
$
|
2,231.4
|
|
|
$
|
9,346.4
|
|
|
Additions
(a)
|
|
8,209.7
|
|
|
26.5
|
|
|
8,236.2
|
|
|||
|
Adjustments
(b)
|
|
49.3
|
|
|
3.7
|
|
|
53.0
|
|
|||
|
Foreign exchange and other
|
|
(144.7
|
)
|
|
(116.2
|
)
|
|
(260.9
|
)
|
|||
|
Balance, September 30, 2015
|
|
$
|
15,229.3
|
|
|
$
|
2,145.4
|
|
|
$
|
17,374.7
|
|
|
(a)
|
Primarily relates to the Salix Acquisition (as described in Note 3).
|
|
(b)
|
Primarily reflects the impact of measurement period adjustments for 2014 acquisitions, including PreCision and other smaller acquisitions.
|
|
9.
|
|
|
|
|
Maturity
Date
|
|
As of
September 30, 2015 |
|
As of
December 31,
2014
|
||||
|
Revolving Credit Facility
(1)
|
|
April 2018
|
|
$
|
—
|
|
|
$
|
165.0
|
|
|
Series A-1 Tranche A Term Loan Facility
(1)
|
|
April 2016
|
|
139.8
|
|
|
139.3
|
|
||
|
Series A-2 Tranche A Term Loan Facility
(1)
|
|
April 2016
|
|
136.6
|
|
|
135.5
|
|
||
|
Series A-3 Tranche A Term Loan Facility
(1)
|
|
October 2018
|
|
1,878.8
|
|
|
1,633.8
|
|
||
|
Series A-4 Tranche A Term Loan Facility
(1)
|
|
April 2020
|
|
962.8
|
|
|
—
|
|
||
|
Series D-2 Tranche B Term Loan Facility
(1)
|
|
February 2019
|
|
1,085.8
|
|
|
1,088.4
|
|
||
|
Series C-2 Tranche B Term Loan Facility
(1)
|
|
December 2019
|
|
833.7
|
|
|
835.0
|
|
||
|
Series E-1 Tranche B Term Loan Facility
(1)
|
|
August 2020
|
|
2,530.3
|
|
|
2,543.8
|
|
||
|
Series F Tranche B Term Loan Facility
(1)
|
|
April 2022
|
|
4,062.2
|
|
|
—
|
|
||
|
Senior Notes:
|
|
|
|
|
|
|
||||
|
6.875%
|
|
December 2018
|
|
—
|
|
|
496.6
|
|
||
|
7.00%
|
|
October 2020
|
|
687.8
|
|
|
687.5
|
|
||
|
6.75%
|
|
August 2021
|
|
645.9
|
|
|
645.4
|
|
||
|
7.25%
|
|
July 2022
|
|
541.8
|
|
|
540.9
|
|
||
|
6.375%
|
|
October 2020
|
|
2,225.3
|
|
|
2,221.6
|
|
||
|
6.75%
|
|
August 2018
|
|
1,587.7
|
|
|
1,584.5
|
|
||
|
7.50%
|
|
July 2021
|
|
1,609.0
|
|
|
1,606.9
|
|
||
|
5.625%
|
|
December 2021
|
|
893.0
|
|
|
891.8
|
|
||
|
5.50%
|
|
March 2023
|
|
990.4
|
|
|
—
|
|
||
|
5.375%
|
|
March 2020
|
|
1,978.1
|
|
|
—
|
|
||
|
5.875%
|
|
May 2023
|
|
3,212.7
|
|
|
—
|
|
||
|
4.50%
(2)
|
|
May 2023
|
|
1,657.3
|
|
|
—
|
|
||
|
6.125%
|
|
April 2025
|
|
3,212.3
|
|
|
—
|
|
||
|
Other
(3)
|
|
Various
|
|
12.0
|
|
|
12.9
|
|
||
|
|
|
|
|
30,883.3
|
|
|
15,228.9
|
|
||
|
Less current portion
|
|
|
|
(707.0
|
)
|
|
(0.9
|
)
|
||
|
Total long-term debt
|
|
|
|
$
|
30,176.3
|
|
|
$
|
15,228.0
|
|
|
(1)
|
Together, the “Senior Secured Credit Facilities” under the Company’s Third Amended and Restated Credit and Guaranty Agreement, as amended (the “Credit Agreement”).
|
|
(2)
|
Represents the U.S. dollar equivalent of Euro-denominated debt (discussed below).
|
|
(3)
|
Relates primarily to the debentures assumed in the B&L Acquisition.
|
|
10.
|
SHARE-BASED COMPENSATION
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
|
Stock options
|
$
|
8.3
|
|
|
$
|
5.4
|
|
|
$
|
15.7
|
|
|
$
|
14.7
|
|
|
RSUs
|
42.2
|
|
|
14.8
|
|
|
95.7
|
|
|
45.9
|
|
||||
|
Share-based compensation expense
|
$
|
50.5
|
|
|
$
|
20.2
|
|
|
$
|
111.4
|
|
|
$
|
60.6
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Research and development expenses
|
$
|
1.5
|
|
|
$
|
1.4
|
|
|
$
|
4.5
|
|
|
$
|
4.2
|
|
|
Selling, general and administrative expenses
|
49.0
|
|
|
18.8
|
|
|
106.9
|
|
|
56.4
|
|
||||
|
Share-based compensation expense
|
$
|
50.5
|
|
|
$
|
20.2
|
|
|
$
|
111.4
|
|
|
$
|
60.6
|
|
|
11.
|
PENSION AND POSTRETIREMENT EMPLOYEE BENEFIT PLANS
|
|
|
|
Pension Benefit Plans
|
|
Postretirement
Benefit
Plan
|
||||||||||||||||||||
|
|
U.S. Plan
|
|
Non-U.S. Plans
|
|
||||||||||||||||||||
|
|
|
Three Months Ended September 30,
|
||||||||||||||||||||||
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||||||
|
Service cost
|
|
$
|
0.4
|
|
|
$
|
0.1
|
|
|
$
|
0.8
|
|
|
$
|
1.0
|
|
|
$
|
0.5
|
|
|
$
|
0.4
|
|
|
Interest cost
|
|
2.4
|
|
|
2.7
|
|
|
1.6
|
|
|
2.1
|
|
|
0.5
|
|
|
0.6
|
|
||||||
|
Expected return on plan assets
|
|
(3.6
|
)
|
|
(3.7
|
)
|
|
(2.0
|
)
|
|
(2.0
|
)
|
|
(0.1
|
)
|
|
(0.1
|
)
|
||||||
|
Amortization of prior service credit
|
|
—
|
|
|
—
|
|
|
(0.2
|
)
|
|
—
|
|
|
(0.7
|
)
|
|
(0.6
|
)
|
||||||
|
Amortization of net loss
|
|
—
|
|
|
—
|
|
|
0.4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
|
Net periodic (benefit) cost
|
|
$
|
(0.8
|
)
|
|
$
|
(0.9
|
)
|
|
$
|
0.6
|
|
|
$
|
1.1
|
|
|
$
|
0.2
|
|
|
$
|
0.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
Pension Benefit Plans
|
|
Postretirement
Benefit
Plan
|
||||||||||||||||||||
|
|
U.S. Plan
|
|
Non-U.S. Plans
|
|
||||||||||||||||||||
|
|
|
Nine Months Ended September 30,
|
||||||||||||||||||||||
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||||||
|
Service cost
|
|
$
|
1.2
|
|
|
$
|
0.3
|
|
|
$
|
2.4
|
|
|
$
|
3.0
|
|
|
$
|
1.5
|
|
|
$
|
1.2
|
|
|
Interest cost
|
|
7.2
|
|
|
8.1
|
|
|
4.8
|
|
|
6.4
|
|
|
1.5
|
|
|
1.8
|
|
||||||
|
Expected return on plan assets
|
|
(10.8
|
)
|
|
(11.1
|
)
|
|
(6.0
|
)
|
|
(6.0
|
)
|
|
(0.3
|
)
|
|
(0.3
|
)
|
||||||
|
Amortization of prior service credit
|
|
—
|
|
|
—
|
|
|
(0.6
|
)
|
|
—
|
|
|
(2.0
|
)
|
|
(1.8
|
)
|
||||||
|
Amortization of net loss
|
|
—
|
|
|
—
|
|
|
1.2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
|
Net periodic (benefit) cost
|
|
$
|
(2.4
|
)
|
|
$
|
(2.7
|
)
|
|
$
|
1.8
|
|
|
$
|
3.4
|
|
|
$
|
0.7
|
|
|
$
|
0.9
|
|
|
12.
|
SHAREHOLDERS’ EQUITY
|
|
|
Valeant Pharmaceuticals International, Inc. Shareholders
|
|
|
|
|
|||||||||||||||||||||||||
|
|
Common Shares
|
|
Additional
Paid-In
Capital
|
|
Accumulated
Deficit
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Valeant
Pharmaceuticals
International, Inc.
Shareholders’
Equity
|
|
Noncontrolling
Interest
|
|
Total
Equity
|
|||||||||||||||||
|
|
Shares
|
|
Amount
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Balance, January 1, 2014
|
333.0
|
|
|
$
|
8,301.2
|
|
|
$
|
228.8
|
|
|
$
|
(3,278.5
|
)
|
|
$
|
(132.8
|
)
|
|
$
|
5,118.7
|
|
|
$
|
114.6
|
|
|
$
|
5,233.3
|
|
|
Common shares issued under share-based compensation plans
|
1.0
|
|
|
33.2
|
|
|
(23.6
|
)
|
|
—
|
|
|
—
|
|
|
9.6
|
|
|
—
|
|
|
9.6
|
|
|||||||
|
Settlement of stock options
|
—
|
|
|
—
|
|
|
(3.1
|
)
|
|
—
|
|
|
—
|
|
|
(3.1
|
)
|
|
—
|
|
|
(3.1
|
)
|
|||||||
|
Share-based compensation
|
—
|
|
|
—
|
|
|
60.6
|
|
|
—
|
|
|
—
|
|
|
60.6
|
|
|
—
|
|
|
60.6
|
|
|||||||
|
Employee withholding taxes related to share-based awards
|
—
|
|
|
—
|
|
|
(38.5
|
)
|
|
—
|
|
|
—
|
|
|
(38.5
|
)
|
|
—
|
|
|
(38.5
|
)
|
|||||||
|
Excess tax benefits from share-based compensation
|
—
|
|
|
—
|
|
|
17.1
|
|
|
—
|
|
|
—
|
|
|
17.1
|
|
|
—
|
|
|
17.1
|
|
|||||||
|
Acquisition of noncontrolling interest
|
—
|
|
|
—
|
|
|
(1.1
|
)
|
|
—
|
|
|
—
|
|
|
(1.1
|
)
|
|
(2.2
|
)
|
|
(3.3
|
)
|
|||||||
|
Noncontrolling interest distributions
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.5
|
)
|
|
(0.5
|
)
|
|||||||
|
|
334.0
|
|
|
8,334.4
|
|
|
240.2
|
|
|
(3,278.5
|
)
|
|
(132.8
|
)
|
|
5,163.3
|
|
|
111.9
|
|
|
5,275.2
|
|
|||||||
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Net income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
378.6
|
|
|
—
|
|
|
378.6
|
|
|
(0.5
|
)
|
|
378.1
|
|
|||||||
|
Other comprehensive income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(419.2
|
)
|
|
(419.2
|
)
|
|
(0.5
|
)
|
|
(419.7
|
)
|
|||||||
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
(40.6
|
)
|
|
(1.0
|
)
|
|
(41.6
|
)
|
||||||||||||
|
Balance, September 30, 2014
|
334.0
|
|
|
$
|
8,334.4
|
|
|
$
|
240.2
|
|
|
$
|
(2,899.9
|
)
|
|
$
|
(552.0
|
)
|
|
$
|
5,122.7
|
|
|
$
|
110.9
|
|
|
$
|
5,233.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Balance, January 1, 2015
|
334.4
|
|
|
$
|
8,349.2
|
|
|
$
|
243.9
|
|
|
$
|
(2,365.0
|
)
|
|
$
|
(915.9
|
)
|
|
$
|
5,312.2
|
|
|
$
|
122.3
|
|
|
$
|
5,434.5
|
|
|
Issuance of common stock (see below)
|
7.5
|
|
|
1,481.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,481.0
|
|
|
—
|
|
|
1,481.0
|
|
|||||||
|
Common shares issued under share-based compensation plans
|
1.4
|
|
|
75.7
|
|
|
(46.6
|
)
|
|
—
|
|
|
—
|
|
|
29.1
|
|
|
—
|
|
|
29.1
|
|
|||||||
|
Repurchases of common shares
|
(0.2
|
)
|
|
(6.3
|
)
|
|
—
|
|
|
(43.7
|
)
|
|
—
|
|
|
(50.0
|
)
|
|
—
|
|
|
(50.0
|
)
|
|||||||
|
Share-based compensation
|
—
|
|
|
—
|
|
|
111.4
|
|
|
—
|
|
|
—
|
|
|
111.4
|
|
|
—
|
|
|
111.4
|
|
|||||||
|
Employee withholding taxes related to share-based awards
|
—
|
|
|
—
|
|
|
(85.8
|
)
|
|
—
|
|
|
—
|
|
|
(85.8
|
)
|
|
—
|
|
|
(85.8
|
)
|
|||||||
|
Excess tax benefits from share-based compensation
|
—
|
|
|
—
|
|
|
21.7
|
|
|
—
|
|
|
—
|
|
|
21.7
|
|
|
—
|
|
|
21.7
|
|
|||||||
|
Noncontrolling interest from business combinations
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4.9
|
|
|
4.9
|
|
|||||||
|
Noncontrolling interest distributions
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7.0
|
)
|
|
(7.0
|
)
|
|||||||
|
|
343.1
|
|
|
9,899.6
|
|
|
244.6
|
|
|
(2,408.7
|
)
|
|
(915.9
|
)
|
|
6,819.6
|
|
|
120.2
|
|
|
6,939.8
|
|
|||||||
|
Comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Net income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
70.2
|
|
|
—
|
|
|
70.2
|
|
|
4.4
|
|
|
74.6
|
|
|||||||
|
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(547.5
|
)
|
|
(547.5
|
)
|
|
(2.2
|
)
|
|
(549.7
|
)
|
|||||||
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
(477.3
|
)
|
|
2.2
|
|
|
(475.1
|
)
|
||||||||||||
|
Balance, September 30, 2015
|
343.1
|
|
|
$
|
9,899.6
|
|
|
$
|
244.6
|
|
|
$
|
(2,338.5
|
)
|
|
$
|
(1,463.4
|
)
|
|
$
|
6,342.3
|
|
|
$
|
122.4
|
|
|
$
|
6,464.7
|
|
|
13.
|
ACCUMULATED OTHER COMPREHENSIVE LOSS
|
|
|
|
Foreign Currency Translation Adjustment
|
|
Unrealized Gain on Equity Investment
|
|
Net Unrealized Holding Gain on Available-For-Sale Equity Securities
|
|
Pension Adjustment
|
|
Total
|
||||||||||
|
Balance, January 1, 2014
|
|
$
|
(170.3
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
37.5
|
|
|
$
|
(132.8
|
)
|
|
Foreign currency translation adjustment
|
|
(439.9
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(439.9
|
)
|
|||||
|
Unrealized gain on equity method investment, net of tax
(1)
|
|
—
|
|
|
22.5
|
|
|
—
|
|
|
—
|
|
|
22.5
|
|
|||||
|
Net unrealized holding gain on available-for-sale equity securities, net of tax
|
|
—
|
|
|
—
|
|
|
1.8
|
|
|
—
|
|
|
1.8
|
|
|||||
|
Reclassification to net income (loss)
(2)
|
|
—
|
|
|
—
|
|
|
(1.8
|
)
|
|
—
|
|
|
(1.8
|
)
|
|||||
|
Pension adjustment
(3)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1.8
|
)
|
|
(1.8
|
)
|
|||||
|
Balance, September 30, 2014
|
|
$
|
(610.2
|
)
|
|
$
|
22.5
|
|
|
$
|
—
|
|
|
$
|
35.7
|
|
|
$
|
(552.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Balance, January 1, 2015
|
|
$
|
(886.5
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(29.4
|
)
|
|
$
|
(915.9
|
)
|
|
Foreign currency translation adjustment
|
|
(546.1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(546.1
|
)
|
|||||
|
Pension adjustment
(3)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1.4
|
)
|
|
(1.4
|
)
|
|||||
|
Balance, September 30, 2015
|
|
$
|
(1,432.6
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(30.8
|
)
|
|
$
|
(1,463.4
|
)
|
|
(1)
|
Relates to the Company's investment in PS Fund 1, LLC ("PS Fund 1"), an entity that we previously owned with Pershing Square Capital Management, L.P. ("Pershing Square"). The Company is no longer a member of PS Fund 1.
|
|
(2)
|
Included in gain on investments, net.
|
|
(3)
|
Reflects changes in defined benefit obligations and related plan assets of the Company’s defined benefit pension plans and the U.S. postretirement benefit plan (see Note 11).
|
|
14.
|
INCOME TAXES
|
|
15.
|
EARNINGS PER SHARE
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
|
Net income attributable to Valeant Pharmaceuticals International, Inc.
|
$
|
49.5
|
|
|
$
|
275.4
|
|
|
$
|
70.2
|
|
|
$
|
378.6
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Basic weighted-average number of common shares outstanding
|
344.9
|
|
|
335.4
|
|
|
340.8
|
|
|
335.2
|
|
||||
|
Diluted effect of stock options, RSUs and other
|
6.1
|
|
|
5.9
|
|
|
6.4
|
|
|
6.2
|
|
||||
|
Diluted weighted-average number of common shares outstanding
|
351.0
|
|
|
341.3
|
|
|
347.2
|
|
|
341.4
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
|
Earnings per share attributable to Valeant Pharmaceuticals International, Inc.:
|
|
|
|
|
|
|
|
||||||||
|
Basic
|
$
|
0.14
|
|
|
$
|
0.82
|
|
|
$
|
0.21
|
|
|
$
|
1.13
|
|
|
Diluted
|
$
|
0.14
|
|
|
$
|
0.81
|
|
|
$
|
0.20
|
|
|
$
|
1.11
|
|
|
16.
|
LEGAL PROCEEDINGS
|
|
17.
|
SEGMENT INFORMATION
|
|
•
|
Developed Markets
consists of (i) sales in the U.S. of pharmaceutical products, OTC products, and medical device products, as well as alliance and contract service revenues, in the areas of dermatology and podiatry, neurology, gastrointestinal disorders, eye health, oncology and urology, dentistry, and aesthetics, and (ii) pharmaceutical products, OTC products, and medical device products sold in Western Europe, Canada, Japan, Australia and New Zealand.
|
|
•
|
Emerging Markets
consists of branded generic pharmaceutical products and branded pharmaceuticals, OTC products, and medical device products. Products are sold primarily in Central and Eastern Europe (primarily Poland and Russia), Asia, Latin America (Mexico, Brazil, and Argentina and exports out of Mexico to other Latin American markets), Africa and the Middle East.
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
|
Revenues:
|
|
|
|
|
|
|
|
||||||||
|
Developed Markets
(1)
|
$
|
2,320.7
|
|
|
$
|
1,507.9
|
|
|
$
|
6,322.7
|
|
|
$
|
4,409.4
|
|
|
Emerging Markets
(2)
|
466.1
|
|
|
548.3
|
|
|
1,387.4
|
|
|
1,574.1
|
|
||||
|
Total revenues
|
2,786.8
|
|
|
2,056.2
|
|
|
7,710.1
|
|
|
5,983.5
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
|
Segment profit:
|
|
|
|
|
|
|
|
||||||||
|
Developed Markets
(3)
|
690.0
|
|
|
478.0
|
|
|
2,004.5
|
|
|
1,375.3
|
|
||||
|
Emerging Markets
(4)
|
60.3
|
|
|
104.0
|
|
|
193.2
|
|
|
268.1
|
|
||||
|
Total segment profit
|
750.3
|
|
|
582.0
|
|
|
2,197.7
|
|
|
1,643.4
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
|
Corporate
(5)
|
(90.1
|
)
|
|
(42.9
|
)
|
|
(220.8
|
)
|
|
(127.3
|
)
|
||||
|
Restructuring, integration and other costs
|
(75.6
|
)
|
|
(61.7
|
)
|
|
(274.0
|
)
|
|
(337.4
|
)
|
||||
|
In-process research and development impairments and other charges
|
(95.8
|
)
|
|
(19.9
|
)
|
|
(108.1
|
)
|
|
(40.3
|
)
|
||||
|
Acquisition-related costs
|
(7.0
|
)
|
|
(1.6
|
)
|
|
(26.3
|
)
|
|
(3.7
|
)
|
||||
|
Acquisition-related contingent consideration
|
(3.8
|
)
|
|
(4.0
|
)
|
|
(22.6
|
)
|
|
(14.8
|
)
|
||||
|
Other (expense) income
|
(30.2
|
)
|
|
232.0
|
|
|
(213.2
|
)
|
|
275.7
|
|
||||
|
Operating income
|
447.8
|
|
|
683.9
|
|
|
1,332.7
|
|
|
1,395.6
|
|
||||
|
Interest income
|
0.7
|
|
|
0.8
|
|
|
2.5
|
|
|
3.8
|
|
||||
|
Interest expense
|
(420.2
|
)
|
|
(258.4
|
)
|
|
(1,130.7
|
)
|
|
(746.1
|
)
|
||||
|
Loss on extinguishment of debt
|
—
|
|
|
—
|
|
|
(20.0
|
)
|
|
(93.7
|
)
|
||||
|
Foreign exchange and other
|
(34.0
|
)
|
|
(53.0
|
)
|
|
(99.5
|
)
|
|
(63.0
|
)
|
||||
|
Gain on investments, net
|
—
|
|
|
3.4
|
|
|
—
|
|
|
5.9
|
|
||||
|
(Loss) income before (recovery of) provision for income taxes
|
$
|
(5.7
|
)
|
|
$
|
376.7
|
|
|
$
|
85.0
|
|
|
$
|
502.5
|
|
|
(1)
|
Developed Markets segment revenues reflect incremental product sales revenue in the
three-month and nine-month periods ended September 30, 2015
from 2014 and 2015 acquisitions of
$636 million
and
$1.39 billion
, respectively, in the aggregate, primarily from the Salix, Marathon, and Dendreon acquisitions.
|
|
(2)
|
Emerging Markets segment revenues reflect incremental product sales revenue in the
three-month and nine-month periods ended September 30, 2015
from 2014 and 2015 acquisitions of
$11 million
and
$36 million
, respectively, in the aggregate.
|
|
(3)
|
Developed Markets segment profit in the
three-month and nine-month periods ended September 30, 2015
reflects the impact of acquisition accounting adjustments related to the fair value adjustments to inventory and identifiable intangible assets of
$628 million
and
$1.50 billion
, in the aggregate, primarily from the Salix Acquisition, compared with
$224 million
and
$665 million
in the corresponding periods of 2014.
|
|
(4)
|
Emerging Markets segment profit in the
three-month and nine-month periods ended September 30, 2015
reflects the impact of acquisition accounting adjustments related to the fair value adjustments to inventory and identifiable intangible assets of
$78 million
and
$230 million
, in the aggregate, compared with
$90 million
and
$243 million
in the corresponding periods of 2014.
|
|
(5)
|
Corporate reflects non-restructuring-related share-based compensation expense of
$40 million
and
$78 million
in the
three-month and nine-month periods ended September 30, 2015
, respectively, compared with
$11 million
and
$32 million
in the corresponding periods of 2014.
|
|
|
As of
September 30, 2015 |
|
As of
December 31, 2014 |
||||
|
Assets:
|
|
|
|
||||
|
Developed Markets
(1)
|
$
|
40,336.3
|
|
|
$
|
19,093.4
|
|
|
Emerging Markets
(1)
|
5,939.2
|
|
|
6,332.9
|
|
||
|
|
46,275.5
|
|
|
25,426.3
|
|
||
|
Corporate
|
2,179.1
|
|
|
901.0
|
|
||
|
Total assets
|
$
|
48,454.6
|
|
|
$
|
26,327.3
|
|
|
(1)
|
Segment assets as of
September 30, 2015
were impacted by the identifiable intangible assets and goodwill from the various acquisitions in the current year. See Note 3 for additional information regarding the current year acquisitions.
|
|
18.
|
SUBSEQUENT EVENTS
|
|
|
|
Acquisition
Date
|
|
Acquisitions/Licenses
|
|
|
|
Amoun Pharmaceutical (“Amoun”)
|
|
October 2015
|
|
Sprout Pharmaceuticals, Inc. ("Sprout")
|
|
October 2015
|
|
Certain brodalumab product rights
|
|
October 2015
|
|
Salix
|
|
April 2015
|
|
Certain assets of Dendreon Corporation ("Dendreon")
|
|
February 2015
|
|
Certain assets of Marathon Pharmaceuticals, LLC ("Marathon")
|
|
February 2015
|
|
•
|
workforce reductions across the Company and other organizational changes;
|
|
•
|
closing of duplicative facilities and other site rationalization actions company-wide, including research and development facilities, sales offices and corporate facilities;
|
|
•
|
leveraging research and development spend; and/or
|
|
•
|
procurement savings.
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||||||||||
|
|
2015
|
|
2014
|
|
Change
|
|
2015
|
|
2014
|
|
Change
|
||||||||||||
|
($ in millions, except per share data)
|
$
|
|
$
|
|
$
|
|
%
|
|
$
|
|
$
|
|
$
|
|
%
|
||||||||
|
Revenues
|
2,786.8
|
|
|
2,056.2
|
|
|
730.6
|
|
|
36
|
|
|
7,710.1
|
|
|
5,983.5
|
|
|
1,726.6
|
|
|
29
|
|
|
Operating expenses
|
2,339.0
|
|
|
1,372.3
|
|
|
966.7
|
|
|
70
|
|
|
6,377.4
|
|
|
4,587.9
|
|
|
1,789.5
|
|
|
39
|
|
|
Net income attributable to Valeant Pharmaceuticals International, Inc.
|
49.5
|
|
|
275.4
|
|
|
(225.9
|
)
|
|
(82
|
)
|
|
70.2
|
|
|
378.6
|
|
|
(308.4
|
)
|
|
(81
|
)
|
|
Earnings per share attributable to Valeant Pharmaceuticals International, Inc.:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Basic
|
0.14
|
|
|
0.82
|
|
|
(0.68
|
)
|
|
(83
|
)
|
|
0.21
|
|
|
1.13
|
|
|
(0.92
|
)
|
|
(81
|
)
|
|
Diluted
|
0.14
|
|
|
0.81
|
|
|
(0.67
|
)
|
|
(83
|
)
|
|
0.20
|
|
|
1.11
|
|
|
(0.91
|
)
|
|
(82
|
)
|
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||
|
($ in millions)
|
|
$
|
|
$
|
|
$
|
|
$
|
||||
|
Gross product sales
|
|
4,666.1
|
|
|
2,980.2
|
|
|
11,884.7
|
|
|
8,180.3
|
|
|
Provisions to reduce gross product sales to net product sales
|
|
1,917.9
|
|
|
957.3
|
|
|
4,294.6
|
|
|
2,312.2
|
|
|
Net product sales
|
|
2,748.2
|
|
|
2,022.9
|
|
|
7,590.1
|
|
|
5,868.1
|
|
|
Percentage of provisions to gross sales
|
|
41
|
%
|
|
32
|
%
|
|
36
|
%
|
|
28
|
%
|
|
•
|
Developed Markets
consists of (i) sales in the U.S. of pharmaceutical products, OTC products, and medical device products, as well as alliance and contract service revenues, in the areas of dermatology and podiatry, neurology, gastrointestinal disorders, eye health, oncology and urology, dentistry, and aesthetics, and (ii) pharmaceutical products, OTC products, and medical device products sold in Western Europe, Canada, Japan, Australia and New Zealand.
|
|
•
|
Emerging Markets
consists of branded generic pharmaceutical products and branded pharmaceuticals, OTC products, and medical device products. Products are sold primarily in Central and Eastern Europe (primarily Poland and Russia), Asia, Latin America (Mexico, Brazil, and Argentina and exports out of Mexico to other Latin American markets), Africa and the Middle East.
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||||||||||||
|
|
2015
|
|
2014
|
|
Change
|
|
2015
|
|
2014
|
|
Change
|
||||||||||||||
|
($ in millions)
|
$
|
%
|
|
$
|
%
|
|
$
|
%
|
|
$
|
%
|
|
$
|
%
|
|
$
|
%
|
||||||||
|
Developed Markets
|
2,320.7
|
|
83
|
|
1,507.9
|
|
73
|
|
812.8
|
|
54
|
|
|
6,322.7
|
|
82
|
|
4,409.4
|
|
74
|
|
1,913.3
|
|
43
|
|
|
Emerging Markets
|
466.1
|
|
17
|
|
548.3
|
|
27
|
|
(82.2
|
)
|
(15
|
)
|
|
1,387.4
|
|
18
|
|
1,574.1
|
|
26
|
|
(186.7
|
)
|
(12
|
)
|
|
Total revenues
|
2,786.8
|
|
100
|
|
2,056.2
|
|
100
|
|
730.6
|
|
36
|
|
|
7,710.1
|
|
100
|
|
5,983.5
|
|
100
|
|
1,726.6
|
|
29
|
|
|
•
|
the incremental product sales revenue of
$636 million
and
$1.39 billion
(which includes a negative foreign currency exchange impact of $2 million and $7 million, in the aggregate, in the
third quarter
and
first nine months
of
2015
, respectively), in the aggregate, from all 2014 and 2015 acquisitions in the
third quarter
and
first nine months
of
2015
, respectively, primarily from the 2015 acquisitions of Salix (mainly driven by Xifaxan®, as well as Glumetza®, Uceris® and Apriso® product sales), certain assets of Marathon (mainly driven by Isuprel® and Nitropress® product
|
|
•
|
a negative foreign currency exchange impact on the existing business of $66 million and $198 million in the
third quarter
and
first nine months
of
2015
, respectively, due to the impact of a strengthening of the U.S. dollar against certain currencies, including the
Euro, Canadian dollar, Australian dollar, and Japanese yen
; and
|
|
•
|
a negative impact from divestitures and discontinuations of $5 million and $116 million in the
third quarter
and
first nine months
of
2015
, respectively, primarily driven by $94 million for the first nine month period, related to the divestiture in the third quarter of 2014 of facial aesthetic fillers and toxins.
|
|
•
|
the incremental product sales revenue of
$11 million
and
$36 million
(which includes a negative foreign currency exchange impact of $2 million and $4 million, in the aggregate, in the
third quarter
and
first nine months
of
2015
, respectively), in the aggregate, primarily from all 2014 and 2015 acquisitions in the
third quarter
and
first nine months
of
2015
, respectively.
|
|
•
|
a negative foreign currency exchange impact on the existing business of $102 million and $275 million in the
third quarter
and
first nine months
of
2015
, respectively, due to the impact of a strengthening of the U.S. dollar against certain currencies, including the
Russian ruble, Polish zloty, Brazilian real, Mexican peso, and Euro
; and
|
|
•
|
a negative impact from divestitures and discontinuations of $5 million and $18 million in the
third quarter
and
first nine months
of
2015
, respectively, primarily from Latin America.
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||||||||||||
|
|
2015
|
|
2014
|
|
Change
|
|
2015
|
|
2014
|
|
Change
|
||||||||||||||
|
($ in millions)
|
$
|
%
(1)
|
|
$
|
%
(1)
|
|
$
|
%
|
|
$
|
%
(1)
|
|
$
|
%
(1)
|
|
$
|
%
|
||||||||
|
Developed Markets
|
690.0
|
|
30
|
|
478.0
|
|
32
|
|
212.0
|
|
44
|
|
|
2,004.5
|
|
32
|
|
1,375.3
|
|
31
|
|
629.2
|
|
46
|
|
|
Emerging Markets
|
60.3
|
|
13
|
|
104.0
|
|
19
|
|
(43.7
|
)
|
(42
|
)
|
|
193.2
|
|
14
|
|
268.1
|
|
17
|
|
(74.9
|
)
|
(28
|
)
|
|
Total segment profit
|
750.3
|
|
27
|
|
582.0
|
|
28
|
|
168.3
|
|
29
|
|
|
2,197.7
|
|
29
|
|
1,643.4
|
|
27
|
|
554.3
|
|
34
|
|
|
•
|
an increase in contribution of $506 million and $1.09 billion, in the aggregate, from all 2014 and 2015 acquisitions in the
third quarter
and
first nine months
of
2015
, respectively, primarily from sales of Salix, Marathon, and Dendreon products, including expenses for acquisition accounting adjustments related to inventory of $27 million and $98 million, in the aggregate, in the
third quarter
and
first nine months
of 2015, respectively; and
|
|
•
|
a favorable impact of $11 million and $24 million related to the existing business acquisition accounting adjustments related to inventory in the
third quarter
and
first nine months
of
2014
, respectively, that did not similarly occur in the
third quarter
and
first nine months
of
2015
.
|
|
•
|
an increase in operating expenses (including amortization and impairments of finite-lived intangible assets) of $490 million and $987 million in the
third quarter
and
first nine months
of
2015
, respectively, primarily associated with the acquisitions of new businesses within the segment;
|
|
•
|
a negative foreign currency exchange impact on the existing business contribution of $49 million and $148 million in the
third quarter
and
first nine months
of
2015
, respectively, due to the impact of a strengthening of the U.S. dollar against certain currencies, including the Euro, Canadian dollar, Australian dollar, and Japanese yen; and
|
|
•
|
a decrease in contribution related to divestitures and discontinuations of $4 million and $93 million in the
third quarter
and
first nine months
of
2015
, respectively, primarily driven by $80 million for the first nine month period, respectively related to the divestiture in the third quarter of 2014 of facial aesthetic fillers and toxins.
|
|
•
|
a decrease in operating expenses (including amortization and impairments of finite-lived intangible assets) of $13 million and $56 million in the
third quarter
and
first nine months
of
2015
, respectively, primarily driven by foreign currency exchange; and
|
|
•
|
an increase in contribution of $5 million and $18 million in the
third quarter
and
first nine months
of
2015
, respectively, primarily from all 2014 and 2015 acquisitions.
|
|
•
|
a negative foreign currency exchange impact on the existing business contribution of $62 million and $165 million in the
third quarter
and
first nine months
of
2015
, respectively, due to the impact of a strengthening of the U.S. dollar against certain currencies, including the Russian ruble, Polish zloty, Brazilian real, Mexican peso, and Euro; and
|
|
•
|
a decrease in contribution related to divestitures and discontinuations of $3 million and $11 million in the
third quarter
and
first nine months
of
2015
, respectively.
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||||||||||||||
|
|
2015
|
|
2014
|
|
Change
|
|
2015
|
|
2014
|
|
Change
|
||||||||||||||||
|
($ in millions)
|
$
|
%
(1)
|
|
$
|
%
(1)
|
|
$
|
%
|
|
$
|
%
(1)
|
|
$
|
%
(1)
|
|
$
|
%
|
||||||||||
|
Cost of goods sold (exclusive of amortization and impairments of finite-lived intangible assets shown separately below)
|
634.6
|
|
23
|
|
545.8
|
|
27
|
|
|
88.8
|
|
16
|
|
|
1,864.9
|
|
24
|
|
1,619.5
|
|
27
|
|
|
245.4
|
|
15
|
|
|
Cost of other revenues
|
13.6
|
|
—
|
|
15.0
|
|
1
|
|
|
(1.4
|
)
|
(9
|
)
|
|
43.1
|
|
1
|
|
45.3
|
|
1
|
|
|
(2.2
|
)
|
(5
|
)
|
|
Selling, general and administrative
|
697.6
|
|
25
|
|
504.1
|
|
25
|
|
|
193.5
|
|
38
|
|
|
1,956.9
|
|
25
|
|
1,501.8
|
|
25
|
|
|
455.1
|
|
30
|
|
|
Research and development
|
101.6
|
|
4
|
|
59.1
|
|
3
|
|
|
42.5
|
|
72
|
|
|
238.5
|
|
3
|
|
186.9
|
|
3
|
|
|
51.6
|
|
28
|
|
|
Amortization and impairments of finite-lived intangible assets
|
679.2
|
|
24
|
|
393.1
|
|
19
|
|
|
286.1
|
|
73
|
|
|
1,629.8
|
|
21
|
|
1,113.9
|
|
19
|
|
|
515.9
|
|
46
|
|
|
Restructuring, integration and other costs
|
75.6
|
|
3
|
|
61.7
|
|
3
|
|
|
13.9
|
|
23
|
|
|
274.0
|
|
4
|
|
337.4
|
|
6
|
|
|
(63.4
|
)
|
(19
|
)
|
|
In-process research and development impairments and other charges
|
95.8
|
|
3
|
|
19.9
|
|
1
|
|
|
75.9
|
|
381
|
|
|
108.1
|
|
1
|
|
40.3
|
|
1
|
|
|
67.8
|
|
168
|
|
|
Acquisition-related costs
|
7.0
|
|
—
|
|
1.6
|
|
—
|
|
|
5.4
|
|
338
|
|
|
26.3
|
|
—
|
|
3.7
|
|
—
|
|
|
22.6
|
|
611
|
|
|
Acquisition-related contingent consideration
|
3.8
|
|
—
|
|
4.0
|
|
—
|
|
|
(0.2
|
)
|
(5
|
)
|
|
22.6
|
|
—
|
|
14.8
|
|
—
|
|
|
7.8
|
|
53
|
|
|
Other expense (income)
|
30.2
|
|
1
|
|
(232.0
|
)
|
(11
|
)
|
|
262.2
|
|
NM
|
|
|
213.2
|
|
3
|
|
(275.7
|
)
|
(5
|
)
|
|
488.9
|
|
NM
|
|
|
Total operating expenses
|
2,339.0
|
|
84
|
|
1,372.3
|
|
67
|
|
|
966.7
|
|
70
|
|
|
6,377.4
|
|
83
|
|
4,587.9
|
|
77
|
|
|
1,789.5
|
|
39
|
|
|
•
|
a favorable impact from sales of products acquired in the Salix Acquisition in the second quarter of 2015, as well as higher sales of dermatology products, as such products have a higher gross profit margin than our overall gross profit margin. This is partially offset by a lower gross profit margin related to the Provenge® product, which was acquired as part of the Dendreon acquisition in the first quarter of 2015; and
|
|
•
|
a favorable impact from product mix and geographic mix driven by growth in the U.S. businesses and recent dermatology product launches, including Jublia®, RAM 0.08%, and Onexton®. These products have a higher gross profit margin than our overall margin.
|
|
•
|
an unfavorable impact on gross margin from foreign currency exchange of $103 million and $298 million in the
third quarter
and
first nine months
of
2015
, respectively; and
|
|
•
|
the impact of incremental acquisition accounting adjustments of $15 million and $76 million in the
third quarter
and
first nine months
of
2015
, respectively, primarily related to step-up for acquired inventory from the Salix and Marathon acquisitions which was expensed in the
third quarter
and
first nine months
of
2015
that did not similarly occur in the
third quarter
and
first nine months
of
2014
.
|
|
•
|
higher expenses of $80 million and $267 million, respectively, to support recent product launches in dermatology, including Jublia® and Onexton®;
|
|
•
|
higher expenses of $97 million and $220 million, respectively, related to acquisitions, including Salix and Dendreon;
|
|
•
|
increased share-based compensation expense of $30 million and $50 million, respectively, primarily driven by new awards granted during the period, the impact of the accelerated vesting related to certain performance-based RSU awards, and the impact from a modification made to certain share-based awards. Refer to Note 10 of notes to the unaudited consolidated financial statements for further details); and
|
|
•
|
higher expenses of $5 million and $15 million, respectively, to support launches in the contact lens business.
|
|
•
|
a favorable impact from foreign currency exchange of $53 million and $148 million in the
third quarter
and
first nine months
of
2015
, respectively; and
|
|
•
|
lower expenses of $5 million and $35 million, respectively, related to the facial aesthetic fillers and toxins assets which were divested in the third quarter of 2014.
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||||||||
|
|
2015
|
|
2014
|
|
Change
|
|
2015
|
|
2014
|
|
Change
|
||||||||||
|
($ in millions; Income (Expense))
|
$
|
|
$
|
|
$
|
%
|
|
$
|
|
$
|
|
$
|
%
|
||||||||
|
Interest income
|
0.7
|
|
|
0.8
|
|
|
(0.1
|
)
|
(13
|
)
|
|
2.5
|
|
|
3.8
|
|
|
(1.3
|
)
|
(34
|
)
|
|
Interest expense
|
(420.2
|
)
|
|
(258.4
|
)
|
|
(161.8
|
)
|
63
|
|
|
(1,130.7
|
)
|
|
(746.1
|
)
|
|
(384.6
|
)
|
52
|
|
|
Loss on extinguishment of debt
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
|
(20.0
|
)
|
|
(93.7
|
)
|
|
73.7
|
|
(79
|
)
|
|
Foreign exchange and other
|
(34.0
|
)
|
|
(53.0
|
)
|
|
19.0
|
|
(36
|
)
|
|
(99.5
|
)
|
|
(63.0
|
)
|
|
(36.5
|
)
|
58
|
|
|
Gain on investments, net
|
—
|
|
|
3.4
|
|
|
(3.4
|
)
|
(100
|
)
|
|
—
|
|
|
5.9
|
|
|
(5.9
|
)
|
(100
|
)
|
|
Total non-operating expense
|
(453.5
|
)
|
|
(307.2
|
)
|
|
(146.3
|
)
|
48
|
|
|
(1,247.7
|
)
|
|
(893.1
|
)
|
|
(354.6
|
)
|
40
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|||||||||||||||||
|
|
2015
|
|
2014
|
|
Change
|
|
2015
|
|
2014
|
|
Change
|
|||||||||
|
($ in millions; Expense (Income))
|
$
|
|
$
|
|
$
|
%
|
|
$
|
|
$
|
|
$
|
%
|
|||||||
|
Current income tax expense
|
34.0
|
|
|
25.7
|
|
|
8.3
|
|
32
|
|
89.4
|
|
|
61.2
|
|
|
28.2
|
|
46
|
|
|
Deferred income tax expense
|
(91.4
|
)
|
|
74.6
|
|
|
(166.0
|
)
|
NM
|
|
(79.0
|
)
|
|
63.2
|
|
|
(142.2
|
)
|
NM
|
|
|
Total (recovery of) provision for income taxes
|
(57.4
|
)
|
|
100.3
|
|
|
(157.7
|
)
|
NM
|
|
10.4
|
|
|
124.4
|
|
|
(114.0
|
)
|
(92
|
)
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||||||||
|
|
2015
|
|
2014
|
|
Change
|
|
2015
|
|
2014
|
|
Change
|
||||||||||
|
($ in millions)
|
$
|
|
$
|
|
$
|
%
|
|
$
|
|
$
|
|
$
|
%
|
||||||||
|
Net cash provided by operating activities
|
736.5
|
|
|
618.7
|
|
|
117.8
|
|
19
|
|
|
1,638.0
|
|
|
1,479.0
|
|
|
159.0
|
|
11
|
|
|
Net cash (used in) provided by investing activities
|
(156.2
|
)
|
|
756.3
|
|
|
(912.5
|
)
|
NM
|
|
|
(14,041.9
|
)
|
|
105.8
|
|
|
(14,147.7
|
)
|
NM
|
|
|
Net cash (used in) provided by financing activities
|
(108.5
|
)
|
|
(1,082.1
|
)
|
|
973.6
|
|
(90
|
)
|
|
13,523.2
|
|
|
(1,361.4
|
)
|
|
14,884.6
|
|
NM
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
(9.8
|
)
|
|
(15.3
|
)
|
|
5.5
|
|
(36
|
)
|
|
(21.9
|
)
|
|
(14.9
|
)
|
|
(7.0
|
)
|
47
|
|
|
Net increase in cash and cash equivalents
|
462.0
|
|
|
277.6
|
|
|
184.4
|
|
66
|
|
|
1,097.4
|
|
|
208.5
|
|
|
888.9
|
|
426
|
|
|
Cash and cash equivalents, beginning of period
|
958.0
|
|
|
531.2
|
|
|
426.8
|
|
80
|
|
|
322.6
|
|
|
600.3
|
|
|
(277.7
|
)
|
(46
|
)
|
|
Cash and cash equivalents, end of period
|
1,420.0
|
|
|
808.8
|
|
|
611.2
|
|
76
|
|
|
1,420.0
|
|
|
808.8
|
|
|
611.2
|
|
76
|
|
|
•
|
the inclusion of cash flows in the
third quarter
of
2015
from all
2014
and 2015 acquisitions, including Salix, Marathon and Dendreon; and
|
|
•
|
incremental cash flows from the continued growth of the existing business, including new product launches.
|
|
•
|
an increased investment in working capital of
$133 million
in the
third quarter
of
2015
, primarily related to the post-acquisition build up in accounts receivable for recent acquisitions (primarily the Salix Acquisition) where minimal
|
|
•
|
a payment of RUR 1.66 billion (approximately $25 million) related to AntiGrippin® litigation (refer to Note 16 titled "LEGAL PROCEEDINGS" of notes to unaudited consolidated financial statements); and
|
|
•
|
higher payments of $13 million related to restructuring, integration and other costs primarily due to payments made in the third quarter of 2015 related to the Salix and Dendreon acquisitions, partially offset by lower payments related to the B&L Acquisition.
|
|
•
|
the inclusion of cash flows in the
first nine months
of
2015
from all
2014
and 2015 acquisitions, including Salix, Marathon, Dendreon and PreCision;
|
|
•
|
incremental cash flows from the continued growth of the existing business, including new product launches; and
|
|
•
|
lower payments of $97 million related to restructuring, integration and other costs primarily due to lower payments related to the B&L Acquisition, partially offset by payments made in 2015 related to the Salix and Dendreon acquisitions.
|
|
•
|
an increased investment in working capital of
$431 million
in the
first nine months
of
2015
, primarily related to the post-acquisition build up in accounts receivable for recent acquisitions (primarily the Salix and Marathon acquisitions) where minimal accounts receivable balances were acquired, slower account receivable collections in Russia, and the impact of changes related to timing of payments and receipts in the ordinary course of business;
|
|
•
|
payment of $168 million in the second quarter of 2015 for outstanding restricted stock that was accelerated in connection with the Salix Acquisition, which includes $3 million of related payroll taxes (recognized as a post-combination expense within Other expense (income)); and
|
|
•
|
a payment of RUR 1.66 billion (approximately $25 million) related to AntiGrippin® litigation (refer to Note 16 titled "LEGAL PROCEEDINGS" of notes to unaudited consolidated financial statements).
|
|
•
|
a decrease of $1.48 billion related to proceeds in the third quarter of 2014 from the sale of assets and businesses, net of costs to sell, primarily attributable to the cash proceeds of approximately $1.40 billion for the divestiture of filler and toxin assets to Galderma, which did not similarly occur in the third quarter of 2015.
|
|
•
|
an increase of
$565 million
, in the aggregate, related to lower purchases of businesses (net of cash acquired) and intangible assets.
|
|
•
|
a decrease of
$12.97 billion
, in the aggregate, related to higher purchases of businesses (net of cash acquired) and intangible assets, driven by the Salix, Dendreon and Marathon acquisitions; and
|
|
•
|
a decrease of $1.48 billion related to proceeds in the first nine months of 2014 from the sale of assets and businesses, net of costs to sell, primarily attributable to the cash proceeds of approximately $1.40 billion for the divestiture of filler and toxin assets to Galderma, which did not similarly occur in the first nine months of 2015.
|
|
•
|
an increase of $185 million related to the net impact from the settlement of derivative contracts assumed in the Salix Acquisition in the second quarter of 2015 (consists of the settlement of the $1.27 billion asset mostly offset by the
|
|
•
|
an increase of $76 million related to the investment in the second quarter of 2014 in PS Fund 1, LLC ("PS Fund 1"), an entity that we previously owned with Pershing Square Capital Management, L.P. (we are no longer a member of PS Fund 1), which did not similarly occur in 2015; and
|
|
•
|
an increase of
$48 million
due to lower purchases of property, plant and equipment.
|
|
•
|
a decrease of $1.60 billion related to lower repayments
primarily associated with incremental term loans and our revolving credit facility in the third quarter of 2015.
|
|
•
|
an increase of $555 million related to net proceeds from the issuances under our revolving credit facility in the third quarter of 2014, which did not similarly occur in the third quarter of 2015.
|
|
•
|
an increase due to the net proceeds of $10 billion related to the issuance of the senior notes in the first quarter of 2015 (which were released from escrow in April 2015 and utilized to fund the Salix Acquisition);
|
|
•
|
an increase due to the net proceeds of $5.06 billion, in the aggregate, related to the issuances of incremental term loans under the Series A-4 Tranche A Facility and the Series F Tranche B Term Loan Facility in the second quarter of 2015;
|
|
•
|
an increase due to the net proceeds of $1.43 billion related to the issuance of common stock in March 2015, which were utilized to fund the Salix Acquisition;
|
|
•
|
an increase due to the net proceeds of $992 million from the issuance of the 2023 Notes in the first quarter of 2015; and
|
|
•
|
an increase of $797 million related to (i) lower repayments of $1.29 billion in the first nine months of 2015 associated with incremental term loans and our revolving credit facility partially offset by (ii) $500 million paid in connection with the redemption of the December 2018 Notes in the first quarter of 2015.
|
|
•
|
a decrease due to $3.12 billion paid in connection with the redemption of the convertible notes assumed in the Salix Acquisition in the second quarter of 2015.
|
|
|
|
Payments Due by Period
|
|||||||||||||
|
|
|
Total
|
|
2015
|
|
2016 and 2017
|
|
2018 and 2019
|
|
Thereafter
|
|||||
|
($ in millions)
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|||||
|
Long-term debt obligations, including interest
(1)
|
|
41,705.5
|
|
|
527.8
|
|
|
4,676.9
|
|
|
8,238.4
|
|
|
28,262.4
|
|
|
(1)
|
Expected interest payments assume repayment of the principal amount of the debt obligations at maturity.
|
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•
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the challenges and difficulties associated with managing the rapid growth of our Company and a large complex business;
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•
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our ability to retain, motivate and recruit executives and other key employees;
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the introduction of products that compete against our products that do not have patent or data exclusivity rights;
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our ability to compete against companies that are larger and have greater financial, technical and human resources than we do, as well as other competitive factors, such as technological advances achieved, patents obtained and new products introduced by our competitors;
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our ability to identify, finance, acquire, close and integrate acquisition targets successfully and on a timely basis;
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factors relating to the acquisition and integration of the companies, businesses and products acquired by the Company, such as the time and resources required to integrate such companies, businesses and products, the difficulties associated
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factors relating to our ability to achieve all of the estimated synergies from our acquisitions as a result of cost-rationalization and integration initiatives. These factors may include greater than expected operating costs, the difficulty in eliminating certain duplicative costs, facilities and functions, and the outcome of many operational and strategic decisions, some of which have not yet been made;
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factors relating to our acquisition of Salix, including the impact of substantial additional debt on our financial condition and results of operations; our ability to effectively and efficiently integrate the operations of the Company and Salix; our ability to achieve the estimated synergies from this transaction; our ability to further reduce wholesaler inventory levels of certain of Salix's products and the timing of such reduction; and, once integrated, the effects of such business combination on our future financial condition, operating results, strategy and plans;
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our ability to secure and maintain third party research, development, manufacturing, marketing or distribution arrangements;
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our eligibility for benefits under tax treaties and the continued availability of low effective tax rates for the business profits of certain of our subsidiaries , including the impact on such matters of the recent reports published by the Organization for Economic Co-operation and Development (OECD) respecting base erosion and profit shifting (BEPS) and the potential enactment in law of such measures by individual countries;
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our substantial debt and debt service obligations and their impact on our financial condition and results of operations;
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our future cash flow, our ability to service and repay our existing debt, our ability to raise additional funds, if needed, and any restrictions that are or may be imposed as a result of our current and future indebtedness, in light of our current and projected levels of operations, acquisition activity and general economic conditions (including capital market conditions and a lack of liquidity therein);
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any downgrade by rating agencies in our corporate credit ratings, which may impact, among other things, our ability to raise additional debt capital and implement elements of our growth strategy;
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interest rate risks associated with our floating rate debt borrowings;
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the risks associated with the international scope of our operations, including our presence in emerging markets and the challenges we face when entering new geographic markets (including the challenges created by new and different regulatory regimes in such countries);
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adverse global economic conditions and credit markets and foreign currency exchange uncertainty and volatility in the countries in which we do business (such as the recent instability in Brazil, China, Russia, Ukraine and the Middle East);
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economic factors over which the Company has no control, including changes in inflation, interest rates, foreign currency rates, and the potential effect of such factors on revenues, expenses and resulting margins;
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the introduction of generic competitors of our branded products;
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our ability to obtain and maintain sufficient intellectual property rights over our products and defend against challenges to such intellectual property;
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the expense, timing and outcome of legal proceedings, arbitrations, investigations, tax and other regulatory audits, and regulatory proceedings and settlements thereof (including the matters assumed as part of our acquisition of Salix
,
the pending investigations by the U.S. Attorney's Office for the District of Massachusetts and the U.S. Attorney's Office for the Southern District of New York, the recent shareholder class action suits and other matters relating to our distribution and pricing practices);
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the risk that our products could cause, or be alleged to cause, personal injury and adverse effects, leading to potential lawsuits, product liability claims and damages and/or withdrawals of products from the market;
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the availability of and our ability to obtain and maintain adequate insurance coverage and/or our ability to cover or insure against the total amount of the claims and liabilities we face, whether through third party insurance or self-insurance;
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the difficulty in predicting the expense, timing and outcome within our legal and regulatory environment, including with respect to approvals by the U.S. Food and Drug Administration (the "FDA"), Health Canada and similar agencies in other countries, legal and regulatory proceedings and settlements thereof, the protection afforded by our patents and other intellectual and proprietary property, successful generic challenges to our products and infringement or alleged infringement of the intellectual property of others;
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the results of continuing safety and efficacy studies by industry and government agencies;
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ongoing oversight and review of our products and facilities by regulatory and governmental agencies, including periodic audits by the FDA, and the results thereof;
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the availability and extent to which our products are reimbursed by government authorities and other third party payors, as well as the impact of obtaining or maintaining such reimbursement on the price of our products;
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the inclusion of our products on formularies or our ability to achieve favorable formulary status, as well as the impact on the price of our products in connection therewith;
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the impact of price control restrictions on our products, including the risk of mandated price reductions;
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the success of preclinical and clinical trials for our drug development pipeline or delays in clinical trials that adversely impact the timely commercialization of our pipeline products, as well as factors impacting the commercial success of our currently marketed products, which could lead to material impairment charges;
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the results of management reviews of our research and development portfolio, conducted periodically and in connection with certain acquisitions, the decisions from which could result in terminations of specific projects which, in turn, could lead to material impairment charges;
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negative publicity or reputational harm to, or other adverse impacts on, our Company, products and business, including as a result of the recent public scrutiny of our pricing and distribution practices, recent statements made by a short seller respecting our business practices and financial accounting and the pending investigations by the U.S. Attorney's Office for the District of Massachusetts and the U.S. Attorney's Office for the Southern District of New York;
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the outcome of the review of the Company's business relationship with Philidor Rx Services, LLC and the negative publicity or reputational harm to, or other adverse impacts on, the Company that could derive therefrom;
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the uncertainties associated with the acquisition and launch of new products, including, but not limited to, the acceptance and demand for new pharmaceutical products, and the impact of competitive products and pricing;
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our ability to obtain components, raw materials or finished products supplied by third parties and other manufacturing and related supply difficulties, interruptions and delays;
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the disruption of delivery of our products and the routine flow of manufactured goods;
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the seasonality of sales of certain of our products;
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declines in the pricing and sales volume of certain of our products that are distributed or marketed by third parties, over which we have no or limited control;
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compliance by the Company or our third party partners and service providers (over whom we may have limited influence), or the failure of our Company or these third parties to comply, with health care “fraud and abuse” laws and other extensive regulation of our marketing, promotional and pricing practices, worldwide anti-bribery laws (including the U.S. Foreign Corrupt Practices Act), worldwide environmental laws and regulation and privacy and security regulations;
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the impacts of the Patient Protection and Affordable Care Act (as amended) and other legislative and regulatory healthcare reforms in the countries in which we operate;
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potential ramifications, including possible financial penalties, relating to Salix's restatement of its historical financial results and our ability to address historical weaknesses in Salix's internal control over financial reporting;
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interruptions, breakdowns or breaches in our information technology systems; and
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other risks detailed from time to time in our filings with the U.S. Securities and Exchange Commission (the “SEC”) and the Canadian Securities Administrators (the “CSA”), as well as our ability to anticipate and manage the risks associated with the foregoing.
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10.1†
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Employment Letter dated June 10, 2015 between Valeant Pharmaceuticals International, Inc. and Robert Rosiello, originally filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 filed on July 28, 2015, which is incorporated by reference herein.
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10.2†
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Separation Agreement dated July 14, 2015 between Valeant Pharmaceuticals International, Inc. and Howard B. Schiller, originally filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 filed on July 28, 2015, which is incorporated by reference herein.
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31.1*
|
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Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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31.2*
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Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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32.1*
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Certificate of the Chief Executive Officer of Valeant Pharmaceuticals International, Inc. pursuant to 18 U.S.C. § 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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32.2*
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Certificate of the Chief Financial Officer of Valeant Pharmaceuticals International, Inc. pursuant to 18 U.S.C. § 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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101.INS*
|
|
XBRL Instance Document
|
|
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101.SCH*
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
101.CAL*
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
101.LAB*
|
|
XBRL Taxonomy Extension Label Linkbase Document
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|
|
101.PRE*
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
101.DEF*
|
|
XBRL Taxonomy Extension Definition Document
|
|
|
*
|
Filed herewith.
|
|
†
|
Management contract or compensatory plan or arrangement.
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|
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Valeant Pharmaceuticals International, Inc.
(Registrant) |
|
Date: October 26, 2015
|
/s/ J. MICHAEL PEARSON
J. Michael Pearson
Chairman of the Board and Chief Executive Officer (Principal Executive Officer) |
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Date: October 26, 2015
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/s/ ROBERT L. ROSIELLO
Robert L. Rosiello
Executive Vice-President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |
|
Exhibit
Number
|
|
|
Exhibit Description
|
|
10.1†
|
|
Employment Letter dated June 10, 2015 between Valeant Pharmaceuticals International, Inc. and Robert Rosiello, originally filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 filed on July 28, 2015, which is incorporated by reference herein.
|
|
|
10.2†
|
|
Separation Agreement dated July 14, 2015 between Valeant Pharmaceuticals International, Inc. and Howard B. Schiller, originally filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 filed on July 28, 2015, which is incorporated by reference herein.
|
|
|
31.1*
|
|
Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
31.2*
|
|
Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
32.1*
|
|
Certificate of the Chief Executive Officer of Valeant Pharmaceuticals International, Inc. pursuant to 18 U.S.C. § 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
32.2*
|
|
Certificate of the Chief Financial Officer of Valeant Pharmaceuticals International, Inc. pursuant to 18 U.S.C. § 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
101.INS*
|
|
XBRL Instance Document
|
|
|
101.SCH*
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
101.CAL*
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
101.LAB*
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
101.PRE*
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
101.DEF*
|
|
XBRL Taxonomy Extension Definition Document
|
|
|
*
|
Filed herewith.
|
|
†
|
Management contract or compensatory plan or arrangement.
|
No information found
* THE VALUE IS THE MARKET VALUE AS OF THE LAST DAY OF THE QUARTER FOR WHICH THE 13F WAS FILED.
| FUND | NUMBER OF SHARES | VALUE ($) | PUT OR CALL |
|---|
| DIRECTORS | AGE | BIO | OTHER DIRECTOR MEMBERSHIPS |
|---|
No information found
No Customers Found
No Suppliers Found
Price
Yield
| Owner | Position | Direct Shares | Indirect Shares |
|---|