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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 March 31, 2016
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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
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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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Consolidated
Financial Statements (unaudited)
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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 expense, timing and outcome of legal and governmental proceedings, investigations and information requests relating to, among other matters, our distribution, marketing, pricing, disclosure and accounting practices (including with respect to our former relationship with Philidor), including pending investigations by the U.S. Attorney's Office for the District of Massachusetts, the U.S. Attorney's Office for the Southern District of New York and the State of North Carolina Department of Justice, the pending investigation by the U.S. Securities and Exchange Commission (the “SEC”) of the Company, pending investigations by the U.S. Senate Special Committee on Aging and the U.S. House Committee on Oversight and Government Reform, the request for documents and information received by the Company from the Autorité des marchés financiers (the “AMF”) (the Company’s principal securities regulator in Canada), the document subpoena from the New Jersey State Bureau of Securities and a number of pending purported class action litigations in the U.S. and Canada and other claims, investigations or proceedings that may be initiated or that may be asserted;
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our ability to manage the transition to our new Chairman and Chief Executive Officer, the success of such individual in assuming the roles of Chairman and Chief Executive Officer and the ability of such individual to implement and achieve the strategies and goals of the Company as they develop;
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the election of the slate of directors who are standing for election at our upcoming annual general meeting of shareholders, many of whom are new or recently appointed directors, and our ability to manage the transition to this new Board of Directors and the success of these individuals in their new roles as members of the Board of Directors of the Company;
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potential additional litigation and regulatory investigations (and any costs, expenses, use of resources, diversion of management time and efforts, liability and damages that may result therefrom), negative publicity and reputational harm that may result from the completed review by the Ad Hoc Committee of our Board of Directors;
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the effect of the misstatements identified in, and the resultant restatement of, certain of our previously issued financial statements and results (as further described herein); the material weaknesses in our internal control over financial reporting identified by the Company; and any claims, investigations or proceedings (and any costs, expenses, use of resources, diversion of management time and efforts, liability and damages that may result therefrom), negative publicity or reputational harm that may arise as a result;
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the effectiveness of the remediation measures and actions currently being implemented and to be taken in the future to remediate the material weaknesses in our internal control over financial reporting identified by the Company, our deficient control environment and the contributing factors leading to the misstatement of our results and the impact such measures may have on the Company and our businesses;
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potential additional litigation and regulatory investigations (and any costs, expenses, use of resources, diversion of management time and efforts, liability and damages that may result therefrom), negative publicity and reputational harm on our Company, products and business that may result from the recent public scrutiny of our distribution, marketing, pricing, disclosure and accounting practices and from our former relationship with Philidor, including any claims, proceedings, investigations and liabilities we may face as a result of any alleged wrongdoing by Philidor;
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the current scrutiny of our business practices including with respect to pricing (including the investigations by the U.S. Attorney's Offices for the District of Massachusetts and the Southern District of New York, the U.S. Senate Special Committee on Aging, the U.S. House Committee on Oversight and Government Reform and the State of North Carolina Department of Justice) and any pricing controls or price reductions that may be sought or imposed (or that we may elect to implement) on our products as a result thereof (such as the recent decision of the Company to take no further price increases on our Nitropress® and Isuprel® products and to implement an enhanced rebate program for such products);
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any default under the terms of our senior notes indentures or Credit Agreement and our ability, if any, to cure or obtain waivers of such default;
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any delay in the filing of any subsequent financial statements or other filings and any default under the terms of our senior notes indentures or Credit Agreement as a result of such delays;
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our substantial debt (and potential future indebtedness) and current and future debt service obligations and their impact on our financial condition, cash flows and results of operations;
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our ability to meet the financial and other covenants contained in our Credit Agreement, senior note indentures and other current or future debt agreements and the limitations, restrictions and prohibitions such covenants impose or may impose on the way we conduct our business, including the restrictions imposed by the April 11, 2016 amendment (the “April 2016 amendment”) to our Credit Agreement that restrict us from, among other things, making acquisitions over an aggregate threshold (subject to certain exceptions) and from incurring debt to finance such acquisitions, until we achieve a specified leverage ratio;
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our ability to service and repay our existing or any future debt, including our ability to reduce our outstanding debt levels during 2016 in accordance with our stated intention;
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any downgrade by rating agencies in our credit ratings (such as the recent downgrades by Moody’s Investors Service and Standard & Poor’s Ratings Services), which may impact, among other things, our ability to raise debt and the cost of capital for additional debt issuances;
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our ability to raise additional funds, as needed, in light of our current and projected levels of operations, general economic conditions (including capital market conditions) and any restrictions or limitations imposed by the financial and other covenants of our debt agreements with respect to incurring additional debt;
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any further reductions in, or changes in the assumptions used in, our forecasts for fiscal year 2016 or beyond, which could lead to, among other things, a failure to meet the financial and/or other covenants contained in our Credit Agreement and/or senior note indentures and/or impairment in the goodwill associated with certain of our reporting units (including our U.S. reporting unit) or impairment charges related to certain of our products (in particular, our Addyi® product) or other intangible assets, which impairments could be material;
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changes in the assumptions used in connection with our impairment analyses or assessments, which would lead to a change in such impairment analyses and assessments and which could result in an impairment in the goodwill associated with any of our reporting units (such as our U.S. reporting unit) or impairment charges related to certain of our products (in particular, our Addyi® product) or other intangible assets;
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the potential divestiture of certain of our assets or businesses and our ability to successfully complete any future divestitures on commercially reasonable terms and on a timely basis, or at all;
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the impact of any such future divestitures on our Company, including the reduction in the size or scope of our business or market share, any loss on sale or any adverse tax consequences suffered as a result of such divestitures;
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our shift in focus to minimal business development activity through acquisitions in 2016 and possibly beyond as we focus on reducing our outstanding debt levels and as a result of the restrictions imposed by the April 2016 amendment to our Credit Agreement that restrict us from, among other things, making acquisitions over an aggregate threshold (subject to certain exceptions) and from incurring debt to finance such acquisitions, until we achieve a specified leverage ratio;
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the uncertainties associated with the acquisition and launch of new products (in particular, our Addyi® product launched in October 2015), including, but not limited to, our ability to provide the time, resources, expertise and costs required for the commercial launch of new products, the acceptance and demand for new pharmaceutical products, and the impact of competitive products and pricing, which could lead to material impairment charges;
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our ability to retain, motivate and recruit executives and other key employees and the termination or resignation of executives or key employees, such as the recent departure of our former chief executive officer;
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our ability to implement effective succession planning for our executives and key employees;
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our ability to successfully manage the transition of new executives and key employees, such as our new Corporate Controller;
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our implemented and proposed price freezes and reductions on certain of our products, including the recent decision of the Company to take no further price increases on, and to implement an enhanced rebate program with respect to, our Nitropress® and Isuprel® products and the planned price reductions in conjunction with our arrangements with Walgreen Co. ("Walgreens"), and any future pricing freezes, reductions, increases or changes we may elect to make, as well as any proposed or future legislative price controls or price regulation, including mandated price reductions, that may impact our products;
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the challenges and difficulties associated with managing a large complex business, which has grown rapidly over the last few years;
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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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the success of our recent and future fulfillment and other arrangements with Walgreens, including market acceptance of, or market reaction to, such arrangements (including by customers, doctors, patients, pharmacy benefit managers ("PBMs"), third party payors and governmental agencies), the continued compliance of such arrangements with applicable laws and the ability of the anticipated increased volume across all distribution channels resulting from such arrangements to offset the impact of lower average selling prices associated with these arrangements;
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the extent to which our products are reimbursed by government authorities, PBMs and other third party payors; the impact our distribution, pricing and other practices (including as it relates to our former relationship with Philidor, any alleged wrongdoing by Philidor and our current relationship with Walgreens) may have on the decisions of such government authorities, PBMs and other third party payors to reimburse our products; and the impact of obtaining or maintaining such reimbursement on the price and sales 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 and sales of our products in connection therewith;
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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 proposals published by the Organization for Economic Co-operation and Development ("OECD") respecting base erosion and profit shifting ("BEPS");
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the actions of our third party partners or service providers of research, development, manufacturing, marketing, distribution or other services, including their compliance with applicable laws and contracts, which actions may be beyond our control or influence, and the impact of such actions on our Company, including the impact to the Company of our former relationship with Philidor and any alleged legal or contractual non-compliance by Philidor;
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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 instability in Brazil, Russia, Ukraine, Argentina, certain countries in Africa and the Middle East);
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our ability to reduce wholesaler inventory levels in Russia, Poland and certain other countries, in-line with our targeted levels for such markets;
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our ability to obtain, maintain and license sufficient intellectual property rights over our products and enforce and defend against challenges to such intellectual property;
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the introduction of generic, biosimilar or other competitors of our branded products and other products, including the introduction of products that compete against our products that do not have patent or data exclusivity rights;
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once the additional limitations in our Credit Agreement restricting our ability to make acquisitions are no longer applicable, and to the extent we elect to resume business development activities through acquisitions, 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 that have been acquired by the Company (and that may in the future be acquired by the Company, once the additional limitations in our Credit Agreement restricting our ability to make acquisitions are no longer applicable and to the extent we elect to resume business development activities through acquisitions), 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, equipment and other assets, and the achievement of the anticipated benefits from such integrations, as well as risks associated with the acquired companies, businesses and products;
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factors relating to our ability to achieve all of the estimated synergies from such 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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the expense, timing and outcome of pending or future legal and governmental proceedings, arbitrations, investigations, subpoenas, tax and other regulatory audits, reviews and regulatory proceedings against us or relating to us and settlements thereof;
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our ability to obtain components, raw materials or finished products supplied by third parties (some of which may be single-sourced) 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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ongoing oversight and review of our products and facilities by regulatory and governmental agencies, including periodic audits by the U.S. Food and Drug Administration (the "FDA"), and the results thereof;
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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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interest rate risks associated with our floating rate debt borrowings;
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our ability to effectively distribute our products and the effectiveness and success of our distribution arrangements, including the impact of our recent arrangements with Walgreens;
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our ability to secure and maintain third party research, development, manufacturing, marketing or distribution arrangements;
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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 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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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 (such as our Addyi® product launched in October 2015), 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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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 business practices (including with respect to pricing), 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, including with respect to recent government inquiries on pricing;
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the impact of the upcoming United States elections, including any healthcare reforms arising therefrom, including with respect to pricing controls;
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factors relating to our acquisition of Salix Pharmaceuticals, Ltd. (“Salix”), including the impact of substantial additional debt on our financial condition, cash flows 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; once integrated, the effects of such business combination on our future financial condition, operating results, strategy and plans; and, our ability to achieve the anticipated benefits of such acquisition, including the anticipated revenue growth resulting from such acquisition (such as the anticipated revenue of the Xifaxan® product, including the recently-approved IBS-D indication);
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potential ramifications, including financial penalties, relating to Salix's restatement of its historical financial results;
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illegal distribution or sale of counterfeit versions of our products;
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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 SEC and the Canadian Securities Administrators (the “CSA”) (including in our 2015 Form 10-K), as well as our ability to anticipate and manage the risks associated with the foregoing.
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As of
March 31, 2016 |
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As of
December 31, 2015 |
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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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1,310.4
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$
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597.3
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Trade receivables, net
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2,692.7
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2,686.9
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Inventories, net
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1,320.2
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1,256.6
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Prepaid expenses and other current assets
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910.4
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966.4
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Total current assets
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6,233.7
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5,507.2
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Property, plant and equipment, net
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1,465.5
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1,441.8
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Intangible assets, net
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22,346.0
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23,083.0
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Goodwill
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18,600.7
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18,552.8
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Deferred tax assets, net
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163.2
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156.0
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Other long-term assets, net
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210.8
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223.7
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Total assets
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$
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49,019.9
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$
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48,964.5
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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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438.1
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$
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433.7
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Accrued and other current liabilities
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3,337.9
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3,859.1
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Acquisition-related contingent consideration
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146.3
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196.8
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Current portion of long-term debt
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675.1
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823.0
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Total current liabilities
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4,597.4
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5,312.6
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Acquisition-related contingent consideration
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951.7
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959.1
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Long-term debt
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31,303.4
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30,265.4
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Pension and other benefit liabilities
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194.8
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190.4
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Liabilities for uncertain tax positions
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117.7
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120.2
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Deferred tax liabilities, net
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5,896.6
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5,902.4
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Other long-term liabilities
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182.7
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184.6
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Total liabilities
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43,244.3
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42,934.7
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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, 343,019,163 and
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342,926,531 issued and outstanding at March 31, 2016 and December 31, 2015, respectively
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9,905.9
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9,897.4
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Additional paid-in capital
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351.6
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304.9
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Accumulated deficit
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(3,123.4
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)
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(2,749.7
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)
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Accumulated other comprehensive loss
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(1,478.6
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)
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(1,541.6
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)
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Total Valeant Pharmaceuticals International, Inc. shareholders’ equity
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5,655.5
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5,911.0
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Noncontrolling interest
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120.1
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118.8
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Total equity
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5,775.6
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6,029.8
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Total liabilities and equity
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$
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49,019.9
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$
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48,964.5
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Three Months Ended
March 31, |
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2016
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2015
(restated) |
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Revenues
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Product sales
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$
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2,336.1
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$
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2,126.1
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Other revenues
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35.5
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44.0
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2,371.6
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2,170.1
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Operating Expenses
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Cost of goods sold (exclusive of amortization and impairments of
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finite-lived intangible assets shown separately below)
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620.2
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507.9
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Cost of other revenues
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9.7
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14.3
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Selling, general and administrative
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812.6
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573.8
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Research and development
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103.1
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55.8
|
|
||
|
Amortization and impairments of finite-lived intangible assets
|
694.5
|
|
|
365.2
|
|
||
|
Restructuring, integration and other costs
|
38.0
|
|
|
55.0
|
|
||
|
Acquisition-related costs
|
1.8
|
|
|
13.9
|
|
||
|
Acquisition-related contingent consideration
|
2.4
|
|
|
7.1
|
|
||
|
Other expense
|
23.1
|
|
|
6.1
|
|
||
|
|
2,305.4
|
|
|
1,599.1
|
|
||
|
Operating income
|
66.2
|
|
|
571.0
|
|
||
|
Interest income
|
0.9
|
|
|
0.9
|
|
||
|
Interest expense
|
(426.6
|
)
|
|
(297.8
|
)
|
||
|
Loss on extinguishment of debt
|
—
|
|
|
(20.0
|
)
|
||
|
Foreign exchange and other
|
(6.2
|
)
|
|
(71.1
|
)
|
||
|
(Loss) income before provision for income taxes
|
(365.7
|
)
|
|
183.0
|
|
||
|
Provision for income taxes
|
7.2
|
|
|
84.5
|
|
||
|
Net (loss) income
|
(372.9
|
)
|
|
98.5
|
|
||
|
Less: Net income attributable to noncontrolling interest
|
0.8
|
|
|
0.8
|
|
||
|
Net (loss) income attributable to Valeant Pharmaceuticals International, Inc.
|
$
|
(373.7
|
)
|
|
$
|
97.7
|
|
|
|
|
|
|
||||
|
(Loss) earnings per share attributable to Valeant Pharmaceuticals International, Inc.:
|
|
|
|
||||
|
Basic
|
$
|
(1.08
|
)
|
|
$
|
0.29
|
|
|
Diluted
|
$
|
(1.08
|
)
|
|
$
|
0.28
|
|
|
|
|
|
|
||||
|
Weighted-average common shares outstanding (in millions)
|
|
|
|
||||
|
Basic
|
344.9
|
|
|
336.8
|
|
||
|
Diluted
|
344.9
|
|
|
343.4
|
|
||
|
|
Three Months Ended
March 31, |
||||||
|
|
2016
|
|
2015
(restated) |
||||
|
Net (loss) income
|
$
|
(372.9
|
)
|
|
$
|
98.5
|
|
|
Other comprehensive loss
|
|
|
|
||||
|
Foreign currency translation adjustment
|
63.9
|
|
|
(411.5
|
)
|
||
|
Pension and postretirement benefit plan adjustments
|
(0.4
|
)
|
|
(0.4
|
)
|
||
|
Other comprehensive income (loss)
|
63.5
|
|
|
(411.9
|
)
|
||
|
Comprehensive loss
|
(309.4
|
)
|
|
(313.4
|
)
|
||
|
Less: Comprehensive income attributable to noncontrolling interest
|
1.3
|
|
|
0.6
|
|
||
|
Comprehensive loss attributable to Valeant Pharmaceuticals International, Inc.
|
$
|
(310.7
|
)
|
|
$
|
(314.0
|
)
|
|
|
Three Months Ended
March 31, |
||||||
|
|
2016
|
|
2015
(restated) |
||||
|
Cash Flows From Operating Activities
|
|
|
|
||||
|
Net (loss) income
|
$
|
(372.9
|
)
|
|
$
|
98.5
|
|
|
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
|
|
|
|
||||
|
Depreciation and amortization, including impairments of finite-lived intangible assets
|
746.8
|
|
|
407.0
|
|
||
|
Amortization and write-off of debt discounts and debt issuance costs
|
20.5
|
|
|
10.5
|
|
||
|
Acquisition accounting adjustment on inventory sold
|
28.9
|
|
|
24.5
|
|
||
|
Acquisition-related contingent consideration
|
2.4
|
|
|
7.1
|
|
||
|
Allowances for losses on accounts receivable and inventories
|
28.4
|
|
|
12.2
|
|
||
|
Deferred income tax (benefit) expense
|
(26.2
|
)
|
|
66.0
|
|
||
|
Additions to accrued legal settlements
|
1.6
|
|
|
1.5
|
|
||
|
Payments of accrued legal settlements
|
(2.8
|
)
|
|
(3.0
|
)
|
||
|
Loss on deconsolidation
|
18.4
|
|
|
—
|
|
||
|
Share-based compensation
|
63.5
|
|
|
35.0
|
|
||
|
Tax expense (benefit) from share-based compensation
|
1.4
|
|
|
(17.9
|
)
|
||
|
Foreign exchange (gain) loss
|
(1.8
|
)
|
|
75.9
|
|
||
|
Loss on extinguishment of debt
|
—
|
|
|
20.0
|
|
||
|
Payment of accreted interest on contingent consideration
|
(2.2
|
)
|
|
(2.2
|
)
|
||
|
Other
|
1.9
|
|
|
(7.2
|
)
|
||
|
Changes in operating assets and liabilities:
|
|
|
|
||||
|
Trade receivables
|
5.5
|
|
|
(67.0
|
)
|
||
|
Inventories
|
(85.9
|
)
|
|
(91.0
|
)
|
||
|
Prepaid expenses and other current assets
|
156.5
|
|
|
(45.1
|
)
|
||
|
Accounts payable, accrued and other liabilities
|
(25.9
|
)
|
|
(33.7
|
)
|
||
|
Net cash provided by operating activities
|
558.1
|
|
|
491.1
|
|
||
|
|
|
|
|
||||
|
Cash Flows From Investing Activities
|
|
|
|
||||
|
Acquisition of businesses, net of cash acquired
|
(18.5
|
)
|
|
(795.0
|
)
|
||
|
Acquisition of intangible assets and other assets
|
(7.3
|
)
|
|
(48.8
|
)
|
||
|
Purchases of property, plant and equipment
|
(62.3
|
)
|
|
(65.8
|
)
|
||
|
Reduction of cash due to deconsolidation
|
(30.2
|
)
|
|
—
|
|
||
|
Proceeds from sales and maturities of short-term investments
|
—
|
|
|
17.7
|
|
||
|
Proceeds from sale of assets and businesses, net of costs to sell
|
6.3
|
|
|
—
|
|
||
|
Increase in restricted cash and cash equivalents
|
—
|
|
|
(10,349.1
|
)
|
||
|
Other
|
—
|
|
|
0.5
|
|
||
|
Net cash used in investing activities
|
(112.0
|
)
|
|
(11,240.5
|
)
|
||
|
|
|
|
|
||||
|
Cash Flows From Financing Activities
|
|
|
|
||||
|
Issuance of long-term debt, net of discount
|
1,220.0
|
|
|
12,001.0
|
|
||
|
Repayments of long-term debt
|
(425.6
|
)
|
|
(1,110.3
|
)
|
||
|
Short-term debt borrowings
|
0.7
|
|
|
3.2
|
|
||
|
Short-term debt repayments
|
(0.7
|
)
|
|
(2.3
|
)
|
||
|
Issuance of common stock, net
|
—
|
|
|
1,433.7
|
|
||
|
Proceeds from exercise of stock options
|
0.8
|
|
|
14.5
|
|
||
|
Tax (expense) benefit from share-based compensation
|
(1.4
|
)
|
|
17.9
|
|
||
|
Payment of employee withholding tax upon vesting of share-based awards
|
(7.7
|
)
|
|
(15.9
|
)
|
||
|
Payments of contingent consideration
|
(25.6
|
)
|
|
(12.3
|
)
|
||
|
Payments of deferred consideration
|
(500.0
|
)
|
|
—
|
|
||
|
Payments of financing costs
|
(0.3
|
)
|
|
(23.2
|
)
|
||
|
Other
|
(1.0
|
)
|
|
—
|
|
||
|
Net cash provided by financing activities
|
259.2
|
|
|
12,306.3
|
|
||
|
Effect of exchange rate changes on cash and cash equivalents
|
7.8
|
|
|
(15.1
|
)
|
||
|
Net increase in cash and cash equivalents
|
713.1
|
|
|
1,541.8
|
|
||
|
Cash and cash equivalents, beginning of period
|
597.3
|
|
|
322.6
|
|
||
|
Cash and cash equivalents, end of period
|
$
|
1,310.4
|
|
|
$
|
1,864.4
|
|
|
|
|
|
|
||||
|
Non-Cash Investing and Financing Activities
|
|
|
|
||||
|
Acquisition of businesses, contingent and deferred consideration obligations at fair value
|
$
|
—
|
|
|
$
|
(286.9
|
)
|
|
1.
|
DESCRIPTION OF BUSINESS
|
|
2.
|
RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
|
|
(a)
|
Philidor revenue recognition adjustments - The correction of the misstatement from recognizing revenue related to sales to Philidor from a sell-in to sell-through basis had the effect of eliminating certain revenue recorded in 2014 prior to the date that Philidor was consolidated as a variable interest entity. The revenue that was eliminated from 2014 did not result in an increase to revenue in subsequent periods as a result of the Company having previously recognized that revenue, subsequent to the consolidation of Philidor, when Philidor dispensed the product to patients. Under the sell-in method previously utilized by the Company with respect to sales to Philidor prior to its consolidation in December 2014, revenue was recognized upon delivery of the products to Philidor. At the date of consolidation, certain of that previously sold inventory was still held by Philidor. Subsequent to the consolidation, Philidor recognized revenue on that inventory when it dispensed products to patients, and that revenue was consolidated into the Company’s results. As long as those pre-consolidation sales transactions were in the normal course of business under applicable accounting standards and not entered into in contemplation of the purchase option agreement, the Company’s historical accounting for this revenue was in accordance with U.S. GAAP. The Company has since determined that certain sales transactions for deliveries to Philidor, leading up to the purchase option agreement, were not executed in the normal course of business under applicable accounting standards and included actions taken by the Company (including fulfillment of unusually large orders with extended payment terms and increased pricing, an emphasis on delivering product prior to the execution of the purchase option agreement and seeking and filling a substitute order of equivalent value for an unavailable product) in contemplation of the purchase option agreement. As such, revenue, net of managed care rebates, of
$58 million
previously recorded in 2014 was corrected. However, because that revenue was also recorded by Philidor subsequent to consolidation, upon dispensing of products to patients, the elimination of this revenue in 2014, prior to consolidation, did not result in additional revenue being recorded in 2015. Additionally, provisions for managed care rebates of
$21 million
previously recorded in 2014 are now recognized against that revenue in the first quarter of 2015.
|
|
(b)
|
Accrued liability adjustment - Unrelated to Philidor, the Company recorded an accrual for previously unrecorded professional fees related to acquisition-related costs.
|
|
(c)
|
Tax effect of restatement adjustments - The Company calculated the tax effect of the adjustments noted above.
|
|
|
Three Months Ended March 31,
|
||||||||||||
|
|
2015
(As Previously Reported)
|
|
Restatement
Adjustments
|
|
2015
(Restated)
|
|
Restatement
Ref
|
||||||
|
Revenues
|
|
|
|
|
|
|
|
||||||
|
Product sales
|
$
|
2,146.9
|
|
|
$
|
(20.8
|
)
|
|
$
|
2,126.1
|
|
|
(a)
|
|
Other revenues
|
44.0
|
|
|
—
|
|
|
44.0
|
|
|
|
|||
|
|
2,190.9
|
|
|
(20.8
|
)
|
|
2,170.1
|
|
|
|
|||
|
Expenses
|
|
|
|
|
|
|
|
||||||
|
Cost of goods sold (exclusive of amortization and impairments of finite-lived
|
|
|
|
|
|
|
|
||||||
|
intangible assets shown separately below)
|
560.4
|
|
|
(52.5
|
)
|
|
507.9
|
|
|
(a)
|
|||
|
Cost of other revenues
|
14.3
|
|
|
—
|
|
|
14.3
|
|
|
|
|||
|
Selling, general and administrative
|
573.8
|
|
|
—
|
|
|
573.8
|
|
|
|
|||
|
Research and development
|
55.8
|
|
|
—
|
|
|
55.8
|
|
|
|
|||
|
Amortization and impairment of finite-lived intangible assets
|
365.2
|
|
|
—
|
|
|
365.2
|
|
|
|
|||
|
Restructuring, integration and other costs
|
55.0
|
|
|
—
|
|
|
55.0
|
|
|
|
|||
|
Acquisition-related costs
|
9.8
|
|
|
4.1
|
|
|
13.9
|
|
|
(b)
|
|||
|
Acquisition-related contingent consideration
|
7.1
|
|
|
—
|
|
|
7.1
|
|
|
|
|||
|
Other expense
|
6.1
|
|
|
—
|
|
|
6.1
|
|
|
|
|||
|
|
1,647.5
|
|
|
(48.4
|
)
|
|
1,599.1
|
|
|
|
|||
|
Operating income
|
543.4
|
|
|
27.6
|
|
|
571.0
|
|
|
|
|||
|
Interest income
|
0.9
|
|
|
—
|
|
|
0.9
|
|
|
|
|||
|
Interest expense
|
(297.8
|
)
|
|
—
|
|
|
(297.8
|
)
|
|
|
|||
|
Loss on extinguishment of debt
|
(20.0
|
)
|
|
—
|
|
|
(20.0
|
)
|
|
|
|||
|
Foreign exchange and other
|
(71.1
|
)
|
|
—
|
|
|
(71.1
|
)
|
|
|
|||
|
Income before provision for income taxes
|
155.4
|
|
|
27.6
|
|
|
183.0
|
|
|
|
|||
|
Provision for income taxes
|
80.9
|
|
|
3.6
|
|
|
84.5
|
|
|
(c)
|
|||
|
Net income
|
74.5
|
|
|
24.0
|
|
|
98.5
|
|
|
|
|||
|
Less: Net income attributable to noncontrolling interest
|
0.8
|
|
|
—
|
|
|
0.8
|
|
|
|
|||
|
Net income attributable to Valeant Pharmaceuticals International, Inc.
|
$
|
73.7
|
|
|
$
|
24.0
|
|
|
$
|
97.7
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Earnings per share attributable to Valeant Pharmaceuticals International, Inc.:
|
|
|
|
|
|
|
|
||||||
|
Basic
|
$
|
0.22
|
|
|
$
|
0.07
|
|
|
$
|
0.29
|
|
|
|
|
Diluted
|
$
|
0.21
|
|
|
$
|
0.07
|
|
|
$
|
0.28
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Weighted-average common shares outstanding (in millions)
|
|
|
|
|
|
|
|
||||||
|
Basic
|
336.8
|
|
|
|
|
336.8
|
|
|
|
||||
|
Diluted
|
343.4
|
|
|
|
|
343.4
|
|
|
|
||||
|
|
Three Months Ended March 31,
|
||||||||||||
|
|
2015
(As Previously Reported)
|
|
Restatement
Adjustments
|
|
2015
(Restated)
|
|
Restatement
Ref
|
||||||
|
Cash Flow From Operating Activities
|
|
|
|
|
|
|
|
||||||
|
Net income
|
$
|
74.5
|
|
|
$
|
24.0
|
|
|
$
|
98.5
|
|
|
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
||||||
|
Depreciation and amortization, including impairments of finite-lived intangible assets
|
407.0
|
|
|
—
|
|
|
407.0
|
|
|
|
|||
|
Amortization and write-off of debt discounts and debt issuance costs
|
10.5
|
|
|
—
|
|
|
10.5
|
|
|
|
|||
|
Acquisition accounting adjustment on inventory sold
|
24.5
|
|
|
—
|
|
|
24.5
|
|
|
|
|||
|
Acquisition-related contingent consideration
|
7.1
|
|
|
—
|
|
|
7.1
|
|
|
|
|||
|
Allowances for losses on accounts receivable and inventories
|
12.2
|
|
|
—
|
|
|
12.2
|
|
|
|
|||
|
Deferred income taxes
|
62.4
|
|
|
3.6
|
|
|
66.0
|
|
|
(c)
|
|||
|
Additions to accrued legal settlements
|
1.5
|
|
|
—
|
|
|
1.5
|
|
|
|
|||
|
Payments of accrued legal settlements
|
(3.0
|
)
|
|
—
|
|
|
(3.0
|
)
|
|
|
|||
|
Share-based compensation
|
35.0
|
|
|
—
|
|
|
35.0
|
|
|
|
|||
|
Tax benefits from share based compensation
|
(17.9
|
)
|
|
—
|
|
|
(17.9
|
)
|
|
|
|||
|
Foreign exchange loss
|
75.9
|
|
|
—
|
|
|
75.9
|
|
|
|
|||
|
Loss on extinguishment of debt
|
20.0
|
|
|
—
|
|
|
20.0
|
|
|
|
|||
|
Payment of accreted interest on contingent consideration
|
(2.2
|
)
|
|
—
|
|
|
(2.2
|
)
|
|
|
|||
|
Other
|
(7.2
|
)
|
|
—
|
|
|
(7.2
|
)
|
|
|
|||
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
||||||
|
Trade receivables
|
(67.0
|
)
|
|
—
|
|
|
(67.0
|
)
|
|
|
|||
|
Inventories
|
(38.5
|
)
|
|
(52.5
|
)
|
|
(91.0
|
)
|
|
(a)
|
|||
|
Prepaid expenses and other current assets
|
(45.1
|
)
|
|
—
|
|
|
(45.1
|
)
|
|
|
|||
|
Accounts payable, accrued and other liabilities
|
(58.6
|
)
|
|
24.9
|
|
|
(33.7
|
)
|
|
(a), (b)
|
|||
|
Net cash provided by operating activities
|
491.1
|
|
|
—
|
|
|
491.1
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
||||||
|
Net cash used in investing activities
|
(11,240.5
|
)
|
|
—
|
|
|
(11,240.5
|
)
|
|
|
|||
|
|
|
|
|
|
|
|
|
||||||
|
Net cash provided by financing activities
|
12,306.3
|
|
|
—
|
|
|
12,306.3
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
||||||
|
Effect of exchange rate changes on cash and cash equivalents
|
(15.1
|
)
|
|
—
|
|
|
(15.1
|
)
|
|
|
|||
|
Net increase in cash and cash equivalents
|
1,541.8
|
|
|
—
|
|
|
1,541.8
|
|
|
|
|||
|
Cash and cash equivalents, beginning of period
|
322.6
|
|
|
—
|
|
|
322.6
|
|
|
|
|||
|
Cash and cash equivalents, end of period
|
$
|
1,864.4
|
|
|
$
|
—
|
|
|
$
|
1,864.4
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Non- Cash Investing and Financing Activities
|
|
|
|
|
|
|
|
||||||
|
Acquisition of businesses, contingent consideration at fair value
|
$
|
(286.9
|
)
|
|
$
|
—
|
|
|
$
|
(286.9
|
)
|
|
|
|
3.
|
SIGNIFICANT ACCOUNTING POLICIES
|
|
4.
|
ACQUISITIONS
|
|
•
|
amounts for intangible assets, property, plant 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
|
|
Amounts
Recognized as of
March 31, 2016
(as adjusted)
|
||||||
|
Cash
|
|
$
|
43.5
|
|
|
$
|
—
|
|
|
$
|
43.5
|
|
|
Accounts receivable
(b)
|
|
64.2
|
|
|
—
|
|
|
64.2
|
|
|||
|
Inventories
|
|
37.9
|
|
|
—
|
|
|
37.9
|
|
|||
|
Other current assets
|
|
12.2
|
|
|
—
|
|
|
12.2
|
|
|||
|
Property, plant and equipment
|
|
96.4
|
|
|
(1.0
|
)
|
|
95.4
|
|
|||
|
Identifiable intangible assets, excluding acquired in-process research and development ("IPR&D")
(c)
|
|
528.0
|
|
|
(0.2
|
)
|
|
527.8
|
|
|||
|
Acquired IPR&D
|
|
18.5
|
|
|
(1.1
|
)
|
|
17.4
|
|
|||
|
Other non-current assets
|
|
0.1
|
|
|
—
|
|
|
0.1
|
|
|||
|
Current liabilities
|
|
(30.8
|
)
|
|
—
|
|
|
(30.8
|
)
|
|||
|
Deferred tax liability, net
(d)
|
|
(130.5
|
)
|
|
0.5
|
|
|
(130.0
|
)
|
|||
|
Other non-current liabilities
|
|
(11.2
|
)
|
|
2.9
|
|
|
(8.3
|
)
|
|||
|
Total identifiable net assets
|
|
628.3
|
|
|
1.1
|
|
|
629.4
|
|
|||
|
Goodwill
(e)
|
|
282.0
|
|
|
(0.2
|
)
|
|
281.8
|
|
|||
|
Total fair value of consideration transferred
|
|
$
|
910.3
|
|
|
$
|
0.9
|
|
|
$
|
911.2
|
|
|
(a)
|
As previously reported in the Company’s 2015 Form 10-K.
|
|
(b)
|
The fair value of trade accounts receivable acquired was
$64 million
, with the gross contractual amount being
$66 million
, of which the Company expects that
$2 million
will be uncollectible.
|
|
(c)
|
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
(as previously
reported)
|
|
Measurement
Period
Adjustments
|
|
Amounts
Recognized as of
March 31, 2016
(as adjusted)
|
||||||
|
Product brands
|
|
9
|
|
$
|
490.8
|
|
|
$
|
(0.1
|
)
|
|
$
|
490.7
|
|
|
Corporate brand
|
|
15
|
|
37.2
|
|
|
(0.1
|
)
|
|
37.1
|
|
|||
|
Total identifiable intangible assets acquired
|
|
9
|
|
$
|
528.0
|
|
|
$
|
(0.2
|
)
|
|
$
|
527.8
|
|
|
(d)
|
Comprised of deferred tax liabilities partially offset by nominal deferred tax assets.
|
|
(e)
|
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 products and expand its business to new geographic markets;
|
|
•
|
the value of the continuing operations of Amoun'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, Amoun's assembled workforce).
|
|
•
|
amounts for intangible assets, 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)
|
||
|
Cash and cash equivalents
|
|
$
|
26.6
|
|
|
Inventories
|
|
11.0
|
|
|
|
Other assets
|
|
1.6
|
|
|
|
Identifiable intangible assets
(b)
|
|
993.7
|
|
|
|
Current liabilities
|
|
(4.4
|
)
|
|
|
Deferred income taxes, net
|
|
(351.9
|
)
|
|
|
Total identifiable net assets
|
|
676.6
|
|
|
|
Goodwill
(c)
|
|
769.9
|
|
|
|
Total fair value of consideration transferred
|
|
$
|
1,446.5
|
|
|
(a)
|
As previously reported in the Company’s 2015 Form 10-K.
|
|
(b)
|
Consists of product rights with a weighted-average useful life of
11
years.
|
|
(c)
|
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 potential ability to develop and market the product to additional types of patients/indications and launch the product in a variety of new geographies;
|
|
•
|
the value of the continuing operations of Sprout'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, Sprout's assembled workforce).
|
|
(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 the 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 the 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
Recognized as of
Acquisition Date
(as previously
reported)
(a)
|
|
Measurement
Period
Adjustments
(b)
|
|
Amounts
Recognized as of
December 31, 2015
(as adjusted)
|
||||||
|
Cash and cash equivalents
|
|
$
|
113.7
|
|
|
$
|
—
|
|
|
$
|
113.7
|
|
|
Inventories
(c)
|
|
233.2
|
|
|
(0.6
|
)
|
|
232.6
|
|
|||
|
Other assets
(d)
|
|
1,400.3
|
|
|
10.1
|
|
|
1,410.4
|
|
|||
|
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
|
|
|
(183.9
|
)
|
|
5,182.9
|
|
|||
|
Current liabilities
(g)
|
|
(1,764.2
|
)
|
|
(175.0
|
)
|
|
(1,939.2
|
)
|
|||
|
Contingent consideration, including current and long-term portion
(h)
|
|
(327.9
|
)
|
|
(6.2
|
)
|
|
(334.1
|
)
|
|||
|
Long-term debt, including current portion
(i)
|
|
(3,123.1
|
)
|
|
—
|
|
|
(3,123.1
|
)
|
|||
|
Deferred income taxes, net
(j)
|
|
(3,512.0
|
)
|
|
84.1
|
|
|
(3,427.9
|
)
|
|||
|
Other non-current liabilities
|
|
(7.3
|
)
|
|
(36.0
|
)
|
|
(43.3
|
)
|
|||
|
Total identifiable net assets
|
|
5,160.1
|
|
|
(307.5
|
)
|
|
4,852.6
|
|
|||
|
Goodwill
(k)
|
|
7,971.9
|
|
|
307.5
|
|
|
8,279.4
|
|
|||
|
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 IPR&D assets, specifically for the Oral Relistor® program based mainly on refinement of the pricing assumptions and cost projections (see further discussion of IPR&D programs in (f) below) and (ii) the tax impact of pre-tax measurement period adjustments as well as reclassifications of certain tax balances impacting current liabilities. The measurement period
|
|
(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
(as previously
reported)
|
|
Measurement
Period
Adjustments
|
|
Amounts
Recognized as of
December 31, 2015
(as adjusted)
|
||||||
|
Product brands
|
|
10
|
|
$
|
6,088.3
|
|
|
$
|
1.3
|
|
|
$
|
6,089.6
|
|
|
Corporate brand
|
|
20
|
|
668.0
|
|
|
(1.3
|
)
|
|
666.7
|
|
|||
|
Total identifiable intangible assets acquired
|
|
11
|
|
$
|
6,756.3
|
|
|
$
|
—
|
|
|
$
|
6,756.3
|
|
|
(f)
|
A multi-period excess earnings methodology (income approach) was used to determine the estimated fair values of the acquired 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
9.5%
-
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
$375 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. As of the acquisition date, 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. This amount includes 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
$334 million
as of the acquisition date was determined using probability-weighted discounted cash flows. Refer to Note 6 for additional information regarding the 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 (
$303 million
) and deferred tax liabilities (
$3.73 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. 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.
|
|
•
|
In the year ended December 31, 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(as previously reported)
|
|
Measurement
Period
Adjustments
(a)
|
|
Amounts
Recognized as of
March 31, 2016
(as adjusted)
|
||||||
|
Cash
|
|
$
|
92.2
|
|
|
$
|
—
|
|
|
$
|
92.2
|
|
|
Accounts receivable
(b)
|
|
49.5
|
|
|
(3.0
|
)
|
|
46.5
|
|
|||
|
Inventories
|
|
142.9
|
|
|
(2.2
|
)
|
|
140.7
|
|
|||
|
Other current assets
|
|
20.2
|
|
|
(0.2
|
)
|
|
20.0
|
|
|||
|
Property, plant and equipment
|
|
94.6
|
|
|
(15.0
|
)
|
|
79.6
|
|
|||
|
Identifiable intangible assets, excluding acquired IPR&D
(c)
|
|
1,121.6
|
|
|
(36.8
|
)
|
|
1,084.8
|
|
|||
|
Acquired IPR&D
|
|
57.5
|
|
|
(3.7
|
)
|
|
53.8
|
|
|||
|
Other non-current assets
|
|
2.9
|
|
|
—
|
|
|
2.9
|
|
|||
|
Deferred tax (liability) asset, net
|
|
(54.7
|
)
|
|
60.8
|
|
|
6.1
|
|
|||
|
Current liabilities
(d)
|
|
(123.9
|
)
|
|
(3.9
|
)
|
|
(127.8
|
)
|
|||
|
Long-term debt
|
|
(6.1
|
)
|
|
—
|
|
|
(6.1
|
)
|
|||
|
Non-current liabilities
(d)
|
|
(117.4
|
)
|
|
0.2
|
|
|
(117.2
|
)
|
|||
|
Total identifiable net assets
|
|
1,279.3
|
|
|
(3.8
|
)
|
|
1,275.5
|
|
|||
|
Goodwill
(e)
|
|
141.9
|
|
|
(5.2
|
)
|
|
136.7
|
|
|||
|
Total fair value of consideration transferred
|
|
$
|
1,421.2
|
|
|
$
|
(9.0
|
)
|
|
$
|
1,412.2
|
|
|
(a)
|
The measurement period adjustments primarily relate to the acquisition of certain assets of Dendreon and reflect: (i) an increase to the deferred tax assets based on further assessment of the Dendreon net operating losses ("NOLs") available to the Company post-acquisition, (ii) a reduction in the estimated fair value of intangible assets based on further assessment of assumptions related to the probability-weighted cash flows, (iii) a reduction in the estimated fair value of property, plant and equipment driven by further assessment of the fair value of a manufacturing facility, and (iv) 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. The adjustments recorded in the current period did not have a significant impact on the Company’s consolidated financial statements.
|
|
(b)
|
The fair value of trade accounts receivable acquired was
$47 million
, with the gross contractual amount being
$51 million
, of which the Company expects that
$4 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 (as previously reported)
|
|
Measurement
Period
Adjustments
|
|
Amounts
Recognized as of
March 31, 2016
(as adjusted)
|
||||||
|
Product brands
|
|
7
|
|
$
|
741.2
|
|
|
$
|
0.4
|
|
|
$
|
741.6
|
|
|
Product rights
|
|
3
|
|
42.7
|
|
|
(0.7
|
)
|
|
42.0
|
|
|||
|
Corporate brands
|
|
16
|
|
6.6
|
|
|
—
|
|
|
6.6
|
|
|||
|
Partner relationships
|
|
8
|
|
7.8
|
|
|
—
|
|
|
7.8
|
|
|||
|
Technology/know-how
|
|
10
|
|
321.3
|
|
|
(36.5
|
)
|
|
284.8
|
|
|||
|
Other
|
|
6
|
|
2.0
|
|
|
—
|
|
|
2.0
|
|
|||
|
Total identifiable intangible assets acquired
|
|
8
|
|
$
|
1,121.6
|
|
|
$
|
(36.8
|
)
|
|
$
|
1,084.8
|
|
|
(d)
|
As part of the acquisition of certain assets of Marathon, the Company assumed a contingent consideration liability related to potential payments, in the aggregate, of up to approximately
$200 million
as of the acquisition date, 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
March 31, 2016
, 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. The Company made contingent consideration payments related to the Marathon acquisition of
$35 million
during 2015 and an additional
$10 million
during the first quarter of 2016.
|
|
(e)
|
The goodwill relates primarily to certain smaller acquisitions and the acquisition of certain assets of Marathon. 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. The majority of the goodwill is not 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.
|
|
|
|
Three Months Ended
March 31, |
||
|
|
|
2015
(restated) |
||
|
Revenues
|
|
$
|
2,271.2
|
|
|
Net loss attributable to Valeant Pharmaceuticals International, Inc.
|
|
(269.8
|
)
|
|
|
|
|
|
||
|
Loss per share attributable to Valeant Pharmaceuticals International, Inc.:
|
|
|
||
|
Basic
|
|
$
|
(0.78
|
)
|
|
Diluted
|
|
$
|
(0.78
|
)
|
|
•
|
elimination of historical intangible asset amortization expense of these acquisitions;
|
|
•
|
additional amortization expense related to the fair value of identifiable intangible assets acquired;
|
|
•
|
additional depreciation expense related to fair value adjustment to property, plant and equipment acquired;
|
|
•
|
additional interest expense associated with the financing obtained by the Company in connection with the Salix Acquisition; and
|
|
•
|
the exclusion of
$24 million
related to the acquisition accounting adjustments on these acquisitions’ inventories that were sold subsequent to the acquisition dates.
|
|
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
|
|
Contract
Termination,
Facility Closure
and Other Costs
|
|
Total
|
||||||
|
Balance, January 1, 2015
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Costs incurred and/or charged to expense
|
|
90.6
|
|
|
0.9
|
|
|
91.5
|
|
|||
|
Cash payments
|
|
(57.8
|
)
|
|
(0.3
|
)
|
|
(58.1
|
)
|
|||
|
Non-cash adjustments
|
|
2.2
|
|
|
—
|
|
|
2.2
|
|
|||
|
Balance, December 31, 2015
|
|
$
|
35.0
|
|
|
$
|
0.6
|
|
|
$
|
35.6
|
|
|
Costs incurred and/or charged to expense
|
|
0.7
|
|
|
7.7
|
|
|
8.4
|
|
|||
|
Cash payments
|
|
(11.1
|
)
|
|
(0.3
|
)
|
|
(11.4
|
)
|
|||
|
Balance, March 31, 2016
|
|
$
|
24.6
|
|
|
$
|
8.0
|
|
|
$
|
32.6
|
|
|
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 March 31, 2016
|
|
As of December 31, 2015
|
||||||||||||||||||||||||||||
|
|
|
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)
|
|
$
|
920.3
|
|
|
$
|
902.0
|
|
|
$
|
18.3
|
|
|
$
|
—
|
|
|
$
|
167.2
|
|
|
$
|
156.1
|
|
|
$
|
11.1
|
|
|
$
|
—
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Acquisition-related contingent consideration
|
|
$
|
(1,098.0
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(1,098.0
|
)
|
|
$
|
(1,155.9
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(1,155.9
|
)
|
|
(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,
2016
|
|
Payments/
Settlements
(a)
|
|
Net
Unrealized
Loss
|
|
Foreign
Exchange
(b)
|
|
Balance,
March 31,
2016
|
||||||||||
|
Acquisition-related contingent consideration
|
$
|
(1,155.9
|
)
|
|
$
|
52.4
|
|
|
$
|
(2.4
|
)
|
|
$
|
7.9
|
|
|
$
|
(1,098.0
|
)
|
|
(a)
|
Primarily relates to the settlement of contingent consideration obligation in connection with the termination of the arrangements with and relating to Philidor and payments of acquisition-related contingent consideration related to the acquisition of certain assets of Marathon, the Elidel®/Xerese®/Zovirax® agreement entered into with Meda Pharma SARL in June 2011 (the "Elidel®/Xerese®/Zovirax® agreement"), and other smaller acquisitions.
|
|
(b)
|
Included in other comprehensive income.
|
|
7.
|
INVENTORIES
|
|
|
|
As of
March 31, 2016 |
|
As of
December 31, 2015 |
||||
|
Raw materials
(1)
|
|
$
|
324.1
|
|
|
$
|
289.3
|
|
|
Work in process
(1)
|
|
141.7
|
|
|
152.7
|
|
||
|
Finished goods
(1)
|
|
854.4
|
|
|
814.6
|
|
||
|
|
|
$
|
1,320.2
|
|
|
$
|
1,256.6
|
|
|
(1)
|
The components of inventories shown in the table above are net of allowance for obsolescence.
|
|
8.
|
INTANGIBLE ASSETS AND GOODWILL
|
|
|
|
As of March 31, 2016
|
|
As of December 31, 2015
|
||||||||||||||||||||
|
|
|
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
|
|
$
|
22,124.1
|
|
|
$
|
(5,798.3
|
)
|
|
$
|
16,325.8
|
|
|
$
|
22,082.8
|
|
|
$
|
(5,236.4
|
)
|
|
$
|
16,846.4
|
|
|
Corporate brands
|
|
1,047.1
|
|
|
(116.6
|
)
|
|
930.5
|
|
|
1,066.1
|
|
|
(107.1
|
)
|
|
959.0
|
|
||||||
|
Product rights/patents
|
|
4,300.1
|
|
|
(1,845.2
|
)
|
|
2,454.9
|
|
|
4,339.9
|
|
|
(1,711.7
|
)
|
|
2,628.2
|
|
||||||
|
Partner relationships
|
|
175.2
|
|
|
(131.5
|
)
|
|
43.7
|
|
|
217.6
|
|
|
(170.3
|
)
|
|
47.3
|
|
||||||
|
Technology and other
|
|
449.3
|
|
|
(164.5
|
)
|
|
284.8
|
|
|
480.3
|
|
|
(186.1
|
)
|
|
294.2
|
|
||||||
|
Total finite-lived intangible assets
(1)
|
|
28,095.8
|
|
|
(8,056.1
|
)
|
|
20,039.7
|
|
|
28,186.7
|
|
|
(7,411.6
|
)
|
|
20,775.1
|
|
||||||
|
Indefinite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Acquired IPR&D
(2)
|
|
608.8
|
|
|
—
|
|
|
608.8
|
|
|
610.4
|
|
|
—
|
|
|
610.4
|
|
||||||
|
Corporate brand
(3)
|
|
1,697.5
|
|
|
—
|
|
|
1,697.5
|
|
|
1,697.5
|
|
|
—
|
|
|
1,697.5
|
|
||||||
|
|
|
$
|
30,402.1
|
|
|
$
|
(8,056.1
|
)
|
|
$
|
22,346.0
|
|
|
$
|
30,494.6
|
|
|
$
|
(7,411.6
|
)
|
|
$
|
23,083.0
|
|
|
(1)
|
In the fourth quarter of 2015, the Company recognized impairment charges of
$79 million
related to the write-off of intangible assets and
$23 million
related to the write-off of property, plant and equipment, in connection with the termination (the termination was announced in October 2015) of the arrangements with and relating to Philidor (Developed Markets segment). In addition, in the fourth quarter of 2015, the Company recognized an impairment charge of
$27 million
related to the write-off of ezogabine/retigabine (immediate-release formulation) (Developed Markets segment) resulting from further analysis of commercialization strategy and projections. GlaxoSmithKline plc (‘‘GSK’’) controls all sales force promotion for ezogabine/retigabine.
|
|
(2)
|
The Company acquired certain IPR&D assets as part of the Salix Acquisition, as described further in Note 4.
|
|
(3)
|
Represents the corporate trademark, related to the acquisition of Bausch & Lomb Holdings Inc. ("B&L") in August 2013, which has an indefinite useful life and is therefore not amortized.
|
|
|
|
2016
|
|
2017
|
|
2018
|
|
2019
|
|
2020
|
||||||||||
|
Amortization expense
(1)
|
|
$
|
2,683.3
|
|
|
$
|
2,615.6
|
|
|
$
|
2,485.6
|
|
|
$
|
2,357.6
|
|
|
$
|
2,150.6
|
|
|
(1)
|
Estimated amortization expense shown in the table above does not include potential future impairments of finite-lived intangible assets, if any.
|
|
|
|
Developed
Markets
|
|
Emerging
Markets
|
|
Total
|
||||||
|
Balance, January 1, 2016
|
|
$
|
16,141.3
|
|
|
$
|
2,411.5
|
|
|
$
|
18,552.8
|
|
|
Additions
|
|
0.7
|
|
|
—
|
|
|
0.7
|
|
|||
|
Reclassification
(1)
|
|
(36.2
|
)
|
|
—
|
|
|
(36.2
|
)
|
|||
|
Foreign exchange and other
|
|
75.5
|
|
|
7.9
|
|
|
83.4
|
|
|||
|
Balance, March 31, 2016
|
|
$
|
16,181.3
|
|
|
$
|
2,419.4
|
|
|
$
|
18,600.7
|
|
|
(1)
|
Relates to the reclassification of goodwill attributable to a group of assets that has been classified as assets held for sale (included in prepaid expenses and other current assets) as of March 31, 2016.
|
|
9.
|
|
|
|
|
Maturity
Date
|
|
As of
March 31, 2016 |
|
As of
December 31, 2015 |
||||
|
Revolving Credit Facility
(1)
|
|
April 2018
|
|
$
|
1,450.0
|
|
|
$
|
250.0
|
|
|
Series A-1 Tranche A Term Loan Facility
(1)
|
|
April 2016
|
|
—
|
|
|
140.4
|
|
||
|
Series A-2 Tranche A Term Loan Facility
(1)
|
|
April 2016
|
|
—
|
|
|
137.3
|
|
||
|
Series A-3 Tranche A Term Loan Facility
(1)
|
|
October 2018
|
|
1,780.6
|
|
|
1,881.5
|
|
||
|
Series A-4 Tranche A Term Loan Facility
(1)
|
|
April 2020
|
|
939.4
|
|
|
951.3
|
|
||
|
Series D-2 Tranche B Term Loan Facility
(1)
|
|
February 2019
|
|
1,089.2
|
|
|
1,087.5
|
|
||
|
Series C-2 Tranche B Term Loan Facility
(1)
|
|
December 2019
|
|
836.4
|
|
|
835.1
|
|
||
|
Series E-1 Tranche B Term Loan Facility
(1)
|
|
August 2020
|
|
2,532.1
|
|
|
2,531.2
|
|
||
|
Series F Tranche B Term Loan Facility
(1)
|
|
April 2022
|
|
4,047.8
|
|
|
4,055.8
|
|
||
|
Senior Notes:
|
|
|
|
|
|
|
||||
|
7.00%
|
|
October 2020
|
|
688.1
|
|
|
688.0
|
|
||
|
6.75%
|
|
August 2021
|
|
646.3
|
|
|
646.1
|
|
||
|
7.25%
|
|
July 2022
|
|
542.4
|
|
|
542.1
|
|
||
|
6.375%
|
|
October 2020
|
|
2,227.7
|
|
|
2,226.5
|
|
||
|
6.75%
|
|
August 2018
|
|
1,589.9
|
|
|
1,588.8
|
|
||
|
7.50%
|
|
July 2021
|
|
1,610.4
|
|
|
1,609.7
|
|
||
|
5.625%
|
|
December 2021
|
|
893.5
|
|
|
893.2
|
|
||
|
5.50%
|
|
March 2023
|
|
991.0
|
|
|
990.6
|
|
||
|
5.375%
|
|
March 2020
|
|
1,981.0
|
|
|
1,979.9
|
|
||
|
5.875%
|
|
May 2023
|
|
3,216.1
|
|
|
3,215.0
|
|
||
|
4.50%
(2)
|
|
May 2023
|
|
1,689.2
|
|
|
1,611.8
|
|
||
|
6.125%
|
|
April 2025
|
|
3,215.1
|
|
|
3,214.3
|
|
||
|
Other
(3)
|
|
Various
|
|
12.3
|
|
|
12.3
|
|
||
|
|
|
|
|
31,978.5
|
|
|
31,088.4
|
|
||
|
Less current portion
|
|
|
|
(675.1
|
)
|
|
(823.0
|
)
|
||
|
Total long-term debt
|
|
|
|
$
|
31,303.4
|
|
|
$
|
30,265.4
|
|
|
(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 acquisition of B&L.
|
|
|
|
|
Margins
(2)
|
|||||
|
|
Effective Interest Rate
|
|
Base Rate Borrowings
|
|
LIBO Rate Borrowings
|
|||
|
Revolving Credit Facility
|
2.87
|
%
|
|
1.25
|
%
|
|
2.25
|
%
|
|
Series A-1 Tranche A Term Loan Facility
|
2.68
|
%
|
|
1.25
|
%
|
|
2.25
|
%
|
|
Series A-2 Tranche A Term Loan Facility
|
2.68
|
%
|
|
1.25
|
%
|
|
2.25
|
%
|
|
Series A-3 Tranche A Term Loan Facility
|
2.72
|
%
|
|
1.25
|
%
|
|
2.25
|
%
|
|
Series A-4 Tranche A Term Loan Facility
|
2.90
|
%
|
|
1.25
|
%
|
|
2.25
|
%
|
|
Series D-2 Tranche B Term Loan Facility
(1)
|
3.52
|
%
|
|
1.75
|
%
|
|
2.75
|
%
|
|
Series C-2 Tranche B Term Loan Facility
(1)
|
3.77
|
%
|
|
2.00
|
%
|
|
3.00
|
%
|
|
Series E-1 Tranche B Term Loan Facility
(1)
|
3.75
|
%
|
|
2.00
|
%
|
|
3.00
|
%
|
|
Series F Tranche B Term Loan Facility
(1)
|
4.00
|
%
|
|
2.25
|
%
|
|
3.25
|
%
|
|
(1)
|
Subject to a
1.75%
base rate floor and a
0.75%
LIBO rate floor.
|
|
(2)
|
The applicable margins included in the table do not reflect the changes from the April 2016 amendment. See Note 18 for additional information regarding the amendment and waiver to the Credit Agreement.
|
|
10.
|
PENSION AND POSTRETIREMENT EMPLOYEE BENEFIT PLANS
|
|
|
|
Pension Benefit Plans
|
|
Postretirement
Benefit
Plan
|
||||||||||||||||||||
|
|
U.S. Plan
|
|
Non-U.S. Plans
|
|
||||||||||||||||||||
|
|
|
Three Months Ended March 31,
|
||||||||||||||||||||||
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||||||
|
Service cost
|
|
$
|
0.5
|
|
|
$
|
0.4
|
|
|
$
|
0.6
|
|
|
$
|
0.8
|
|
|
$
|
0.2
|
|
|
$
|
0.5
|
|
|
Interest cost
|
|
2.0
|
|
|
2.4
|
|
|
1.4
|
|
|
1.6
|
|
|
0.4
|
|
|
0.5
|
|
||||||
|
Expected return on plan assets
|
|
(3.3
|
)
|
|
(3.6
|
)
|
|
(1.7
|
)
|
|
(2.0
|
)
|
|
—
|
|
|
(0.1
|
)
|
||||||
|
Amortization of prior service credit
|
|
—
|
|
|
—
|
|
|
(0.1
|
)
|
|
(0.1
|
)
|
|
(0.6
|
)
|
|
(0.6
|
)
|
||||||
|
Amortization of net loss
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|
0.4
|
|
|
—
|
|
|
—
|
|
||||||
|
Net periodic (benefit) cost
|
|
$
|
(0.8
|
)
|
|
$
|
(0.8
|
)
|
|
$
|
0.3
|
|
|
$
|
0.7
|
|
|
$
|
—
|
|
|
$
|
0.3
|
|
|
11.
|
SHARE-BASED COMPENSATION
|
|
|
Three Months Ended
March 31, |
||||||
|
|
2016
|
|
2015
|
||||
|
Stock options
|
$
|
3.2
|
|
|
$
|
3.9
|
|
|
RSUs
|
60.3
|
|
|
31.1
|
|
||
|
Share-based compensation expense
|
$
|
63.5
|
|
|
$
|
35.0
|
|
|
|
|
|
|
||||
|
Research and development expenses
|
$
|
1.7
|
|
|
$
|
1.5
|
|
|
Selling, general and administrative expenses
|
61.8
|
|
|
33.5
|
|
||
|
Share-based compensation expense
|
$
|
63.5
|
|
|
$
|
35.0
|
|
|
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
(in millions)
|
|
Amount
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Balance, January 1, 2015 (restated)
|
334.4
|
|
|
$
|
8,349.2
|
|
|
$
|
243.9
|
|
|
$
|
(2,397.8
|
)
|
|
$
|
(915.9
|
)
|
|
$
|
5,279.4
|
|
|
$
|
122.3
|
|
|
$
|
5,401.7
|
|
|
Issuance of common stock (see below)
|
7.3
|
|
|
1,431.9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,431.9
|
|
|
—
|
|
|
1,431.9
|
|
|||||||
|
Common shares issued under share-based compensation plans
|
0.6
|
|
|
29.2
|
|
|
(14.7
|
)
|
|
—
|
|
|
—
|
|
|
14.5
|
|
|
—
|
|
|
14.5
|
|
|||||||
|
Share-based compensation
|
—
|
|
|
—
|
|
|
35.0
|
|
|
—
|
|
|
—
|
|
|
35.0
|
|
|
—
|
|
|
35.0
|
|
|||||||
|
Employee withholding taxes related to share-based awards
|
—
|
|
|
—
|
|
|
(21.2
|
)
|
|
—
|
|
|
—
|
|
|
(21.2
|
)
|
|
—
|
|
|
(21.2
|
)
|
|||||||
|
Excess tax benefits from share-based compensation
|
—
|
|
|
—
|
|
|
17.9
|
|
|
—
|
|
|
—
|
|
|
17.9
|
|
|
—
|
|
|
17.9
|
|
|||||||
|
|
342.3
|
|
|
9,810.3
|
|
|
260.9
|
|
|
(2,397.8
|
)
|
|
(915.9
|
)
|
|
6,757.5
|
|
|
122.3
|
|
|
6,879.8
|
|
|||||||
|
Comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Net income (restated)
|
—
|
|
|
—
|
|
|
—
|
|
|
97.7
|
|
|
—
|
|
|
97.7
|
|
|
0.8
|
|
|
98.5
|
|
|||||||
|
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(411.7
|
)
|
|
(411.7
|
)
|
|
(0.2
|
)
|
|
(411.9
|
)
|
|||||||
|
Total comprehensive loss (restated)
|
|
|
|
|
|
|
|
|
|
|
(314.0
|
)
|
|
0.6
|
|
|
(313.4
|
)
|
||||||||||||
|
Balance, March 31, 2015 (restated)
|
342.3
|
|
|
$
|
9,810.3
|
|
|
$
|
260.9
|
|
|
$
|
(2,300.1
|
)
|
|
$
|
(1,327.6
|
)
|
|
$
|
6,443.5
|
|
|
$
|
122.9
|
|
|
$
|
6,566.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Balance, January 1, 2016
|
342.9
|
|
|
$
|
9,897.4
|
|
|
$
|
304.9
|
|
|
$
|
(2,749.7
|
)
|
|
$
|
(1,541.6
|
)
|
|
$
|
5,911.0
|
|
|
$
|
118.8
|
|
|
$
|
6,029.8
|
|
|
Common shares issued under share-based compensation plans
|
0.1
|
|
|
8.5
|
|
|
(7.7
|
)
|
|
—
|
|
|
—
|
|
|
0.8
|
|
|
—
|
|
|
0.8
|
|
|||||||
|
Share-based compensation
|
—
|
|
|
—
|
|
|
63.5
|
|
|
—
|
|
|
—
|
|
|
63.5
|
|
|
—
|
|
|
63.5
|
|
|||||||
|
Employee withholding taxes related to share-based awards
|
—
|
|
|
—
|
|
|
(7.7
|
)
|
|
—
|
|
|
—
|
|
|
(7.7
|
)
|
|
—
|
|
|
(7.7
|
)
|
|||||||
|
Excess tax expense from share-based compensation
|
—
|
|
|
—
|
|
|
(1.4
|
)
|
|
—
|
|
|
—
|
|
|
(1.4
|
)
|
|
—
|
|
|
(1.4
|
)
|
|||||||
|
|
343.0
|
|
|
9,905.9
|
|
|
351.6
|
|
|
(2,749.7
|
)
|
|
(1,541.6
|
)
|
|
5,966.2
|
|
|
118.8
|
|
|
6,085.0
|
|
|||||||
|
Comprehensive (loss) income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Net (loss) income
|
—
|
|
|
—
|
|
|
—
|
|
|
(373.7
|
)
|
|
—
|
|
|
(373.7
|
)
|
|
0.8
|
|
|
(372.9
|
)
|
|||||||
|
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
63.0
|
|
|
63.0
|
|
|
0.5
|
|
|
63.5
|
|
|||||||
|
Total comprehensive (loss) income
|
|
|
|
|
|
|
|
|
|
|
(310.7
|
)
|
|
1.3
|
|
|
(309.4
|
)
|
||||||||||||
|
Balance, March 31, 2016
|
343.0
|
|
|
$
|
9,905.9
|
|
|
$
|
351.6
|
|
|
$
|
(3,123.4
|
)
|
|
$
|
(1,478.6
|
)
|
|
$
|
5,655.5
|
|
|
$
|
120.1
|
|
|
$
|
5,775.6
|
|
|
13.
|
ACCUMULATED OTHER COMPREHENSIVE LOSS
|
|
|
|
Foreign Currency Translation Adjustment
|
|
Pension Adjustment
|
|
Total
|
||||||
|
Balance, January 1, 2015
|
|
$
|
(886.5
|
)
|
|
$
|
(29.4
|
)
|
|
$
|
(915.9
|
)
|
|
Foreign currency translation adjustment
|
|
(411.3
|
)
|
|
—
|
|
|
(411.3
|
)
|
|||
|
Pension adjustment
(1)
|
|
—
|
|
|
(0.4
|
)
|
|
(0.4
|
)
|
|||
|
Balance, March 31, 2015
|
|
$
|
(1,297.8
|
)
|
|
$
|
(29.8
|
)
|
|
$
|
(1,327.6
|
)
|
|
|
|
|
|
|
|
|
||||||
|
Balance, January 1, 2016
|
|
$
|
(1,529.4
|
)
|
|
$
|
(12.2
|
)
|
|
$
|
(1,541.6
|
)
|
|
Foreign currency translation adjustment
|
|
63.4
|
|
|
—
|
|
|
63.4
|
|
|||
|
Pension adjustment
(1)
|
|
—
|
|
|
(0.4
|
)
|
|
(0.4
|
)
|
|||
|
Balance, March 31, 2016
|
|
$
|
(1,466.0
|
)
|
|
$
|
(12.6
|
)
|
|
$
|
(1,478.6
|
)
|
|
(1)
|
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 10).
|
|
14.
|
INCOME TAXES
|
|
15.
|
(LOSS) EARNINGS PER SHARE
|
|
|
Three Months Ended
March 31, |
||||||
|
|
2016
|
|
2015
(restated) |
||||
|
Net (loss) income attributable to Valeant Pharmaceuticals International, Inc.
|
$
|
(373.7
|
)
|
|
$
|
97.7
|
|
|
|
|
|
|
||||
|
Basic weighted-average number of common shares outstanding
|
344.9
|
|
|
336.8
|
|
||
|
Diluted effect of stock options, RSUs and other
(a)
|
—
|
|
|
6.6
|
|
||
|
Diluted weighted-average number of common shares outstanding
|
344.9
|
|
|
343.4
|
|
||
|
|
|
|
|
||||
|
(Loss) earnings per share attributable to Valeant Pharmaceuticals International, Inc.:
|
|
|
|
||||
|
Basic
|
$
|
(1.08
|
)
|
|
$
|
0.29
|
|
|
Diluted
|
$
|
(1.08
|
)
|
|
$
|
0.28
|
|
|
(a)
|
In the three-month period ended March 31, 2016, all potential common shares issuable for stock options and RSUs were excluded from the calculation of diluted loss per share, as the effect of including them would have been anti-dilutive. The dilutive effect of potential common shares issuable for stock options and RSUs on the weighted-average number of common shares outstanding would have been as follows:
|
|
|
|
Three Months
Ended
March 31 |
|
|
|
|
2016
|
|
|
Basic weighted-average number of common shares outstanding
|
|
344.9
|
|
|
Diluted effect of stock options, RSUs and other
|
|
4.8
|
|
|
Diluted weighted-average number of common shares outstanding
|
|
349.7
|
|
|
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, aesthetics, and women's health 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, Argentina, and Colombia and exports out of Mexico to other Latin American markets), Africa and the Middle East.
|
|
|
Three Months Ended
March 31, |
||||||
|
|
2016
|
|
2015
(restated) |
||||
|
Revenues:
|
|
|
|
||||
|
Developed Markets
(1)
|
$
|
1,929.9
|
|
|
$
|
1,743.6
|
|
|
Emerging Markets
(2)
|
441.7
|
|
|
426.5
|
|
||
|
Total revenues
|
2,371.6
|
|
|
2,170.1
|
|
||
|
|
|
|
|
||||
|
Segment profit:
|
|
|
|
||||
|
Developed Markets
(3)
|
259.6
|
|
|
667.7
|
|
||
|
Emerging Markets
(4)
|
18.3
|
|
|
54.6
|
|
||
|
Total segment profit
|
277.9
|
|
|
722.3
|
|
||
|
|
|
|
|
||||
|
Corporate
(5)
|
(146.4
|
)
|
|
(69.2
|
)
|
||
|
Restructuring, integration and other costs
|
(38.0
|
)
|
|
(55.0
|
)
|
||
|
Acquisition-related costs
|
(1.8
|
)
|
|
(13.9
|
)
|
||
|
Acquisition-related contingent consideration
|
(2.4
|
)
|
|
(7.1
|
)
|
||
|
Other expense
|
(23.1
|
)
|
|
(6.1
|
)
|
||
|
Operating income
|
66.2
|
|
|
571.0
|
|
||
|
Interest income
|
0.9
|
|
|
0.9
|
|
||
|
Interest expense
|
(426.6
|
)
|
|
(297.8
|
)
|
||
|
Loss on extinguishment of debt
|
—
|
|
|
(20.0
|
)
|
||
|
Foreign exchange and other
|
(6.2
|
)
|
|
(71.1
|
)
|
||
|
(Loss) income before provision for income taxes
|
$
|
(365.7
|
)
|
|
$
|
183.0
|
|
|
(1)
|
Developed Markets segment revenues reflect incremental product sales revenue in the
three-month period ended March 31, 2016
from 2015 acquisitions of
$513 million
, in the aggregate, primarily from the Salix Acquisition and the acquisition of certain assets of Dendreon.
|
|
(2)
|
Emerging Markets segment revenues reflect incremental product sales revenue in the
three-month period ended March 31, 2016
from 2015 acquisitions of
$59 million
, in the aggregate, primarily from the Amoun Acquisition.
|
|
(3)
|
Developed Markets segment profit in the
three-month period ended March 31, 2016
reflects the impact of acquisition accounting adjustments related to the fair value adjustments to inventory and identifiable intangible assets of
$637 million
, in the aggregate, primarily from the Salix Acquisition, compared with
$314 million
in the corresponding period of 2015.
|
|
(4)
|
Emerging Markets segment profit in the
three-month period ended March 31, 2016
reflects the impact of acquisition accounting adjustments related to the fair value adjustments to inventory and identifiable intangible assets of
$86 million
, in the aggregate, compared with
$76 million
in the corresponding period of 2015.
|
|
(5)
|
Corporate reflects non-restructuring-related share-based compensation expense of
$50 million
in the
three-month period ended March 31, 2016
, compared with
$24 million
in the corresponding period of 2015. The expense in the three-month period ended March 31, 2016, included a charge relating to the acceleration of vesting of the performance-based RSUs held by the Company's former Chief Executive Officer. See Note 11 for additional information.
|
|
|
As of
March 31, 2016 |
|
As of
December 31, 2015 |
||||
|
Assets:
|
|
|
|
||||
|
Developed Markets
|
$
|
40,580.6
|
|
|
$
|
41,182.7
|
|
|
Emerging Markets
|
6,861.5
|
|
|
6,897.4
|
|
||
|
|
47,442.1
|
|
|
48,080.1
|
|
||
|
Corporate
|
1,577.8
|
|
|
884.4
|
|
||
|
Total assets
|
$
|
49,019.9
|
|
|
$
|
48,964.5
|
|
|
18.
|
SUBSEQUENT EVENTS
|
|
•
|
Maximizing our key therapeutic area businesses including: dermatology, GI, and eye health;
|
|
•
|
Obtaining regulatory approval for and successfully launching brodalumab, latanoprostene bunod, and Oral Relistor®;
|
|
•
|
Completing a successful transition of certain of our products to the new fulfillment arrangements with Walgreen Co. ("Walgreens"), described further under ''Selected Financial Information" below; and
|
|
•
|
Reducing outstanding debt levels.
|
|
•
|
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
|
|
•
|
procurement savings.
|
|
|
|
Three Months Ended March 31,
|
|||||||||
|
|
|
2016
|
|
2015
(restated) |
|
Change
|
|||||
|
($ in millions, except per share data)
|
|
$
|
|
$
|
|
$
|
|
%
|
|||
|
Revenues
|
|
2,371.6
|
|
|
2,170.1
|
|
|
201.5
|
|
|
9
|
|
Operating expenses
|
|
2,305.4
|
|
|
1,599.1
|
|
|
706.3
|
|
|
44
|
|
Net (loss) income attributable to Valeant Pharmaceuticals International, Inc.
|
|
(373.7
|
)
|
|
97.7
|
|
|
(471.4
|
)
|
|
NM
|
|
(Loss) earnings per share attributable to Valeant Pharmaceuticals International, Inc.:
|
|
|
|
|
|
|
|
|
|||
|
Basic
|
|
(1.08
|
)
|
|
0.29
|
|
|
(1.37
|
)
|
|
NM
|
|
Diluted
|
|
(1.08
|
)
|
|
0.28
|
|
|
(1.36
|
)
|
|
NM
|
|
|
|
Three Months Ended
March 31, |
||||||||
|
|
|
2016
|
|
2015
(restated) |
||||||
|
($ in millions)
|
|
$
|
|
%
(1)
|
|
$
|
|
%
(1)
|
||
|
Gross product sales
|
|
3,935.8
|
|
|
|
|
3,074.6
|
|
|
|
|
Provisions to reduce gross product sales to net product sales
|
|
|
|
|
|
|
|
|
||
|
Discounts and allowances
|
|
175.8
|
|
|
4
|
|
109.4
|
|
|
4
|
|
Returns
|
|
129.4
|
|
|
3
|
|
69.0
|
|
|
2
|
|
Rebates
|
|
592.7
|
|
|
15
|
|
364.0
|
|
|
12
|
|
Chargebacks
|
|
592.3
|
|
|
15
|
|
349.3
|
|
|
11
|
|
Distribution fees
|
|
109.5
|
|
|
3
|
|
56.8
|
|
|
2
|
|
|
|
1,599.7
|
|
|
41
|
|
948.5
|
|
|
31
|
|
Net product sales
|
|
2,336.1
|
|
|
|
|
2,126.1
|
|
|
|
|
•
|
an increase in the provisions for returns due mainly to a favorable change in estimate adjustment recognized in the first quarter of 2015 due to improved returns experience for Solodyn®, Jublia® and Wellbutrin XL® as a result of our increased promotional efforts (including managed care contracting and co-pay assistance programs) which lowered the inventory level in the distribution channel for these promoted products. The increase in the return provisions is partially offset by improved returns experience for Wellbutrin XL® product sales due to increased utilization by the U.S. government;
|
|
•
|
an increase in the provisions for rebates driven primarily by increased sales of products which carry higher contractual rebates and co-pay assistance programs, including the impact of gross price increases where customers receive incremental rebates based on contractual price increase limitations. Specifically, the comparisons were impacted primarily by higher provisions for rebates, including managed care rebates for Jublia® and the co-pay assistance programs for launch products and other promoted products including Onexton®, Retin-A Micro® Microsphere 0.08% (“RAM 0.08%”), and Solodyn®, as well as the Salix products;
|
|
•
|
an increase in the provisions for chargebacks as a result of increased utilization and higher chargeback discounts given to the U.S. government in connection with product sales for Minocin®, Isuprel®, Mysoline®, Ativan® and Targretin®; and
|
|
•
|
higher distribution service agreement fees due to lower offsetting price appreciation credits, which credits offset against the total distribution service agreement fees we pay on all of our products to each wholesaler, realized in the first quarter of 2016 as compared to the amounts realized in the first quarter of 2015. Net reduction to the distribution
|
|
•
|
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, aesthetics, and women's health 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, Argentina, and Colombia and exports out of Mexico to other Latin American markets), Africa and the Middle East.
|
|
|
|
Three Months Ended March 31,
|
||||||||||
|
|
|
2016
|
|
2015
(restated) |
|
Change
|
||||||
|
($ in millions)
|
|
$
|
%
|
|
$
|
%
|
|
$
|
%
|
|||
|
Developed Markets
|
|
1,929.9
|
|
81
|
|
1,743.6
|
|
80
|
|
186.3
|
|
11
|
|
Emerging Markets
|
|
441.7
|
|
19
|
|
426.5
|
|
20
|
|
15.2
|
|
4
|
|
Total revenues
|
|
2,371.6
|
|
100
|
|
2,170.1
|
|
100
|
|
201.5
|
|
9
|
|
•
|
the incremental product sales revenue of
$513 million
, in the aggregate, from all 2015 acquisitions,
primarily from the acquisitions of Salix (mainly driven by Xifaxan®, as well as Zegerid®, Uceris®, Apriso® and Relistor® product sales) and certain assets of Dendreon Corporation ("Dendreon") (Provenge® product sales)
. Of the
$513 million
increase, approximately 25% of such amount was attributable to price increases implemented subsequent to such acquisitions (primarily related to Omeprazole, Isuprel®, Nitropress®, Apriso®, Zegerid®, and Relistor®). Price appreciation credits for the first quarter of 2016 related to product sales from 2015 acquisitions were nominal. Regarding the Salix Acquisition, wholesaler inventory levels were reduced to approximately 1.5 months at March 31, 2016 (as compared to approximately 1.8 months at December 31, 2015), and we anticipate selling to demand by the second quarter of 2016. Overall, our U.S. wholesaler inventory levels for branded products were approximately 1.5 months at March 31, 2016 and December 31, 2015.
|
|
•
|
a negative foreign currency exchange impact on the existing business of $13 million in the
first quarter
of
2016
due to the impact of a
strengthening of the U.S. dollar against certain currencies, including the Canadian dollar, Australia dollar and Euro
; and
|
|
•
|
a negative impact from divestitures and discontinuations of $13 million in the
first quarter
of
2016
.
|
|
•
|
the incremental product sales revenue of
$59 million
, in the aggregate, from all 2015 acquisitions, primarily the acquisition of Amoun Pharmaceutical Company S.A.E. (the "Amoun Acquisition").
|
|
•
|
a negative foreign currency exchange impact on the existing business of $39 million in the
first quarter
of
2016
, due to the impact of a
strengthening of the U.S. dollar against certain currencies, including the Mexican peso, Brazilian real, Egyptian pound, Russian ruble, and Chinese yuan
; and
|
|
•
|
a negative impact from divestitures and discontinuations of $9 million in the
first quarter
of
2016
, primarily from Latin America.
|
|
|
|
Three Months Ended March 31,
|
|||||||||||
|
|
|
2016
|
|
2015
(restated) |
|
Change
|
|||||||
|
($ in millions)
|
|
$
|
%
(1)
|
|
$
|
%
(1)
|
|
$
|
%
|
||||
|
Developed Markets
|
|
259.6
|
|
13
|
|
667.7
|
|
38
|
|
(408.1
|
)
|
(61
|
)
|
|
Emerging Markets
|
|
18.3
|
|
4
|
|
54.6
|
|
13
|
|
(36.3
|
)
|
(66
|
)
|
|
Total segment profit
|
|
277.9
|
|
12
|
|
722.3
|
|
33
|
|
(444.4
|
)
|
(62
|
)
|
|
•
|
an increase in operating expenses (including amortization and impairments of finite-lived intangible assets) of $522 million in the first quarter of 2016, primarily associated with the 2015 acquisitions within the segment (primarily Salix);
|
|
•
|
a decrease in contribution related to divestitures and discontinuations of $10 million in the first quarter of 2016; and
|
|
•
|
a negative foreign currency exchange impact on the existing business contribution of $10 million in the first quarter of 2016, due to the impact of a
strengthening of the U.S. dollar against certain currencies, including the Canadian dollar, Australia dollar and Euro
;.
|
|
•
|
an increase in contribution of $404 million, in the aggregate, from all 2015 acquisitions in the
first quarter
of
2016
, primarily from the 2015 acquisitions of Salix (mainly driven by Xifaxan®, as well as Zegerid®, Uceris®, Apriso® and Relistor® product sales) and certain assets of Dendreon (Provenge® product sales), including expenses for acquisition accounting adjustments related to inventory of $27 million, in the aggregate, in the
first quarter
of 2016; and
|
|
•
|
a favorable impact of $25 million related to the existing business acquisition accounting adjustments related to inventory in the
first quarter
of 2015 that did not similarly occur in the
first quarter
of
2016
.
|
|
•
|
a negative foreign currency exchange impact on the existing business contribution of $21 million in the
first quarter
of
2016
due to the impact of a
strengthening of the U.S. dollar against certain currencies, including the Mexican peso, Brazilian real, Egyptian pound, Russian ruble, and Chinese yuan
;
|
|
•
|
an increase in operating expenses (including amortization and impairments of finite-lived intangible assets) of $17 million in the
first quarter
of
2016
, primarily associated with the 2015 acquisitions within the segment (primarily the Amoun Acquisition); and
|
|
•
|
a decrease in contribution related to divestitures and discontinuations of $5 million in the
first quarter
of
2016
.
|
|
•
|
an increase in contribution of $28 million, from all 2015 acquisitions, primarily the Amoun Acquisition.
|
|
|
|
Three Months Ended March 31,
|
|||||||||||
|
|
|
2016
|
|
2015
(restated) |
|
Change
|
|||||||
|
($ in millions)
|
|
$
|
%
(1)
|
|
$
|
%
(1)
|
|
$
|
%
|
||||
|
Cost of goods sold (exclusive of amortization and impairments of finite-lived intangible assets shown separately below)
|
|
620.2
|
|
26
|
|
507.9
|
|
23
|
|
112.3
|
|
22
|
|
|
Cost of other revenues
|
|
9.7
|
|
—
|
|
14.3
|
|
1
|
|
(4.6
|
)
|
(32
|
)
|
|
Selling, general and administrative
|
|
812.6
|
|
34
|
|
573.8
|
|
26
|
|
238.8
|
|
42
|
|
|
Research and development
|
|
103.1
|
|
4
|
|
55.8
|
|
3
|
|
47.3
|
|
85
|
|
|
Amortization and impairments of finite-lived intangible assets
|
|
694.5
|
|
29
|
|
365.2
|
|
17
|
|
329.3
|
|
90
|
|
|
Restructuring, integration and other costs
|
|
38.0
|
|
2
|
|
55.0
|
|
3
|
|
(17.0
|
)
|
(31
|
)
|
|
Acquisition-related costs
|
|
1.8
|
|
—
|
|
13.9
|
|
1
|
|
(12.1
|
)
|
(87
|
)
|
|
Acquisition-related contingent consideration
|
|
2.4
|
|
—
|
|
7.1
|
|
—
|
|
(4.7
|
)
|
(66
|
)
|
|
Other expense
|
|
23.1
|
|
1
|
|
6.1
|
|
—
|
|
17.0
|
|
279
|
|
|
Total operating expenses
|
|
2,305.4
|
|
97
|
|
1,599.1
|
|
74
|
|
706.3
|
|
44
|
|
|
•
|
an unfavorable impact on margin from foreign currency exchange in the
first quarter
of
2016
;
|
|
•
|
lower dermatology revenues in the first quarter of 2016 due to the termination of the Philidor relationship; and
|
|
•
|
an unfavorable impact from sales of Provenge® (acquired as part of the acquisition of certain assets of Dendreon in the first quarter of 2015) and the Amoun portfolio, which represent lower margin products as compared to our overall product portfolio.
|
|
•
|
higher margin realized for our neurology and other portfolio driven by price increases implemented prior to the fourth quarter of 2015 and lower product sales for Xenazine®, which is a lower margin product; and
|
|
•
|
a favorable impact from sales of certain products acquired in the Salix Acquisition in the second quarter of 2015 (such as Xifaxan®), which represent higher margin products as compared to our overall product portfolio.
|
|
•
|
higher expenses of $144 million, related to acquisitions, including the Salix Acquisition, the acquisition of Sprout Pharmaceuticals, Inc. (the "Sprout Acquisition"), the Amoun Acquisition and the acquisition of certain assets of Dendreon;
|
|
•
|
incremental expense of $37 million, in the aggregate, recognized in the first quarter of 2016, primarily related to termination benefits that our former Chief Executive Officer is entitled to as a result of his termination, consisting of (i) pro-rata vesting of performance-based restricted stock units ("RSUs") (no shares were issued on vesting of these performance-based RSUs because the associated market-based performance condition was not attained), (ii) a cash
|
|
•
|
higher expenses of $31 million to support the U.S. operations, primarily driven by increased advertising and promotion expenses to support the dermatology and eye health businesses; and
|
|
•
|
professional fees of $29 million incurred in the first quarter of 2016 in connection with recent legal and governmental proceedings, investigations and information requests relating to, among other matters, our distribution, marketing, pricing, disclosure and accounting practices.
|
|
•
|
a favorable impact from foreign currency exchange of $19 million in the
first quarter
of
2016
.
|
|
•
|
Latanoprostene bunod ophthalmic solution 0.024%, an intraocular pressure ("IOP") lowering single-agent eye drop dosed once daily for patients with open angle glaucoma or ocular hypertension. In September 2015, we announced that the FDA has accepted for review the New Drug Application ("NDA") for this product and set a PDUFA action date of July 21, 2016;
|
|
•
|
Oral Relistor® is a tablet for the treatment of opioid-induced constipation in adult patients with chronic non-cancer pain. In September 2015, we announced that the FDA accepted for review the NDA for Oral Relistor®, and the FDA assigned a PDUFA action date of April 19, 2016. In April 2016, we announced that the FDA had extended the PDUFA action date for Oral Relistor® to July 19, 2016 to allow for a full review of our responses to certain information requests from the FDA; and
|
|
•
|
Brodalumab is an IL-17 receptor monoclonal antibody for patients with moderate-to-severe plaque psoriasis and psoriatic arthritis. Regulatory submission in both the U.S. and the European Union occurred in November 2015. In January 2016, we announced that the FDA accepted for review the Biologics License Application ("BLA") for brodalumab, and the FDA assigned a PDUFA action date of November 16, 2016.
|
|
|
|
Three Months Ended March 31,
|
|||||||||
|
|
|
2016
|
|
2015
|
|
Change
|
|||||
|
($ in millions; Income (Expense))
|
|
$
|
|
$
|
|
$
|
%
|
||||
|
Interest income
|
|
0.9
|
|
|
0.9
|
|
|
—
|
|
—
|
|
|
Interest expense
|
|
(426.6
|
)
|
|
(297.8
|
)
|
|
(128.8
|
)
|
43
|
|
|
Loss on extinguishment of debt
|
|
—
|
|
|
(20.0
|
)
|
|
20.0
|
|
(100
|
)
|
|
Foreign exchange and other
|
|
(6.2
|
)
|
|
(71.1
|
)
|
|
64.9
|
|
(91
|
)
|
|
Total non-operating expense
|
|
(431.9
|
)
|
|
(388.0
|
)
|
|
(43.9
|
)
|
11
|
|
|
|
|
Three Months Ended March 31,
|
|||||||||
|
|
|
2016
|
|
2015
(restated) |
|
Change
|
|||||
|
($ in millions; Expense (Income))
|
|
$
|
|
$
|
|
$
|
%
|
||||
|
Provision for income taxes
|
|
7.2
|
|
|
84.5
|
|
|
(77.3
|
)
|
(91
|
)
|
|
|
|
Three Months Ended March 31,
|
|||||||||
|
|
|
2016
|
|
2015
|
|
Change
|
|||||
|
($ in millions)
|
|
$
|
|
$
|
|
$
|
%
|
||||
|
Net cash provided by operating activities
|
|
558.1
|
|
|
491.1
|
|
|
67.0
|
|
14
|
|
|
Net cash used in investing activities
|
|
(112.0
|
)
|
|
(11,240.5
|
)
|
|
11,128.5
|
|
(99
|
)
|
|
Net cash provided by financing activities
|
|
259.2
|
|
|
12,306.3
|
|
|
(12,047.1
|
)
|
(98
|
)
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
7.8
|
|
|
(15.1
|
)
|
|
22.9
|
|
NM
|
|
|
Net increase in cash and cash equivalents
|
|
713.1
|
|
|
1,541.8
|
|
|
(828.7
|
)
|
(54
|
)
|
|
Cash and cash equivalents, beginning of period
|
|
597.3
|
|
|
322.6
|
|
|
274.7
|
|
85
|
|
|
Cash and cash equivalents, end of period
|
|
1,310.4
|
|
|
1,864.4
|
|
|
(554.0
|
)
|
(30
|
)
|
|
•
|
the inclusion of cash flows in the
first quarter
of
2016
from all 2015 acquisitions, including the Salix Acquisition and the Amoun Acquisition;
|
|
•
|
a decreased investment in working capital of
$287 million
in the
first quarter
of
2016
, primarily related to (i) a true-up payment of $110 million, related to price appreciation credits, received under a distribution service agreement with one of our wholesalers, (ii) the post-acquisition build up in accounts receivable in the first quarter of 2015 related to the acquisition of certain assets of Marathon where minimal accounts receivable balances were acquired, and (iii) the impact of changes related to timing of payments and receipts in the ordinary course of business; and
|
|
•
|
lower payments of $26 million related to restructuring, integration and other costs, primarily attributable to the acquisition of B&L.
|
|
•
|
lower operating cash flows generated from existing business resulted from the decline in product sales experienced in the first quarter 2016. Refer to "—Revenues By Segments" above for additional details.
|
|
•
|
a decrease of $10.35 billion in restricted cash and cash equivalents related to the net proceeds on the issuance of the senior notes in the first quarter of 2015, which were utilized to fund the Salix Acquisition, as well as the related accrued interest deposited into escrow; and
|
|
•
|
a decrease of
$818 million
, in the aggregate, related to higher purchases of businesses (net of cash acquired) and intangible assets, driven by the acquisition of certain assets of both Dendreon and Marathon in the first quarter of 2015.
|
|
•
|
a decrease of the net proceeds of $10 billion related to the issuance of the senior notes in the first quarter of 2015, which were utilized to fund the Salix Acquisition (such proceeds were included as restricted cash and cash equivalents as of March 31, 2015, as explained above under "Investing Activities");
|
|
•
|
a decrease of 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;
|
|
•
|
a decrease of the net proceeds of $992 million from the issuance of the 2023 Notes in the first quarter of 2015;
|
|
•
|
a decrease of $500 million related to payment of deferred consideration in the first quarter of 2016 in connection with the Sprout Acquisition; and
|
|
•
|
a decrease of the net proceeds of $250 million related to the issuance of incremental term loans under the Series A-3 Tranche A Term Loan Facility in the first quarter of 2015.
|
|
•
|
an increase of $550 million in net borrowings under our revolving credit facility in the first quarter of 2016;
|
|
•
|
an increase due to $500 million paid in connection with the redemption of the December 2018 Notes in the first quarter of 2015; and
|
|
•
|
an increase of $184 million related to lower repayments under our senior secured credit facilities in the first quarter of 2016.
|
|
Rating Agency
|
|
Corporate Rating
|
|
Senior Secured Rating
|
|
Senior Unsecured Rating
|
|
Outlook
|
|
Moody’s
|
|
B2
|
|
Ba2
|
|
B3
|
|
Negative
|
|
Standard & Poor’s
|
|
B
|
|
BB-
|
|
B-
|
|
CreditWatch Positive
|
|
|
|
Payments Due by Period
|
|||||||||||||
|
|
|
Total
|
|
2016
|
|
2017 and 2018
|
|
2019 and 2020
|
|
Thereafter
|
|||||
|
($ in millions)
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|||||
|
Long-term debt obligations, including interest
(1)
|
|
41,855.0
|
|
|
1,865.3
|
|
|
8,290.6
|
|
|
12,686.8
|
|
|
19,012.3
|
|
|
(1)
|
Expected payments assume repayment of the principal amounts of the debt obligations at maturity and on each scheduled amortization payment date, with the exception of the voluntary prepayment of $125 million on April 1, 2016, and do not reflect the increased interest amounts related to the April 2016 amendment. See Note 18 titled "SUBSEQUENT EVENTS" of notes to the unaudited consolidated financial statements for details related to the April 2016 amendment, which among other things, increased the interest rate applicable to our loans under our Credit Agreement by 1.00% until delivery of our financial statements for the fiscal quarter ending June 30, 2017. Thereafter, the interest rate applicable to the loans will be determined on the basis of a pricing grid tied to the Company’s secured leverage ratio.
|
|
•
|
the expense, timing and outcome of legal and governmental proceedings, investigations and information requests relating to, among other matters, our distribution, marketing, pricing, disclosure and accounting practices (including with respect to our former relationship with Philidor), including pending investigations by the U.S. Attorney's Office for the District of Massachusetts, the U.S. Attorney's Office for the Southern District of New York and the State of North Carolina Department of Justice, the pending investigation by the U.S. Securities and Exchange Commission (the “SEC”) of the Company, pending investigations by the U.S. Senate Special Committee on Aging and the U.S. House Committee on Oversight and Government Reform, the request for documents and information received by the Company from the Autorité des marchés financiers (the “AMF”) (the Company’s principal securities regulator in Canada), the document subpoena from the New Jersey State Bureau of Securities and a number of pending purported class action litigations in the U.S. and Canada and other claims, investigations or proceedings that may be initiated or that may be asserted;
|
|
•
|
our ability to manage the transition to our new Chairman and Chief Executive Officer, the success of such individual in assuming the roles of Chairman and Chief Executive Officer and the ability of such individual to implement and achieve the strategies and goals of the Company as they develop;
|
|
•
|
the election of the slate of directors who are standing for election at our upcoming annual general meeting of shareholders, many of whom are new or recently appointed directors, and our ability to manage the transition to this new Board of Directors and the success of these individuals in their new roles as members of the Board of Directors of the Company;
|
|
•
|
potential additional litigation and regulatory investigations (and any costs, expenses, use of resources, diversion of management time and efforts, liability and damages that may result therefrom), negative publicity and reputational harm that may result from the completed review by the Ad Hoc Committee of our Board of Directors;
|
|
•
|
the effect of the misstatements identified in, and the resultant restatement of, certain of our previously issued financial statements and results (as further described herein); the material weaknesses in our internal control over financial reporting identified by the Company; and any claims, investigations or proceedings (and any costs, expenses, use of resources, diversion of management time and efforts, liability and damages that may result therefrom), negative publicity or reputational harm that may arise as a result;
|
|
•
|
the effectiveness of the remediation measures and actions currently being implemented and to be taken in the future to remediate the material weaknesses in our internal control over financial reporting identified by the Company, our
|
|
•
|
potential additional litigation and regulatory investigations (and any costs, expenses, use of resources, diversion of management time and efforts, liability and damages that may result therefrom), negative publicity and reputational harm on our Company, products and business that may result from the recent public scrutiny of our distribution, marketing, pricing, disclosure and accounting practices and from our former relationship with Philidor, including any claims, proceedings, investigations and liabilities we may face as a result of any alleged wrongdoing by Philidor;
|
|
•
|
the current scrutiny of our business practices including with respect to pricing (including the investigations by the U.S. Attorney's Offices for the District of Massachusetts and the Southern District of New York, the U.S. Senate Special Committee on Aging, the U.S. House Committee on Oversight and Government Reform and the State of North Carolina Department of Justice) and any pricing controls or price reductions that may be sought or imposed (or that we may elect to implement) on our products as a result thereof (such as the recent decision of the Company to take no further price increases on our Nitropress® and Isuprel® products and to implement an enhanced rebate program for such products);
|
|
•
|
any default under the terms of our senior notes indentures or Credit Agreement and our ability, if any, to cure or obtain waivers of such default;
|
|
•
|
any delay in the filing of any subsequent financial statements or other filings and any default under the terms of our senior notes indentures or Credit Agreement as a result of such delays;
|
|
•
|
our substantial debt (and potential future indebtedness) and current and future debt service obligations and their impact on our financial condition, cash flows and results of operations;
|
|
•
|
our ability to meet the financial and other covenants contained in our Credit Agreement, senior note indentures and other current or future debt agreements and the limitations, restrictions and prohibitions such covenants impose or may impose on the way we conduct our business, including the restrictions imposed by the April 2016 amendment to our Credit Agreement that restrict us from, among other things, making acquisitions over an aggregate threshold (subject to certain exceptions) and from incurring debt to finance such acquisitions, until we achieve a specified leverage ratio;
|
|
•
|
our ability to service and repay our existing or any future debt, including our ability to reduce our outstanding debt levels during 2016 in accordance with our stated intention;
|
|
•
|
any downgrade by rating agencies in our credit ratings (such as the recent downgrades by Moody’s Investors Service and Standard & Poor’s Ratings Services), which may impact, among other things, our ability to raise debt and the cost of capital for additional debt issuances;
|
|
•
|
our ability to raise additional funds, as needed, in light of our current and projected levels of operations, general economic conditions (including capital market conditions) and any restrictions or limitations imposed by the financial and other covenants of our debt agreements with respect to incurring additional debt;
|
|
•
|
any further reductions in, or changes in the assumptions used in, our forecasts for fiscal year 2016 or beyond, which could lead to, among other things, a failure to meet the financial and/or other covenants contained in our Credit Agreement and/or senior note indentures and/or impairment in the goodwill associated with certain of our reporting units (including our U.S. reporting unit) or impairment charges related to certain of our products (in particular, our Addyi® product) or other intangible assets, which impairments could be material;
|
|
•
|
changes in the assumptions used in connection with our impairment analyses or assessments, which would lead to a change in such impairment analyses and assessments and which could result in an impairment in the goodwill associated with any of our reporting units (such as our U.S. reporting unit) or impairment charges related to certain of our products (in particular, our Addyi® product) or other intangible assets;
|
|
•
|
the potential divestiture of certain of our assets or businesses and our ability to successfully complete any future divestitures on commercially reasonable terms and on a timely basis, or at all;
|
|
•
|
the impact of any such future divestitures on our Company, including the reduction in the size or scope of our business or market share, any loss on sale or any adverse tax consequences suffered as a result of such divestitures;
|
|
•
|
our shift in focus to minimal business development activity through acquisitions in 2016 and possibly beyond as we focus on reducing our outstanding debt levels and as a result of the restrictions imposed by the April 2016 amendment to our Credit Agreement that restrict us from, among other things, making acquisitions over an aggregate threshold (subject to certain exceptions) and from incurring debt to finance such acquisitions, until we achieve a specified leverage ratio;
|
|
•
|
the uncertainties associated with the acquisition and launch of new products (in particular, our Addyi® product launched in October 2015), including, but not limited to, our ability to provide the time, resources, expertise and costs required for the commercial launch of new products, the acceptance and demand for new pharmaceutical products, and the impact of competitive products and pricing, which could lead to material impairment charges;
|
|
•
|
our ability to retain, motivate and recruit executives and other key employees and the termination or resignation of executives or key employees, such as the recent departure of our former chief executive officer;
|
|
•
|
our ability to implement effective succession planning for our executives and key employees;
|
|
•
|
our ability to successfully manage the transition of new executives and key employees, such as our new Corporate Controller;
|
|
•
|
our implemented and proposed price freezes and reductions on certain of our products, including the recent decision of the Company to take no further price increases on, and to implement an enhanced rebate program with respect to, our Nitropress® and Isuprel® products and the planned price reductions in conjunction with our arrangements with Walgreen Co. ("Walgreens"), and any future pricing freezes, reductions, increases or changes we may elect to make, as well as any proposed or future legislative price controls or price regulation, including mandated price reductions, that may impact our products;
|
|
•
|
the challenges and difficulties associated with managing a large complex business, which has grown rapidly over the last few years;
|
|
•
|
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;
|
|
•
|
the success of our recent and future fulfillment and other arrangements with Walgreens, including market acceptance of, or market reaction to, such arrangements (including by customers, doctors, patients, pharmacy benefit managers ("PBMs"), third party payors and governmental agencies), the continued compliance of such arrangements with applicable laws and the ability of the anticipated increased volume across all distribution channels resulting from such arrangements to offset the impact of lower average selling prices associated with these arrangements;
|
|
•
|
the extent to which our products are reimbursed by government authorities, PBMs and other third party payors; the impact our distribution, pricing and other practices (including as it relates to our former relationship with Philidor, any alleged wrongdoing by Philidor and our current relationship with Walgreens) may have on the decisions of such government authorities, PBMs and other third party payors to reimburse our products; and the impact of obtaining or maintaining such reimbursement on the price and sales of our products;
|
|
•
|
the inclusion of our products on formularies or our ability to achieve favorable formulary status, as well as the impact on the price and sales of our products in connection therewith;
|
|
•
|
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 proposals published by the Organization for Economic Co-operation and Development ("OECD") respecting base erosion and profit shifting ("BEPS");
|
|
•
|
the actions of our third party partners or service providers of research, development, manufacturing, marketing, distribution or other services, including their compliance with applicable laws and contracts, which actions may be beyond our control or influence, and the impact of such actions on our Company, including the impact to the Company of our former relationship with Philidor and any alleged legal or contractual non-compliance by Philidor;
|
|
•
|
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);
|
|
•
|
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 instability in Brazil, Russia, Ukraine, Argentina, certain countries in Africa and the Middle East);
|
|
•
|
our ability to reduce wholesaler inventory levels in Russia, Poland and certain other countries, in-line with our targeted levels for such markets;
|
|
•
|
our ability to obtain, maintain and license sufficient intellectual property rights over our products and enforce and defend against challenges to such intellectual property;
|
|
•
|
the introduction of generic, biosimilar or other competitors of our branded products and other products, including the introduction of products that compete against our products that do not have patent or data exclusivity rights;
|
|
•
|
once the additional limitations in our Credit Agreement restricting our ability to make acquisitions are no longer applicable, and to the extent we elect to resume business development activities through acquisitions, our ability to identify, finance, acquire, close and integrate acquisition targets successfully and on a timely basis;
|
|
•
|
factors relating to the acquisition and integration of the companies, businesses and products that have been acquired by the Company (and that may in the future be acquired by the Company, once the additional limitations in our Credit Agreement restricting our ability to make acquisitions are no longer applicable and to the extent we elect to resume business development activities through acquisitions), 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, equipment and other assets, and the achievement of the anticipated benefits from such integrations, as well as risks associated with the acquired companies, businesses and products;
|
|
•
|
factors relating to our ability to achieve all of the estimated synergies from such 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;
|
|
•
|
the expense, timing and outcome of pending or future legal and governmental proceedings, arbitrations, investigations, subpoenas, tax and other regulatory audits, reviews and regulatory proceedings against us or relating to us and settlements thereof;
|
|
•
|
our ability to obtain components, raw materials or finished products supplied by third parties (some of which may be single-sourced) and other manufacturing and related supply difficulties, interruptions and delays;
|
|
•
|
the disruption of delivery of our products and the routine flow of manufactured goods;
|
|
•
|
ongoing oversight and review of our products and facilities by regulatory and governmental agencies, including periodic audits by the FDA, and the results thereof;
|
|
•
|
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;
|
|
•
|
interest rate risks associated with our floating rate debt borrowings;
|
|
•
|
our ability to effectively distribute our products and the effectiveness and success of our distribution arrangements, including the impact of our recent arrangements with Walgreens;
|
|
•
|
our ability to secure and maintain third party research, development, manufacturing, marketing or distribution arrangements;
|
|
•
|
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;
|
|
•
|
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;
|
|
•
|
the difficulty in predicting the expense, timing and outcome within our legal and regulatory environment, including with respect to approvals by 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;
|
|
•
|
the results of continuing safety and efficacy studies by industry and government agencies;
|
|
•
|
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 (such as our Addyi® product launched in October 2015), which could lead to material impairment charges;
|
|
•
|
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;
|
|
•
|
the seasonality of sales of certain of our products;
|
|
•
|
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;
|
|
•
|
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 business practices (including with respect to pricing), worldwide anti-bribery laws (including the U.S. Foreign Corrupt Practices Act), worldwide environmental laws and regulation and privacy and security regulations;
|
|
•
|
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, including with respect to recent government inquiries on pricing;
|
|
•
|
the impact of the upcoming United States elections, including any healthcare reforms arising therefrom, including with respect to pricing controls;
|
|
•
|
factors relating to our acquisition of Salix, including the impact of substantial additional debt on our financial condition, cash flows 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; once integrated, the effects of such business combination on our future financial condition, operating results, strategy and plans; and, our ability to achieve the anticipated benefits of such acquisition, including the anticipated revenue growth resulting from such acquisition (such as the anticipated revenue of the Xifaxan® product, including the recently-approved IBS-D indication);
|
|
•
|
potential ramifications, including financial penalties, relating to Salix's restatement of its historical financial results;
|
|
•
|
illegal distribution or sale of counterfeit versions of our products;
|
|
•
|
interruptions, breakdowns or breaches in our information technology systems; and
|
|
•
|
other risks detailed from time to time in our filings with the SEC and the Canadian Securities Administrators (the “CSA”) (including in our 2015 Form 10-K), as well as our ability to anticipate and manage the risks associated with the foregoing.
|
|
•
|
During the first quarter of 2016, the Company placed its former Corporate Controller on administrative leave and, subsequently, identified and hired a new Corporate Controller, who commenced employment with the Company on May 31, 2016;
|
|
•
|
The Board requested that the Company’s former Chief Financial Officer resign from the Board; the former Chief Financial Officer is not standing for re-election to the Board at the Company’s next annual general shareholder meeting, to be held in June 2016;
|
|
•
|
With respect to the impact on 2015 executive compensation decisions, the Company has identified the relevant members of senior management and has determined the impact to their compensation;
|
|
•
|
In the second quarter of 2016, the Company engaged a third party to conduct a tone at the top and enterprise risk review and make appropriate recommendations to ensure that the Company’s tone at the top is appropriate, demonstrates a commitment to integrity and ethical values and supports a robust internal control environment that mitigates risk of inappropriate behavior, accounting errors or irregularities, and promotes appropriate disclosures. This risk review commenced in the second quarter of 2016;
|
|
•
|
In the second quarter of 2016, the Company engaged a third party to develop and provide training programs with respect to proper revenue recognition accounting and the Company’s internal control over financial reporting framework for the Company’s Executive Management Team, Business Unit Leaders, Business Unit Vice Presidents of Finance and Accounting, and certain other officers and/or employees. Training is scheduled to begin in the second quarter of 2016;
|
|
•
|
With respect to the fourth quarter of 2015 and the first quarter of 2016, members of the ARC have conducted quarterly private sessions with the Company’s business unit leaders and their Vice Presidents in the Finance and Accounting areas to ensure a candid and timely dialogue regarding accounting and financial reporting matters, including but not limited to significant unusual transactions and the business purposes thereof, significant changes in business terms and/or conditions, tone at the top and the level of senior management pressure to meet key performance measures. Quarterly sessions are also planned for the second quarter of 2016 and subsequent quarters; and
|
|
•
|
Commencing at the end of the first quarter of 2016 and continuing in the second quarter of 2016, certain independent Board members began to attend certain of the Company’s planning and forecasting telephone conferences to monitor, and, if necessary, address any tone at the top, management override, corporate governance, internal control, or accounting and financial reporting issues. Future attendance is scheduled for subsequent quarters and it is intended that independent Board members will also begin to attend the Company’s periodic business reviews.
|
|
10.1
|
Employment Letter between Valeant Pharmaceuticals International, Inc. and Howard Schiller, dated February 1, 2016, originally filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on February 2, 2016, which is incorporated by reference herein.†
|
|
|
10.2
|
Employment Agreement between Valeant Pharmaceuticals International, Inc. and Joseph C. Papa, dated as of April 25, 2016, originally filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on April 27, 2016, which is incorporated by reference herein.†
|
|
|
10.3
|
|
Amendment No. 12 and Waiver, dated as of April 11, 2016, to the Third Amended and Restated Credit and Guaranty Agreement, dated as of February 13, 2012 (as amended), by and among Valeant Pharmaceuticals International, Inc., certain subsidiaries of Valeant Pharmaceuticals International, Inc. as guarantors and Barclays Bank PLC, as administrative agent and on behalf of the requisite lenders and as Amendment No. 12 arranger, originally filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on April 11, 2016, which is incorporated by reference herein.
|
|
10.4
|
|
Letter Agreement, dated as of March 22, 2016, by and among Valeant Pharmaceuticals International, Inc., William A. Ackman and Pershing Square Capital Management, L.P., originally filed as Exhibit 99.2 to the Company's Current Report on Form 8-K filed on March 24, 2016, which is incorporated by reference herein.
|
|
10.5
|
|
Letter Agreement, dated as of March 8, 2016, between Valeant Pharmaceuticals International, Inc. and Pershing Square Capital Management, L.P., originally filed as Exhibit 99.2 to the Company's Current Report on Form 8-K filed on March 14, 2016, which is incorporated by reference herein.
|
|
10.6
|
|
Form of Executive Retention Letter Agreement, originally filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on May 16, 2016, which is incorporated by reference herein.†
|
|
10.7
|
|
Separation Agreement, dated as of May 26, 2016, between Valeant Pharmaceuticals International, Inc. and J. Michael Pearson, originally filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on May 31, 2016, which is incorporated by reference herein.†
|
|
31.1*
|
Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
31.2*
|
Certification of the Chief Financial Officer 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 Linkbase Document
|
|
|
†
|
Management contract or compensatory plan or arrangement.
|
|
|
Valeant Pharmaceuticals International, Inc.
(Registrant) |
|
|
|
|
Date: June 7, 2016
|
/s/ JOSEPH C. PAPA
|
|
|
Joseph C. Papa
Chairman of the Board and Chief Executive Officer (Principal Executive Officer) |
|
|
|
|
|
|
|
Date: June 7, 2016
|
/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 between Valeant Pharmaceuticals International, Inc. and Howard Schiller, dated February 1, 2016, originally filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on February 2, 2016, which is incorporated by reference herein.†
|
|
|
10.2
|
Employment Agreement between Valeant Pharmaceuticals International, Inc. and Joseph C. Papa, dated as of April 25, 2016, originally filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on April 27, 2016, which is incorporated by reference herein.†
|
|
|
10.3
|
|
Amendment No. 12 and Waiver, dated as of April 11, 2016, to the Third Amended and Restated Credit and Guaranty Agreement, dated as of February 13, 2012 (as amended), by and among Valeant Pharmaceuticals International, Inc., certain subsidiaries of Valeant Pharmaceuticals International, Inc. as guarantors and Barclays Bank PLC, as administrative agent and on behalf of the requisite lenders and as Amendment No. 12 arranger, originally filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on April 11, 2016, which is incorporated by reference herein.
|
|
10.4
|
|
Letter Agreement, dated as of March 22, 2016, by and among Valeant Pharmaceuticals International, Inc., William A. Ackman and Pershing Square Capital Management, L.P., originally filed as Exhibit 99.2 to the Company's Current Report on Form 8-K filed on March 24, 2016, which is incorporated by reference herein.
|
|
10.5
|
|
Letter Agreement, dated as of March 8, 2016, between Valeant Pharmaceuticals International, Inc. and Pershing Square Capital Management, L.P., originally filed as Exhibit 99.2 to the Company's Current Report on Form 8-K filed on March 14, 2016, which is incorporated by reference herein.
|
|
10.6
|
|
Form of Executive Retention Letter Agreement, originally filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on May 16, 2016, which is incorporated by reference herein.†
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10.7
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Separation Agreement, dated as of May 26, 2016, between Valeant Pharmaceuticals International, Inc. and J. Michael Pearson, originally filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on May 31, 2016, which is incorporated by reference herein.†
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31.1*
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Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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31.2*
|
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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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.
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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.
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*101.INS
|
XBRL Instance Document
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*101.SCH
|
XBRL Taxonomy Extension Schema Document
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*101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
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*101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document
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*101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document
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*101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document
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†
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Management contract or compensatory plan or arrangement.
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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 |
|---|