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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, 2017
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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
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x
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Accelerated filer
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Non-accelerated filer
(Do not check if a smaller reporting company) |
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Smaller reporting company
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Emerging growth company
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o
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
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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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 Rx Services, LLC ("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 investigations 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, the pending investigation by the California Department of Insurance, a number of pending putative class action litigations in the U.S. and Canada and purported class actions under the federal RICO statute and other claims, investigations or proceedings that may be initiated or that may be asserted;
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the success of our new management team (including our new Chairman and Chief Executive Officer, new Chief Financial Officer, new General Counsel, new Corporate Controller and Chief Accounting Officer and new Chief Quality Officer) in implementing and achieving the strategies and goals of the Company as they develop;
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the impact of the changes in and reorganizations to our business structure, including changes to our operating and reportable segments;
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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, 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 has arisen or may arise as a result;
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the effectiveness of the measures implemented to remediate the material weaknesses in our internal control over financial reporting that were identified by the Company, our deficient control environment and the contributing factors leading to the misstatement of our previously issued 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 and/or its management and/or employees;
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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 adjustments that may be sought or imposed on our products as a result thereof;
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pricing decisions that we have implemented, or may in the future, elect to implement, whether as a result of recent scrutiny or otherwise, such as the 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, our decision on the price of our Siliq™ product, the Patient Access and Pricing Committee’s commitment that the average annual price increase for our prescription pharmaceutical products will be set at no greater than single digits and below the 5-year weighted average of the increases within the branded biopharmaceutical industry or any future pricing actions we may take following review by our Patient Access and Pricing Committee (which is responsible for the pricing of our drugs);
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legislative or policy efforts, including those that may be introduced and passed by the U.S. Congress, designed to reduce patient out-of-pocket costs for medicines, which could result in new mandatory rebates and discounts or other pricing restrictions, controls or regulations (including mandatory price reductions);
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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, such as the inspections by the FDA of the Company's facilities in Tampa, Florida and Rochester, New York, and the results thereof;
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any default under the terms of our 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 future financial statements or other filings and any default under the terms of our indentures or Credit Agreement as a result of such delays;
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our substantial debt (and potential additional future indebtedness) and current and future debt service obligations, our ability to reduce our outstanding debt levels in accordance with our stated intention and the resulting 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, 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, prohibitions on incurring additional debt if certain financial covenants are not met, limitations on the amount of additional debt we are able to incur where not prohibited, and restrictions on our ability to make certain investments and other restricted payments;
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any further downgrade by rating agencies in our credit ratings, which may impact, among other things, our ability to raise debt and the cost of capital for additional debt issuances;
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any reductions in, or changes in the assumptions used in, our forecasts for fiscal year 2017 or beyond, which could lead to, among other things, (i) a failure to meet the financial and/or other covenants contained in our Credit Agreement and/or indentures, and/or (ii) impairment in the goodwill associated with certain of our reporting units (including our Salix 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 or impairment charges related to certain of our products (in particular, our Addyi® product) or other intangible assets;
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the pending and additional divestitures of certain of our assets or businesses and our ability to successfully complete any such divestitures on commercially reasonable terms and on a timely basis, or at all, and the impact of any such pending or future divestitures on our Company, including the reduction in the size or scope of our business or market share, loss of revenue, any loss on sale, including any resultant write-downs of goodwill, or any adverse tax consequences suffered as a result of any such divestitures;
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our shift in focus to much lower business development activity through acquisitions for the foreseeable future as we focus on reducing our outstanding debt levels and as a result of the restrictions imposed by 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 (such as our Addyi® product and our recently approved Siliq™ product (brodalumab)), 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, including subsequent to retention payments being paid out and as a result of the reputational challenges we face and may continue to face;
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our ability to implement effective succession planning for our executives and key employees;
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the challenges and difficulties associated with managing a large complex business, which has, in the past, grown rapidly;
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our ability to compete against companies that are larger and have greater financial, technical and human resources than we do, as well as other competitive factors, such as technological advances achieved, patents obtained and new products introduced by our competitors;
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our ability to effectively operate, stabilize and grow our businesses in light of the challenges that the Company currently faces, including with respect to its substantial debt, pending investigations and legal proceedings, scrutiny of our pricing, distribution and other practices, reputational harm and limitations on the way we conduct business imposed by the covenants in our Credit Agreement, indentures and the agreements governing our other indebtedness;
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the success of our fulfillment arrangements with Walgreen Co. ("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 our ability to successfully negotiate any improvements to our arrangements with Walgreens;
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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
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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 and operating in new and different geographic markets (including the challenges created by new and different regulatory regimes in such countries and the need to comply with applicable anti-bribery and economic sanctions laws and regulations);
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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 current or recent instability in Brazil, Russia, Ukraine, Argentina, Egypt, certain other countries in Africa and the Middle East, the devaluation of the Egyptian pound, and the adverse economic impact and related uncertainty caused by the United Kingdom's decision to leave the European Union (Brexit));
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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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if permitted under our Credit Agreement, 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, the risks associated with the acquired companies, businesses and products and our ability to achieve the anticipated benefits and synergies from such acquisitions and integrations, including as a result of cost-rationalization and integration initiatives. Factors impacting the achievement of anticipated benefits and synergies 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;
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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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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 recalls or withdrawals of products from the market;
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the mandatory or voluntary recall or withdrawal of our products from the market and the costs associated therewith;
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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 other factors impacting the commercial success of our products (such as our Addyi® product and our recently approved
Siliq™
product (brodalumab)), which could lead to material impairment charges;
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the results of management reviews of our research and development portfolio (including following the receipt of clinical results or feedback from the FDA or other regulatory authorities), 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 economic sanctions and/or export laws, 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 by the Health Care and Education Reconciliation Act of 2010 (the “Health Care Reform Act”) and potential repeal or amendment thereof 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 any changes in or reforms to the legislation, laws, rules, regulation and guidance that apply to the Company and its business and products or the enactment of any new or proposed legislation, laws, rules, regulations or guidance that will impact or apply to the Company or its businesses or products;
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the impact of changes in federal laws and policy under consideration by the new administration and Congress, including the effect that such changes will have on fiscal and tax policies, the potential repeal of all or portions of the Health Care Reform Act, international trade agreements and policies and policy efforts designed to reduce patient out-of-pocket costs for medicines (which could result in new mandatory rebates and discounts or other pricing restrictions);
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potential ramifications, including legal sanctions and/or financial penalties, relating to the restatement by Salix Pharmaceuticals, Ltd. ("Salix") of its historical financial results prior to our acquisition of Salix in April 2015;
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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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risks in Item 1A. "”Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2016, filed on March 1, 2017, and risks detailed from time to time in our other filings with the SEC and the Canadian Securities Administrators (the “CSA”), as well as our ability to anticipate and manage the risks associated with the foregoing.
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As of
March 31, 2017 |
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As of
December 31, 2016 |
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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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1,210
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$
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542
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Trade receivables, net
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2,097
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2,517
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Inventories, net
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1,111
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1,061
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Current assets held for sale
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240
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261
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Prepaid expenses and other current assets
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675
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696
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Total current assets
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5,333
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5,077
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Property, plant and equipment, net
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1,328
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1,312
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Intangible assets, net
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18,186
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18,884
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Goodwill
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15,753
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15,794
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Deferred tax assets, net
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142
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146
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Non-current assets held for sale
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1,401
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2,132
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Other non-current assets
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190
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184
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Total assets
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$
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42,333
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$
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43,529
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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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368
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$
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324
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Accrued and other current liabilities
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3,484
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3,227
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Current liabilities held for sale
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49
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57
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Current portion of long-term debt
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346
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1
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Total current liabilities
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4,247
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3,609
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Acquisition-related contingent consideration
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818
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840
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Non-current portion of long-term debt
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28,198
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29,845
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Pension and other benefit liabilities
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197
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195
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Liabilities for uncertain tax positions
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253
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184
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Deferred tax liabilities, net
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4,490
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5,434
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Non-current liabilities held for sale
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48
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57
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Other non-current liabilities
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88
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107
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Total liabilities
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38,339
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40,271
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Commitments and contingencies (Note 17)
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Equity
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Common shares, no par value, unlimited shares authorized, 347,860,891 and 347,821,606
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issued and outstanding at March 31, 2017 and December 31, 2016, respectively
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10,041
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10,038
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Additional paid-in capital
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374
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351
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Accumulated deficit
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(4,502
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)
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(5,129
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)
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Accumulated other comprehensive loss
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(2,020
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)
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(2,108
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)
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Total Valeant Pharmaceuticals International, Inc. shareholders’ equity
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3,893
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|
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3,152
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Noncontrolling interest
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101
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|
106
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Total equity
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3,994
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3,258
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Total liabilities and equity
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$
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42,333
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$
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43,529
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Three Months Ended
March 31, |
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2017
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2016
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Revenues
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Product sales
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$
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2,076
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$
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2,336
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Other revenues
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|
33
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|
|
36
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|
||
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2,109
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2,372
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Expenses
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|
|
|
|
||||
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Cost of goods sold (excluding amortization and impairments of
|
|
|
|
|
||||
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intangible assets)
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584
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|
|
620
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Cost of other revenues
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|
12
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|
|
10
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Selling, general and administrative
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661
|
|
|
813
|
|
||
|
Research and development
|
|
96
|
|
|
103
|
|
||
|
Amortization of intangible assets
|
|
635
|
|
|
678
|
|
||
|
Asset impairments
|
|
138
|
|
|
16
|
|
||
|
Restructuring and integration costs
|
|
18
|
|
|
38
|
|
||
|
Acquired in-process research and development costs
|
|
4
|
|
|
1
|
|
||
|
Acquisition-related contingent consideration
|
|
(10
|
)
|
|
2
|
|
||
|
Other (income) expense
|
|
(240
|
)
|
|
25
|
|
||
|
|
|
1,898
|
|
|
2,306
|
|
||
|
Operating income
|
|
211
|
|
|
66
|
|
||
|
Interest income
|
|
3
|
|
|
1
|
|
||
|
Interest expense
|
|
(474
|
)
|
|
(427
|
)
|
||
|
Loss on extinguishment of debt
|
|
(64
|
)
|
|
—
|
|
||
|
Foreign exchange and other
|
|
29
|
|
|
(6
|
)
|
||
|
Loss before (recovery of) provision for income taxes
|
|
(295
|
)
|
|
(366
|
)
|
||
|
(Recovery of) provision for income taxes
|
|
(924
|
)
|
|
7
|
|
||
|
Net income (loss)
|
|
629
|
|
|
(373
|
)
|
||
|
Less: Net income attributable to noncontrolling interest
|
|
1
|
|
|
1
|
|
||
|
Net income (loss) attributable to Valeant Pharmaceuticals International, Inc.
|
|
$
|
628
|
|
|
$
|
(374
|
)
|
|
|
|
|
|
|
||||
|
Earnings (loss) per share attributable to Valeant Pharmaceuticals International, Inc.:
|
|
|
|
|
||||
|
Basic
|
|
$
|
1.80
|
|
|
$
|
(1.08
|
)
|
|
Diluted
|
|
$
|
1.79
|
|
|
$
|
(1.08
|
)
|
|
|
|
|
|
|
||||
|
Weighted-average common shares
|
|
|
|
|
||||
|
Basic
|
|
349.8
|
|
|
344.9
|
|
||
|
Diluted
|
|
350.5
|
|
|
344.9
|
|
||
|
|
|
Three Months Ended
March 31, |
||||||
|
|
|
2017
|
|
2016
|
||||
|
Net income (loss)
|
|
$
|
629
|
|
|
$
|
(373
|
)
|
|
Other comprehensive income
|
|
|
|
|
||||
|
Foreign currency translation adjustment
|
|
90
|
|
|
64
|
|
||
|
Pension and postretirement benefit plan adjustments
|
|
(1
|
)
|
|
(1
|
)
|
||
|
Other comprehensive income
|
|
89
|
|
|
63
|
|
||
|
Comprehensive income (loss)
|
|
718
|
|
|
(310
|
)
|
||
|
Less: Comprehensive (loss) income attributable to noncontrolling interest
|
|
(1
|
)
|
|
1
|
|
||
|
Comprehensive income (loss) attributable to Valeant Pharmaceuticals International, Inc.
|
|
$
|
719
|
|
|
$
|
(311
|
)
|
|
|
Three Months Ended
March 31, |
||||||
|
|
2017
|
|
2016
|
||||
|
Cash Flows From Operating Activities
|
|
|
|
||||
|
Net income (loss)
|
$
|
629
|
|
|
$
|
(373
|
)
|
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
|
|
|
||||
|
Depreciation and amortization of intangible assets
|
674
|
|
|
731
|
|
||
|
Amortization and write-off of debt discounts and debt issuance costs
|
43
|
|
|
21
|
|
||
|
Asset impairments
|
138
|
|
|
16
|
|
||
|
Acquisition accounting adjustment on inventory sold
|
—
|
|
|
29
|
|
||
|
(Gain) loss on disposals of assets and businesses, net
|
(317
|
)
|
|
2
|
|
||
|
Acquisition-related contingent consideration
|
(10
|
)
|
|
2
|
|
||
|
Allowances for losses on trade receivable and inventories
|
24
|
|
|
28
|
|
||
|
Deferred income taxes
|
(954
|
)
|
|
(26
|
)
|
||
|
Additions to accrued legal settlements
|
76
|
|
|
2
|
|
||
|
Payments of accrued legal settlements
|
—
|
|
|
(3
|
)
|
||
|
Loss on deconsolidation
|
—
|
|
|
18
|
|
||
|
Share-based compensation
|
28
|
|
|
64
|
|
||
|
Foreign exchange gain
|
(31
|
)
|
|
(2
|
)
|
||
|
Loss on extinguishment of debt
|
64
|
|
|
—
|
|
||
|
Payment of contingent consideration adjustments, including accretion
|
(1
|
)
|
|
(2
|
)
|
||
|
Other
|
(1
|
)
|
|
(1
|
)
|
||
|
Changes in operating assets and liabilities:
|
|
|
|
||||
|
Trade receivables
|
432
|
|
|
6
|
|
||
|
Inventories
|
(38
|
)
|
|
(86
|
)
|
||
|
Prepaid expenses and other current assets
|
2
|
|
|
157
|
|
||
|
Accounts payable, accrued and other liabilities
|
196
|
|
|
(26
|
)
|
||
|
Net cash provided by operating activities
|
954
|
|
|
557
|
|
||
|
|
|
|
|
||||
|
Cash Flows From Investing Activities
|
|
|
|
||||
|
Acquisition of businesses, net of cash acquired
|
—
|
|
|
(19
|
)
|
||
|
Acquisition of intangible assets and other assets
|
(131
|
)
|
|
(7
|
)
|
||
|
Purchases of property, plant and equipment
|
(38
|
)
|
|
(62
|
)
|
||
|
Reduction of cash due to deconsolidation
|
—
|
|
|
(30
|
)
|
||
|
Proceeds from sale of marketable securities
|
—
|
|
|
6
|
|
||
|
Proceeds from sale of assets and businesses, net of costs to sell
|
1,317
|
|
|
—
|
|
||
|
Net cash provided by (used in) investing activities
|
1,148
|
|
|
(112
|
)
|
||
|
|
|
|
|
||||
|
Cash Flows From Financing Activities
|
|
|
|
||||
|
Issuance of long-term debt, net of discount
|
6,234
|
|
|
1,220
|
|
||
|
Repayments of long-term debt
|
(7,619
|
)
|
|
(426
|
)
|
||
|
Short-term debt borrowings
|
—
|
|
|
1
|
|
||
|
Short-term debt repayments
|
(1
|
)
|
|
(1
|
)
|
||
|
Proceeds from exercise of stock options
|
—
|
|
|
1
|
|
||
|
Tax (expense) benefit from share-based compensation
|
—
|
|
|
(1
|
)
|
||
|
Payment of employee withholding tax upon vesting of share-based awards
|
—
|
|
|
(8
|
)
|
||
|
Payments of contingent consideration
|
(8
|
)
|
|
(26
|
)
|
||
|
Payments of deferred consideration
|
—
|
|
|
(500
|
)
|
||
|
Acquisition of noncontrolling interest
|
(9
|
)
|
|
(1
|
)
|
||
|
Payments of financing costs
|
(38
|
)
|
|
—
|
|
||
|
Other
|
(1
|
)
|
|
1
|
|
||
|
Net cash (used in) provided by financing activities
|
(1,442
|
)
|
|
260
|
|
||
|
Effect of exchange rate changes on cash and cash equivalents
|
8
|
|
|
8
|
|
||
|
Net increase in cash and cash equivalents
|
668
|
|
|
713
|
|
||
|
Cash and cash equivalents, beginning of period
|
542
|
|
|
597
|
|
||
|
Cash and cash equivalents, end of period
|
$
|
1,210
|
|
|
$
|
1,310
|
|
|
1.
|
DESCRIPTION OF BUSINESS
|
|
2.
|
SIGNIFICANT ACCOUNTING POLICIES
|
|
(in millions)
|
|
Three Months Ended March 31, 2016
|
||||||||||
|
(Income) / Expense
|
|
As Initially Reported
|
|
Reclassification
|
|
As Reclassified
|
||||||
|
Amortization of intangible assets
|
|
$
|
695
|
|
|
$
|
(17
|
)
|
|
$
|
678
|
|
|
Asset impairments
|
|
—
|
|
|
16
|
|
|
16
|
|
|||
|
Acquired in-process research and development costs
|
|
—
|
|
|
1
|
|
|
1
|
|
|||
|
|
|
$
|
695
|
|
|
$
|
—
|
|
|
$
|
695
|
|
|
3.
|
ACQUISITIONS
|
|
4.
|
DIVESTITURES
|
|
(in millions)
|
|
As of
March 31, 2017 |
|
As of
December 31, 2016 |
||||
|
Current assets held for sale:
|
|
|
|
|
||||
|
Cash
|
|
$
|
1
|
|
|
$
|
1
|
|
|
Trade receivables
|
|
93
|
|
|
86
|
|
||
|
Inventories
|
|
110
|
|
|
147
|
|
||
|
Other
|
|
36
|
|
|
27
|
|
||
|
Current assets held for sale
|
|
$
|
240
|
|
|
$
|
261
|
|
|
|
|
|
|
|
||||
|
Non-current assets held for sale:
|
|
|
|
|
||||
|
Identifiable intangible assets
|
|
$
|
618
|
|
|
$
|
680
|
|
|
Goodwill
|
|
699
|
|
|
1,355
|
|
||
|
Other
|
|
84
|
|
|
97
|
|
||
|
Non-current assets held for sale
|
|
$
|
1,401
|
|
|
$
|
2,132
|
|
|
5.
|
RESTRUCTURING AND INTEGRATION COSTS
|
|
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, 2017
|
|
As of December 31, 2016
|
||||||||||||||||||||||||||||
|
(in millions)
|
|
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
|
|
$
|
720
|
|
|
$
|
650
|
|
|
$
|
70
|
|
|
$
|
—
|
|
|
$
|
242
|
|
|
$
|
179
|
|
|
$
|
63
|
|
|
$
|
—
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Acquisition-related contingent consideration
|
|
$
|
(874
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(874
|
)
|
|
$
|
(892
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(892
|
)
|
|
(in millions)
|
|
|
|
|
||||
|
Balance, January 1, 2017
|
|
|
|
$
|
892
|
|
||
|
Acquisition-related contingent consideration:
|
|
|
|
|
||||
|
Accretion for the time value of money
|
|
$
|
19
|
|
|
|
||
|
Fair value adjustments
|
|
(29
|
)
|
|
|
|||
|
|
|
|
|
(10
|
)
|
|||
|
Foreign currency translation adjustment included in other comprehensive loss
|
|
|
|
1
|
|
|||
|
Payments
|
|
|
|
(9
|
)
|
|||
|
Balance, March 31, 2017
|
|
|
|
874
|
|
|||
|
Current portion
|
|
|
|
56
|
|
|||
|
Non-current portion
|
|
|
|
$
|
818
|
|
||
|
|
|
As of March 31, 2017
|
|
As of December 31, 2016
|
||||||||||||||||||||||||||||
|
(in millions)
|
|
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
Non-current assets held for sale
|
|
$
|
232
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
232
|
|
|
$
|
38
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
38
|
|
|
7.
|
INVENTORIES
|
|
(in millions)
|
|
As of
March 31, 2017 |
|
As of
December 31, 2016 |
||||
|
Raw materials
|
|
$
|
272
|
|
|
$
|
256
|
|
|
Work in process
|
|
153
|
|
|
125
|
|
||
|
Finished goods
|
|
686
|
|
|
680
|
|
||
|
|
|
$
|
1,111
|
|
|
$
|
1,061
|
|
|
8.
|
INTANGIBLE ASSETS AND GOODWILL
|
|
|
|
As of March 31, 2017
|
|
As of December 31, 2016
|
||||||||||||||||||||
|
(in millions)
|
|
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
|
|
$
|
20,690
|
|
|
$
|
(7,371
|
)
|
|
$
|
13,319
|
|
|
$
|
20,725
|
|
|
$
|
(6,883
|
)
|
|
$
|
13,842
|
|
|
Corporate brands
|
|
934
|
|
|
(142
|
)
|
|
792
|
|
|
999
|
|
|
(146
|
)
|
|
853
|
|
||||||
|
Product rights/patents
|
|
4,250
|
|
|
(2,222
|
)
|
|
2,028
|
|
|
4,240
|
|
|
(2,118
|
)
|
|
2,122
|
|
||||||
|
Partner relationships
|
|
159
|
|
|
(138
|
)
|
|
21
|
|
|
152
|
|
|
(128
|
)
|
|
24
|
|
||||||
|
Technology and other
|
|
206
|
|
|
(131
|
)
|
|
75
|
|
|
252
|
|
|
(160
|
)
|
|
92
|
|
||||||
|
Total finite-lived intangible assets
|
|
26,239
|
|
|
(10,004
|
)
|
|
16,235
|
|
|
26,368
|
|
|
(9,435
|
)
|
|
16,933
|
|
||||||
|
Acquired IPR&D not in service
|
|
253
|
|
|
—
|
|
|
253
|
|
|
253
|
|
|
—
|
|
|
253
|
|
||||||
|
B&L Trademark
|
|
1,698
|
|
|
—
|
|
|
1,698
|
|
|
1,698
|
|
|
—
|
|
|
1,698
|
|
||||||
|
|
|
$
|
28,190
|
|
|
$
|
(10,004
|
)
|
|
$
|
18,186
|
|
|
$
|
28,319
|
|
|
$
|
(9,435
|
)
|
|
$
|
18,884
|
|
|
(in millions)
|
|
|
||
|
April through December 2017
|
|
$
|
1,819
|
|
|
2018
|
|
2,371
|
|
|
|
2019
|
|
2,255
|
|
|
|
2020
|
|
2,066
|
|
|
|
2021
|
|
1,883
|
|
|
|
2022
|
|
1,745
|
|
|
|
Thereafter
|
|
4,096
|
|
|
|
Total
|
|
$
|
16,235
|
|
|
(in millions)
|
|
Developed Markets
|
|
Emerging Markets
|
|
Bausch + Lomb/ International
|
|
Branded Rx
|
|
U.S. Diversified Products
|
|
Total
|
||||||||||||
|
Balance, January 1, 2016
|
|
$
|
16,141
|
|
|
$
|
2,412
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
18,553
|
|
|
Acquisitions
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
||||||
|
Divestiture of a portfolio of neurology medical device products
|
|
(36
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(36
|
)
|
||||||
|
Goodwill related to Ruconest® reclassified to assets held for sale
|
|
(37
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(37
|
)
|
||||||
|
Foreign exchange and other
|
|
47
|
|
|
(12
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
35
|
|
||||||
|
Impairment to goodwill of the former U.S. reporting unit
|
|
(905
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(905
|
)
|
||||||
|
Realignment of segment goodwill
|
|
(15,211
|
)
|
|
(2,400
|
)
|
|
6,708
|
|
|
7,873
|
|
|
3,030
|
|
|
—
|
|
||||||
|
Impairment to goodwill of the Salix reporting unit
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(172
|
)
|
|
—
|
|
|
(172
|
)
|
||||||
|
Divestitures
|
|
—
|
|
|
—
|
|
|
(5
|
)
|
|
—
|
|
|
—
|
|
|
(5
|
)
|
||||||
|
Goodwill reclassified to assets held for sale
|
|
—
|
|
|
—
|
|
|
(947
|
)
|
|
(431
|
)
|
|
—
|
|
|
(1,378
|
)
|
||||||
|
Foreign exchange and other
|
|
—
|
|
|
—
|
|
|
(257
|
)
|
|
(5
|
)
|
|
—
|
|
|
(262
|
)
|
||||||
|
Balance, December 31, 2016 (Before realignment)
|
|
—
|
|
|
—
|
|
|
5,499
|
|
|
7,265
|
|
|
3,030
|
|
|
15,794
|
|
||||||
|
Realignment of segment goodwill
|
|
—
|
|
|
—
|
|
|
264
|
|
|
(264
|
)
|
|
—
|
|
|
—
|
|
||||||
|
Balance, January 1, 2017 (After realignment)
|
|
—
|
|
|
—
|
|
|
5,763
|
|
|
7,001
|
|
|
3,030
|
|
|
15,794
|
|
||||||
|
Goodwill reclassified to assets held for sale
|
|
—
|
|
|
—
|
|
|
(18
|
)
|
|
(3
|
)
|
|
(88
|
)
|
|
(109
|
)
|
||||||
|
Foreign exchange and other
|
|
—
|
|
|
—
|
|
|
69
|
|
|
(1
|
)
|
|
—
|
|
|
68
|
|
||||||
|
Balance, March 31, 2017
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,814
|
|
|
$
|
6,997
|
|
|
$
|
2,942
|
|
|
$
|
15,753
|
|
|
•
|
Under the former reporting unit structure, the fair value of each reporting unit exceeded its carrying value by more than
15%
, except for the former U.S. reporting unit whose carrying value exceeded its fair value by
2%
. As a result, the Company proceeded to perform step two of the goodwill impairment test for the former U.S. reporting unit and determined that the carrying value of the unit's goodwill exceeded its implied fair value. However, as the estimate of fair value is complex and requires significant amounts of time and judgment, the Company could not complete step two of the testing prior to the release of its financial statements for the period ended September 30, 2016. Under these circumstances, accounting guidance requires that a company recognize an estimated impairment charge if management determines that it is probable that an impairment loss has occurred and such impairment can be reasonably estimated. Using its best estimate, the Company recorded an initial goodwill impairment charge of
$838 million
as of September 30, 2016. In the fourth quarter of 2016, step two testing was completed and the Company concluded that the excess of the carrying value of the former U.S. reporting unit's unadjusted goodwill over its implied value as of September 30, 2016 was
$905 million
and recognized an incremental goodwill impairment charge of
$67 million
for the fourth quarter of 2016. The goodwill impairment was primarily driven by changes to the Company's forecasted performance which resulted in a lower fair value of the U.S. businesses, mainly the Salix business.
|
|
•
|
Under the current reporting unit structure, the carrying value of the Salix reporting unit exceeded its fair value, as updates to the unit's forecast resulted in a lower estimated fair value for the business. As a result, the Company proceeded to perform step two of the goodwill impairment test for the Salix reporting unit and determined that the carrying value of the unit's goodwill exceeded its implied fair value. However, the Company could not complete step two of the testing prior to the release of its financial statements for the period ended September 30, 2016. Using its best estimate, the
|
|
9.
|
ACCRUED AND OTHER CURRENT LIABILITIES
|
|
(in millions)
|
|
As of
March 31, 2017 |
|
As of
December 31, 2016 |
||||
|
Product rebates
|
|
$
|
965
|
|
|
$
|
897
|
|
|
Product returns
|
|
750
|
|
|
708
|
|
||
|
Interest
|
|
381
|
|
|
337
|
|
||
|
Income taxes payable
|
|
213
|
|
|
213
|
|
||
|
Legal liabilities assumed in the Salix Acquisition
|
|
264
|
|
|
281
|
|
||
|
Employee compensation and benefit costs
|
|
209
|
|
|
198
|
|
||
|
Professional fees
|
|
98
|
|
|
93
|
|
||
|
Litigation matters and related fees
|
|
84
|
|
|
7
|
|
||
|
Royalties
|
|
66
|
|
|
69
|
|
||
|
Acquisition-related contingent consideration
|
|
56
|
|
|
52
|
|
||
|
Advertising and promotion
|
|
51
|
|
|
50
|
|
||
|
Restructuring and integration costs
|
|
22
|
|
|
38
|
|
||
|
Value added tax
|
|
28
|
|
|
27
|
|
||
|
Deferred revenue
|
|
26
|
|
|
26
|
|
||
|
Deferred consideration for business acquisitions
|
|
18
|
|
|
18
|
|
||
|
Capital expenditures
|
|
15
|
|
|
17
|
|
||
|
Accrued milestones
|
|
19
|
|
|
12
|
|
||
|
Short-term borrowings
|
|
7
|
|
|
6
|
|
||
|
Other
|
|
212
|
|
|
178
|
|
||
|
|
|
$
|
3,484
|
|
|
$
|
3,227
|
|
|
10.
|
|
|
|
|
|
|
As of March 31, 2017
|
|
As of December 31, 2016
|
||||||||||||
|
(in millions)
|
|
Maturity
|
|
Principal Amount
|
|
Net of Discounts and Issuance Costs
|
|
Principal Amount
|
|
Net of Discounts and Issuance Costs
|
||||||||
|
Senior Secured Credit Facilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Revolving Credit Facility
|
|
April 2018
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
875
|
|
|
$
|
875
|
|
|
Revolving Credit Facility
|
|
April 2020
|
|
525
|
|
|
525
|
|
|
—
|
|
|
—
|
|
||||
|
Series A-3 Tranche A Term Loan Facility
|
|
October 2018
|
|
—
|
|
|
—
|
|
|
1,032
|
|
|
1,016
|
|
||||
|
Series A-4 Tranche A Term Loan Facility
|
|
April 2020
|
|
—
|
|
|
—
|
|
|
668
|
|
|
658
|
|
||||
|
Series D-2 Tranche B Term Loan Facility
|
|
February 2019
|
|
—
|
|
|
—
|
|
|
1,068
|
|
|
1,048
|
|
||||
|
Series C-2 Tranche B Term Loan Facility
|
|
December 2019
|
|
—
|
|
|
—
|
|
|
823
|
|
|
805
|
|
||||
|
Series E-1 Tranche B Term Loan Facility
|
|
August 2020
|
|
—
|
|
|
—
|
|
|
2,456
|
|
|
2,429
|
|
||||
|
Series F Tranche B Term Loan Facility
|
|
April 2022
|
|
6,830
|
|
|
6,680
|
|
|
3,892
|
|
|
3,815
|
|
||||
|
Senior Secured Notes:
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
6.50% Secured Notes
|
|
March 2022
|
|
1,250
|
|
|
1,234
|
|
|
—
|
|
|
—
|
|
||||
|
7.00% Secured Notes
|
|
March 2024
|
|
2,000
|
|
|
1,974
|
|
|
—
|
|
|
—
|
|
||||
|
Senior Unsecured Notes:
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
6.75%
|
|
August 2018
|
|
500
|
|
|
498
|
|
|
1,600
|
|
|
1,593
|
|
||||
|
5.375%
|
|
March 2020
|
|
2,000
|
|
|
1,986
|
|
|
2,000
|
|
|
1,985
|
|
||||
|
7.00%
|
|
October 2020
|
|
690
|
|
|
688
|
|
|
690
|
|
|
689
|
|
||||
|
6.375%
|
|
October 2020
|
|
2,250
|
|
|
2,233
|
|
|
2,250
|
|
|
2,231
|
|
||||
|
7.50%
|
|
July 2021
|
|
1,625
|
|
|
1,613
|
|
|
1,625
|
|
|
1,613
|
|
||||
|
6.75%
|
|
August 2021
|
|
650
|
|
|
647
|
|
|
650
|
|
|
647
|
|
||||
|
5.625%
|
|
December 2021
|
|
900
|
|
|
895
|
|
|
900
|
|
|
894
|
|
||||
|
7.25%
|
|
July 2022
|
|
550
|
|
|
544
|
|
|
550
|
|
|
543
|
|
||||
|
5.50%
|
|
March 2023
|
|
1,000
|
|
|
992
|
|
|
1,000
|
|
|
992
|
|
||||
|
5.875%
|
|
May 2023
|
|
3,250
|
|
|
3,221
|
|
|
3,250
|
|
|
3,220
|
|
||||
|
4.50% euro-denominated debt
|
|
May 2023
|
|
1,598
|
|
|
1,583
|
|
|
1,578
|
|
|
1,563
|
|
||||
|
6.125%
|
|
April 2025
|
|
3,250
|
|
|
3,219
|
|
|
3,250
|
|
|
3,218
|
|
||||
|
Other
|
|
Various
|
|
12
|
|
|
12
|
|
|
12
|
|
|
12
|
|
||||
|
Total long-term debt
|
|
|
|
$
|
28,880
|
|
|
28,544
|
|
|
$
|
30,169
|
|
|
29,846
|
|
||
|
Less: Current portion of long-term debt
|
|
|
|
|
|
346
|
|
|
|
|
|
1
|
|
|||||
|
Non-current portion of long-term debt
|
|
|
|
|
|
$
|
28,198
|
|
|
|
|
|
$
|
29,845
|
|
|||
|
(in millions)
|
|
||
|
April through December 2017
|
$
|
260
|
|
|
2018
|
846
|
|
|
|
2019
|
346
|
|
|
|
2020
|
5,811
|
|
|
|
2021
|
3,521
|
|
|
|
2022
|
6,987
|
|
|
|
Thereafter
|
11,109
|
|
|
|
Total gross maturities
|
28,880
|
|
|
|
Unamortized discounts
|
(336
|
)
|
|
|
Total long-term debt
|
$
|
28,544
|
|
|
11.
|
PENSION AND POSTRETIREMENT EMPLOYEE BENEFIT PLANS
|
|
|
|
Pension Benefit Plans
|
|
Postretirement
Benefit
Plan
|
||||||||||||||||||||
|
|
U.S. Plan
|
|
Non-U.S. Plans
|
|
||||||||||||||||||||
|
|
|
Three Months Ended March 31,
|
||||||||||||||||||||||
|
(in millions)
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||||||
|
Service cost
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Interest cost
|
|
2
|
|
|
2
|
|
|
1
|
|
|
1
|
|
|
1
|
|
|
1
|
|
||||||
|
Expected return on plan assets
|
|
(3
|
)
|
|
(3
|
)
|
|
(1
|
)
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
||||||
|
Amortization of prior service credit
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
||||||
|
Net periodic (benefit) cost
|
|
$
|
—
|
|
|
$
|
(1
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
12.
|
SHARE-BASED COMPENSATION
|
|
|
Three Months Ended
March 31, |
||||||
|
(in millions)
|
2017
|
|
2016
|
||||
|
Stock options
|
$
|
5
|
|
|
$
|
3
|
|
|
RSUs
|
23
|
|
|
61
|
|
||
|
Share-based compensation expense
|
$
|
28
|
|
|
$
|
64
|
|
|
|
|
|
|
||||
|
Research and development expenses
|
$
|
2
|
|
|
$
|
2
|
|
|
Selling, general and administrative expenses
|
26
|
|
|
62
|
|
||
|
Share-based compensation expense
|
$
|
28
|
|
|
$
|
64
|
|
|
13.
|
ACCUMULATED OTHER COMPREHENSIVE LOSS
|
|
(in millions)
|
|
As of
March 31, 2017 |
|
As of
December 31, 2016 |
||||
|
Foreign currency translation adjustment
|
|
$
|
(1,986
|
)
|
|
$
|
(2,074
|
)
|
|
Pension adjustment, net of tax
|
|
(34
|
)
|
|
(34
|
)
|
||
|
Ending Balance
|
|
$
|
(2,020
|
)
|
|
$
|
(2,108
|
)
|
|
14.
|
OTHER (INCOME) EXPENSE
|
|
|
|
Three Months Ended March 31,
|
||||||
|
(in millions)
|
|
2017
|
|
2016
|
||||
|
Gain on the Skincare Sale (Note 4)
|
|
$
|
(319
|
)
|
|
$
|
—
|
|
|
Loss on other sales of assets
|
|
2
|
|
|
2
|
|
||
|
Deconsolidation of Philidor
|
|
—
|
|
|
19
|
|
||
|
Litigation and other matters
|
|
76
|
|
|
2
|
|
||
|
Other, net
|
|
1
|
|
|
2
|
|
||
|
Other (income) expense
|
|
$
|
(240
|
)
|
|
$
|
25
|
|
|
15.
|
INCOME TAXES
|
|
16.
|
EARNINGS (LOSS) PER SHARE
|
|
|
|
Three Months Ended March 31,
|
||||||
|
(in millions, except per share amounts)
|
|
2017
|
|
2016
|
||||
|
Net income (loss) attributable to Valeant Pharmaceuticals International, Inc.
|
|
$
|
628
|
|
|
$
|
(374
|
)
|
|
|
|
|
|
|
||||
|
Basic weighted-average number of common shares outstanding
|
|
349.8
|
|
|
344.9
|
|
||
|
Diluted effect of stock options, RSUs and other
|
|
0.7
|
|
|
—
|
|
||
|
Diluted weighted-average number of common shares outstanding
|
|
350.5
|
|
|
344.9
|
|
||
|
|
|
|
|
|
||||
|
Earnings (loss) per share attributable to Valeant Pharmaceuticals International, Inc.:
|
|
|
|
|
||||
|
Basic
|
|
$
|
1.80
|
|
|
$
|
(1.08
|
)
|
|
Diluted
|
|
$
|
1.79
|
|
|
$
|
(1.08
|
)
|
|
(in millions)
|
|
Three months ended March 31, 2016
|
|
|
Basic weighted-average number of common shares outstanding
|
|
344.9
|
|
|
Diluted effect of stock options, RSUs and other
|
|
5.4
|
|
|
Diluted weighted-average number of common shares outstanding
|
|
350.3
|
|
|
17.
|
LEGAL PROCEEDINGS
|
|
•
|
In respect of any settlement relating to the Allergan Litigation that receives the mutual consent of both the Valeant Parties and the Pershing Square Parties, the payments in connection with such settlement will be paid
60%
by the Valeant Co Parties and
40%
by the Pershing Square Parties. The agreement does not provide for any allocation of costs in a settlement that is not consented to by both parties;
|
|
•
|
The first
$10 million
in legal fees and litigation expenses incurred by the Valeant Parties and the Pershing Square Parties after the date of the Litigation Management Agreement in connection with the Allergan Litigation will be paid
50%
by the Valeant Co Parties and
50%
by the Pershing Square Parties; and
|
|
•
|
The Litigation Management Agreement will terminate on November 1, 2017 if a stipulation of settlement with regards to the current California action has not been executed by that date (unless the Litigation Management Agreement is extended by mutual written agreement of the Valeant Parties and the Pershing Square Parties).
|
|
18.
|
SEGMENT INFORMATION
|
|
•
|
The Bausch + Lomb/International segment
consists of (i) sales in the U.S. of pharmaceutical products, OTC products and medical device products, primarily comprised of Bausch + Lomb products, with a focus on the Vision Care, Surgical,
|
|
•
|
The Branded Rx segment
consists of sales in the U.S. of (i) Salix products, (ii) dermatological products, (iii) branded pharmaceutical products, branded generic pharmaceutical products, OTC products and medical device products and (iv) oncology, dentistry and women’s health products.
|
|
•
|
The U.S. Diversified Products segment
consists of sales in the U.S. of (i) pharmaceutical products, OTC products and medical device products in the areas of neurology and certain other therapeutic classes, including aesthetics (which includes the Solta and Obagi businesses) and (ii) generic products.
|
|
|
Three Months Ended March 31,
|
||||||
|
(in millions)
|
2017
|
|
2016
|
||||
|
Revenues:
|
|
|
|
||||
|
Bausch + Lomb/International
|
$
|
1,150
|
|
|
$
|
1,146
|
|
|
Branded Rx
|
604
|
|
|
665
|
|
||
|
U.S. Diversified Products
|
355
|
|
|
561
|
|
||
|
|
2,109
|
|
|
2,372
|
|
||
|
|
|
|
|
||||
|
Segment profits:
|
|
|
|
||||
|
Bausch + Lomb/International
|
333
|
|
|
309
|
|
||
|
Branded Rx
|
326
|
|
|
257
|
|
||
|
U.S. Diversified Products
|
264
|
|
|
464
|
|
||
|
|
923
|
|
|
1,030
|
|
||
|
|
|
|
|
||||
|
Corporate
|
(167
|
)
|
|
(204
|
)
|
||
|
Amortization of intangible assets
|
(635
|
)
|
|
(678
|
)
|
||
|
Asset impairments
|
(138
|
)
|
|
(16
|
)
|
||
|
Restructuring and integration costs
|
(18
|
)
|
|
(38
|
)
|
||
|
Acquired in-process research and development costs
|
(4
|
)
|
|
(1
|
)
|
||
|
Acquisition-related contingent consideration
|
10
|
|
|
(2
|
)
|
||
|
Other income (expense)
|
240
|
|
|
(25
|
)
|
||
|
Operating income
|
211
|
|
|
66
|
|
||
|
Interest income
|
3
|
|
|
1
|
|
||
|
Interest expense
|
(474
|
)
|
|
(427
|
)
|
||
|
Loss on extinguishment of debt
|
(64
|
)
|
|
—
|
|
||
|
Foreign exchange and other
|
29
|
|
|
(6
|
)
|
||
|
Loss before (recovery of) provision for income taxes
|
$
|
(295
|
)
|
|
$
|
(366
|
)
|
|
(in millions)
|
As of
March 31, 2017 |
|
As of
December 31, 2016 |
||||
|
Assets:
|
|
|
|
||||
|
Bausch + Lomb/International
|
$
|
15,375
|
|
|
$
|
16,201
|
|
|
Branded Rx
|
20,658
|
|
|
21,143
|
|
||
|
U.S. Diversified Products
|
5,428
|
|
|
5,820
|
|
||
|
|
41,461
|
|
|
43,164
|
|
||
|
Corporate
|
872
|
|
|
365
|
|
||
|
Total assets
|
$
|
42,333
|
|
|
$
|
43,529
|
|
|
•
|
The Bausch + Lomb/International segment
consists of (i) sales in the U.S. of pharmaceutical products, OTC products and medical device products, primarily comprised of Bausch + Lomb products, with a focus on the Vision Care, Surgical, Consumer and Ophthalmology Rx products and (ii) sales in Canada, Europe, Asia, Australia and New Zealand, Latin America, Africa and the Middle East of branded pharmaceutical products, branded generic pharmaceutical products, OTC products, medical device products, and Bausch + Lomb products.
|
|
•
|
The Branded Rx segment
consists of sales in the U.S. of (i) Salix products, (ii) dermatological products, (iii) branded pharmaceutical products, branded generic pharmaceutical products, OTC products and medical device products and (iv) oncology, dentistry and women’s health products.
|
|
•
|
The U.S. Diversified Products segment
consists of sales in the U.S. of (i) pharmaceutical products, OTC products and medical device products in the areas of neurology and certain other therapeutic classes, including aesthetics (which includes the Solta and Obagi businesses) and (ii) generic products.
|
|
•
|
Sales Force Stabilization
- We believe that new leadership and the enhanced focus on core assets have enabled the Company to recruit and retain stronger talent for its sales initiatives. We continue to focus on stabilizing our sales forces, which, in turn, will allow us to deliver more consistent and concise messages in the marketplace.
|
|
•
|
Patient Access and Pricing Committee and New Pricing Actions
- In May 2016, we formed the Patient Access and Pricing Committee responsible for setting, changing and monitoring the pricing of our Branded Rx and other pharmaceutical products. Following this committee's recommendation, we implemented an enhanced rebate program to all hospitals in the U.S. to reduce the price of our Nitropress® and Isuprel® products. In October 2016, the Patient Access and Pricing Committee approved 2% to 9% increases to our gross selling price (wholesale acquisition cost or “WAC”) for products in our neurology, GI and urology portfolios. The changes are aligned with the Patient Access and Pricing Committee's commitment that the average annual price increase for our prescription pharmaceutical products will be set at no greater than single digits and below the 5-year weighted average of the increases within the branded biopharmaceutical industry. In addition, in 2016, no pricing increases were taken on our dermatology and ophthalmology products and, in 2016, net pricing of our dermatology and ophthalmology products, after taking into account the impact of rebates and other adjustments, decreased by greater than 10% on average. On April 21, 2017, the Company announced that, following the evaluation and approval of the Patient Access and Pricing Committee, it had decided to list SILIQ™ (brodalumab) injection at $3,500 per month, which represented the lowest injectable biologic psoriasis treatment on the market at the time of the announcement. In the future, we expect that the Patient Access and Pricing Committee will implement or recommend additional price changes and/or new programs to enhance patient access to our drugs and that these pricing changes and programs could affect the average realized prices for our products and may have a significant impact on our revenue trends.
|
|
•
|
Walgreens Fulfillment
- At the beginning of 2016, we launched our fulfillment arrangement with Walgreen Co. ("Walgreens"). Our partnership with Walgreens initially presented some operational challenges, which were substantially addressed in 2016. As a result, we began seeing improved average realized prices through the Walgreens fulfillment arrangements in the latter part of 2016. Sales of our prescription dermatology and ophthalmology products through Walgreens under our fulfillment arrangements were $375 million in 2016, of which $238 million were attributable to the second half of 2016. Although this fulfillment arrangement represents less than 5% of our Company revenues, we continue to monitor our business model with Walgreens to find additional operational efficiencies.
|
|
•
|
Dermatology -
Brodalumab (to be marketed as Siliq™ in the U.S.) is an IL-17 receptor blocker monoclonal antibody biologic for treatment of moderate-to-severe plaque psoriasis, which we estimate to be an over $5,000 million market in the U.S. On February 15, 2017, the FDA approved the Biologics License Application ("BLA") for Siliq™ (brodalumab) injection, for subcutaneous use for the treatment of moderate-to-severe plaque psoriasis in adult patients who are candidates for systemic therapy or phototherapy and have failed to respond or have lost response to other systemic therapies. We expect to commence sales and marketing of Siliq™ in the U.S. in the second half of 2017. Siliq™ has a Black Box Warning for the risks in patients with a history of suicidal thoughts or behavior and was approved with a Risk Evaluation and Mitigation Strategy involving a one-time enrollment for physicians and one-time informed consent for patients.
|
|
•
|
Dermatology -
IDP-118 is a fixed combination product with two different mechanisms of action for treatment of moderate-to-severe plaque psoriasis in adults which has completed two positive Phase 3 Trials. We expect to file the New Drug Application ("NDA") for this product in the second half of 2017.
|
|
•
|
Dermatology -
IDP-122 is a psoriasis medication, for which we expect to file an NDA in the second half of 2017.
|
|
•
|
Gastrointestinal
- A new formulation of rifaximin, which we acquired as part of the Salix Acquisition, is scheduled to begin Phase 2b/3 testing in the second half of 2017.
|
|
•
|
Eye Health
- Luminesse™ (
provisional name
) (brimonidine tartrate ophthalmic solution, 0.025%) is being developed as an ocular redness reliever. On February 27, 2017, we filed the NDA for Luminesse™ with the FDA. In May 2017, we announced that the FDA had accepted the NDA for review, and set a Prescription Drug User Fee Act ("PDUFA") action date of December 27, 2017.
|
|
•
|
Eye Health
- Latanoprostene Bunod is an intraocular pressure 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 had accepted for review the NDA for this product and set a PDUFA action date of July 21, 2016. On July 22, 2016, we announced that we had received a Complete Response Letter from the FDA regarding the NDA for this product. The concerns raised by the FDA in this letter pertain to a Current Good Manufacturing Practices inspection at B&L’s manufacturing facility in Tampa, Florida where certain deficiencies were identified by the FDA. However, the letter did not identify any efficacy or safety concerns with respect to this product or additional clinical trials needed for the approval of the NDA. We refiled the NDA for this product on February 24, 2017 and we announced that the FDA has set a PDUFA date of August 24, 2017 for its decision on the NDA. We expect to launch this product in late 2017, subject to FDA approval.
|
|
•
|
Eye Health
- Vitesse™ is a novel technology using ultrasonic energy for vitreous removal with reduced surgical trauma. On April 26, 2017, Vitesse™ received 510(k) clearance from the FDA. We expect to launch this product during the second half of 2017.
|
|
•
|
Dermatology
- Traser™ is an energy-based platform device with significant versatility and power capabilities to address various dermatological conditions, including vascular and pigmented lesions. Product launch is currently planned for the first half of 2019.
|
|
•
|
Eye Health
- We expect to file a Premarket Approval application with the FDA in the first half of 2017 for 7-day extended wear for our Bausch + Lomb ULTRA® monthly planned replacement contact lenses.
|
|
•
|
Eye Health
- On April 6, 2017, we announced that our Stellaris Elite™ Vision Enhancement System received 510(k) clearance from the FDA. The Stellaris Elite™ Vision Enhancement System is our next generation phacoemulsification cataract platform which offers new innovations as well as the opportunity to add upgrades and enhancements every one to two years. Stellaris Elite™ will be the first phacoemulsification platform on the market to offer Adaptive Fluidics™, which combines precise aspiration control with predictive infusion management to create a highly responsive and controlled surgical environment for efficient cataract lens removal. Stellaris Elite™ was launched in April 2017.
|
|
•
|
Eye Health
- Biotrue® ONEday for Astigmatism is a daily disposable contact lens for astigmatic patients. The Biotrue® ONEday lenses incorporates Surface Active Technology
TM
to provide a unique dehydration barrier. The Biotrue® ONEday for Astigmatism also includes an evolved peri-ballast geometry to deliver stability and comfort for the astigmatic patient. We launched this product in December 2016.
|
|
•
|
Eye Health
- Bausch + Lomb ULTRA® for Astigmatism is a monthly planned replacement contact lens for astigmatic patients. The Bausch + Lomb ULTRA® for Astigmatism lens was developed using the proprietary MoistureSeal® technology. In addition, the Bausch + Lomb ULTRA® for Astigmatism lens integrates a unique OpticAlign™ design engineered for lens stability and to promote a successful wearing experience for the astigmatic patient. We launched this product in March 2017.
|
|
•
|
Eye Health
- Bausch + Lomb ULTRA® for Presbyopia is a monthly planned replacement contact lens for presbyopic patients. The Bausch + Lomb ULTRA® for Presbyopia lens was developed using the proprietary MoistureSeal® technology. In addition, the Bausch + Lomb ULTRA® for Presbyopia lens integrates a unique 3 zone progressive design for near, intermediate and distance vision. We will continue to launch expanded parameters of this product throughout 2017.
|
|
•
|
Eye Health
- Bausch + Lomb ScleralFil® solution is a novel contact lens care solution that makes use of a preservative free buffered saline solution for use with the insertion of scleral lenses. This contact lens care solution was launched in 2017.
|
|
•
|
Eye Health
- We expect to launch a novel multipurpose contact lens care solution that provides daily cleaning, rinsing and disinfecting of soft contact lenses in 2017.
|
|
•
|
Gastrointestinal
- Oral Relistor® is a tablet for the treatment of OIC 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 on July 19, 2016, the FDA approved Oral Relistor® tablets. We commenced sales of Oral Relistor® tablets in the U.S. in the third quarter of 2016.
|
|
•
|
Eye Health
- On February 21, 2017, EyeGate Pharmaceuticals, Inc. granted the Company the exclusive licensing rights to manufacture and sell its EyeGate® II Delivery System and EGP-437 combination product candidate worldwide for the treatment of post-operative pain and inflammation in ocular surgery patients. EyeGate Pharmaceuticals, Inc. will be responsible for the continued development of this product candidate in this field in the U.S. and all associated costs. The Company has the right to further develop the product in this field outside of the U.S., at its cost. This product candidate is in Phase 1b/2a trials in the U.S.
|
|
•
|
Eye Health
- A new Ophthalmic Viscosurgical Device product, with a unique formulation to protect corneal endothelium during Phaco emulsification process during a cataract surgery and also helps chamber maintenance and lubrication during intraocular lens delivery.
|
|
•
|
Dermatology -
IDP-121 is an acne lotion. We expect to file the NDA for this product in 2017.
|
|
•
|
Dermatology
- Next Generation Thermage® is a fourth-generation non-invasive treatment option using a radiofrequency platform designed to optimize key functional characteristics, expand clinical indication set, and improve patient outcomes. We expect to launch this product in 2017.
|
|
|
|
|
|
As of March 31, 2017
|
|
As of December 31, 2016
|
||||||||||||
|
(in millions)
|
|
Maturity
|
|
Principal Amount
|
|
Net of Discounts and Issuance Costs
|
|
Principal Amount
|
|
Net of Discounts and Issuance Costs
|
||||||||
|
Senior Secured Credit Facilities:
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Revolving Credit Facility
|
|
April 2018
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
875
|
|
|
$
|
875
|
|
|
Revolving Credit Facility
|
|
April 2020
|
|
525
|
|
|
525
|
|
|
—
|
|
|
—
|
|
||||
|
Series A-3 Tranche A Term Loan Facility
|
|
October 2018
|
|
—
|
|
|
—
|
|
|
1,032
|
|
|
1,016
|
|
||||
|
Series A-4 Tranche A Term Loan Facility
|
|
April 2020
|
|
—
|
|
|
—
|
|
|
668
|
|
|
658
|
|
||||
|
Series D-2 Tranche B Term Loan Facility
|
|
February 2019
|
|
—
|
|
|
—
|
|
|
1,068
|
|
|
1,048
|
|
||||
|
Series C-2 Tranche B Term Loan Facility
|
|
December 2019
|
|
—
|
|
|
—
|
|
|
823
|
|
|
805
|
|
||||
|
Series E-1 Tranche B Term Loan Facility
|
|
August 2020
|
|
—
|
|
|
—
|
|
|
2,456
|
|
|
2,429
|
|
||||
|
Series F Tranche B Term Loan Facility
|
|
April 2022
|
|
6,830
|
|
|
6,680
|
|
|
3,892
|
|
|
3,815
|
|
||||
|
Senior Secured Notes:
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
6.50% Secured Notes
|
|
March 2022
|
|
1,250
|
|
|
1,234
|
|
|
—
|
|
|
—
|
|
||||
|
7.00% Secured Notes
|
|
March 2024
|
|
2,000
|
|
|
1,974
|
|
|
—
|
|
|
—
|
|
||||
|
Senior Unsecured Notes:
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
6.75%
|
|
August 2018
|
|
500
|
|
|
498
|
|
|
1,600
|
|
|
1,593
|
|
||||
|
All other Senior Unsecured Notes
|
|
March 2020 through April 2025
|
|
17,763
|
|
|
17,621
|
|
|
17,743
|
|
|
17,595
|
|
||||
|
Other
|
|
Various
|
|
12
|
|
|
12
|
|
|
12
|
|
|
12
|
|
||||
|
Total long-term debt
|
|
|
|
$
|
28,880
|
|
|
$
|
28,544
|
|
|
$
|
30,169
|
|
|
$
|
29,846
|
|
|
(in millions)
|
|
March 31, 2017
|
|
December 31, 2016
|
||||
|
Remainder of 2017
|
|
$
|
260
|
|
|
$
|
—
|
|
|
2018
|
|
846
|
|
|
3,738
|
|
||
|
2019
|
|
346
|
|
|
2,122
|
|
||
|
2020
|
|
5,811
|
|
|
7,723
|
|
||
|
2021
|
|
3,521
|
|
|
3,215
|
|
||
|
2022
|
|
6,987
|
|
|
4,281
|
|
||
|
Thereafter
|
|
11,109
|
|
|
9,090
|
|
||
|
Gross maturities
|
|
$
|
28,880
|
|
|
$
|
30,169
|
|
|
|
|
Three Months Ended March 31,
|
||||||||||
|
(in millions, except per share data)
|
|
2017
|
|
2016
|
|
Change
|
||||||
|
Revenues
|
|
$
|
2,109
|
|
|
$
|
2,372
|
|
|
$
|
(263
|
)
|
|
Operating income
|
|
$
|
211
|
|
|
$
|
66
|
|
|
$
|
145
|
|
|
Net income (loss) attributable to Valeant Pharmaceuticals International, Inc.
|
|
$
|
628
|
|
|
$
|
(374
|
)
|
|
$
|
(1,002
|
)
|
|
Earnings (loss) per share attributable to Valeant Pharmaceuticals International, Inc.:
|
|
|
|
|
|
|
||||||
|
Basic
|
|
$
|
1.80
|
|
|
$
|
(1.08
|
)
|
|
$
|
2.88
|
|
|
Diluted
|
|
$
|
1.79
|
|
|
$
|
(1.08
|
)
|
|
$
|
2.87
|
|
|
•
|
a decrease
in contribution (product sales revenue less cost of goods sold, excluding amortization and impairments of intangible assets) of
$224 million
. The
decrease
is primarily driven by the decrease in product sales of our existing business (excluding the effects of foreign currencies and divestitures and discontinuances) and includes decreases in contribution from (i) lower volumes of approximately
$170 million
, (ii) the impact of divestitures and discontinuances of
$20 million
and (iii) lower average realized pricing of
$9 million
;
|
|
•
|
a decrease
in Selling, general, and administrative (“SG&A”) expenses of
$152 million
primarily attributable to (i) higher direct to consumer advertising in 2016 as compared to 2017 and (ii) expenses in 2016 related to the termination of our former Chief Executive Officer. These decreases were partially offset by (i) higher professional fees incurred in connection with ongoing legal matters and executing on our key initiatives and (ii) higher compensation costs associated with our sales force expansion program in our GI business;
|
|
•
|
a decrease
in R&D of
$7 million
which was due to the timing of costs on the projects in development and does not suggest a reduction in our R&D activity. We continue to expect our investment in R&D for the full year 2017 to exceed the full year 2016;
|
|
•
|
a decrease
in Amortization of intangible assets of
$43 million
which is reflective of impairments to intangible assets in 2016 and divestitures and discontinuances of product lines as the Company focuses on its core assets;
|
|
•
|
an increase
in Asset impairments of
$122 million
associated with product lines considered non-core to our operations and which we have decided to either hold for sale or discontinue;
|
|
•
|
a decrease
in Restructuring and integration costs of
$20 million
as the integration of acquisitions in 2015 and prior is substantially complete; and
|
|
•
|
an increase in
Other (income) expense
of
$265 million
, which includes the
Gain on the Skincare Sale
of
$319 million
partially offset by an increase in charges for legal and other matters of $75 million during the
three months ended March 31, 2017
.
|
|
|
|
Three Months Ended March 31,
|
||||||||||||
|
|
|
2017
|
|
2016
|
|
Change
|
||||||||
|
(in millions)
|
|
Amount
|
|
Amount
|
|
Amount
|
|
Pct.
|
||||||
|
Revenues
|
|
|
|
|
|
|
|
|
||||||
|
Product sales
|
|
$
|
2,076
|
|
|
$
|
2,336
|
|
|
$
|
(260
|
)
|
|
(11)%
|
|
Other revenues
|
|
33
|
|
|
36
|
|
|
(3
|
)
|
|
(8)%
|
|||
|
|
|
2,109
|
|
|
2,372
|
|
|
(263
|
)
|
|
(11)%
|
|||
|
Expenses
|
|
|
|
|
|
|
|
|
||||||
|
Cost of goods sold (excluding amortization and impairments of intangible assets)
|
|
584
|
|
|
620
|
|
|
(36
|
)
|
|
(6)%
|
|||
|
Cost of other revenues
|
|
12
|
|
|
10
|
|
|
2
|
|
|
20%
|
|||
|
Selling, general and administrative
|
|
661
|
|
|
813
|
|
|
(152
|
)
|
|
(19)%
|
|||
|
Research and development
|
|
96
|
|
|
103
|
|
|
(7
|
)
|
|
(7)%
|
|||
|
Amortization of intangible assets
|
|
635
|
|
|
678
|
|
|
(43
|
)
|
|
(6)%
|
|||
|
Asset impairments
|
|
138
|
|
|
16
|
|
|
122
|
|
|
763%
|
|||
|
Restructuring, integration and other costs
|
|
18
|
|
|
38
|
|
|
(20
|
)
|
|
(53)%
|
|||
|
Acquired in-process research and development costs
|
|
4
|
|
|
1
|
|
|
3
|
|
|
300%
|
|||
|
Acquisition-related contingent consideration
|
|
(10
|
)
|
|
2
|
|
|
(12
|
)
|
|
(600)%
|
|||
|
Other (income) expense
|
|
(240
|
)
|
|
25
|
|
|
(265
|
)
|
|
-
|
|||
|
|
|
1,898
|
|
|
2,306
|
|
|
(408
|
)
|
|
(18)%
|
|||
|
Operating income
|
|
211
|
|
|
66
|
|
|
145
|
|
|
220%
|
|||
|
Interest income
|
|
3
|
|
|
1
|
|
|
2
|
|
|
200%
|
|||
|
Interest expense
|
|
(474
|
)
|
|
(427
|
)
|
|
(47
|
)
|
|
11%
|
|||
|
Loss on extinguishment of debt
|
|
(64
|
)
|
|
—
|
|
|
(64
|
)
|
|
-
|
|||
|
Foreign exchange and other
|
|
29
|
|
|
(6
|
)
|
|
35
|
|
|
(583)%
|
|||
|
Loss before (recovery of) provision for income taxes
|
|
(295
|
)
|
|
(366
|
)
|
|
71
|
|
|
(19)%
|
|||
|
(Recovery of) provision for income taxes
|
|
(924
|
)
|
|
7
|
|
|
(931
|
)
|
|
-
|
|||
|
Net income (loss)
|
|
629
|
|
|
(373
|
)
|
|
1,002
|
|
|
(269)%
|
|||
|
Less: Net income attributable to noncontrolling interest
|
|
1
|
|
|
1
|
|
|
—
|
|
|
—%
|
|||
|
Net income (loss) attributable to Valeant Pharmaceuticals International, Inc.
|
|
$
|
628
|
|
|
$
|
(374
|
)
|
|
$
|
1,002
|
|
|
(268)%
|
|
|
|
Three Months Ended March 31,
|
||||||||||||
|
|
|
2017
|
|
2016
|
||||||||||
|
(in millions)
|
|
Amount
|
|
Pct.
|
|
Amount
|
|
Pct.
|
||||||
|
Gross product sales
|
|
$
|
3,586
|
|
|
100
|
%
|
|
$
|
3,936
|
|
|
100
|
%
|
|
Provisions to reduce gross product sales to net product sales
|
|
|
|
|
|
|
|
|
||||||
|
Discounts and allowances
|
|
203
|
|
|
6
|
%
|
|
176
|
|
|
4
|
%
|
||
|
Returns
|
|
108
|
|
|
3
|
%
|
|
129
|
|
|
3
|
%
|
||
|
Rebates
|
|
611
|
|
|
17
|
%
|
|
593
|
|
|
15
|
%
|
||
|
Chargebacks
|
|
512
|
|
|
14
|
%
|
|
592
|
|
|
15
|
%
|
||
|
Distribution fees
|
|
76
|
|
|
2
|
%
|
|
110
|
|
|
3
|
%
|
||
|
Total provisions
|
|
1,510
|
|
|
42
|
%
|
|
1,600
|
|
|
41
|
%
|
||
|
Net product sales
|
|
2,076
|
|
|
58
|
%
|
|
2,336
|
|
|
59
|
%
|
||
|
Other revenues
|
|
33
|
|
|
|
|
36
|
|
|
|
||||
|
Revenues
|
|
$
|
2,109
|
|
|
|
|
$
|
2,372
|
|
|
|
||
|
•
|
an increase
in the provisions for discounts and allowances, resulting from a greater portion of our total product sales coming from our generic products, which typically have higher discounts and allowances;
|
|
•
|
an increase
in the provisions for rebates primarily driven by increased sales of products that 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. The
increase
was partially offset by a decrease in rebates for Glumetza® due to a decline in sales volume as a result of generic competition;
|
|
•
|
a decrease
in the provisions for chargebacks as a result of (i) decreased utilization by the U.S. government of certain products such as Minocin®, Ativan®, and Mysoline and (ii) better contract pricing as a result of the Company's pricing discipline. During much of 2016, the Company was subject to higher chargeback rates as a result of its 2015 pricing strategies. As a result of corrective actions taken by the Company, and its continued pricing discipline during 2016, the previous chargeback rates are no longer effective during 2017; and
|
|
•
|
a decrease
in distribution service fees primarily due to higher offsetting price appreciation credits, which credits offset against the total distribution service fees we pay on all of our products to each wholesaler. Price appreciation
|
|
•
|
costs attributable to the net decrease in sales volumes from existing businesses;
|
|
•
|
the favorable impact of foreign currencies of
$20 million
;
|
|
•
|
lower amortization of acquisition accounting adjustments related to inventories of
$28 million
; and
|
|
•
|
the decrease attributable to the impact of divestitures and discontinuations of
$8 million
.
|
|
•
|
a net decrease in advertising and promotional expenses of $108 million, primarily driven by decreases in (i) advertising as direct to consumer advertising in support of our Jublia®, Xifaxan® and other branded products was higher in 2016 as compared to 2017 and (ii) expenses with businesses sold;
|
|
•
|
termination benefits associated with our former Chief Executive Officer of $37 million recognized during the
three months ended March 31, 2016
consisting of (i) the 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 severance payment and (iii) a pro-rata annual cash bonus; and
|
|
•
|
the favorable impact of foreign currencies of
$9 million
.
|
|
•
|
an increase in professional fees of $27 million incurred in connection with (i) legal and governmental proceedings, investigations and information requests relating to, among other matters, our distribution, marketing, pricing, disclosure and accounting practices, (ii) the execution on our key initiatives and (iii) other ongoing corporate and business matters; and
|
|
•
|
incremental expenses associated with our sales force expansion program in our GI business unit of $13 million.
|
|
|
|
Three Months Ended March 31,
|
||||||
|
(in millions)
|
|
2017
|
|
2016
|
||||
|
Gain on the Skincare Sale
|
|
$
|
(319
|
)
|
|
$
|
—
|
|
|
Loss on other sales of assets
|
|
2
|
|
|
2
|
|
||
|
Deconsolidation of Philidor
|
|
—
|
|
|
19
|
|
||
|
Litigation and other matters
|
|
76
|
|
|
2
|
|
||
|
Other, net
|
|
1
|
|
|
2
|
|
||
|
Other (income) expense
|
|
$
|
(240
|
)
|
|
$
|
25
|
|
|
•
|
The Bausch + Lomb/International segment
consists of (i) sales in the U.S. of pharmaceutical products, OTC products and medical device products, primarily comprised of Bausch + Lomb products, with a focus on the Vision Care, Surgical, Consumer and Ophthalmology Rx products and (ii) sales in Canada, Europe, Asia, Australia and New Zealand, Latin America, Africa and the Middle East of branded pharmaceutical products, branded generic pharmaceutical products, OTC products, medical device products, and Bausch + Lomb products.
|
|
•
|
The Branded Rx segment
consists of sales in the U.S. of (i) Salix products, (ii) dermatological products, (iii) branded pharmaceutical products, branded generic pharmaceutical products, OTC products and medical device products and (iv) oncology, dentistry and women’s health products.
|
|
•
|
The U.S. Diversified Products segment
consists of sales in the U.S. of (i) pharmaceutical products, OTC products and medical device products in the areas of neurology and certain other therapeutic classes, including aesthetics (which includes the Solta and Obagi businesses) and (ii) generic products.
|
|
|
|
Three Months Ended March 31,
|
|||||||||||||||||||
|
|
|
2017
|
|
2016
|
|
Change
|
|||||||||||||||
|
(in millions)
|
|
Amount
|
|
Pct.
|
|
Amount
|
|
Pct.
|
|
Amount
|
|
Pct.
|
|||||||||
|
Segment Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Bausch + Lomb/International
|
|
$
|
1,150
|
|
|
54
|
%
|
|
$
|
1,146
|
|
|
48
|
%
|
|
$
|
4
|
|
|
—
|
%
|
|
Branded Rx
|
|
604
|
|
|
29
|
%
|
|
665
|
|
|
28
|
%
|
|
(61
|
)
|
|
(9
|
)%
|
|||
|
U.S. Diversified Products
|
|
355
|
|
|
17
|
%
|
|
561
|
|
|
24
|
%
|
|
(206
|
)
|
|
(37
|
)%
|
|||
|
Total revenues
|
|
$
|
2,109
|
|
|
100
|
%
|
|
$
|
2,372
|
|
|
100
|
%
|
|
$
|
(263
|
)
|
|
(11
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Segment Profits / Segment Profit Margins
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Bausch + Lomb/International
|
|
$
|
333
|
|
|
29
|
%
|
|
$
|
309
|
|
|
27
|
%
|
|
$
|
24
|
|
|
8
|
%
|
|
Branded Rx
|
|
326
|
|
|
54
|
%
|
|
257
|
|
|
39
|
%
|
|
69
|
|
|
27
|
%
|
|||
|
U.S. Diversified Products
|
|
264
|
|
|
74
|
%
|
|
464
|
|
|
83
|
%
|
|
(200
|
)
|
|
(43
|
)%
|
|||
|
Total segment profits
|
|
$
|
923
|
|
|
44
|
%
|
|
$
|
1,030
|
|
|
43
|
%
|
|
$
|
(107
|
)
|
|
(10
|
)%
|
|
•
|
net increase in product sales volume from our existing business (excluding foreign currency and divestitures and discontinuations) of
$49 million
. The
increase
in volume was primarily driven by increases in our international volumes, particularly in Europe, the Middle East, South Africa, China and Australia, of $59 million, partially offset by declines in U.S. Bausch + Lomb volumes of $10 million. In 2016, we took steps to de-stock wholesaler inventories in Europe, particularly in Poland and Russia, to bring wholesaler inventories in this region in line with our target inventory levels. This in turn, had a negative effect on our volumes in this region throughout 2016. As of March 31, 2016, wholesaler inventory levels in Poland and Russia were 3.6 months and 2.8 months, respectively. As of March 31, 2017, wholesaler inventory levels in Poland and Russia were 1.5 months and 2.5 months, respectively. We expect to maintain wholesaler inventories at or near these levels; and
|
|
•
|
net increase from our existing business due to the increase in average realized pricing of
$16 million
, primarily related to product sales in the Middle East, Latin America and in our ophthalmology business in the U.S. The increases in average realized pricing were partially offset by lower average realized pricing related to our Bausch + Lomb surgical and vision care products in the U.S.
|
|
•
|
the unfavorable impact of foreign currencies of
$41 million
, primarily due to the strengthening of the U.S. dollar against certain currencies, most notably the Egyptian pound. In November 2016, as a result of the Egyptian government’s decision to float the Egyptian pound and un-peg it to the U.S. Dollar, the Egyptian pound was significantly devalued. Our exposure to the Egyptian pound is primarily with respect to revenue generated from the Amoun business we acquired in October 2015, which represented approximately 2% of our 2016 total revenues or approximately 5% of 2016 revenues from our Bausch + Lomb/International segment. Further strengthening of the U.S. dollar and/or the devaluation of other countries' currencies could have a negative impact on our reported international revenue. Revenue outside the U.S. and Puerto Rico was approximately 35% of our total 2016 revenues; and
|
|
•
|
the impact from divestitures and discontinuations of
$21 million
.
|
|
•
|
an increase in product sales revenue as a result of the increases in volume and average realized pricing as discussed above; and
|
|
•
|
a decrease in operating expenses (excluding amortization and impairments of intangible assets) of
$17 million
primarily of advertising and promotion expenses, including advertising and promotion expenses eliminated as a result of the Skincare Sale.
|
|
•
|
the decrease in contribution from the impact of divestitures and discontinuations of
$14 million
; and
|
|
•
|
the unfavorable impact of foreign currencies on the existing business due to the strengthening of the U.S. dollar against certain currencies of
$10 million
, most notably the Egyptian pound.
|
|
•
|
a decrease in volume from our existing business of
$74 million
primarily driven by (i) lower demand within the Salix business, most notably with our Xifaxan®, Uceris®, Relistor®, Apriso® and Cycloset® products, attributable to (a) competition and (b) the increase in high deductible medical plans, (ii) the dermatology business, most notably with our Jublia® product which continues to experience lower volumes since the change in our fulfillment model and (iii) generic competition as certain products lost exclusivity such as our Zegerid® product in our Salix business unit and our Ziana®, Carac® and Targretin® products in our dermatology business unit; and
|
|
•
|
the decrease from the impact of divestitures and discontinuations of
$7 million
.
|
|
•
|
acquisition accounting adjustments related to inventories expensed in 2016 of
$24 million
; and
|
|
•
|
a decrease in operating expenses of
$102 million
primarily related to lower advertising and promotional expenses.
|
|
•
|
a decrease in contribution from our existing business as a result of lower volumes partially offset by higher average realized pricing; and
|
|
•
|
a decrease in contribution from the impact of divestitures and discontinuations of
$6 million
.
|
|
|
|
Three Months Ended March 31,
|
|||||||||||||||||||
|
|
|
2017
|
|
2016
|
|
Change
|
|||||||||||||||
|
(in millions)
|
|
Amount
|
|
Pct.
|
|
Amount
|
|
Pct.
|
|
Amount
|
|
Pct.
|
|||||||||
|
Wellbutrin®
|
|
$
|
49
|
|
|
14
|
%
|
|
$
|
67
|
|
|
12
|
%
|
|
$
|
(18
|
)
|
|
(27
|
)%
|
|
Isuprel®
|
|
38
|
|
|
11
|
%
|
|
66
|
|
|
12
|
%
|
|
(28
|
)
|
|
(42
|
)%
|
|||
|
Xenazine US®
|
|
29
|
|
|
8
|
%
|
|
47
|
|
|
8
|
%
|
|
(18
|
)
|
|
(38
|
)%
|
|||
|
Syprine®
|
|
20
|
|
|
6
|
%
|
|
23
|
|
|
4
|
%
|
|
(3
|
)
|
|
(13
|
)%
|
|||
|
Cuprimine®
|
|
20
|
|
|
6
|
%
|
|
27
|
|
|
5
|
%
|
|
(7
|
)
|
|
(26
|
)%
|
|||
|
Mephyton®
|
|
17
|
|
|
5
|
%
|
|
16
|
|
|
3
|
%
|
|
1
|
|
|
6
|
%
|
|||
|
Ativan®
|
|
17
|
|
|
5
|
%
|
|
12
|
|
|
2
|
%
|
|
5
|
|
|
42
|
%
|
|||
|
Migranal AG®
|
|
12
|
|
|
3
|
%
|
|
9
|
|
|
2
|
%
|
|
3
|
|
|
33
|
%
|
|||
|
Glumetza AG®
|
|
11
|
|
|
3
|
%
|
|
—
|
|
|
—
|
%
|
|
11
|
|
|
-
|
|
|||
|
Virazole®
|
|
9
|
|
|
3
|
%
|
|
20
|
|
|
4
|
%
|
|
(11
|
)
|
|
(55
|
)%
|
|||
|
Other product revenues
|
|
129
|
|
|
35
|
%
|
|
269
|
|
|
47
|
%
|
|
(140
|
)
|
|
(52
|
)%
|
|||
|
Other revenues
|
|
4
|
|
|
1
|
%
|
|
5
|
|
|
1
|
%
|
|
(1
|
)
|
|
(20
|
)%
|
|||
|
Total U.S. Diversified revenues
|
|
$
|
355
|
|
|
100
|
%
|
|
$
|
561
|
|
|
100
|
%
|
|
$
|
(206
|
)
|
|
(37
|
)%
|
|
|
|
Three Months Ended March 31,
|
|||||||||||||
|
|
|
2017
|
|
2016
|
|
Change
|
|||||||||
|
(in millions)
|
|
Amount
|
|
Amount
|
|
Amount
|
|
Pct.
|
|||||||
|
Net income (loss)
|
|
$
|
629
|
|
|
$
|
(373
|
)
|
|
$
|
1,002
|
|
|
(269
|
)%
|
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities
|
|
(267
|
)
|
|
879
|
|
|
(1,146
|
)
|
|
(130
|
)%
|
|||
|
Changes in operating assets and liabilities
|
|
592
|
|
|
51
|
|
|
541
|
|
|
1,061
|
%
|
|||
|
Net cash provided by operating activities
|
|
954
|
|
|
557
|
|
|
397
|
|
|
71
|
%
|
|||
|
Net cash provided by (used in) investing activities
|
|
1,148
|
|
|
(112
|
)
|
|
1,260
|
|
|
(1,125
|
)%
|
|||
|
Net cash (used in) provided by financing activities
|
|
(1,442
|
)
|
|
260
|
|
|
(1,702
|
)
|
|
(655
|
)%
|
|||
|
Effect of exchange rate on cash and cash equivalents
|
|
8
|
|
|
8
|
|
|
—
|
|
|
—
|
%
|
|||
|
Net increase in cash and cash equivalents
|
|
668
|
|
|
713
|
|
|
(45
|
)
|
|
(6
|
)%
|
|||
|
Cash and cash equivalents, beginning of period
|
|
542
|
|
|
597
|
|
|
(55
|
)
|
|
(9
|
)%
|
|||
|
Cash and cash equivalents, end of period
|
|
$
|
1,210
|
|
|
$
|
1,310
|
|
|
$
|
(100
|
)
|
|
(8
|
)%
|
|
(in millions)
|
|
March 31, 2017
|
|
December 31, 2016
|
||||
|
Remainder of 2017
|
|
$
|
260
|
|
|
$
|
—
|
|
|
2018
|
|
846
|
|
|
3,738
|
|
||
|
2019
|
|
346
|
|
|
2,122
|
|
||
|
2020
|
|
5,811
|
|
|
7,723
|
|
||
|
2021
|
|
3,521
|
|
|
3,215
|
|
||
|
2022
|
|
6,987
|
|
|
4,281
|
|
||
|
Thereafter
|
|
11,109
|
|
|
9,090
|
|
||
|
Gross maturities
|
|
$
|
28,880
|
|
|
$
|
30,169
|
|
|
Rating Agency
|
|
Corporate Rating
|
|
Senior Secured Rating
|
|
Senior Unsecured Rating
|
|
Outlook
|
|
Moody’s
|
|
B3
|
|
Ba3
|
|
Caa1
|
|
Negative
|
|
Standard & Poor’s
|
|
B
|
|
BB-
|
|
B-
|
|
Stable
|
|
•
|
Debt service
—We expect to make contractual debt service payments of principal and interest of
$1,594 million
during the remainder of 2017, although we may elect to make additional principal payments under certain circumstances. The expected payments are exclusive of repayments we have made or may make under our Revolving Credit Facility. In the ordinary course of business, we may borrow and repay amounts under our Revolving Credit Facility to meet business needs.
|
|
•
|
Capital expenditures
—We expect to make payments of $200 million to $220 million for property, plant and equipment during the remainder of 2017, of which there is $60 million in committed amounts as of
March 31, 2017
.
|
|
•
|
Contingent consideration payments
—We expect to make contingent consideration payments of $47 million during the remainder of 2017 for businesses we acquired in 2015 and prior.
|
|
•
|
Restructuring and integration payments
—We expect to make payments of $22 million during the remainder of 2017 for employee separation costs and lease termination obligations associated with restructuring and integration actions we have taken through March 31, 2017.
|
|
•
|
Litigation settlement
—We expect to make a payment of $210 million during the remainder of 2017 in settlement of the Salix securities litigation. See
Note 17, "LEGAL PROCEEDINGS"
to our unaudited interim Consolidated Financial Statements for further details regarding the Salix securities litigation matter. We may incur other payments if other litigation is resolved.
|
|
•
|
Benefit obligations
—We expect to make payments under our pension and postretirement obligations of $14 million during the remainder of 2017. See
|
|
(in millions)
|
|
Total
|
|
Remainder of 2017
|
|
2018
|
|
2019 and 2020
|
|
2021 and 2022
|
|
Thereafter
|
||||||||||||
|
Long-term debt obligations, including interest
|
|
$
|
38,463
|
|
|
$
|
1,594
|
|
|
$
|
2,614
|
|
|
$
|
9,551
|
|
|
$
|
12,723
|
|
|
$
|
11,981
|
|
|
•
|
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 Rx Services, LLC ("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 investigations 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, the pending investigation by the California Department of Insurance, a number of pending putative class action litigations in the U.S. and Canada and purported class actions under the federal RICO statute and other claims, investigations or proceedings that may be initiated or that may be asserted;
|
|
•
|
the success of our new management team (including our new Chairman and Chief Executive Officer, new Chief Financial Officer, new General Counsel, new Corporate Controller and Chief Accounting Officer and new Chief Quality Officer) in implementing and achieving the strategies and goals of the Company as they develop;
|
|
•
|
the impact of the changes in and reorganizations to our business structure, including changes to our operating and reportable segments;
|
|
•
|
the effect of the misstatements identified in, and the resultant restatement of, certain of our previously issued financial statements and results, 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 has arisen or may arise as a result;
|
|
•
|
the effectiveness of the measures implemented to remediate the material weaknesses in our internal control over financial reporting that were identified by the Company, our deficient control environment and the contributing factors leading to the misstatement of our previously issued results and the impact such measures may have on the Company and our businesses;
|
|
•
|
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 and/or its management and/or employees;
|
|
•
|
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 adjustments that may be sought or imposed on our products as a result thereof;
|
|
•
|
pricing decisions that we have implemented, or may in the future, elect to implement, whether as a result of recent scrutiny or otherwise, such as the 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, our decision on the price of our Siliq™ product, the Patient Access and Pricing Committee’s commitment that the average annual price increase for our prescription pharmaceutical products will be set at no greater than single digits and below the 5-year weighted average of the increases within the branded biopharmaceutical industry or any future pricing actions we may take following review by our Patient Access and Pricing Committee (which is responsible for the pricing of our drugs);
|
|
•
|
legislative or policy efforts, including those that may be introduced and passed by the U.S. Congress, designed to reduce patient out-of-pocket costs for medicines, which could result in new mandatory rebates and discounts or other pricing restrictions, controls or regulations (including mandatory price reductions);
|
|
•
|
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, such as the inspections by the FDA of the Company's facilities in Tampa, Florida and Rochester, New York, and the results thereof;
|
|
•
|
any default under the terms of our indentures or Credit Agreement and our ability, if any, to cure or obtain waivers of such default;
|
|
•
|
any delay in the filing of any future financial statements or other filings and any default under the terms of our indentures or Credit Agreement as a result of such delays;
|
|
•
|
our substantial debt (and potential additional future indebtedness) and current and future debt service obligations, our ability to reduce our outstanding debt levels in accordance with our stated intention and the resulting 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, 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, prohibitions on incurring additional debt if certain financial covenants are not met, limitations on the amount of additional debt we are able to incur where not prohibited, and restrictions on our ability to make certain investments and other restricted payments;
|
|
•
|
any further downgrade by rating agencies in our credit ratings, which may impact, among other things, our ability to raise debt and the cost of capital for additional debt issuances;
|
|
•
|
any reductions in, or changes in the assumptions used in, our forecasts for fiscal year 2017 or beyond, which could lead to, among other things, (i) a failure to meet the financial and/or other covenants contained in our Credit Agreement and/or indentures, and/or (ii) impairment in the goodwill associated with certain of our reporting units (including our Salix 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 or impairment charges related to certain of our products (in particular, our Addyi® product) or other intangible assets;
|
|
•
|
the pending and additional divestitures of certain of our assets or businesses and our ability to successfully complete any such divestitures on commercially reasonable terms and on a timely basis, or at all, and the impact of any such pending or future divestitures on our Company, including the reduction in the size or scope of our business or market share, loss of revenue, any loss on sale, including any resultant write-downs of goodwill, or any adverse tax consequences suffered as a result of any such divestitures;
|
|
•
|
our shift in focus to much lower business development activity through acquisitions for the foreseeable future as we focus on reducing our outstanding debt levels and as a result of the restrictions imposed by 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 (such as our Addyi® product and our recently approved Siliq™ product (brodalumab)), 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, including subsequent to retention payments being paid out and as a result of the reputational challenges we face and may continue to face;
|
|
•
|
our ability to implement effective succession planning for our executives and key employees;
|
|
•
|
the challenges and difficulties associated with managing a large complex business, which has, in the past, grown rapidly;
|
|
•
|
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;
|
|
•
|
our ability to effectively operate, stabilize and grow our businesses in light of the challenges that the Company currently faces, including with respect to its substantial debt, pending investigations and legal proceedings, scrutiny of our pricing, distribution and other practices, reputational harm and limitations on the way we conduct business imposed by the covenants in our Credit Agreement, indentures and the agreements governing our other indebtedness;
|
|
•
|
the success of our fulfillment arrangements with Walgreen Co. ("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 our ability to successfully negotiate any improvements to our arrangements with Walgreens;
|
|
•
|
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") and various corporate tax reform proposals being considered in the U.S.;
|
|
•
|
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 and operating in new and different geographic markets (including the challenges created by new and different regulatory regimes in such countries and the need to comply with applicable anti-bribery and economic sanctions laws and regulations);
|
|
•
|
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 current or recent instability in Brazil, Russia, Ukraine, Argentina, Egypt, certain other countries in Africa and the Middle East, the devaluation of the Egyptian pound, and the adverse economic impact and related uncertainty caused by the United Kingdom's decision to leave the European Union (Brexit));
|
|
•
|
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;
|
|
•
|
if permitted under our Credit Agreement, 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, the risks associated with the acquired companies, businesses and products and our ability to achieve the anticipated benefits and synergies from such acquisitions and integrations, including as a result of cost-rationalization and integration initiatives. Factors impacting the achievement of anticipated benefits and synergies may include greater than expected operating costs,
|
|
•
|
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;
|
|
•
|
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 recalls or withdrawals of products from the market;
|
|
•
|
the mandatory or voluntary recall or withdrawal of our products from the market and the costs associated therewith;
|
|
•
|
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 other factors impacting the commercial success of our products (such as our Addyi® product and our recently approved Siliq™ product (brodalumab)), which could lead to material impairment charges;
|
|
•
|
the results of management reviews of our research and development portfolio (including following the receipt of clinical results or feedback from the FDA or other regulatory authorities), 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 economic sanctions and/or export laws, worldwide environmental laws and regulation and privacy and security regulations;
|
|
•
|
the impacts of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (the “Health Care Reform Act”) and potential repeal or amendment thereof and other
|
|
•
|
the impact of any changes in or reforms to the legislation, laws, rules, regulation and guidance that apply to the Company and its business and products or the enactment of any new or proposed legislation, laws, rules, regulations or guidance that will impact or apply to the Company or its businesses or products;
|
|
•
|
the impact of changes in federal laws and policy under consideration by the new administration and Congress, including the effect that such changes will have on fiscal and tax policies, the potential repeal of all or portions of the Health Care Reform Act, international trade agreements and policies and policy efforts designed to reduce patient out-of-pocket costs for medicines (which could result in new mandatory rebates and discounts or other pricing restrictions);
|
|
•
|
potential ramifications, including legal sanctions and/or financial penalties, relating to the restatement by Salix Pharmaceuticals, Ltd. ("Salix") of its historical financial results prior to our acquisition of Salix in April 2015;
|
|
•
|
illegal distribution or sale of counterfeit versions of our products;
|
|
•
|
interruptions, breakdowns or breaches in our information technology systems; and
|
|
•
|
risks in Item 1A. "”Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2016, filed on March 1, 2017, and risks detailed from time to time in our other filings with the SEC and the Canadian Securities Administrators (the “CSA”), as well as our ability to anticipate and manage the risks associated with the foregoing.
|
|
4.1
|
Indenture, dated as of March 21, 2017, by and among Valeant Pharmaceuticals International, Inc., the guarantors party thereto, The Bank of New York Mellon, as trustee and the notes collateral agents party thereto, originally filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on March 21, 2017, which is incorporated by reference herein.
|
|
10.1
|
Separation Agreement between Robert Rosiello and Valeant Pharmaceuticals International, Inc., dated January 12, 2017, originally filed as Exhibit 10.31 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2016 filed on March 1, 2017, which is incorporated by reference herein.†
|
|
10.2
|
Separation Agreement between Ari Kellen and Valeant Pharmaceuticals International, Inc., dated January 12, 2017, originally filed as Exhibit 10.36 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2016 filed on March 1, 2017, which is incorporated by reference herein.†
|
|
10.3
|
Separation Agreement between Anne Whitaker and Valeant Pharmaceuticals International, Inc., dated February 7, 2017, originally filed as Exhibit 10.38 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2016 filed on March 1, 2017, which is incorporated by reference herein.†
|
|
10.4
|
Litigation Management Agreement dated February 10, 2017 among Valeant Pharmaceuticals International, Inc., Valeant Pharmaceuticals International, J. Michael Pearson, Pershing Square Capital Management, L.P., Pershing Square Holdings, Ltd., Pershing Square International, Ltd., Pershing Square, L.P., Pershing Square II, L.P., PS Management GP, LLC, PS Fund 1, LLC, Pershing Square GP, LLC and William A. Ackman, originally filed as Exhibit 99.14 to Pershing Square Capital Management, L.P.’s Schedule 13D/A filed on February 13, 2017, which is incorporated by reference herein.
|
|
10.5
|
Amendment No. 14 to Third Amended and Restated Credit and Guaranty Agreement, dated as of March 21, 2017, by and among Valeant Pharmaceuticals International, Inc., the guarantors party thereto and Barclays Bank PLC, as administrative agent, originally filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 21, 2017, which is incorporated by reference herein.
|
|
10.6
|
Amendment No. 15 to Third Amended and Restated Credit and Guaranty Agreement, dated as of March 28, 2017, by and among Valeant Pharmaceuticals International, Inc., the guarantors party thereto, the lenders and issuing bank party thereto, and Barclays Bank PLC, as administrative agent, originally filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 28, 2017, 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: May 9, 2017
|
/s/ JOSEPH C. PAPA
|
|
|
Joseph C. Papa
Chief Executive Officer (Principal Executive Officer and Chairman of the Board) |
|
|
|
|
|
|
|
Date: May 9, 2017
|
/s/ PAUL S. HERENDEEN
|
|
|
Paul S. Herendeen
Executive Vice President and Chief Financial Officer (Principal Financial Officer) |
|
Exhibit
Number
|
Exhibit Description
|
|
4.1
|
Indenture, dated as of March 21, 2017, by and among Valeant Pharmaceuticals International, Inc., the guarantors party thereto, The Bank of New York Mellon, as trustee and the notes collateral agents party thereto, originally filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on March 21, 2017, which is incorporated by reference herein.
|
|
10.1
|
Separation Agreement between Robert Rosiello and Valeant Pharmaceuticals International, Inc., dated January 12, 2017, originally filed as Exhibit 10.31 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2016 filed on March 1, 2017, which is incorporated by reference herein.†
|
|
10.2
|
Separation Agreement between Ari Kellen and Valeant Pharmaceuticals International, Inc., dated January 12, 2017, originally filed as Exhibit 10.36 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2016 filed on March 1, 2017, which is incorporated by reference herein.†
|
|
10.3
|
Separation Agreement between Anne Whitaker and Valeant Pharmaceuticals International, Inc., dated February 7, 2017, originally filed as Exhibit 10.38 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2016 filed on March 1, 2017, which is incorporated by reference herein.†
|
|
10.4
|
Litigation Management Agreement dated February 10, 2017 among Valeant Pharmaceuticals International, Inc., Valeant Pharmaceuticals International, J. Michael Pearson, Pershing Square Capital Management, L.P., Pershing Square Holdings, Ltd., Pershing Square International, Ltd., Pershing Square, L.P., Pershing Square II, L.P., PS Management GP, LLC, PS Fund 1, LLC, Pershing Square GP, LLC and William A. Ackman, originally filed as Exhibit 99.14 to Pershing Square Capital Management, L.P.’s Schedule 13D/A filed on February 13, 2017, which is incorporated by reference herein.
|
|
10.5
|
Amendment No. 14 to Third Amended and Restated Credit and Guaranty Agreement, dated as of March 21, 2017, by and among Valeant Pharmaceuticals International, Inc., the guarantors party thereto and Barclays Bank PLC, as administrative agent, originally filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 21, 2017, which is incorporated by reference herein.
|
|
10.6
|
Amendment No. 15 to Third Amended and Restated Credit and Guaranty Agreement, dated as of March 28, 2017, by and among Valeant Pharmaceuticals International, Inc., the guarantors party thereto, the lenders and issuing bank party thereto, and Barclays Bank PLC, as administrative agent, originally filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 28, 2017, 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*
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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 |
|---|