Fourth Quarter and Year End 2011 Financial Results...
Transcript of Fourth Quarter and Year End 2011 Financial Results...
Fourth Quarter and Year End 2011 Financial Results Conference Call
February 27, 2012
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Forward-looking StatementsForward-looking StatementsCertain statements made in this presentation may constitute forward-looking statements, including, but not limited to, statements regarding guidance with respect to integration-related activities, product candidates in development, timing of product launches and expected benefits from acquisitions by the Company. Forward-looking statements may be identified by the use of the words “anticipates,” “expects,” “intends,” “plans,” “could,” “should,” “would,” “may,” “will,” “believes,” “estimates,” “potential,” or “continue” and variations or similar expressions. These statements are based upon the current expectations and beliefs of management and are subject to certain risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties include, but are not limited to, risks and uncertainties discussed in the Company's most recent annual or quarterly report filed with the Securities and Exchange Commission ("SEC") and other risks and uncertainties detailed from time to time in the Company's filings with the SEC and the Canadian Securities Administrators ("CSA"), which factors are incorporated herein by reference. Readers are cautioned not to place undue reliance on any of these forward-looking statements. The Company undertakes no obligation to update any of these forward-looking statements to reflect events or circumstances after the date of this presentation or to reflect actual outcomes.
Non-GAAP InformationTo supplement the financial measures prepared in accordance with generally accepted accounting principles (GAAP), the Company uses non-GAAP financial measures that exclude certain items, such as amortization of inventory step-up, stock-based compensation step-up, restructuring and acquisition-related costsTBD, acquired in-process research and development ("IPR&D"), legal settlements, amortization and other non-cash charges, amortization of deferred financing costs, debt discounts and ASC 470-20 (FSP APB 14-1) interest, loss on extinguishment of debt, and (gain) loss on investments, net, and adjusts tax expense to cash taxes. Management uses non-GAAP financial measures internally for strategic decision making, forecasting future results and evaluating current performance. By disclosing non-GAAP financial measures, management intends to provide investors with a meaningful, consistent comparison of the company’s core operating results and trends for the periods presented. Non-GAAP financial measures are not prepared in accordance with GAAP; therefore, the information is not necessarily comparable to other companies and should be considered as a supplement to, not a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP.
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Agenda
1. Fourth Quarter & Year End Results
2. U.S. Dermatology Update
3. Financial Update
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Fourth Quarter 2011 Results
Total Revenue = $688 million34% revenue growth over 2010
Product sales = $654 million34% product sales growth over 201010% organic product sales growth over 2010
Cash EPS = $0.9488% Cash EPS growth over 2010
Adjusted Cash Flow from Operations = $253 million 22% adjusted cash flow from operations growth over 2010Excluding changes in working capital - adjusted cash flow from operations grew at >50% over 2010
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2011 Financial Summary
$0.62
$0.73
$0.54 $0.57
$0.94
$0.66
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
Reported Cash EPS Adjusted Cash EPS
Total 2011 Revenue = $2.46 BillionTotal Cash EPS = $2.93
* Adjusted for Cloderm divestiture (Q1 2011) and Trobalt milestone (Q2 2011)
$529$569$565
$609 $601$688
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
Reported Product Sales Adjusted Product Sales
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Strong Organic Growth39%
-4%
14%
3%
7%10%
Organic Growth
32%
-5%
13% 13%10% 9%
Organic Growth
Fourth Quarter 2011 Full Year 2011
Branded Generics - LA
Canada/Australia
U.S Neurology & Other
U.S Dermatology
Total Organic Growth
Branded Generics - EU
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Adjusted Cash Flow From Operations
$253
$208
$260
$204
1st Qtr 2nd Qtr* 3rd Qtr 4th Qtr
Excluded Items:
Total 2011 Adjusted Cash Flow from Operations = $925 Million
* Includes $40 M Milestone payment from GSK
• Legal Settlements• Restructuring/Acquisition
Related Costs• Working Capital Changes• Tax Benefit from Stock Options• Effect of ASC 470-20
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2011 Performance v. Guidance
Original Expectations
Revenue $2.1-$2.3 billion
Organic Growth ~8%
Cash EPS $2.25 - $2.50
>$800 million in Adjusted Cash Flow from Operations
Final Results
Revenue $2.46 billion
Organic Growth 9%
Cash EPS $2.93
$925 million in Adjusted Cash Flow from Operations
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Deal Update
Completed in Q4 2011OrthoDermikAfexaiNova
Announced YTD 2012ProbioticaEyeTech
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Progress on 2012 Synergy ProgramRun rate
expected by mid-year
Run RateYTD
$200 million
$135 million
U.S. Dermatology Update
Rajiv De Silva
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U.S. Dermatology Integration StatusCompleted Ongoing
Sales and MarketingSales force optimization/restructuringMarketing combinationA&P rationalization
R&DProgram rationalizationPeople reduction
Supply Chain / ManufacturingSupply agreementsLong-term tech transfers
FinanceOrder to cash
Information TechnologyCommercialManufacturing plant
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Maintaining Growth During Acquisitions in U.S. Dermatology
2011 vs. 2010 Volume Growth
Source: Wolters Kluwer Health; IRI Scan data; Retailer data
54%
25%29%
27%
0%
10%
20%
30%
40%
50%
60%
70%
Acanya Atralin Zovirax* CeraVe**
* Zovirax volume in TRx grams; **Cerave Scan Volume growth
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Acanya and Atralin Showing Sustained Prescription Volume Growth
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
Q12009
Q22009
Q32009
Q42009
Q12010
Q22010
Q32010
Q42010
Q12011
Q22011
Q32011
Q42011
AcanyaAtralin
Source: Wolters-Kluwer; Data for all prescribers
Revamping of Co-Pay Cards
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Promotional Efforts Turning the ElidelGrowth Curve
-7%
-14%
-16%
-20%
-15%
-10%
-5%
0%
FY 2011
Q4 2011
Jan-12
Elidel YOY TRx Growth All Prescribers
Source: Wolters Kluwer Health
Elidel YOY TRx Growth Dermatologists
9%
-2%
-7%-10%
-5%
0%
5%
10%
15%FY 2011
Q4 2011
Jan-12
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Zovirax Franchise Rejuvenated Through New Strategy
Source: Wolters-Kluwer; Data for all prescribers
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
50.0%
Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011
TR
x G
ram
s vs
. Pri
or
year
% G
row
th
-1%
12%
43%
47%
16
70%
Driving CeraVe Growth Through New Product Introduction
HydratingCleanser
Lotion Cream Facial PM Lotion AM FoamingCleanser
+26% +27% +34%
+101%
+361%+332%
Original SKUs Newer SKUsProportion of Business 30%
Source: IRI Scan data; Retailer data
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U.S. Dermatology Pipeline Update
New Products
LifecycleManagement
Generics
# of Projects
4
~15
3
~20+
Onychomycosis (IDP-108)Psoriasis (IDP-118)Acne (IDP-107 / MC5)
AcanyaRAMSculptra
Key Projects
Undisclosed
Financial Update
Howard Schiller
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Financial Summary
* Excludes fair value step-up adjustment to inventory and other non-GAAP items** Q410 & Q411 includes the impact of working capital changes of $22 million and $62 million respectively
Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 2011
Product Sales $489m $500m $530m $570m $654m $2,255mTotal Revenue $515m $565m $609m $601m $688m $2,463m
Cost of Goods Sold %* 31% 24% 29% 28% 25% 27%SG&A % 22% 21% 22% 21% 21% 21%R&D Expense $18m $14m $18m $18m $17m $66m
Operating Margin (excluding amortization) 45% 50% 53% 50% 57% 51%
Cash EPS $0.50 $0.62 $0.73 $0.66 $0.94 $2.93
Adjusted Cash Flow from Operations $187m** $204m $260m $208m $253m** $925m
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Segment Trends
Q4 10 Q4 11 FY 11 FY 12 e
U.S. Dermatology 103.9 174.2 568.3 900-925U.S. Neurology & Other 213.0 202.8 829.3 675-750Canada/Australia 80.5 101.3 340.1 550-625Branded Generics Latin America 69.0 65.8 254.9 >275Branded Generics Europe 48.3 144.4 470.9 >625South East Asia/South Africa N/A N/A N/A ~100Emerging Markets N/A N/A N/A >1.0 B
Total Revenue 514.6$ 688.5$ 2,463.5$ $3.1 - $3.4 b
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Price vs. Volume Trend
4QPrice
4QVolume
4QTotal
2011Price
39% -1%
8%
2%
1%
0%
-3%
14%
3%
%
2011Volume
33%
-12%
11%
12%
10%
U.S. Neuro
8% -11% -4%
Branded Generics – Europe
0% 7% 10%
Canada/ Australia
2%
2011Total
U.S. Derm
-6% 45%
12%
32%
Branded Generics - LA
2% 1%
13%
13%
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COGS Trend
Q4 10 Q4 11 FY 11
U.S. Neuro & Other 24% 17% 17%U.S. Dermatology 35% 11% 15%Canada/Australia 28% 23% 28%Branded Generics - Europe 38% 47% 48%Branded Generics - Latin America 42% 37% 39%
Total 31% 25% 27%
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2011 Adjusted Cash Flow from Operations
$166$59
$2,876
$2,653
$68 $164$394
$925
$639
Current cash (2/24) position ~$570 m
+ $275 m undrawnrevolver
Cash December
2010
SecuritiesRepurchases
Acquisitions Cap Ex
Restructuring/Integration/
Legal Settlements
Other* Cash December
2011
IssuanceLT Debt
Adjusted CashFlow
from Operations
* Includes payment of withholding tax upon vesting of share based awards, one-time working capital adjustments, proceeds from the exercise of stock options and other miscellaneous cash outflows
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Currency Impact
Currency
2010 vs
20112012 YTD
PolandSerbiaHungaryRussia
AustraliaCanada
MexicoBrazil
South Africa
-16%-4%-17%-5%
--2%
-13%-13%
-22%
10%1%9%9%
4%2%
7%9%
6%
- Foreign currency per 1 U.S. Dollar
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Additional UpdatesNew Segment Reporting
U.S. DermU.S. Neuro & OtherCanada/AustraliaEmerging Markets
Number of Shares Outstanding317 million diluted shares as of December 31, 2011
Decreased by 12 million shares from December 31, 2010
Strong LiquidityCurrent cash position of ~$570 million $275 million undrawn revolver
Recent Financing$600 million senior secured Tranche B Term Loan
LIBOR + 2.75% with 1% LIBOR floor
Fourth Quarter and Year End 2011 Financial Results Conference Call
February 27, 2012