Bill Ackman’s slides from his investor conference call on Valeant.

Valeant Pharmaceuticals International (VRX)

• Multinational specialty pharmaceutical company
• Leader in dermatology, ophthalmology, branded generics, and gastroenterology
• Significant presence in both developed and emerging markets
• Market cap of ~$40bn and TEV of ~$68bn
• Approximately 40 manufacturing plants worldwide
• ~18,000 employees(1)

Valeant: Context on the Company

• In February 2008, when Mike Pearson was named CEO, Valeant was a small, struggling company
• Pearson changed Valeant’s strategy to incorporate:
  • A durable, diverse portfolio of products in specialties where doctors are decision makers, with limited government reimbursement
  • Decentralized, efficient, nimble organizational structure
  • Return-driven capital allocation framework (M&A, high ROI R&D, buybacks)
  • Rapid growth
  • Diverse portfolio of products
  • Numerous drivers of value creation
  • Numerous acquisitions
    • Purchased distressed assets, inherited multiple Corporate Integrity Agreements
  • Utilized leverage
• Valeant’s business and strategy are complicated to understand; GAAP accounting is an inadequate measure of an acquisitive company
  • Investor base has historically consisted of sophisticated, long-term investors (Ruane Cunniff & Goldfarb, T Rowe Price, ValueAct, Lone Pine, Brave Warrior, Brahman Capital, etc.)
• Valeant’s complexity necessitates:
  • Strong, high-integrity management
  • High level of transparency
• Anything less than complete transparency leaves Valeant susceptible to attack
• Valeant’s implicit compact with shareholders: in exchange for high returns, investors accept complexity so long as there is transparency
• Valeant has underinvested in public relations, government relations, and investor relations. This has been a very costly mistake

Valeant: Recent Events

A. Price Increaces

• Volume is primary growth driver for ~90% of Valeant’s business
• Media reports are focused on gross prices; net realized prices to manufacturer are much lower
• Drugs improve health outcomes and can reduce overall cost of healthcare; returns on investment critical to drug innovation

B. VRX’s Perceived “Strategy Shift”

• VRX’s strategy is multi-faceted, focused on creating shareholder value, adapts with opportunities:
  • M&A: No more “price increase” deals (only 4 of ~150 historical acquisitions)
  • R&D: Increasing modestly to pursue attractive late-stage development opportunities

See full slides below.