 Investor Presentation
Regarding the Allergan Special
Meeting Process
July 18, 2014
1
Filed by Valeant Pharmaceuticals International, Inc.
(Commission File No. 001-14956) pursuant to Rule 425 under the Securities Act
of 1933 and deemed filed pursuant to Rule 14a-12 under the Securities
Exchange Act of 1934 Subject Company: Allergan, Inc.
Commission File No.: 001-10269 |
 Forward-Looking Statements
2
This communication may contain forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995 and Canadian securities laws. These
forward-looking statements include, but are not limited to, statements regarding Valeant offer to
acquire Allergan, its financing of the proposed transaction, its expected future performance
(including expected results of operations and financial guidance), and the combined company’s future financial condition, operating results, strategy and plans.
Forward-looking statements may be identified by the use of the words “anticipates,”
“expects,” “intends,” “plans,” “should,” “could,” “would,” “may,” “will,” “believes,” “estimates,”
“potential,” “target,” “opportunity,” “tentative,”
“positioning,” “designed,” “create,” “predict,” “project,” “seek,” “ongoing,” “upside,” “increases” or “continue” and variations or similar
expressions. These statements are based upon the current expectations and beliefs of management and
are subject to numerous assumptions, risks and uncertainties that change over time and could
cause actual results to differ materially from those described in the forward-looking statements. These assumptions, risks and uncertainties include,
but are not limited to, assumptions, risks and uncertainties discussed in the company’s most
recent annual or quarterly report filed with the SEC and the Canadian Securities Administrators
(the “CSA”) and assumptions, risks and uncertainties relating to the proposed merger, as detailed from time to time in Valeant’s filings with the SEC and the CSA,
which factors are incorporated herein by reference. Important factors that could cause actual
results to differ materially from the forward-looking statements we make in this
communication are set forth in other reports or documents that we file from time to time with the SEC
and the CSA, and include, but are not limited to: •
the ultimate outcome of the offer and the second-step merger, including the ultimate removal or
the failure to render inapplicable the obstacles to consummation of the offer and the
second-step merger described in the offer to exchange;
•
the ultimate outcome and results of integrating the operations of Valeant and Allergan, the ultimate
outcome of Valeant’s pricing and operating strategy applied to Allergan and the ultimate
ability to realize synergies;
•
the effects of the proposed combination of Valeant and Allergan, including the combined company’s
future financial condition, operating results, strategy and plans;
•
the effects of governmental regulation on our business or potential business combination transactions;
•
the ability to obtain regulatory approvals and meet other conditions to the offer, including the
necessary stockholder approval, on a timely basis; •
Valeant’s ability to sustain and grow revenues and cash flow from operations in our markets and
to maintain and grow our customer base, the need for innovation and the related capital
expenditures and the unpredictable economic conditions in the United States and other markets;
•
the impact of competition from other market participants; •
the development and commercialization of new products; •
the availability and access, in general, of funds to meet our debt obligations prior to or when they
become due and to fund our operations and necessary capital expenditures, either through (i)
cash on hand, (ii) free cash flow, or (iii) access to the capital or credit markets;
•
our ability to comply with all covenants in our indentures and credit facilities, any violation of
which, if not cured in a timely manner, could trigger a default of our other obligations under
cross-default provisions; and
•
the risks and uncertainties detailed by Allergan with respect to its business as described in its
reports and documents filed with the SEC.
All forward-looking statements attributable to us or any person acting on our behalf are expressly
qualified in their entirety by this cautionary statement. Readers are cautioned not to
place undue reliance on any of these forward-looking statements. These forward-looking statements speak only as of the date hereof. Valeant undertakes no obligation to
update any of these forward-looking statements to reflect events or circumstances after the date
of this communication or to reflect actual outcomes. |
 More
Information Note 1: The guidance in this presentation is only effective
as of the date given, April 22, 2014, and will not be updated or affirmed
unless and until the Company publicly announces updated or affirmed guidance
3
Additional Information
This communication does not constitute an offer to buy or solicitation of an offer to
sell any securities. This communication relates to the exchange offer which Valeant has made to
Allergan stockholders. The exchange offer is being made pursuant to a tender offer statement on Schedule TO (including the offer to
exchange, the letter of election and transmittal and other related offer materials) and a registration
statement on Form S-4 filed by Valeant with the SEC on June 18, 2014. These
materials, as they may be amended from time to time, contain important information, including the terms and conditions of the offer. In
addition, Valeant has filed a preliminary proxy statement with the SEC on June 24, 2014, Pershing
Square has filed a definitive solicitation statement with the SEC on July 11, 2014, and Valeant
and Pershing Square Capital Management, L.P. (“Pershing Square”) (and, if a negotiated transaction is agreed, Allergan)
may file one or more additional proxy statements or other documents with the SEC. This
communication is not a substitute for any proxy statement, registration statement, prospectus
or other document Valeant, Pershing Square and/or Allergan have filed or may file with the SEC in connection with the
proposed transaction. INVESTORS AND SECURITY HOLDERS OF VALEANT AND ALLERGAN ARE URGED TO READ THE
TENDER OFFER STATEMENT, REGISTRATION STATEMENT, AND ANY OTHER DOCUMENTS FILED WITH THE SEC
CAREFULLY IN THEIR ENTIRETY IF AND WHEN THEY BECOME AVAILABLE AS THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE PROPOSED TRANSACTION. Any definitive proxy statement(s) (if and when
available) will be mailed to stockholders of Allergan and/or Valeant, as applicable. Investors and security holders may obtain free
copies of the tender offer statement, the registration statement and other documents (if and when
available) filed with the SEC by Valeant and/or Pershing Square through the web site maintained
by the SEC at http://www.sec.gov. Consent was not obtained or sought with respect to third party statements referenced in this
presentation.
Information regarding the names and interests in Allergan and Valeant of Valeant and persons related
to Valeant who may be deemed participants in any solicitation of Allergan or Valeant
shareholders in respect of a Valeant proposal for a business combination with Allergan is available in the additional definitive
proxy soliciting materials in respect of Allergan filed with the SEC by Valeant on April 21, 2014 and
May 28, 2014. Information regarding the names and interests in Allergan and Valeant of
Pershing Square and persons related to Pershing Square who may be deemed participants in any solicitation of Allergan or
Valeant shareholders in respect of a Valeant proposal for a business combination with Allergan is
available in additional definitive proxy soliciting material in respect of Allergan filed with
the SEC by Pershing Square. The additional definitive proxy soliciting material referred to in this paragraph can be obtained free
of charge from the sources indicated above.
Non-GAAP Information
To supplement the financial measures prepared in accordance with generally accepted
accounting principles (GAAP), the Company uses non-GAAP financial measures that exclude
certain items. 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. The Company has provided preliminary results and guidance that are non-
GAAP financial measures. The Company has not provided a reconciliation of these preliminary and
forward-looking non-GAAP financial measures due to the difficulty in forecasting and
quantifying the exact amount of the items excluded from the non-GAAP financial measures that will be included in the comparable
GAAP financial measures. Reconciliations of historical non-GAAP financials can be found at
www.valeant.com |
 Agenda
4
I.
Executive Summary
II.
Overview of Valeant
III.
Overview of the Transaction
IV.
Why a Special Meeting is Needed
V.
Conclusion
VI.
Appendix |
 I.
EXECUTIVE SUMMARY
5 |
 Allergan
Stockholders Deserve to be Heard Valeant’s
offer is $72 in cash and 0.83 of a Valeant share providing Allergan stockholders a
compelling premium of approximately 50% to the unaffected stock price, an implied
LTM EBITDA
multiple
of
approximately
23x
(1)
,
and
an
implied
P/E
multiple
of
31x
2014
earnings
(2)
Valeant’s offer is the result of meetings with and direct feedback from most
of Allergan’s major institutional stockholders
Allergan’s
board
has
refused
any
engagement
with
Valeant,
has
adopted
and
is
enforcing
its
non-stockholder friendly structural defenses, as recognized by many
institutional investors along
with
ISS
and
Glass
Lewis,
acting
to
limit
its
stockholders’
rights,
and
is
taking
a
“scorched earth”
approach, attacking Valeant’s business model and business performance with
false and misleading information, and in turn hurting both Valeant and
Allergan stockholders. We believe Allergan stockholders should have a voice
on both eliminating the non-stockholder friendly structural defenses of
Allergan, along with evaluation of the Valeant offer, and that there are
significant risks and uncertainties associated with Allergan continuing to delay.
If
stockholders
request
Special
Meeting,
Allergan
should
call
it
immediately,
and
not
delay
for
120 days.
We are Asking for Your Support in Calling a Special Meeting
6
Based on Valeant share price of $121.71 as of close on 16 July 2014; Allergan
unaffected share price of $116.63 as of 10 April 2014, the day before Pershing
Square crossed the 5% Schedule 13D ownership level Capital IQ Thomson
Estimates; FY2014 Allergan Median Consensus EPS estimate as at 16 July 2014
(1)
(2)
Note |
 Situation Overview (1/2)
Valeant’s
offer
is
compelling
and
reflects
direct
feedback
from
Allergan
stockholders
$72
in
cash
and
0.83
of
a
Valeant
share
($172.50
per
share
as
of
July
14,
2014)
(1)
Based on Valeant’s current stock price, the offer represents a compelling
approximate 50% premium to Allergan’s unaffected share price of
$116.63 on April 10, an implied LTM EBITDA multiple
of
23x,
and
an
implied
P/E
multiple
of
31x
2014
earnings
(2)
With certainty of a transaction, we believe that Valeant stock will increase and
hence, significantly increase the value of the offer
Pershing Square, Allergan’s largest stockholder with 9.7% of shares
outstanding, supports the acquisition and has agreed to take all stock at a
discount to allow Valeant to increase the value delivered
to
Allergan’s
other
stockholders,
and
demonstrates
their
belief
in
the
value
of
our
currency and the value of the combined company
Allergan’s board and management have repeatedly refused to engage in
discussions with Valeant about
a
transaction
and
has
worked
to
mislead
stockholders
about
Valeant
by
releasing
numerous
false and misleading statements about the Valeant business and business
model Allergan’s board has not been stockholder friendly by taking
actions to impede the rights of Allergan stockholders and block them from
voicing their perspectives on this offer, specifically by: hiding behind
onerous bylaws related to the mechanics of a special meeting, adopting a 10%
poison pill, failing to clarify solicitation rules until sued in
a Delaware court, and ignoring
stockholder proposals
7
Based on Valeant share price of $121.71 as of close on 16 July 2014
Capital IQ Thomson Estimates; FY2014 Allergan Median Consensus EPS estimate as at 16
July 2014 Note
(1)
(2) |
 Situation Overview (2/2)
We believe that calling a special meeting in the very near future is the only path
to provide stockholders
with
the
opportunity
to
provide
meaningful
input
on
this
transaction
in
a
timely
manner
in
order
to
maximize
the
present
value
of
the
transaction
without
the
uncertainty
of
waiting
until the 2015 annual meeting
Special meeting is required to:
Revise
current
Allergan
bylaws
which
significantly
inhibits
stockholders
from
exercising
their
right
to
call
a
special
meeting
due
to
a
number
of
onerous
requirements,
including:
holding of shares, reporting all trades, and a 25% threshold, which is higher than
the 10% requested by stockholders
Address
the
transaction
in
a
timely
manner:
if
left
to
an
annual
meeting,
Allergan
could
delay
the
annual
meeting
out
to
the
3
rd
quarter
of
2015;
as
it
stands,
Allergan
can
already delay the special meeting to the fourth quarter this year, nine months
after our initial offer
We are looking for support to call a special meeting in order to:
Give
a
voice
to
stockholders
on
Valeant's
offer
--
stockholders
should
not
have
to
wait
until
the next annual meeting, which could be delayed to the third quarter of
2015. Remove the majority of current Allergan board members to ensure better
governance and engagement
Revise current Allergan bylaws which impede the rights of Allergan
stockholders Have the new board evaluate our offer for Allergan
8 |
 II.
OVERVIEW OF VALEANT 9 |
 Valeant
Operating Principles Put patients and our customers first by maintaining the
highest ethical standards in the industry
Select high-growth business segments (therapeutic areas and geographies) where
the healthcare professional is still the primary decision maker
Maintain a bias toward durable products that are largely cash pay, or are
reimbursed through private insurance
Focus our resources on bringing new products to the market (output), not R&D
spend (input)
Maintain
a
decentralized
operating
model
to
ensure
decisions
are
made
close
to
the
customer
Focus our promotional spending on customer-facing activities
Measure all of our operating units on organic growth and cash flow generation
Require Internal Rates of Return (IRR) significantly above our cost of capital,
coupled with short-term cash paybacks for all of our deals
Directly link senior management compensation to long-term stockholder
returns Ensure tight controls and rigorous compliance standards while
avoiding overspending 10 |
 Key
Attributes of Valeant’s Business Model Decentralized model delivers strong
organic growth (averaged 7% Pro Forma organic growth since 2010)
Value added M&A with a history of maintaining or accelerating revenue growth
for nearly all platform acquisitions
All deals targeting 20%+ IRRs and short payback periods
Bausch + Lomb organic growth accelerated from 4% (pre-acquisition) to 10%+
(post acquisition), predominately on volume
All
other
major
platform
deals
experienced
material
acceleration
in
organic
growth
since acquisition
Commitment to innovation through output-driven R&D approach
Delivering 19 new product launches in 2014 (>350 if including BGx), on a
disciplined
R&D
budget
–
more
than
the
majority
of
our
competitors
and
Allergan
Rich late-stage pipeline of 300+ assets driven by a balanced approach of internal
product development, lifecycle management, BGx development, late-stage
in- licensing, and late-stage/pre-launch product acquisition
Attractive product and payor mix
85% durable products portfolio
75% cash/privately reimbursed
11 |
 Focusing on R&D Output Rather than Input
Traditional Big Pharma input-driven
approach
Focus on shots on goal
Higher spend levels assumed to
generate more new products
Incentives linked to investment levels
High fixed cost/in-house model
All capabilities in-house
Staff for peak workloads
Valeant’s output focused approach
Focus
on
productivity
–
outputs
measured against inputs
Lower risk projects
Decentralization helps ensure right
products for right markets
Focus on line extensions and new
indications
Portfolio prioritization via rigorous,
unbiased peer scientific review
Leveraging industry capacity
Outsourcing commodity services
Staff for base needs, outsource for
peak workloads
With overall industry R&D
productivity steadily declining,
traditional bets on R&D are unlikely
to pay off
12 |
 Valeant
2014 U.S. Launch Products – Peak Sales of $1.3-
$2.3 Billion
Product
Description
Source
Est. peak sales ($M)
Bensal HP®
Dermatitis, wound healing
Partnered from SMG
25-75
Luzu®
Topical antifungal for athlete’s
foot
Medicis
50-75
Neotensil™
Topical product for under-eye
bags
Partnered from Living Proof
80-100
Obagi360™
System
Skincare kit for women in their
30’s
In-house
10-30
Retin-A Micro®
.08%
Topical treatment for acne
In-house
20-30
Jublia®
Topical antifungal for
onychomycosis
In-house
300-800
Ideal Implants
Breast implant
Partnered from Ideal Implant
25-75
Hyaluronic acid for lips
Small particle filler
Medicis
20-30
Onexton™
Topical treatment for acne
In-house
50-75
enVista™
inserter (lens)
Further enhancements
Bausch + Lomb
40-50
PureVision2
for Presbyopia
Daily contact lens
Bausch + Lomb
20-30
Victus™
enhancements
Multiple enhancements
Bausch + Lomb
100-200
Ultra
Silicone hydrogel monthly lens
Bausch + Lomb
300-400
BioTrue®
multifocal
Daily contact lens
Bausch + Lomb
60-80
Trulign™
expanded ranges
(lens)
Broader range of powers
Bausch + Lomb
40-60
CeraVe®
baby line
OTC moisturizer
In-house
15-20
Peroxiclear™
Peroxide based contact lens
solution
Bausch + Lomb
50-70
Ossix®
Plus
Dental membrane
Partnered from Datum Dental
10-20
Onset®
Dental analgesic
Acquired from Onset
40-50
Total
$1,255M-2,270M
Source: Valeant management estimates
13
™ |
 Based
on projected 2014 revenues excluding Aesthetic Injectables 1
Includes contact lens, surgical, aesthetic devices
Asia
Latin
America
Central &
Eastern
Europe/
Middle East/
Africa
United
States
Canada /
Australia
By Geography
By Business
47%
21%
11%
7%
7%
17%
19%
43%
17%
Devices
1
Gx/BGx
OTC /
Solutions
Rx
11%
Western
Europe
Emerging Markets = ~27%
Highly Diversified Business Portfolio
14 |
 Strong
Growth Platforms Developed Markets
Emerging Markets
Derm Rx
Consumer
Eye Health
Dental
Latin America
Brazil
Mexico
EMEA
Russia/ CIS
Poland
Turkey
Middle East
Asia/South Africa
China
Vietnam
Indonesia
South Africa
Aesthetics
Neuro & Other
15 |
 Firm
Analyst
Report Title
Selected Broker Commentary
Aegis
Raghuram
Selvaraju
“Jubilant over Jublia U.S. Approval”
Jun 9, 2014
“…regardless of whether VRX succeeds in acquiring AGN, the VRX
business model remains valid and the firm can continue to drive
growth near-term” BMO
Alex Arfaei
“Will Likely Go the Distance with AGN;
But Should Gain More Support”
Jun
10, 2014
“…we are surprised
by some of the arguments made in Allergan’s slide presentation. […]
Given the stock’s reaction following Valeant’s offers, we believe
most investors would disagree. We also disagree with
Allergan’s characterizations of Valeant’s business”
Cantor
Fitzgerald
Irina
Rivkind
Koffler
“We Like Standalone Business, with
AGN Upside; Maintain Buy, Increase
PT to $209”
Jun 2, 2014
CIBC
Stephanie
Price
“Growth On Steroids: Initiating
Coverage At Sector Outperformer”
May 8, 2014
“Valeant has a strong track record of creating value by acquiring
firms with solid product portfolios and investing only in
late-stage/low-risk R&D. Management has proven that M&A can lead to better returns
than early stage R&D given Valeant's ability to strip out costs”
Guggenheim
Louise
Chen
“1Q14 Beat and Raise Quarter
Underscores Earnings Power of
VRX's Business Model”
May 8, 2014
“We remain positive on VRX because of the durable nature of its
diversified business model. VRX reported strong sales growth and
profitability across all regions.” Jefferies
David
Steinberg
“Disrupting the Specialty Pharma
Business Model; Assuming at Buy”
Apr 21, 2014
Investing community is highly supportive of Valeant business model and
performance ~ 1,100%
price
adjusted
increase
in
Valeant
share
price
since
2008
(1)
~
90%
of
analysts
have
a
Buy
or
Overweight
rating
(2)
Current
price
target
$168
/
share
(2)
Goldman
Sachs,
Allergan’s
financial
advisor,
price
target
prior
to
offer
was
$164
/
share
(3)
“We’re increasing our revenue and EPS estimates, and our 12-month
target […] as we have greater confidence in the growth potential of the
base business […]. For a company not known for focusing on R&D, it is worth noting a
number of new product launches and pipeline products in attractive categories that
could help organic growth down the road.”
(4)
Street Highly Supportive of Valeant’s Business Model
16
Notes
(1)
(2)
(3)
(4)
“We don't think that Valeant promotionally starves its brands, but
rather makes selective investments in highest
value
programs
[…]
the
roll-up
strategy
is
difficult,
and
Valeant's
execution
know-how
and experience
is an intangible asset that will continue to drive value”
“…an
attribute
that
is
often
overlooked
is
product
and
geographic
selection..
Valeant
is
‘where
others
aren't’. […] As such, we believe longer term organic growth may
be more durable than perceived.” Adjusted for Valeant / Biovail merger Per Bloomberg 16 July 2014 Goldman Sachs Equity Research price
target prior to initial proposal
Per Goldman Sachs Report, 28 February 2014 |
 Despite
Allergan Assertions our Model has Delivered Huge Value for Our
Stockholders 17
Total Return Analysis since 2008
(1)
(2)
1082%
212%
180%
88%
59%
45%
32%
Valeant
Apple
Allergan
Google
S&P 500
Index
Berkshire
Hathaway
Peer Group
Index
Notes
(1)
Total return analysis per Bloomberg based on a start date of 2 January 2008 to unaffected share prices of
Valeant and Allergan as of
10 April 2014 the day before
Pershing Square crossed the 5% schedule 13D ownership level
(2)
Peer Group per Valeant’s Company Filings (Actavis, Biogen, Perrigo, Mylan, Celgene, Gilead, Vertex,
Amgen, Bristol Myers Squibb,
Forest, Shire, Allergan, Danaher, Eli Lilly). Peer Group Index performance calculated as average of
its constituents |
 Bausch
+ Lomb, a Blueprint for Allergan History
Acquired B&L on August 6
th
2013
Have almost 1 year of operating performance to date
Owned by Warburg Pincus, who acquired the company in 2007
Prior to acquisition growth was ~4%
Valeant Acquisition
Initially identified $800M in cost synergies, which has since been upped
to $900M (~60% of standalone company OPEX)
Applied Valeant’s decentralized operating model to centralized
Bausch + Lomb structure
Most cuts were from non-customer facing roles
Since acquisition growth has accelerated to double digits every quarter
In Q2 growth has accelerated to 12% through decentralized structure
and continued investment in sales, marketing, and medical activities
Continue to fund all major R&D programs, which will drive continued
organic growth for years to come
18 |
 Bausch
+ Lomb Was A More Complex Integration Than Allergan Would Be
Number of
employees
13,000
11,400
Manufacturing
plants (primary)
14
6
Revenues in
North America
41%
66%
Revenues in
Emerging Markets
~25%
~17%
SKUs
200,000
Far fewer
19 |
 20
Most Reductions (40%) Were to Bausch + Lomb’s Non-Customer Facing
Functions
B+L CEO
% Reduction
to B+L personnel
US Commercial
9%
Consolidated and leaned parallel commercial teams (Pharma, Surgical, Vision Care)
and large Commercial Operations staff (6%)
Reduced marketing management (3%)
Europe
19%
Consolidated commercial teams (10%)
Eliminated redundant regional HQ and country-level G&A (6%)
Consolidated country-level Ops and R&D (3%)
Latin America
33%
Consolidated commercial teams (14%)
Eliminated redundant G&A (10%)
Consolidated country-level functional leaders in Ops and R&D (9%)
Asia
6%
Eliminated redundant G&A
Canada
14%
Consolidated commercial teams (10%)
Eliminated duplicate G&A and functional leaders (4%)
Global Supply
Chain
3%
Eliminated global infrastructure creating “one size fits all”
policies and pushing all
products to all markets
Global R&D +
Quality
23%
Eliminated high-risk projects, increased use of outsourcing, and eliminated
redundant leadership in 3 parallel R&D organizations (17%)
Consolidated country-level personnel (6%)
Corporate
Center
Leaned Finance, IT, Legal, HR, Global Marketing and Corporate Communications
teams (60%)
Consolidated G&A from parallel global BUs (Pharma, Surgical, Vision Care)
(6%) 66%
Actions taken |
 21
Bausch + Lomb Pipeline Update
Project
Status/Development
Pharmaceuticals
Brimonidine
Recent completion of Phase 3 studies, planned NDA
submission
Lotemax Gel Next Gen
Recent completion of positive Phase 3 study
Latanoprostene bunod
Phase 3 enrollment complete
Mimetogen
Awaiting analysis of Phase 2 data
Contact Lens
Ultra
Successful approval, US launch underway, Anticipated approval
and launches of Ultra Toric and Multifocal lenses
Biotrue
Approval of multifocal contact lens
Surgical
EnVista
Toric IOL in Phase 3 development
Victus
US fragmentation approval and launch; improvements to
software and hardware
Trulign
Development of expanded ranges
Stellaris PC
New packs, retina products, and enhancements
Cirle
Investment in surgical navigation system
Consumer
Peroxiclear
Successful approval and launch
Soothe XP
Re-launching product |
 Update
on Bausch + Lomb Q2 Performance (1)
•
Consumer
•
RX Pharma
•
Surgical
•
Contact Lens
•
Generics
Emerging Markets
Other Developed Markets
Organic Growth:
Q2 2014/Q2 2013
22
14%
8%
14%
United States
12%
17%
12%
38%
3%
Country/Region
Notes
(1)
Total
12%
~90% of growth in the U.S. was from volume
Preliminary Estimates
>90% of the growth on a global basis was from volume
|
 Bausch
+ Lomb Performance Acquisition through Q2 2014
(1)
•
Consumer
•
RX Pharma
•
Surgical
•
Contact Lens
•
Generics
Emerging Markets
Other Developed Markets
Organic Growth
since acquisition
23
13%
10%
13%
United States
12%
11%
11%
12%
29%
Country/Region
Notes
(1)
Total
11%
~90% of growth in the U.S. was from volume
Preliminary Estimates
>90% of the growth on a global basis was from volume
|
 III.
COMPELLING STRATEGIC AND FINANCIAL TRANSACTION FOR ALLERGAN STOCKHOLDERS
24 |
 Compelling Strategic & Financial Transaction for Allergan Stockholders
Significant immediate value to Allergan stockholders
Each Allergan share receives $72 in cash and 0.83 Valeant shares
Approximate
50%
premium
to
the
unaffected
stock
price,
an
implied
EBITDA
multiple
of
approximately
23x
(1)
,
and an implied P/E multiple of 31x 2014 earnings
(2)
Allergan ownership of 44% of pro forma entity
Open to providing a contingent value right for DARPin in a negotiated
transaction We
believe
that
the
Valeant
stock
price,
and
value
of
the
offer,
will
increase
as
certainty
of
transaction
increases
Sustainable long-term value to stockholders
Unrivaled portfolio in Ophthalmology, Dermatology, Aesthetics, and Neurology
Robust combined company product pipeline
Valeant strength in emerging markets to drive future growth, as seen in Bausch
& Lomb $2.7B+ in annual operating cost synergies and additional
significant revenue and tax synergies, supporting meaningful earnings
accretion Valeant
intends
to
initiate
$0.20
/
share
annual
dividend
–
equal
to
current
Allergan
dividend
Allergan’s
largest
stockholder,
Pershing
Square,
has
elected
to
take
all
stock
–
at
a
substantial
discount
based on current prices
Pershing Square is confident in our currency and the value of the combined entity
Allows Valeant to offer more cash to Allergan stockholders
Other than the antitakeover devices that can be removed by the Allergan board, no
substantive hurdles to closing
No financing contingency; committed financing in place
Divested aesthetics business
Valeant will accept antitrust risk
Flexible with any and all social issues
All other conditions are customary and should easily be satisfied
25
Note
Based on Valeant share price of $121.71 as of close on 16 July 2014; Allergan
unaffected share price of $116.63 as of 10 April 2014, the day before Pershing
Square crossed the 5% Schedule 13D ownership level Capital IQ Thomson
Estimates; FY2014 Allergan Median Consensus EPS estimate as at 16 July 2014
(1)
(2) |
 26
Valeant + Allergan –
A Perfect Strategic Combination
Dermatology &
Aesthetics
Ophthalmology
Consumer
Neuro. &
Urology
Emerging markets
Combined company with 14 late stage pipeline programs with $4B+ in
potential annual peak sales
Note
(1)
are approximated
Therapeutic
area
revenue
estimates
exclude
revenue
from
emerging
markets.
Revenue
estimates |
 Valeant
+ Allergan, an Unrivaled Platform for Growth and Value Creation in Healthcare
(1)
Note
(1)
Valeant +Allergan
2014E rev
5 year market
growth rate
Source: IMS, EvaluatePharma
27
Therapeutic
area
revenue
estimates
exclude
revenue
from
emerging
markets.
Revenue
estimates
are
approximated
Ophthalmology
Dermatology Rx
Aesthetics
Consumer
Neurology/Dental/Other
Emerging Markets
$3.8B
6-7%
$1.5B
6-7%
$2.1B
11-12%
$1.3B
6-7%
$2.8B
4-6%
$3.8B
10-13% |
 Valeant
Allergan
Benefits of Valeant Model
Emerging
Market (“EM”)
Focus
Significant EM presence with field
sales force to drive growth
Strong branded generics / OTC
portfolio with 55% annual growth
in EM
Continue to utilize distributors in
some markets
11% annual growth in EM
Ability to leverage direct EM sales
force to sell branded generics
Commercial
Direct customer-facing promotion
(70%
total
headcount)
Heavy
investment
in
marketing
Clear ROI and value of dollars
spent
Organization
Decentralized, local, empowered
business
owners (SG&A equal to
22% of sales in 2013)
Rapid-decision making at local /
customer level
Centralized, global & regional
organizations
Heavy
corporate
focus
and
spend
(SG&A equal to 38% of sales in
2013)
“Gold-plated”
approach
Quicker, better-informed decisions
made
close
to
the
customer
Small, lean and focused corporate
center
Capital
Allocation
Low risk, in-line and late-stage
assets
Strict price discipline
History of successful M&A
Higher-risk,
earlier-stage
assets
Less sensitive to price paid
Mixed M&A track-record
Higher returns on capital and
faster paybacks
Easier to understand success and
track record
R&D
Low-risk, late-stage projects (line-
extensions)
Robust pipeline from internal &
external sources
2 –
3% of revenue
Early-stage, risky programs
(limited success; 35 failures since
1998)
Similar emphasis on line-
extensions but at ~4-5x the cost
Low-risk investments (eliminates
risky
early
stage
research)
Focus on outputs
Operating Model Differences Create Opportunity for Synergies
28 |
 Opportunity to Drive Significant Value From Synergies …
Annual
cost
synergy opportunity of $2.7 billion + tax + revenue synergy
Value
Source of Synergy
SG&A Synergies
~$1,800 million
(40% reduction of
combined SG&A)
Rationalize US & Corporate HQ
Eliminate regional HQ
Decentralize organization by eliminating unnecessary global functions
Reduce duplicate external spend
Align to Valeant advertising and promotion model and spend
Maintain strong field force presence
R&D Cost
Synergy
~$900 million
(69% reduction of
combined R&D)
Apply Valeant approach to on-going R&D
Focus on output not input
Target low-risk projects
Continue high-probability programs such as line extensions
Continue to in-license late stage/launch products (e.g. Emerade,
Neotensil, Luzu)
Rationalize core R+D infrastructure
Tax Synergy
Revenue Synergy
Valeant has a proven track record in achieving or surpassing announced
synergies 29
Combined high single-digit tax rate
Acceleration of Allergan in emerging markets
Acceleration of Allergan OTC
Acceleration of Valeant Aesthetic assets ex-US
Additional product growth opportunities |
 +$72
per
share
in cash
Allergan Stockholders
Assumes reinvestment of $72 in Valeant stock at $117.75 share price as of June 16th
close Based on mid-point of guidance
…
Which Supports Significant Earnings Accretion for Both
Sets of Stockholders, and …
(1)
30
$5.68
(2)
$5.68
(2)
$8.68
(2)
$9.00
$15.65
$10.85
Allergan based on .83
exchange
Allergan based on .83
exchange and reinvesting
cash in VRX
Valeant stockholder
2014
Pro Forma 2014
58%
Accretion
176%
Accretion
25%
Accretion
(1)
(2)
Notes |
 This
value is for illustrative purposes only and is not a prediction of a future trading price; the actual future trading price may be higher or lower
Pro
Forma
2014
EPS
=
$10.85;
Management
estimate,
Valeant
June
2
presentation
Illustrative, based on blended Unaffected 2014 P / E Multiple = 16.8x; Management
estimate, Valeant May 28th presentation Exchange
Ratio
Valeant
Stock
Price
.83
$122
Per Share Cash
Consideration
Per Share
Equity
Consideration
Total
$72
$101
$173
$10.85
(2)
x 16.8x P / E
(3)
= $182 per share
Current
“See
Through”
Value
.83
$182
$72
$151
$223
Indicative
Trading
Value
(1)
Valeant Closing Price July 16, 2014
…
A Compelling Valuation for Allergan Stockholders, that …
31
Equity Consideration
Calculation
(1)
(2)
Notes
(3)
nd |
 Implied
Standalone
Allergan
2015
P
/
E
Multiples
Pre-Bid EPS
(3)
Post-Bid EPS
(4)
$116.63 as of 10 April 2014, the day before Pershing Square crossed the 5% Schedule
13D ownership level This value is for illustrative purposes only and is not a
prediction of a future trading price; the actual future trading price may be higher or lower
Capital IQ Thomson Estimates; FY2015 Allergan Median Consensus EPS estimate as at 10
April 2014 ~$6.21 Capital IQ Thomson Estimates; FY2015 Allergan Median Consensus
EPS estimate as at 16 July 2014 ~$6.94 +91%
32
(1)
(2)
Allergan Unaffected
Stock Price
Current "See Through"
Value
Indicative
Trading Value
+48%
18.8x
16.8x
27.9x
24.9x
36.0x
32.2x
…
Represents a Significant Premium to Allergan’s
Unaffected Trading Levels, and …
(1)
(2)
Notes
(3)
(4)
$117
$173
$223 |
 …
Compares Favorably to Precedent M&A Transactions …
Notes
Premium to Unaffected Trading Price
AV / LTM EBITDA Acquisition
Multiples
(4)
(4)
33
Thomson Reuters Database. Median premium paid to target’s unaffected trading
price 1-day prior to announcement or event. Based on transactions announced in
last 12 months, where transaction value was above $1Bn and cash was included in the
deal This value is for illustrative purposes only and is not a prediction of a
future trading price; the actual future trading price may be higher or lower
Based on selected pharmaceutical M&A transactions over $15Bn in the last 10 years:
Actavis / Forest Laboratories, Abbvie / Shire, Sanofi-Aventis / Genzyme, Bayer /
Schering,
Merck
/
Schering-Plough
and
Pfizer
/
Wyeth.
Data
sourced
from
Company
filings
and
FactSet
as
of
16
July
2014.
Implied
aggregate
value
/
LTM
EBITDA
are
based on unaffected prices and pro forma for announced acquisitions”
Allergan 31 March 2014 LTM EBITDA of $2.259Bn per company filings; defined as
non-GAAP operating income plus depreciation; net debt & MI per 31 March 2014 AGN company filings.
This value is for illustrative purposes only and is not a prediction of a future
trading price; the actual future trading price may be higher or lower
(1)
(2)
(3)
(4)
(5)
(1)
(2)
(3)
Median Premium
Paid in US M&A
Transactions
During Last
Twelve Months
($1Bn and Higher)
Based on
Current "See Through
Value"
Based on
Indicative
Trading Value
Based on
Current "See
Through Value"
Based on Indicative
Trading Value
Median for
Precedent Selected
Pharmaceutical
Transactions |
 Indicative Trading Value AGN
(1)
-
$223 per share
Current “See Through”
Value AGN -
$173 per share
(2)
(6)
(5)
…
As Well As Other Pricing Reference Points …
(3)
Trading Reference Points
Price Targets From
Allergan’s Advisers
(9)
(4)
(8)
34
$125
$132
$117
$131
$126
$127
$125
$130
Goldman Sachs
Price Target Prior to
Valeant's Offer
BAML Price
Target Prior to
Valeant's Offer
AGN Unaffected
Share Price
AGN Unaffected
All-Time Trading High
Illustrative AGN
Price Adjusted for
S&P 500 Return
Illustrative AGN Price
Adjusted for Proxy
Peers
Return
Illustrative AGN Price
Adjusted for S&P 1500
Pharmaceuticals
Index Return
Illustrative AGN Price
Adjusted for Street
Revised 2015 EPS
Notes
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
This value is for illustrative purposes only and is not a prediction of a future trading price; the
actual future trading price may be higher or lower
Goldman Sachs Equity Research price target prior to initial proposal BAML Equity Research price target
prior to initial proposal
Unaffected share prices as of 10 April 2014, the day before Pershing Square crossed the 5% schedule 13D
ownership level Per
Bloomberg; 19 March 2014
Allergan share price on 10 April 2014 adjusted for S&P 500 performance through to 16 July 2014 Allergan share price on 10 April
2014 through to 16 July 2014 adjusted for peers from Allergan proxy statement dated 26 March 2014. Proxy peers exclude Forest Laboratories due to acquisition of Actavis on 1 July
2014 Allergan share
price on 10 April 2014 adjusted for S&P 1500 Pharmaceuticals Index performance through to 16 July 2014
Pre-bid P / E multiple calculated using Capital IQ Thomson estimates as of 10 April 2014 applied to
current Capital IQ EPS estimates as of 16 July 2014 to derive implied Allergan price
(7) |
 IV. WHY
A SPECIAL MEETING IS NEEDED 35 |
 In
April, Valeant made a public acquisition proposal to buy Allergan for $48.30 in cash and 0.83 of a Valeant
share for each Allergan share, representing a substantial premium over
Allergan’s unaffected stock price Valeant met with most of
Allergan’s major institutional stockholders Based on feedback received
from Allergan stockholders, Valeant revised its offer to $58.30 in cash, representing
an
increase
of
$10,
or
approximately
21%,
of
cash
consideration,
and
0.83
of
a
Valeant
share
Pershing Square engaged further with several of Allergan’s largest
stockholders and received feedback that if Valeant raised its offer to $180
in value per share (based on the trading price at that time of Valeant stock), they
would be supportive of the transaction
Valeant
subsequently
launched
an
exchange
offer
to
take
the
bid
to
Allergan
stockholders
–
due
to
the
structural
defenses
adopted
by
Allergan’s
incumbent
board,
stockholders
are
unable
to
exchange
their
shares
Allergan
remains
unwilling
to
engage
in
discussions
about
the
benefits
of
a
proposed
combination
–
as
a
result,
Valeant and Pershing Square have decided to put the decision directly in the hands
of Allergan stockholders
Valeant Has Presented a Compelling Offer –
Allergan Has
Refused to Engage or Allow Stockholders a Voice
36
Note
(1)
(2)
Based on this further feedback, Valeant and Pershing Square restructured their
arrangement to materially increase the value and cash component to
Allergan’s non-affiliated stockholders In
response,
Valeant’s
board
approved
raising
the
offer
to
$72.00
in
cash
and
0.83
Valeant
shares
an
approximate
50%
premium
to
the
unaffected
stock
price,
an
implied
EBITDA
multiple
of
approximately
23x
(1)
,
and
an
implied
P/E
multiple
of
31x
2014
earnings
(2)
Based on Valeant share price of $121.71 as of close on 16 July 2014; Allergan unaffected share price of
$116.63 as of 10 April 2014, the day before Pershing Square crossed the 5% Schedule 13D ownership
level Capital IQ
Thomson Estimates; FY2014 Allergan Median Consensus EPS estimate as at 16 July 2014
|
 May
13:
Pershing
Square
attempts to have a discussion with
Mr. Pyott regarding the rejection
of
the
Valeant
proposal;
Mr.
Pyott
does
not
respond
to
substantive
questions
and
refuses
a
request
for a call between Pershing
Square and independent directors
Feb
10–14:
Mr.
Pyott
conducted
sessions
with
research analysts where he made statements
indicating that Allergan and its stockholders were not
interested in a combination with Valeant
May
12:
Despite
having no
substantive
discussions with
Valeant or its
advisors, Allergan’s
board rejects the
acquisition proposal
April
23-24:
Allergan
refuses
Pershing
Square’s
request
for
a
call
with
Michael
Gallagher,
Allergan’s
Lead Independent Director, and instead provides a
call with Mr. Gallagher, Mr. Pyott and other Allergan
executives; during the call, Mr. Gallagher refuses a
request
for
a
call
without
Allergan
management
present
April
21:
Pershing
Square
announces its 9.7% position
in Allergan, making it
Allergan’s largest
stockholder, and Valeant
announces its acquisition
proposal; within hours,
Allergan adopts a poison pill
with a 10% ownership trigger
Timeline of Valeant’s Efforts and Allergan’s Responses
Feb
6:
After
outreach
by Mr. Pearson, Mr.
Pyott agreed to meet
to discuss a potential
combination of
Allergan and Valeant
May
29:
At
the
Sanford
C.
Bernstein Strategic Decisions
Conference in NYC, several of
Allergan’s largest stockholders
expressed to Pershing Square
their support for a merger between
Allergan and Valeant, particularly
if the offer increased to $180 in
value per share
May
27:
Despite
having
conducted
no
thorough
due
diligence
on
Valeant,
Allergan’s
management
makes
a
public
presentation
criticizing
Valeant’s
business
model
and
team;
many of the assertions contained in the
presentation are factually incorrect
May
30:
In
response
to
Allergan stockholders’
feedback, Valeant
increases its bid by [23]%;
in connection with the
increase, Pershing Square
agrees to the restructuring
of its agreement (including
taking less consideration
and all stock)
June
10:
After
announcing
publicly on May 27 that
Allergan would likely not be
willing to negotiate with
Valeant, Allergan rejects
Valeant’s revised proposal
(and, on June 24, the
subsequently announced
exchange offer)
June
13:
Pershing
Square is forced to
pursue litigation after
Allergan refuses to
clarify that
stockholders
attempting to exercise
their
special
meeting
right will not trigger
Allergan’s
poison
pill
June
27:
Allergan
settles the Pershing
Square suit,
acknowledging that
stockholders attempting
to exercise their right to
call a special meeting
will not trigger the
poison pill
Based on Historical Conduct, in the Absence of a Stockholder Forum Allergan’s
Incumbent Board is Unlikely to Engage 2012:
Mike
Pearson of Valeant
approached David
Pyott of Allergan,
regarding a
potential
combination
transaction; Mr.
Pyott indicated the
Allergan board was
not interested at
the time
Note
Other than the 2012 discussions, all events above occurred in 2014
37
Subsequent to the sessions, Sanford Bernstein
and Bank of America Merrill Lynch (subsequently
engaged as an advisor to Allergan) published
reports including Mr. Pyott’s statements
These
statements
preempted
the
meeting
between
Mr.
Pyott
and
Mr.
Pearson,
and
it
was
cancelled |
 Allergan’s Board Has Been Focused on Obstructing
Stockholder Input Rather than Constructively Engaging
Since Valeant's initial proposal, the Allergan board has responded by adopting
structural defenses, limiting stockholder rights and refusing to engage,
including: Immediately
adopting
a
poison
pill
with
a
10%
trigger
threshold,
which
prevents
stockholders
from
taking
advantage of our exchange offer
Quick to “clarify”
that stockholders can remove but not replace directors at a special meeting, but
did not “clarify”
that
stockholders’
attempts
to
call
a
special
meeting
would
not
trigger
the
poison
pill
until
litigation
was pursued
Attacking Valeant’s business model and business performance, the value of our
currency and the capabilities of our leadership team, with assertions that
have been proven factually incorrect Deferring
all
matters
of
the
Valeant
offer
to
the
Chairman
&
CEO
as
the
sole
point
of
contact
with
Valeant
and Pershing Square –
this is the same executive who the majority of Allergan stockholders voted to
strip of the Chairman role
Allergan ignored its own guidelines by refusing to allow many stockholders to meet
separately with Mr. Gallagher–
the
same
director
they
appointed
to
discuss
the
transaction
and
against
whom
one-third
of
Allergan stockholders voted against, and ISS and Glass Lewis recommended against
in 2014 Refusing
to
engage
in
any
discussions
related
to
our
offer
and
attacked
our
business
model
and
business performance without any due diligence on our business
Lobbying government officials and physicians against the deal
1
2
3
4
5
6
7
38 |
 Allergan Management Approach
Refusing to evaluate our offer
Has attacked our business model without any factual basis
Has not done any direct due diligence with Valeant, whose stock constitutes a
majority of its offer
Has made false and misleading statements about our business model and
business performance
Proposing an implausible standalone plan
Allergan's plan is in direct response to Valeant's offer and lacks
credibility Provided a plan for future cost containment
Have no track record of cost reduction
Continue to raise future earnings estimates:
Q4 2013 earnings call: “
growth of between 12% and 15%, which is
consistent with our aspiration of mid-teens EPS growth.”
May 2014 special call: “
…[we believe] we can achieve EPS growth of 20%
on a compound annual basis over the next five years.”
Allergan has now suggested they will further revise guidance
39 |
 Allergan is Making False and Misleading Statements
Allergan Assertions:
40
Top 10 markets: China, Brazil, Russia, India, Mexico, Poland, Turkey, Venezuela, Saudi
Arabia, and Indonesia 13 of the top 15 Valeant products are growing
9 of the 15 are growing by volume
“Emerging market growth
in smaller countries with
less revenue potential”
“Bausch & Lomb’s outlook
is poor”
“Valeant model leads to
rapid organic sales
decline”
Bausch & Lomb continues to grow 10%+ year over year
Growth predominately from volume, not price
Valeant has direct presence in 9 of the top 10 emerging
markets ,
and
sales
in
all
10
markets
Over $200M in sales in 2014 for 5 of the top 6 markets
(China, Brazil, Russia, Mexico, and Poland)
Delivering double-digit organic revenue growth in 7 of the 9
markets, and over 10% organic growth in aggregate across
these markets
“
acquisition (CAGR year of acquisition through 2013)
Coria: 27%, Dow: 12%, Aton: 33%, Pharmaswiss: 5%,
Sanitas: 5%, OraPharma: 9%, Medicis: 4%, Bausch &
Lomb 12% (growth through Q2 2014)
Valeant has averaged ~7% pro forma organic growth since
2010
In Q1 2014, quarter over comparable quarter in Q1 2013
Facts:
“Anemic growth driven
by what we believe are
unsustainable price
increases -
not volume”
(1)
Notes
All platform acquisitions growth has accelerated post
1 |
 Allergan vs. Valeant governance comparison
ISS Quick Score
41
Overall
•
Board
•
Shareholder Rights
•
Compensation
•
Audit
•
10
•
9
•
3
•
1
•
3
•
6
•
1
•
1
8
2
Source: Yahoo Finance, ISS
Note: the lower scores are better ratings, (1: best, 10: worst)
|
 Allergan’s Board is Not Functionally Independent
Michael Gallagher is not an effective Lead Director
Longest-standing non-management director on the board,
having joined in 1998 (shortly after Mr. Pyott joined)
Received 33% withhold votes from Allergan stockholders at
the 2014 Annual Meeting
Limited scope of his lead director role was only enhanced in
reaction to stockholder pressure
Refused interactions with Pershing Square, Allergan’s largest
stockholder, without Mr. Pyott present, which we have been
told has been the case for many AGN stockholders
ISS and Glass Lewis recommended against Mr. Gallagher in
2014 given the board's failure to fully implement a stockholder
proposal that received majority support at the company's
2013 annual meeting.
Allergan’s Board Structure Provides a Poor Check on Management Interests
Long-serving CEO David Pyott dominates the current
board in his role as Chairman
Joined
in
1998
–
his
16-year
tenure
is
longer
than
any
other director on the board
Stockholders voted to remove him from the Chairman
role at Allergan’s 2014 annual meeting, but he still
retains his Chairman position
Mr. Pyott’s compensation in the past two years alone
is comparable to the amount he would receive in a
deal
Used his role as Chairman to lead all matters relating
to Valeant’s proposal
The Compensation Committee, under the leadership of Mr. Gallagher as Chairman, has
designed a compensation structure
that
enables
Mr.
Pyott
to
remain
highly
compensated
regardless
of
value
creation
for
Allergan
stockholders
Overwhelming
majority
of
Mr.
Pyott’s
compensation
is
delivered
via
a
long-term
incentive
plan
that
is
benchmarked
to
the
75th
percentile
of
a
peer
group,
nearly
half
of
which
is
comprised
of
companies
that
are
more
than
2x
Allergan’s market cap
Mr.
Pyott’s
long-term
incentive
award
is
not
subject
to
any
performance
metrics
and
will
deliver
value
to
Mr.
Pyott as long as there is any share price increase, even if Allergan underperforms
peers In
2012
the
Compensation
Committee
used
its
discretion
to
grant
a
one-time,
non-performance
based
“retention
grant”
to
Mr.
Pyott,
who
had
been
in
his
role
for
14
years
at
the
time,
valued
at
$9.2
million
A portion of compensation is directly tied to the level of R&D spend, more
spending leads to
higher
pay
irrespective
of
the
return
on
investment
Illustrative Example: Lack of Effective, Independent Oversight of CEO
Compensation 42 |
 Allergan’s Board Has History of Not Reacting Without
Direct Stockholder Pressure
Board
Declassification
2011: Stockholder proposal sought
declassification
of
the
board
2011:
Allergan
sought
no
action
relief
from
the
SEC
and
reacted
by
declassifying
the
board
Lead
Independent
Director
2014:
Allergan’s
lead
independent
director
role was described by a proxy advisor as
“not sufficiently robust to provide an
effective
counterbalance”
to
Mr.
Pyott
1
2014:
Allergan’s
board
purports
to
have
expanded
the role in response to stockholder pressure,
although Mr. Pyott appears to continue to dominate
the board
Stockholder
Ability to Call a
Special Meeting
2012: Majority supported stockholder
proposal
to
establish
the
right
for
holders
of
10%
of
stock
to
call
a
special
meeting
2013:
Allergan
submitted
a
charter
amendment
to
provide holders of 25% of Allergan’s stock the right to
call special meetings
The board unilaterally
imposed onerous
information and procedural bylaw requirements
without
reasonable
disclosure
that
make
it
difficult
for stockholders to exercise this right
Stockholder
Action by
Written Consent
2013: Majority supported stockholder
proposal
to
establish
the
right
to
act
by
written consent
2014:
Allergan
submitted
charter
amendment
to
provide stockholders the right to act by written
consent, but again
unilaterally imposed onerous
information and procedural requirements without
reasonable
disclosure
making
it
difficult
to
exercise
this right
Separation of
Chairman / CEO
2014: Majority supported stockholder
proposal
to
split
the
Chairman
and
CEO
roles of Mr. Pyott
Present:
Allergan’s
board
has
taken
no
action
to
date
in
response
to
this
majority
supported
proposal
Engaging with
Valeant
Present:
Based
on
our
conversations,
Allergan stockholders are interested in
Allergan having constructive dialogue
with Valeant
Present:
Allergan’s
board
continues
to
reject
requests
for
substantive
discussions
Partially
Ignored
Reactive
Ignoring
Allergan Stockholder Views
Allergan’s Response
Note
(1)
43
From 2014 ISS report on Allergan
|
 Allergan
has No Experience with Major Restructuring Programs or Large Scale Acquisitions
Recent Allergan Statements Lack Credibility
44
Prior to Valeant Offer
Following Valeant Offer
Cost Cutting
EPS Growth
Share
Repurchases
M&A |
 Allergan’s Poor Business Development Track Record
Inamed, March 2006, $3.3Bn
Obesity business sold off for less than 1x sales and an ~80% write-off of book
value
Breast aesthetics business has slowed and sales have fallen below
expectations Esprit Pharma, October 2007, $371MM
Peak sales fell ~80% short of expectations
Resulted in write-off of 99.6% of purchase price
DARPin, May 2011, $420MM (including milestones)
Phase III trial delayed, and no formal timeline for Phase III trial has been
provided
MAP Pharmaceuticals, March 2013, $871MM
Lead
product
Levadex
has
been
delayed
three
times
and
now
is
not
expected
to
launch until 2015
Since MAP acquisition have acquired an additional company in an attempt to fix
ongoing CMC issues
45 |
 Allergan stockholders should have the right to assert their
views on the Valeant offer
The existence of a poison pill makes it impossible for
Allergan stockholders to take advantage of our exchange
offer
This right was only adopted after stockholder pressure
Made charter unclear if calling a meeting could trigger
Poison Pill (Valeant and Pershing Square were forced to
litigate to clarify)
Developed onerous process which provides significant
inconvenience and burden to Allergan stockholders
Pershing Square is seeking the support of at least 15.3% of
non-affiliated Allergan stockholders to exercise their right to
call a special meeting
The special meeting will provide a forum for
Allergan stockholders to deliver a clear
message regarding their views on the
Valeant proposal and the conduct of
Allergan’s board
Allergan stockholders will be able to vote on
proposals related to the following:
Removal of 6 of 9 of the incumbent
directors of Allergan
Recommendation of a slate of new
independent directors
Encourage the independent board to
engage in discussions with Valeant
Other positive governance changes,
removing impediments to stockholder
action
A Special Meeting Will Provide Allergan Stockholders With
a Meaningful Voice
“The ability to request a special stockholder meeting gives our stockholders a
powerful means to consider and approve stockholder-sponsored action and
timely effect changes….” -
Allergan Proxy for the 2014 Annual Meeting, Filed 3/26/2014
46
Stockholders should not have to wait for the next annual
meeting, which could be delayed to the third quarter of
2015. The Special Meeting should be called promptly, and
not delayed for 120 days
Allergan’s charter provides stockholders holding 25% of
the stock with the right to call a special meeting
Valeant believes that Allergan
stockholder support at the special
meeting will deliver a clear message that
Allergan should engage with Valeant |
 V.
CONCLUSION
47 |
 Allergan Stockholders Deserve to be Heard
Valeant’s offer is $72 in cash and 0.83 of a Valeant share providing Allergan
stockholders a compelling premium of approximately 50% to the unaffected
stock price, an implied LTM EBITDA
multiple
of
approximately
23x
(1)
,
and
an
implied
P/E
multiple
of
31x
2014
earnings
(2)
Valeant’s offer is the result of meetings with and direct feedback from most
of Allergan’s major institutional stockholders
Allergan’s
board
has
refused
any
engagement
with
Valeant,
has
adopted
and
is
enforcing
its
non-stockholder friendly structural defenses, as recognized by many
institutional investors along
with
ISS
and
Glass
Lewis,
acting
to
limit
its
stockholders’
rights,
and
is
taking
a
“scorched earth”
approach, attacking Valeant’s business model and business performance with
false and misleading information, and in turn hurting both Valeant and
Allergan stockholders. We believe Allergan stockholders should have a voice
on both eliminating the non-stockholder friendly structural defenses of
Allergan, along with evaluation of the Valeant offer, and that there are
significant risks and uncertainties associated with Allergan continuing to delay.
If stockholders request Special Meeting, Allergan should call it
immediately, and not delay for
120 days.
We are Asking for Your Support in Calling a Special Meeting
48
Note
Based on Valeant share price of $121.71 as of close on 16 July 2014; Allergan
unaffected share price of $116.63 as of 10 April 2014, the day before Pershing
Square crossed the 5% Schedule 13D ownership level
Capital IQ Thomson Estimates; FY2014 Allergan Median Consensus EPS estimate as at 16
July 2014 (1)
(2) |
 APPENDIX |
 50
Cathleen
P.
Black
(70)
Senior
Advisor
at
RRE
Ventures
LLC
Senior Advisor at RRE Ventures LLC, an early stage venture capital firm, since 2011, and has served
on the boards of two of RRE Ventures LLC’s portfolio companies, Yieldbot Inc. and Bark
& Co Inc. She is also a board member of PubMatic, Inc. Previously served as President of
Hearst Magazines and also served as a director of the Hearst Corporation from January 1996
until late 2010. Served as President of USA Today from October 1983 until June 1991 and was a board member of the
parent company, Gannett Co.
Served as a director of Vibrant Media Inc., a global leader of in-content contextual technology,
from October 2012 until 2013, served as an independent director of International Business
Machines Corp. from 1995 until 2010, and served as a director of The Coca-Cola Company
from 1992 until 2010 Proposed Director Slate (1/2)
Fredric
N.
Eshelman
(65)
Principal
of
Eshelman
Ventures,
LLC
Principal at Eshelman Ventures, LLC, which is a fund that invests primarily in early-stage
healthcare Served as Founding Chairman of Furiex Pharmaceuticals, Inc., a drug development
company, from its founding in 2009 until the sale of the company to Forest Laboratories LLC in
July 2014 for $1.5 billion. Founded Pharmaceutical Product Development (PPD), an international
contract research organization, and served as the CEO of PPD until 1989 and from July 1990
until July 2009, Vice Chairman of its board of directors from July 1993 until July 2009, and Executive Chairman
from July 2009 until its sale to private equity in 2011 for $3.9
billion. From 1989 until 1990, Dr. Eshelman was Senior Vice
President of Development at Glaxo, Inc. and served on the board of the U.S. subsidiary of Glaxo
Holdings plc. Currently serves as director on several private company boards. Served on the
board of Princeton Pharma Holdings LLC from February 2008 until May 2010, when it was acquired
by Valeant Pharmaceuticals International, Inc. Betsy
Atkins
(61)
Chief
Executive
Officer
of
Baja
LLC
CEO of Baja LLC, an independent venture capital firm focused on technology, renewable sciences, and
sciences, since 1994 Co-founded several successful high tech and consumer companies,
including Ascend Communications, which was sold to Lucent Technologies in 1999 for $24
billion Formerly CEO and Chairman of Clear Standards, an on-demand enterprise energy
management sustainability software company, from 2008 to 2009, at which time it was acquired
by SAP AG. Former Chairman of the Board of Directors of Third Screen Media, a company that was
eventually sold to AOL Has served as a director of Polycom, Inc. since April 1999, Schneider
Electric, SA since April 2011, HD Supply Holdings, Inc. since September 2013, and Ciber Inc.
since July 2014. Formerly served on the Boards of Directors of Human Genome Sciences Inc.,
HealthSouth Corporation, Vonage Holdings Inc., Towers Watson & Co., Reynolds American Inc., SunPower
Corporation, and Chico’s FAS, Inc. Has agreed she will remain on only three other boards if
elected to Allergan’s board |
 51
Managing Director of Shulman Ventures Inc., a private equity firm, and has been a strategic advisor
to Water Street Healthcare Partners, a health care private equity firm, since 2008
Served as Chairman of Health Management Associates Inc. from 2013 until January 2014, and served as
Chairman and CEO of Magellan Health Services, Inc. from 2003 until 2009
Founded and was Chairman and CEO at Internet Healthcare Group, LLC, a health care services and
technology venture fund, from 1999 until 2003, and served as the Chairman, President and CEO
of Prudential Healthcare, Inc. from 1997-1999 Has served as Chairman of CareCentrix, Inc.
since 2008, Access MediQuip, LLC since 2009, and Accretive Health, Inc. since 2014, and has
served on numerous privately held company boards Former President and CEO of the Graduate
Management Admission Council, a not-for-profit association dedicated to creating
access to graduate management and professional education, a position he held from 1995 until December 2013
Has served as a Director for CoreSite Realty Corporation since 2010 and Barnes & Noble, Inc.
since 2010. Served as a Director for Terra Industries, Inc. from 2009 until 2010 and Laureate
Education, Inc. from 2002 until 2007. Worked in various capacities for Ernst & Young LLP
from 1978 until 1994. Also held faculty positions at Queen’s University from 1968 until
1970, the University of Illinois at Urbana Champaign from 1970 until 1972, the University of Texas from 1972
until 1978, and Harvard University’s Graduate School of Business from 1976 until 1977
Former Executive Chairman of Univar, Inc., a position he held from May 2012 until December 2012.
Served as Director, President and CEO of Univar, Inc. from 2009 to May 2012.
Served
as
Chairman
and
CEO
of
Allied
Waste
Industries,
Inc.
from
2005
until
2008,
at
which
time
Allied
Waste
Industries,
Inc. merged with Republic Services, Inc. Served as Executive VP of ARAMARK Corporation from 2000
until 2004 Has
served
as
a
Director
of
Veritiv
Corporation
since
June
2014,
Reynolds
American
Inc.
since
2007
and
Ecolab
Inc.
since
2006. Has also served as Director of Liberty Capital Partners, Investment Arm, a private equity and
venture capital firm specializing in startups, early stage, growth
equity, buyouts, and acquisitions, since June 2004
Proposed Director Slate (2/2)
Steven
J.
Shulman
(63)
Managing
Director
of
Shulman
Ventures,
Inc.
David
A.
Wilson
(73)
Former
President
and
CEO
of
the
Graduate
Management
Admission
Council
John
J.
Zillmer
(58)
Former
President,
CEO
and
Director
of
Univar,
Inc. |
 Valeant
Corporate Governance (1/3) Provision
Valeant*
Allergan
Stockholder Support Needed to Call a
Special Meeting
5% (BCBCA)
25% (Articles)
Amount of Time Board May Delay
Holding a Special Meeting After a
Request
4 months (BCBCA)
120 days (Bylaws)
Requirements for Stockholders to Call a
Special Meeting
Must satisfy the basic technical requirements of the
BCBCA (which include, among other things, a
requirement to state the business to be conducted and
obtaining the signature of all the requisitioning
shareholders)
Must provide detailed Special Meeting Request with
information on, among other things, the holder, its
holdings, and any “Disclosable Interest”
(as defined in the
Bylaws) and a representation that the holder will hold its
shares through the date of the meeting (Bylaws)
Stockholder Action by Written Consent
No specific requirements for requesting a record date,
66 %
approval
is
required
to
pass
any
matter
that
would
normally require simple majority approval at a general
meeting, and unanimous written consent is required for all
other resolutions (BCBCA)
Permitted if 25% of holders request a record date (by
providing similar information required for the calling of a
special meeting by shareholders); the shareholder approval
necessary to act by written consent would be the same as
that required at a meeting of shareholders (Articles)
Stockholder Removal of Directors
May
be
removed
with
66 %
approval
(Articles
and
consistent with BCBCA)
May be removed with or without cause by the affirmative
vote of the holders of a majority of the shares then entitled
to vote at an election of directors (Articles)
Newly Created Directorships and
Vacancies
May be filled by a plurality of shareholders at the meeting
in which the director is removed or, if not filled by the
shareholders at such meeting, by the shareholders or the
remaining directors (BCBCA); directors may make
additional appointments of new directors, but additional
directors may not exceed one-third of the number of
directors elected at the last stockholder meeting (Articles)
May be filled solely by the affirmative vote of a majority
of the remaining directors (Articles); however, the DGCL
also provides that, if the directors then in office constitute
less than a majority of the whole Allergan Board, then,
upon application by at least 10% of the outstanding shares,
the Delaware Court of Chancery may order a stockholder
election of directors
Director Nominations
Advance notice requirement, approved by ISS Canada, for
director nominations whereby shareholders seeking to
nominate candidates must provide timely notice in writing
in accordance with the terms of such provision (Articles)
Advanced notice requirement for director nominations at
annual meetings whereby stockholders seeking to
nominate candidates must provide notice, subject to certain
exceptions, not more than 60 days and not less than 30
days prior to an annual meeting; requirement to provide
certain information on the director nominee and the
nominating shareholder (including on stock ownership and
any Disclosable Interest) (Articles and Bylaws)
*
The Valeant Articles were reviewed by ISS Canada in 2013 in connection
with Valeant’s continuation as a corporation under the
BCBCA. ISS Canada recommended approval of the Articles. 52
2
/3
2
/3 |
 Valeant
Corporate Governance (2/3) Provision
Valeant*
Allergan
Interested Stockholder Provision
MI 61-101 Protection of Minority Security
Holders in Special Transactions
(a rule of
the Ontario Securities Commission and the
Autorité
des marchés financiers in Québec)
requires, in the context of certain
transactions with interested parties (which
would include a merger with a 10%
shareholder) and subject to certain
exceptions, disinterested shareholder
approval of the transaction by a simple
majority of the disinterested votes cast, a
formal valuation and enhanced disclosure
If a merger with an interested stockholder (5% or more
holder) is not approved by a majority of independent
directors, the merger requires the approval of a majority of
stockholders other than the interested stockholder (Articles);
Section 203 of the DGCL also prevents an interested
stockholder (15% or more) from engaging in a “business
combination”
for three years following the date that person
became an interested stockholder, unless (1)
the board
approves the transaction in which the interested person
became an interested person or the business combination,
(2)
upon consummation of the transaction which resulted in
the interested stockholder becoming an interested
stockholder, the interested stockholder owned at least 85%
of the voting stock of the corporation outstanding at the time
the transaction commenced (excluding certain shares owned
by officers, directors or employees) or (3) following the
transaction in which such person became an interested
stockholder, the business combination is approved by the
board of directors of the corporation and authorized at a
meeting of stockholders by the affirmative vote of the holders
of two-thirds of the outstanding voting stock of the
corporation not owned by the interested stockholder.
Poison Pill
None. If adopted, not an effective long term
structural defense as Canadian securities
regulators typically cease trade pills in 100
days or less (generally within 50-75 days) to
enable bidder take-up, which eliminates the
proponent’s need to requisition a meeting to
complete a change of control transaction in
spite of a board’s opposition
Adopted April 22, 2014
*
The Valeant Articles were reviewed by ISS Canada in 2013 in connection
with Valeant’s continuation as a corporation under the
BCBCA. ISS Canada recommended approval of the Articles. 53
|
 Valeant
Corporate Governance (3/3) Provision
Valeant*
Allergan
Consideration of Other
Constituencies
The BCBCA requires that directors and
officers of Valeant act in the best interests
of the corporation
Board and each individual director may consider the interests
of the employees, distributors, customers, suppliers and/or
creditors of Allergan and its subsidiaries and the
communities in which Allergan and its subsidiaries own or
lease property or conduct business (Articles)
Amendments to Constating
Documents
66 %
approval
is
required
to
amend
Valeant’s Articles (no bylaws) (BCBCA)
Allergan Board is expressly authorized to amend the Bylaws
(Articles)
*
The Valeant Articles were reviewed by ISS Canada in 2013 in connection
with Valeant’s continuation as a corporation under the
BCBCA. ISS Canada recommended approval of the Articles. 54
2
/3 |