IRVINE, Calif. -- (BUSINESS WIRE) --
Allergan, Inc. (NYSE: AGN) (“Allergan” or the “Company”) today announced
that it has filed an investor presentation with the Securities and
Exchange Commission (“SEC”) and posted the presentation under the
“Investors” section of the Company’s website detailing its initial
concerns about the sustainability of Valeant Pharmaceuticals
International, Inc.’s (“Valeant”) business model.
Allergan retained two nationally-recognized financial consultants and
forensic accountants, Alvarez & Marsal and FTI Consulting, to evaluate
certain concerns about the inherent value of Valeant’s business model
and stock. With the assistance of these two independent firms, and in
response to feedback from numerous Allergan stockholders and analysts,
Allergan and its legal and financial advisors carefully analyzed
publicly available data on Valeant and the opaque nature of Valeant’s
pro-forma driven financial reporting.
The presentation raises a number of important issues about Valeant’s
business model and stock value that Allergan’s stockholders need to be
What is Valeant’s real organic growth?
believes that Valeant’s organic sales growth, which is primarily
driven by price increases, is overstated based on changing definitions
and classifications with no disclosure of key products. The pro-forma
revenue growth from Valeant's SEC filings paints a picture far
different from what is communicated to investors. Valeant’s pro-forma
revenue growth including acquisitions for fiscal year 2013 was -0.5%.
In the first quarter of 2014, the growth rate declined to -1.4%.
How have the two largest Valeant acquisitions (Bausch & Lomb and
Medicis) performed under Valeant’s ownership? How have other
Analysis based upon data
acquired from IMS FIRST, a provider of top-line information about
pharmaceutical companies and the largest vendor of U.S. physician
prescribing data, raises concerns about the source of Bausch & Lomb’s
growth. This analysis indicates substantial erosion in units sold for
three out of four of Bausch & Lomb’s largest prescription ophthalmic
products, for which Valeant compensates with significant list price
The Medicis business is losing market share and
increasing prices at, we believe, an unsustainable pace. Since Valeant
acquired Medicis, Allergan has rapidly accelerated its capture of
market share. Over this same timeframe, Valeant increased prices for
Medicis’ six largest products by a significant and, we believe,
Does Valeant have any experience promoting products of Allergan’s
Valeant’s limited experience with large, global
scale products represents a material execution risk attempting to grow
Allergan’s categories and launching significant new large products
through existing channels. Allergan would be Valeant’s largest
acquisition and the synergies proposed by Valeant are the most
aggressive to date. Botox’s annual sales are more than seven times
greater than each of Valeant’s largest products, Zovirax and
Wellbutrin, which are declining or stagnant.
How stable is Valeant’s management team?
executive officers continuing to serve at Valeant since 2011 are J.
Michael Pearson and Robert R. Chai-Onn. Seven executive officers have
departed over this period. In addition, three Board members, Fred
Hassan, G. Mason Morfit and Lloyd M. Segal, recently resigned, with
two citing “potential conflicts” - one of whom withdrew after a tenure
of less than a year.
Can Valeant cut $2.7bn of Allergan’s expenses without disrupting
the performance of the business?
Valeant will only be
able to achieve a fraction of its stated SG&A and R&D synergies
without destroying Allergan’s near-term and long-term value. Valeant
has indicated it will maintain R&D required for post-approval and
maintenance, product line extensions and late phase projects, but
drastically underestimates the spend required by approximately $350
million. Moreover, Valeant’s purported SG&A synergies are unrealistic
given Valeant’s goals, as communicated in numerous letters to its
customers: “I want to reassure all of you that we remain committed to
investing in you and in the fields of Dermatology, Aesthetics and Eye
What is the relative distribution strength of Allergan vs. Valeant
in important emerging markets (BRICs)?
In the BRIC
Countries, Allergan’s sales are approximately 4 times larger than
Bausch & Lomb’s prescription ophthalmic sales. While Valeant boasts
market growth in emerging markets, it is important to clarify that
these are smaller markets with less revenue potential.
Is Valeant’s low tax rate sustainable?
multiple off-shore tax deferral structures are aggressive, difficult
to sustain and compound risk in multiple jurisdictions. No other
pharmaceutical or healthcare peers that have recently re-domiciled
outside the U.S. have achieved tax rates nearly as low as Valeant,
which suggests that Valeant’s tax strategies are abnormally aggressive.
Are Valeant’s accounting practices clearly consistent with others
in the industry?
Valeant’s management team, which seems
to change reporting methodology when convenient, has realigned
Valeant’s segment reporting structure three times in the past three
years, decreasing the level of disaggregation each time. Furthermore,
in a survey conducted by an independent consultant, Valeant was the
only company that organizes segments on a geographic basis.
Is a business model centered on a serial acquisition and cost
cutting strategy sustainable?
Valeant’s model of taking
on debt to serially acquire companies will become incrementally harder
to do as interest rates move higher. While appearing on CNBC on May
15, 2014, Jim Chanos, president and founder of Kynikos Associates,
noted many of the same issues other Allergan stockholders expressed,
stating, “Roll ups are generally accounting-driven, and we certainly
think that's the case in [Valeant]. We think [Valeant] is playing some
very aggressive accounting games when they buy companies, write down
the assets, and also engaged in what we call spring-loading.”1 Allergan
expressed these concerns as well.
Alvarez & Marsal and FTI Consulting are acting as Allergan’s financial
consultants and forensic accountants.
Goldman, Sachs & Co. and BofA Merrill Lynch are serving as financial
advisors to the Company and Latham & Watkins, Richards, Layton & Finger,
P.A. and Wachtell, Lipton, Rosen & Katz are serving as legal counsel to
Allergan is a multi-specialty health care company established more than
60 years ago with a commitment to uncover the best of science and
develop and deliver innovative and meaningful treatments to help people
reach their life's potential. Today, we have approximately 11,600 highly
dedicated and talented employees, global marketing and sales
capabilities with a presence in more than 100 countries, a rich and
ever-evolving portfolio of pharmaceuticals, biologics, medical devices
and over-the-counter consumer products, and state-of-the-art resources
in R&D, manufacturing and safety surveillance that help millions of
patients see more clearly, move more freely and express themselves more
fully. From our beginnings as an eye care company to our focus today on
several medical specialties, including eye care, neurosciences, medical
aesthetics, medical dermatology, breast aesthetics, and urologics,
Allergan is proud to celebrate more than 60 years of medical advances
and proud to support the patients and customers who rely on our products
and the employees and communities in which we live and work. For more
information regarding Allergan, go to: www.allergan.com
Information contained in this press release regarding Valeant is taken
directly from the information publicly disclosed by Valeant and we do
not make any representations or warranties, either express or implied,
with respect to such information’s accuracy or completeness. In
addition, certain other information contained in this press release is
based on publicly available sources as of the date of this press
release, and while we have no reason to believe that such information is
not accurate, we can provide no such assurances with respect thereto.
IMS data used in this press release has been purchased from IMS Health,
a provider of healthcare information. The information in this press
release represents the opinions of Allergan and Investors and
stockholders should make their own independent investigations of the
matters referenced in this press release and draw their own conclusions.
1 Permission to use quotations was neither sought nor
Copyright © Business Wire 2014
Jacobs, Allergan, (714) 246-5134
Joele Frank, Dan Katcher, and
Scott Bisang, Joele Frank, Wilkinson Brimmer Katcher, (212) 355-4449