Bausch Health Companies Inc (BHC) 2014 Q3 法說會逐字稿

Good morning. My name is Keith and I will be your conference operator today. At this time I would like to welcome everyone to the Valeant third-quarter 2014 earnings conference call.

(Operator Instructions)

Thank you. Laurie Little, Head of Investor Relations, you may begin your conference.

Thank you, Keith. Good morning, everyone, and welcome to Valeant's third-quarter 2014 financial results conference call. Presenting on the call today are J. Michael Pearson, Chairman and Chief Executive Officer, and Howard Schiller, Chief Financial Officer. In addition, Dr. Ari Kellen, Company Group Chairman, will be available for questions. In addition to a live webcast, a copy of today's live presentation can be found on our website under the investor relations section.

Before we begin, our presentation today contains forward-looking information. We would ask that you take a moment to read the forward-looking statement legend at the beginning of our presentation as it contains important information.

In addition, 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 S4 filed by Valeant with the SEC on June 18, 2014, and with the CSA, as each may be amended from time to time. These materials 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, as may be amended from time to time. Pershing Square Capital Management has filed a definitive solicitation statement with the SEC on July 11, 2014, and a preliminary proxy statement on July 23, 2014. And Valeant and Pershing Square 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, perspectives or any 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 transaction.

Any definitive proxy statement 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 filed with the SEC by Valeant and/or Pershing Square through the website maintained by the SEC at sec.gov.

Information regarding the names and interest in Allergan and Valeant and persons related to Valeant who may be deemed participants in any solicitation of Allergan or Valeant shareholders in respect to the 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 interest 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 to the 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. Additional definitive proxy soliciting material referred to in this paragraph can be obtained free of charge from the sources indicated above.

Finally, in addition, this presentation contains non-GAAP financial measures. For more information about non-GAAP financial measures please refer to slide number 2. Non-GAAP reconciliations can be found in the press release issued earlier today and posted on our website.

And with that I'm glad to turn the call over to Mike Pearson.

Thank you, Laurie. Good morning, everyone, and thank you for joining us for our third-quarter earnings call. We are pleased to report an exceptionally strong Q3.

On our call today, I will review our results, highlight the key drivers of our successful performance across all our businesses, and update you on recent and near-term product launches. Howard will then provide an update on our financial performance, an update on our B+ L integration, and our expectations for the remainder of 2014. Finally, we will provide you a brief update on our offer for Allergan. After our remarks, Howard, Ari Kellen and I will be available for Q&A.

For the quarter, our total revenue was $2.1 billion, an increase of 33% over the prior year. This is our second best revenue quarter ever. Our cash EPS was $2.11, an increase of 48% over the prior year, and well in excess of our guidance.

Our adjusted cash flow from operations for the quarter was $771 million, an increase of 89% over the prior year. GAAP cash flow from operations was $619 million, a 207% increase over the prior year. This quarter's exceptionally strong cash flow generation resulted in a cash conversion of 107% of adjusted cash net income.

Great execution by our employees around the world led to exceptional results this quarter. Our results are within or above the high end of our guidance for all key metrics. Our same-store organic growth for the total Company, including the full impact of generics, exceeded our early read of the quarter.

Bausch + Lomb continued its outstanding performance and achieved double-digit organic growth, in line with our guidance for the second half of 2014. Our revenues are at the high end of our guidance, even with the negative $31 million FX impact. And our cash EPS significantly exceeded guidance, even with a negative FX impact of $0.04.

Adjusted cash flow from operations of $771 million significantly exceeded our guidance of 90% cash conversion. Our restructuring charges continued to decrease and were below our expectations as we neared the end of the B+ L integration.

Turning to organic growth, our overall same-store Company organic growth, including all generics, was 19% for the quarter. If we had excluded generics in Q3 our total Company same-store organic growth would have been 3% higher, or 22%. In Q2, our total same-stores organic growth with generics was 4%, and without generics was 10%, a differential of 6%. The differential narrowed as the generic impact of Zovirax, Retin-A Micro and BenzaClin have annualized and are largely behind us in the US, and due to the inclusion of Bausch + Lomb and our same-store organic growth calculations from August 5 onward.

The impact of generic entrants in Q4 2013 for both Vanos and Wellbutrin XL in Canada have not yet annualized, and are included in our Q3 organic growth and our Q4 organic growth guidance. Vanos and Wellbutrin XL in Canada will both annualize at the end of the year.

All of our regions contributed to the strong total Company organic growth, with our US business at 29%, our total developed market business at 22%, and our emerging market business at 12% same-store organic growth. Our same-store organic growth through the first three quarters of 2014 year to date is 11%. We expect continued strong double-digit same-store organic growth in the fourth quarter, but certainly reduced from the 19% we achieved this quarter. And therefore we expect double-digit organic growth for the full year 2014.

B+ L continues its strong performance, delivering 12% organic growth in Q3, adjusted only for FX. There is no adjustment for the discontinuation of Bromday. B+ L's third-quarter revenues in 2012, 2013, and 2014 has been consistent at approximately 24% to 25% of B+ L's annual revenues. Under Valeant's ownership, B+ L has grown at a compound annual growth rate of 10%. We expect this trend to continue in the fourth quarter.

Our businesses broadly performed well beyond our expectations this quarter. The turnaround of our base dermatology business, coupled with a number of strong launches, including Jublia, Luzu, and RAM 0.08% was the strongest outperformer. Neurology exceeded forecast primarily due to the growth of Xenazine, Wellbutrin XL and our orphan products.

In addition, a number of our smaller businesses, including dental, the US generics, and Obagi performed well above their forecasted growth. Our emerging markets and B+ L also contributed strong double-digit growth. Importantly, for the total Company, more of our growth was from volume than price.

As promised, we are continuing to show revenue for the quarter and year to date for our top 20 products, as well as the primary growth driver of either price [or volume] for each product. All top 20 products grew this quarter. Our top [20] products are the same as the second quarter. New additions to the top 20 products this quarter include the Retin-A franchise, which includes RAM 0.08%, Cardizem CD AG and Ziana.

The products which are no longer in the top 20 this quarter include Thermage Tips, Acanya, as well as the Excimer Laser. Year-to-date revenue for our top 20 products are $1.8 billion, representing 31% of our total revenue, the same percentage of total revenue as the second quarter.

In total, our top 20 products grew 32% in the third quarter year over year, and 16% year to date over the last year, with approximately 50% of the growth coming through volume. All 20 of our largest products showed growth in the third quarter year over year.

Jublia is currently our 28th largest product, demonstrating its strong start since launch. And we expect it to be a top 20 product next quarter. No product represents greater than 3.5% of our total revenues this quarter, which again demonstrates the diversification of our business.

Our mix of the top 20 products includes Rx products, OTC, and devices. These products continue to demonstrate the durability and diversity of our portfolio.

Highlights for our US business and the rest of the world are contained in the next four slides. We have expanded our disclosure on table 3 of our press table to include additional data for our US businesses. Revenue and growth numbers for this table are actual, and do not include sales for Bausch + Lomb before August 5 in 2013.

Revenues for our dermatology business, including the recent Precision acquisition, grew 33% quarter over quarter. The turnaround of our dermatology business is continuing. New leadership has brought stability to the sales force and has led to innovative new marketing approaches that are working well. This has resulted in market share and revenue gains across the portfolio, including launch products.

Elidel, Acanya, Zyclara, and Ziana have all gained market share since the beginning of 2014. Elidel has had an exceptional year, increasing market share from 45% to 52%. And it has overtaken Protopic as the leader in this category.

After years of declines Solodyn market share has stabilized. On the new products side, both Jublia and Luzu quickly gained share, with Jublia reaching 7% script share of the total onychomycosis market, both branded and generics. And Luzu accelerated its script share to 13% of the branded topical antifungal market. In addition, quarter-over-quarter result growth for all of our dermatology promoted brands was over 40%.

Our consumer business grew 43% quarter over quarter. Our consumer healthcare business, as reported by IRI, is one of the fastest-growing OTC healthcare companies in the US this year. Key consumer growth brands include CeraVe, PreserVision, Ocuvite, and BioTrue multipurpose solutions.

Our prescription ophthalmology revenues grew 57% quarter over quarter. Our core brands, Prolensa and the Lotemax franchise, continue to grow, and are complemented by the strong performance of Besivance, Zylet and Zirgan.

Revenues for our contact lens business grew 82% quarter over quarter. According to third-party data, the business has expanded its US market share from 7% to over 10% since our acquisition of B+ L. BioTrue ONEday and PureVision 2 for presbyopia continue to capture market share. Our new lens, Bausch + Lomb Ultra, while not a significant contributor to revenues today, as it is still only being produced on our private line, has received very positive reviews from eyecare professionals, and will be an important new product in our lens franchise.

Our surgical business continued its strong performance, with 74% quarter-over-quarter revenue growth. We continued to improve our market position at IOLs. According to MarketScope data we are now the number two player in the posterior chamber IOL market in the US.

As we continue to further invest in this business, key products that will continue to drive growth include the enVista and Trulign IOLs, and our Victus and Solaris equipment platforms. Revenue growth of 40% for our neural and other portfolio was driven by promoted brands including, Xenazine, Wellbutrin XL, and Syprine/Cuprimine. Our generic business benefited both from portfolio expansion and competitor stockouts.

New customers and strong early performance of launched products such as Onset, a local anesthetic, continue to drive our dental business, resulting in 20% quarter-over-quarter revenue growth. Finally, in aesthetics, Obagi demonstrated excellent quarter-over-quarter organic growth of 21% as a result of improved sales force effectiveness.

Now turning to the rest of the world, our emerging markets in Central and Eastern Europe and the Middle East continue to demonstrate strong performance with 36% quarter-over-quarter revenue growth, even with a significant FX impact this quarter of negative $18 million in revenues. Russia, Ukraine, and CIS continued their strong performance, demonstrating 20% organic growth.

Revenues for our emerging market business in Asia and Africa grew 66% quarter over quarter. China's 11% pro forma organic growth was from primarily by the lens franchise. Our iNova Southeast Asia, South Africa business pro forma organic growth was 18%.

In Latin America, quarter-over-quarter revenue growth was 13%. The strong organic growth of 12% from Mexico was offset by the continued economic slowdown in Brazil and Argentina and import restrictions in Argentina. In addition, our export business was negatively impacted by capital controls in Venezuela.

The rest of the world developed markets grew 29% quarter over quarter. Australia benefited this quarter from a strong cough and cold season which contributed to its 15% same-store organic growth rate. Our Western European business grew mid-single-digit organically. This growth was offset by a decline in our Canadian business, which is primarily due to Wellbutrin XL being genericized, as well as foreign exchange.

We are off to a great start in both the US and Canada post the launch of Jublia in July. Jublia script trends in the US are currently reigning at 5,831 scripts per week through the week ending October 10. Canada monthly script trends are currently 5,462 scripts per month through the month end of September, an impressive 18% market share after only three months.

This performance increases our confidence in our ability to significantly exceed our estimates for Jublia of $150 million of revenue in 2015 and $300 million of revenue in 2016. We continue to believe that Jublia will likely become our largest product.

We are investing in the growth of Jublia through a comprehensive marketing campaign and an expanded sales force. In the first half of the third quarter, prior to the FDA review at our promotional materials, we were only able to sell Jublia using the package insert. In the second half of the third quarter we began the rollout of our print and digital campaigns to both physicians and consumers.

Our results to date are prior to our planned TV advertising, which the FDA completed its review of last week. We plan to be on air by mid November. Our initial sales plan had included a contracted primary care sales force.

After assessing the effectiveness of the sales force at the end of Q3 we have decided to shift this spend to additional dermatology representatives and consumer advertising. Between the US and Canada we have approximately 175 sales representatives consisting of both podiatry and dermatology representatives selling Jublia.

Luzu uptake continues to grow since launch with current script volume accounting for 13% of the branded topical antifungal market. Luzu has broken the 1,300 prescription per week level for the week ending October 10. Luzu performance has benefited from the expanded coverage to both dermatology and podiatry through the same sales force that is also selling Jublia.

Retin-A-Micro pump 0.08% uptake has exceeded expectations since its launch in early July. After only 15 weeks we have exceeded 1,400 prescriptions per week. Retin-A is the most widely recognized brand name in dermatology. The entire Retin-A franchise, including our generics brand is growing strongly.

In our 2015 outlook, both Retin-A-Micro 0.08% and Onexton were expected to generate $35 million in revenues. We now expect Retin-A-Micro 0.08% to generate $35 million on its own in 2015, thus providing additional upside for our 2015 outlook.

Other recently launched products in the US are also contributing to our current and expected to contribute to our future business. BioTrue ONEday lens continues to accelerate. For the second quarter in a row, it grew over 90% per year.

Bausch + Lomb Ultra, our recently introduced lens, is currently selling to capacity on a pilot line. While Ultra only contributed less than $5 million in revenue to our current quarter, we expect this to increase significantly when commercial quantities are available from our first-installed commercial line in the second quarter of 2015.

The double-digit organic growth of our surgical business is benefiting from the successful launch of the Trulign Toric IOL. In addition, with the approval of the Victus lens fragmentation indication, we expect to place 28 Victus machines in 2014, twice as many as in 2013, which would position us for pull-through sales of IOLs and other consumables in future years.

In our consumer business we continue to promote and gain physician recommendations for our 2014 launches of CeraVe Baby, part of the extended continued expansion of the brand, Peroxiclear, a superior hydrogen peroxide-based lens cleaner, and SootheXP, a dry eye product.

In addition to the products already launched, we have a rich pipeline of near-term launches with significant commercial potential. Consistent with our business model these products have been sourced both internally and externally. Our expected near-term US Rx launches include a Onexton, Vesneo, and Lotemax Next Generation.

Onexton, a new combination acne product, was developed internally. We have a PDUFA date of November 30 and expect to launch in early 2015.

We recently announced positive Phase 3 results for Vesneo, a novel nitric oxide donating glaucoma product to treat intraocular pressure for patients with glaucoma or ocular hypertension. We expect to file the NDA in the first half of 2015. As a reminder, Vesneo beat Xalatan in a previous Phase 2 study. Lotemax Next Generation, which also received positive Phase 3 results, will allow us to extend the life of the Lotemax franchise.

We are also very excited about the potential for Emerade, an adrenaline auto-injector for anaphylaxis. After a launching in selected European markets in the first half of 2014, we are off to a strong start in Germany and Europe, with more than 20% market share in the UK and Sweden and approximately 6% market share in Germany where we just launched a month ago. Emerade is currently undergoing stability trials in the US.

We continue to extend the CeraVe brands with various planned launches, including a CeraVe hydrating cleansing bar which locks in moisture three times longer than the leading cleansing bar, Dove, and six times longer than the Cetaphil bar. We will also be extending the Ocuvite brand with the introduction of Gummies, the fastest growing vitamin segment in the first quarter of 2015.

We recently completed a Phase 3 study for our eye whitening physician-dispense product, Brimonidine. We are planning our NDA submission in the first quarter of 2015.

Since our second-quarter earnings call we've signed or closed several transactions, including Croma, Zaraccom and several others that we highlighted last quarter. We recently signed a deal to acquire the worldwide rights to Croma's ophthalmic and orthopedic portfolio. Croma's products consist primarily of physical elastics and IOLs, with existing sales concentrated in Western Europe. We are very excited to bring these products to other markets including the US, Asia and elsewhere around the world.

As another addition to our surgical portfolio, we completed a transaction with Zaraccom, which is based in Turkey. Zaraccom provides us a lower price point IOL in Europe.

A quick update on transactions that we highlighted last quarter are now closed. These transactions will all contribute to further penetration in attractive international markets. PT Armoxindo Farma and MedPharma will provide important on-the-ground presence in Indonesia and the Middle East, respectively. Bescon, based in South Korea, presents us a global opportunity to expand our contact lens business through their full range of both clear and color high- and lower-end lenses, including a daily SiHi lens.

With this I will now turn the call over to Howard.

Thank you, Mike. We are very excited to report exceptional Q3 results across all of our key businesses. Our revenue was again in excess of $2 billion with our US and emerging market businesses contributing strong double-digit same-store organic growth.

In addition, while we have recently had a number of successful launches, they added only 3% to organic growth this quarter. These products and the other products Mike just reviewed as near-term launches are expected to contribute significantly to organic growth in 2015 and 2016.

Our impressive revenue growth of 33% and cash EPS growth of 48% in Q3 were off of a strong Q3 2013. If you recall, Q3 of last year was a very good quarter but we suffered from the genericization of Zovirax, RAM and BenzaClin when comparing that quarter to Q3 2012. In addition, Q3 2012 was particularly strong given that we sold approximately $90 million of Zovirax following the stockout in Q2 of 2012.

Our cost of goods sold improved in the third quarter primarily due to product mix, resulting in improved gross margins of 74% of sales. We are expecting a similar gross margin in the fourth quarter subject to foreign exchange movements.

While SG&A percentage has improved each quarter this year, SG&A remains above historical levels, as expected, at 24% of sales, primarily due to costs associated with our numerous launch products. Excluding these launch costs, our SG&A would have been less than 22% of sales.

The table on this page shows change in foreign exchange spot rates since our July 31 earnings call. The currency order is based on the financial impact of currency movement versus our Q3 guidance given on July 31. Most of the movement in currencies occurred in September as the dollar significantly strengthened versus most currencies around the world.

The negative impact on our third-quarter revenue and cash EPS relative to our July 31 guidance was $31 million and $0.04 of earnings per share. We were able to absorb all of this impact and still generate revenue at the upper end of our guidance and deliver cash EPS above our guidance.

Looking forward to our fourth quarter, at current rates, the negative impact to revenues and cash EPS would be approximately $53 million and approximately $0.06 per share. Obviously our results will be impacted either up or down with further movements in FX rate. As we have discussed previously, we continue to look for opportunities to produce products locally in order to create more of a natural hedge and reduce the bottom-line impact of currency swings.

As we discussed in our second-quarter earnings conference call, given that we have passed the one-year anniversary of Bausch + Lomb, and we have not done any significant large transactions, we expect that our restructuring and integration charges to decline significantly in the second half of the year. This quarter our restructuring and integration charges declined from $143 million in Q2 to $63 million in Q3, less than our guidance of $70 million.

The restructuring and integration charges included charges of approximately $3 million for deals completed in Q3 for Armoxindo Pharma and Bescon, which were not included in our July estimate due to the uncertainty of timing for close. We expect a further reduction in our fourth-quarter restructuring charges to less than $50 million and in the first quarter of 2015 to less than $25 million.

This quarter our GAAP and adjusted cash flow from operations are the highest in Valeant's history. As we've said in the past, we are extremely focused on converting the maximum amount of net income to cash flow. Our adjusted cash flow from operations this quarter was $771 million, resulting in 107% cash conversion for the quarter and 97% cash conversion year to date, both well above our guidance of 90%. In addition, in the absence of significant business development activity our GAAP and adjusted operating cash flows will converge as cash payments for restructuring and integration wind down.

At the beginning of the year, we set a strategic objective to reduce our leverage ratio to 4 times or below. We achieved this goal this quarter by reducing our term loans by $1.1 billion, resulting in a net leverage ratio of approximately 4 times adjusted pro forma EBITDA, down from 4.4 times at the beginning of 2014. In addition to our term loan repayment in Q3 we recently redeemed $500 million of bonds in Q4.

Our days sales outstanding have continued to decline this quarter to 64 days from 66 days in Q2 and 72 days in Q1. As we've previously discussed, we believe that calculating DSOs based on gross sales and gross account receivables makes sense for us given the fact that we have a number of older products and there are a large amount of provisions to gross sales to get to net sales.

This quarter we are adding additional disclosure in our 10-Q that will allow investors to calculate our days sales outstanding using gross quarterly sales and gross accounts receivables. We have included that table in the appendix of this presentation.

Our overall accounts receivable this quarter increased by $109 million, with an offsetting increase in accrued liabilities of approximately $90 million related to rebates, returns, and allowances. This is a net increase of approximately $20 million compared to an increase of approximately $30 million in net sales. In addition, our US Rx wholesale inventory levels with the major wholesalers were flat this quarter on a unit basis, and lower on a dollar basis compared to levels at the end of Q2.

We are thrilled with the integration and performance of Bausch + Lomb during our first year of ownership. As we've said many times in the past, the successful integration will serve as the blueprint for Allergan.

Since closing, we have accelerated organic growth from less than 5% to 10%. This increased growth rate has been achieved by continued strength in the pharmaceuticals business, the turnaround of the lens and surgical businesses, a combined consumer business with increased scale, the benefit from our decentralized approach, and leveraging our emerging market capabilities for our expanded business.

We have also had numerous successful recent product launches shown on this slide which will be key growth drivers going forward. Our integration has progressed well since close. As of today we have achieved almost all of our targeted synergies. Remaining synergies will be achieved on a run rate basis by the end of the year and are primarily related to manufacturing, Europe, and small amounts in a number of other areas.

Our cost to achieve the synergies has been a bit higher than expected due to costs to achieve synergies outside the US. We have also added many great people in our organization at all levels, many of whom are leading some of our most important businesses. We look forward to implementing the same formula of success for acquisitions going forward, including Allergan.

We remain very confident in the future growth prospects for Valeant. We expect more than 10% same-store sales organic growth in the fourth quarter driven by strong performance by almost all of the businesses. We're very excited about the strong start of our recent launch products and their further potential as we look forward to 2015 and 2016.

Given this strength we are increasing our fourth-quarter guidance for cash EPS by $0.10 to $2.45 to $2.55 per share. Our revenue guidance for Q4 remains unchanged at $2.1 billion to $2.3 billion. We are also adjusting our full-year 2014 guidance to reflect the outperformance in our third-quarter and our increased guidance for Q4.

Revenue will be in the $8.1 billion to $8.3 billion and cash EPS is increased to $8.22 to $8.32 per share. And adjusted cash flow from operations is updated to greater than $2.5 billion, which assumes at least 90% cash conversion for the year. Q4 tends to have a disproportionate amount of revenue in December and therefore we are conservatively projecting operating cash flow for Q4.

By year end we expect our net leverage ratio to be approximately 3.9 times adjusted pro forma EBITDA. Our strengthening balance sheet will give us flexibility to pay capital for business development and/or share repurchase in 2015.

With the backdrop of this quarter's strong performance, the strength of our overall business, and increasing confidence around a number of the launch products, including the potential of Jublia, we are increasing our 2015 outlook. We now expect organic revenue growth of 10% or more relative to the 9% growth in our July outlook.

Gross margin is expected to improve to 75% relative to our previous outlook of 74% based on the fact that we have now current gross margins in the 74% range plus the expected improved mix, declining Zenazine revenue and current cost improvement initiatives. We expect our SG&A margins to be in the 23% to 24% range, which is in line with our prior guidance of low to mid 20% of revenue. SG&A will continue to be above historical levels in 2015 due to our planned investment in new products.

In addition, we still expect our tax rate to be in the 5% to 6% range. This updated outlook results in cash EPS of $10 per share assuming no acquisitions, a 21% increase over 2014. With acquisitions we expect to be able to significantly add incremental cash EPS.

Now turning to Allergan, we remain completely committed and focused on completing the Allergan transaction. Six months ago when we made the offer to Allergan, to date the Allergan board of management have been unwilling to engage with us or take the time to better understand our strategy and business model. We remain open to speaking with Allergan at any time should they decide to engage.

If we do not hear from Allergan's management prior to December, we look forward to the December 18 special meeting that has been called by Pershing Square where shareholders will be given the opportunity to remove the majority of Allergan's Board. We believe Allergan shareholders need to remove the majority of the directors in order for Allergan to be compelled to negotiate.

The record date devoted to special meeting is Thursday, October 30. Shares would need to be purchased by Monday, October 27 in order to be a shareholder of record for the meeting.

The combination of Valeant and Allergan creates an unrivaled platform for value creation for both sets of shareholders. As we have discussed in the past, the two businesses are highly complementary. And under the leadership of the Valeant management team we will apply our integration blueprint to maximize the efficiency of the combined company while still retaining appropriate levels of R&D spend to drive future growth and innovation.

The economic choice is clear. In 2016 an Allergan shareholder will have greater than $20 cash EPS per Allergan share in a combination with Valeant, as compared to the approximately $10 per share cash EPS for standalone Allergan.

Until we hear from Allergan board of management, or hear from the Allergan shareholders based on their special meeting vote, we will stay focused on driving value in our own business. We are extremely excited about our prospects as we look forward for the remainder of the year and into 2015 and beyond.

And with that we will now open the call for questions.

(Operator Instructions)

Andrew Finkelstein, Susquehanna Financial Group.

Thank you very much for taking the questions. Maybe as a preliminary question, from all these results and the details across businesses that have been given, what message should Allergan shareholders most take that might change views of the combined company, for anyone who's not convinced about the staying power of the combined company? And then I have some follow-ups on individual details you have given.

Thanks for the question. I think from the very beginning since we announced our offer for Allergan they have always held out Q3 as a litmus test in terms of our ability to sustain growth. And Q3 was the quarter where B+ L annualized.

And I think the message they give to their shareholders was that the wheels are going to fall off the bus in terms of B+ L, and that the rest of the Valeant business would continue to decline. I think this quarter, through facts and through performance, we have demonstrated both those assertions are incorrect.

Our hope is that the Allergan shareholders just look at the numbers, look at the performance, and see that the Valeant operating model does work and will continue to work. A combination of day-to-day strong execution.

And our R&D model, sourcing and innovation, both inside and outside, leads to lots of new products and a very diversified business model, both in terms of geographies and products. So, we would just encourage the Allergan shareholders to take a look at our results and compare them to what Allergan has been asserting since the beginning.

Okay, thanks. And then two other things. If you could talk a little about the lessons from the Jublia launch, what has worked well. And you mentioned some shifts in the spending away from primary care contract sales to additional in-house resources. But what's the primary care role for that product ultimately to maximize the opportunity?

And then on the Bausch + Lomb side, very large organic growth rates from some new launches in the surgical business. Is there any details you could share on a market share gains and what we should think about for that business in the near term? Thanks.

Sure. In terms of the Jublia launch, our team has just done a fantastic job. Ari Kellen, who is here, and [Deb Jordan] who leads the business unit, have just done a fabulous job.

I think the keys to success so far have been the real stability and motivation of the sales representatives. They are doing a terrific job and making lots and lots of calls. They are excited about the product since it's such a great product. I think the digital marketing campaign has proved to be very effective. It is quite easy to measure an ROI in terms of on digital activity.

And what we're most excited about is actually the TV that will soon be running. If you look at the impact of television on other dermatology launches, like EPIDUO and ACZONE, which is an Allergan product, you have seen huge increases when DTC goes on air. And that is the key to getting to the primary care audience. I think what we found was detailing them without something to draw the patients into the offices probably doesn't work as well as just gaining the consumers' -- make the consumers aware of this product and have them come into the office.

It's only the start but if you annualize the sales of Jublia based on our most recent week, it's somewhere between $70 million and $80 million a year already. And if we were to take away our zero co-pay, which at some point we will, we are approaching $100 million of annual revenue even at today's run rate. We expect that to be closer to $200 million by the end of this year. And we feel very good about the launch. And it's all due to the team we have in place.

In terms of surgical market share, I think we've increased our market share about 3 percentage points across all categories since we acquired B+ L. Part of it is the new products. It is led by Andy Chang in the US who is doing a great job. I think there's just a lot more focus.

And, again, I think the sales force incentives have been fixed. I think that the new frag approval for the Victus machine, coupled with, in addition, some of the Croma products that we are going to bring into the US, is really going to secure a bright future for that business.

Chris Schott, JPMorgan.

Great. Thanks very much. Just a couple questions here. First, the Valeant stock, on its revised guidance, is 12 times 2015 earnings. Obviously an expensive valuation. When we consider potential revisions or changes to your bid heading into the December 18 meeting, is there a leverage ceiling we should think about at Valeant? To me it just seems like it would be a lot cheaper to finance the deal with more debt versus equity at this point.

The second question I had was just, in your presentation you talked about your ability to achieve more synergies with Allergan than anybody. Is there a minimum rate of return we should think about for large acquisition such as Allergan [to excess of their bitter emerges]? I'm just trying to gauge your ability -- if someone else emerges you clearly have more synergies in your ability. Is there some threshold at which point you just don't go any higher? I know you don't give specific numbers but just how do we think about that if a process emerges? Thanks so much.

In terms of if we were to improve our proposal, how we'd think about it, clearly with our stock where it's at we much prefer cash over stock. And we've said that a number of times. And we are just balancing that with making sure that we come out of the merger with an incredibly strong balance sheet that will give us the flexibility that we want going forward. So, we're looking at all options. But that's how we're balancing the two.

As we said before, we would be willing to sit down and improve our offer. And when we do that, we'll make that decision. When we think it's the right time we'll make that decision.

You know us, Chris, so you know that we define winning as delivering value to our shareholders. And we have very high hurdles for how we deploy capital. In this case, we have significantly more synergies than anybody. It's a combination of the unique business overlap that we have, our emerging markets infrastructure, and our operating model which allows us to extract more synergies.

That's all factored in. We will be disciplined. As you rightly said, we can't and won't give you a precise number. But we'll be disciplined. But, again, we should own Allergan. We have the most synergies and Allergan shareholders will benefit the most with the combination with Valeant.

Great. Thank you. And just a really quick product follow-up. VESNEO -- I know that is one with peak sales. We've had some questions. Can you just elaborate a little bit more on the differentiation you see versus existing agents that get you comfortable with those peak sales assumptions? If we think of all the new product launches that's the one where we probably get the most questions.

Yes. It's Ari Kellen. VESNEO is the first monotherapy that is statistically significantly better than latanoprost, as we put out in our Phase 2 dose-ranging study. And the Phase 3 study, which we published, showed the lowering of 7.5 to 9.1 million meters of mercury. Other prostaglandins, in particular the Xalatan label, are more close to 6 to 8 million meters of mercury drop in pressure from baseline.

We are also encouraged by the safety data that we have now. We also have additional secondary end points that we're discussing with the FDA that are unique that will demonstrate the efficacy of our drug, which we're not able to share that at this time.

The other point I will add is that our KOLs are excited at this drug and the reception at the current AAO has been pretty positive. So, we believe in the growth prospects of this differentiated compound.

Thanks very much.

(Operator Instructions)

Alex Arfaei, BMO Capital Markets.

Good morning. Thank you for taking the questions and congratulations for the quarter. Howard, just a follow to your earlier comment about the synergy -- having more synergies than the other combinations. Are you getting a chance to make that comparative argument with Allergan shareholders? And could you comment on some of the feedback you've been receiving?

And my follow-up is how do you expect the break up of Shire Abbvie deal to impact your prospects given the significant role we expect of [venture] investors to play heading into the special meeting? Thank you.

I don't think anyone has debated or disagreed with the fact that Valeant and Allergan, there is a unique business overlap. I think there's general agreement. There is general agreement in our ability to extract the synergies -- and, again, through the business overlap and through our unique operating model.

We've had some interesting debates with people about sources, are they going to come from here or there, but generally I think agreement that there will be significant synergies and more synergies from us than from any other player. There hasn't been any pushback in addition. We obviously have a differentiated tax rate, as well.

We can't predict and protect ourselves against people from doing irrational things, but just focused on the economics and the facts. We clearly have the most to bring to the table.

And in terms of the impact that the Shire Abbvie deal has, clearly there was some losses taken by the [avent]-driven people last week. I think that in Allergan's case there is already significant ownership by the hedge fund community, and I think a growing sense that a transaction is going to happen. So I think that's all positive. And again, we're committed to getting this transaction done, which is important to that community, and we're going to march on.

Thank you.

David Steinberg, Jefferies.

Thanks very much. I had some questions on Jublia. The first thing is, it looks like in the prescription graph that you added up the Walters [clura] data and the specialty pharmacy data. I was just curious, what's the rough breakout between the prescription audit information and that now you get through your specialty pharmacy Philidor?

And, secondly, is sampling still a significant part of your program? And if so, perhaps how much would it understate TruScripts by? And then could you give us an update on how managed care discussions are going on that product? Thanks.

Sure. Thanks, David. In terms of the breakdown, the specialty pharmacy channels are multiple specialty pharmacies throughout the United States. But the rough script breakdown is about 40% of the volumes going through specialty pharma and 60% is going through traditional pharmacies.

Sampling is not a key part of what we're doing. One of the reasons is, you may recall that we had to shift manufacturers to our Japanese partner, which is doing a terrific job for us. But they only have trade-sized bottles at this point. So, until we get smaller sample bottles, sampling's not something that we're doing. But we would expect to start sampling next year once we get the smaller bottle, which will be one more thing that we think will help drive the growth.

And the last question -- oh, managed care. Our conversations so far are going well. I think we do have a unique product. And there is a strong consumer and physician demand for it. And I think that we are cautiously optimistic that we're going to get excellent managed care coverage.

Okay. Just a quick follow-up. You'd indicated your guidance for next year, $150 million, could be substantially exceeded, that the run rate at the end of this year could actually be closer to that. Any thoughts on what perhaps a new number might look like?

In terms of next year's sales for Jublia?

Yes.

If our run rate at the end of the year is $200 million, then certainly $150 million would be a little bit light as an estimate. We haven't gone through but it's probably closer to the $400 million -- $300 million to $400 million. But that's just a bit of an estimate.

Okay. Thanks.

Sachin Shah with Albert Fried.

Good morning. Congratulations on the quarter. I just wanted to find out -- there has been some speculation that you're going to -- you may be considering improving your offer. I know you've talked about that in various ways. But in light of the fact that the record date's coming up on the 30th, and shares, as you mentioned in the presentation, can be acquired on the 27th, just wanted to find out, in light of the market volatility and dislocation, is that something that you've been considering because of this location and just to solidify the December 18 meeting?

Yes, we consider it every day, as Howard said, that we do have some more dry powder and at the appropriate time when the conditions are right. Again, our preference is to sit down with management but I think we all know that's unlikely with the current management team on board.

Yes.

We want today to be all about earnings. But it's certainly saying that we are contemplating, and we may make that decision at any point in time.

Okay, fine. Today's about earnings. But as far as the record date is concerned, should we use that as a gauge or is that not important to you because you already have as much as 40% of the shareholders leaning into the December 18 meeting. I just want to understand the level of importance for the shareholder meeting because you already have a significant amount of support. Are you looking for more? Or is it that the potential boost that you're considering is for that reason and to make sure that you get to the finish line here?

The record date is obviously an important date. We've thought about it in the context of the overall transaction. I think the reality is that most of the shares have found their home already. The people that own them now, the institutions, the long-only institutions that decided to pick profits and sell, have done so. The arbs and hedge funds are significant holders. Pershing has their stake. And a number of the institutions that are in it for the long haul have increased their stake.

Volumes are significantly down. Even on big news days, they're significantly down. There's always going to be some trading post a record date, and that's just reality. But for the most part, the shares have found the right home and the people that own the shares are the people that are going to vote come December 18.

Okay. And just one last question if you don't mind. There's been some speculation by the media with your relationship with Ackman. Just can you confirm that that relationship is solid going into this shareholder meeting?

Absolutely. We continue to have a very good relationship with Bill Ackman and Pershing. I think our interests are aligned. We both want to get this deal done and we are both committed and we'll work hard to make it happen. With that, we need to move on.

Okay. Thank you.

We have a long list and a short period of time, so let me reemphasize this, to try to keep it to one question so everyone can get in at least one question. Thank you.

Annabel Samimy, Stifel.

Hi. Thanks for taking my call and congratulations on a good quarter. Since it's an earnings call I'll ask about earnings. You have some very strong increased outlook. My question is, what's changed between last quarter and this quarter that's made this positive outlook so strong? We've pretty much known about the annualization of Bausch + Lomb and the annualization of the generics, so what is it that's the biggest driver of your increased outlook from this point forward?

I think it's primarily dermatology in the US where we've had really a complete turnaround. All the promoter brands are growing. We are very excited about our launch products, Jublia, RAM 0.08% and Luzu. We are increasingly optimistic about Onexton because of some of the unique data we have on that. So, I think that's the primary driver.

But also every other business is, quite frankly, every business around the world, with the exception of maybe one or two small ones, are outperforming with great momentum. We have a lot of smaller launches, everything from CeraVe to the surgical business. We just see significantly more upside. So, when you add all the numbers together I think we can still give what is a conservative outlook, which is much improved from our previous one. We will be giving guidance for 2015 at our normal time, and I would expect that to be better than our outlook.

Okay. And just on that point of the different business doing better than expected, one of the questions we've also gotten often is the contact lens business, it seems to be growing significantly higher than the overall market. And it's a relatively stag market without that much market changes from quarter to quarter. So, can you help us understand what's driving that growth?

It's led by Mark McKenna who is just doing an excellent job. He's brought real life to the franchise. We've upgraded our management team across the board with some new hires. We are increasing our sales force, up from 120 to 180.

And we have some great new products. BioTrue Daily which was not being focused on, which was launched maybe a year before we acquired B+ L, we're doubling each quarter, doubling the growth of that brand. Ultra -- the reception has been terrific in terms of the doctors and it's just a question of getting the commercial lines up, which we will.

But you also have to remember it's off of a very small base. Bausch + Lomb's market share had fallen to, like, 6% in the United States. And it had been on a decline for a decade. So, it's a lot easier to gain share if you are a very small player.

So, we're doing it and we're doing it through -- it's all volume. We've kept our prices completely constant. We have not been discounting. But we've not been taking any price. And we are just doing it through better products and a more focused team.

We're also getting -- the combination of having both Ultra and BioTrue Daily has changed the physicians' image of Bausch + Lomb. So, we're very excited about the contact lens business.

Great. Thank you very much.

Louise Chen, Guggenheim.

Thanks for taking my question. I am not suggesting that you should do this but just curious, because we obviously get a lot of questions on this, at what point Valeant is willing to walk away from the Allergan deal in terms of timing, valuation, how you think about that. You did say you were going to be diligent about assessing deals. Thanks.

We now have a record date. We had to fight long and hard and we had to win a bunch of court cases. We now have a record date. We've annualized the third quarter. We've delivered a very strong third quarter and basically have shown through performance that all the allegations made by Allergan are just wrong.

They put out another note this morning. We've gone through it. Again, they are all wrong. I think that we're in very good position to win this thing. So we look forward to the upcoming vote. And there's no way we're going to walk away at this point. We're waiting until December 18.

Tim Chiang, CRT Capital.

Hi, Mike. I was looking at the pipeline chart, and you have this product Emerade. What's the limiting factor in getting an auto injector for anaphylaxis into the market earlier than late 2016 in the US? What do you have to do between now and then to get this product on the market?

There's only two things. One is stability data. We have 36 months of -- it's a 36-month dating on this product, which is one of many aspects that makes it a superior product to the current product on the market. And then there's this time and motion study you have to do -- I forget the technical term -- to show that it's easy enough for outpatients to use. We'll hopefully beat that date.

This is a real sleeper for us. I know some people have pooh-poohed this one. But the European Union is actually contemplating currently whether they just recommend this product across the board, given its significant benefits compared to what's out there on the market. It's a major market in the US. It's over $1 billion alone. And we are doing everything to try to expedite that and get it approved.

Just one follow-up, Mike. I think you had originally highlighted for Jublia that you'd spent about $80 million in the second half of 2014. Given the changes with your marketing, does that number change materially?

Actually we're spending more than we originally forecasted for Jublia. We're going to get TV much sooner than we thought. We thought it would not be until early December. It's now going to be early November. We're adding more reps than we originally had thought given the initial success for that.

So, my guess is the number will probably be closer to $100 million that we are spending for that and Luzu, which goes to the same markets. My guess is we'll probably overspend, but we're also getting additional revenues that we didn't expect we were going to get, and additional profit that we had not built into our forecast either.

Okay, great. Thanks.

David Risinger, Morgan Stanley. Gary Nachman, Goldman Sachs.

Thanks. Good morning. Mike, of the total organic growth for the Company, could you break down the rough split between price and volume? You said more volume than price in the quarter, but maybe just quantify how much price contributed.

And then, Howard, with the recent changes in tax policy, will that impact your ability to use your favorable tax structure at all with M&A, including the Allergan deal? I just want to confirm that. Thanks.

Gary, I don't have the precise breakdown. We'll get back to you off-line. We delivered earnings early this quarter on purpose. We wanted to get it out before the record date. We don't have all the numbers from around the world but we do know that it's going to be definitely more volume than price.

Maybe just comment on that. Where are you seeing the most pricing flexibility in your business?

That's clear. It's in the orphan category and some of our tail products. That's the main area. In a lot of our business we get no price. The vast majority of -- if you think of contact lenses, there's no price. Surgical, there's no price. Consumer. When I say no price, it's low single-digit price. Emerging markets, rest of the world, Europe, no price. And so it's concentrated in tail products in the US.

Okay. That's helpful.

In terms of tax policy, there's nothing that's been talked about. Like, the treasury regulations would have no impact on us. We're not an inverted company. We are not doing these upstream loans the way some companies are, these hopscotch loans, and last week the double Irish structures. We don't have any double Irish structures.

Clearly, if the government would restrict interest expense deductions, that would have an impact. And we've said that in the past. We are well below the Safe Harbor debt-to-equity ratio. If they were to change that and limit interest expense -- and, again, our interest expense is real cash interest expense because our debt is essentially all in the US -- but if that were to limit, that would have an impact.

It wouldn't impact Allergan in the way we're looking at Allergan. We still think there's tax savings upside, if we were able to do diligence, that we haven't factored in yet. So, earnings tripping rules have changed, could have some impact. Not huge. We said somewhere between 0% and 3% depending on where they end up. But, again, it's unclear where they're going to end up.

One other follow-up, Gary. In terms of our 2015 and 2016 outlook that we put out, you might notice that our growth rates for the neural and generics business, where, again, most of the price increase opportunity is, was only 5%. So, we're not assuming that we can continue to take prices. We look to the future to the extent we can. That's upside.

So, we are going to do what's the smart thing to do in the short term. But in terms of our long-term outlook on the business, it's probably composed of 80% to 90% volume and 10% to 20% price. And then to the extent we can take more price that will be upside on our outlook.

Okay. Thank you.

Umer Raffat, ISI Group.

Thanks for taking my question. Mike, I just wanted to get into some numbers with you. We've run our math on this but want to get your take on it. So, the same-store growth for Valeant has been about 10% on an ex generic basis for the past several quarters. And we know Bausch is growing about 10%, as well. So, to get to 19%, that's about $140 million in extra revenues. So, can you help us quantify what that extra $140 million of extra revenue is in Q3?

And then, Howard, one for you, very quickly. If the Allergan bid was raised again, will it continue to be a 20%-plus IRR? Thanks.

The big delta in this quarter -- one was, probably a quarter of it is products that we just launched -- Jublia, Luzu, RAM 0.08%, and other -- Peroxiclear. These are products that just did not even exist. So, this quarter we had new launches.

The second is an acceleration of products that have been launched but weren't -- like, BioTrue Daily. It's probably another quarter. Which was growing quite slowly but now we're growing them 100%. Again, all volume.

Trulign is another example of a product like that. And a number of -- Victus, we're installing, it's doubling. We've accelerated the growth on a number of launch brands from prior years when they were in the hands of Bausch + Lomb.

And then the businesses have just done -- we've talked about dental growing 20%. We talked about generics -- they've been growing over 20%. The businesses are just outperforming. The businesses accelerate.

And we don't expect -- we're not going to report 19% every quarter. I am not projecting that. But we feel quite comfortable it will be 10%-plus for the foreseeable future.

And in terms of a potential increase proposal, for obvious reasons we are not going to get into what we're going to do and when. I think we're pretty clear that we had more to offer and we would do it at the time we felt was right and strategic.

And I think you know us well enough to know, again, we define success as delivering value to our shareholders. I think we're big believers that share prices will correlate with return on capital over time. There's points of time in the market where a market falls in love with earnings accretion, but that's not real value. And that's what we are focused on.

And we're going to continue to be disciplined and watch carefully where we think the returns are. And we're not going to do a transaction if we don't believe our shareholders are getting rewarded for the risk.

Gregg Gilbert, Deutsche Bank.

Thanks. Howard, can you quantify the new launches' contribution in the quarter? And you mentioned wholesaler inventory levels in the US were stable but can you talk about what that level is in terms of weeks? Thanks.

The launches were around 3% this quarter. And, again, going forward, when you roll it out to 2015 and 2016 it will be a much more significant piece. And I think that's what gets us so excited about the 2015 and 2016.

Someone asked about the confidence level, what gave us the confidence to increase the outlook. If you think about Jublia alone, $82 million equals about 1 percentage point of organic growth in 2015. And we had $150 million for Jublia. And Mike talked about potential for Jublia next year. You can see the potential for incremental organic growth.

RAM is going to beat what we said RAM Onexton would do together, so that's additional upside to organic growth. So, I think starting next year you're really going to see the potential of these launch products to drive organic growth.

We've been asked, because Allergan has raised issues with investors about inventory levels. Our inventory levels were exactly flat on a unit basis, and actually declined on a dollar basis. And they've been basically flat for most of the year.

I don't have the exact number per wholesaler at this point but they have been flat and declining. And I would expect they'll stay in these levels. We won't see any benefit of any additional channel add. And probably, given the growth of a bunch of these products, we probably won't see any that have come down in the near term either.

Ram Selvaraju, Aegis Capital.

Thanks very much for taking my question. I wanted to ask about your feelings regarding Valeant's competitive positioning in the context of the new treasury regulations, which I think are likely to impact tax inversions going forward. In the context of that, given that you are already in a tax advantage position, what do you think is likely to be the competitive edge that you have and the enhancement to that competitive edge, given the fact that maybe some of your competitors are now going to be less likely to be able to realize tax synergies, and therefore should enable you to continue to be competitive on pursuing future acquisitions?

I think you answered the question. We're not an inverted company. Those treasury regulations have zero impact on our tax status, our tax rate. And obviously, clearly, if others are prevented from reducing their tax rate through an inversion, that gives us an advantage. But as Mike and I have said many times, our objective is not to compete away, pay away our tax advantage. And that's to preserve for our shareholders and to drive additional cash flows to be able to redeploy to create more value.

But we expect that advantage to continue. Again, the treasury regulations will have zero impact on us.

And then just going forward, do you see disproportionate strength in a particular line of the Bausch + Lomb business? And if so, what specific line do you think is most likely to outperform going forward? Is that likely to be more in the contact lens side or on the surgical site?

I think it's going to be contact lenses and surgical. I think the pharma business was run quite well by Bausch + Lomb. I think it'll continue to do well. It's a great business.

But contact lenses -- we're very excited about the Ultra lens. Unfortunately, we won't have commercial capacity until the second quarter but we've ordered three additional lines to the first line because we think this could be a very large product given the reception in the marketplace. And we are working from a very small base. Again, it's much easier to grow market share if you are a small player with superior products.

Thank you.

Alan Ridgeway, Paradigm Capital.

Hi. Good morning, guys. Thanks for taking the question. Howard, you mentioned that the stronger balance sheet or the improvements in the balance sheet would allow you guys the ability to do more BD and potentially return cash to shareholders through a share buyback.

Can you guys maybe talk about how you think about that? Do you have some levels earmarked for one versus the other going forward? And would that change whether you do or don't get Allergan in an acquisition? Thank you.

Al, as you'd expect, we have an internal model. We have a view as to what we believe will work. Whenever we look at an acquisition, we're asking ourselves whether this acquisition will create more value versus buying back our shares.

Over the last year I think we've been hamstrung a little bit in our desire to delever, and our commitment to delever, plus we tied up our balance sheet with Allergan. We've been frustrated in the fact we haven't been able to repurchase shares given the levels our stock's traded at most of this year. As we strengthen our balance sheet and reduce our leverage, we will have that flexibility to make those decisions.

We're just excited. If you look at the modeling we did back in July, I believe we'll have $6 billion to deploy capital for acquisitions, less if we were to repurchase shares because of course there's no EBITDA that comes in when you repurchase your shares. That gives us a significant amount of firepower and still maintaining a strong balance sheet. That coupled with the organic growth we've talked about we believe really allows us to drive value for shareholders.

Marc Goodman, UBS.

Good morning. Howard, on slide 7, I just want to make sure I understand these Bausch + Lomb growth rates. Are these growth rates for the three months that you owned them this year versus the two months that you owned them last year? Or have you made some type of alteration to that to figure out the two months versus two months or something like that?

And then second question is, on slide 23 you list all these new product acquisitions that you've made or are about to make. Can you just give us a sense of how big these are, maybe annual sales for each one, just really quickly, just so we have a sense of how much we should be adding in. And obviously you raised sales guidance by a few hundred million for next year, so I'm trying to figure out what part of it comes from that and what part is from the base. Thanks.

Sure. First of all, just to be crystal clear, the Q3 2014 is 100%. It's a three months versus three months. So it's the actual three months, there's no adjustments, around the August 5 date, and since inception day-to-day counting the sales of those first five days in August, and looking at the actual sales. And the only adjustments are for FX.

So, there's no adjustments, there's no acquisitions in there, there's no adjustment for any divestitures or discontinuations. Bromday -- the decline of Bromday is included in that. When we publish our organic growth we are very clear that we adjust for discontinuations. In this slide there's been no adjustments for anything other than FX.

So, just to be clear, this is the three months that you owned it this year and two months last year plus the one month you didn't own it but you made it three month so we got the actual three months versus three months.

The actual sales this year and the actual three months of 2013.

Perfect. Thank you.

No adjustments other than FX. And in terms of the acquisitions, remember, these acquisitions, other than Croma -- Croma we knew was going to happen. We thought it was -- we just hadn't signed it yet. All the other ones were included, and they're quite small right now.

Both Bescon an Armoxindo are $15 million -- maybe a little bit less -- in terms of annual revenue. MedPharma is in the same range. Zaraccom is even smaller than that. Croma was a little bit large but that was also included in the forecast.

In our 2015 outlook there are no acquisitions built in. All these small acquisitions have already been factored it.

And Croma is how big?

Croma is in the $40 million or $50 million range.

And in terms of the impact on this quarter, as you can see in the footnote, it was about $2 million of sales in Q3 from these acquisitions.

And the PreCision Company, that was in the numbers this quarter, right? What kind of revenues did that do this quarter?

It was between $15 million and $20 million.

Thank you.

Tony Reiner, Imperial Capital.

Hi, guys. Thanks for taking the call. I know you've got a lot of them going on. Can you please just give a quick two minutes on where you currently stand with Mr. Ackman on your earnings achievements in going forward?

I'm not sure I understand the question in terms of --.

There's been some reports that -- I know it was on TV last week -- that you and Mr. Ackman weren't on the same page. So, do you want to talk about it on this forum?

Sure. I'm not sure -- I don't think -- well, there's no basis for those reports. We talk to him frequently. In fact, he was in our office yesterday for a while. And, so, I think we are completely aligned. We are aligned that we are going to win this battle, that we are going to acquire Allergan. We feel that we're committed to marching forward and getting this deal done.

Are things proceeding as both of you saw planned? It's obviously been a lengthy process with lots of stuff, plant and stuff like that. But overall would you say it's gone as you planned?

I think in terms of the timing it's about where we thought. I think early on we thought that we'd probably get the special meeting in November. I think we communicated. But it's happening in December so maybe it slipped a month. But certainly no more.

I think we've been a little surprised by the baseless attacks that have been put on our Company in terms of -- they're just not true. Public companies usually don't put things out that are untrue. But, anyways, I think our Q3 performance and our outlook is discrediting those attacks.

And personally I've been surprised by the Board of Directors. They've done no independent analysis. You would have thought one of them might -- when we continue to prove everything they said is wrong, one of them might have broken ranks. But they haven't. Maybe the poor governance.

But overall I think we're happy with where we're at. We're happy in terms that there is a record date. We are pleased with our legal victories and we are very pleased with our performance.

Where would you say is left field and the thing you anticipated less, more than anything, what was that during this process?

Again, I'm not sure --.

Just over the timeframe. So, yes, you didn't anticipate the hostility, but overall you are where you want to be. And you got the meeting, and you certainly deserve, and you and Mr. Ackman both deserve a lot of credit for that.

Where was the biggest left field in the last few months that you haven't anticipated? Was it just the hostile nature of them? Was it the leaks in the press? Was it talking down your Company? If you had to make one comment on where you didn't anticipate this happening during the process what would it be?

Yes. I think I answered that question, which is probably the attacks on us. The viciousness of those attacks, would probably be the thing.

Also the false and misleading -- consistent false and misleading nature of the comments.

Understood. Thanks very much, guys. I appreciate the response.

There are no further questions.

All right. Thanks, everyone. I know it was a long call. I appreciate your patience. And we look forward to talking soon.

This concludes today's conference call. You may now disconnect.