45x

Pershing Square Capital Management, L.P.

Disclaimer
The analyses and conclusions of Pershing Square Capital Management, L.P. ("Pershing Square") contained in this
presentation are based on publicly available information. Pershing Square recognizes that there may be nonpublic information
in the possession of the companies discussed in this presentation that could lead these companies and others to disagree
with Pershing Squares analyses, conclusions and opinions. This presentation and the information contained herein is not
investment advice or a recommendation or solicitation to buy or sell any securities. All investments involve risk, including the
loss of principal.
The analyses provided may include certain forward-looking statements, estimates and projections prepared with respect to,
among other things, the historical and anticipated operating performance of the companies discussed in this presentation,
access to capital markets, market conditions and the values of assets and liabilities. Such statements, estimates, and
projections reflect various assumptions by Pershing Square concerning anticipated results that are inherently subject to
significant economic, competitive, and other uncertainties and contingencies and have been included solely for illustrative
purposes. No representations, express or implied, are made as to the accuracy or completeness of such statements, estimates
or projections or with respect to any other materials herein and Pershing Square disclaims any liability with respect thereto.
Actual results may vary materially from the estimates and projected results contained herein. The information contained in this
presentation may not contain all of the information required in order to evaluate the value of the companies discussed in this
presentation. The opinions, analyses, conclusions and proposals presented herein represent the views of Pershing Square and
not those of any third party.
Funds managed by Pershing Square and its affiliates are invested in securities of some of the companies mentioned in this
presentation. Pershing Square manages funds that are in the business of trading buying and selling securities and financial
instruments. It is possible that there will be developments in the future that cause Pershing Square to change its position
regarding these companies. Pershing Square may buy, sell, cover or otherwise change the form of its investment in these
companies for any or no reason. Pershing Square hereby disclaims any duty to provide any updates or changes to the
analyses contained here including, without limitation, the manner or type of any Pershing Square investment.

Jarden Corporation: ~45x Return in 14 Years

Since Martin Franklin joined Jarden in 2001, the company has achieved
success as a well-managed consolidator of consumer products assets,
generating a ~45x total shareholder return to-date
Indexed total shareholder return of Jarden from 6/25/2001 to 5/1/2015
8/29/14:
Acquired
Rexair for
$349mm

Indexed total shareholder return

5,000%
4,500%

3/27/02:
Acquired Tilia
for $160mm

4,000%
3,500%
3,000%
2,500%
2,000%
1,500%

2/7/03:
Acquired
Diamond
Brands for
$110mm

1/24/05:
Acquired
American
Household
for $845mm

9/2/03:
Acquired
Leigh for
$155mm

7/18/05:
Acquired
Holmes
Group for
$625mm

9/5/06:
Acquired
Pine
Mountain for
$150mm

4,518%

4/1/10:
Acquired
MAPA for
$500mm

4/6/07:
Acquired
Pure Fishing
for $400mm
7/9/07:
Acquired K2
for $1.2bn

10/3/13:
Acquired
Yankee Candle
for $1.8bn

1,000%
500%

6/28/04: Acquired U.S.

Playing Card for $240mm

0%
Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14
Jarden Corp.

S&P 500

362%
228%

S&P Mid Cap 400

Note: Total shareholder returns are calculated per Bloomberg from June 25, 2001 to May 1, 2015 with all starting values indexed to 100%.
3

Investors Have Consistently Underestimated

Jardens Earnings Potential
In June 2001, investors could have purchased Jardens shares at
~0.4x 2016 Consensus EPS(1)
Jardens Historical Share Price as a Multiple of 2016E Earnings (6/25/2001 to 5/1/2015)
16x
14x

P/E Multiple

12x
10x
8x
6x
4x
2x
0x
2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

P/E Multiple of 2016E Earnings

Source: Bloomberg. Stock price adjusted to assume reinvestment of dividends.
(1) Based on Bloomberg Consensus 2016 EPS of $3.149 as of May 1, 2015.

Platform Specialty Products (NYSE: PAH)

Martin Franklin, Chairman of Jarden, and private investor
Nicolas Berggruen co-founded PAH in early 2013
In May 2013, PAH raised approximately $900mm(1) in a public
offering at $10 per share
In October 2013, PAH announced the acquisition of MacDermid
Inc., a specialty chemical company, for $1.8bn
PAH has subsequently acquired three businesses in the
agricultural chemicals industry for approximately $5 billion
Today, PAH trades at $27.40 per share, a ~175% increase from its
public offering price just two years ago
(1)

http://ir.platformspecialtyproducts.com/faq.cfm

Platform Specialty: ~175% Return in Two Years

PAH Share Price from 5/16/2013 to 5/1/2015
$35

10/10/13:
Announced
acquisition of
MacDermid for
$1.8bn TEV

$30

PAH Share Price

$25

$20

$27.40

5/16/2013:
Began trading
near cash NAV

$15

4/17/14:
Announced
acquisition of
Chemtura
AgroSolutions for
$1.0bn TEV

$10

$5

$0
5/16/2013

8/16/2013

11/16/2013

2/16/2014

5/16/2014

8/6/14:
Announced
acquisition of
Agriphar SA for
300m TEV

8/16/2014

11/16/2014

10/20/14:
Announced
acquisition of
Arysta
LifeScience for
$3.5bn TEV

2/16/2015

Source: Bloomberg.
6

Nomad Holdings Limited (NOMHF) (Nomad)

Martin Franklin and Noam Gottesman, co-founder of GLG
Partners, co-founded Nomad in early 2014
In April 2014, Nomad raised $500mm(1) in a public offering and
began trading at a valuation approximating its cash per share
In April 2015, Nomad announced the acquisition of Iglo Foods
Holdings, the largest frozen foods business in Europe, for
approximately 2.6 billion from private equity owner Permira
Nomad is financing its acquisition of Iglo with cash on hand
from its IPO, debt financing, and a $750mm private placement of
equity
Nomad has called Iglo its anchor investment(2), and intends to
use this asset as a base for future food industry acquisitions
(1)
(2)

Includes $485mm in ordinary shares (with matching warrants) and $15mm in founder preferred shares.
Source: http://www.reuters.com/article/2015/04/20/us-iglo-m-a-nomad-foods-idUSKBN0NB1C520150420.
7

Nomad Holdings: ~80% Return Since IPO

Nomad shares have increased by ~80% in just over a year, driven
by the Iglo acquisition announcement
Nomad share price from 4/9/2014 to 4/27/2015(1)
$20

Nomad Share Price

$15

4/9/2014:
Began trading
near cash NAV

4/20/15:
Announces
acquisition of Iglo
Foods Holdings
for 2.6bn TEV

$18

$10

$5

$0

Source: Bloomberg
Note: Presented as Nomad Holdings (LSE) through 4/20/15 and NOMHF US, a grey market tracking stock, from 4/20/15 through 5/1/15 following the LSE de-listing.
(1) Trading in Nomad shares was halted subsequent to 4/27/2015.

Nomad Holdings: Why Has the Stock

Gone Up So Much?
Nomads share price has increased dramatically since the Iglo
Foods acquisition was announced
What are the possible explanations for this 80% price increase?
Did Nomad purchase Iglo for materially less than its fair value?
Nomad paid ~8.5x 2014 adjusted EBITDA, a reasonable multiple

given Iglo Foods business quality and modest growth potential

The seller was a private equity firm with no urgency to sell

Are there substantial synergies with the acquirers assets?

Prior to the acquisition, Nomads only asset was cash

What is going on here?

Platform Value
Businesses managed by superior operators that execute valueenhancing acquisitions and shareholder-focused capital
allocation have substantial Platform Value

Additional Examples of Well-Known, Successful Platforms:

Liberty Media

11

Martin Franklins Platform Strategy

Franklins intense focus on value-creating capital allocation has driven
significant share price appreciation across several companies
Value-creating acquisition and capital allocation strategy
Maintains high standards for quality and valuation of acquired businesses
Focus on shareholder value creation not reported GAAP earnings
Intelligent use of debt and equity to finance acquisitions
Capital allocation and acquisitions are a core competency and a significant

focus of senior management and the board

A decentralized organizational structure allows Franklins companies to

move quickly to seize opportunities and to keep costs down

12

Not All Acquisitive Businesses Create Value

While Martin Franklin and other intelligent capital allocators have
created tremendous value through platforms, there are many
examples of acquisition-intensive companies that have
destroyed shareholder value
These failures can be distinguished from successful platform models in
the following ways
Lacked a competitive advantage in cost structure or strategy
Overpaid for acquisitions to generate growth
Relied on overvalued equity as an acquisition currency
Failed to integrate and achieve cost synergies
Focused on growing reported GAAP earnings rather than economic

earnings per share

13

Valeant: An UnderAppreciated Platform

Valeants Platform Strategy Has Created

Shareholder Value Over Many Years
An investment in Valeant shares on the day Mike Pearson became CEO
has appreciated to ~45x its initial value in seven years including
dividend reinvestment
5,000%

Valeant total shareholder return from 2/1/2008 to 5/1/2015

3/16/15: Announced
final agreement to
acquire Salix
for $15.8bn

Valeant Total Shareholder Return

4,500%

5/27/13:
Announced
acquisition of
Bausch & Lomb
for $8.7bn

4,000%
3,500%
3,000%
2,500%
2,000%
1,500%
1,000%
500%
0%
Feb-08

2/1/08: Mike
Pearson
appointed
Valeant CEO

Feb-09

6/20/10:
Announced
merger with
Biovail

Feb-10

4,502%

9/3/12: Announced
acquisition of
Medicis for $2.6bn

Feb-11

Feb-12

Feb-13

Feb-14

Feb-15

Note: Chart shows the total shareholder return with the initial share price indexed to 100% for an investment in Valeant Pharmaceuticals International, the entity that merged into
Biovail Corporation on September 28, 2010. Subsequent to this transaction, Biovail Corporation changed its name to Valeant Pharmaceuticals International, Inc. Chart assumes
that the special dividend of $16.77 paid to legacy Valeant shareholders at closing of the merger and the special dividend of $1.00 paid to new Valeant shareholders on December
22, 2010 were both immediately reinvested in new Valeant (fka Biovail) common stock.
15

Valeants Acquisition Strategy

Management expects to invest the majority of the companys
free cash flow in value-creating acquisitions
Large acquisitions of traditional pharma / device companies with
bloated cost structures and unproductive R&D spending
Small, bolt-on acquisitions of products easily integrated into
Valeant's efficient, international distribution infrastructure
In-licenses from one-product companies
Acquisitions of sub-scale companies without adequate distribution
Declining products neglected by other companies that can return to

growth with promotion

Effective acquisition and integration process
CEO Mike Pearson is personally involved in evaluation, negotiation
and execution of transactions
16

Valeant's Acquisition Track Record &

Financial Framework
Valeant has earned a >20% unleveraged return on the $20bn+ it
has invested in acquisitions since 2008 (excluding tax benefits)(1)
Conservative underwriting of attractive returns
Target 20%+ unlevered IRR, before tax synergies (est. 30%+ after-tax)
Target < 6-year payback
Pipeline value of acquisition target assigned zero value

Implementation of Valeants decentralized management model at

acquired companies
Valeant management has accelerated revenue growth at all seven of

Valeants platform acquisitions(2)

Rapid integration with synergies at or exceeding budget
Have met or exceeded synergy budget on all announced acquisitions
Typically, ~80% of synergies achieved within first year
Source: Management interviews
(1) Excludes 2015 transactions.
(2) Management Presentation: The Valeant Approach An Enduring Engine For Growth, 5/28/14

17

How Can One Evaluate Valeants Platform Value?

Valeants Platform Value is a function of several factors:
Competitive advantages of the Platform Company

Valeant

Operational efficiencies relative to competitors

Integration track record
Revenue synergy potential
Access to and cost of capital
Transaction execution capability
Target Opportunity

Large relative size of the market opportunity

Competitiveness of acquisition market
High Platform Value:
Low Platform Value:

18

Valeant: Bausch & Lomb (B&L) Transaction

Transaction Background
In May 2013, Valeant agreed to acquire global eye
health company Bausch & Lomb for $8.7 billion
Valeant acquired B&L from Warburg Pincus
VRX paid 13.5x 2012 Adj. EBITDA of $643 million(1)

(1)

Source: Bausch & Lomb S1.

19

Valeant: B&L Transaction

Valeant management has increased the value of B&L from $8.7bn
to more than $21bn
B&L Transaction Value Creation ($mm):

Sources of Value Creation

2014ProFormaB&LFreeCashFlow
Multiple
CurrentB&LValue

Low
Mid
High
$1,425 $1,425 $1,425
15.0x
16.0x
17.0x
$21,375 $22,800 $24,225

Consideration+RestructuringExpense

$9,300 $9,300 $9,300

AB

ValueCreation

$12,075 $13,500 $14,925

(AB)/B

%Return

130%

145%

Under Valeant ownership:

B&Ls organic growth
increased from 5% to 11%(1)

Under Valeant ownership:

B&Ls EBITDA margin
increased from 21% to ~50%(2)

160%

Analysisgivesnocreditto:B&Lpipeline,Boltonacquisitionopportunities,Leverage

B&L Free Cash Flow Calculation:

Applied estimated 2012 Pro-Forma EBITDA margin of 50% ($900mm of synergies) to 2014 revenue. Other
assumptions include: $120mm of B&L Capex and a long-term 10% cash tax rate.

(1)
(2)

Represents 5% organic growth in 2012 (Pro-Forma ISTA acquisition, as if acquisition had occurred at the beginning of 2011), the last full year prior to the acquisition by
Valeant, and 11% growth in 2014, the first full year of Valeant ownership.
50% pro forma margin allocating all synergies to B&L.

20

Valeant Stock Price Bausch & Lomb

Despite issuing equity, VRX shares appreciated 47% in the six months
following press reports announcing Valeants agreement to acquire B&L
VRX share price from 5/1/2013 to 11/29/2013
$120

VRX Share Price

$110

$100

5/24/13:
WSJ announces
impeding deal
with Bausch &
Lomb for ~$9bn

6/18/13:
VRX issues $2bn
of equity to fund
B&L acquisition

8/7/13:
VRX announces
second quarter
earnings results

$110

10/31/13:
VRX announces
third quarter
earnings results

$90

$80

5/27/13:
VRX announces
acquisition of
Bausch & Lomb
for $8.7bn

$70

$60
5/1/2013

6/1/2013

7/1/2013

8/1/2013

9/1/2013

10/1/2013

11/1/2013

Source: Bloomberg. Share price appreciation measured from the closing price 1 day prior to the WSJ news article (5/23/2013) to the end of November 2013.

21

Investors Have Consistently Underestimated the

Earnings Potential of the Valeant Platform
In 2008, investors could have purchased Valeant's shares at ~0.3x
2016 Consensus EPS(1)
Valeant's Historical Share Price as a Multiple of 2016E Earnings (2/1/2008 to 5/1/2015)
16x
14x

P/E Multiple

12x
10x
8x
6x
4x
2x
0x
Feb-08

Feb-09

Feb-10

Feb-11

Feb-12

Feb-13

Feb-14

Feb-15

P/E Multiple of 2016E Earnings

Source: Bloomberg. Stock price adjusted to assume reinvestment of dividends.
(1) Based on Bloomberg Consensus 2016 EPS of $14.779 as of May 1, 2015.

22

Why the Stock Market Undervalues

Platform Companies
The traditional multiple-of-earnings valuation methodology does not
incorporate Platform Value
The traditional multiple-of-earnings valuation approach:
Measures the earnings of the companys existing asset base
Applies a multiple to earnings that reflects growth potential and risk
Ignores the value a company can generate from value-enhancing

acquisitions

Instead, investors should consider both the earnings potential of the

companys current asset base, as well as the potential to generate
additional earnings through future, value-enhancing investments

23

Equity Research Analysts are Starting to Give

Credit to Valeants Platform Value
Valuation: Our price target is based on a DCF that includes a bolt-on sensitivity, with the
increase due to a higher DCF with SLXP more than offsetting a slightly more
conservative bolt-on analysis [of $50 dollars in present value per share].
- Goldman Sachs (Apr-12-2015)

While management appears focused on tuck-in deals in the near term, we would not be
surprised to see VRX evaluate larger M&A over time. We calculate that continued
deployment of cash flow and fully leveraging the companys balance sheet could drive
2017 EPS near $20.
- JPMorgan (Apr-2-2015)

Valeants diversified, global platform gives it the unique flexibility to consider a number of
small and large transactions in branded pharma, generics, branded generics, OTC, and
aesthetics all around the world.
- Morgan Stanley (Feb-27-2014)
24

Valeant Valuation Model

Managements $7.5bn+ 2016 EBITDA

guidance implies ~$16+ of 2016 Adj. EPS1
Valued at 16x forward earnings, this implies
$250+ of value by year end 2015, a ~10%+
return from todays stock price
However, this analysis ignores one of
Valeants most valuable assets, its Platform
Value
(1): Assumes $300mm of D&A and stock based compensation, $1.4bn of interest expense, 5% tax rate, 350mm shares

26

Platform Valuation Model Assumptions

Acquisitions
Assumption

Rationale

Acquisition Multiple

4x forward sales1

Managements long-term goal

is to acquire assets for 2x to
3x sales

Pro Forma Financials

of Acquired Assets

~52.5% EBITA margin

2016 corporate EBITA margin

>55%
Valeant reported 13% organic
growth in 20142
Current Valeant corporate tax
rate ~5%

5% organic growth
10% long-term tax rate

Acquisition Value Creation

Implied unlevered FCF multiple
~8.5x FCF

Implied value creation

Valuing pro-forma FCF at 16x, implies a ~90% unlevered return
(1): Restructuring expenses capitalized in the acquisition price
(2): Same store organic growth, including impact of generics

27

2020 Earnings Scenarios

We believe Valeant can earn ~$28 to ~$39 per share in 2020, if
management is able to continue its historically successful
capital allocation strategy

BaseBusinessRevenue
RevenueofAcquiredProducts

AnnualM&ACap
$0bn
$5bn
$10bn
$20bn
$15,000 $15,000 $15,000 $15,000

5,400 10,800 19,000

Total2020Revenue($mm)

$15,000 $20,400 $25,800 $34,000

2020EBITDA($mm)
%Margin

9,000 12,000 14,900 19,400

60%
59%
58%
57%

Debt(January2020,$mm)
xLeverage(Debt/2019ProFormaEBITDA)

34,200 45,400 56,600 73,800

4.0x
4.0x
4.0x
4.0x

2020EarningsPerShare
%Growthfrom2016earningsbase

$23.00 $27.90 $32.40 $38.60

46%
78%
106%
146%

CumulativeInvestment($bn):
InvestmentinAcquisitions
InvestmentinShareBuybacks
%ofsharesrepurchased

$
$20.0 $40.0 $71.1
26.2 20.1 14.0 3.2
23%
16%
10%
2%

Leverage pegged
at 4x

Excess FCF used

to buyback stock
28

Valuation Multiple: Summary

If Valeants durable portfolio were valued within the range of
multiples of businesses that we believe to be comparable, and
its patent cliff portfolio were valued using a DCF analysis, then
we estimate that Valeants forward earnings multiple would be
as follows:
2020
Portfolio

Durable
Cliff
Total

% Earnings
Contribution

70%
30%
100%

Earnings
Multiple

20.0x
8.0x
16.4x

Reflects Comparables
Analysis
Reflects DCF Analysis

Assumption: We assume the durable and patent cliff portfolios have earnings contributions equal to their sales contributions
29

Valuation Summary
Assuming management continues to make attractive
acquisitions, Valeant trades at a large discount to fair value

2020EPS
NTMP/EMultiple
2020Value(January2020)
%Increaseovercurrentshareprice
%IRR

AnnualM&ACap
$5bn
$10bn
$20bn
$27.90 $32.40 $ 38.60
16.0x
16.0x
16.0x
$ 446 $ 518 $ 618
100%
132%
177%
16%
20%
24%

Values acquired
assets and base
business at 16x
2020 earnings

PV(ValueToday10%DiscountRate)
%Increaseovercurrentshareprice

$ 286 $ 332 $ 396

28%
49%
78%

Current Valeant share

price = $223

This analysis excludes potential upside from a large,

transformational acquisition and any contribution from
VRXs drug development pipeline(1)
(1) Legacy Valeant pipeline excluding Salix pipeline.
30

Valeants Late-Stage Pipeline

Valued at 8x its estimated peak earnings contribution, Valeants latestage pipeline, excluding Salix, may be worth as much as ~$40 per share

Product
Luminesse
Vesneo
LotemaxGelNextGen.
Emerade
IDP118

Description
EyeWhitening,OTC
NovelGlaucomaTherapy
OcularInflamationTopical
AnaphylaxisDevice
PsoriasisTopical

2015Development
Milestones
FiledNDAinMarch2015
FileNDA,1H2015
FileNDA,2016
PhaseIIIinitiated

Expected
LaunchYear
2016
2016
2016
2016/2017
2017/2018

ManagementPeakSalesEst.
Low
High
300 400
400 1,000
75 100
100 500
200 300

TotalPeakAnnualSalesPotential

$1,075 $2,300

ValuePerShare
%ofCurrentSharePrice

$18 $38
8%
17%

Valeant management intends to continue the majority of Salixs R&D programs.

Salix management had estimated ~$5bn of potential peak sales from the
companys Phase II and Phase III programs, not including Xifaxin for IBS-D
Valuation assumes contribution margin of 80%, 10% tax rate and no time or risk discount factor
Valeant program peak sales estimates from managements 4/22/14 presentation except Lotemax Gel Next Gen., which is a Pershing Square forecast
Salix program peak sales from 7/9/2014 investor day

31

Summary
Platform companies can be incredibly valuable but are often underappreciated
A traditional multiple-of-earnings approach does not capture platform value
Investors should consider the potential for additional value creation through future

acquisitions in valuing platform companies

The Valeant Platform
Superior operating and capital allocation strategy in a large, historically inefficient

industry
Valuation
The majority of Valeants business is comprised of high quality, durable assets that

merit a high earnings multiple

At $223 per share, Valeant trades at only ~14x managements implied ~$16 2016

earnings per share guidance

If VRX is able to continue its historic success allocating capital,

Valeants stock today is worth $330+ per share excluding
substantial pipeline upside or the potential for a large,
transformative acquisition
32

Appendix

Patent Cliff vs. Durable Drugs/Medical Devices

Patent Cliff Products
A patent provides a legal monopoly to the inventor of a drug or
medical device for a limited period of time
During the period of patent exclusivity (usually 20 years from the

filing of the patent application), superior profit margins are possible

(and necessary to recoup the cost of developing the drug/device)
On the day the patent expires (the patent cliff), low-cost, generic

products can enter the market. If generics enter, sales of more

expensive, previously patented products usually decline
substantially
Durable Products
Do not depend on the legal monopoly afforded by patents for their
market position
Similar to consumer packaged goods
34

Sum of the Parts (SOTP) Valuation:

Two Types of Cash Flow
Durable Products
Products:

Valuation Methodology

Durable Rx
Branded Generics
OTC

Multiple of after-tax profits

Durable Devices

Patent Cliff Products

Products:
Patent Cliff Rx

Valuation Methodology
Discounted cash flow analysis

35

Durable Portfolio:
Few Healthcare Trading Comparables
Valeants durable business has few peers among publicly
traded pharmaceutical companies
Big Pharma
Few durable assets
High exposure to

competitive, low-growth
categories

Specialty Pharmaceuticals
High product

concentration
Few durable assets

Generic Pharmaceuticals
Biotech
High product concentration
Large R&D investment

Focused on commodity

categories
Low secular growth

36

Durable Portfolio:
Healthcare Trading Comparables
Only a handful of public healthcare companies have durability
comparable to Valeant's durable product portfolio
Perrigo Co.
~80%1 of EBITA is durable assumes large biologic drug is a patent cliff asset
Major businesses: Private label and branded OTC; Rx generics; Rx biologic royalty
Lower gross margin than Valeant: 2016e Gross Margin = 48%2 vs. 79%2
Undisturbed trading multiple: 21x Forward EPS3

Zoetis Inc.
>80%4 durable ~80% of revenues are not covered by exclusive intellectual

property; animal health pharmaceuticals face lower generic substitution risk than
human pharma
Major business: Companion and livestock animal health pharmaceuticals
Undisturbed trading multiple: 23x Forward EPS3
1 RBC

analyst report 3/23/15

2Capital

IQ consensus

3Based

on the closing share prices and capital IQ consensus NTM EPS estimates as of 10/31/14 for Zoetis (the day before Pershing
Squares rapid accumulation program began) and 4/7/15 for Perrigo (the day before Mylan publicized its Perrigo bid)

4Zoetis

2014 Investor Day 11/18/2014

37

Durable Portfolio:
Healthcare Transaction Comparables
Several large portfolios of durable OTC products have been
sold in the last decade
xForward Net Income
Announced
Date

Asset

Buyer

10/7/2005

Boots Healthcare Int'l

Reckitt Benckiser

6/26/2006

Pfizer Consumer Health Johnson & Johnson

12/10/2007

Adams Respiratory

7/21/2010

Price ($bn)

Reported

Adj. for 25%

Premium (1)

$3.4

26x

20x

16.6

36x

29x

Reckitt Benckiser

2.3

29x

23x

SSL International

Reckitt Benckiser

4.2

25x

20x

11/15/2012

Schiff Nutrition

Reckitt Benckiser

1.5

26x

21x

5/6/2014

Merck Consumer Care

Bayer AG

14.2

34x

27x

11/6/2014

Omega Pharma NV

Perrigo Co PLC

4.5

19x

16x

28x

22x

Average

Source: CapIQ, Bloomberg and Wall Street research. Net income multiples represent multiples of tax-affected EBIT excluding synergies.
(1): Multiples adjusted downward for a hypothetical 25% control premium.

38

Durable Portfolio:
Trading Comparables Outside of Healthcare
We believe trading comparables outside of traditional
healthcare can be useful for valuing Valeants durable business

Personal Care

Global Beauty

39

Durable Portfolio:
Trading Comparables Outside of Healthcare
We believe trading comparables outside of traditional
healthcare can be useful for valuing Valeants durable business
Gross Margins

Long Term
Organic Growth

>70%

5% - 7%

Personal Care1

50% - 60%

4% - 6%

Global Beauty2

60% - 80%

5% - 7%

Industry
Valeant (Durable)

(1): Personal Care: Procter & Gamble, Reckitt Benckiser and Colgate Palmolive.
(2): Global Beauty: LOreal SA, The Estee Lauder Companies and Beiersdorf AG.

40

Durable Portfolio:
Trading Comparables Outside of Healthcare
Comparable non-healthcare companies are valued at an
average of 25x 2015 earnings
2015 P/E Multiple
30x
25x

27x
25x
22x

20x
15x
10x
5x
0x
Average

Personal Care (1)

Global Beauty (2)

Source: CapIQ median estimates as of 5/1/2015.

(1) Personal Care: Procter & Gamble, Reckitt Benckiser and Colgate Palmolive.
(2) Global Beauty: LOreal SA, The Estee Lauder Companies and Beiersdorf AG
41

Valuation Multiple:
Durable Portfolio
We conservatively value Valeants durable portfolio at 20x
forward earnings
Valuation Range Forward P/E Multiple
Average: 23x

Pershing Square
Valuation Multiple: 20x
Healthcare
Trading
Comparables (1)

23x

21x

Healthcare
Healthcare
Transaction
Comparables (2)

NonHealthcare

16x

29x

Non-Healthcare
Trading
Comparables (3)

10x

22x

15x

20x

27x

25x

30x

35x

(1) Based on the undisturbed forward earnings multiples for Perrigo and Zoetis.
(2) Presented based on the low and high ends of the range of the durable OTC deal comparable. Net income multiples represent multiples of tax-affected EBIT excluding synergies.
Multiples presented are adjusted downward for a hypothetical 25% control premium.
(3) Presented based on the average multiple of the public comparable companies: Personal Care at the low end (22x) and Global Beauty at the high end (27x).

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Valuation of Patent Cliff Portfolio

(Base Business)
The below assumptions imply a patent cliff portfolio value in
2020 equal to eight times forward earnings
10 years of remaining cash flow, from 2020
Reflects average patent life of cliff portfolio in 2020
Assumes Xifaxin (550mg tablet) loses exclusivity in 2029

5% annual cash flow growth until cliff

10% discount rate
Ineffective Life-Cycle Management
Assumes management is unable to extend the economics of the franchise

beyond the expiration of the original patent

Revenues after patent cliff are zero
Assumes that the branded products market share drops to zero immediately

after final patent expires

Assumes that Valeant will not enter the generic market

Costs are variable

Assumes Valeant is able to reduce SG&A and R&D costs proportionate to the

revenue lost from patent cliffs

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Durable vs. Cliff Product Sales:

Base Business in 2020
Implied Cliff
Product Sales

Valeant Total Sales (Estimated)

2020e
2020
$mmSales %ofSales
Valeant(exSalix)
Durable
Cliff
SubTotal

10,600
1,150
11,750

Salix

3,250

Total

15,000

Cliff(exSalix)
Salix
CliffSales
%ofTotalSales

90%
10%

1,150
3,250
4,400
~30%

Valeant 2020 Cliff Sales Bridge (ex-Salix)

2015revenuefrompatentedUSRx(cliffproducts)

~$1.4bn <ExcludesJublia,Luzu,Onexton;IncludesMarathon

Less:Saleslosttopatentcliffs20152019
Subtotal
Plus:Growthofcliffproductsfrom2015to2020
Subtotal
Plus:2020salesoflaunchproducts
Total

1.2bn
0.3bn
0.1bn
0.3bn
0.8bn
~$1.2bn

<Measuredat2015saleslevel(perguidance),IncludesMarathon
<Measuredat2015saleslevel
<5%annualizedgrowth
<Jublia,Luzu,Onexton

Source: Pershing Square analysis based on public filings and statements by Valeant, including January 13, 2015 presentation. Please see disclaimer on page 2.

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Platform Valuation Model Assumptions

Base Business Forecast (No Acquisitions)
Revenue: ~$11.5bn1 (2015) ~$15bn (2020)
Valeant (ex-Salix)
2015 and 2016: sales growth consistent with management guidance2
2017 thru 2020: 5% organic growth excluding impact of loss of exclusivity; patent

cliffs modeled per management guidance

No pipeline contribution3

Salix 2020 sales of ~$3.2bn consistent with sell side consensus prior to
Valeant acquisition4

Margins & Tax

Managements $7.5bn 2016 EBITDA guidance implies ~57% EBITA margins
Our model assumes the base business will earn ~57% EBITA margins through 2020,

implying continued spend on promotion and R&D, despite no pipeline contribution

Assumes cash tax rate increases from ~5% today to 10% by 2020
1: Pro-Forma January 1, 2015 close for Salix and Dendreon, excludes effects of Salix inventory destocking

3: We exclude Brimonidine from managements 2016 forecast

2: Management forecast dates 2015 = 2/23/15, 2016 = 11/14/14

4: Consensus as reported in Evercore ISI Febuary 23, 2015 report

45

Platform Valuation Model Assumptions Sources and Uses of Cash

Sources of cash
Operations:
90% of Adj. Net Income converts to Cash Income

Leverage:
Annually leverage balance sheet to 4x trailing Net Debt/Pro-Forma LTM

EBITDA
Current leverage is >5.5x Net Debt/Pro-Forma LTM EBITDA
5.75% cost of debt

Cost of debt for Salix transaction = ~5%

46

Platform Valuation Model Assumptions Sources and Uses of Cash

Uses of cash
Acquisition financing and timing:
Acquisitions are cash financed
Acquisitions are made at start of year
Valeant acquires assets until annual M&A cap or leverage limit (4x Net

Debt/Pro-Forma LTM EBITDA) is reached

Four acquisition cases:
$0bn of acquisitions per year
Up to $5bn of acquisitions per year
Up to $10bn of acquisitions per year
Up to $20bn of acquisitions per year

If Valeant has additional debt capacity (up to 4x) after acquisitions,

cash is used to buy back stock at 18x trailing earnings
47