Bausch Health Companies Inc.
Q1 2015 Earnings Call Transcript

Published: 29 Apr 2015

[Operator:]

Good morning. My name is Stefanie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Valeant Pharmaceuticals First Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. Ms. Laurie Little, Head of Investor Relations, you may begin your conference.

[Laurie Little:]

Thanks, Stefanie. Good morning, everyone, and welcome to Valeant’s Investor First Quarter 2015 Conference Call. Today we will be discussing our financial results and presenting on the call are J. Michael Pearson, Chairman and Chief Executive Officer; and Howard Schiller, Chief Financial Officer. Dr. Ari Kellen, Company Group Chairman, will be available for questions after our prepared remarks. In addition to a live webcast, a copy of today’s slide 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 presentation contains non-GAAP financial measures. For more information about non-GAAP financial measures, please refer to Slide Number 1. Non-GAAP reconciliations can be found in the press release issued earlier today and posted on our website. Finally, the financial guidance in this presentation is effective only as of today. It is our policy to update our firm guidance only through broadly disseminated public disclosure. And with that, I will turn the call over to Mike.

[Mike Pearson:]

Thank you, Laurie. Good morning, everyone, and thank you for joining us. Today, we announced very strong financial results for the first quarter of 2015. We plan to discuss four topics on today’s call. First, we will review our strong first quarter financial results. Second, provide you with the highlights of our first quarter business performance. Next, we’ll update you on the progress with the integrations of both Dendreon and Salix. And finally, we’ll discuss our financial performance and update our 2015 guidance. This morning, we reported Valeant’s first quarter results for 2015 which were driven by strong sales growth and profitability across all our regions, once again demonstrating the strength of our diversified and decentralized business model. Before we begin discussing the details of our performance, I wanted to provide the highlights of this quarter. And results from that stage [ph] exceeded the Q1 guidance that we provided on our last call despite losing $140 million in top line revenue and $0.12 in cash EPS to FX headwinds. We have very strong same-store organic growth of greater than 15%, driven by the strong performance from most of our business units around the world. The Dendreon and Salix integrations are largely complete. With Salix, we will exceed $530 million in synergies and exceed the $500 million run rate by the end of Q2. With Dendreon, we expect to achieve greater than $130 million in synergies and to achieve 90% of this run rate by the end of the year. Based on our strong base business of performance and the contributions for sales in Dendreon, we are raising our 2015 cash EPS guidance to $10.90 to $11.20. Finally, we are reconfirming that we expect 20%-plus cash EPS accretion from sales acquisition in 2016 and we remain confident in our ability to comfortably exceed $7.5 billion of EBITDA in 2016. Looking at our quarter, our total revenue was $2.2 billion, an increase of 16% over the prior year, largely driven by the exceptionally strong growth in many of our U.S. businesses, which more than offset the negative headwinds from FX in our ex-U.S. markets. Adjusting for FX in the divestiture of our aesthetics business to Galderma last year, revenue grew 27% in Q1 of 2014. Cash EPS was $2.36, an increase of 34% over prior year. This includes the negative impacts of the $140 million in revenue and $0.12. Adjusted for FX and the aesthetic divestment, cash EPS grew 50% Q1 2015 over Q1 2014. Additionally, the acquisition related financing that was completed prior to the quarter end had an impact on our Q1 result. We included the negative $0.01 impact from the share issuance while we excluded the $0.02 impact from the debt financing that settled prior to quarter end. Turning to organic growth, our overall same-store total company organic growth was 15% for the quarter. While almost all of our businesses delivered strong organic growth, I would like to highlight contact lenses, dermatology, Obagi, Ophthalmology Rx, Asia, the Middle East and North Africa, Poland and Mexico as having particularly strong quarters. This performance puts us at the high end of our previous guidance of 10% to 15% and we expect to deliver organic growth for the rest of the year of greater than 10%. Most of the Bausch + Lomb businesses continue their consistently strong growth pattern, delivering 6% organic growth in Q1. If we exclude Japan, B&L grew 8% for the quarter. You may remember that Japan enacted a sales tax increase effective April 1, 2014. This led to a significant increase in forward buying of all consumer products in Japan, including our B&L products in Q1 of last year. In the subsequent quarter, our sales in Japan dropped approximately $8 million. Thus, we expect double-digit organic growth next quarter in B&L Japan. If normalized over both quarters, Japan is growing in the high single-digits. The other area of slow organic growth is in our U.S. surgical division which has had a second consecutive slow quarter. As you have seen in other earnings reports, the cataract market in the U.S. has been flat from Q4 of 2014 to Q1 of 2015. We do expect this to start strengthening in the rest of the year. Our growth was slowed by changing our business model for VICTUS femtosecond laser to a lease versus sale model from 2014 to 2015 and a continued erosion of our Excimer laser. This reduction was offset by growth in TRULIGN and enVista IOLs. Overall, our surgical business is doing well and gaining share in the most attractive segments. We have begun trials on our next generation laser platform, TENEO, in the U.S. which will replace the Excimer. Outside the U.S., our TENEO platform is gaining share. Despite these pressures on B&L’s, we’re confident that B&L will achieve approximately 10% organic growth for the full year 2015. And as promised, we are continuing to share revenue for our top 20 products. As a percentage, our top 20 products represent 41% of total revenue in the first quarter with the largest product representing approximately 3% of revenue and the top 10 products contributing approximately 27% of revenue. The top 20 products, excluding three newly acquired products, grew 36% over the first quarter of 2014. The three newly added products from recently completed acquisitions include two from our Marathon acquisition, Isuprel and Nitropress; and Provenge from the Dendreon transaction. This quarter, the majority of the growth of our top 20 products is driven by volume increases from most of our top products/ Our U.S. dermatology business had an outstanding quarter. Dermatology revenue grew 38% year-on-year. And its script growth grew 37% year-on-year. Jublia scripts grew 87% in Q1 versus Q4 of last year. Our Jublia revenue growth was more modest due, as expected, to post-launch stocking levels of wholesalers and retailers being reduced. On April 20th, we launched a new television campaign featuring John McEnroe which is already having a positive impact on the product. Next week, we will be launching a Jublia 8mL cube [ph] as opposed to our current 4mL cube [ph] with a zero-dollar co-pay. At the end of Q2, we will be eliminating our zero co-pay on the 4mL cube [ph]. We expect this will further accelerate the growth of the brand. We also launched Onexton this quarter, our new combination acne treatment. And we are seeing an almost identical rank of scripts as we do with Jublia. We also begun a DTC campaign with our first commercial airing April 6th targeted towards the adult female audience. Our peak sales estimate for next gen is now between $100 million and $200 million. Luzu continues to grow with weekly scripts growing 90% over the course of Q1. Our Retin-A franchise grew greater than 50% Q1 ’14 to Q1 ’15. And finally, Obagi and Solta combined to grow over 20%. As you can see, given their modest size, we are now including Obagi and Solta in our U.S. dermatology businesses. Turning to our eye health business. Our eye health business is performing extremely well and delivered 19% growth over the prior year. Our contact lens business continues to see strong growth from our Biotrue ONEday lens. Biotrue ONEday delivered its biggest revenue quarter since launched, growing 97% over the prior year. We expect this growth to continue as we recently received clearance for our Biotrue Toric lens and planning on launching this product later this year. Our ophthalmology Rx business continues to see strong double-digit growth fueled by multiple brands. B&L’s Ultra contact lens continues to be well-received by healthcare professionals and is going [ph] to production capacity on our private line. Our first commercial manufacturing line is expected to be validated and producing contact lenses in May, which will begin to help fuel demand not only in the U.S. but allows us to launch outside the United States in select markets by the end of the year. In addition, we have now received clearance for both the Multifocal and Toric Ultra lens which we expect to launch in Q4 2015 and Q1 2016 respectively. In Q1, Ultra sales were only $7 million due to only producing products on our private line. As I mentioned previously, the number of cataract surgeries remained flat overall which affected our surgical business. As I mentioned, the growth in TRULIGN IOLs offset the decline in sales of our Excimer lasers. Our R&D team was successful in obtaining FDA clearance for both new software and hardware for our VICTUS machine which will fuel growth for the rest of the year. Turning to our other U.S. businesses. Revenue growth for our neuro and other and generics portfolio was driven by products including Xenazine, Ammonul and Virazole. Our consumer business revenue continued to outpace the market with strong revenue growth from CeraVe, PreserVision, Occuvite and Soothe XP. We launched seven new CeraVe products in the quarter as well as our new Occuvite vitamin gummies which will continue to provide growth in 2015. Our lens care solutions delivered 21% growth over the prior year driven by our Biotrue Multipurpose Solution. Finally, our dental business accelerated its historically strong growth due to the exceptionally strong volume growth of Arestin. Now turning to the rest of the world. Our emerging markets business in Central and Eastern Europe and the Middle East delivered solid growth of 6%. We realized strong organic growth in Poland of 29% as well as the Middle East which delivered organic growth of 26%. Russia delivered negative organic growth this quarter due to the strong demand in the fourth quarter of 2014 as the market anticipated retail prices that were set for increases at the beginning of 2015. We expect Russia to return to positive organic growth in the second quarter. Organic growth for our emerging markets business in Asia was overall 10% versus prior year. We continue to see strong growth in our number of key countries, such as Thailand at 30%, China at 17%, South Korea at 15% and Malaysia at 13%, just to mention a few. In Latin America, we delivered 7% organic growth with Mexico performing very well growing 11% for the quarter which offset continued weakness in Brazil. For the rest of the world developed markets, the underlying businesses remain strong with both Canada and Australia businesses performing well with 10% and 3% growth respectively. Their growth was offset by the decline of 9% in Japan due to the anticipation of the sales tax increase in April of last year which I discussed earlier. On our last call, we announced the close of our acquisition of Dendreon. And I am pleased to report that we are off to a strong start. Dendreon’s revenue is on plan and the business was profitable in Q1. We have identified more than $130 million in synergies and we expect to achieve a 90% run rate of these synergies by the end of 2015 with gross margins expected to be in the mid-60s range by yearend. Our commercial team has now focused their efforts on the neurology in addition to oncology which we believe will begin to drive growth. Now, let me turn to our Salix acquisition. We completed our acquisition of Salix on April 1st and we are largely complete with the integration. A new leadership team has been appointed that includes Bill Bertrand, Salix’s former COO as General Manager; John Temperato as Head of Sales; and Tom Hadley, former Marketing Director for both the Jublia and LUZU, as Head of Marketing. As with Dendreon, we have identified all synergies and expect to exceed our original synergy target of $500 million. We notified all office-based employees on day one as to their respective status with this company and we’d expect to be at the $500 million run rate in terms of synergies by the end of June. The remaining synergies will be achieved by the end of the year. In terms of the key Salix or TRx trends. We showed you the script trends for the major products in the sales portfolio last fall. And this stage shows the positive trends have continued. So the business remains in excellent shape. On the commercial side of the business, we will maintain three specialty GI sales teams. We have made some minor adjustments to these teams to maximize efficiency. We are doubling the hospital sales force and adding a number of Valeant products, for example, Virazole and amaryl [ph] to the bag. We are also doubling the size of the federal sales team and adding products such as Jublia, Luzu and Arestin to their promotional list. Next, we have established a new sales force to provide greater attention to the pain community, promoting Relistor and other Valeant brands such as Migranal and Bupap. We expect significant revenue synergies to Valeant products which have certainly not been actively promoted to neither hospital, government, energy such as the DOD or pain specialist. We have also decided to take a more focused-targeting to the primary care market. We plan to cover the primary care market through our specialty sales force coupled with extensive directed consumer campaign once the IBS-D indication for Xifaxan is approved. We’ve also made significant progress towards the potential approval of the IBS-D indication of Xifaxan. With a PDUFA date of May 28, we are already in labeling discussions with the FDA as well as conversions regarding the post-marketing commitments that may be required. We are encouraged by the potential approval in May. In terms of our R&D and our pipeline, we previously provided this chart as significant R&D milestones in 2015 and thought we should update everyone on our progress so far. As you can see, we have received marketing clearance for all our contact lenses. We filed the NBA for brimonidine or Luminesse as it will be called in the market, initiated a phase 3 trial for IDP-118 for psoriasis, and we remain on track for many of the other activities. The enVista Toric and the Lotemax Gel series of [ph] Valeant have now shifted into 2016. Before I turn over the call to Howard, I’d like to address another piece of news that we announced today, namely that Howard has announced his decision to step down as Valeant’s CFO, upon the appointment of his successor. I know how disappointing this is for all of you, our owners and also to me. Howard has been a great colleague, partner and friend and obviously he’s been a great CFO. We have been through a lot together. And I think our respect for each other has only grown over time. I’ll let Howard talk about the reasons behind his decision. So on behalf of the entire Valeant team, I want to take this opportunity to thank him for his many contributions he’s made over the past three-and-a-half years. Howard’s unwavering commitment to Valeant, his sound judgment, his keen intellect and his tireless work ethic has helped us position the company for continued success. During his tenure, our market cap has increased from under $15 billion to over $70 billion. And the total shareholder return over that period has been over 300%. Howard has been an integral part of the management team and we will miss him. I am delighted and that he’s excited about continuing to serve on our board where we can all continue to benefit from his many strong attributes. We will conduct the search for his replacement in a thoughtful way. And I will involve Howard in the selection process. Howard has built an extremely strong finance team. And the company is in a tremendous position to continue on its next phase of shareholder value creation. With that, I will now turn the call over to Howard.

[Howard Schiller:]

Thanks, Mike. The decision to step down as CFO of Valeant was a very difficult one, which I came to after a quite a bit of soul-searching. At this point of my life, I would like to pursue other business interest likely in a private company setting. I will remain a CFO until Mike and the board find a successor. And of course, I will work closely with Mike and the new CFO to ensure seamless transition. Since day one, my journey at Valeant has been nothing short of incredible. I’ve completely bought in to our unique strategy and culture, the transparency and fast-based approach to running our business and our relentless focus on building a great company and on creating shareholder value. While I’ll be resigning as an executive of Valeant, I’m thrilled and honored that the board has asked me to remain as a director and I stand for reelection in May. Valeant’s business has never been stronger and its prospects have never been brighter. I’m excited to remain in the Valeant family and they have the opportunity to continue to contribute to achieve their success. I want to thank my 18,000 plus colleagues at Valeant and our board of directors for making this experience so special. In particular, I want to thank Mike for his partnership, mentorship, but most importantly, friendship. Mike set the tone of Valeant. He’s the most talented person I’ve ever had the privilege to work with. He works tirelessly for the shareholders of Valeant and he is a great guy. Now, let’s get back to our first quarter result and guidance for 2015. We’re very excited to report exceptional Q1 results across all of our key businesses. Our revenue was $2.2 billion with our U.S. and many of our emerging market businesses contributing strong double-digit same-store organic growth. As mentioned earlier, the stronger U.S. dollar costs us $140 million in revenue compared to Q1 of last year. In the space of the significant FX headwinds, we generated strong revenue with cash EPS growth of 16% and 34% respectively. Adjusting for FX and the divested aesthetics injectables business, revenue and cash EPS increased by 27% and 50% respectively. Our cost to goods sold for the quarter was 25%, a slight uptick from the fourth quarter due to rounding cost by the lower cost growth margins of Avant [ph] and the impact of FX primarily in Europe. We are expecting an improvement in gross margins for the remainder of the year due to continued strong growth of the legacy Valeant businesses in the U.S. and the sale of Salix products which will have gross margins in the low 80% rate. By the end of the year, we expect to approach our goal or achieving 80% gross margins. Our SG&A’s percentage of revenue was in line with our budget. It was higher than historical levels due to the significant investment in DTC marketing campaigns associated with our dermatology launch brands. We will continue to invest in these products so long as the growth in sales supports this spend. SG&A’s percentage of revenue will trend down throughout the year as we realize synergies from Salix and Dendreon. The combination of a strengthening dollar and the outperformance of our U.S. businesses has increased the percentage of our revenue generated in the U.S. from 53% in Q1 2014 to 64% in Q1 of ’15. Given the fact that almost 100% of Salix’s revenue is generated in the U.S., the percentage of revenue attributed to the U.S. will jump further to greater than 70% in 2016. Of course, future business development for significant FX swings could influence these percentages. In Q1, we incurred restructuring and integration expenses of $65 million. As expected, less than $25 million resulted from pre-2015 transaction. And the majority of these expenses related to the restructuring of the B&L plant in Waterford, Ireland. We continue to expect restructuring expenses related to pre-2015 transaction to be less than $10 million in Q2. Restructuring and integration charges relating to 2015 deals were approximately $41 million with $35 million of the charges relating to Dendreon. Restructuring and integration charges for Salix are expected to be approximately $300 million in total with a significant accounting charge to occur in Q2. The cash severance portion will be paid out over one to three years depending upon the employee. With Dendreon, we expect additional restructuring charges of $20 million for total charges of $55 million to achieve these synergies or approximately 40% of the anticipated total synergies. In Q1, adjusted cash flow for operations was a strong $708 million or 88% of cash net income. For purposes of calculating adjusted cash flow from operations, we excluded the buildup of accounts receivables of $131 million associated with the acquired Marathon products given that we did not acquire any accounts receivable in that transaction. Also, under the terms of the renegotiated managed care contract, rebate payments will now be prepaid at the end of each quarter. As a result, we made two quarterly rebate payments to this PBM in Q1 of 2015. Going forward, the timing of these payments will be consistent so we do not expect any future fluctuations in our cash flow relating to the timing of these payments. If we had adjusted for operating cash flow for the second of these payments, adjusted operating cash flow would have been $757 million or 94% conversion. Post-Salix, we will have $31.2 billion in total debt with an average weighted interested rate of 5.1%. The debt is a mix of approximately 40% bank debt, 60% bonds and our revolver is currently undrawn. The bonds for the Salix deal were included on the March 31st balance sheet even though the transaction did not close until April 1st. Proceeds from the bonds were included in restricted cash and the fees and expenses related to the debt financing were in accrued liabilities. Our debt pro forma adjusted EBITDA ratio was approximately 5.7x at the close of the Salix transaction. And we have committed to reducing that ratio to below 4x by the end of 2016. 2015 is off to a strong start and we expect this strength to continue for the remainder of this year. As a result, we are increasing our 2015 guidance. We’re increasing our guidance for revenue from $10.4 billion to $10.6 billion, from $9.2 billion to $9.3 billion. And we are increasing guidance for cash EPS to $10.90 to $11.20 per share from $10.10 to $10.40 per share. This guidance includes the impact of gains of both Dendreon and Salix. For 2015, we expect our strong organic growth to continue and expect same-store organic growth to be greater than 10% in Q2 through Q4. And we continue to expect B&L organic growth to be around 10% for the year. As mentioned earlier, we are well on our way to achieving the synergies on the Salix and Dendreon acquisitions. For Salix, we will realize greater synergies than originally estimated and we will achieve these synergies faster than originally estimated. We are thrilled with a strong TRx growth in Q1 of Salix’s major products especially given the uncertainty that all these [ph] companies have [ph] sales process. At closing, Salix had approximately 45 months of inventory at the wholesalers and we now plan to reduce the wholesaler inventory level to 1.5 months or less by the end of the year rather than the two months or less originally estimated at the time the deal was announced. As a result, Salix revenue is expected to be approximately $1 billion for Q2 through Q4. This estimate does not assume approval of the IBS-D indication for Xifaxan. After we receive this approval, we will update guidance to reflect this exciting opportunity. Our 2015 guidance also does not include use of our balance sheet. You should expect us to use our free cash flow to reduce debt and for small tuck-in acquisitions. Also, while continue to generate adjusted cash flow to target adjusted cash flow from operation of 90% or more of cash net earnings, the inventory workout program for the Salix products will have a negative impact in operating cash flow. And therefore, we’ll update guidance in operating cash flow once the inventory work on plan is well underway. Given the recent acquisitions of Salix and Dendreon and the need to reduce Salix inventory levels, we thought it would be helpful to make an exception to our general rule of not providing quarterly guidance and provide Q2 guidance. In Q2, we expect revenue of $2.45 to $2.55 billion, approximately 22% growth over the revenue in 2014 Q2 and cash EPS of $2.40 to $2.50 per share, approximately 28% growth over cash EPS in 2014 Q2. This represents strong growth in revenue and cash EPS even in the face of expected negative FX impact of approximately $178 million and $0.20 in cash EPS and despite the hit from needing to review the wholesaler inventory levels for the Salix products. Lastly, we want to reconfirm our expectation of 20% plus cash EPS accretion and EBITDA in excess of $7.5 billion in 2016. This 2016 outlook reflects the continued strong organic growth of our businesses, the continued outperformance of the U.S. businesses including continued success of our many launch brands, significant profit contribution of Dendreon post the restructuring of the business and the continued impressive growth of the Salix franchise including future sales of Xifaxan for IBS-D. The organic growth rate embedded in this outlook for the legacy Valeant businesses are generally consistent with the detail of 2016 outlook we provided last summer and fall. This outlook does not include any future acquisitions. In closing, we are very pleased of the strong performance of the Valeant operations in Q1 and excited about our prospects for the remainder of the year and for 2016. We look forward to updating you on our financial and operational progress on the next call. And with that, we will now open the call for questions.

[Operator:]

[Operator Instructions] Your first question from the line of Chris Schott with JPMorgan. Your line is open.

[Chris Schott:]

Great. Thanks very much for the questions. And Howard, best of luck with your future endeavors. It has been a great run you’ve had. So just a couple of quick questions here. Maybe first on this 20% accretion to 2016 EPS from Salix. I guess just with today’s 2015 update, can you give us a better sense of where that standalone I think $12.05 number that you provided last fall would be at this point? I guess if I look at between Dendreon, Marathon, the core business performances, it’s kind like a $12.50 or greater earnings number. Is that a reasonable thing to think about before considering the 20% accretion or just anything you can help us on that front. And my second question was on Jublia. Can you give us a better sense of where realized price per prescription is shaking out at this point and maybe elaborate a little bit more on the impact of that 8 millimeter launch is going to have on the franchise and how to think about realized prices that goes through? Thanks very much.

[Mike Pearson:]

Great. Let me start with the second question and I’d like Howard to address the first question. In terms of the Jublia, right now, our net pricing on Jublia is probably about $240, $250 per script. But actually, there’s zero co-pay on the 4 ml. And we’re still in the midst of signing managed care contracts. But most of those are done. Obviously, the 8 ml will cost twice with the 4 ml cost given it’s twice the part. And we will be increasing the - we’ll be illuminating the co-pay on the 4 ml which will obviously help in terms of its average pricing. So you can start to do the math right now, we’re buying down co-pays of anywhere from $30 to $50 on the product. In terms of conversion, the doctors have really been asking for the 8 ml. Many patients have more than one toe that’s affected by onychomycosis. So we think the conversion will actually be quite high for the care [ph]. And I think 75% of their scripts are their larger size. So we won’t get there overnight, but we suspect that we’ll actually get to 75% to 80% of all our scripts will be 8 ml especially the pricing difference. And then the growth to that - so on the larger size, it will be actually a little bit bigger or a little - or I mean smaller because of the retail administrative fuel [ph] only be one v [ph] for twice the size. So you can start to do the math. But it should have a real significant impact on our business in terms of almost doubling our business size, I suspect, over the next three quarters.

[Howard Schiller:]

And Chris, on the first question, I understand the desire to have more and more detail in terms of 2016. I think at this point, the easiest way to describe it is if we update the guidance for 2015 for the legacy Valeant business, for the entire business. And as I’ve mentioned in my remarks, the growth rates that’s embedded in our 2016 outlook are very consistent with the organic growth rates that we talked about in the summer and fall of 2014, which we gave you a lot of granularity around by business unit. And then on top of that, obviously Marathon wasn’t part of the portfolio at that point, and then Dendreon and Salix. So you can come at it in two ways. You can start with, well what is the cash EPS you need to get to the $7.5 billion of EBITDA and then where are we in 2015. And you could figure out what you need for those two to converge. And I think if you sit down with the facts that I just outlined, you can fill in the missing pieces.

[Chris Schott:]

Okay. Thanks very much.

[Operator:]

You next question comes from the line of Corey Davis with Canaccord Genuity. Your line is open.

[Corey Davis:]

Thanks very much. Just a couple of questions on Xifaxan. First, how soon after you get approval, assuming that it comes on May 28th, could you launch? And secondly, I’ve noticed that you’ve taken two 9% price increases in Q1. Does that mean that you’re feeling pretty good about where you stand with managed care and maybe just elaborate a little bit more as to how that’s going to roll out once you launch for the IBS indication? And then lastly, at the time you announced Salix, I think you said that Xifaxan would be about a $900 million run rate, but that was assuming about 30% volume growth. And it looks like scripts are below that right now, but if prices are a little bit higher, is that still the right way to think about Xifaxan’s run rate once inventories normalize?

[Mike Pearson:]

Sure. So in terms of the launch, we’ll actually start promoting the next day. We use the package insert just like we do with Jublia and Onexton. Then we’ll prepare the marketing materials, we’ll deal with the FDA, develop a PPC campaign, and then we’ll do a formal launch meeting sort of later in the summer. But we’ll be able to promote off the package insert the very next day. The two 9% price increases were not taken by us. We didn’t own Salix until April 1st. So you’d have to talk to Salix’s previous management to discuss those. In terms of the $900 million run rate for Xifaxan, I think that actually seems a little bit low. In fact, it is low. But once we get passed the PDUFA date, I think that that’s actually the appropriate time to give a sense of what we Xifaxan is going to be.

[Howard Schiller:]

Yes, and then that number, when we give that number, it’s kind of the announcement half the year was assumed, it would be sold by Salix with their exiting discounts because we weren’t sure of the timing of the close at that time. So then half the year in our hands in terms of overall scripts, I think the business is operating as Mike mentioned in line with what we would expect and the growth continues to be strong.

[Corey Davis:]

I’m sorry. Can you just remind us about the level of discounting that was going on to the wholesalers that Salix had and how that’s changed in your hand?

[Mike Pearson:]

Their discounts were sort of 15% to 20%. And ours are - the cost of our distributor arrangements are less than 5%.

[Corey Davis:]

Great. Thanks very much.

[Operator:]

Your next question comes from the line of Annabel Samimy with Stifel. Your line is open.

[Annabel Samimy:]

Hi. Thanks for taking my question. I just wanted to go back to the $7.5 billion in EBITDA. It seems like there’s clearly a huge disconnect between where the street is [ph] and where that guidance is. So you talked a bit about the top line. Maybe you can help us a little bit on any additional cost that might be coming out of the income statement to sort of get to those numbers. And then on emerging markets, it seems that recently it’s been a little bit weak outside of just the FX impact. That used to be the high growth markets, everyone wanted to be there. Is there something fundamentally going on in those markets? Is there any shift going on? And can you help us understand how to think about emerging markets? Is there growth opportunity going forward? Thanks.

[Mike Pearson:]

I want to take the emerging market question then I’ll - so it’s about $7.5 billion and Howard can chime in as well. Now, we’re actually very excited about emerging markets. And if you look back, we’ve always broken that up since I’ve been here 2008 through now. If you go quarter-by-quarter, it goes up, it goes down, and sometimes it’s gone down as low as I think 3%, 4%. Sometimes it’s up 15%. But the pattern is not changing. We fully expect that we’ll continue to grow at about 10% in terms of our emerging market organic growth. But there’ll be big fluctuations, quarter-to-quarter. These markets are not - it’s not like a developed market. And so crises [ph] as we’ve seen in places like Russia that - it will fluctuate quite a bit. But over the last couple of months, we’ve been to Asia and had a review of that business. Its outlook is strong double-digit growth for the rest of this year and going forward. We’ve been over to Europe. And we actually are being to feel quite good about Russia that things are settling down a little bit. And the Middle East and North Africa is going to be a great market. And actually our business is improving quite a bit in LatAm. So again, it’s a bit of a bet on sort of macroeconomics. But these countries continue to get more wealthy and healthcare continues to increase as a percent of GDP. So I think that we shall feel comfortable. And we don’t think FX is going to continue to work against us forever either. So we’re very pleased that we’re in the emerging markets. And quite frankly, right now it’s a great opportunity to continue to pick up assets at low prices and build our business there, which we think we’ll be greatly rewarded in the long term In terms of the gap between us and the three, in terms of the $7.5 billion, I don’t think we can be any more clear that that’s what we’re going to do. So there should be a gap, you guys are going to test your numbers to reflect the fact that that’s what we’re going to do. We’re going to comfortably deliver $7.5 billion in EBITDA. And actually, there’s enough facts in this presentation that is quite frankly just a bit of a mock exercise to get there.

[Annabel Samimy:]

Okay. Thank you.

[Operator:]

Your next question comes from the line of Louise Chen with Guggenheim. Your line is open.

[Louise Chen:]

Hi. Thanks for taking my questions. The first I had was with respect to the $7.5 billion EBITDA. I’m just curious if you could talk more about if you include anything in there for tuck-ins and/or pipeline in that number, is that upside? And then secondly, just on the gross margin reaching 80% by the end of ’15, could you give more color on what is going to be driving that? Thanks.

[Mike Pearson:]

Yes. Now, there’s nothing assumed in the $7.5 billion in terms of acquisitions.

[Howard Schiller:]

We did assume debt paydown.

[Mike Pearson:]

Yes. The full debt paydown case [ph], it probably won’t happen. We probably will do some acquisitions which means we’re getting better. But it’s the most conservative case.

[Howard Schiller:]

Because the debt paydown doesn’t impact EBITDA. It’s just reducing interesting expense and helping increases net income obviously.

[Mike Pearson:]

In terms of the 80% gross margins, a couple of things are going on. One is under our ownership, Salix’s gross margins will increase significantly. And that’s because we will not be doing the discounting that they were doing to the wholesalers which obviously affects their gross margin. So under our hands, they’ll be in the low 80s in terms of - and that’s before we actually negotiate better rates with wholesalers, et cetera. And then a lot of our launch brands in the dermatology area have very high gross margins. And those will continue to grow disproportionally. And our contact lenses, once they get to a commercial line and we get the Ultra up, the yields will continue to improve. The yields are continuing to improve on Biotrue daily. And so we have a lot of things going on in manufacturing that continue to - and they’re doing a great job in terms of improving the cost basis.

[Louise Chen:]

And then just quickly, just on the $7.5 billion, are you including anything for pipeline? I know you have a lot of potential new product approvals next year.

[Mike Pearson:]

No. No, we assume nothing. That’s why we feel very comfortable in terms of the $7.5 billion because there’s a lot of things that will happen. In that respect, there’s one product that we do have a built-in [ph], Luminesse, which we know will get approved, correct?

[Howard Schiller:]

Yes. Eye whitening product.

[Mike Pearson:]

That’s right. It’s small [ph] and --

[Howard Schiller:]

And now it’s consistent again. We have highlighted that over the summer and the fall as the only pipeline product to be included.

[Laurie Little:]

Next question?

[Operator:]

Your next question comes from the line of Gary Nachman with Goldman Sachs. Your line is open.

[Gary Nachman:]

Hi. Howard, my best wishes to you as well as you move on. Mike, a couple more in succession for IBS. If approved a little more on the initial marketing plans in terms of increasing the sales force, then how aggressive you’ll be with DTCs in Jublia as a comp? And then if you could just quantify a little bit how much was price versus volume that contributed to growth in 1Q and what do you factor in your full-year guidance, price versus volume?

[Mike Pearson:]

Sure. In terms of our marketing plan for Xifaxan, yes, we will be sort of taking the Jublia approach to Xifaxan but maybe turbocharged a little bit. There’s huge, huge unmet need here and people there are just not - just like onychomycosis, people that have the medical condition and just are not getting any treatment because those treatments just are not that good out there today. It’s also like onychomycosis saying that it’s pretty simple to self-diagnose. It’s a much more serious condition than onychomycosis. So we think that going directly to the patients to make them aware of the treatment for this and an excellent treatment for this will really drive demand. So you will probably see sort of a little bit turbocharged Jublia approach to this product. In terms or price volume, actually volume was greater than price in terms of our growth outside the United States. It’s all volume. In fact, we have negative price sales out of the U.S. with FX. And in the U.S., it’s shifting more to volume than price. And we expect that to continue with our large brands. A lot of our prices is, for most of our products, are negotiating it with managed care. And there’s the unlimited amount of price that we can take to make sure that our consumer business is very well wallmarked as the [ph] price increases. If you look at our contact lens business, we’re not discounting contact lens. We’re keeping the prices the same. So I think there’s some noise in the market that there’s discounting going on. We’re not discounting but that’s all volume growth. And similarly in the cataract surgery market, again, we’re just holding our prices. So it’s primarily volume. And we expect that to continue.

[Gary Nachman:]

Okay. And then just the follow-up on Xifaxan with the sales force, if you could just comment. You said you’re going to have more of a specialized sales force?

[Mike Pearson:]

Well, no, right now, Salix has three sleeves of specialty sales force into the GI community. In terms of primary care, we’re not going to build out a huge primary care sales force. We don’t think that’s efficient. What we will do, just like we have done in dermatology, is we will, for high rating primary care in the GI space, we will include them as part of our call plan. But we’re not going to have a - we don’t see the need to have a large, large primary care sales force. When we’ve done the analysis, it appears that return on investment is much higher in terms of mostly DTC than primary care sales force.

[Gary Nachman:]

Okay. Thank you.

[Operator:]

Your next question comes from the line of Marc Goodman with UBS. Your line is open.

[Marc Goodman:]

Yes, good morning. So first on the Salix products, I’m not sure if you mentioned it, but if you could just tell us where are inventory levels now. We know where you’re going to take them, but I’m just curious now. Jublia, in the past, you’ve mentioned that IMS is not really capturing average sales. Can you just give us a sense of how much you think IMS is capturing versus how much in the channels that are not being captured? Just give us that breakdown like you’ve done for it. And then Salix R&D, I was curious, what pipeline assets, now that you own the company, which assets are you going to move forward and which ones have you decided to stop? And then can you just - contact lenses for the ONEday product, where is that around the world right now? You talked about that. I was just curious, what countries has it been launched in? Thanks.

[Mike Pearson:]

A lot of questions. Where Jublia - or I don’t know what the IMS numbers are because - but in terms of how many - our scripts per week are about 25,000 at this point with Jublia, continuing to grow. So it sounds like you have IMS, so you can do the arithmetic there. Salix R&D, actually, most of the programs we’re going to continue. And we’ll - probably next quarter, we will update our R&D slides for that. So we’re still finalizing discussions. But most of the programs we’re going to be continuing. Biotrue daily, we’re launched - we just launched it in - we were just in China last week. So we just are launching it in China, Japan and in Asia. So it’s not really in Asia - it’s really not in a lot of the emerging markets. It’s more in the developed - it’s mostly in, at this point, I’d say U.S., Canada and Europe - or Western Europe. So there are still a lot of geographies to go. And inventories --

[Howard Schiller:]

And inventories, as I mentioned in my prepared remarks, Marc, the inventory levels of - at close were in the four- to five-month range. And that includes both the traditional, the big three wholesalers as well as some of the other wholesalers that Salix was dealing with.

[Marc Goodman:]

Thanks.

[Operator:]

Your next question comes from the line of Alex Arfaei with BMO Capital Markets. Your line is open.

[Alex Arfaei:]

Good morning, and thank you for taking my question. Howard, congratulations on a strong track record with Valeant. You sounded very committed to the company last year and we were under the impression that you were staying on for another two years. If you don’t mind us asking, what changed since mid last year? And then on the Salix synergies, can you give us more clarity on where the synergies are coming from, particularly given that you just said you’re keeping much of the R&D projects and I think you said you’re increasing the sales force. So where are the synergies coming from? Thank you.

[Howard Schiller:]

I can’t tell you there is any one moment. I mean, this has been a process, lots of discussions with Mike and a lot of soul-searching, as I mentioned, and preclusion that I recently grew that at this part of my life it was an interest in doing some things on my own. As I mentioned, most likely at a private company setting. And it was a very difficult decision. As I told Mike and the board that there is 90%-plus of the time I’m sure I’m going to regret the decision. But he was - it felt like the right decision for me today.

[Mike Pearson:]

In terms of synergies, basically all the back office, all the G&A was addressed. I mentioned that we’re not going to have a primary care sales force. So, yes, we’re building up some other sales forces but it’s not a net increase in selling expenses. In fact, it’s a little bit of a decrease. And in terms of the R&D in programs, I think what’s a little unique about Valeant is the amount we spend on a program tends to be a lot less than other companies because of our approach and how we do it. So I think we’ve talked in the past with Jublia, the cumulative cost of Jublia was like $40 million. And we pre-developed that product from pre-clinical all the way through. If I look at Onexton, the number I think was actually lower. If we look at the psoriasis part we’re developing, again, the total cost is going to be less than $15 million. So I think it’s our approach to - we’re able to do more with less. And I don’t think that’s fully appreciated. And so a lot of how we can do the R&D is by spending lots to get the same work done. So a fair amount of synergies come from there. Obviously, there’s purchasing synergies and all those types of things as well. But we have identified $530 million and that cost will largely all be done by the end of this quarter.

[Alex Arfaei:]

Thank you. And all the best, Howard.

[Howard Schiller:]

Thank you.

[Operator:]

Your next question comes from the line of Douglas Tsao with Barclays. Your line is open.

[Douglas Tsao:]

Hi, good morning. Thanks for taking the questions and, Howard, wishing you well from the lead off. Just in terms of - two quick questions. In terms of the inventory work-down, should we anticipate that being fairly linear through the course of the year or should this be something that is pretty heavy in 2Q and 3Q and then sort of eases up in 4Q? And then in terms of the gross margins for Dendreon which you expect to get to 60% by yearend, is that sort of how we should think about that for 2016 or as some of the other initiatives in terms of perhaps growing volumes, et cetera, take hold that you could start to inch up from that level or move up from that level? I think when you announced the acquisition you sort of indicated that you thought you could get considerably above that 60% level. Thank you.

[Mike Pearson:]

Sure. So we’re going to actually let Salix inventories come down. And so they will come down more quickly in Q2 and Q3 because - and not every wholesaler has the exact same amount of inventory of every product, so there’s fluctuations in there. But we certainly are going to be giving discounts to get people to buy the product [ph]. So we’ll be heavier in Q2 and Q3 and hopefully Q4 returns begin to normalize in terms of the inventory levels. That indeed is the plan. And that’s why we gave specific items for Q2 because of it’s impacted quite severely by the sales drop element [ph]. In terms of the gross margins on Dendreon, I think we’ll be above 60%. It should be 62%, 63% by the end of the year. And, yes, we will continue to work on that in 2016. And we have programs in place to continue to improve that. We certainly expect to get over 70% in terms of Dendreon. I don’t think we’ll probably get to 80% in the foreseeable future.

[Douglas Tsao:]

Okay, great. Thank you very much.

[Operator:]

Your next question comes from the line of David Hall [ph] with Piper Jaffray. Your line is open.

[Unidentified Analyst:]

Thanks. So just on your comments on the expansion of the hospital sales organization and then greater promotion into the pain specialist market, should we take that to mean that you are now more open to acquisition activity in the hospital space or in the pain management space? Is that necessarily signaling a C-Change in your thinking in terms of what your M&A interests are, at least from those areas going forward? Maybe you could elaborate on that. Thanks.

[Mike Pearson:]

Sure. We now have a capability in those two areas that we didn’t have. And whenever we get into a new area, GI is the main area we’re gaining to where we’re obviously looking already at opportunities in GI to add products to that franchise. And so it’s - I’m not sure I’d characterize it as a C-Change, but we’re always opportunistic. And if we have a capability and we can find the right opportunity that creates value for our shareholders, we’ll look at it.

[Unidentified Analyst:]

Yes. Just a follow-up to that question, actually switching gears on Xifaxan, Salix had talked about historically potentially launching a new SKU blister pack upon approval or some time during the launch in IBS-D. Is that something that you’re planning to do once you get the approval?

[Mike Pearson:]

Assuming we got approval, yes, we will have a different SKU for IBS-D.

[Unidentified Analyst:]

Thank you.

[Operator:]

Your next question comes from the line of Andrew Finkelstein with Susquehanna Financial Group. Your line is open.

[Andrew Finkelstein:]

Thanks for taking the question and best wishes, Howard. Could you talk a little bit about pricing on some of the products where it is a driver? I think it’s certainly a contributor in the neurology and generics segment. Does that continue to be a year-on-year driver through this year? And then how do you think about it in 2016 for that segment in the U.S. in particular? And then in terms of your expectations for this year, has anything changed in terms of what you are expecting for generic competition to a couple of products, Xenazine being one, there were a couple of others that were potential cliffs this year?

[Mike Pearson:]

Sure. If you go back to our ’16 outlook which I think we put out in the summer of 2014 or the fall - November?

[Laurie Little:]

Yes.

[Mike Pearson:]

Yes, I think it was actually - we have to find out. You can see that our growth rate for neuro and other is 5%, both this year and next year. Now, obviously, we’re growing a little bit faster than 5% so far this year. But in terms of how we look at our business going forward, we assume actually modest growth in that segment. That being said, if we see that there are - products are sort of mispriced and there’s an opportunity, we will act appropriately in terms of doing what I assume our shareholders would like us to do. But in terms of any kind of long term forecast, we are 5% in terms. So we’re not planning on laser price increases. Sometimes there’s an opportunity to just take a little bit more price and we’ll do it but that’s not built into our remainder of this year or 2016 guidance. And if there’s more than that, that will be upset [ph]. I think the - what was the second question? I’m sorry.

[Howard Schiller:]

Generics, I think.

[Mike Pearson:]

Oh, generics. Yes, Xenazine, well, Xenazine we thought we’d see a generic midway through this year. So right now, our guidance continues to assume that we will have a generic midway through this year. That being said, it’s not 100% clear that one will be coming out. So that could be upset [ph] if it doesn’t. And then Targretin, we also assume we’ll see a generic midway through this year. That one I think there’s a little bit more evidence that one may come. So we have not adjusted our guidance at all for - right now, they’re both assumed to go generic this year, midway through the year. And for Targretin, there’s only one of - we have two SKUs. We have one generic --

[Howard Schiller:]

Gel and capsule.

[Mike Pearson:]

It’s a gel and capsule. But we’re just going on capsule, not on the gel. So we’re assuming both will happen. We expect Targretin to happen. Xenazine, we wouldn’t be shocked if nothing happened. But if so, we’ll update our guidance if we don’t see a generic.

[Andrew Finkelstein:]

Thanks for that. And you were still very interested in the emerging markets, has the availability and valuation on potential tuck-ins there got any more attractive as those markets have become a bit choppier and does that create opportunities for you? Thanks.

[Mike Pearson:]

Yes and yes. And you should probably expect to see us make some acquisitions over the rest of the year on some of the more attractive emerging markets.

[Andrew Finkelstein:]

That’s very helpful, thanks.

[Operator:]

Your next question comes from the line of David Risinger with Morgan Stanley. Your line is open.

[David Risinger:]

Thanks very much. So I have one question for Mike and one question for Howard. Mike, could you just update us on opportunities ahead to use stock for a large transaction and whether there might be any opportunities to buy large assets out of big pharma? And then, Howard, as you’re wrapping up in your role, could you just provide some perspective on - given your - in light of your interactions with investors over the last four years and even more recently, what do you think investors on Wall Street most underappreciate about Valeant? Thanks very much.

[Mike Pearson:]

Thanks, David. Well, I guess everyone on this call knows that we really, really value our stock. And we’re always reluctant to use it because it’s a scarce asset and we continue to believe it’s quite undervalued. And if we can continue to put out numbers that we have this quarter which we expect to do, it will be undervalued. That being said, if a great opportunity comes with great shareholder value, we’ll figure out that all in and do it. As we said in the beginning of the year, we’re - large deals are opportunistic. You can’t predict when they’re going to happen. And we were certainly not expecting to deal with [indiscernible] sales this year. But when we got a call and we took a look at the asset and we decided it made sense. So we are not right now out there trying to look for a large deal to do. But we will continue to be opportunistic and do whatever makes sense for our shareholders.

[Howard Schiller:]

And in terms of your second question, but I will give you an answer and I’ll also give it some more thought and we can - and next time we see each other we can talk about it in more detail. But there are sort of three or four things that come to mind initially. I think, one, because deals get headlines, I think there’s a little bit of a misconception that we spend all of our time running around doing deals where it’s pretty much the opposite. We spend most of our time running around trying to squeeze as much growth out of our existing collection of assets as possible. And related to that, I think is the value of our diversified business model because very few of our products are well-known to the broader world. I think it’s harder to have an appreciation for the growth potential that we’ve kept into the issue of terminal value which I think is underappreciated. The second area I’d say is the whole area of R&D. And maybe we’re a little bit to blame, though I think we got tagged with not believing in R&D which couldn’t be the farthest from the truth. And we have recognized like any technology company that innovation is the lifeblood. It’s just how we go about doing it, the risk rewards and our openness and willingness to acknowledge that we may not be the right people to develop everything we need to grow our business. So our willingness to go to third parties for licensing technology, get it through acquisitions. I’m hoping that the world, they look at our R&D pipeline last year, this year, next year and the year after and say, the model really does work. Combination of internal development, acquisitions, in-licensing is going to work. But I think that’s work in progress. And I think lastly, emerging markets, because their strategy is so much different having a local company in an emerging market versus most pharma companies take their U.S. products and escort them and actually end up surveying a very small percentage of the population, where a local company surveying really the local person on the street. So it’s much more of a long term macroeconomic plight on GDP growth and healthcare spend which we can all argue year to year. But overtime, I think we’d all agree that the emerging markets wherein there’s going to be tremendous growth in GDP and tremendous growth in healthcare spend just won’t be straight lined [ph]. So I’ll give it some more thought, but those were some initial thoughts.

[David Risinger:]

Right, thanks so much.

[Operator:]

Your next question comes from the line of Greg Fraser with Deutsche Bank. Your line is open.

[Greg Fraser:]

Great. Thanks for taking the questions. It’s Greg Fraser on for Gregg Gilbert. Wholesale inventory levels for the Salix products, will there be any further work on it in 2016 or do you plan to maintain the inventories around the one-and-a-half-month level? And then a question on Marathon, the sales figures for Isuprel and Nitropress on the top product table, do those reflect any adjustments or was there any buy-in that occurred ahead of the price increases that you took that affected sales for those products? Thank you.

[Mike Pearson:]

Yes, in terms of the wholesale, we’re going to say that there’ll be less than 1.5x. And usually we aim for about a month of inventory in the channel but in faster growing products, it’s usually a little bit more because that’s a backwards-looking month. And so if you have a product that’s growing quickly, a forward-looking month is a lot higher than a backwards-looking month. So most of the sales parts are growing quite nicely. So my guess is it will be somewhere between one and one-and-a-half months by the end of the year. And that’s probably the level we’ll keep them at as long as the growth takes up, which I think is probably normal in the industry.

[Howard Schiller:]

And it also might be IBS-D indication for Xifaxan which we didn’t factor in could have a huge impact on those levels.

[Mike Pearson:]

Absolutely, absolutely. Now, in terms of price increases on the two parts you mentioned, the company sold to us and done some pricing work and identified the opportunities and had a consultant come in. So those happened immediately, so there’s no buy-in.

[Laurie Little:]

Next question, please.

[Mike Pearson:]

Anyone else?

[Operator:]

Your next question comes from the line of Douglas Miehm with RBC Capital Markets. Your line is open.

[Douglas Miehm:]

Good morning. Thanks, Howard, and best wishes as well. A couple of questions, just more housekeeping ones. Mike, maybe you can tell us why it looks like the commercial line for Ultra slipped a little bit from the first quarter into May. And then I know that you were expecting to have several other lines for Ultra come on stream probably over the next 12 months as well, maybe you can talk to the timing as to those. Second question just has to do with Vesneo. And maybe Ari, if he’s around, can talk about the competitive environment. And I know that you haven’t put out data yet and you’re likely going to publish that, but given a few things that’s happened in the marketplace, do you see the competitive positioning for that product having improved? And then finally, Mike, do you see an opportunity for Provenge to any degree in Europe? And I’ll leave it there. Thanks.

[Mike Pearson:]

Okay. So Ultra - do you want to take the --

[Ari Kellen:]

Yes.

[Mike Pearson:]

Okay, Ari will take all of them.

[Ari Kellen:]

No, not all of them. But I think on Ultra we’re already producing commercial vendors. We’re just going through validations. So we have that underway. And we expect by the middle or third week in May to be able to release the commercial productions and in quality. So that’s --

[Mike Pearson:]

Not so [indiscernible].

[Ari Kellen:]

Yes, not so [indiscernible]. So that’s good. And that’s line one. And we have line two on track for September-ish this year. So that’s Ultra.

[Mike Pearson:]

Two lines next year.

[Ari Kellen:]

Yes, two lines next year, exactly. Other question - yes, Vesneo, as we’ve said, we’ve always been positive on Vesneo. It’s a breakthrough in the monotherapy versus prostaglandin. So we’ve held to that thesis. Obviously the neoadjuvant [ph] competitive trial makes us more confident about the outlook for Vesneo.

[Mike Pearson:]

Yes. And Provenge has been approved in Europe but the pricing so far that we’ve been able to get in Europe does not make it something that we probably want to do by ourselves. So we’ll probably look for a partner in Western Europe to see if someone else wants to take the product. And right now, we are focusing our efforts on the U.S. And, first, the focus was to make it profitable, which we have. The second priority is to grow it, which hopefully we can report back in another quarter or two that were trying to grow it. And I think staying very focused in the U.S. and making it a growing - our profitable product is our short term mission in terms of providing [ph].

[Ari Kellen:]

And maybe just more on Ultra, we’re going to launch the Multifocal at the end of this year. We’ll already be validating and producing Toric towards the - sometime in Q4. So, again, well on track for release of commercial product early Q1 and maybe earlier.

[Douglas Miehm:]

And each of those lines can do 150 million?

[Ari Kellen:]

That’s a rough estimate. Obviously as we release Ultra and Toric and Multifocal, the ASPs will rise. So that 150 million is a reasonable estimate per line.

[Douglas Miehm:]

Great. Thank you.

[Operator:]

Your next question comes from the line of Umer Raffat with Evercore ISI. Your line is open.

[Umer Raffat:]

Hi, guys. Thanks for taking my question. Maybe a couple for Howard and one for Mike. Howard, best of luck to you. There’s a lot of shareholder interest in this, so I’m compelled to ask a bit more. So I just wanted to understand the timing of news. We understand that right around your three-year anniversary date you had another three-year equity award. So I just wanted to understand timing there. And then separately, what’s the EBITDA expectation for 2015, not 2016, but EBITDA expectation for 2015 and then what was that number for 2014? And then, Mike, my last question, Jublia is up 87% quarter-on-quarter on TRx. I think the sales were up about 20%-ish. So I just wanted to understand trends there. Thank you very much.

[Howard Schiller:]

Okay. So again, in terms of the timing, this was a decision that while we’ve been having discussions for a period of time, a decision that was just made. So up until the decision was made, it was business as usual. So wouldn’t draw any connection between those two. In terms of the EBITDA for ’14, I mean that you can get from our public filings. I don’t have that in front of me. For ’15, the easiest - we’re giving you the guidance. We’ve told you what the interest expense - we’re paying 5.1% on our interest expense for the rest of the year and we’ve given you our tax issues - some tax rates there is roughly the same. So the only missing piece is stock-based comp and depreciation. Depreciation is running a little over $50 million a quarter, so that’s $200 million-plus. And stock-based comp is a little over $100 million. So I think you can pretty easily, from our updated guidance, you can get there very, very easily.

[Mike Pearson:]

And in terms of Jublia, in our prepared remarks, I think we mentioned that the difference between the growth in scripts and the growth in revenues is basically what’s out there in the channel and inventory. And when you launch a product, people - there’s a fair amount of inventory that’s put in every pharmacy, the wholesaler. So you need to - so you always see that on our launch brand that early on there’s a lot of sales that are just filling up the channel. And so those have all been reduced. And our sales, especially pharmacies, we have our inventory levels very, very low, so well below two weeks. So I think going forward what you’ll see is - was the important thing is the growth in script trends and the growth in Jublia revenues will pretty - well, might have started from Q2 going forward.

[Umer Raffat:]

Thank you very much.

[Mike Pearson:]

Okay. Thank you. Thank you, everyone, and we’ll talk to you next quarter.

[Operator:]

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