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TABLE OF CONTENTS
EXPLANATORY NOTE
The following is a copy of the transcript of Valeant Pharmaceuticals Internationals (Valeant)
and Biovail Corporations (Biovail) joint employee town hall meeting and webcast on June 21, 2010
relating to the Agreement and Plan of Merger, dated as of June 20, 2010, among Valeant, Biovail,
Biovail Americas Corp. and Beach Merger Corp.
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1
Final Transcript
Jun 21, 2010 / 07:30PM GMT, BVF Biovail and Valeant Employee Conference Call
CORPORATE PARTICIPANTS
Bill Wells
Biovail Corp. CEO
Michael Pearson
Valeant Chairman, CEO
Gilbert Godin
BioVail Corp EVP, COO
CONFERENCE CALL PARTICIPANTS
Dr. Robert Butts
Ashley Cummings
Natalie Minco
Rashid Majunder
Heather Peterson
PRESENTATION
Operator
Good afternoon, ladies and gentlemen. Welcome to the Biovail, Valeant Employee Conference
Call. I would now like to turn the meeting over to Mr. Bill Wells. Please go ahead, Mr. Wells.
Bill Wells - Biovail Corp. CEO
Thank you very much. Hello, everyone. Thanks so much for being with us today here. Were
located here in the Bridgewater conference room. Ive got a sea of bright, shiny, interested faces
in front of me. We also have some guests with us. The folks who are from the Valeant headquarters
here in New Jersey have joined us, so welcome. And of course Mike Pearson, who is the Chair and CEO
of Valeant is here with us today as well.
I will be saying a few remarks. they are prepared remarks. we actually have to go through some
legal technicalities because the remarks here today will, in fact, become part of the public
record. So rather than our normal freeform discussion, I will be using some prepared remarks. Mike
will say a few words. Then we will take questions. And I hope you all have some good, hard
questions for us.
Well take questions from the folks here and also from all of the folks who are listening at our
different sites across North America and in Barbados. And we also have the Valeant employees who
are listening in as well from their respective sites. We have also received a bunch of emailed
questions that have come in from folks in remote locations. And so well try to get to some of
those questions as well.
So, with that, lets get started. So, thanks so much for joining us with this special webcast with
both Biovail and Valeant. Im Bill Wells, CEO of Biovail, and Im joined today by Mike Pearson, the
chairman and CEO of Valeant.
As you know, earlier today Biovail and Valeant announced that their Board of Directors have
unanimously approved a definitive merger agreement to combine the companies. The combined company
will be called Valeant Pharmaceuticals International, Inc. and will be a new leader in the
specialty pharmaceuticals industry.
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2
Final Transcript
Jun 21, 2010 / 07:30PM GMT, BVF Biovail and Valeant Employee Conference Call
We want to take some time today to answer your questions about this merger and what it means for
you. so well keep our opening remarks brief.
First, for all those joining from Valeant, let me tell you a little bit about our company. Biovail
is headquartered in Mississauga, Ontario, with approximately 1,300 employees worldwide. And we are
Canadas largest publicly traded pharmaceutical company. We are focused on the development and
commercialization of medicines that address unmet medical needs in niche specialty central system,
or CNS, markets.
As my Biovail colleagues know, our focus for the past few years has been on moving Biovail to high
growth. And this combination with Valeant is a significant step towards that goal. When we started
putting together a new strategic plan for Biovail a couple of years ago, we envisioned that five
years out Biovail would have a strong specialty CNS platform and would begin developing additional
specialty areas, as well as exploring international opportunities.
Todays announcement is significant because it enables Biovail in a single step to leapfrog ahead
and create a leading, diversified specialty pharmaceuticals company that its focused on growth and
cash flow generation. The new Valeant will have a significantly expanded presence in North America
and operations in eight other countries.
This merger will accelerate our ability to pursue substantial growth opportunities by leveraging
our complementary product lines and operations across four focused growth platforms, all of which
are experiencing double digit growth. These platforms are specialty CNS, dermatology, Canada and
emerging markets/branded generics.
In addition, the new Valeant will have a diversified portfolio in terms of products, therapeutic
areas and geographies, and limited patent exposure, all of which, taken together, generate strong
and stable cash flows that will be used to support future growth. Overall, this combination is a
great strategic fit on all fronts. And together, we will be able to create opportunities for both
companies at a level that would not have been possible for either on a standalone basis.
The merger is entirely consistent with Biovails corporate values. Its a courageous step designed
to enable us to respond with greater agility to opportunities. Our new colleagues from Valeant
share our passion to benefit the lives of our patients and increase value for our stockholders. And
they also share our respect for individuals.
You know that I regard you as some of the most talented and dedicated people in the industry. And I
am confident that this merger will create exciting opportunities for the employees of both
companies. Once the merger is complete, which is expected to occur before the end of the year, I
will be the non-executive chairman of the new Valeant, and Mike will serve as the new companys
chief executive officer, residing in Barbados.
Before turning things over to Mike, I would like to tell those of you a little bit about Mike.
First off, he is a Canadian national who later moved to the US and enjoyed a 23-year career at
McKinsey & Co., helping leading companies enact successful turnarounds, acquisitions and corporate
strategy. Hes been able to apply that experience at Valeant, which he has led since 2008.
Mike is an accomplished and experienced leader and Im confident that he will continue to deliver
as CEO of the combined company and add to his track record of accomplishments.
So, with that, let me introduce Mike Pearson.
Michael Pearson - Valeant Chairman, CEO
All right, thank you, Bill. Can you hear us? Or it probably doesnt matter if you can hear it.
These people are hearing it.
Good afternoon. Welcome to everyone whos on the phone. Hopefully we have some colleagues from
California as well, so good morning to you.
This is probably going to be the last time you ever see me in a suit. I never wear suits. So I feel
very jealous of all of you. But we had to be in New York today so they told me I had to wear a
suit. So Im wearing one.
Im also Im not really good at reading remarks not prepared by me because Id rather just tell
you. So Ill try to stay within the legal guidelines, but Ill ignore that. So Id also like to
thank my colleagues at Valeant. I think both companies have had good success over the last few
years. We come from a similar pasts. Not perfect pasts, but similar pasts. Different pasts, but
similar.
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Final Transcript
Jun 21, 2010 / 07:30PM GMT, BVF Biovail and Valeant Employee Conference Call
And its clear that both companies have made great strides in moving forward. In our case, we also
changed our strategy and weve been working awfully hard to execute on that, just like you have at
Biovail. So Im delighted to be here today. I think theres huge opportunity for this new company
for shareholders and for our employees.
Its not going to come without its difficulties. You get to know me, youll know Im very blunt,
very direct, very honest. I guess that has pluses and minuses. Just talk to colleagues from
California. I think they would I think they would support that statement.
So I think both Bill and I felt it was very important to get out here today and get on the phone
with all of our employees to let you know that our success, were not going to be successful
without you. This company, we have products, but in the end its people. And thats what makes a
great company.
So were probably not going to be able to answer every question today. And if we dont know the
answer, well tell you, give you a timeframe that well know the answer. Well also give you that.
But we all I can commit to is sort of telling everyone the truth.
I think it was interesting. Ill say when I joined Valeant two years and four months ago we went
through some tough changes. We had some layoffs. We downsized in the US And our employee base
dropped. But two years and four months later, our employee base is actually a lot larger than it
was in the company when I joined.
And I know I spoke on the phone this morning that, by definition, whenever you put two companies
together, there will be some changes. There will be some reductions. But if we all do our jobs
right, I fully suspect two years from now therell be a lot more people working at this company
than there are in the combined company right now.
So the better we perform, the faster we grow, the more successful we are, the more opportunity for
everyone. Itll be to the benefit of our shareholders, the benefit of the employees and the benefit
of the patients.
So, I dont have a lot well, I guess I do have a lot of prepared remarks. But they werent
prepared by me so I wont read them. So, with that, Ill ask Bill what were supposed to do next.
Bill Wells - Biovail Corp. CEO
(inaudible microphone inaccessible)
Michael Pearson - Valeant Chairman, CEO
Take questions. All right. Maybe questions to either Bill or I. If you want both of us to try
to answer them, well try to answer them. If youre on the phone, I guess theres some technology
that allows you to ask them.
QUESTION AND ANSWER
Bill Wells - Biovail Corp. CEO
We have a question over here with [Dr. Robert Butts].
Dr. Robert Butts
(inaudible question microphone inaccessible)
Bill Wells - Biovail Corp. CEO
(inaudible microphone inaccessible)
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4
Final Transcript
Jun 21, 2010 / 07:30PM GMT, BVF Biovail and Valeant Employee Conference Call
Michael Pearson - Valeant Chairman, CEO
Oh. Well, this is good. I can repeat the questions, which gives me time to think, which is, in
my case, usually a good thing.
So we have an optimist, which I love, who is more interested in about the next move two years from
now rather than whats going to happen in between. And I love that kind of thinking.
I think our aspiration, I think both companies aspiration, certainly the new companys aspiration,
is we want to keep growing and we want to become an industry leader. We dont want to copy other
people. We intend we intend to grow. If we I think we should have we dont have a shared
objective yet, but I would hope that this would not be well continue to make acquisitions. We
made 18 acquisitions since Ive gotten there. Most of them have been small.
This is a merger of equals. Its a different form. In a sense were acquiring each other, is one
way to look at it. But I would expect well continue to be a consolidator. I do not if you dont
grow, you dont survive. And so I think well continue to be aggressive. Who knows what, where,
who? Those are all mysteries.
Unidentified Audience Member
(inaudible question microphone inaccessible)
Michael Pearson - Valeant Chairman, CEO
The question is wheres the US site going to be located.
Thats probably one of the big elephants in the room. And the answer is no, absolutely do not know.
We did not we have not addressed that question. So its theres no certainty in where it will
be. What we will do is work hard in the next few months. And we need to answer that question sooner
rather than later.
Will there only be one site? I doubt it. If I think about it, for example, in Petaluma, Northern
California, we have an R&D facility with labs and things like that. The odds are were going to
have labs and R&D people up in Petaluma. I dont even I havent been to all your sites. I dont
even know whats in all the sites. Similarly, you guys have no idea whats in ours. What I will
assure you of, itll be a fair process. Well sort it out. Well try to do whatevers best for our
shareholders, our customers, our patients and our employees.
So, certainly we expect this integration or this merger to close somewhere in the October, November
timeframe. And I would expect that we will know well before we get to that point.
Bill, anything to add on that?
Bill Wells - Biovail Corp. CEO
Lets take a
Michael Pearson - Valeant Chairman, CEO
You take one.
Bill Wells - Biovail Corp. CEO
Well, lets take a question from the from the page, from the email questions that came in.
Ill read the question. You can answer it, Mike. Hows that for a fair division of labor?
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5
Final Transcript
Jun 21, 2010 / 07:30PM GMT, BVF Biovail and Valeant Employee Conference Call
Michael Pearson - Valeant Chairman, CEO
Not a problem.
Bill Wells - Biovail Corp. CEO
Im getting used to this chairman thing. I kind of like it.
The slide presentation states the new operating philosophy will be one of low cost with minimal
headquarter staff, where all managers work in addition to managing. Compensation will be true
performance-based pay. Can you please elaborate?
Michael Pearson - Valeant Chairman, CEO
Sure. My experience, I worked in McKinsey. Probably many of you know what that is, consulting
firm. I worked I led the pharmaceutical practice for a long time at McKinsey and most of our
clients were large pharmaceutical companies. And pharmaceuticals has been a very, very profitable
industry for many, many years. And because of that, its attracted an awful lot of very, very
bright people.
But in many of these companies, and I wont say all, you get a little bit spoiled if you have a lot
of money and stuff like that. So unlike some other industries, you do you do tend to see more
staffs, more people to do any one job. I think for us to be successful, we have to more we have
to operate more like a company outside our industry in terms of the amount of staff and whatever.
And I dont believe one should delegate, but one should be involved. You cant have if youre
responsible for something, you cant completely delegate decision making because if you do, why do
we need you? So I think the whole concept is we want people that are actively involved in the
business.
Doesnt mean you cant have staffs and direct reports. We all do. We need to have that. But the
notion that everyones no ones an administrator; youre a manager and a doer. And thats
hopefully that distinction is somewhat clear.
The other thing that weve done, at least at and I suspect you have exactly the same thing here,
but weve really developed a compensation system on sort of pay for performance. The good news is
if you perform, you get very well paid.
We had a pretty generous stock program with our employees. In fact, every employee had the
opportunity to buy stock and we would match it. And that was every employee in the company in the
world. And if you look at what our stock price has done over the last four years, thats made a lot
of people pretty happy. And thats great because you begin to think as a shareholder. And we should
all be thinking like shareholders.
So Im not promising we have a new board. Im not promising any kind of specific system that
well have at the new Valeant. Thatll be based on whatever we come up with and the board will need
to approve it. But I know I will certainly be recommending a system that is pay for performance.
Now, theres the other side of it, which is if you dont perform, you get paid less. And quite
frankly, if you dont perform, at some point you dont get paid at all, at least not from this
company. So thats sort of the flip side.
But I think the small company, having everyone have a sense of ownership in its success and a
reward, if it is successful, is the unique thing that a smaller company can do. And while well
certainly be larger than were roughly the same size today. We have more employees than you do.
Part of thats because of our international operations and we have a lot of people in Mexico and
Brazil and Central Europe. If you take away those parts of our company, were about equally sized.
Were still a small company. Were about a $2 billion company. So we need to retain. I think part
of the success of Valeant has been being a small company. And I think part of the success of
Biovail is its been a small company. So we dont want to lose we dont want to lose that. We
dont want to turn into a bureaucracy.
I dont know, on that rambling answer, whether I picked that up. But probably close enough.
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6
Final Transcript
Jun 21, 2010 / 07:30PM GMT, BVF Biovail and Valeant Employee Conference Call
Bill Wells - Biovail Corp. CEO
Any other questions? Got one in the back. Bob?
Unidentified Audience Member
(inaudible question microphone inaccessible)
Michael Pearson - Valeant Chairman, CEO
Good question. If we do our job right, we should take advantage of the direction both
companies are moving, the moves theyve made, the assets they have accumulated. We were less of a
singularly focused company than you were. But that had plenty to do with our past and our history
and what I inherited when I got there.
So we probably had a couple of legs of growth. You were more focused on one leg of growth. Well,
maybe two. You had specialty neurology, but I think in Canada, where youve where, from what I
can see, you guys have had outstanding success, that probably goes well beyond just specialty CNS.
So you could argue that you had two great platforms for growth, those two.
I think we had a few of our own. We had dermatology, which is also has many of the
characteristics, highly specialized, highly specialized market where some of the big guys arent as
present. We also had Canada. It just so happens both our Canadian businesses are about the same
size, growing at about the same rate. So probably the two most successful Canadian businesses,
which working together will be better.
We had some emerging market businesses like Brazil and Mexico and Central Europe, which are growth
platforms and doing very well. And then we had our neuro and our other business. So we have some
legacy neuro. We have retigabine, which we hope will be an awesome epilepsy drug. And we were
funneling all our resources, quite frankly, in the last couple of years in terms of the epilepsy
group, and certainly in the epilepsy R&D area, on retigabine.
And retigabine has a shot of [venous significant] drug, a real blockbuster. We will know, probably
sooner rather than later. It has a PDUFA date in the end of August. And so thats where weve been
focusing our neural efforts. So from that standpoint, neuro specialty CNS, I think in a sense those
two efforts will come together.
And I think well have rather than one or two legs, each of us, were going to have multiple legs,
which I think creates more diversification. And quite frankly, if something doesnt work somewhere,
theres higher odds of something thatll work somewhere else. So I think we will take each of our
growth legs and add them to each other and have a more diversified decentralized company.
Bill Wells - Biovail Corp. CEO
Can we check and see if theres anyone on the phone line who would like to ask a question?
Operator
Thank you. We will now take questions from the telephone lines. (Operator Instructions).
Bill Wells - Biovail Corp. CEO
So while were waiting for folks to register for their questions, let me ask another one that
came in by email.
Will there be any difference versus the corporate culture of either company now? What will be the
corporate culture of the new Valeant company?
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7
Final Transcript
Jun 21, 2010 / 07:30PM GMT, BVF Biovail and Valeant Employee Conference Call
Michael Pearson - Valeant Chairman, CEO
I guess I cant answer that, sort of by definition, because I know what our corporate culture
is, and I have no clue what yours is. Well just have to figure that out. My guess is theyre not
dissimilar, given some of the philosophies that we share. Ive described a piece of it. Its sort
of its pay for performance, high performance level, things like that.
What we did do, maybe the best way to answer this question, is we did an employee survey. We do
once every year, to all of our employees around the world. And we asked one of the questions is
what do you like best about this company and what do you like worst about this company?
So the top three or four responses on the positive side, first one was high performance. The second
one was ethics. The third one was teamwork. And I dont recall what the fourth one was. It was
positive, too. That was the positive side. So I think those three, you get a sense.
On the negative side, the first one was lack of communications. The second one was stressful. And
the third one was sort of a cousin of stressful, sort of lots of tired folks. So, thats what our
I have no idea if you do a similar survey, but that gives that might give you a little bit of
sense of what our culture is like or what the employees more important, what the employees think
our cultures like, not what I think. My guess is its not wildly different from this company.
Now, what well do when we become one company is were not going to have one or the other culture.
Well just figure out whats the right culture for the new company and take the best. If you have
your list of (inaudible) maybe we can pick the best and get rid of the worst. I dont know.
So, again, I dont know. I only know one side of the equation. Hopefully that gives you a sense of
the culture we have.
Bill Wells - Biovail Corp. CEO
Operator, any questions on the phone?
Operator
Yes. The first question is from Ashley Cummings. Please go ahead.
Ashley Cummings
I do have a question. Im sorry. I just logged in earlier.
Bill Wells - Biovail Corp. CEO
Hi, Ashley.
Ashley Cummings
Hi. I didnt have a specific question on
Bill Wells - Biovail Corp. CEO
You dont have to ask one.
Ashley Cummings
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Final Transcript
Jun 21, 2010 / 07:30PM GMT, BVF Biovail and Valeant Employee Conference Call
Studied about the merger. Big news here.
Bill Wells - Biovail Corp. CEO
Okay, thank you. Is there another question, Operator?
Operator
Yes, theres a question from Natalie Minco. Please go ahead.
Natalie Minco
Hi. Good afternoon and thank you very much for giving us the opportunity to hear about this
great news and the opportunities and great ventures that lie ahead. As a new primary care rep with
Biovail and just a strong believer of the products that most of us represent in the sales force,
Im just curious to know that Im curious to know where primary care falls or what role well
play in this merger, considering that you guys specialize more in specialty, while we have both
taskforce available at Biovail. So where would primary care fall in this particular merger?
Michael Pearson - Valeant Chairman, CEO
Well, Im assuming that youre in Canada.
Natalie Minco
Yes.
Michael Pearson - Valeant Chairman, CEO
Now we got a real problem. Actually were delighted that Biovail has a primary care sales
force. We have a number of products in our pipeline that and one being Sublinox, which will
hopefully be the first Sublinox is a short acting Ambien. And Ambien was never approved in
Canada, but Health Canada has (inaudible) we think its going to be approved.
Thats an example of a drug that we should be have coming out early next year, which will be a
primary care drug. If we didnt do this, we probably would have been calling Bill and saying, Bill,
you want to help us sell this drug? Now I dont have to ask Bill. I just have to ask myself. But
its so we do have a pipeline.
I think the unique opportunity in Canada is that there is no other company out there that we should
compete with in terms of bringing in new products. The big companies arent going to theyre
less interested in selling other peoples products, especially only in a territory like Canada. But
for us, Canada is a great business and one of our most important businesses.
So I think we can increase the level of business development of bringing in products. I know that a
couple of the products weve recently in-licensed for Canada, we were competing with one company,
and that was you. And my guess is the reverse is also true. So I think in terms of primary care in
Canada, hopefully therell be a real opportunity to have all of you help us sell some products that
we have that need that kind of coverage.
And going forward, I think we should aspire, we will be the biggest maybe not the biggest
were certainly going to be biggest sort of Canadian-based pharmaceutical company. I think well be
by far the biggest Canadian specialty company and I think our aspiration should be the biggest
Canadian pharmaceutical company.
Bill Wells - Biovail Corp. CEO
Any more questions on the phone, Operator?
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9
Final Transcript
Jun 21, 2010 / 07:30PM GMT, BVF Biovail and Valeant Employee Conference Call
Operator
There are no further questions registered at this time.
Bill Wells - Biovail Corp. CEO
Okay. Have one in this row.
Unidentified Audience Member
(inaudible question microphone inaccessible)
Michael Pearson - Valeant Chairman, CEO
Oh, Im sorry. Im a slow learner. Im supposed to repeat all the questions. I should go back
and repeat all the ones I missed, or we could just just do this one?
So, whats the kind of tradeoff or the or a bias towards
Unidentified Audience Member
(inaudible question microphone inaccessible)
Michael Pearson - Valeant Chairman, CEO
the balance towards earlier stage versus late stage development or in-house versus
partnered.
I think Im first of all, (inaudible) discovery and were not going to get into discovery. In
terms of whether we do development in-house or through partners, Im sure it almost doesnt
matter. Kind of depends on what the capabilities that we have, whats the capability of the
partner, and what makes the most sense.
I know you do some of your development in-house and you do some of it with partners. We do the
same. We have some dermatology products that were developing on our own and we also have
partnerships, like retigabine. So I think its whatever makes sense for that whats going to
increase the probability of that development project to win.
And what we cant afford to do is build up a lot of capacity well beyond what we can what we can
(inaudible microphone inaccessible) given our size. So, again, I dont think there is I dont
know what the balance is. The balance is whatever (inaudible microphone inaccessible) tell me the
balance is. Im not a scientist. Theyre a lot smarter than I am. And theyll figure it out.
Bill Wells - Biovail Corp. CEO
Mike, while were on R&D, let me ask a question. Is there a fundamental difference in the
approach to R&D between Biovail and Valeant and how do you see it being handled by the company
going forward?
Michael Pearson - Valeant Chairman, CEO
I dont know if theres a fundamental in how the R&D is done, I hope theres not a
fundamental difference. I hope were both doing great R&D projects. I think the biggest difference
that you can see sort of from the outside are a couple of differences, is we have strayed away from
some of
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10
Final Transcript
Jun 21, 2010 / 07:30PM GMT, BVF Biovail and Valeant Employee Conference Call
the earlier sort of Phase II and earlier programs. I know thats actually a modest part of
what you do, but we probably dont have a lot in that area. Certainly I think the strategys the
same, late phase R&D development.
I think as a percent of revenue, the amount we spend on R&D is different. I think youve been
spending about 15% a year on R&D and ours is closer to 5%. Now, part of that is a function of
numbers. If you look at more than 60% of our revenue comes from outside the US and 40% to 50% comes
from our branded generic businesses, where that doesnt have R&D, you have dossiers and
registrations and files. So if you do the math, thats why the percentages are somewhat
meaningless.
I think what we want to do going forward is we want to de-risk the our projects and have the
highest probability of getting products to the market. Youve taken an approach different than ours
in terms of how you partnered. And theres probably some interesting learning for us from that
standpoint.
Youve tended to probably bring more things in, but paid very low sort of up fronts and sort of
stage-gated it. So thats interesting and its another way of basically getting to the same
endgame, which is limited amount of we dont want to commit to major, major programs without
having some sense that theyre going to be successful.
I think a little bit is our history, too. If you look at the Valeant history, when I walked in the
door we had two R&D programs. One was taribavirin, which we had spent literally over $300 million
trying to develop it, $300 million. And we failed a Phase III and we were back in Phase II $300
million later. And we had retigabine and we were spending over $120 a year on retigabine.
So we had a culture or we had a strategy of finding fairly risky products that could be
blockbusters and not partnering them, doing it all ourselves. So we were making one or two bets.
And if those bets worked, great. But if they didnt, well, thats what happened to the last CEO,
right? So, that wasnt going to be my strategy.
So thats our origins, and obviously why weve taken our approach. I think your origins have been
more out of the reformulation business and where it was sort of less risky. And youve had some
great, great reformulations. And Wellbutrin XL is an example of that. But intellectual property has
changed, the protection has changed. So youve moved more into a strategy of getting more into more
traditional development.
So I think we come from different paths. And therefore, our approach has been a little bit
different. So theres nothing set in stone, but I will say I think that one of the advantages that
we can have is to keep we need to have development. We need to invest in growth in terms of
development. But we do not want to turn into either sort of the big pharma mentality or some other
specialty pharma mentalities that were just going for broke, were going for blockbusters. Because
if youre doing that, we might as well just go to Las Vegas and well get our results much quicker.
So hopefully that hopefully that helps. Actually, you asked the question. Hopefully that helps.
He asks this question every day, but give him a slightly different answer.
Bill Wells - Biovail Corp. CEO
Thank you. We have another question here.
Unidentified Audience Member
(inaudible question microphone inaccessible)
Bill Wells - Biovail Corp. CEO
The question was Ive been with Biovail for a while, actually over five years now, including
being on the board and as CEO. And Ive built an aura of trust and faith. Thank you very much for
the compliment. And what is my role going to be as we go forward.
Im going to perform the same role that Doug Squires performs today, which is Im going to be
chairman of the company. So I intend to be very active on the board. Im not going to be involved
in day-to-day activities of the company. Thats going to be Mikes responsibility with his
management team. I expect many of you will be on that management team.
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11
Final Transcript
Jun 21, 2010 / 07:30PM GMT, BVF Biovail and Valeant Employee Conference Call
I will be in Barbados for probably the next 6 to 12 months as we do a transition, because Mike is
going to be residing in Barbados, but it takes time to get down there and to get your visa and get
installed in terms of residence and so on. So Ill be in Barbados keeping the wheels on the bus
while that process goes on.
But you can be sure you have not seen the last of me. I am very emotionally committed to this
company. We have together been through a fantastic journey over the last few years. I think we have
really shown the world that this is a great company. We have recovered Biovails reputation after
what it had fallen to after a few unfortunate years. And this deal, Im convinced this is the next
big step for Biovail.
Were going to be under a new name, but thats no big deal. Its going to be the same organization,
joined with another great organization. And as Mike said, when youre green, youre growing. If you
stop, you die. And so as an organization, we have to keep moving forward, we have to be growing,
and we have to make sure that we have the conditions to be extremely successful.
Im convinced that this transaction is the very best way to do that and to have a great future for
the company, for the employees. Because the platform that were going to have to work with is going
to be fantastic in terms of new growth opportunities, new fun and exciting things to do , and of
course for the shareholders. Because I think its going to be great for the shareholders as well.
Thats why, when this possibility came up, both Doug and I worked tirelessly to put this
transaction in place. He and I were the main advocates for this deal, despite the fact that Doug
had to step down as chairman and I had to step down as CEO. We did that because we believe in this
deal and we believe its the right thing for this company.
Unidentified Audience Member
(inaudible question microphone inaccessible)
Michael Pearson - Valeant Chairman, CEO
Sure. Oh, yes. Thank you. Smart guy. Repeat the question. Hows this going to role out, whats
the timing going to be like?
First of all, you probably shouldnt ask me because were really were terrible at
communication. So we probably should find someone whos better. But basically we until we close
and the lawyers lawyers on both sides actually agreed on this one, so thats a good sign because
they usually dont agree on anything. But they both think sort of the October, November timeframe
is when this will actually close. The governments got to review it, et cetera, et cetera.
During that period of time we are we remain two independent companies. Bill will be your CEO and
I will be the Valeant CEO. And we have to continue operating as completely independent companies.
Now, what we can do, and well have to get our legal counsels to agree on the specific process, but
Bill and I have already started to talk about what we can do and start to get to know each other,
start to plan, start to think about it. We cant make decisions. Again, Biovail can make decisions
and Valeant can make decisions, but you cant tell us what to do and we cant tell you what to do.
So thats sort of the process. Well have to get the lawyers to help us. We are planning to start
integration process led by sort of co-led by both sides. I think Gilbert and I are going to be
talking from Biovail side. Gilbert is going to play a leadership role on that. And were going to
start to think about how are we going to put these two companies together.
Well probably have some integration people up in Canada. A lot of our operations outside the US
and Canada will be unaffected. What happens in Brazil will be what happens in Brazil. So well
start a process. And then well ask the people that are leading it to also figure out how to
communicate it and keep people keep people up to speed.
So the only good thing or at least one of the good things is this one shouldnt take that long
to close. A lot of these mergers take forever because theres competing products that have to be
sold off and it can take a year. I know the Schering-Plough, Merck one took, like, 14 months. And
no
one its going to be an anxious period for everyone until we can just get moving forward. And
once we are, then we can start moving forward to the fun stuff, the growth and what wed like to
do.
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12
Final Transcript
Jun 21, 2010 / 07:30PM GMT, BVF Biovail and Valeant Employee Conference Call
So Im crossing my fingers and hoping its three, four months so we can get the integration over
with and start moving forward. So I dont know if that quite answered your question, but probably
the best I can do right now.
Unidentified Audience Member
(inaudible question microphone inaccessible)
Michael Pearson - Valeant Chairman, CEO
The question is, and I finally learned, I may forget next one, is wouldnt it make sense to
sort of align the R&D programs, the development programs, the acquisitions?
And the answer is absolutely. If we could do it, we would do. But we cant. Were not allowed to.
So what we have done, though, as part of the contract with each other, for both sides and on
purpose, is any significant acquisition at all above some very little amount that we want to make,
I have to talk to Bill, and vice versa. So that way we can at least chat about it. And were not
going to do things that dont make sense in the unfortunately, thatll probably slow down some
of these things, is that.
In terms of R&D programs, we cannot those are just decisions youll have to make and well have
to make. Well have to figure out what the lawyers will let us do in terms of at least educating
each other. I suspect we can in terms of what we have. But that part probably, even though ideally
it would happen sooner, it would be in the best interests of shareholders, it obviously is not in
the best interests of what the government thinks we need to be able to do.
So that will be the gating item. We will do absolutely what is right. And well ask our two legal
counsels to shepherd us through that process.
Bill Wells - Biovail Corp. CEO
Is there any other questions on the telephone, Operator?
Operator
Yes. The next question on the telephone line is from Rashid Majunder. Please go ahead.
Rashid Majunder
Hi. I have also my IT colleagues here, so hell ask the question.
Unidentified Audience Member
Yes, since this mornings announcement, were all curious about learning new news. And one of
the questions I had was what IT resources have been outsourced already.
Michael Pearson - Valeant Chairman, CEO
Is that a question to me or to Bill or to both of us?
Unidentified Audience Member
Sorry. To Mike.
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13
Final Transcript
Jun 21, 2010 / 07:30PM GMT, BVF Biovail and Valeant Employee Conference Call
Michael Pearson - Valeant Chairman, CEO
Okay. In terms of IT resources, it varies by country for us. We have actually SAP systems in
place in Poland and Central Europe and also in Mexico. SAP works pretty well with manufacturing.
Probably we would have ended up putting that in Canada, too, but we may or we may not. Well see. I
have no idea what you have up in Canada.
In the US we dont have any plants. And what we have done, we have an outsource contract with ACS.
We have IT people in-house and we have but our servers and sort of our help desk and things like
that are outsourced.
In terms of what well do going forward, which is probably the implication of the question, I dont
know. Whatever makes the most sense. Got guys from IT on both sides. Both companies can sit down
and figure it out. And whatever its tradeoffs between cost and service and what we need to do.
So I think thats the way this integration will work. Well take a look at both.
And my hope if at least one or the other or some combination would be the best solution. If in a
certain area that we both think that our capabilities are hopeless, then maybe well go outside and
try to bring somebody else in. But I think I dont think the idea is going to be to reinvent the
wheel here. We could spend a year and a half reinventing the back office instead of our real job,
which is to grow the company.
So in terms of IT, I think we take the best that either company has or combined company and go with
that.
Bill Wells - Biovail Corp. CEO
Any other questions on the phone?
Operator
Yes. The next question is from Heather Peterson. Please go ahead.
Heather Peterson
Hi. I just wondered if you could maybe highlight for us the projected synergies that you see
with this merger? And of course I know that translates directly into headcount reduction and I was
just wondering, the second part of the question is just a sort of sense of timeframe. I know you
just said that the merger itself wouldnt be able to complete until October, November, the first
stage anyway. Im just wondering where do you see the word coming out to the employees on the
specific areas of synergies and headcount reduction?
Michael Pearson - Valeant Chairman, CEO
Sure. Well, the number that we gave to Wall Street today, which is the same number well give
to everyone, is $175 million of synergies over the next two years. Part of that will be headcount
and part of that will not be headcount. To the extent that theres outsourced services and things
like that. Theres more to be going after there.
I also gave a number of 15% to 20% total headcount reduction. That will also be based, though, off
of growth plans of each company. So when we built our models, both of our companies, we were going
to continue to grow and so we were both going to increase headcount. And thats sort of our base
model.
So to the extent that some of those that headcount comes from positions you were going to add or
positions we were going to add, that also counts because its based on the models. So what it turns
into so in a sense its reduction in planned positions of that level.
And so again, the integration teams are going to have to figure this out. Coming out with a number,
there was from your side Gilbert and Peggy and Greg were part of a team, and we had three people
from Valeant working with them on the synergy team. So the numbers came from that team. And
fortunately, there was also a lot of other things we could do to hopefully get some of those
synergies.
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14
Final Transcript
Jun 21, 2010 / 07:30PM GMT, BVF Biovail and Valeant Employee Conference Call
But thats the number. We cannot announce anything until the deal closes. We cannot get overly
specific and we certainly cant have any kind of people process selection before we close the deal
because we cant we just cant make those kinds of decisions.
So I dont know, Gilbert, dont know if you want to say anything. You were kind of part of the
process.
Bill Wells - Biovail Corp. CEO
Gilbert, would you mind coming up and taking the mic?
Gilbert Godin - BioVail Corp EVP, COO
So Mike was right in that we have representation from both companies looking at Company A and
Company B equals Company C. And weve been also guided by experts in the field, saying, well, what
should Company C look like if Company C was to be a high performing company? And therefore, with
those math and minds, we were able to [better mine] what has some of the basic blueprint of what
it should look like for various functions and various capabilities in the different geographies.
So at this point in time, thats kind of a rough cut, but its one that is supported by a fair
amount of empirical evidence (inaudible) McKinsey and McKinsey was also a great support in helping
us [get our mind] what should the company look like at in the end state.
Bill Wells - Biovail Corp. CEO
Id just like to make a comment. This is never an easy process when youre bringing together
two large organizations. I think the folks of Biovail and the folks of Valeant, weve all earned
the PhD in changed management over the last few years. Weve all been through this process. Weve
all had to go through downsizings and restructurings and looking after reducing costs. Its never a
fun process. We all know that. And so Im sure none of us is looking forward to going through that
process.
However, what I think both companies have learned over the last couple of years is that when you
get through that process, boy, the results can be great, right? It is not all about negative
things. This is about building a platform for some really positive things. For growing the company
more aggressively, faster, with greater opportunities for everybody as we go forward.
So you get a little bit of the bad along with the good. Thats just the way it goes in life. We
will get through this and we will do it as expeditiously as we can. And as we always have, folks
who are going to be affected by this, and there will be some, we know that, will be treated very
fairly as we go through the process.
Any other questions on the phone?
Operator
There are no further questions on the telephone lines.
Bill Wells - Biovail Corp. CEO
Have another question in the room?
Michael Pearson - Valeant Chairman, CEO
Let me make a few comments, then, and hand the mike back to Bill. Again, I think the future of
this company is extremely bright, I think, if we can figure out a way to get through this short
term pain and really start growing. Its not that often that two growing companies get together.
Usually when someone acquires someone or someone merges with someone its because one or both those
companies are really struggling.
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15
Final Transcript
Jun 21, 2010 / 07:30PM GMT, BVF Biovail and Valeant Employee Conference Call
And thats not the case. Neither of our two companies were struggling. We were two of the better if
not the best companies in the industry, at least in the minds of the outside world. So we should
have strength building on strength. And thats what we have to take advantage of. In my mind its
all about growth. If we can grow this company, if we can find new products, we can develop new
products, we can sell new products, if we grow, theres tons of opportunity for everyone.
So that really is going to be the mantra, that we have to grow. And both companies have done so and
so hopefully well learn from each other and improve from that.
So, with that, I thank all of you in this room. I thank colleagues from Biovail who are not in the
room and obviously I thank all my colleagues at Valeant in California and Texas, wherever you might
be. And well try to well try to improve on our record of not being good communicators and I
suspect Bill will make every effort to do so as well.
Bill Wells - Biovail Corp. CEO
Well, thank you, Mike.
I just wanted to close with one final question for Mike. And now this is a real question because it
did come in over the emails. Valeant skin care products are great. Can we get employee discounts?
Michael Pearson - Valeant Chairman, CEO
Once we become one company, you certainly can. However, in the meantime, CVS, Wal-Mart, Rite
Aid, we really appreciate the business. And since our share price now moves in tandem after this
morning, youll only be helping yourselves as well. We might be able to get some samples over here.
Well see what we can do.
Bill Wells - Biovail Corp. CEO
Great. Well, were going to hold him to that about the samples.
So thank you very much everyone, everyone whos attending here, folks on the telephone in the
various locations around North America and actually around the globe with Valeant and with Biovail.
This is a very exciting day for all of us and we appreciate your being here with us. I know theres
going to be lots more questions as we go forward. Please just ask your managers. They will pass
them up to us and well do our best to get a response to you.
Thanks very much, everyone. Thank you, Operator.
Michael Pearson - Valeant Chairman, CEO
Thank you.
Operator
Thank you. The conference is now ended. Please disconnect your lines at this time. We thank
you for your participation.
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16
Final Transcript
Jun 21, 2010 / 07:30PM GMT, BVF Biovail and Valeant Employee Conference Call
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17
Caution Regarding Forward-Looking Information and Safe Harbor Statement
To the extent any statements made in this document contain information that is not historical,
these statements are forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and
may be forward-looking information as defined under applicable Canadian securities legislation
(collectively, forward-looking statements).
These forward-looking statements relate to, among other things, the expected benefits of the
proposed merger such as efficiencies, cost savings, tax benefits, enhanced revenues and cash flow,
growth potential, market profile and financial strength; the competitive ability and position of
the combined company; the expected timing of the completion of the transaction; and the expected
payment of a one-time cash dividend. Forward-looking statements can generally be identified by the
use of words such as believe, anticipate, expect, estimate, intend, continue, plan,
project, will, may, should, could, would, target, potential and other similar
expressions. In addition, any statements that refer to expectations, projections or other
characterizations of future events or circumstances are forward-looking statements. Although
certain of these statements set out herein are indicated above, all of the statements in this
letter that contain forward-looking statements are qualified by these cautionary statements.
Although Valeant and Biovail believe that the expectations reflected in such forward-looking
statements are reasonable, such statements involve risks and uncertainties, and undue reliance
should not be placed on such statements. Certain material factors or assumptions are applied in
making forward-looking statements, including, but not limited to, factors and assumptions regarding
the items outlined above. Actual results may differ materially from those expressed or implied in
such statements. Important factors that could cause actual results to differ materially from these
expectations include, among other things, the following: the failure to receive, on a timely basis
or otherwise, the required approvals by Valeant and Biovail stockholders and government or
regulatory agencies (including the terms of such approvals); the risk that a condition to closing
of the merger may not be satisfied; the possibility that the anticipated benefits and synergies
from the proposed merger cannot be fully realized or may take longer to realize than expected; the
possibility that costs or difficulties related to the integration of Valeant and Biovail operations
will be greater than expected; the ability of the combined company to retain and hire key personnel
and maintain relationships with customers, suppliers or other business partners; the impact of
legislative, regulatory, competitive and technological changes; the risk that the credit ratings of
the combined company may be different from what the companies expect; and other risk factors
relating to the pharmaceutical industry, as detailed from time to time in each of Valeants and
Biovails reports filed with the Securities and Exchange Commission (SEC) and, in Biovails case,
the Canadian Securities Administrators (CSA). There can be no assurance that the proposed merger
will in fact be consummated.
Additional information about these factors and about the material factors or assumptions underlying
such forward-looking statements may be found in the body of this letter, as well as under Item 1.A.
in each of Valeants and Biovails Annual Report on Form 10-K for the fiscal year ended December
31, 2009, and Item 1.A in each of Valeants and Biovails most recent Quarterly Report on Form 10-Q
for the quarterly period ended March 31, 2010. Valeant and Biovail caution that the foregoing list
of important factors that may affect future results is not exhaustive. When relying on
forward-looking statements to make decisions with respect to Valeant and Biovail, investors and
others should carefully consider the foregoing factors and other uncertainties and potential
events. Neither Biovail nor Valeant undertakes any obligation to update or revise any
forward-looking statement, except as may be required by law.
Additional Information
1
In connection with the proposed merger, Valeant and Biovail plan to file with the SEC a
Registration Statement on Form S-4 that will include a joint proxy statement of Valeant and Biovail
that also constitutes a prospectus of each of Valeant and Biovail. Valeant and Biovail will mail
the joint proxy statement/prospectus to their respective stockholders. INVESTORS ARE URGED TO READ
THE JOINT PROXY STATEMENT/PROSPECTUS WHEN IT BECOMES AVAILABLE BECAUSE IT WILL CONTAIN IMPORTANT
INFORMATION. You will be able to obtain the joint proxy statement/prospectus, as well as other
filings containing information about Valeant and Biovail, free of charge, at the website maintained
by the SEC at www.sec.gov and, in Biovails case, on SEDAR at www.sedar.com. You may also obtain
these documents, free of charge, from Valeants website (www.valeant.com) under the tab Investor
Relations and then under the heading SEC Filings, or by directing a request to Valeant, One
Enterprise, Aliso Viejo, California, 92656, Attention: Corporate Secretary. You may also obtain
these documents, free of charge, from Biovails website (www.biovail.com) under the tab Investor
Relations and then under the heading Regulatory Filings and then under the item Current SEC
Filings, or by directing a request to Biovail, 7150 Mississauga Road, Mississauga, Ontario,
Canada, L5N 8M5, Attention: Corporate Secretary.
The respective directors and executive officers of Valeant and Biovail and other persons may be
deemed to be participants in the solicitation of proxies in respect of the proposed transaction.
Information regarding Valeants directors and executive officers is available in its definitive
proxy statement filed with the SEC by Valeant on March 25, 2010, and information regarding Biovail
directors and executive officers is available in its definitive proxy statement filed with the SEC
and CSA by Biovail on April 21, 2010. These documents can be obtained free of charge from the
sources indicated above. Other information regarding the interests of the participants in the
proxy solicitation will be included in the joint proxy statement/prospectus and other relevant
materials to be filed with the SEC and the CSA when they become available. This communication
shall not constitute an offer to sell or the solicitation of an offer to sell or the solicitation
of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in
which such offer, solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such jurisdiction. No offer of securities shall be made except by
means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as
amended.
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