Perrigo Company PLC (PRGO) Earnings Report: Q! 2016 ... · Perrigo Company PLC (PRGO) Earnings Report: Q! 2016 Conference Call Transcript The following Perrigo Company PLC conference

CompanyName:PerrigoCoPLCCompanyTicker:PRGOSector:HealthCareIndustry:Drugs

EventDescription:Q!2016EarningsCallMarketCapasofEventDate:13.28BPriceasofEventDate:89.0

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PerrigoCompanyPLC(PRGO)EarningsReport:Q!2016ConferenceCallTranscriptThefollowingPerrigoCompanyPLCconferencecalltookplaceonMay12,2016,08:00AMET.Thisisatranscriptofthatearningscall:

CompanyPart icipants

BradleyJoseph;PerrigoCompany;VPofGlobalIRLaurieBrlas;PerrigoCompany;ChairmanoftheBoardJohnHendrickson;PerrigoCompany;CEOJudyBrown;PerrigoCompany;EVP,BusinessOperationsandCFO

OtherPart icipants

LouiseChen;GuggenheimSecuritiesLLC;AnalystGreggGilbert;DeutscheBank;AnalystRandallStanicky;RBCCapitalMarkets;AnalystElliotWilbur;Needham&Company;AnalystDavidRisinger;MorganStanley;AnalystDavidMaris;WellsFargoSecurities;AnalystDavidSteinberg;JefferiesLLC;AnalystMarcGoodman;UBS;AnalystAnnabelSamimy;StifelNicolaus;AnalystChrisSchott;JPMorgan;AnalystSumantKulkarni;BofAMerrillLynch;AnalystDouglasTsao;BarclaysCapital;AnalystJamiRubin;GoldmanSachs;AnalystTimChiang;BTIG;AnalystMikeGrondahl;NorthlandCapital;AnalystJonAndersen;WilliamBlair&Company;AnalystDerekArchila;LeerinkPartners;Analyst

MANAGEMENTDISCUSSIONSECTION

Operator :

Goodmorning.MynameisVashanta,andIwillbeyourconferenceoperatortoday.Atthistime,IwouldliketowelcomeeveryonetothePerrigocalendaryear2016first-quarterearningsconferencecall.

Alllineshavebeenplacedonmutetopreventanybackgroundnoise.Afterthespeakers'remarkswewillholdaquestionandanswersession.Ifyouwouldliketoaskaquestionduringthistime,simplypressstarthanthenumberoneonyourtelephonekeypad.Ifyouwouldliketowithdrawyourquestion,pressthepoundkey.

Thankyou.IwillnowturntheconferenceovertoBradleyJoseph,VicePresidentofGlobalInvestorRelations.Pleasegoahead.

BradleyJoseph (VPofGlobalIR):




Goodmorning.WelcometoPerrigo'sfirst-quarter2016earningsconferencecall.Ihopeyouallhadachancetoreviewourpressrelease,whichweissuedearlierthismorning.Acopyofthereleaseisavailableonourwebsite,asistheslidepresentationforthiscall.

JoiningmetodayisPerrigo'sChairman,LaurieBrlas;ChiefExecutiveOfficer,JohnHendrickson;andExecutiveVicePresident,BusinessOperationsandChiefFinancialOfficer,JudyBrown.

Iwouldliketoremindeveryonethatduringtoday'scallparticipantswillmakecertainforward-lookingstatements.PleaserefertotheimportantinformationforinvestorsandshareholdersandSafeHarborlanguageregardingthesestatementsinourpressreleaseissuedthismorning.Inaddition,intheappendixfortoday'spresentation,wehaveprovidedreconciliationsforallnon-GAAPfinancialmeasurespresented.

Turningtoslide3.Next,I'dliketowalkthroughtheagendafortoday'scall.LauriewillbeginbydiscussingPerrigo'srecentCEOtransitionprocess,fromtheperspectiveofPerrigo'sBoardofDirectors.Next,Johnwillwalkthroughhisprioritiesandoverarchingmanagementphilosophy,andthenwilldiscusshisperspectivesandinsightsonthefuturedirectionofPerrigobysegment.

Judywillthenwalkthroughthefinancialresultsforthequarterandguidanceforcalendar2016.Finally,Johnwilldiscusstheteam'sphilosophyaroundguidance,andwhatyoushouldexpectfromPerrigogoingforward,concludingwithQ&A.IwouldnowliketoturnthecallovertoPerrigo'sChairman,LaurieBrlas.

LaurieBrlas (ChairmanoftheBoard):

Thankyou,Brad.

Goodmorning,everyone,andthanksforjoiningustoday.IhavebeenamemberofPerrigo'sBoardofDirectorssince2003,andhavetheprivilegetoserveonboththeauditandremunerationcommittees.DuringmytenureontheBoardI'vecometodeeplyappreciatethestrengthofthisCompanyanditsmanagement,aswellasourabilitytogrowanddelivervalue,whileeffectivelyaddressingchallenges.

I'dliketotakethisopportunitytodaytotalkwithyouaboutourCEOtransitionprocess.Aspreviouslyannounced,followingourrobustsuccessionplanningprocess,onApril25,theBoardofDirectorsunanimouslyselectedJohnHendricksonasChiefExecutiveOfficer.SpeakingonbehalfoftheentireBoard,IcanassureyouthatthechoicetoelevateJohnwasclear.JohnhasbeenessentialtotheCompany'ssuccessineachofhisroleswithPerrigo.Johnledandshapedtheoperationalbackboneoftheorganization,designingavastandmultifacetedinfrastructuretoproduceandsupplyabroadandcomplexportfolioofproducts.

Heshoweddistinctiveleadershipasheadofourconsumerhealthcarebusinessfrom2003to2007.Duringthatchallengingperiod,whenweweregrapplingwiththemovementofpseudoephedrine,whichwasthelargestproductinourOTCportfolioatthetimetobehindthecounter,Johnledtheteamtoincreaserevenue.Allfunctionsreportedtohim,includingR&D,regulatory,sales,marketingandoperations.

Since2007,JohnhasservedasEVPandheadofglobalsupplychain,untilhispromotiontoPresidentlastyear.Hismanufacturingandsupplychainleadership,exceptionaloperationaltrackrecord,andabilitytoconnectwithandgetthemostoutofhispeoplegaveusgreatconfidenceinourdecisiontopromoteJohntoPresident,aswellasourrecentdecisiontoappointhimtoCEO.

InJohn,weidentifiedaleaderwhoknowsthebusiness,iscommittedtoourmission,andcanmakethechoicesnecessarytodelivervalueforourshareholders.TheBoardrecognizesofcoursethatthesuccessofPerrigodoesnotstartorstopwithoneperson.Johnissupportedbyatalented,experiencedteamand




theBoardhasfullconfidenceintheteam'sabilitytoworkeffectivelywithJohn,execute,anddelivershareholdervalue.

Finally,Iwanttounderscoremyremarksbyhighlightingourcommitmenttocorporategovernanceandtransparency.ToenhanceindependentdecisionmakingattheBoardlevel,andtoalignourstructurewithwhatwebelieveisappropriatefortheCompanyatthistime,theBoardhaschosentoseparatetherolesofCEOandChairmanoftheBoard.Ourcommitmenttoshareholderswillremain,asitalwayshas,centraltoourdecision-makingprocessgoingforward.Now,I'dliketoturnthecallovertoJohn.

JohnHendrickson (CEO):

Thankyou,Laurie.Andwelcomeagain,everybodytoPerrigo'sfirst-quarter2016earningscall.IwanttostartbysayinghowhonoredandprivilegedIamtobeCEOofthisgreatorganization,andleadourmorethan13,000talentedemployees.

DuringmytimewithPerrigo,IhaveservedinavarietyofdifferentcapacitiesasLaurieoutlined,andI'macutelyawareofwhatthisgreatbusinesshastooffercustomers,consumers,andourshareholders.Iwillsayitunequivocallyatitscore,Perrigoisatrulydiversified,uniquebusiness,transcendinggenericprescriptionproductswitharesilientOTCbase.

Ibelievethere'salongrunwayforgrowthaheadofus,andIamconfidentwehavetherightcohesivemanagementteaminplacetofocusontheexecutionthatisrequiredtodeliverclearvaluetoourshareholders.Thatsaid,Iknowthatmeetingorexceedingexpectationsisthefoundationforestablishingyourtrust.Thiswillbemypersonalfocus,andthefocusofthemanagementteamgoingforward.

Turningtoslide6,ourrecenttrackrecordofperformanceagainstourownexpectationsisunacceptable.Iunderstandthat.Ourteamunderstandsthat.

Myfocusandthatofmyteamwillbeonoperationaldisciplineandgeneratingconsistentresults.Iamconfidentwewilldeliver,givenouropportunitiesforgrowth,thepowerofourplatform,andourdeeplong-standingrelationshipswithourcustomers.Wewilldeliverourresults.

Nowletmehighlightthekeycomponentsofouroverarchingleadershipprinciplesforourbusiness.First,asIsaid,ouroperationalexecutionisthecornerstoneofoursuccess.Developing,marketing,purchasing,manufacturing,distributingabroad,complexarrayofcustomizedproductshavealwaysbeenourstrengths.Qualitycontinuestobethedrivingforcebehindourorganization,andwehavetheinfrastructureandqualitytrackrecordtoconsistentlymoveourproductsontoshelvesforourcustomersandintothehomesofourconsumers.

Second,I'mactionoriented.I'vealreadymadecriticaldecisionsinanumberofourbusinesses.Iwillcontinuetotakeappropriatestepstocapitalizeonopportunities,andeffectivelyaddressourchallenges.

Third,Ifeltitimportanttosharemyguidancephilosophy,whichwe'lladdressinmoredetailsoon.I'munequivocallycommittedtotransparency,andwillbeactivelyengagedwithandlisteningtoyou,yourquestionsandcomments.That'showI'vealwaysworkedwithourcustomers,suppliers,employeesandshareholders.

Finally,ourgoalistoultimatelycreatevaluefortheshareholders,theownersofourCompany.Tothatend,myprimaryfocusatthistimeisonourcoreoperatingandorganicgrowthvehicles.Asalways,wewillcontinuetoevaluatewaystorefineandenhanceourportfolioofproductstocustomersandconsumers.Wewillcontinuetolookatsynergistic,bolt-onacquisitionsthatfitstrategicallywithinourcoreinfrastructure,andwewillcontinuetoevaluatemethodsofreturningcapitaltoourshareholderbase.

NowI'dliketogiveyoumyinsightintothePerrigoadvantage,andmyperspectiveoneachofour




businesssegments.Lookingatslide7,ourconsumerhealthcareplatformiscoretoPerrigo.Wehaveastronganddurableposition,withnumerousproducts,dosageforms,andcapabilities.

OurUSconsumerbusinessincludesmoreOTCabbreviatednewdrugapplicationsthananyothermanufacturer,evenincludingthelargebrandedpharmaceuticalcompaniesthatyouallknow.ThisabilitytobringnewproductstomarketwillcontinuetodrivegrowthinourCHCsegment.Inaddition,wehaveoneofthebroadeststorebrandOTCsupplychainsintheworld.Thatmeansthefirstrawmaterialsbeingprocured,throughmanufacturing,allthewaythroughlogisticsanddistribution,ultimatelyaretoourcustomers.

OnetruckloadofproductleavesaPerrigodistributioncenterevery30minutes,24/7,365daysayear,togotoourcustomers,toultimatelygotoourconsumers.WearetheCompanyretailerslooktoastheirpartnerofchoice.WearetheCompanyretailerslookto,todrivevaluefortheirconsumersandultimatelytheirshareholders.

ThissegmentcontinuestobeledbyJeffNeedham.Jeffisanindustryinnovatorwithover30yearsofexperience.Thedeepcustomerrelationshipswehavehelpensurewecontinuetobeavaluedpartnerinthisconsumerspace.

Next,turningtoourbrandedconsumerhealthcaredivision.Despitesomechallenges,myviewofthisbusinesssegmentisoneofoptimismaboutthepoweroftheplatformthatitprovidesus.Perrigoisnowabletodistributeproductstoanadditional32countriesglobally,reachinggreaterthan300,000pharmacistsandretailersinthesecountries.

TheEuropeanOTCmarketrepresents$30billionayearinsales.Sincethebeginningofthiscalendaryear,Ihaveworkedwiththecountryleadersandtheexecutiveteaminourbrandedconsumerhealthcaredivision,todevelopadeeperunderstandingoftheday-to-dayoperationsofthebusiness.WearenowfullyandeffectivelyintegratingBCHintoourexistingleadershipstructure.Wearebuildingupontheteam'scoresalesandmarketingstrengths,implementingourownstrongoperationalcontrolsandstructures.

AsCEO,IhavemadeanumberofadditionalchangestotheBCHbusiness,suchascomingtomutualagreementwithMarkCouckethathewouldresign,andappointingSharonKochanasHeadoftheBCHbusiness.Sharon'sbackground,disciplinedapproach,andabilitytodriveorganizationstopeakperformancemadethedecisiontoappointhimtoleadtheBCHteamaclearone.SharonwasthearchitectofourRxbusiness,whichhebuiltfromthegroundup,withasuperbexecutionaltrackrecord.

Thetrackrecordincludestheacquisitionandintegrationofvariousbolt-onproductsandbusinessesduringhistenure.Asthecurrentheadofourinternationalbusiness,Sharonhasalsooverseendiversemarkets,includingbothbrandedandstorebrandofferingsinmultiplegeographiessuchasMexicoandtheUK.Iamconfidentthatthegrowth,executionandfinancialaccountabilityofthesegmentwillbeenhancedunderSharon'sleadership.

Inadditiontopersonnelchanges,SharonandIareprovidingourstrongBCHleaderswithincreasingresponsibilitiestoleadnewgeographies,prioritizeourportfolioanddivestunderperformingassets.Wearealsoemphasizingnewandinnovativeproducts,suchasournicotinereplacementtherapyfranchise,acquiredfromGSKlastsummer.

Ourleadersarenowalignedwiththestrategytocontinuefocusingonourtop20brands,toensuregrowthofthisstrongportfolio.Andtobeclear,todaythesetop20productscontinuetogrowatafasterpacethanthemarketsthattheyarein.

ThesechangesareinconjunctionwiththeimportantdecisionsJudyhasmadeinthefinance




organization.Shehasenhancedfinancialmanagement,andweareactivelyintheprocessesofputtingBCH'ssales,forecasting,inventorycontrolandoperationsplanningontoPerrigo'sexistingplatform,andupgradingthefinancialplanningandanalysistosupporttheseactivitiesanddrivegrowth.

Again,Iwanttoreiteratethatthetop20brandsthatwehaveinthebusinesstodaycontinuetogrowfasterthanthemarkets.WehaveasupplychainandaplatformtosupportPan-Europeangrowth,andwecanaddproductstofurtherleveragethisbusiness.

TurningnowtoourRxbusiness,ourprescriptionbusinessisanimportantpartofourdiversifiedconsolidatedportfolio.OurRxbusinesshasaclearstrategicrationaleaspartofourbroaddiversifiedportfolio,andisagreatcomplementtoourcoreconsumercompetencies.Products,plans,procurement,technology,distributionareallhighlysynergisticwithourOTCbusiness.AndthisbusinessrepresentsapotentialfeederpipelineforproductconversionsfromRxtoOTC.

Forexample,takeourtopicalacnecategorywithintheRxportfolio.Whenacategorylikethisbeginstoswitch,weareinaprimepositiontocapitalizeonthisopportunity.Theswitchprovidesadermatologypipelineandallowsustobenefitfromtwolifecyclesforasinglepharmaceuticalproduct.

WealsohaveastrongpipelineinourRxbusiness.Whilethesenewproductstendtobemoretechnicallychallenging,withlongerregulatoryapprovaltimeframes,theydopotentiallycreateahigherbarriertoentry,allowingforalonger,moreenduringproductlifespan.

Asallofyouknow,pricingpressuresandultimatelydeflationhavebeenamajortopicacrosstheindustry.OurRxteamhasdoneagreatjoboverthepastyearsofmanagingthroughthis;howeverwearenotimmunetothisdynamic,andultimatelyincreasedcompetitionandgreaterthanexpectedpriceerosionhurtourperformanceinQ1,andresultedinloweringofourexpectationsfortheyear.

DougBoothe,ourEVPandGeneralManageroftheRxbusiness,hasbeenwithPerrigosince2013,leadingthebusinessthroughexceptionalgrowth.Doughasbeenintheindustryandseenvariouscyclesintheprescriptionpharmaceuticalbusiness,andistherightpersontoguidethebusinessinthismarket.

Finally,specialtysciencesandTysabri.Frommyperspective,Tysabriisavaluablefinancialassetwhichcontributesmeaningfullytoourfinancialflexibility,andenablesustocapitalizeonopportunities.

Now,I'dliketohandthecallovertoJudy.BeforeIdoso,I'dliketofirstcongratulateJudyandourCompanyonhernewlyexpandedrole,announcedthismorning.AspartofmystrategytotakeactionsthatwilldeliverenhancedvalueforourCompanyandforourshareholders,youasowners,JudyBrownwilltakeonanexpandedroleasExecutiveVicePresident,BusinessOperationsandChiefFinancialOfficer.

Inthisrole,Judywillhaveleadershipofourglobalproductportfolioandglobalsharedserviceplatform,complementinghercurrentresponsibilitiesforcorporatedevelopment,finance,strategyandcommunications.Leveragingherexperienceinleadingmulti-nationalfinancingandproductdevelopmentorganizations,bothatPerrigoandatWhirlpool,Judywillnowleadtheexpansionofourexistingportfolioandpipelineproductsacrossallbusinesssegmentsandgeographies,whileoptimizingourbusinessservices.

Thankyou,Judy.IwillnowturnthecallovertoJudy.JudyBrown.

JudyBrown (EVP,BusinessOperationsandCFO):

Thankyouverymuch,John.Goodmorningeveryone.

BeforeIdelveintothefinancials,though,letmecongratulateJohnonhisappointmenttoCEO.Ihave




workedwithJohnonthisexecutiveteamformanyyears,verymanyyears,buttimeflies,andIagreewithLaurieandtheBoardthatJohnisabsolutelytherightleaderforPerrigoatthispointinourhistory.Ilookforwardtosupportinghisstatedfocusonexecution,growth,andtransparencyinhisnewrole.Congrats.


Thanks,Judy.


So,divingin.Youcanseeonslide9thatGAAPnetlossforthequarterwas$133.1millioncomparedtoanetlossof$95millionintheprioryear.

LetmeexplaintheprimarydifferencesbetweenourGAAPresultsandadjustedearnings.Ourlong-standingphilosophyistoadjustGAAPEPS,tohelpyoubetterunderstandourunderlyingoperations.Theseadjustmentsincludesuchitemsasacquisition-relatedmatterssuchasnon-cashacquisition-relatedamortizationexpenses,restructuringchargesandrelatedtaxeffects,andthoseitemsoutlinedintables1and2intoday'spressrelease.

YouwillnoticethatasdescribedonFebruary18,wearealsoremovingourvitamins,mineralsandsupplementsoperatingresultsfromouradjustedearningsin2016,asthebusinessiscurrentlyheldforsale.Afullreconciliationcanbeviewedintables1and2inourpressrelease.Therearetwospecificlargenon-cashimpairmentchargeshere,relatedtobrandedconsumerhealthcare,whichIwillalsotalkaboutinamomentwhenwegettothesegmentdetails.

Soasyoucanseenowonslide10,Perrigodeliveredconsolidatedfirst-quarteradjustednetsalesgrowthof33%year-over-yearonaconstantcurrencybasis,excludingcontributionsfromtheVMSbusinessforboth2016and2015.Asnotedonourfourth-quarter2015earningscall,pleaseexcludeapproximately$40millionofcontributionseachquarterinyourmodelsfor2015,relatedtothisbusiness.

Duringthefirstquarter,weexperiencedaconfluenceofevents,whichhasimpactedquarterresultstoamagnitudewecouldnothaveanticipatedatthebeginningofthequarter,andwhichhavealsoimpactedourguidanceforthefullyear,asI'lldiscussshortly.Netsalescontributionsfrombrandedconsumerhealthcare,whichwasnotpartofourbusinessthistimelastyear,wastheprimarydriverofouryear-over-yeartoplinegrowth.

Consolidatednewproductsalesof$74million,including$31millioninBCHnewproductsaleswerepartiallyoffsetby$39millionofdiscontinuedproducts.First-quarterconsolidatedadjustedgrossmarginwasaMarchquarterrecordof47.9%,highlightedbyfirst-quarteradjustedgrossprofitmarginsinourconsumerhealthcaresegmentof33.8%,withfirst-quarterconsolidatedadjustedoperatingmarginof25.1%.

Sowalkingthesegments,startingwithCHConslide11.Inthequarteradjustednetsales,excludingVMS,grew2%onaconstantcurrencybasis,drivenbycontinuedmomentuminstorebrandinfantformula,andcontinuedstrengthinourNRTfranchise.I'mpleasedtonotethatPerrigosuppliedinfantformulamarketsharehasgrownto13.9%accordingtoIRIdata,whichisarecordfortheconsumerhealthcareteam.

Thesegainswerepartiallyoffsetbydecreasesintheanalgesicandcough-coldcategories,followinganextremelymildcough-coldseason,andtheabsenceoftheguaifenesin600milligramERproduct,ascomparedtolastyear.Aspreviouslydiscussed,thisisthelastquarterwhereourinfantformulalabelrefreshwillhaveanegativeyear-over-yearimpact.Thisconversionaccountedforthemajorityoftheabnormallyhighdiscontinuedproductnumberof$32millionembeddedintheseresults.

Newproductsalesinthequarterwere$31million.Remember,weanticipatedournewproductlaunches




inthissegmenttobeweightedmoreheavilytothesecondhalfofthecalendaryear.

Onslide12,youcanseethatBCHpostednetsalesof$318million,withnewproductscontributing$31million,andouracquiredGSKportfolioandYokebebrandcontributinganother$37milliontothistotal.TheBCHsegmentrevenueswereorganicallyflatcomparedtotheprioryear,withgrowthinourtop20brandsprimarilyinthecough,coldandallergycategory,despiteasoftseasoninEurope,whichwasoffsetbylowerOTCsalesincertainmarkets.

Inthequarter,BCHfellconsiderablyshortofourtoplineexpectations.Despitesofttoplineresults,aspreviewedinFebruary,wecontinuedtomakesignificantinvestmentsinadvertisingandpromotioninthisquarter,equaltoapproximately18.6%ofnetsales.Theseeffectsweretheprimarydriversofadjustedoperatingincomeasapercenttosalesofonlyapproximately8%.

Thenetsalesmissinthequarter,combinedwiththechangeinforecastednetsalesandadjustedoperatingincomefortheremainderoftheyear,werethebasisforthechangeinguidanceforthissegment,aswellastriggeringaninitialindicatorofimpairment.Thisstartedaprocesstoupdateourlong-rangesegmentplanstoevaluateassetcarryingvalues.

Thechangeinfairvaluefrompreviousestimateswasdueprimarilytothechangesinthecurrentmarketandperformanceofthebrands,suchthattheevaluationofthebrandprioritizationandproductextensionsorlaunchesinnewregionsarebeingmorefocusedtomaximizethepotentialofthewholebasketofbrandsinthesegmentportfolio.Theresult,asoutlinedinourpressreleasethismorning,isthatwerealizedapre-taxnon-cashimpairmentchargeofapproximately$467millionrelatedtointangibleassetsacquiredinconjunctionwiththeOmegaacquisition.$273millionrelatedtoindefinitelivedintangibleassets,andtheremaining$194millionrelatedtogoodwill.

ThisisclearlyadisappointmentbutstepsarebeingtakentocorrecttheunderperformanceinBCH,includingchangesinleadership,asJohnhasoutlined.Whilemanystepshavealreadybeentaken,itisimportanttonotethatitwilltaketimetofullyrealizethetruevalueoftheactionswearetaking.

Onslide13,Rxnetsalesincreased2%,whichcameinbelowourexpectations.Weexperiencednegativeorganicgrowthwithinthesegmentresultingfromseveralfactors,soletmeexplain.Thechangeinthecompetitivelandscapewasmuchmoredisruptivetoourplanthanhadbeenanticipatedandimpactedouroverallpricingstrategiesforthesegment.

Duringthequarter,weexperienced24competitivelaunchesagainstourportfolio,producingsharppriceerosioninanumberoftopicalproductswesell.Thesefactors,combinedwithcontinuedpricingpressureduetotheconsolidationofthelargebuyingcooperativegroups,andtheabsenceofsignificantnewproductsinthequarter,furtherimpactedourabilitytoexecuteonourplannedpricingstrategies.

Despiteallofthis,however,theteamwasabletomaintainitsextendedtopicalsleadershippositioninthequarter.Thesepricingpressuresimpactedboththeadjustedgrossandoperatingmargins,accountingforthedeclineyouseehereyear-over-year.Turningtoslide14,specialtysciencenetsaleswere$88millioninthequarter,up9%onaconstantcurrencybasis.

BeforeIturntotheforecast,I'llmakeaquickcommentonthebalancesheet.AsofApril2,2016,totalcashonthebalancesheetwas$589million,andtotaldebtwasapproximately$6.5billion.TheincreaseindebtfromDecember31reflectsthefinancingofthetretinoinacquisitioninJanuary,andthesubsequent$1.2billionseniornotesissuancewedidinearlyMarch,totermoutourshort-termdebt.

Aswehavestatedinthepast,wearefullycommittedtoourinvestmentgraderatings,anddeleveringourbalancesheetthroughEBITDAgrowthanddebtrepayment.Cashflowfromoperationsinthequarterwas$170million,whichincludedone-timeunfavorablereductioninaccountspayableofanestimated$67




millioninbrandedconsumerhealthcare,relatedtothenormalizationoftheiraccountspayableterms.

Asareminder,weintendtofundourpreviously-announcedsharerepurchaseprogram,whichrunsoutuntillatecalendar2018,throughoperatingcashflow.Totheextenttheuseofthosecashflowsforsharerepurchaseswouldimpedeourdeleveraginggoalsoranytuck-inacquisitions,wewouldsloworsuspendtheprogramforaperiodoftime.Quarterly,giventhecashgeneratedandourcommitmenttodelever,wewillevaluatecashavailableforM&Aand/orsharerepos.

So,let'smoveonnowto2016guidance.OnApril25,weprovidedpreliminaryguidancewithoutmuchdetail,soletmewalkyouthroughmoreinformationbysegmentonslide16,startingwithCHC.Weexpectconsumerhealthcarenetsalesfor2016tobeapproximately$2.65billion.

Thesegmenthasbeenupdatedprimarilyfortheexclusionoftheguaifenesin600milligramERproductrelaunch,delayinnewproductlaunches,whichincludearisk-adjustedlaunchofthestorebrandversionofFlonaseinthesecondhalfoftheyear,andsomeadjustmentsforrecentcustomernegotiations.Whiletheteamcontinuestoworkonrelaunchingtheguaifenesin600milligramERproduct,webelieveitmakessensetoremoveitherefromourfinancialforecasts.WeanticipateCHCadjustedoperatingmargintoberelativelyflatyear-over-year.

Next,weexpectBCHnetsalesfor2016tobeapproximately$1.4billion.Tohelpyouthroughyourmodeling,letmegiveyousomecoloronourexpectationsfortheadjustedoperatingmargininthissegment.2015adjustedoperatingmarginforthesegmentwas15.8%fortheninemonthsendedDecember.Ourupdatedguidanceassumedthatadjustedoperatingmarginwillbeapproximately200basispointslowerin2016,duetothemanyorganizationalandportfoliochangeswehavediscussedthismorning,coupledwithcontinuedinvestmentinA&Pinourtop20brands.

Rx.WeexpectRxnetsalesfor2016tobeapproximately$1.2billion.WithinRx,weassumepriceerosionofapproximately6%fortheremainderofthecalendaryearandnowassumethelaunchofthegenericversionofProairin2017.Ourguidancereflectstheexpectationthattheadjustedoperatingmarginwillbeinthehigh40%rangesfortheyear.

Allofthisleadstoourupdatedconsolidatedguidanceperspectiveonslide17.Wenowexpectrevenuebetween$5.6billionand$5.9billion,whichassumesgreaterthan$300millioninnewproductlaunchesacrossallsegmentsfortheyear,adjustedtoreflectthenewproductdelayswe'vealreadydiscussed.

Giventhenewjurisdictionalmixofincomeexpectedacrosssegments,particularlywiththenewproductsslatedforlaunchinthesecondhalfoftheyear,weareupdatingthefull-yearadjustedeffectivetaxrateguidancetobeapproximately15%for2016.Giventhefactthisquarter'staxratewas11.4%,youshouldmodelataxrateofapproximately16%to17%onaquarterlybasisfortherestoftheyear.

SummingallofthisuptotheconsolidatedP&L,wecontinuetoexpect2016adjustedearningsperdilutedsharetobeinarangebetween$8.20and$8.60.Aspreviouslynoted,wecontinuetoexpectapproximately55%ofouradjusteddilutedEPStomaterializeinthesecondhalfofthecalendaryear,dueprimarilytotimingofexpectednewproductlaunches.

Lastly,afewcommentsonoperatingcashflowguidancefortheyear.Weexpecttheperformanceofourbusinesstodeliverfull-yearoperatingcashflowofapproximately$1billion,whichincludestheone-timeunfavorable$67millionBCH-relatednormalizationeffectImentionedafewmomentsago.

Thisrepresentsanoperatingcashflowconversionapproaching90%tothemidpointofouradjustednetincomeearningsguidance.Thisbusinessmodelcontinuestodrivestrongcashflows,andillustratestheabilityofourplatformtogeneratequalitynetincomeperformance.I'llnowhandthecallbacktoJohn.





Thankyouverymuch,Judy.

Turningnowtoslide19,IwanttoamplifywhatJudysaidaboutourguidance.TheguidancerangethatweputforwardonApril25accuratelyreflectstheperspectiveofmyfullmanagementteamandouropportunities,andonthedynamicsfacingPerrigoandourindustry.Aswestatedearlier,wewillsetandcommunicatepropertargets,andworktirelesslytomeetorexceedthem.

IalsowanttoreiteratemyleadershipprinciplesthatItalkedaboutupfront,whichatthecorearefocusedonexecutiondesignedtodriveshareholdervalue.First,asIsaidearlier,myforemostpriorityisoperationalexecution.Wehaveagreatbusinessandoperationalexcellenceisthefoundationwhichallofoursuccessisbuilt.Thisiswhoweare,ourplatformisdesignedtoaddproductsandtechnologiesthatfosterourgrowth.

Highqualityandaffordabilityforourconsumerisparamount.Whenweaddnewlegstoourstool,likewedidwithinfantnutritionandanimalhealth,weleveragethesebusinessmodels,investinginR&D,talent,andinfrastructuretofurthergrowth.ThisiswhycanwegeneratethestrongcashflowthatJudyemphasizedearlier.

Second,Iamactionorientedandwilldealwithchallengesandopportunitieshead-on.I'vemadeandwillcontinuetomakecriticaldecisionstoimprovecertainaspectsofourbusinesses.

Third,Iamunequivocallycommittedtotransparencyandwillbeactivelyengagedwithandlisteningtoyourquestionsandcomments.That'showI'vealwaysworked,andthat'showIwillcontinuetowork.

Fourthandfinally,everythingIandthemanagementteamdoisdirectedtodeliveringvaluetoPerrigoshareholders,andwewillcontinuetodeploycapitalprudentlyandappropriatelytothatend.

I'dliketoclosebyreiteratingmyconfidenceinthestrengthofthePerrigobusiness.Wehaveasolidfoundationtobuildon.Wehaveanexperiencedmanagementteam.Wehaveadeeppipelineofnewproducts.Wecontinuetorefineandimproveouroperatingmodelacrossallofoursegmentsofbusinesstodrivereturns.

Ourglobalplatformgivesusthespringboardforgrowth,andweareallfixatedonleveragingourcoreadvantagestodelivershareholdervalue.AndIwouldberemissifIdidn'tthankourmorethan13,000employeesaroundtheworldfortheirhardworkinbuildingPerrigotothebusinessitistoday.Wehaveanexceptionalgroupofprofessionalsworkingtodeliverqualityaffordablehealthcareproductsaroundtheworld,andtheyarecoretooursuccessinthepastandinthefuture,andI'mhonoredtobepartofthisoutstandingorganization.

Wewillnowopenthecallforquestionsandanswers.IwanttoremindyouthatIamjoinedforQ&AbyPerrigo'sChairman,LaurieBrlas,andourExecutiveVicePresident,JudyBrown.

QUESTIONS&ANSWERS

Operator :

Ladiesandgentlemen,asareminderinordertoaskanaudioquestion,pleasepressstaroneonyourtelephonekeypad.

YourfirstquestioncomesfromLouiseChenwithGuggenheim.

LouiseChen (Analyst-GuggenheimSecuritiesLLC):




FirstquestionIhadherewasjustforJohnandJudy,intermsofyourphilosophyonfinancialguidance.Hasthatchangedgoingforward,andifso,how?

Secondly,aquestionthatwe'vegottenprettyoftenisregardingyourdebtcovenantsandcoverageratios.Iwaswonderingifyoucouldaddressthat.Lastly,howweshouldthinkaboutgrowthandmarginsforOmegafor2017andbeyond?


Thankyouverymuch.Appreciateyourquestion.IthinkIwilltackletheguidancequestion,andI'llprobablytossthenexttwotoJudytodealwith.Sofromaguidance,asI'vesaid,myphilosophyistobeveryopen,clearwithourguidance,withourexpectations,withourgrowth,andthendriveourinternalteamrelentlesslytomeetandexceedthatguidance.Soveryclearinwhatwearetryingtodo,andwherewearetryingtosetthebar.

Judy,ifyouwanttotakethedebtcovenantsandgrowth?


Rightnow,withoutreconcilingEBITDAonthecall,sufficeittosayourleverageratiorightnowisinthehigh3s.Withtheadjustmentwejusttalkedabouttoguidance,notexactlywherewehadanticipatedtobeatthispoint,withtheresultsinQ1ondelevering,butsufficeittosay,committedstilltoourpaydowninQ4,andwithastrongcashflowsandcontinuedgrowthinEBITDA,continuingourdeleveragingtask.

Onthecoverageside,weareverysolidinourcovenantcoverage.Sonoissuesthere,whatsoever.


Thankyou,Judy.Omega,marginsforOmega.


Expectations.


Consumerhealthcaremarginexpectationsfor2017.


Pardonme.Imissedthethirdpart.MaybeI'llmakeacommentonthat.Aswestated,weexpectedoperatingmarginnottoseemuchgrowthforthisyearonayear-over-yearbasis.Infact,giventhesoftfirstquarter,mid-teensthroughouttherestofthisyear.Andgoingintonextyear,we'renotgiving2017-specificguidanceyetbutsufficeittosayforyourmodelingpurposes,assumingthatsamemid-teenswouldbeappropriateatthistime,aswedidourlongrangeplanningthatbecamepartoftheanalysisthatwasdoneinthelastfewweeks,thatIjustmentionedearlier.


Iwouldaddtothat.Weseegoodstrengthinthebrands,goodstrengthinthemarkets.Wewanttocontinuetoinvestinouradvertisingandpromotioncampaigns,todrivethoseproducts,andsowe'lldothatprudentlytomanagethebottomline.


Nextquestion,please.




Operator :

YournextquestioncomesfromthelineofGreggGilbertwithDeutscheBank.

GreggGilbert (Analyst-DeutscheBank):

Thankyou.First,thanksforbeingonthecall.

Laurie,Iwanttostartwithyou.IsthereanythinginvestorsshouldknowaboutthecircumstancesaroundJoe'sdeparture,sowedon'thavetorelyonmediaorspeculation?Sorrytolookbackwards,butcanyouwalkusthroughhowtheBoardhandledtheMylansituation,andassureinvestorsthatalloptionswerefullyexplored?

ForJohn,theissuesthathaveweighedonPerrigoinrecenttimesseemtobeablendofexpectationsetting,execution,aswellasstrategicdecisionsthathavebeenmadeinthepast.Somyquestionforyouis,whatchangesdoyouplantomake?Itseemslikesettingexpectations,atleastonpaper,shouldbetheeasiestpartofthat,butperhapsyoucantalkaboutspecificchangestotheexecutionmodelandwhetherornotyouagreewiththestrategicplatform.

Itsoundslikeyoubelievetheplatformisintactandcorrect,andit'saboutexecution.ButwouldreallylikeyoutoexpresswhetheryousortofyouagreewithallthepiecesatPerrigo,andwhetherthey'reallcore,etcetera.Thanks,guys.


Thanks,Gregg.Goodquestions.Laurie,whydon'tIhaveyoupickupthefirstone,firstrelatedtotheBoardandJoe.


Sure.Thanks,John.Firstofall,I'dsayJoemadeadecisiontoresigntopursueanotheropportunityandyou'dhavetoaskhimwhyhedidthatandwhathisthoughtprocesswas.Butoncehemadethatdecision,theBoardlookedforward,asweneedtodo,andwefeltitwasaneasydecision,asImentioned.WewereveryclearthatJohnwastherightpersontoelevatetotherole.

We,andIknowJohnandJudycantellyouthis,it'saveryactive,engagedBoardthatspendsalotoftimewiththem.Wespendalotoftimetalkingaboutsuccession.SowewereverycomfortablethatJohnwastherightperson,andmovedonfromthere.

AstotheMylanquestion,I'llgobacktowe'reprettyactive,engagedBoard.Wespentalotoftimeduringtheperiodoftimethatwasanactiveevent,andspenttimewithJohn,Judy,Joe,alloftheadvisors,evaluatingwhatthedifferentopportunitieswerethatwereavailabletotheCompany,andwecontinuetofeelthatwemadetherightdecision.


Thanks,Laurie.AndGregg,I'llattacktheotherone,asyoudirectedthemtome,theotherones.Firstofall,goingbacktoexpectations,guidance,etcetera.

Myphilosophyis,again,Itrytobeastransparentaspossible.Iwanttheexpectationswelayouttoberealistic,numberswefeelwecandeliver,andthendriveourteamtodeliverandbeatthoseeveryday.SoI'llstatethat,andletthatstayatthat.

Ithinkontheexecutionside,wehaveagreatteam.Wehaveagoodexecutionalplatform.Wearetryingtoputstrongoperatorsinchargeofallofthebusinesssegmentsthatwehave,thatknowhowtodrive




theresultsofthebusinessallthewaythroughtooperatingincomeandafter-taxincome.

I,asyouknow,Gregg,amanoperatoratheart,deliveringhowdowesell,howdowemarket,howdoweaddorganicproductstothetruck,howdowecontinuetodelivermorethroughourBCHplatforms?Ifeelwehavegreatplatformsinplace.Ithinktherearethingswecandotocontinuetoaddproducts,inwhatIcallbolt-onacquisitions.Sonotnecessarilytransformational,butbolt-onsintoourcurrentplatform.

Andbydoingthatwiththeinfrastructure,Ifeelwehaveagoodgrowthplatformaheadofus.AndIthinkourstrategyfitsrightaroundthosecores.Ithinkwe'recurrentlyingreatareastooperate,greatareastodeliverincreasedvalue,gettingbacktothethingsthatPerrigodoesverywell.

GreggGilbert (Analyst-DeutscheBank):

Thanks.

Operator :

YournextquestioncomesfromthelineofRandallStanickywithRBCCapitalMarkets.

RandallStanicky(Analyst-RBCCapitalMarkets):

John,Judy,Iwasjusthopingthatyoucouldhelpusgetabettersenseofrecentchanges.IsitfairtoassumethatmostofthesechallengeshitbetweenlateMarchandlateApril?Andthen,justhelpusbetterunderstandwhathappenedoverthatonemonthtimeperiodrelativetochainofevents,withrespecttoOmegaandthegenericsbusiness?

AndspecificallyJudy,maybeyoucouldcomment,howmuchofthegenericimpactwascompetitiveentriesversusbidcycles?Andwiththe6%erosionthatyoubuiltin,howcanyougetuscomfortablethat'snotgoingtocontinue,thatwenowhavegoodvisibilityintothatbusiness?Andthenthequickfollow-upforJohn.IsitfairtoassumefromyourpreparedcommentsthatyouviewTysabriasacoreassetandthere'snotgoingtobereviewtodivestthatbusiness?Thanks.


Thankyou.Whydon'tIstartofffirstofallonthebigpicturewise,whenwelookatthebigsegments,brandedconsumerhealthcare,Rxbusiness,etcetera,alotofthosechanges,theyallkindofcameandmaterializedstrongerwithinthefirstquarter,andmanyofthemwereevidenttowardtheendofthefirstquarter.Sowithoutgivingdates,theyallhappenedatthattimeperiod,andcontinued,andaswelookedattheyearsomeofthemlingeredon,andsowechangedourguidancebasedonwhatwesawthere.

I'llletJudyjumpintothechainofeventsoranythingelsethatshewantstoadd,andthenI'llcomebacktoTysabri.So,Judy,doyouhaveany?


OntheRxfront,specificallyyouaskedabouttheevolutionthere,andtheupdatetoourforecast.SowesawI'llcallitsomesoftnessstartinginJanuary,begantoaccelerateasthesecompetitivelaunches,Iquoted24competitorslaunchedagainstourproductsinQ1.Andthatinandofitselfchangedthepricingdynamicforourteamversustheirexpectations.Andsoasyoulookatthat,itstartedtobuildoverthecourseofthequarter.

Soaswelookpragmaticallyattherestoftheyear,wehadtosaywhatisareasonableassumptionbasedonthecompetitivelandscapeasitchasesusrightnow?ThingsIcalledout,withtheincreasedbuyingpressureacrossthecooperativelargegroups,whicheveryoneintheindustryisseeingtosomeextentrightnow,buildingthatintoourexpectations,updatingourforecasttoreflectspecificcontractual




agreementsnowinplacefortherestoftheyear,evaluatingthepricingstrategiesthatwehadinplaceforthelastthreequartersoftheyear,andmakingsurethatthoseareupdatedtoreflectthenewrealityfortheremainderof2016,andmakingsurethatinournumbersandinourbottomline,thatwe'restillmakingtherightinvestmentsinR&D.

SonotskimpinginR&Dentirely,withthissituationinthemarket,butmakingsurethatwestillmadethatcontributiontothelong-termgrowthoftheportfolio.Sothat'stheevolutionofthepricingupdate.Wesaid6%fortheremainderoftheyear.Ithinktheteamfeelsthat'sareasonableapproachtopricing,wherethey'veevaluatedandtriedtotakeintheknownknowns,aswellasalittlebitofwiggleroomfortheunknowns,andgoingforward,stilllookingatadjustedoperatingmarginforthesegmentinthehigh40s,adjustedoperatingmarginforthefullyear.

RandallStanicky(Analyst-RBCCapitalMarkets):

Judy,justaquickfollow-up.ThegrossMarchskinswasstrongerthanIthinkalotofpeoplewouldhaveexpected,includingus,justgivenwhatyoucalledoutassomeofthepressures.Isthatrealisticgoingforwardtoholdat61%?


OurexpectationsfortheyearandtheadjustedoperatingmarginframeworkIgaveyouwouldimplythatthat'sthecase,becausewe'restillmakingtheR&Dinvestment.Soifyoubackup--ifyouworkbackwards,youwouldsaythatwouldbeareasonableassumption.


RelatedtoTysabri,I'llstepbackfirstofallandkindofgiveyouthebigpictureperspective.IthinkTysabriisagreatproductfromahealthcarestandpoint.Servesatoughdisease,atoughpopulation.IthinktheCompanythatownsit,marketsit,sellsit,greatCompany,havehighrespectforthem.

Formeandmyperspective,it'snotastrategicassetforPerrigo.It'snotsomethingwe'relookingtoinvestabunchofmoneyin,orgetintomoreproductsrelatedtoit.Itisafinancialasset.Ithasgreatcashflow.

Ithasgreatotherbenefitsarounditthatenableustodootherthings.IamopeneverydaytodifferentwaysofthinkingaboutTysabri,differentwaystoutilizethatfinancialassettodootherthingswithinourbusiness,orfortheshareholderbase.I'mveryopenbutIviewitasafinancialasset,notastrategicinvestmentforus.


Canwelimitquestionstoonegoingforward?Thankyou.

Operator :

YournextquestioncomesfromthelineofElliotWilburwithRaymondJames.

Elliot Wilbur (Analyst-Needham&Company):

Nowyouimplementtheonequestionrule.


Youalwayshadsuchgoodlongones,Elliott.





I'venevercheatedonairtime.That'sforsure.Thanks.CongratulationsJohn,andcongratulationstoJudy,andlookforwardtoworkingwithyou,John.


Thanks,Elliot.


Inthefuture.Judy,partofyourpreparedcommentaryyoumentionedsomethingthatcaughtmyattention,andwantedtojustaskyoutoelaborateonit.Specificallytalkingaboutconsumerhealthcarebusinessandsomenegotiationsandconcessionswiththecustomerbase,thatobviouslyItake,isyougivingupsomethinginordertosecureshelfspaceorprotectmargins.Ijustwantedyoutomaybeelaborateonthatalittlebit.


Absolutely.Goodcatch,Elliot.Welldone.Wefrequentlytalkedaboutouroverallbasketofconsumerhealthcareproducts,beingabletomaintainstablepricing,andthatcontinuestobethecase.

ButI'vealwayssaid,veryclearlythatinperiodsoftimewhenwe'renotlaunchingbig,newproducts,thatdynamicbecomesmorechallengingforourconsumerhealthcareteam.Theydoayeoman'sjoboutinthefieldeveryday,sittingwiththebuyersatimportant,large,sophisticatedretailers,talkingaboutoverallpricing.

Sowedon'thavetheabilityofcoursetosetpricingtotheconsumersontheshelf.That'sthedeterminationbytheretailers.Butweworkactivelyonbeingeffectiveinourownbuying,havingeffectivesupplychaintomitigateanypricingpressureseenfortheconsumerhealthcareteam,andofcourse,whenwelaunchnewproducts,itgivesleveragetotheentirebasketofsalesthattheteamgoesoutandspeakswiththeretailersabout.

Sothephraseusedinmypreparedremarksisdirectlylinkedofcoursetothedynamicofnobig,veryvisible,largeproductslaunchedthisquarterintheOTCbasket.We'regoingtohavesomeveryattractiveonescomingupjustverysoon,butthat'spartoftheyinandyang.Soastheteamsitsdown,theysayveryclearly,getmemynewproductlaunchesbecauseithelpsthewholebasketofgoodshavebetterstickinesslong-terminpricing.


I'dliketoaddoneother--steppingback,IthinkwhenyoulookespeciallyasattheUSconsumerbusinesssegment,therelationshipwithourcustomers,thepartnershipsthatwehavewiththecustomers,thefranklymutualimportancethatwearetoeachotherwithourcustomersisthestrengthofthatcorebusiness.We'veworkedwiththemforsomanyyears.Alotoftheirprofitability,theirgrowth,theirsaleswereintegrallyconnected,andsothatbodeswellforuscontinuingastrongrelationshiptheregoingforward.

Nextquestion.


Thanks.

Operator :

YournextquestioncomesfromthelineofDavidRisingerwithMorganStanley.




DavidRisinger (Analyst-MorganStanley):

Iwanttoalsocongratulateyouboth,LaurieandJohn,onyournewroles.Laurie,sincewehaveyouonthephone,Iwashopingthatyoucouldprovidesomemorecoloronakeyquestionthatwe'vereceivedfrominvestors,giventhemediastoriesamonthagoontheCEOcontract.Andthatquestionis,whydidtheBoardreleaseJoePapafromhiscontractwithoutgreaterpenalties,inthewakeofPerrigo'sissuesoverthepastyear?

IfyouIcoulddroponeinforJohn,givenyournewrole,justcouldyoucommentbrieflyonPerrigo'slong-termorganicrevenuegrowthtargetof5%to10%,andwhetheryouexpecttoupdatethat,orhowshouldwethinkaboutthatatthispoint?Thankyou.


Great.Thanks.Icancertainlyalsostartout,thenI'lltossitovertoyou,Laurie,onJoe'sdeparture,andwhereweendedupwiththat.Therewererumorsouttherethatwegotridofhisnon-compete.Thoseweren'ttrue.

Wedidnot.Weactuallyfine-tunedhisnon-compete.ValeantandPerrigodonotcompletetodayonproducts,etcetera,sothere'sveryfewfringeproducts.Weactuallyfine-tunedhisnon-competeagreementsothatitmorealignedwithcategorieswithinPerrigothathecouldnotcompetein,andsowefeltgoodaboutthatnegotiation.

TherewereotherrumorsaboutwhatJoegotwhenheleft,etcetera.Hewasbasicallypaidupuntilthislastdayofemployment,andnothinggoingforward.SoLaurie,Idon'tknowiftheyouhaveanythingtoaddtothat,butIwantedtoclarifysomeofthoserumorsthatwerewrongoutthereinthemarketplace.


Thanks,John,andIreallyappreciatethequestion,David,becausetheBoardspentquiteabitoftimeensuringvaluefortheshareholdersandfocusingonthenon-compete.Itwasamended.Itwasnotwaived.Hedidnotgetoutofit.

AsJohnsaid,wefeltthatwemadeitabsolutelyclearerthatduringthenext24months,JoeremainsprohibitedfromreallyservingasasignificantcompetitortoPerrigo,sowefeltverygoodaboutthatandhedidwalkawayfromanyofhisunvestedshares,orsoforth.Sowethinkthatwedidtherightthingfortheshareholders,andIreallyappreciateyouaskingthequestion,sothatwecanclearupsomeofthoserumors.


David,onthelong-termplan,whatIwilldoiswalkyouthroughtheprocessofhowI'mgoingtoworkourteamthroughit,ratherthangiveyouthenumbertoday,becauseI'mnotpreparedtoIsayhere'swhatthenextthreeyears,fouryearslooklike.Wearegettingtogetherhereoverthenextfewweeksandnextmonth,andthenpresentingtotheBoardourperspectiveofourlongrangeplan,whichgoesoutandlooksatthat.AndIwillcommittoyouandeveryoneelsethatinthesummertimeframe,wewillbecomingbacktofolkswithourupdatedlongrangeplanandoutlook.

DavidRisinger (Analyst-MorganStanley):

Thankyou.

Operator :

YournextquestioncomesfromDavidMariswithWellsFargo.




DavidMaris (Analyst-WellsFargoSecurities):

Acouplequestions.First,onthecapitaldeployment,doyouthinkthatacontinuedM&AstrategyinEuropeiscompatiblewithwhatyousayisaprincipleofreturnstoshareholders,sinceitappearsthatreturnonequityandassetsandROIChaveweakened,sinceyoustartedthatstrategy?Andthenseparately,24competitivelaunchesagainstthetopicalproductline,canyouquantifythatindollars,andwhat'sthistrendrelatedto?IsthistheFDApushingmoreapprovals,andmaybejustanycommentsonthevulnerabilitythatyoumighthaveonthathappeningwithmoreproductsgoingforward?


Yes,thanks,David.Letmetakesomeofthose,andthenImaytossitovertoJudyforacoupleothers.

Firstofall,capitaldeploymentandreturntoshareholders.AsIgothroughagain,andthinkaboutpriority,andIlaytheseout,tryingtomentallygettheseclear,Ithinkorganicgrowth,greatwaytodoit,greatplatform,makessense.

IbelieveinEuropewehaveagoodplatform.We'retryingtoputmoreoperatingstructureintoit,takealittlebitoftheoperatingentrepreneurshipoutofitandbringsomestructuresintoit,butitisagoodplatform.

TheGSKproductsthatweboughtafewmonthsbackareperformingwellinthosemarkets.Thenicotinefranchise,oneofthebiggestnicotinefranchises,nicotinereplacementtherapyfranchisesintheUS,andnowhavingthatinEurope,agreatnaturalextensionforourcoreconsumerbusinesses.

SoIdobelievethataddingoncorebolt-onacquisitionswithintheinfrastructurescanhaveagoodreturnforshareholdervalue,soI'mabelieverinthat.Ultimately,whatelsedowedowiththecashandthevaluethatwe'regenerating,arethereotherwaysofreturningthatvaluetoshareholders.ButIwouldputtheminthatorder,becauseIthinkthat'saprioritythatwecandelivervaluetothegroup.

Whydon'tIturnitovertoJudyonthe24,andtheescalation,etcetera?


David,Ijustcalledthatout.I'mnotquantifyingthespecificdollarsversusourexpectationinQ1thatthe24launcheshadonourbottomlinethisquarter.ThereasonIdidcallitoutisbecausecomparedtoprobablyeveryotherquartersincewe'veownedRx,itwasanescalation,arapidescalationofapprovalsandchangeincompetitivelandscapethatIjustwantedtocallout.

Sofasterthanwehadanticipated,andwehavelaunchescomingupintheremainderoftheyear.Thisparticularquarter,thedynamicforthecompetitionwasdifferentthanours.That'stheonlyreasonIcalleditout.

DavidMaris (Analyst-WellsFargoSecurities):

Thankyou.

Operator :

YournextquestioncomesfromDavidSteinbergwithJefferies.

DavidSteinberg (Analyst-JefferiesLLC):

John,inyourpreparedremarksyoumentionedyouputanewleadershipteamintotheOmegabusiness,onethathadbeenverysuccessfulwithbolt-ons.Justcurious,howcanyougetuscomfortablethatyou




candothesamewithOmega?Afterall,it'saverylargeacquisition,over$1billioninsales,versusbolt-on.

TheyhavemomandpopsinEurope.It'smultiplecountries.Theydon'thaveconsolidatedchains.Howcanyougetuscomfortablethatintegrationwillgowell,andthatyouhaveahandleonthebusiness?Andrelatedtothat,duringtheMylansaga,apparentlyStadahadchangedtheirbusinesswithOmega,andIthinkMylanwasblamedsomehow.

WenevergotafullansweronwhathappenedwithStada,andwilltheycomebackastheywerebefore?Andfinally,canyougiveusanupdateontheFlonaselaunch?Thanks.


Thankyou,David.Letmego--tryandgoinorder.Firstofall,Ido,asyousaid,havegreatconfidencewiththeteamandtheinitialactionswe'vetakenwiththeOmega,withbrandedconsumerhealthcareaswecallit,inEurope.Iwon'tgobacktogothroughallSharon'saccolades,buthisintegrity,hisabilitytodriveperformancetotheoperatingline,he'sprovenhimself.

SoI'mconfidentinhim.I'mconfidentthatwewillneedtoaddmoreleadersandaddmorethingstodriveit,butIthinkwe'reofftoagreatstart.

Wealsoaddedoneofourexperiencedfinancialleaderstothatbusinessabouttwomonthsago.Hehasalreadybegunamuchstrongerfinancialplanning,financialcontrolacumentotheBCHteam.SoIfeelgoodaboutthat.

DoIthinkthatyoucanaddabrandacrosseveryEuropeancountry,justlikeyoudointheUS?No.Eachofourbrandsaremorespecializedwithinregionsthere.ItmightbetheNordics,oritmightbedownintheBalticareas,butthey'reallmoreregionalized.

Ibelievethatevenwithinthoseregions,oneoftheadvantagesthatOmegahasinourbrandedconsumerhealthcaredivisionistheyhavetheabilitytolaunchproductswithinregionsegmentsandmakethemprofitable.SowhenIsaybolt-ons,itmaynotbejustonePan-Europeanbrand,itmaybebrandsthataremuchmoreregionalbutwecanaddtothatinfrastructureandgrow.SoIdohaveconfidenceinthat.Ihaveconfidenceinourabilitytocontinuetoprovidegrowthontothatplatform.

Ithinktheintegration,we'regoingtocontinue.Theyhaveagreatsalesmarketingdryfootprint.Thewaytheyworkwitheachcountry,whetherit'sapharmacy-drivencountry,whetherit'smoreliketheUK,whichtendstobemoreliketheUSfromaretailerdistribution,nomatterwhat,they'vegotagoodinfrastructurethere,andthey'vebeenabletoshowstrongleadership.Andso,I'vegotalotofconfidenceinthebusinessdriversthere,etcetera.Ithinkweneedtheoperationalbackbone,thefinancialbackbonethatPerrigobrings,tosolidifythatoverallstructure.

RelatedtotheMylanStadabusiness,StadaisagenericCompanythatwedistributeforinBelgium,asyoumightrecall.DuringalltheMylandiscussions,etcetera,thereweresomestrainedrelationshipstherewithStadaholdingoffsomedistribution,etcetera.Wearebasicallythroughthat.WearecontinuingtooperatewithStadaanddistributetheirproductsinBelgium.

Wearetalkingwiththemaboutwhatthego-forwardrelationshipmightbeormightnotbe.Butwestillhaveatimeperiodofacoupleyearsforthatrelationship.Sothat'swhereit'sat.Today,we'remeetingwellwiththem.


AndjusttheupdateonFlonase?





Oh,Flonase.SowearestillplanningonlaunchingFlonase,awaitingforourfinalapproval,andhaveretailers,etcetera,readytolaunchandreadytogo.Productisinourdocks,readytoship,assoonaswegetourapproval.


Thanksverymuch.

Operator :

YournextquestioncomesfromMarcGoodmanwithUBS.

MarcGoodman (Analyst-UBS):

YoumentionedFlonasejustnow.YoualsohadmentionedProair,youpushedouttheMucinex600milligrams.Isthisjustbeingmoreconservativeacrosstheboard,oristheresomereasonyoucan'tlaunchProairnowinthiscalendaryear?

AndMucinex,IguessIunderstand,you'rejustbeingmoreconservative.Justgiveusalittlemoreflavoronthat.

AndthenOmega,youmentionedlowerlifestyleandnaturalhealth,BMSIguess,productswaskeyinthequarter,andforthechangeoftheguidance.Canyoujustgiveusasenseofhowbigtheseproductsare,whatwasthechange?Thanks.


Sofirstofall,wetalkaboutthenewproducts,Flonase,Proair,Mucinex.Idon'tliketosayconservative.I'drathersayrealistic.We'retryingtoputrealisticexpectationsoutthere.

Couldsomeofthosestillhitintheyear?Yestheywould.They'renotplanned.Flonasewestillhaveinourplan.Mucinexwemovedout.Arewestillaggressivelyworkingtogetthatbacktomarket?Weare.

Proairwasplannedtolaunchrightattheendofthecalendaryear,andgivenallthedynamics,we'vedecidedtomoveitoutoftheyear.Arewestillworkingtotryanddriveit?Weare.It'sadelayinwhenwe'dexpectitbutwe'restilltryingtodrivethattocompletion.

RelatedtothebrandedconsumerhealthcareandOmegaproducts,Judy,Idon'tknowifyouwanttotalkaboutthatrelatedtotheimpairmentside,andtheissuesrelatedthere,thatwetookonthoseareas?


Certainly.Letmejustgiveeveryonealittlebitofcolortotheextentyouhadquestionsontheimpairmentsdiscussed.Theintangibleassetsthatarerecordedintheindefinitelivedintangibleassetbasket,thatisrecordedonourbalancesheet,isacompositionofthebrandedportfolioofOmegaatthetimeofacquisition.Sowithineachofthemajorcategoriesareseveralbrands.

Astheyearhasprogressedin2015andinto2016,wealsodidadditionalacquisitions.WedidaGSKportfolio.WelaunchedtheYokebeproductline,whichhasproventobeaverysuccessfullifestylehealthproductthatisperformingverywellintheportfolioandcapturingalotofmarketshare.

Aswemovedthenstrategicallyasateam,theteamlookedattheofferingsofproducts,andaremovingawayfromXLS,whichwasintheoriginalacquisitionbasketandmovingtowardYokebe.Thattriggerstherequirementtolowerthecarryingvalueofthoseparticularassetsonthebalancesheet.




Soonecanlookattheimpairmentasanegative.Wearewritingdowncertainassetsthatwereacquiredatthetimeofacquisition.Atthesametime,we'realsoinvestinginotherbrandsintheportfolioforfuturegrowth.

Sothat'spartofthiscompositionofJohntalking,hemadeseveralcommentsaboutreanalyzingtheportfolio,reprioritizingthatportfolioforgrowth.Partofthatprioritizationprocessactuallyiswhattriggeredthediscussionaroundtheimpairment.Soit'smovingfromplanAtoplanB,intriggeringthatimpairment,thatnon-cashcharge.

Inlookingattheremainderoftheyear,allofthatcomestogether.Theguidancewasupdatedtoreflectcertainchangesinthatportfolio,someup,somedown,loweringtheoverallguidanceacrosscertaincategories,tomakesomeadjustments,primarilywiththefocusonnewproducts.

Sosomeexpectationsoftimingchangesonthoseandhowwereprioritizethetop20brands,arewhatwerethedriversforthisyear'sguidance.Andwedidn'tgetspecificonwhichcategoriesgotchangedinguidance,butsufficeittosayit'sreallyaboutpullingdifferentleverswithintheoveralltop20brandbasket.

MarcGoodman (Analyst-UBS):

Thanks,Judy.

Operator :

YournextquestioncomesfromthelineofAnnabelSamimywithStifel.

AnnabelSamimy(Analyst-StifelNicolaus):

Congratulationsonyourappointments.IguessIwanttolookbiggerpictureatgenericsbusiness.It'salwaysbeencharacterized,giventhatit'stopical,asahigherbarriertypeofgenericscomposition,andthatdoesn'tseemtobethecaseatallthisquarter,givenyouhadsomanycompetingproductsthatgotapproved.

Howshouldwereallythinkaboutyourgenericsbusinessfromthispointforward?Isitgoingto--istopicalnowbecomingamorecommoditizedbusiness,oristhisjustaflukeintermsofthebacklogthattheFDAstartedapproving?Anddoyouhavetherightcompositionofassetsthere?

IntermsofOmega,justlongertermit'salwaysbeencharacterizedas5%to10%growingbusinessandalsothestrategicrationaleistoreallybelessofanoperatingsynergyplaybutmoreofarevenuesynergyplayandsodoesthatstillstand?Doyoustillhavealotofopportunitiesforrevenuesynergiesinthelongerterm,twotothreeyearsout?Thanks.


Great.Judy,whydon'tyouleadoffonthefirstquestion?


Thatwasamulti-partquestion.


Ididn'tbreathe.Ididn'tbreathebetweenthequestions.





Goodpoint.


Nocomment.Nocomment.


That'satipforeveryoneelse.Ifyoucanmanagetogoalongwaywithoutbreathingyou'reallset.Letmestartoffbriefly.

IwanttomakeonepointontheRxfront.BecausetheRxquarterperformedsomuchdifferentlythanourexpectations,becauseoftheitemsIhavealreadymentioned,andwe'retakingapragmaticviewfortherestoftheyear,wehaveloweredourguidance.We'recallingoutthereasonstherefore.

Iwanttopointouttoeveryone,sortofstatingtheobvious,wesawflow-throughinthesepricingdynamicsinthetoplinewhichrolledthroughindollartermsthroughtothebottomlineversusourexpectations,andtheimpactforthefullyear.Butpleasenote,theadjustedmarginsarestillverystrong.Sotheteam'sstillleadershippositioninthespace.Theproductsthatweputtomarketarestillstickierinrelativetermsthantheaveragegeneric.

Andyoucanseethatthroughboththisquarter,whilethequarteryear-over-yearisinfactdown,notarguingthatpoint,thosearestillveryattractiveoperatingmargins,withcontinuedinvestmentinR&D.SoIjustwanttopointthatpartout,becauseit'sreallyaboutrelativedynamics,butstillattractiveportfolio.Andwebelievethatwe'vebuiltinanupdatetothenewlandscape,andstillarelookingatveryattractivemargins.


Thankyou,Judy.Similar,Ithinkthatthetechnology,thebarriers,they'reallthere,aswedescribed,tocommandagoodmarket,andwhat'sthere.OntheOmegafront,Iwouldsayonthelong-termlookattheOmegagrowth,I'mgoingtosaythesamethingIdidearlier,whichis,Iwanttomakesurewegetachancetogetourwholeteamtogethertolookatthelongrangeplan,toreviewitandconsolidateit.Welookatitbybusinesssegment,butthenwelookatwhatothervaluewecanbringtoeachofthosebusinesses.And,again,mycommitmentistocomebacktoyouandothersinthesummerherewithourlong-rangegrowthplanrelatedtoOmega.

Whenyouthinkaboutthesynergisticsidethatwehavewiththebrandedconsumerhealthcarebusiness,theyarestillthere.Theoperatingsidesynergies,theteam'sstilldrivinghardtotryanddeliver,drivingthosetothebottomline.

Therevenuesynergies,inmymind,arestillthere.Theytake,andeveninourmodel,longertogettobecauseyouhavemultipleregistrations,multiplehowdoyouadvertiseandpromotedifferentthings,multipleregulationswithindifferentcountries,evenintheUS.

Inmyperspective,theyarestilltherefromalong-termplanstandpoint.Butjusttakelongertogettothoseultimaterevenuesynergies.

ByputtingJudyinhernewrole,oneofhergreatopportunitieswillbetakingtheproductsthatwehaveindifferentdivisions,andfiguringouthowdoweleveragethoseacrossourglobalbusinessportfolios.SothatwillbeoneofJudy'skeyto-dos,beginningtomorrow.


Thankyou.




Operator :

YournextquestioncomesfromChrisSchottwithJPMorgan.

ChrisSchott (Analyst-JPMorgan):

Justahigherlevelquestion.InlightofJoe'sdepartureandtherecentperformanceinthebusiness,IguessthisisforJohnandLaurie,areyoureviewingtheoverallportfolio?Iguessmyquestionhereis,doyouhavetherightassetsinplace,andisthismaybeatimetolookmorecarefullyattheportfolioandperhapsevenmorerefocusonacoregroupofassetsanddivestsomefranchises?

IfIcouldsneakinaquickfollow-upontheRxbusiness.Judy,I'msorrytore-askthis,butI'mstilljustnotclearexactlywhy.Whyisn'tthebusinessseeingmoremarginerosion,giventhecompetitivedynamicsandpricing.

Seemslikemanyofyourpeerswhoareseeingpricingcompetition,that'stranslatingtoverysteepmarginerosion.I'mtryingtounderstandwhythatisn'tthecasewithPerrigo,andIwouldthinklowerpricewoulddrivedownmarginshere.Thankssomuch.


Great.Laurie,I'lljumpinandclearlyaddsomething,withJoe'sdeparture,recentdeparture.IwouldsaytheBoardandIareveryalignedinlookingateveryaspectofthebusiness,andfiguringoutifthere'sbusinesssegments,productlines,anythingthatdoesnotfit,orthere'sadifferentvaluefor,thatweshouldbelookingat.

I'llsayitforme.Iwon'tspeakforLaurieandtheBoard.Butthereisno--I'mnotmarriedtoanybusinesssegmentthatisn'tdeliveringitsfairshareofvalue.

Wedidthatwithvitamins.WediditwiththeIndiabusinesssegmentwehad,thatweputupforsale.WediditwithacoupleofthebrandsinOmegathatweputforsale,becausetheyweren'taddingvaluetotheportfolio.

SoI'mveryopentolookingatthat,andopentolisteningtootherwaysofthinkingaboutit.Bigpicture,we'regoingtostepback.Therearecertainpartsofourbusinessthatareverysynergistictogether,andeventhoughtheyseemasseparatesegments,doaddvaluetoeachother.

Whenwethinkaboutstandaloneorbreakingupalltheparts,alotofthemdoconnectverywelltogether,togiveusultimatelymorevaluethantheywouldseparated.Butstill,veryopenandinterestedtothoughts,commentsfromanyone,andtheBoardisveryopentothatalso.Laurie,Idon'tknowifyouhaveanythingtoaddtothosecommentsonthat?


Idon'tknowthatIcouldaddawholelot,John,butIwouldjustechowhatyousaid.TheBoardisveryinterestedinlearningaboutandhearingaboutdifferentoptions,andveryopentoconsideringalloptionsthatwilldriveshareholdervalue,fromthatperspective.


Great.Soletmejumponthesecondpartofthequestion.AndthenJudy,pleasejumpin.IfIstepbackandlookatyouit,wecertainlyhavehadpricingdynamicsthatweren'tasexpectedorweren'tasdesired,allofthosethings.

Whenwestepbackandlookatourportfolioofproductsandthemixthatwehave,it'saprettyprofitable




mix.Sodespite--Iknowitsoundscontradictory,butwe'vehadpricingpressures,pricesandmarginhavecomedown.WhenwelookatourwholebasketofmixwithinourRxbusiness,itisstillaveryprofitablemix,asyouseeinthemargins.


Andwe'vehadtheacquisitionscompletedattheendof2015,andbeginningof2016,whichhascontributedattractivemarginstothebasket,aswell.Soonayear-over-yearbasis,thereareplusesandminuses.Onaquarter-over-quarterbasis,therewerethepricingpressuresthatwespentalotoftimeonalreadythismorning,offsetinlargepartfromamarginperspectivewiththeacquiredproducts.Sothebasket'sstillworking,theportfolio,onamarginperspective,isstillworkingwell.

ChrisSchott (Analyst-JPMorgan):

Thanks,Judy.

Operator :

YournextquestioncomesfromthelineofSumantKulkarniwithBankofAmerica-MerrillLynch.

SumantKulkarni(Analyst-BofAMerrillLynch):

Youhaveasmallbrandedspecialtypharmaeffortgoing.Isitfairtocharacterizethatasbeingonthebackburnernow?Istheinfantnutritionbusinessmeetingyourcriteria?


Whydon'tIstartfromthebackfirst.First,theinfantformulabusinessismeetingourcriteria.Itisgrowing.Ifyougobackayearortwoago,weconvertedthewholebusinesstoanewmarketingpresentation,etcetera.

Sincewehaverelaunchedallofthoseproducts,ithasdoneverywell.Goodmovementatretail.Weareverypleasedwithwhereit'sgoingandtheupsidepotentialofthatbusiness.Inmymind,itismeetingourcriteria,fitswellintoourconsumerfranchise.

Relatedtothesmallbranded,Judy,maybeI'lltossthatonebacktoyouonthesmallotherinvestmentswehave,otherthanTysabri.


Withinourbrandedportfolio.


Yes.


BrandedRxportfolio.Itisanascentbusiness.DougBootheandhisteamarecontinuingtolookatopportunitiestoexpandtheirbasketofproducts.Veryspecialtyfocused,nottryingtogoouttoproductcategorieswherewehavetohavethousandsofsalesfolkstocovertheUnitedStates,butbeingverytargeted,andlookingforalsoadditionallyproductsthatwouldfitintoourDurhambusiness,wherewecouldhaveawholelifecyclemanagementofbrandedtogenerics,ofcoursetoourOTCbusinesses.Sostillsmallbutlookingforproducts,productsthatcanbetuckedintothat,andutilizingthesalesforceswehavetoday.




SumantKulkarni(Analyst-BofAMerrillLynch):

Thankyou.

Operator :

YournextquestioncomesfromthelineofDouglasTsaowithBarclays.

DouglasT sao (Analyst-BarclaysCapital):

Justfirst,Judy,maybeifyoucouldhelpusintermsofthesequencingfortheconsumerhealthcarebusinessthroughtherestoftheyear.Intermsoftheguidance,itseemstoberelatively--therestofthequarterseemstoberelativelyflattish,maybeupalittlebitfromthefirstquarter.Butshouldweexpectittobedownandthenbackupinthesecondhalf?

AndthenjustintermsofProair,didyoureceiveacompleteresponseletter,ordoyouhaveatargetactiondatefromtheFDAforthatlaunch?


Judy,whydon'tyoutalktoconsumerhealthcare?


Onarelativebasis,asIthinkabouttheyearinconsumerhealthcare,insomewaysit'ssimilartothewaywetriedtoguideyou--IalwayscallitthearcoftheyearforthefullCompany.Theconsumerhealthcarebusinesswillhaveabiggersecondhalf.Theirnewproductlaunchesareconcentratedinthebackhalfoftheyear.Sothatmeansthatit'sabuildoverthecourseoftheyear.

Investmentscontinueoverthecourseoftheyear.Andifyourecall,theJunequarterforthemlastyear,aswellasforbrandedconsumerhealthcare,werequitebigintheJunequarterof2015.Soitwasahugequarter.SoexpectthecompsinCHConayear-over-yearbasistobemorechallenged,againbecauseofthelastyeardynamic.

Newproductslaunchupinthesecondhalf,growthcontinues,sothatCHCline,toyourpoint,Ithinkyoucalleditoutdoesadip,andthenpicksbackupandthat'sareasonableestimateandthat'swhywealsomadethatcomment.CHC'sourlargestbusiness.Wemadethatcommentabout,expectapproximately55%ofEPStocomeinthesecondhalfoftheyear.


RelatedtotheProairproduct,wedidbasicallyget--wegotsomecommentsfromtheFDA.We'reworkingtoaddressallthosecommentsandconcernsandgetthatinformationbackintheirhands.I'lljustleaveitatthat,duetoconfidentialityatthispoint.

DouglasT sao (Analyst-BarclaysCapital):

Okay.Thankyouverymuch.That'sveryhelpful.

Operator :

YournextquestioncomesfromthelineofJamiRubinwithGoldmanSachs.

JamiRubin (Analyst-GoldmanSachs):

John,I'mlookingforwardtomeetingyouandcongratulationsonyournewopportunity.





Likewise.Thankyou.


Ifyoucouldjust,bothofyou,takeastepbackatthegenericdrugbusiness,becauseitseemsthatthecompaniesthatgotcaughtoff-guardonRxpricingwerecompanieswithconcentratedportfolios.Certainlyyourportfolioismostlydermproducts,whichhavebenefitedfromunusualpriceinflation,typicallygenericdrugsaredeflationary,butyou'vebenefitedfrominflationaryproducts.

Whenyoutakeastepback,clearlytheenvironment'schanged.ItseemsthattheFDA'sapprovingmoredrugsinthisspace,that'screatingcompetition,whichispushingdownprices.Atthesametime,withconsolidatedbuyersarepressingforabroaderdepthofportfolio.

Soitjustseemsthatattheendoftheday,thecompaniesthatwerecaughtoffguardhadconcentratedportfolios.Thosethatweren't,andwhohadanticipatedalowtomidsingledigitdeclineinpriceshavebroadglobalportfolios.

John,yourportfolioishighlyconcentrated,allintheUS.WhilethathasclearlyservedtheCompanywelloverthepastcoupleofyears,goingforward,itdoesappearthattheenvironmentischangingforyourtypeofportfolio.

Whatdoyouseeasapossiblestrategicoptionforthisbusiness?DoesitstillmakesensetokeepforPerrigo,andisthisaone-timerebasingordoweworryaboutthosemarginseventuallycomingbackdowntowhereTeva'sandMylan'sare?Howdoyouthinkaboutthatbusinessstrategically?

Andthenjustmyfollow-upquestiononTysabri.Youtalkedaboutthatnotbeingcore,that'safinancialasset.Isn'tthough,thelongeryouwait,thelessit'sworth,justgiventhecompetitioniscomingnextyear?Thanksverymuch.


Wow.Thatwasalotoftheminthere.IthinkImadegoodnoteshere,butwe'lldomybesttotryanddothose.

Letmestartbackandcommentonourgenericbusiness,gobacktothebigpicture.Itdefinitelyisabusinessfocusedonextendedtopicals,soit'snotjustderm.It'sophthalmics,it'swomen'shealth,butit'sextendedtopicalproducts,thosethatusuallyrequireclinicals,broadertypesofapprovalstogetinthere.

Theyusuallyarenot$1billionblockbusters.Theyusuallyaremuchmorethebrands,areusuallymuchmore$100millionproducts,etcetera.Andsoyouusuallydon'thave57competitorsgoingafterthat,likeyoumightwithan800milligramibuprofen,orsomethingofthatnature.Soitisstillaspace.

WearearelativelybigRxplayer.We'recertainlyinthetop10,notjustwithintheextendedtopical,butingeneral,whenyoulookattheUSgenericsspace.

Ithinkithit,aswelookbackandunderstandhowithit,therecertainlyweresomeapprovals.There'ssomebuyingpower,allofthosethings,thathitusfasterthanweexpected,andwehadtoaddress.Ithinktheothershadbeen--ithitthemearlierbecauseoftheirbroadportfolio,theyhadanumberofproductsthatcertainlyweretargetedinthatinitialbarrage,ifyouwill.

SoIdothinkwe'reinauniquetime.Wehaveagoodproductpipeline,andweexpecttocontinuetogetthoseapprovals,andcontinuetobeabletobalanceouttheupsanddownsofourproductmixandportfolio,givenwe'regoingtocontinuetoseeconstantpricepressureonourolderproducts.We've




alwaysseenthat.It'sheescalatedhereinthelastquarterwiththeapprovals.

Sowhenyoulookglobally,Ithinkit'sagreatquestion,oneIthinkwe'llcontemplatehereoverthenextcouplemonths,aswelookthroughthelong-termstrategyofourRxbusiness.Wecertainly,aswegettoothercountries,haveRxbusinesses.They'renotnearlyasbig.

WedoanRxbusinessintheUKthatmakesspecialtyprescriptions.WehavesomebusinessesthatdistributethroughRxinMexico.WehavepartsofourbusinessthatareRx,certainlymuchsmallerthanourcoreUSbusiness.

Sowewilllookathowthatfits,doesitfitinternationally,doesitfitgloballyintoourstructure?ClearlyintheUS,ithasalotofadvantages.Again,ourwholeinfrastructureisgearedaroundbothofthose,anditprovidesapipelineforustocontinuetofeedourOTCmarketplace,andOTCengine.Soallofthat'sverygood.

IthinkthelastpartofitisTysabri.Again,Idoseeitasafinancialasset.Ithinkwewillcontinuetolookatit,andfigureoutwhatisthebestwaytoutilizethatasset.I

sitascashtofundotherthings?Isitliquidatingpartsofittousemoneytodootherthingswith?We'llcontinuetoevaluatethebestuseofthatTysabriasset.


Thankyou.

Operator :

YournextquestioncomesfromthelineofTimChiangwithBTIG.

T imChiang (Analyst-BTIG):

Iwantedtojustgobacktotheprescriptionpharmabusiness.IfIlookatjusttheoverallmarketthatyou'reintopicals,itdidlooklikeyousufferedfrommuchmorepriceerosiononyourbasebusiness.Itlookslikeyoulostabout$50millioninthefirstquarter,orinthisquarteronsales.Andyou'restillforecastingabout,what,$1.2billionofprescriptionpharmasales,whichwouldreflectaroundabout11%,12%year-over-yeargrowth.

Socouldyousortofprovidealittlebitmorecoloronhowyougettothatfigureforthefullyear?Eitherthat'sgoingtorequiremoreacquisitions,oryou'regoingtohavetohavealotofincrementalnewprescriptionproductscomingonline.Anycolorwouldbegreatlyappreciated.


Great.Soletmekindofstartfirstofall,andagain,I'mgoingtogobackandreiterate.Wethinkit'sagreatbusiness.WedidexperiencemorepricinginQ1andadjustmentstothere.

Wedoexpectabout6%pricinginourmodelgoingforward,andfeelthatistherightnumber,andwe'recomfortablewithwherethingsareat,thatnumberatthistimemakessenseforus.Aswelookattheoverallgrowth,we'vegotnewproductandproductmixthatareallpartofthatgo-forwardprojection,andleadtothatmixofproducts,thatblendofgrossmargin,operatingincomeforthatsegment.

Judy,Idon'tknowifyouhaveanyotherperspectivesordetailstoaddtothat?


Ijustwanttomakesure,justtoclarifyonepointthatconfusedme.Ournumber'sapproximately$1.2




billioninrevenueexpectedinthatsegmentthisyear,includesannouncedacquisitionsEntocort,tretinoin.Itincludeslaunches.LikeJohnsaid,weputProairoutbutotherproductlaunches.Itdoesn'thaveanysortofagapfillerinthereforacquisitionsorpotentialtuck-insoverthecourseoftheyear.Thatisthefootprintofproductsthatweowntodayand/orwehaveondeckinthecalendaryeartolaunch.


Correct.Thankyouforclarifying,Judy.

T imChiang (Analyst-BTIG):

Thankyou.

Operator :

YournextquestioncomesfromthelineofDavidBuckwithNorthlandCapital.

MikeGrondahl(Analyst-NorthlandCapital):

ThisisMikeonforDavid.Thanksfortakingmyquestion.YoutalkedaboutalittlebitaboutbalancingM&Awithotherusesofcapital.Therecentchangesinpricingpressure,doesthatchangehowyoulookatacquisitionsacrossdifferentsegments?Thanks.


Thanksforthequestion.Soagain,I'llstepbackandsay,ifyoulookatourbusinesscomposition,westillremain70%directconsumer-facingwithoutapharmacistinterface.SoifIlookatacquisitions,usingM&Aandtalkaboutbolt-onacquisitionsversuscompletelytransformational-typeacquisitions,mybeliefistheywillfitwithinthecategoriesinthatproportion.


Thankyou.Nextquestion,please.

Operator :

YourlastfinalquestioncomesfromJonAndersonwithWilliamBlair.

JonAndersen (Analyst-WilliamBlair&Company):

Congratulationsonthenewandenhancedroles.IwantedtoaskabouttheCHCbusiness,andspecifically,ifyoucouldcommentalittlebitmoreonoverallmarketsharetrendsforstorebrandsinyourtargetcategories,andwhetherwe'rereachingaplateauinthelegacybusiness,intermsofoverallmarketshare,orwhetherweshouldcontinuetoconsiderahistoricaltrendrateof50to100basispointsofshareimprovementovertime.Thanks.


Yes,thankyou,Jon.Iappreciatethequestion.Aswestepback,andthethingthatyouhaveinconsumerhealthcareisyoudohaveebbsandflows.Wehad,Johnson&Johnsonwasoutofthemarketwithcertainproducts,thentheycameback.Youcertainlyhaveebbsandflowsthatarebiggershiftsinthemarket.

ButwhenIstepback,bigpicture-wiseandsaywhat'sexpected,thedynamicsintheindustryinmymindstillremainunchanged.Asinnovatorslaunchtheproducts,we'reinagreatpositiontocapitalizeonthat.




Themacroeconomictrendsofpeoplegettingolder,needingmore,healthcarecostsgoingup,despiteourabilityordesiretocontrolthemmore,continuetodrivepeopletowardsretailbrandsandfranklywhentheytrythem,theyrecognizethequalitythere.Andsothatallowsthesharetogrow,andmybeliefthatitwillcontinuetoallowthesharetodriveupward.

I'dhatetospeculaterightnowwithout,again,goingthroughalongrangeplanteam,exactlywhatpercentagesitwillgo.Iforeseecontinuedsharegrowth.Again,whenyou'vegotproductbyproductdynamics,butcontinuedsharegrowthforourcoreUSstorebrandmarket.


Sorry,operator.Couldwetakeonemorequestion,please?

Operator :

Yes.YourfinalquestioncomesfromJasonGerberrywithLeerinkPartners.

DerekArchila(Analyst-LeerinkPartners):

Goodmorning,guys.ThisisDerekonforJason.Thanksfortakingmyquestions.

Maybefirst,justontheupdatedguidance.Whatdoesthatimplyforproduct--newproductcontributionin2016,justtryingtohegetabetterunderstandingacrossthesegments,wherethenewproductsaredefinitelycomingfrom.

AndthensecondforJohn,inthePR,youcommentedconsumeristhecoreofthebusiness.Howdoyoubelieveyoucangrowthatorganicallyandstrengthenthatcore?Thanks.


Great.Thankyou.Letmestartoutonthenewproductsideandtheguidancethere.I'mjustgoingtotossthattoJudybecauseshehastheexact.


Theofficialstatementmadeinmypreparedremarksisthatwehadpreviouslysaidgreaterthan$400million,andwehadmovedthattogreaterthan$300million.Soit'sjust--it'smixacrossallthreemajorbusinessunitsintermsofproducttiming.Soit'salittlefromCHC,morefromBCH,andsomeadjustmentstoRx.


Onthesecondpartofyourquestion,whenyoulookatconsumerhealthcareandthecore,soasIaddupalltheparts,thereissomebasegrowthfromourbusinessthatcontinuestoallowthatconsumerhealthcarebusinesstogrow.Switchesarecertainlygamechangingorcategorychanging,dependingonwhichkindofswitchitis.Wecontinuetoseeswitchesasabigpartofthegrowthofthatover-the-countermarket,whenyoulookoutoverthenextfewyears.

Andasdifferentcategories,Italkedaboutdermorothersthatswitch,thoseopenbiggeropportunities,goingbackaways,nottogetbacktoofar,butwhenyoulookatnon-sedatingantihistamines,it'sprobablyoneoftheclearercategories,usedtoeithergototheover-the-counterorgetsomethingthatwouldputyoutosleepwhenyouhadyourallergies,oryouwenttoadoctorandgotaprescription.Nowasthoseproductsswitchtoalloverthecountertheamountofopportunitythathascreatedintheover-the-counterspaceisgreat.




Weseethatcontinuingforcategories,andfranklytheregulatoryagenciesandgovernmentwantingtotryanddrivesafehealthcaretobemoreaffordable.Andsoallofthosewethinkworkinthefavorofthat.

Relatedtoadditionaladd-ins,wecertainlyareabigpartofthebusiness,buttherearestillothersegments,otherareasthatwouldfitwellwithinouroverallsystem,overallstructure,addingmoreitemstothetruckthatarepharmaceuticallyorientedthatwecontinuetolookat.Andnotallofthemwillmakesenseforus,butwecontinuetomakesurethatwehavetheoptimalportfoliotobringthatvaluetoourretailers,andthenultimatelytoconsumers.Ithinkthere'sstillthoseleft,thatJeffandhisteamarecontinuingtolookat,toseehowweaddthosein.

Thankyou.Thanks,Derek.


Withthat,Ithankeveryoneforjoiningusforthecall.Iappreciateyourtime,andIlookforwardtomeetingyoupersonallyhereinthenextcoupleweeks,asIgetachancetoknowandtalkwithyoupersonally.Thankyouverymuch.

Operator :

Thankyou,ladiesandgentlemen.Thisconcludestoday'sconferencecall.Youmaynowdisconnect.

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