Mulong Sui

Valeant PharmaceuticalsA Bargain in a Lifetime

Confidential 1

Agenda

₳ Valeant Overview

₳ Company History

₳ Historical Trading Performance

₳ Key Financial Metrics

₳ Deal Rationale

₳ Precedents and Comparables

₳ Discounted Cash Flow Analysis

₳ Valuation Summary

₳ Potential Acquirers

₳ Conclusion

₳ Appendix

Confidential 2

Valeant Overview

Confidential 3

Valeant Pharmaceuticals International, Inc. is a multinational, specialty pharmaceutical and medical device company that develops, manufactures and markets branded, generic and branded generic pharmaceuticals, over-the-counter products and medical, which are marketed directly or indirectly in more than 100 countries.

Symbol: NYSE: VRX TSX: VRX

HQ: Laval, Quebec, Canada

Employees: 21,500 (2016)

Recent Corporate Performance

$4,923.00

$5,523.00

$4,792.00 $4,882.00

$4,342.00

$0.00

$1,000.00

$2,000.00

$3,000.00

$4,000.00

$5,000.00

$6,000.00

$0.00

$50.00

$100.00

$150.00

$200.00

$250.00

H1 2015 H2 2015 H1 2016 H2 2016 H1 2017

Revenue ($ MM USD) Share Price

Operation Summary

Product Mix

Source: Valeant Pharmaceuticals International Inc.’s SEC filing

Valu

ati

on

Enterprise Value $32465mm

Equity Value $6029mm

EV/EBITDA 8.05x

Bausch + Lomb/Intl

Branded Rx

U.S. Diversified Products

Pharmaceutical products, OTC products and medical device products in the area of eye health

Accounted for 55.6% of revenue with an organic growth rate of 6%

Pharmaceutical products related to the Salix and the Dermatological product； Accounted for 28.5% of the revenue, its top product, Salix, achieved an 16% organic growth rate during last

quarter

Number of Rx is on a steady increase

Two Thirds of the decline originated from LOE, however, is still contributing strong cash flow

Acquireded generics company PharmaSwiss; AB Sanitas; Dermik, dermatology unit of Sanofi; Ortho Dermatologics division of Janssen Pharmaceuticals; Afexa Life; and iNova

Company History

Confidential 4

Corporate Timeline

20162001 2003 2005 2008 2010 2011 2012 2013 2014 2015

Revenue:2.46 B$ 3.48 B$ 5.77 B$ 8.26 B$ 10.45 B$ 9.67 B$1.18 B$

Valeant and Biovail merged, with the new company

retaining the Valeant name.• ICN, predecessor of

Valent was founded

and listed on NYSE

• Biovali, the other

predecessor was

included in TSX 35.

• Valeant was formed when

ICN changes its name

• Under the ticker VRX,

Valeant began trading on

the NYSE

• Mike Pearson named Chairman

and CEO and started Valeant’s

acquiring streak

Acquieded Bausch + Lomb

Completed the acquisition of substantially all the assets of Dendreon Corporation and the acquisition of Salix Pharmaceuticals

• Joseph C. Papa named Chief

Executive Officer and Chairman

of the Board

• Valeant changed it’s strategy

and started divesting none-core

assets

COMMENTARY

Valeant has maintained a high growth rate since its merger with Biovail

The 54% CAGR over the five year period between 2010-2015 was driven by both M&A and selling price of products

The market reacted negatively with VRX’s prolonged strategy of raising debt capital and acquiring competitors; however, this situation exacerbated with the newly

named CEO J.Papa decided to divest non-core assets and pay down debt

Source: Valeant Pharmaceuticals International Inc.’s SEC filing

VRX Stock Performance

Confidential 5

July 28th, 2013 to July 19th, 2015 Price $USD

COMMENTARY

As the beneficiary of the Federal Reserve’s QE, Valeant was able to raise debt capital for acquisition at a relatively low cost

Valeant developed the business model of buy-and-raise, by acquiring competitors with patent products, Valeant bypassed the approval process by FDA; by keep on

raising drug prices, Valeant was able to increase its revenue exponentially.

Valeant used stock exchange for acquisition, the increasing stock price served as fuels for future acquisitions

8/6 Completed Purchase of

Bausch&Lomb

10/28 Reached Settlement of

$142.5M Payable to Anacor

12/16 Agreed to Acquire Solta

Medica for $235.8M

2/3 Agreed to Acquire

Precision Dermatology for at

Leat $475M

4/22 Teamed up with Bill

Ackman in an attempt to Buy

Allergan fo $47B

5/12 Allergan Rejected

Valeant Offer

5/28 Sold Dermatology

Product Rights to Nestle for

$1.4B

1/30 Agreed to purchase

Dendreon’s Provenge for

$296M2/22 Agreed to Buy Salix for

$14.5B EV

3/9 Commenced a Private ebt

Offering of $9.6B

7/17 Acquired Amoun Pharma

for $800M

3/17 Priced Public Offering of

7.2M shares at $199/Share

3/16 Upped bid for Salix to

$15.8B EV

11/17 Gave up on Acquiring

for AGN after Actavis’ offer of

$73.7B

10/7 Upped the Bid for AGN

to $64.3B

5/30 Upped the Bid for AGN

to $58.5B

5/28 Upped the Bid for AGN

to $53.5B

Source: Valeant Pharmaceuticals International Inc.’s SEC filing; Xueqiu Finance; Reuters; Bloomberg

VRX Stock Performance

Confidential 6

9/21 Hilary Clinton Tweet

9/28 Clinton Published Report about Valeant

10/21 Clinton Called

Valeant “Enron”

10/22 Revelations

about Philidor

12/28 CEO Mike Pearson Went on

Medical Leave 2/4 Congressional Hearing

on Drug Pricing

10/30 Valeant Cutter

Ties with Philidor

2/29 Pearson Back

from Leave

3/15 Valeant Cuted

Revenue Forecast4/25 J.Papa Named

CEO

3/21 Bill Ackman

Named to Board

1/10 Sold Dendredon

4/27 Senate Hearing

on Drug Prices

5/17 Considered

Selling Assets

6/7 Earnings Whiff

August Possible

Criminal Investigation

November Philidor CEO

Charged with Fraud2/28 Q4 Earnings, Lowered

Revenue Forecast further

3/13 Bill Ackman Exited

5/9 Q1 Earnings, Divesture

was making progress

6/21 Trump’s Draft Order

on Drug Prices

August 15th, 2015 to July 16th, 2017 Price $USD

COMMENTARY

Valeant’s stock price declined by 96.85% from all time high at $263.81 on Aug 5th, 2015 to $8.31 on Apr 23th despite no significant changes to its fundamentals

The catalyst for VRX’s stock price plummet was political pressure against its business model, acquire and raise prices.

The falling price triggered a series of self fulfilling prophecies, as Valeant used stock exchange to make acquisitions and maintain growth. The disappearance of

growth prospect then triggered ratings downgrade, further exacerbated Valeant’s prospect.

Source: Valeant Pharmaceuticals International Inc.’s SEC filing; Xueqiu Finance; Reuters; Bloomberg

Key Financial Metrics

Confidential 7

Revenue & Net Asset1 Turnover 5 Year EBITDA&FCF3 Change

Net Asset & Adjusted ROA1 Historical Leverage and Cost of Debt

$0M

$1,000M

$2,000M

$3,000M

$4,000M

$5,000M

$6,000M

2013 2014 2015 2016 2017E

EBITDA FCF

Source: Valeant Pharmaceuticals International Inc.’s SEC filing; Guru Focus; Market Watch

2: Adjusted ROA is calculated as (EBITDA-Capital Expenditure)/(Total Asset-Cash), in order to reflect the M&A situation

3: FCF is calculated as Cash Flow from Operation – Capital Expenditure

0.00%

100.00%

200.00%

300.00%

400.00%

500.00%

600.00%

700.00%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

2013 2014 2015 2016 2017H1

Cost of Debt US FED FUNDS RATE Leverage Ratio

27370 25977

48363

4298839708

7.88%

13.12%

10.47%

9.34%8.36%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

0

10000

20000

30000

40000

50000

60000

2013 2014 2015 2016 2017H1

Net Asset Adjusted ROA

$5,770M

$8,260M

$10,450M$9,670M

$4,342M

0.210814761

0.317973592

0.216074272 0.224946497 0.218696484

$0M

$2,000M

$4,000M

$6,000M

$8,000M

$10,000M

$12,000M

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

2013 2014 2015 2016 2017H1

Revenue Net Asset Turnover

2: Net Asset is calculated as Total Asset - Cash

Strategic Rationale

Confidential 8

Why Valeant Should Sell

Financial Summary

Industry Trends

Strategic Rationale

Pharma companies are increasingly using M&A as part of their R&D strategy, the sector delivered 244 deals worth

US$98.2 billion during H1 2017, second highest in industry

The intensifying competition from generic drugs, pricing power of insurance companies, the increasing costs of

R&D and gaining FDA approval, and the growing risks of commercial failure have made Pharma M&A a necessity

“Portfolio Deals” are dominating the industry as more and more companies realize only a strong position in the

relevant market will secure the future; Valeant has a vast diversified portfolio which could be a perfect target

Valeant’s troubles stem from its self fulfilling business model deficiency; when the company’s growth prospect

lowers, its valuation falls back to the “value stock” level, which weakens its ability to make stock acquisitions

With fewer acquisitions in place, Valeant’s stock price will fall even lower, which hinders its M&A activity further and

causes leverage to increase

Increased leverage will downgrade the company’s ratings, increase cost of debt and suppress stock price; when

covenants to the bonds are triggered, the company can no longer make major capital expenditures

Similarly, being acquired by a prominent pharmaceutical company, such as Gilead Sciences or Amgen, would allow

Valeant to pay down its debt and start growing again.

In addition, in terms of sales channels sharing, and the potential marketing enhancement to Valeant’s Addyi by

Amgen’s Viagra, there can be tremendous synergies to be achieved.

Valeant has been trading at a way lower multiple than market average

Valeant’s topline and EBITDA margin has been declining

Despite the poor stock performance, Valeant managed to stop the bleeding; Adjusted ROA and FCF have been

stabilized, and leverage ratio begins to drop

Analysis into Valeant’s share price vs its EBITDA and segmented growth has indicated that the company has

become undervalued as of FYE 2017 and has not yet recovered

Company TickerShare

Price

Shares

OutstandingEquity Value

Enterprise

Value

LTM

Revenue

2017E

Revenue

LTM

EBITDA

2017E

EBITDA

LTM

EBITDA

Margin

Total

Debt

/EBITD

A

LTM EPS 2017E EPSLeverage

Ratio

LT EPS

Growth

Pfizer PFE 33.65$ 5,947mm $200,117mm $230,181mm 4.40x 4.37x 13.21x 10.59x 33.3% 2.51x 24.04x 13.14x 22% 5.4%

Amgen AMGN 172.23$ 730mm $125,671mm $125,671mm 5.45x 5.50x 10.00x 9.33x 54.5% 2.63x 15.57x 13.80x 26% 6.3%

Mean 4.92x 4.94x 11.60x 9.96x 43.9% 2.57x 19.80x 13.47x 24% 5.8%

Tier 2: Pharmaceutical Companies Within Similar EV Range

Regeneron Pharmaceutical REGN 491.14$ 107mm $52,626mm $54,057mm 10.32x 9.39x 29.44x 25.23x 35.1% 0.38x 44.81x 35.56x 1% 21.5%

Alexion Pharmaceutical ALXN 121.67$ 223mm $27,155mm $29,058mm 8.52x 8.23x 25.01x 17.93x 34.1% 2.80x 52.22x 25.51x 12% 20.8%

Jazz Pharmaceuticals JAZZ 155.50$ 60mm $9,339mm $10,712mm 6.95x 6.53x 14.87x 29.82x 46.7% 2.32x 23.74x 16.40x 18% 17.1%

Mylan MYL 38.82$ 536mm $20,818mm $35,038mm 2.92x 2.92x 13.36x 23.24x 21.8% 5.74x 31.31x 8.48x 72% 8.1%

Mean 7.18x 6.77x 20.67x 24.05x 0.34x 2.81x 38.02x 21.49x 0.26x 0.17x

Median 7.73x 7.38x 19.94x 24.23x 0.35x 2.56x 38.06x 20.96x 0.15x 0.19x

Overall

Mean 6.43x 6.16x 17.65x 19.36x 0.38x 2.73x 31.95x 18.82x 0.25x 0.13x

Median 6.20x 6.02x 14.11x 20.59x 0.35x 2.57x 27.67x 15.10x 0.20x 0.13x

75th Percentile 8.13x 7.81x 22.48x 24.73x 43.8% 2.75x 41.44x 23.23x 25% 19.9%

25th Percentile 4.66x 4.65x 13.24x 12.43x 33.5% 2.37x 23.81x 13.31x 13% 6.7%

Valeant VRX 17.30$ 349mm $6,029mm $32,465mm 13.55x 9.28x 13.55x 9.28x 25.98% 9.67x -5.27x 4.64x 384% 9.6%

Enterprise Value / Price/

Tier 1: World Leading Pharmaceutical Companies

Financial Analysis

Confidential 9

Public Comparable Analysis

Valeant’s LTM valuation is close to that of Tier1 comparables, and is at substantial discount to companies of similar enterprise value

EV/Revenue, EBITDA Margin, and LT EPS Growth is lower than comparable companies, which are the main focus of current management

Despite the lower margin and slower growth rate, Valeant currently looks like a bargain in comparison to much of its competitors given its lowest EV/EBITDA Ratio

COMMENTARY

Source: 4-Trader; Reuters; Gurufocus; Y-Chart; Google Finance; NASDAQ.com

Date

AnnouncedAcquirer Target

Equity

Value

Enterprise

Value

LTM

Revenue

LTM

EBITDA

LTM EBITDA

Margin

LTM

Revenue

LTM

EBITDAPremium

2015/3/17 Actavis Allergan $70,500M $114,441M $14,641M $1,299M 9% 7.82x 11.28x 10%

2015/5/26 AbbVie Pharmacyclics $21,000M $20,115M $816M $113M 14% 24.65x 7.22x 13%

2015/9/3 Pfizer Hospira $17,000M $17,172M $4,636M $868M 19% 3.70x 5.34x 39%

2015/4/1 Valeant Salix $10,900M $13,212M $1,134M -$266M -23% 11.66x -4.26x 15%

2015/1/21 Merck & Co. Cubist $8,400M $8,557M $1,165M $216M 19% 7.35x 5.38x 35%

2015/2/21 Shire NPS Pharmaceuticals $5,200M $5,126M $224M $9M 4% 22.88x 24.56x 51%

2015/1/29 Endo Auxilium $2,600M $3,120M $407M $244M 60% 7.67x 1.67x 55%

2015/5/7 Horizon Hyperion Therapeutics $1,100M $1,029M $125M $8M 6% 8.22x 16.24x 8%

2016/1/3 Shire Baxalta $32,000M $31,391M $6,335M $1,360M 21% 4.96x 4.66x 38%

2016/9/28 Pfizer Medivation $14,000M $13,690M $1,027M -$254M -25% 13.33x -4.05x 118%

2016/9/2 Galenica Relypsa $1,530M $1,431M $36M -$227M -628% 39.58x -0.16x 59%

Mean -48% 13.80x 6.17x 40%

Median 9% 8.22x 5.34x 38%

min -628% 3.70x -4.26x 0.08x

75th Percentile 19% 18.10x 9.25x 53%

25th Percentile -10% 7.51x 0.76x 14%

max 60% 39.58x 24.56x 1.18x

Valeant $6,029M $32,465M $9,225M $2,396M 26% 3.52x 3.85x

Enterprise Value /

Financial Analysis

Confidential 10

Precedent Transactions Analysis

Revenue projections are adjusted for the divestiture effect of iNova and Obagi

The projected revenue growth rate is based on Valeant’s 2017 Q2 product portfolio and organic growth rate, and is assumed to be in steady decline; should Valeant

achieve its management’s expected growth prospect, then its current valuation implies to be a substantial discount to its future value

COMMENTARY

Source: Valeant Pharmaceuticals International Inc.’s SEC filing; Xueqiu.com; HBM Partners

2,012$ 2,013$ 2,014$ 2,015$ 2,016$ 2017H1 2017Q3 2017Q4 2018E 2019E 2020E 2021E 2022E

Revenue $3,480M $5,770M $8,206M $10,447M $9,674M $4,342M $2,099M $2,099M $8,313M $8,230M $8,148M $8,066M $7,986M

COGS $970M $1,905M $2,255M $2,665M $2,651M $1,242M $594M $594M $2,354M $2,330M $2,307M $2,284M $2,261M

Gross Profit $2,510M $3,865M $5,951M $7,782M $7,023M $3,100M $1,505M $1,505M $5,959M $5,900M $5,841M $5,782M $5,725M

Gross Profit Margin 72% 67% 73% 74% 73% 71% 72% 72% 72% 72% 72% 72% 72%

R&D $79M $157M $246M $334M $421M $190M $92M $92M $364M $360M $357M $353M $349M

SG&A $756M $1,305M $2,026M $2,700M $2,810M $1,320M $638M $638M $2,527M $2,502M $2,477M $2,452M $2,428M

Operating Income $1,675M $2,403M $3,679M $4,748M $3,792M $1,590M $775M $775M $3,068M $3,038M $3,008M $2,977M $2,948M

Operating Margin 48% 42% 45% 45% 39% 37% 37% 37% 37% 37% 37% 37% 37%

Restructing Cost $267M $462M $382M $362M $132M $36M $17M $17M $69M $68M $68M $67M $66M

Other Revenue (Cost) $137M $287M -$269M $256M $73M -$259M $38M $38M $38M $38M $38M $38M $38M

Sustainable Income $1,545M $2,228M $3,029M $4,642M $3,733M $1,295M $795M $795M $3,037M $3,007M $2,978M $2,948M $2,919M

Change in NWC $433M $419M $89M -$1,268M $1,274M $59M $47M $63M $55M -$17M -$17M -$17M -$16M

CAPEX -$181M -$185M -$471M -$303M -$291M -$216M -$88M -$88M -$347M -$343M -$340M -$336M -$333M

FCFF $930M $1,624M $2,469M $5,607M $2,168M $1,020M $660M $644M $2,635M $2,681M $2,654M $2,628M $2,602M

Discount Factor 0.9838 0.9678 0.9366 0.8773 0.8217 0.7697 0.7209

Discounted Cash Flow $649M $624M $2,468M $2,352M $2,181M $2,023M $1,876M

Terminal Value $23,919M

Net Debt $26,436M

Equity Value $8,014M

Shares Outstanding 349$

Intrinsic Value 23$

Financial Analysis

Confidential 11

Free Cash Flows

Revenue projections are adjusted for the divestiture effect of iNova and Obagi

The projected revenue growth rate is based on Valeant’s 2017 Q2 product portfolio and organic growth rate, and is assumed to be in steady decline; should Valeant

achieve its management’s expected growth prospect, then its current valuation implies to be a substantial discount to its future value

COMMENTARY

Source: Valeant Pharmaceuticals International Inc.’s SEC filing; Valeant Pharmaceuticals International Inc.’s Q2 2017 Webcast; Reuters; Gurufocus

Discounted Cash Flow Analysis

Financial Analysis

Confidential 12

WACC Calculation Implied Share Price

Sensitivity Gordon Growth Method

Te

rmin

al G

row

th R

ate

Gro

ss

Pro

fit

Ma

rgin

Sensitivity Gross Profit Margin

A Gordon growth at even a modest growth rate results in a much higher share price than

at current trading multiples

Valuation is extremely sensitive to WACC usedSource: Valeant Pharmaceuticals International Inc.’s SEC filing; Valeant Pharmaceuticals International Inc.’s Q2 2017 Webcast; Yahoo Finance; Gurufocus

23$ 5% 6% 6.76% 7.52% 8.52%

2.0% 132.7$ 84.9$ 61.8$ 45.3$ 29.3$

0.5% 75.9$ 51.3$ 37.8$ 27.3$ 16.5$

-1.0% 47.6$ 32.2$ 23.1$ 15.7$ 7.7$

-2.5% 30.5$ 19.7$ 13.1$ 7.5$ 1.3$

-4.0% 19.2$ 11.1$ 5.9$ 1.5$ 3.6-$

WACC

23$ 5% 6% 6.76% 7.52% 8.52%

78% 69.0$ 50.6$ 39.8$ 30.9$ 21.4$

75% 58.8$ 41.8$ 31.8$ 23.7$ 14.9$

72% 47.6$ 32.2$ 23.1$ 15.7$ 7.7$

69% 38.4$ 24.3$ 15.9$ 9.2$ 1.8$

66% 28.2$ 15.5$ 8.0$ 1.9$ 4.7-$

WACC

IMPLIED VRX SHARE PRICE

Weighted Average Cost of Debt 6.40% Share Price(June 30th, 2017) 17.3$ EV/EBITDA Exit Multiple 8.97129X

Tax Rate 17.00% Shares Outstanding (mm) 349$

After Tax Cost of Debt 5.31% Market Capitalization (MM) 6,029$

Debt Outstanding (MM) 28,461$ Implied Enterprise Value (MM) 36,091$

Total Capitalization (MM) 34,490$ Less Debt (MM) 28,461$

Risk Free Rate 2.12% Add Excess Cash (MM) 2,025$

Equity Risk Premium 6% Debt/Total Capitalization 83% Equity Value 9,655$

Industry Premium 2.10% Equity/Total Capitalization 17%

Company Premium 3.40% Shares Outstanding (MM) 349$

Cost of Equity 13.62% WACC 6.7643% Implied Price Per Share 23$

Cost of Debt

Cost of Equity

Capital Structure Exit Multiple Method

Financial Analysis

Confidential 13

$- $10.00 $20.00 $30.00 $40.00 $50.00 $60.00 $70.00 $80.00 $90.00 $100.00 $110.00 $120.00 $130.00

Discounted Cash Flow Analysis

EV/LTM EBITDA

EV/LTM Revenue

2017E P/E

EV/2017E EBITDA

EV/LTM EBITDA

EV/2017E Revenue

EV/LTM Revenue

Based on the analysis, Valeant’s 9/5 stock appears to trade at significant discount by all three

valuation methodologies, and current stock price represents a even bargain at $13.10

Valeant’s current stock is trading close to the 25thPercentile of DCF model, and significantly

below the lower bound of its comps when factoring in future growth

Public Company Comparables:

Precedent Transactions ComparableS::

VRX $13.1 (9/5) VRX with 30%~50% Premiums ($17.10-$19.65)

Valuation Summary –Football Field

Strategic Buyers

Confidential 14

Strategic Rationale

Potential Acquirers

Gilead Sciences Pfizer

Strategic Rationale

Symbol: NYSE: GILD

HQ: Foster City, California, US

Employees: 7,900 (2015)

Valu

ati

on

Enterprise Value $114985mm

Equity Value $110337mm

EV/EBITDA 6.34x

Symbol: NYSE: PFE

HQ: New York City, New York,US

Employees: 96,500 (2016)

Valu

ati

on

Enterprise Value $231693mm

Equity Value $210013mm

EV/EBITDA 13.29x

Gilead Sciences, Inc. is a research-based biopharmaceutical

company focused on the discovery, development, and

commercialization of innovative medicines.

Pfizer is one of the world's premier biopharmaceutical

companies, develops and produces medicines and vaccines for

a wide range of medical disciplines

GILD’s portfolio is highly focused on anti-virus, with top 6 products account for 80% of

the revenue, VRX has a large diversified portfolio

Harvoni and Sovaldi, its top 2 products, which account for 35% of GILD’s revenue, are

losing market share rapidly, GILD needs to make a move

This acquisition will help Gilead gain a solid footing in the realm of dermatology, eye

care, gastrointestinal, consumer products and diversified segment

GILD has $31B cash on hand, which enables it to acquire VRX while not weaken its

own balance

Huge synergy potential by sharing Sales Channels

VRX’s SG&A/Revenue is high among pharmaceutical companies, and Pfizer has one of

the best marketing channels in the world

20% of PFE’s revenue come from generic drugs, and this is much overlap between

PFE’s generic portfolio and VRX’s

By acquiring VRX, PFE will be able to reduce it’s effective tax rate significantly

PFE’s corporate rating makes it possible to raise debt capital at a pre-tax rate of 3%,

which enables it to strengthen the after-merger balance sheet

Source: Company Website; Company SEC Filings; Fortune Magazine; WSJ; Harvard Business Review

Financial Buyers

Confidential 15

Strategic Rationale

Pershing Square Capital Management Paulson & Co.

Strategic Rationale

Symbol: N/A

HQ: New York City, York City, US

Employees: 64 (approximately)

Valu

ati

on

Enterprise Value N/A

Equity Value N/A

AUM $10980mm Valu

ati

on

Enterprise Value N/A

Equity Value N/A

AUM $18000mm

Symbol: N/A

HQ: New York City, York City, US

Employees: 120 (approximately)

Pershing Square Capital Management is an American hedge

fund management company founded and run by Bill Ackman,

and Bill Ackman is famous for being an “activist”

Paulson & Co. Inc. is an American investment management firm,

established John Paulson and specializes in global merger,

event arbitrage and credit strategies

Pershing’s activist style can bring long-needed growth after Valeant has strengthened its

balance sheet

Pershing once was the largest shareholder, and Ackman served in the board of

directors, they have a close relationship with the management

Valeant’s management has managed to pay down close to $5B debt and stabilized the

declining revenue, the fundamentals are improving

At a current less than 8x TTM EV/EBITDA, the company is trading at less than

liquidation price, which makes it a good subject for LBO and liquidation

Paulson & Co. is Valeant’s largest shareholder, which makes it easier to acquire

Valeant at a lower premium

Paulson himself servers in the board of directors, which makes it easier for him to

launch strategic moves

Valeant’s management has managed to pay down close to $5B debt and stabilized the

declining revenue, the fundamentals are improving

At a current less than 8x TTM EV/EBITDA, the company is trading at less than

liquidation price, which makes it a good subject for LBO and liquidation

Potential Acquirers

Source: Company Website; Fortune Magazine; WSJ; Harvard Business Review

KEY TAKEAWAYS

Summary

Confidential 16

OUR OPINION

Valeant’s current issues stem from its declining topline and EBITDA margins

I. The fundamental driver of revenue decline and EBITDA margin erosion is due to LOE (Lost of Exclusivity), which is the result of its old business model

II. Divest non-core assets and pay down debt to meet the covenants and re-start acquisition promising targets with pipelines

III. An acquisition or merger with another R&D oriented firm is an efficient method to resolve its most pressing issues

Valeant appears to be substantially undervalued according to all three valuation methodologies

I. Valeant’s stock is currently trading at a substantial discount to even the 25th percentile lower bound of its comp set

II. An acquisition of Valeant at an aggressive 32% premium over its $13.1 trading price would still be substantially cheaper than the multiples that recent bio-

pharmaceutical acquisitions were purchased at

III. Both the terminal multiple and Gordon Growth DCF imply an intrinsic share price substantially above its current market price

Valeant would be an attractive target for both financial buyers and strategic buyers

I. Valent’s operational issues would also give both Strategic and Financial buyers the opportunity to unlock significant value through either cost cutting measures or

through realization of potential revenue and cost synergies

Valeant should immediately signal interest in selling a controlling stake and begin fielding friendly bids from interested buyers

I. Management should prioritize Strategic buyers, and should fight to retain a large stake within the firm to capture the benefits of projected future growth

Valeant should focus on bids from companies with strong pipeline, sales channel and cash stack

I. Firms such as Gilead, with more than 30$B in cash, and Pfizer, with its broad distribution network would best help Valeant get rid of its operating troubles

Closing Thoughts

Appendix

Confidential 17

Key DCF Assumptions and Rationales

DCF Assumptions Assumption Rationales

Long-Term Revenue Grow Rate is -1%, there will be an

additional annual fall of 200m1

COGS/Revenue ratio stays 5-year average

SG&A/Revenue ratio stays the same as H1 2017 number2

R&D/Revenue ratio stays the same as H1 2017 number3

Restructuring Cost/Revenue ratio stays the same as H1 2017

number4

Other Income (Expense) stays the same as 5-year average

CapEx/Revenue ratio stays 5-year average

Net Working Capital/Revenue ratio stays 5-year average

Risk free rate is the same as 10-year-treasury-note rate5

Equity Market Premium is 6%6

Equity Industry Premium is 2.1%7

Equity Company premium is 3.4%8

Capital Structure stays the same as H1 20179

Market value of debt is the same as book value of debt10

Share price is trading at $17.3 and number of share

outstanding is 348.51 million11

1. This is to reflect the current product composition and their

latest organic growth rate; the additional fall reflects the net

effect of the divestiture of iNova and Obagi

2. There is an upward trend as Valeant has been trying to boost

topline

3. There is an upward trend as Valeant is swithing to an R&D

oriented company

4. Because of debt covenants, Valeant can’t make major

restructures in the near future

5. The 30-year-treasury-bond far exceeds most investors’

investing plan

6. We choose to use historical premium over bonds despite the

recent bull market

7. We use the CAPM for IBB, a basket of Bio-Pharma stocks to

calculate the industry premium

8. We used the difference Valeant debt’s coupon rate and

comps’ cost of debt

9. Valeant determines to lower its leverage ratio, however, the

progress is hard to predict

10. Most recent coupon rate is close to the implied cost of debt

11. We used Q2 financial statement, to make things consistant

Appendix

Confidential 18

Valuation Chart

Valuation Valeant

- - - - - - - - - - -

25th 75th Applicable 25th 75th

Min Percentile Median Percentile Max Valeant Minimum Percentile Median Percentile Maximum

Methordology Name Multiple Multiple Multiple Multiple Multiple Figure Multiple Multiple Multiple Multiple Multiple

Public

LTM EV/Revenue 2.92x 4.66x 6.20x 8.13x 10.32x 9,225.00$ 1.15$ 39.44$ 73.29$ 115.56$ 163.86$

2017E EV/Revenue 2.92x 4.65x 6.02x 7.81x 9.39x 8,675.00$ 2.59-$ 33.20$ 61.37$ 98.32$ 131.00$

LTM EV/EBITDA 10.00x 13.24x 14.11x 22.48x 29.44x 2,396.00$ 5.91-$ 12.61$ 17.57$ 65.30$ 105.03$

2017E EV/EBITDA 9.33x 12.43x 20.59x 24.73x 29.82x 3,499.00$ 14.76$ 40.58$ 108.59$ 143.12$ 185.51$

2017E P/E 8.48x 13.31x 15.10x 23.23x 35.56x 3.73$ 31.62$ 49.64$ 56.33$ 86.65$ 132.65$

Precedent

LTM EV/Revenue 3.70x 7.51x 8.22x 18.10x 39.58x 9,225.00$ 18.43$ 101.95$ 117.53$ 334.75$ 806.58$

LTM EV/EBITDA -4.26x 0.76x 5.34x 9.25x 24.56x 2,396.00$ 87.26-$ 58.65-$ 32.47-$ 10.18-$ 77.17$

Discounted Cash Flow Analysis

6%~7.52% WACC, (2.5%)~0.5% Terminal Growth Rate 7.50$ 6.25$ 9.35$ 7.88$ 20.33$

Valeant Implied Per Share RangeValeant Range of Valuation Multiples