Good morning. My name is Kim, and I'll be your conference operator today. At this time, I would like to welcome everyone to Valeant's Third Quarter 2016 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Thank you. Elif McDonald, Director of Investor Relations, you may begin your conference.

Good morning, everyone, and welcome to Valeant's third quarter 2016 financial results conference call. Participating on today's call are Joe Papa, Chairman and Chief Executive Officer; and Paul Herendeen, Chief Financial Officer. In addition to this live webcast, a copy of today's slide presentation and a replay of this conference call will be available on our website under the Investor Relations section. Before we begin, we would like to remind you that our presentation today contains forward-looking information. We would ask that you take a moment to read the forward-looking statement legend at the beginning of our presentation as it contains important information. In addition, this presentation contains non-GAAP financial measures. For more information about these measures please refer to slide 2 of the presentation. Non-GAAP reconciliations can be found in the appendix to the presentation posted on our website. Finally, the financial guidance in this presentation is effective as of today only. It is our policy to update or affirm guidance only through broadly disseminated public disclosure. With that, it is my pleasure to turn the call over to Joe.

Thank you, Elif. Good morning, everyone, and thank you for joining us on Election Day. We have a lot to cover this morning and we'll do our best to keep this call brief so everyone will get a chance to vote. This morning we are going to cover the following topics. First, I'll provide my perspective on our third quarter performance, where we are seeing improvement and where we need to focus our efforts going forward. I will then turn the call over to our new CFO, Paul Herendeen, who will cover our third quarter 2016 financial results and the results for each of our three new reportable business segments, Bausch + Lomb / International, Branded Rx, and U.S. Diversified Products. Paul will then walk through our current expectations with respect to full year 2016 guidance. Next, I will talk about the progress we have made in stabilizing the company since our last call in August when we unveiled our plans for the new Valeant and outlined the action plans we have put in place for the year ahead. Turning now to slide number 4, I'd like to start the call with a few comments about the progress we are continuing to make towards our goal of creating the new Valeant. On the positive side, our third quarter performance reflects sequential improvements in revenue, operating margin, operating expenses, and adjusted EBITDA. Debt reduction is another positive as we have repaid $450 million in debt since the second quarter. We've also reduced SG&A by $20 million last quarter while continuing to make research and development investments of over $100 million in the quarter. This was accomplished through a series of operational efficiency projects. Our derm and GI business are showing signs of growth, which I will talk about in more detail…

Thank you, Joe, and good morning. I'm Paul Herendeen, the relatively new CFO of the company. I joined the day after Labor Day. So, I'm just over two months in. I was formally the CFO of Zoetis, and before that, Warner Chilcott. I was attracted to the opportunity to join the team that Joe is building here and to participate in the transformation of Valeant from being a serial acquirer to managing and growing a group of complementary businesses. We face a number of challenges for sure, but I believe that this team, from Joe on down, is the right team to navigate these challenges and build value over time. As I love to say, value creation is not linear. So, we will face setbacks and we will overcome them. We'll work to protect the interest of all the company stakeholders, our creditors, our debtholders, our shareholders, and importantly, our 20,000-plus colleagues. We take fire from the press and from folks in the investment community just about every day, focused on the company's past. We can't change the things that are in the past. We can only deal with them and change our future. We're a new team and we need to earn your trust. And we will do that by being a good corporate citizen, by delivering on our commitments, and by being transparent in our financial reporting. I think it's worth me spending a moment to provide a basis for how I'll talk about changes in revenue, particularly in our pharma business. When focusing on comparisons with prior year periods, you need to consider three factors: units, pricing, and relative changes in pipeline inventories. Leave one out, you don't have the whole picture. In my comments, I will always try to cover these three factors. I'm sure everyone…

Thank you, Paul. I'd now like to talk about prior information to our second quarter earnings call. On slide 13, you'll see a list of the actions we are taking to stabilize the company. I'll cover each of these briefly. Slide 14 begins with the new management additions. We have two talented executives to our senior management team, and Paul Herendeen, the CFO, and Dr. Louis Yu as Chief Quality Officer. Both Paul and Louis jumped in with both feet on day one and have been making meaningful contributions to the team. Paul joined us shortly after our last earnings call, and we are very happy to have him on the team, he has more than 30 years of financial experience and leadership, including 16 years as CFO at Warner Chilcott and MedPointe, and two years as a CFO of Zoetis, and he's playing a vital role leading our finance functions. Dr. Louis Yu was Executive Vice President at Global Quality and Compliance at Perrigo for nine and a half years, so I know the great achievements he accomplished at Perrigo, and I'm delighted he joined us just last month. Moving now to slide 15 before I address the performance of our GI business, I want to acknowledge that we confirmed last week that we are currently in discussions regarding a potential divestiture of this business unit. As we said at the time, the discussions may or may not lead to a definitive agreement, and we're not going to make any further comments on that process until we have something definitive to say. With that in mind, we are pleased to see continuing growth in our GI franchise. Xifaxan multi-prescription for Q3 2016 were up 14%, compared to Q3 2015. And we have seen 24% growth year-to-date versus the first…

And your first question comes from the line of David Risinger with Morgan Stanley. Your line is open. David R. Risinger - Morgan Stanley & Co. LLC: Yes. Thanks very much. Joe and Paul, I was hoping that you could talk us through a little bit more on why the fourth quarter is going to be down so much sequentially versus the third quarter. Normally, the fourth quarter at drug companies actually benefits from seasonality to some degree, in your case, I think that you're guiding to a $200 million decrease in revenue in the fourth quarter relative to the third quarter sequentially. So, I just wanted to understand what's getting worse in the fourth quarter for Valeant. And then second, with respect to the Tampa plant. Obviously, you were aware of issues at the plant early this year. I believe that a 483 was issued in early September, so I'm wondering what worsened at the plant for the 483 to be issued, and what to expect and whether you have actual confidence that the facility is going to be fixed soon, such that you can ask for re-inspection. And I guess I'll leave it there. Thank you.

Sure. I'll start on the Q4 versus Q3. But Paul, you may also want to add...

Sure.

...your comments. So, the first comment I'd say is that you are correct, there is a – Q4 will be less than Q3. We've looked at a couple of things that were part of this discussion in terms of just looking at Q4. First and foremost, I'd say from a leadership point of view, I realize that we put in a new leadership in finance and quality. We've changed some of the business unit leaders. As Paul mentioned, we did a very hard review in the QBR, quarterly business review, for each business unit. We assessed all the things that one needs to assess, whether it be the inventory, the supply capabilities, the number of generic competitors potentially, what's happening with things like, as Paul talked about, the neuro franchise. So, the Nitropress and the Isuprel rebates and discounts that we're providing. We looked at some potential disruption in our business. And you know, there is people speculating on potential asset divestments. We tried to look at a number of things. In addition to that, we also looked at the need for long-term investment, I think as Paul mentioned. We said we want to make sure that we are prepared for a primary care effort in the GI business. We want brodalumab launch prep to be done well. The relaunch of Addyi, the Vyzolta launch, a number of things that require some investment. We wanted to make sure that, as we went through those things, we are going to be prepared to go forward into 2017 and beyond. Those are really some of the fundamental things at least I would talk about. Paul, I don't know if there's anything else you want to add to my comment.

Yeah, sure. Just kind of walk through from – if you're thinking about, in Q3, we've posted $1.55. By segment, the things that we expect to change in Q4 – to get to the Q4 number, we're expecting the B&L International business to be better in Q4 than it was in Q3, so that will contribute to the plus side. The Branded Rx, we expect to be down predominantly – well, I'd say, let me just spit out a couple of factoids, so you'd know what's going up with the B&L International group. It's basically international growth off of Q3. Second, the Branded Rx segment, we're expecting the GI segment to be down from a revenue perspective in the quarter, not because of the fundamental change of performance, it's one of the reasons why I called out the pipeline. We had a pipeline expansion in Q3, which is not going to continue, and in fact, will likely reverse a little bit in Q4. Derm, we have other adjustments and expecting that to be slightly down in Q4. And we're expecting also back to the Salix situation for the revenue that it does pose a higher level of GI rebating relative to what we've seen in Q3. Flipping to the Diversified Products segment, there's just a number of products in there that are expected to be down in Q4 versus Q3, or drive downward movement and that's oflox otic, it's other generics, it's declines in the neuro and other businesses, and part of that neuro is the continued impact of the discounting that we've done with respect to a couple of products. Within OpEx, so I called this out a couple of times in my prepared remarks, we are continuing to spend against things for which there is not currently revenue. So, that is a bit of a drag on Q4, as you look at it. So, those are the big buckets to walk you from the $1.55 down to the amount implied by our guidance. I'll stop there.

And the second part of your question, David, was on our Tampa facility. We stand by the comments that I made previously on the second quarter that, yes, we did receive some comments of 483 on the Tampa facility. We are ready for a re-inspection in that facility within six months of the comment I made in August, and we target it for being ready approximately by the end of the year for a re-inspection early 2017, by the end of year 2016 for a re-inspection. That will allow us to go forward with our re-inspections that would allow Vyzolta to get a final approval. So, that is still our plan by the end of the year or thereabouts being ready for a re-inspection. Operator, next question.

The next question comes from the line of Gregg Gilbert from Deutsche Bank. Your line is open.

Yes. Thanks. Paul, I want to start off – and welcome, Paul. I wanted to start off asking about what you said about 2017 to make sure I heard your comments correctly. I think you mentioned revenues would be down year-over-year. Within that, that your sort of core growth products would be up, bit overwhelmed by the shrinking Diversified. Is that right? And can you speak about EBITDA and/or EPS direction in 2017 versus 2016? That's the first question. And then secondly, on the GI business, a couple pieces within this. Can you discuss what triggered the impairment? Can you give us what the operating expenses are for that business? And lastly, why is Xifaxan inventory a month and a half when most high-volume products in the industry are a couple of weeks? And what's the plan with that level? Thanks a lot.

Sure. I'll start with a question regarding a look at 2017 and sort of summarize what I said. So, basically you're looking at – at 2017, in our Diversified group, you've got the neurology and other segment, and you've got generics. So, two different pieces. Let's start within neurology. Now, we have the expected loss of exclusivity of Nitropress later this year. And in early 2017, you've got Isuprel, Syprine, Mephyton and Virazole, and then you've got the year-over-year impact of the previous genericization of Edecrin, which went generic in Q2, and the one I can't pronounce Ammonul, which went generic in March of 2016. So, you take all of those together, there is a table in the back that's included as part of our deck where we show five quarters' worth of net revenues for products, at least Nitropress, Isuprel, I think Syprine and Mephyton are included within our top 10 products in that segment. You can look at what that looks like and think about what that means in a situation where we lose exclusivity. In generics, we've had some good fortune in the generics business this year, which we don't expect to continue on into 2017. And so, net-net, these are going to be down and they're going to be down in a material way. And so, my point is, you look at that and say, all right, it kind of – this is what happens when you have loss of exclusivity for a number of products and you have good fortune, and the good fortune eventually evaporates due to competition. What we have is a remaining business, as I said, the majority of which is comprised of our core assets which we expect to grow mid-single-digits at the top line and high-single digits at the operating profit line or EBITDA line, you can think of it as at the EBITDA line. So, that's how we're – we're just providing a hand signal, but when you – but my last point on this was we will dig our way out of part of the growth hole created by the LOEs and the changed expectations, well, not change, the expectations for the generics business in 2017 v. 2016, but we will not crawl all the way out of that hole, so it will be a down year.

I'm sorry. He had a second question. Hold on. Gregg also asked about the Xifaxan inventory. As Paul said, some are approximately 1.5 months. I think that is just normal variation that we saw in the quarter, but we wanted to make sure, as Paul said, we'd be very transparent on that number. But with a product that's grown, it's going to be up, it's going to be down. This is just some normal variation based on what wholesalers purchase for their inventory. And I think – did we answer the question? Was there a question Gregg had on the GI business on impairments?

On the impairment side, in conjunction with our shifting to our new segment reporting, that triggered an overall review of our intangibles, particularly our goodwill. And through the reforecasting of various business units we ended up taking that, I got the number wrong, a $1.04 billion or so of write-down in goodwill in the quarter. But that was triggered by the change in segment reporting which causes a fresh look at all of our forecasts for all of our business units and resulted in the write-down of that particular goodwill.

Thank you. Operator, next question, please.

And your next question comes from the line of David Maris with Wells Fargo. Your line is open.

Hi. I have two questions. First, Joe, have you given any thought about the insider trading case that takes place next year and what impact it might have on Valeant, not just the financial penalties but what might happen if your codefendant is found guilty, as well? And if so, can you give us any of your thoughts on that? Secondly, it came out last week that there may be criminal charges brought against the company and two of your executives, one a current consultant, one a former executive. Can you – I know you won't comment on that or what the charges might be, but can you tell us – you signed consulting agreements with both of them, can you tell us what value you're getting from them because we're not seeing much in the results from that? So, what do they do on a day-to-day basis or a weekly basis to earn what you're paying them? And then lastly, Paul, I know you're new, but do you think based on what you've seen, so far, that you have – the company has sufficient liquidity to meet obligations through 2020 or through 2022 without selling assets and without restructuring the debt? Thank you.

Okay. A couple comments. Number one, on the insider trading case that you referred to, David, as you know, I can't really comment on any existing litigation that's ongoing. I will say that we are delighted that I brought on a brand new general counsel to join us, Christina Ackermann, and she's doing a fabulous job of helping us work our way through all the different cases. But I really can't make any specific comments on any individual case, of course, that's in litigation at this time. On the question of the consulting agreements that we have, I assigned the one for Mike. Mike did help us with some consulting as we went through the early stages of my arrival in the business. Specifically, Mike was involved with some of the discussions that we had with the Walgreens program and putting it originally in place, and he gave me some background and some information on that. But since that time, Mike has not been as active and very limited activity. We will pay him a consulting arrangement as he is involved with the business, and that's exactly what we have agreed to, but I view that as being less and less of involvement, certainly over the last several months that Mike had less and less involvement with the company. In fact, almost no involvement with any of the decisions of the company. On the question, Paul, he has – David is...

No, I got it. Yeah, with respect to liquidity, I think the question was do we – without asset sales, do we see a pathway where we maintain adequate liquidity to service a debt, and the answer is yes, I do see that pathway. I won't kid anybody, we have a challenge here, it's easy to see. You can see the various towers that we have and that we will need to refinance; and in order to refinance it in a good way, we will need to continue to show progress here from 2017 to 2018 to 2019 and beyond. But the short answer, David, is yes, I am confident there is a pathway for us to maintain adequate liquidity to service our debt and to refinance it.

Operator, next question, please.

And your next question comes from the line of Louise Chen With Guggenheim. Your line is open.

Thanks for taking my question. Got a few here. So, first question I had was, there's obviously been a lot of headlines around product divestitures naming specific business units and products, I'm just curious what additional color, aside from what you've said on the call, you could give around that? And then secondly, on Rochester, are there any pending applications out of that facility that are sizable product opportunities, and then how big is that facility in terms of sales? I know you mentioned the sales will not be affected but just curious. And then, are there any similarities between that facility and other ones where there could be potential issues amongst other facilities with the Valeant? Thank you.

If I might, Joe, do you mind? I'll start, I think as we had talked about the talk about potential divestitures of assets, I'd say that when people talk about capital allocation, they usually think about investing inside the company. I think about operating expense, R&D, growth CapEx, investing outside the company, acquisition of assets, companies, transacting with shareholders. What people don't often think about is the disposition of owned assets. I'd say part of our job is to know the value of assets we own, and if we believe in an asset may be worth more in someone else's hands and they'll pay us more than what may be worth in our hands, we should sell that asset. Here comes a bombastic statement, as I often like to do that, when someone labels an asset as strategic, it means they want to buy it and can't justify the price or they want to keep it even though someone offers them more than it's worth in their hands. In a nutshell, if someone offers us a value that exceeds, even by a little, the value of the asset in our hands, we should sell that asset. It's simple. Now let me be clear, our preference is to keep the businesses we identify as core but not at all costs. This is a requirement for us as a management team and as governed by our board that we be responsible in thinking about the value of what we own and whether we can achieve more value by selling it or by continuing to run it. I'll stop there.

I think Paul did a great job, it's amazing, only two months here, great job answering that question. The only thing I'd maybe add to it is that, as I've said at the first call I was on, that we value what's core, what's non-core, and that is still the case. So, core assets for us are the dermatology, the GI, the eye care and the consumer side, but we did receive a number of inbound requests to acquire some of our product assets with very significant numbers that we have to evaluate and as such, we owe it to all of our shareholders, our debtholders to evaluate any inbound requests to acquire assets, and I think it's a positive statement on the company that we have great assets that people are very interested in owning. So, for that reason, those inbound questions are ones that we're going to have to evaluate and do what's best for our shareholders and our debtholders and all of our stakeholders in the company, and that's what we are doing. On the second part of your question of Rochester, maybe I'll just go a little bit more specifics on Rochester. As I mentioned, we did receive an FDA warning letter, we received it just on Friday, November 4. It was relating to an inspection that was in February of 2016 and then a follow-up in September of 2016. As I mentioned, we take these matters very seriously and work with the FDA to respond to the warning letter and resolve as soon as possible. I want to make clear though, it does not impact the production or sales of any of our Bausch & Lomb products or anything at the site, it is specific to some medical devices that are – the registrations are there at the site, and as such, they were specific to those medical devices but it does not relate to the manufacturing of the contact lenses and other products at the Bausch & Lomb site in Rochester, New York. Operator, next question.

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

Hi. Good morning. Thanks for taking the question. Joe, you referenced sort of a 4Q event in terms of finding a primary care solution for the GI business, and I think it was specific to Xifaxan. I was just wondering if you could help us understand a little bit about what you're thinking and some broad strokes sort of description of what that solution might be.

Sure. Thanks very much for the question. So, as I've said on the call, we have a number of solutions for primary care. We actually have three different alternatives. We may do one or two of those alternatives. I will say though that that's something that we're working very actively to go forward with. Down this primary care issue, I remind you, the issue we face is that Xifaxan is a great product. As we moved into the IBS-D category, we realized that we needed to have some additional capabilities in the area of GP, FP, IM; general practice, family practice, internal medicine or primary care for the treatment of IBS-D. Today, we can only cover about 10% of that opportunity. We've put forward a solution that we believe will allow us to cover 70% of the primary care opportunity with the programs that we have in mind. There's an opportunity for us to partner with another player. There's also an opportunity for us to build our own primary care capability. We're looking at both of those alternatives and along with one other alternative, and look to have that answer, as I said, in the fourth quarter, we will get it done. That's the probably the best I can answer at this point, given some of the questions that I'd also mentioned about the potential interest in the acquisition of that business unit. Operator, next question.

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

Hi, guys. Thank you for taking my question. I think the new disclosure on this call versus the press release is obviously on the 2017. So, if you'll allow me to, I just want to drill down to 2017 in some detail here, perhaps on a bridge level, if possible. So, Paul, you mentioned EBITDA will be down because of products facing generics. And these products basically add up to about something like $800 million, and they have expiries at various times. Let's just say that $800 million gets cut into half, and it drops entirely to EBITDA. So, that's a $400 million headwind. So my question is, there's a few offsets here as well. So, number one, Salix. So, you're doing about $70 million to $80 million better sales in Salix in Q3 versus you did in Q1 and Q2. You have some pricing tailwinds, right? About at least $100 million in additional price. You have some relaunch of the Costco products which is what you guys talked about last quarter. And then obviously, SG&A cuts, as Q1 and Q2 were heavier this year than what Q3 is tracking. The SG&A cuts are an additional about $150 million, $160 million. So, I put it together, it's $400 million drop on headwind from products versus tailwinds of about $150 million in additional Salix sales, about $100 million on price, and at least $150 million on additional SG&A cuts. That right there kind of offsets each other. So, I just want to understand what am I missing, just so we understand 2017 much better?

So, let me – I'll start, and I'll turn it to Paul. I think what we're trying to do here is take a look at all the moving pieces and put forth. And we're not trying to give 2017 guidance at this time. I think Paul was just trying to make you aware that there's some U.S. exclusivity risk in 2017 and wanted to be transparent with that. And I think Paul is doing a good job of trying to be transparent there. That is a potential exclusivity – or loss of exclusivity. But clearly, remember, we do think that there is growth prospects in our business and that's what Paul mentioned in terms of, I think he said, mid-single digit growth in our core businesses, and also higher on the EBITDA growth. But I think probably that's the best way I can answer it.

Right. And I'll jump on, too. Think about that core business that we talked about, we had mid-single digits, high-single digits and EBITDA growth in 2017 v. 2016. I'm trying to isolate for you the growth drag. You did what I would hope which is you start to look at the individual assets, you aggregate them and you decide what is an appropriate degradation curve. You can take into consideration what you believe the right timing is, et cetera. But I just wanted to point out that our revenue and EBITDA expectations for 2017 v. 2016 are that revenue and EBITDA will be less, and it will be less primarily because of the performance of those generic – those neurology assets which will either have exclusivity, lose exclusivity during 2016 or in early 2017 as well as a drop-off in the generics business. So, all the other things that you had ticked off are kind of captured in the all other like what the – the remainder part, our core assets, and we expect to grow mid-single digits and high-single digits at the EBITDA line. So, I think that was pretty clear set of hand signals. And with what Joe said, we're not providing detailed 2017 guidance at this time, but we as a team felt compelled to provide those hand signals. I'll stop there.

Yeah, operator, next question, please.

And your next question comes from the line of Chris Schott with JPMorgan. Your line is open.

Great. Thanks very much. Just two questions here, just one coming back to the longer-term outlook for the company. We're obviously seeing 2016 coming down or targeting 2017 revenue and EBITDA declining again next year. What does the longer-term growth of this business look like? I guess, you laid out some 2016 through 2018 trends with 2Q, do those type of trends still hold after today's commentary? Or just any color you can give us as we, again, look past to this eroding business would be helpful. The second is on the ongoing erosion again in top line EBITDA, does that put more pressure on the company to divest assets just to address some of the debt levels? Or are those processes kind of independent of each other? Thank you very much.

All right. Maybe I'll start, and Paul, feel free to add because some of the things that you're asking, Chris, go back to some of the things we talked about in our Q2 results. What we said and continue to believe is that if you look at our core Bausch & Lomb, the Branded Rx business, we see that business as a good growing business, as Paul said, a mid to single-digit growth rate of that business. The EBITDA will have an even higher single-digit growth. So, think of it that way. But there are some things in our Diversified business, in the neuro business, that are onetime events, as you lose exclusivity, and we're trying to be transparent on that loss of exclusivity. Obviously, we're going to do everything we can do to minimize that loss, but we're trying to be transparent to say that there is some challenges to that in the near term. But I want to be very clear, there are other programs and activities that we're going to look at there to help grow that Diversified business with some additional promotional efforts on. And we have some exciting products. We have a product, Migranal, that's been in that business, it's a smaller product but it's got opportunities to grow. We're going to look at that. There are things that we're doing with Wellbutrin, other things we will do to continue to look for growth, but I think right now we want to mostly reflect the fact that the loss of exclusivity that we expect over the next 12 to 18 months is something that we want to be transparent with.

Yeah, I'll take the liquidity question, Chris. Go back to my answer to David earlier, we do not need to sell assets to be okay from a liquidity perspective. That said, on our Q2 call, we talked about our program to evaluate the potential divestiture of non-core assets to the extent that we can do that and we can improve both our liquidity and our leverage situation, we will certainly pursue that if it makes sense, but we don't need to do that to be okay from a liquidity perspective.

Thank you. Operator, next caller, please.

Your next question comes from the line of Gary Nachman with BMO Capital Markets. Your line is open.

Hi. On your pricing strategy, what's the process behind the committee deciding which products to take price increases on and the magnitude of those price increases? The eight or so you took in mid-October, how much of that did you actually realize? So, how important is pricing for you as a lever of growth going forward?

Sure. I'll take that one. Maybe just a couple of the – just go back on the facts, and we did take some price increase in October as you actually said. The overall price increase for us for an annualized basis was approximately 2%, so below the 2.3% consumer price index. I would say that in terms of importance, we just obviously are looking at the range was anywhere from 2% to 9%. What we have said based on the activities of our Patient Access and Pricing Committee, we came forward with a couple of concepts. We would do single-digit price increases, number one. We would stay below the five-year weighted average of Branded pharma pricing, so those are two principles that we are operating under. And I think as long as we continue to operate in that fashion, we think it's about the right thing to do in the pricing environment. Relative to individual decision on product A or product B, we're always just going to look at the relative factors in the marketplace like competition to make our decisions on any individual pricing. But to be clear, that pricing is only going to be one element of our future. A large part of our future, and what I think is currently not recognized in our company is that we have a pipeline, we have pipeline products like brodalumab, we have the Vyzolta product, we launched Oral Relistor. We've got a really exciting product that's a topical psoriasis product that we expect to file in 2017. It is a new product, so I think it's going to be much more important to driving the success of the business. And then, relative to the question on pricing as to what percent is realized, usually it's in the – we realize somewhere in the, let's call it 60% to 65% or two-thirds of any price increase is approximately what one realizes after rebates and discounts. Operator, next question.

And your next question comes from the line of Annabel Samimy with Stifel. Your line is open. Annabel Samimy - Stifel, Nicolaus & Co., Inc.: Hi. Thanks for taking my question. So, I guess with the last decrease in guidance, it was pretty clear that you identified some key challenges, it was negative ASPs, it was the GI business. It seemed like you made some good improvement on those challenges. And now, you have these new challenges, international and sustainable revenue trajectories, generic challenges. And based on these new challenges that you've identified, I'm not really hearing clearly what the distinct strategies are to address them other than reducing costs and investing in R&D. So, I'm hearing more Band-Aid solutions. Am I missing something? Is there something distinct that you're doing that's going to offset some of these challenges that you're facing right now?

So, let me start, and then, I'll let Paul also contribute because he's been very active on many of these challenges. I'm going to refer you to slide number 20 though in terms of things that we're doing to improve on the overall business performance. Clearly, the first and foremost just starts with bringing the right people on the team. I have made some changes in the team as I brought new people in, for example, Tom Appio took over the international business, Tom is going to do a great job for us, but he went in and took a look at where we were and where the assumptions are within the international business, and wanted to make sure that he was transparent to us in terms of what the – as we went through our quarterly business review. So, building the new team and getting new people in place, I think first and foremost, and of course, obviously I've already mentioned Paul, and how he looks at the projections, et cetera, as an important part of the team. The second thing I'd say is making investments in research and development, making investments in quality, bringing on Louis Yu and helping on the quality side was clearly a necessary item for us – I brought him on and knew I needed it, but it was I think evidenced by some of the challenges that I've talked about on the call that I need to get some incremental quality resources to help us to go forward with the future, and that's part of what I think Louis will bring to the table. I'm already seeing great results from Louis and how he's looking at the quality aspects of our business and what we're doing. We are investing in research and development. We could have made a decision, as Paul pointed out, to reduce R&D in the quarter, and over the fourth quarter, we felt that the right thing to do is invest in research and development that we think are the opportunities for the future of our company. So, not to delay a filing of a novel product for psoriasis as an example. But we do have to cut back, to your comment, we're going to reduce operating costs, go through a zero-based budgeting process, and we expect that to save $75 million to $100 million in 2017, and that initiative will be led by Paul to help us define that. We're going to go after the places where we do supply chain rationalization on page 20, we think we had $150 million to $250 million. So, these are some real specific action steps that we're going to take to address the issues that we've identified.

Yeah, I want to chime in – I mean, as the new guy, I got a chance to look at – two of the main engines that will drive us forward are the GI group and the derm group. And I'd say that the GI group, so the changes that we made into that GI group going back before I joined, but things that were being implemented in, call it, the months before I joined, we are seeing a noticeable positive impact from the changes that we're taking within that group, and you're seeing that reflected in kind of the TRx trajectory, as I – as I just love to say, it's like – it gets hard when you look into factory sales because of all of those elements that I had mentioned about what can cause a quarter to look different than another quarter, but when it comes to TRxs and the trajectory of TRxs, that's the ultimate proof in the pudding for a Branded pharma segment, and I think we're seeing very good progress in the GI space. And so, what are we doing? We implemented – we're continuing to review and we're continuing to monitor the progress that that GI team makes, and I think they're doing a great job and moving in the right direction. So, that doesn't sound like a Band-Aid. What that sounds like is we identified an issue, we deployed resources against it, we looked to see if it was effective, and then we hope to get the results and we're seeing the results in GI. Derm is a little bit different story and a little bit more complicated. There are certainly steps that we have taken and we will continue to take to improve the effectiveness of our derm group. I mean…

Thank you. Operator, next question.

And your next question comes from the line of Andrew Finkelstein with Susquehanna. Your line is open.

Thanks for taking the question. First is a broader picture. With the new segments last quarter, you laid out a 2016 to 2018 sort of vision for each of them. Could you just review what's changed, if anything, in the outlook for those? I know you're not giving 2018 guidance, but a lot of this is related to Diversified Products, but to what extent has your three-year outlook for the core segments changed? And then, on specific products, could you talk a little bit about where you see Xifaxan revenue per Rx shaking out, and any initiatives on the hepatic encephalopathy side because you've highlighted that as a major source of future growth? And then, on Oral Relistor, you highlighted formulary acceptance, any color you can give on the expectations for uptake and pricing relative to competitors. Thanks.

Sure. I'll start with the broader question on our commentary on – again, we're not going to provide 2017 guidance, but what we tried to do last quarter is just give some overall indications of where we thought the business – what the growth rate trajectories would look like over a three-year time period, and I think many of those things are still the things that I mentioned before in terms of just overall growth rate, top line growth rate in the, let's call it, the mid-single digit rates, and approximately a higher single-digit growth rate for the EBITDA level of generation. So, I think those types of comments still stand, but the one thing that we're trying to be transparent on is some of the questions and issues that we face relative to the neuro business or what we refer to as Diversified business, and specifically relative to the loss of exclusivity that will occur in the 2017 timeframe. I think that's all that we're trying to do is provide that some transparency on that question. On the other portion of your question, do we see opportunity with Xifaxan and the hepatic encephalopathy, the answer to that is absolutely yes. If you think about the number of patients that are a potential – we think this is potentially a $5 billion opportunity just in hepatic encephalopathy, if all patients were compliant. Now, that's not going to happen, but we certainly think there is a much bigger opportunity than what we see today because of the importance of this product and what it means to reduce re-hospitalization for the patients that have hepatic encephalopathy. So important, our comment. On the Relistor, it's very early as you know, but we did see some growth in the TRxs and the whole Relistor family as a result of launching the Oral Relistor. I'm delighted to say that just over the last couple of weeks, the actual number of Relistor prescribers in both the oral and subcutaneous has increased by 10%, as we've gone out there with the new product labeling and the new product opportunity. So, we're seeing an increase in the number prescribers since the launch of – just going back four or five weeks ago, where we've already seen – probably six, seven weeks ago, we're already seeing 10% increase in prescribers. Managed care situation, we have 50% of commercialized covered within just two months of the product launch. So, we're making progress. We believe it's helpful for us for what we sort of plan to do for the future success of this product. Operator, I think we have time for maybe one more question.

One question, yes.

And your final question comes from the line of Alan Ridgeway with Scotiabank. Your line is open.

Hi. Good morning, guys. Thanks a lot for taking my question here at the end. Paul, maybe just for you, a lot of guys have asked about the liquidity and the debt, if we were to assume that there's going to be some refinancing involved with the debt as it comes due, now that you've been with the company for a while, can you give us a sense for what your target leverage would be long term for Valeant, and where you'd like to work this down to over time? And then secondly, just on the commentary earlier about the higher rebating in the quarter on some of the branded products, is that due to timing of managed care coverage kicking in that you guys have negotiated this year? And how should we think about rebating going into next year? And I'll just leave it with that. Thanks a lot, guys

Yeah, hey. Yeah, I'll take the target leverage. I think, yeah, obviously our goal is to dramatically reduce our leverage and we intend to do that through a number of ways. First, I'd point out that one of the advantages of our company is that we enjoy a low tax rate and that low tax rate enables us to convert earnings to cash at a high rate. So, we would expect, one, to be able to reduce debt through free cash flow. Two, we have talked a little bit already today about our potential for reducing the quantum of debt through sale of non-core assets. Three is over time, yeah, we will have some refi but we would intend to grow our EBITDA which definitely reduces our leverage, and our target would be over time to get our leverage down below 4 times. Now, that's a ways off, I get it. I understand. But that's our target and that's what we're working towards.

I'll take the question on the rebates. I mean, yes, there are some higher rebates, but I think what we've done here is truly to look at – Xifaxan is a good example, we've done two things, if you think about 2015 versus 2016, number one, in 2015 coming into the year with the IBS-D indication, we wanted to get better access. In order to drive that better access, we did have to give incremental rebates. Number two, we said that if we can remove some of the step therapy requirements with the higher rebates, we were willing to do that. And those are what's been driving some of the incremental rebates to make sure we get better access for our products for the patients and physicians to prescribe them. So, that's really the primary thing, but I think we really talked about that in previous calls as being really some of the trends that we've seen in the previous calls.

So, let me close and say thank you, everyone, for your interest in our company. We're going to be able to share with you more information over the next weeks ahead. If there's questions, be glad to try to answer additional questions as well. We thank you, everybody, for participating in today's call. Have a great day, everyone.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.