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The Facts on Norma Provencio’s Tenure as a Director of Valeant Pharmaceuticals

December 15, 2015

  • Bloomberg News has published an article examining Norma Provencio’s tenure on the Board of Directors of Signalife and Valeant. In connection with this inquiry, Valeant provided the following information to Bloomberg News:

    Ms. Provencio  was first elected, as a non-incumbent nominee, to Legacy Valeant’s board in 2007.  More than 95% of the votes cast by shareholders with respect to her nomination were cast “for” Ms. Provencio’s election to the Legacy Valeant Board.  In nominating Ms. Provencio, the Legacy Valeant Board, thorough its Corporate Governance/Nominating Committee, a customary background check and interview process was conducted.

    Ms. Provencio was appointed chairperson of the Audit and Risk Committee of VPII (the current company, as surviving company of the 2010 Biovail-Legacy Valeant merger) in 2011.  Ms. Provencio served as the Chairperson of the Finance and Audit Committee of VPI from May 2008 until the Biovail merger in September 2010.  So, in addition to her accomplished professional background and qualifications, the Board had actual experience working with Ms. Provencio, as a director and as an audit committee chair, and obviously felt comfortable with entrusting her with as the Chairperson of VPII’s Audit and Risk Committee since 2011.

    Ms. Provencio has many years of financial and industry experience that make her well qualified to serve on Valeant’s Board. Ms. Provencio has been a certified public accountant since 1981 and served as the audit partner on numerous public companies with complex accounting issues during her public accounting career.  She has also lead numerous investigations for public and private companies and has been the forensic accountant  for numerous special committees during her professional career.

    The Board has determined that Ms. Provencio’s many years of sophisticated financial and industry specific experience at Provencio Advisory Services, Inc., KPMG LLP and Arthur Andersen, her service on the board and finance and audit committee of VPI, her wealth of knowledge in dealing with financial and accounting matters and the depth and breadth of her exposure to complex financial issues qualify her to be a member of the Board and the committees on which she sits.

    Ms. Provencio’s directorship with Signalife was disclosed in Valeant’s proxy statement, in compliance with applicable SEC rules. Prior to 2010, the proxy rules required disclosure of then-current public company directorships.  Accordingly, Valeant’s 2007 proxy disclosed Ms. Provencio’s directorship with Signalife.  Beginning in 2010, the proxy disclosure rules introduced a 5-year look back, and accordingly, Valeant’s proxy statements filed in 2010, 2011, 2012 and 2013 disclosed Ms. Provencio’s previous directorship with Signalife.

    The ad hoc committee was appointed by the Board of Directors to review allegations related to the company’s business relationship with Philidor and related matters, and consists entirely of independent directors.

    The votes appointing Ms. Provencio to the ad hoc committee and as chairperson to of the ARC were unanimous. And at each election of directors since Ms. Provencio was appointed to the Legacy Valeant board in 2007, she received the overwhelming support of shareholders as demonstrated by the shareholder vote.

    Mike Pearson commented, “Since I have known Norma Provencio, she has acted with integrity and displayed sound business judgment, and I believe that she is exceptionally well qualified to lead our Board’s Audit & Risk Committee.”


    With respect to her tenure at Signalife, Ms. Provencio served as a member of the Board of Directors and chair of its Audit Committee from  July 2005 to June 2007.  She chose not stand for re-election to the board of directors of Signalife.

    The only financial reporting matter that Ms. Provencio is specifically aware of that overlapped with her tenure on the Signalife board is a sale in September 2006 of $190,170 that was alleged to have not been a legitimate sale.  With respect to that specific matter, the SEC complaint states that it was concealed from that company’s CFO, auditors, outside counsel and other officers.

    Signalife engaged outside CPA firms to perform its accounting functions during Ms. Provencio’s tenure on the board.  The CPA firms included Robert C. Scherne, CPA, PC  and Pickard & Green.  Both CPA firms provided accounting and other management consulting services for small companies, including preparing required SEC filings for public companies.

    Ms. Provencio has followed the criminal case against Mr. Stein and believes that the matter was handled appropriately.

Statement Regarding Management Change at Sprout Pharmaceuticals

December 9, 2015

  • Thanks to the efforts of Cindy and her team, Valeant has the opportunity to make Addyi broadly available to patients in need of this important medical treatment.  Having built a team to take Addyi to market, we mutually agreed that it was the right time to transition to new leadership for the next phase of global commercialization.  We look forward to continued progress under the leadership of Tracy Valorie and Ray Larwood, and we are pleased that the team will continue to benefit from Cindy’s guidance as a consultant to Sprout.

Valeant Statements Regarding December 9 Hearing by Special Committee on Aging

December 9, 2015

  • On Price increases generally: 

    Valeant markets more than 200 prescription drugs and hundreds more non-prescription products, so broad conclusions about the company’s pricing cannot be drawn from any one drug or set of drugs. We set prices based on a number of factors, including the cost of the development or acquisition of a drug, the availability of substitutes or generics, and the benefits it offers versus alternative treatments that might be more costly. When possible, we offer patient assistance programs to mitigate the effects of price adjustments and keep out of pocket costs affordable for patients.

  • On Nitropress and Isuprel: 

    Because these drugs are typically administered in hospital settings, patients generally do not pay for them directly. Instead, hospitals are reimbursed by insurance carriers based on fixed bundled rates for the overall procedures in which the drugs are used. Because most hospitals use a small amount, if any, of these drugs, Valeant’s increases in the list price has had a limited impact on the average hospital’s cost. As we have said previously, for the small number of hospitals who use a large volume of the drugs, we are currently working to provide them with significant volume discounts.

  • On research and development: 

    We believe innovation should not be judged by how much you spend, but by the new products that a company is able to bring to market, and our goal has been to bring multiple, high-quality, innovative products to the market year after year. We have harnessed the considerable investment capital at our disposal to identify and acquire innovative companies that have developed, or are on their way to developing, valuable pharmaceutical products. In doing so, we help allocate capital to developmental stage products in a more nimble fashion. We recognize that this is not the R&D model that has governed the pharmaceutical industry in past decades. But it is a model that allows us to bring new products to market (Valeant last year launched 20 products in the United States), while also supporting R&D by smaller companies that benefit from our investments.

Comment on Twitter Account

December 6, 2015

  • We are aware that someone impersonating Mike Pearson has created an account on Twitter, and we have contacted Twitter to report the unauthorized use.  Mike Pearson does not have a Twitter account. For news about Valeant, please refer to the company’s official announcements on www.Valeant.com and www.ValeantNow.com.

Response Statement to Bronte Capital Allegations

November 25, 2015

  • Short sellers have been making false, unsubstantiated claims about Valeant for months in an attempt to drive down our stock price, and today’s allegations also contain significant inaccuracies. Valeant has already disclosed that 7.2% of our sales this year through the third quarter went through specialty pharmaceutical channels, and that has not changed. As we have said, in October we decided it was appropriate to sever our relationship with Philidor after allegations about their business practices came to light. The entities mentioned today appear to have been formed on or prior to 8/18/2015, based on public records. Furthermore, our board of directors has appointed an ad hoc committee to review allegations related to Valeant’s business relationship with Philidor and related matters.

Statement on JAMA Dermatology Study

November 25, 2015

  • Valeant sets prices based on a number of factors, including the cost of the development or acquisition of a drug, the availability of substitutes or generics, and the benefits it offers versus alternative treatments that might be more costly. When possible, we offer patient assistance programs to mitigate the effects of price adjustments and keep out of pocket costs affordable for patients.
  • With respect to the JAMA Dermatology study published 25 November 2015, we note the following:
    • Valeant has the highest U.S. market share in dermatology (excluding biologics) with over 90 products available.
    • 5 of the 19 products listed in the JAMA study are Valeant products, which is lower than would be expected given Valeant’s overall market share in dermatology.
    • 10 of the remaining 14 products are owned by other large, public, pharmaceutical companies who in aggregate have significantly less market share.
    • The retail prices cited in the study rarely represent the prices that patients and insurers are paying or what the pharmaceutical company receives.
    • There are generic alternatives available for four of the five Valeant products on the list (Retin-A-Micro, Targretin, Benzaclin, and Carac cream). These products faced generic competition during the time period examined by the JAMA study, and therefore lower price options were and continue to be available.
    • Valeant owned only one of the five identified products during this entire time period. Some of these price increases were taken by predecessor companies.
    • One product which Valeant owned over the period, Oxsoralen-Ultra achieved peak sales of $10.4M in 2012

Response Statement to Allegations Regarding Inventory Levels

November 19, 2015

  • As previously stated, allegations regarding heightened inventory levels at Valeant are unfounded. Valeant has set targeted inventory levels for emerging markets at 2-4 months, depending upon the market and product. Inventory levels can fluctuate from period to period even if there is no change in the absolute value of inventory due to fluctuations in market demand and other economic factors. Recent media reports have clear inconsistencies with what are the facts:
  1. Valeant’s Slovenian warehouse has been historically the regional warehouse supporting the entire region which includes the Balkans, Baltics, Greece and Ex-Yugoslavia. The warehouse has worked as regional hub for the last 10 years. The level of in-house inventory covering all regional needs is no higher than 3 months. All inventory in our warehouses is included on our balance sheet and is not recorded as sales until it is sold to a customer. The press reports from Slovenia also confirm that the inventory levels at wholesalers/distributors are within normal limits, which directly refutes any allegations of “channel stuffing.”
  2. Looking ahead to support the needs of a growing business, Valeant’s PharmaSwiss operations considered two options: (1) building its own warehouse in Slovenia and (2) renting additional space.
  3. The team sought quotes for warehouse space from several service providers in the region, including Kemofarmacja, and ultimately decided to partner with a different company.

Response Statement Regarding Clerical Error in Delivery of Shares

November 12, 2015

  • The fully vested shares were delivered to Mr. Pearson as a result of a clerical error occurring because Valeant followed the procedures used for other company employees under which performance share units vest and settle concurrently. Mr. Pearson’s then-current compensation agreement had a provision requiring delayed settlement of vested shares until 2019. He was the only Valeant employee with that provision, and the shares were mistakenly delivered under the procedures used for other employees. The error was discovered in the fourth quarter of 2013 and corrected in that same quarter by Mr. Pearson returning to Valeant the taxable income incorrectly paid to him. The taxable amount was determined in accordance with Valeant’s standard practice of valuing stock at the closing price the day prior to vesting. In accordance with the corrections procedures outlined by the Internal Revenue Code, Mr. Pearson paid this amount to the company, plus interest. Pursuant to the corrections procedure, Mr. Pearson could have repaid the taxable income either in cash or by returning a number of shares equal to the value delivered in error. Mr. Pearson elected to repay cash.

Response Statement Regarding Clerical Error in Delivery of Shares

November 12, 2015

  • “Despite recent allegations, the fact is that the misdelivery of shares to Valeant’s CEO was publicly disclosed in an SEC filing on March 13, 2014.  As disclosed in our public filing, the shares that Mike Pearson received in error were fully vested as of May 24, 2013 based on achievement of the applicable performance criteria, and Mr. Pearson repaid the value of the shares he received plus interest.”

Response Statement to Allegations Regarding a Lawsuit Brought by Former Valeant Employee

November 10, 2015

  • On August 6, 2015 a former Valeant employee filed a lawsuit in federal court alleging disability discrimination, harassment and retaliation, among other things. On November 4, 2015 the court dismissed the majority of Weinberg’s claims. Valeant believes Weinberg’s claims are meritless and we have no evidence of unauthorized access to Valeant’s financial systems as alleged by the former employee. In addition, Valeant has had no interaction with any company called Mongran Financial.