Statement Regarding the Relative Impact of Price and Volume on Growth
February 3, 2016
Recent questions have been raised regarding comments made during Valeant’s First Quarter 2015 Earnings Call, on April 29, 2015, addressing the relative impact of price and volume on growth. Here are the facts:
- On the Q1 2015 earnings call, the company provided directional price / volume mix for the Top 20 products for Q1. (See Slide #8 of the Q115 Earnings deck dated April 29, 2015) “Top 20 products, excluding newly acquired products (Provenge, Isuprel, Nitropress), grew 36% Q1 2015 over Q1 2014 – Majority of growth from volume.”
- On the April 29 earnings call, in response to a question that was asked of CEO J. Michael Pearson as to how much price contributed to growth in the quarter, Mr. Pearson responded that “In terms of price volume, actually, volume was greater than price in terms of our growth.” To the extent that Mr. Pearson was asked a question about total revenue growth his response would not have been accurate; it would accurately reflect price/volume mix for Top 20 product revenue growth for the period.
- In the Q1 2015 10Q filed April 30, 2015, total revenue growth was described as follows: Total revenues increased $305 million, or 16%, to $2.19 billion in the first quarter of 2015. The growth in the Developed Markets was driven primarily by price, as significant volume increases in dermatology and eye health were offset by volume declines for certain neurology & other/generic products and for the Japan market. The growth in the Emerging Markets was driven entirely by volume, as price had a negative impact.
- Subsequently, in an email dated May 21, 2015, former Chief Financial Officer Howard Schiller referenced price vs volume mix for revenue growth in Q1 2015 as follows: “Excluding marathon, price represented about 60% of our growth. If you include marathon, price represents about 80%.”
Valeant disclosed actual price volume mix for same store sales organic growth on its Third Quarter 2015 Earnings call. (See Slide 21 of Q3 2015 Earnings deck dated October 19, 2015), and has stated that, going forward, it intends to provide quantitative price volume disclosure on a same store sales organic growth basis for its full portfolio.