Ladies and gentlemen, thank you for standing by, and welcome to the Actavis First Quarter 2014 Earnings Conference Call. [Operator Instructions] Thank you. I will now turn the call over to Lisa DeFrancesco, Vice President of Investor Relations. Please go ahead.

Thank you, Lori, and good morning, everyone. I'd like to welcome you to the Actavis first quarter 2014 earnings conference call. Earlier this morning, we issued a press release reporting Actavis' earnings for the first quarter ended March 31, 2014. The press release, together with additional materials reconciling GAAP and non-GAAP financial results and forecast, are available on our website at www.actavis.com. We are conducting a live webcast of this call, a replay of which will also be available on our website after its conclusion. With us on today's call are Paul Bisaro, our Chairman and CEO, who will provide an overview of the first quarter business highlights; Todd Joyce, our Global Chief Financial Officer, will then provide additional details on the performance of our business segments, as well as our consolidated financial results for the quarter. Paul will then conclude, and then we'll open it up for questions and answers. Also on the call and available during the Q&A are Siggi Olafsson, President of Actavis Pharma; Bob Stewart, President of Global Operations; and David Buchen, our Chief Legal Officer. Please note that today's call is copyrighted material of Actavis and cannot be rebroadcast without the company's expressed written consent. I'd also like to remind you that during the course of this call, management will make projections or other forward-looking remarks regarding future events or the future financial performance of the company. It's important to note that such statements about estimated or anticipated Actavis results, prospects or other nonhistorical facts are forward-looking statements and reflect our current perspective of existing trends and information as of today's date. Actavis disclaims any intent or obligation to update these forward-looking statements except as expressly required by law. Actual results may differ materially from current expectations and projections depending on a number of factors affecting the Actavis business. These factors are detailed in our periodic public filings with the Securities and Exchange Commission, including, but not limited to, the Actavis plc Form 10-K for the period ended December 31, 2013. As you may know, we announced the transaction with Forest Laboratories on February 18, 2014, and we ask that you see the full details of this transaction, which are included in our Registration Statement filed with the SEC on March 25, 2014. Please also see the cautionary statements regarding forward-looking statements contained in our press release which we issued this morning, which may qualify some of our comments today. With that, I'll turn the call over to Paul.

Well, thank you, Lisa, and good morning, everyone, and thank you for joining the call. We are pleased to report another exceptionally strong quarter for Actavis, driven by strong organic growth across our global pharmaceutical business, as well as the inclusion of the Warner Chilcott brand portfolio following last year's acquisition. First quarter net revenues increased 40% to approximately $2.7 billion, non-GAAP earnings per diluted share increased 75% to $3.49 in the first quarter, adjusted EBITDA increased 86% to $860 million. Our Actavis Pharma segment, which now includes all generic and branded pharmaceutical sales, had another strong quarter. We saw a strong contribution from our generic version of Lidoderm, which continue to enjoy exclusivity, and stronger-than-expected performance of our generic version of Cymbalta. In our brand business, our performance reflects the addition of the Warner Chilcott portfolio, along with increased sales of key promoted products including Rapaflo and Generess Fe. We continue to strengthen our U.S. pipeline in the first quarter announcing patent challenges for Treanda, Multaq and Colcrys. We also received the favorable appeals court ruling on Lialda and favorable district court ruling on Celebrex. We also announced the patent challenge settlement with Noven regarding our First-to-File application for Daytrana and we expect to launch a generic version of the product on September 1, 2015. Finally, we announced that the district court ruled in our favor and upheld the validity of our patent on Lo Loestrin Fe. In our North American Brands business, we announced the approval of Metronidazole 1.3% for the treatment of vaginal fungal infections. We expect to launch the product in the second half of this year. We also announced a patent challenge settlement with Mylan and Generess Fe where they are able to launch in April 2015 or later with an AG. Within our branded…

Thanks, Paul. I will review our results on a consolidated and divisional basis. Consolidated net revenue for the first quarter was $2,655,000,000, an increase of 40% over the prior year period, reflecting strong growth in both our Actavis Pharma and Anda Distribution segments. Net revenue in our Actavis Pharma segment was $2,265,000,000, up 36% year-over-year due to the acquisition of Warner Chilcott, new product launches and strong International performance. Within our Actavis Pharma segment, North American Brands revenues was $594 million, up from $130 million in the prior year due to the acquisition of Warner Chilcott and increased sales of certain promoted legacy products including Rapaflo and Generess Fe. Within North American Brands, net revenue for our Women's Health portfolio was $213 million, up from $20 million in the prior year; revenue from our Urology and GI portfolio was $225 million, up from $57 million in the prior year; and revenue from our Dermatology and Established Brands portfolio was $156 million, up from $53 million in the first quarter of 2013. North American Generic revenues was $1,024,000,000 for the quarter, up 7% from $957 million in the first quarter of 2013. This increase was driven by new product launches, including the generic versions of Lidoderm and Cymbalta, partially offset by competition on our Authorized Generic version of Concerta. Finally, International revenue, which consists of all revenue derived outside of North America, was $647 million compared to $578 million in the first quarter of 2013. The current-year period includes $112 million of revenue from our recently divested generic operations in 7 European markets. Actavis Pharma adjusted gross margin for the quarter was 65.3%, up from 52.7% in the prior-year period primarily due to the addition of the Warner Chilcott portfolio. Adjusted SG&A as a percentage of adjusted net revenue for Actavis…

Thanks, Todd. Regarding Forest, our integration leadership group is aggressively planning for the combination of both companies at close, in a way that delivers immediate and long-term growth for the combined business, as well as an efficient synergy capture. Both management teams continue to focus on operating independently to assure we meet all of our separate business objectives established prior to the deal announcement. We are taking the necessary steps to close the transaction. Appropriate antitrust filings have been made in the U.S. and several International jurisdictions. We expect to file the final proxy related to the transaction shortly as shareholder vote is expected in mid-June. All these activities support an expected close midyear as planned. For the second quarter, on a 2014 standalone basis, we have made numerous assumptions regarding -- or consistent with our past practice, the most significant being that we have included additional competition on our generic version of Lidoderm in the second quarter. Based on this, we now expect GAAP second quarter 2014 earnings to be slightly lower than the first quarter of 2014. Regarding our forecast for the remainder of 2014, we plan to provide an updated combined financial forecast for the year at or shortly following the close of the Forest acquisition. I am very pleased with the performance of our business so far this year and with the efforts underway to plan for an on-time close and the strong execution of our integration plans for Forest. As always, I want to thank our employees for their extraordinary efforts and their unwavering commitment to our company's success. With that, let me turn it back to Lisa for questions. Lisa?

Okay, Lori, I think we're ready to take our first question.

[Operator Instructions] Your first question comes from the line of Jami Rubin of Goldman Sachs.

Quick question. On the deal that Forest just announced, the Furiex deal, does that preclude you from adding further IBS-d drugs from an FTC standpoint? And I just have a quick follow-up, go ahead.

Well, no. Actually Jami, I think as we looked at that transaction and, of course, pursuant to the terms of the agreement with them, we had to give our consent to the transaction, so we did have a good view of the Furiex transaction. We're obviously very pleased with it. We think it's a great addition to the GI portfolio for all the reasons that Forest discussed on their call on Monday and then again on Tuesday. But I think we'll have to review what the FTC's position might be with respect to other products. But for now, I think the franchise is very strong. And I'm not sure we need anything at the moment to continue with the IBS-C franchise.

And just as a follow-up, obviously, the drug industry is going through a period of rapid breaking itself up through asset sales and swaps, et cetera, which I would think would provide opportunities for Actavis. Can you talk about what we're seeing in the industry in terms of just sort of these asset swaps and legacy businesses becoming available, drug companies carving out their businesses. Is that an opportunity that would be appealing to the new Actavis as we think about it going forward?

Well, it certainly is an exciting time. And you probably need a scorecard to keep track of all of the changes that are going on. And we have been very active, along with the Forest team, in evaluating all of the transactions that are taking place at the moment. We are looking at how they affect the industry and how they affect the new combined company. I don't -- Jami, I wouldn't preclude anything by way of what we're looking at or what we're not looking at. We are -- we will be hopefully involved in the continuing modification in the industry. We certainly have the balance sheet and the performance to be able to do that, and I think we're going to remain active in that space. With respect to some of the legacy businesses, I think it's going to be a little bit more challenging on a combined basis to participate with some of those legacy businesses because the company now is certainly well-poised for organic growth, and we want to make sure we continue to drive organic growth. And some of those legacy business might be -- might create a little bit of a challenge from a legacy perspective -- or from a growth perspective.

Your next question comes from the line of David Amsellem of Piper Jaffray.

Just a couple product-specific questions. So on Cymbalta, that's been a nice near-term contributor. What are your thoughts on how that market will change, and when do you expect that product to be truly commoditized? And then secondly, on Lidoderm, what's your latest market intel telling you on where Mylan is? And I realized you put that competition in your guidance, but did you think that, that's potentially conservative? And then lastly, on your R&D -- on R&D, your strategy overall. The Furiex deal that Forest announced yesterday, is that the kind -- is that a kind of transaction that combined organization post-closing would do? How should we think about that kind of transaction in the context of the New Actavis?

David, it's Siggi here. I think on generic Cymbalta, as Paul mentioned earlier, the market has been better than we expected. From launch in December and throughout first quarter, there have been fewer players. There also has been some shortage in the market that has given the other companies some opportunity to take market share. Our assumption is that there will be, in second quarter, probably 2 new competitors coming in to generic Cymbalta, probably closer to the end of the quarter. And then in third quarter, we expect that this to be a commodity generic product. So I think second quarter still will be a good quarter going forward also due to the market shortage, but in early third quarter, our expectation is this will be a commodity generic. With regard to the Lidoderm, again, our expectation in the second quarter is a competition. We just came back from the NACDS where we met with all our customers. So far, we haven't heard anything about anyone coming out on Lidoderm. That being said, time is moving on. So I think it's the right way to model it is to assume a generic competition on -- a new generic competition on Lidoderm in the second quarter. But as of today, we don't know of anyone or when they would be coming to the market...

Yes, David. I think the transaction fits perfectly the structure of the kind of transactions we will be looking at going forward. It's an important addition to a very important therapeutic category for us. And it also has long-term enduring value. It can drive growth in the years that we're looking at now in '17, '18 and '19, and we have worldwide rights. And so those are the attributes that we're going to be looking for on our -- for our brand franchise and continuing to build out our brand franchise. But also, the Silom Medical acquisition is something to remember, and that's also an important transaction for us. We will continue to drive growth and want to drive growth in key emerging markets around the world so that when we do acquire worldwide rights to products like this, or even our -- and as well as our having our generic portfolio, we have the commercial infrastructures in key markets and growth markets to be able to drive growth and help support the growth drivers.

[Operator Instructions] Your next question comes from the line of Ken Cacciatore of Cowen and Company.

Paul, just want to kind of pick up on the theme here around Furiex. It seems to me when I look at it that if you put into context, it's about 1/4 of your annual cash flows to your point to get a long-duration potential billion-dollar asset, which I think the Street would be applauding even more than what we saw the other day. So I was wondering how many of these are out there? And how do you convince your shareholder base that if you could do 4 or 5 of these tomorrow, that this would be kind of money well spent to get this type of loan duration assets on top of what is a very good near-term story?

Yes, well, Ken, it's hard to know exactly how to convince investors of things. I think we've all been a little surprised at the way the markets have reacted in the short term, but I also think it's a short-term phenomenon. And when you think about assets like this, I think I would assume for most investors, particularly the long-term holders, that these kinds of assets are no-brainer kind of assets. I also know, and I think post-close when we provide guidance for the combined entity, I think people will be -- become more comfortable with the growth profile of the combined company. That should reduce any concerns that people have and also make it clear that these kinds of assets are exactly where we should be spending our money. Are there -- and I think the other question you asked was how many of these assets exist out there? Well they're hard to find, I will say. We have a very strong group of people looking at those assets. I think the Forest team is extraordinarily good at finding these kinds of assets. And we're going to continue to use those combined groups to look for specific products that fit that kind of profile.

Your next question from the line of Randall Stanicky of RBC Capital Markets.

Just 2 questions. Paul, can you talk about the branded business and what you're seeing, specifically with the GI business? And is it -- are you happy with it? And as you laid out your outlook at the Analyst Day on January 31, is it fair to say that everything's tracking as you would expect? And I have a follow-up.

Sure. With respect of the branded business, and I'll focus principally on the standalone Actavis brand franchise, I think we have achieved our objectives with the Warner Chilcott portfolio. We've arrested some of the declines. We knew that there would be some upset with the integration, particularly the major change that went on through the integration. I think we've arrested the declines of those -- of the key products. And we knew we're going to face some headwinds with respect to the GI franchise from the legacy Warner Chilcott portfolio, but we think we can now drive forward with some of the good products. Siggi, did you want to add?

Yes, I think, Randall, whilst we said on January 31 on our Investor Day, we expected that the Asacol Delzicol [ph] would decline year-on-year. We said about the 18% in our slide. I think overall, we saw that beginning of 2014, that the loss of the CVS Caremark agreement, which we knew about from middle of the year. That came into force 1st of January. We clearly saw that in the first week afterwards. But also, we are very happy with the NRx shares and TRx shares in the last 4 to 5 weeks of the quarter. So I think we are on the right track. The new sales force came in place in the first quarter. It took time to get them trained down on the road. But overall, I think the last 4 weeks of the quarter for April, we are very pleased with the stabilization and the small growth of the business and we hope to continue with that going forward. But there were no surprises overall in the GI business.

Got it. So it's tracking as expected. Paul, on Celebrex, can you just talk about that? And if you and Mylan are successful in knocking out Teva's exclusivity, which is a little bit of a surprise to, I think, a lot of us, when would you launch? What do the competitive dynamics look like? And then I guess just how this could play. Obviously, you have a settlement in place, but there's a little bit of uncertainty as to timing and then competitive make up.

Well, obviously, with the litigation, that's always unpredictable. We were a little surprised with the FDA's position on this product, I would say. Certainly, Mylan obviously was as well. They're going to pursue their litigation. We'll pursue ours. I'm not sure whether they'll be combined or not. We'll have to wait and see what the procedural platform turns out to be. With respect to readiness, launch readiness, we're preparing now, and we will be ready to go at the earliest possible time. Our settlement with -- our settlement does not preclude us from launching if someone else launches, so we are preparing to be ready at the earliest possible moment but no later than December.

Your next question comes from the line of Douglas Tsao of Barclays.

First, in terms of the guidance for Lidoderm, just to clarify. You're expecting generic competition to come into the second quarter. But obviously, that begins at what point? Is that as of today? Or just so we can sort of think through the added time of exclusivity that you may or may not enjoy.

Yes. Let's say I think today is pretty safe. It won't be today. I would have heard that already this morning. And I think, even through the end of the week, we are pretty okay. I think what we say in second quarter, we don't know exactly when, I think to clarify it even further that we built in 2 competitors of both the AG and another competitor. So I think it might be conservative but, let's say, middle of the quarter is not unreasonable to put that into the guidance.

Okay, fantastic. And then, Paul, obviously, with Fred Wilkinson leaving the company, you had sort of a little bit of a shift in terms of responsibility with Bob taking on R&D as part of operations. Do you anticipate sort of a further realignment once the Forest business is brought into -- once the Forest acquisition is completed, and that sort of expanded R&D capability and sort of branded portfolio becomes part of your business?

Well, the short answer is we would anticipate having a number of changes with the close of the acquisition with Forest. They've got a very strong team. We're combining 2 very strong teams and we've got to -- we want to make sure we do it in the best possible way. Brent and I continue to have discussions about how best to structure the organization. The integration teams are working aggressively to look and do the baselining and preparing for day 1 operations, as well as giving us a sense for what the 2 organizations have, where their strengths are. And of course, we can't start integration, but we are aggressively working on those plans. I don't want to say we have fully decided what the structure will be, although we do anticipate making some final decisions within the next month or so. And of course, we'll not only be communicating them internally, they would certainly be communicated externally as well. For today, Bob has taken over the R&D operations. He wasn't busy enough with just the operations. So I want to make sure he had a little bit more to do. He does have a very strong scientific background, as I'm sure you all know, and we feel very comfortable with having the R&D -- the report into the operations. With the operations group, there's certainly great synergies to achieve. And of course, the people who'll actually do the day-to-day running of the operations are doing a fantastic job. Hafrun and Chuck and their teams are doing a great job and they manage the day-to-day operations. So I'm very pleased with the way the organization is set up. We also, of course, wish Fred well. He went on to one of our competitors and it's always good to have a friend as a competitor. Well, [indiscernible]. I don't know.

Your next question comes from the line of Shibani Malhotra of Sterne Agee.

Paul, I got a broad big picture question for you. Obviously, we're seeing a lot of changes in these specialty pharma and generics landscape. Can you talk about your view on some of the more recent transactions that -- or kind of things that companies are trying to do such as Valeant and Allergan, what you think, how that affects your industry and your position, as Jami alluded to earlier? And then also, I know you've just done a big deal with Forest, can you talk about whether Actavis is still in a position to consider transformative deals or whether we should be thinking more along the Furiex sort of lines in terms of further acquisitions?

Thanks, Shibani. Well, with respect to the most recent activity with Valeant and then also with, I would say, Pfizer and AstraZeneca, I don't -- I'm not surprised that there's a lot of activity going on. I think everyone expected it to begin. We got moving a little bit earlier than everyone else, but I'm not very surprised to see the activity pick up. There is certainly good reason for that activity to pick up. Consolidation of customers, consolidation and price pressures throughout the industry, whether it's branded or generic, have caused everyone to reevaluate their business models and try to find the right business model for the long-term growth profiles that we all want to have for our shareholders. With respect to the -- the only other thing I would say with respect to the Valeant and Allergan transaction, I think it's a very unique situation. I think we're all watching it with -- very closely to see how it plays out. This will be -- could be a precedent-setting transaction, not just for the pharmaceutical space, but for other spaces as well. If the shareholder movement -- Actavis shareholder movement moves in that direction, that does change the landscape a bit. I think the other question is -- you had for us was about us in doing transformative deals. I have to say, I think we feel pretty transformed already. I think the Forest transaction has created, really, a fantastic platform for us to grow from. I think we have the luxury of looking at a lot of different kinds of deals but not the necessity to do any of them. So we will continue to evaluate things as they come up. And hopefully, make the best decision possible. And sometimes the best decision might be to stand on the sidelines. But we will be ready to move if we think it's important.

Okay. Just to clarify, so are you in a position where you'd still consider something big or are you referring at the stage to look at the small-size transactions?

Well, I would say now, at least until midyear, we're on the sidelines. But I don't think we're in the position. I think today, we're looking at sort of the smaller transactions but we have an eye on -- we're keeping an eye on everything else.

Your next question comes from the line of Marc Goodman of UBS.

Paul, 2 things. First, can you give us more color on the overseas key regions for you? And then second, on M&A, you bought something small in Thailand. What are some of the other geographies that we should be keeping on our watch list for next as far as these niche acquisitions?

Sure. Well, the key regions continue to be areas like Southeast Asia where 600 million people, fast-growing pharmaceutical use, the good profile you can -- we have a lot of assets in the region. We can deploy those assets very well. We just opened our regional sales office in Singapore. That will help us even further look for small -- small-ish opportunities like the one we just did in Thailand. I would expect that you would continue to see us work there aggressively. The other area that we've made no bones about that we want to get bigger in is in South America. Both Actavis and Forest have a very well-developed R&D portfolio in Brazil, particularly, and our commercial infrastructure probably could use some beefing up in that region. So we'll continue to look very aggressively there. Mexico as well, and of course, all of South America. With respect to Central and Eastern Europe and Russia, I think we still see that as a very attractive space. Our Russian market is performing very well. We're very pleased with its performance to date. Even with the unrest in the region, it has continued to perform well. We did suffer a little bit in the Ukraine but that's not too surprising. It's a small-ish market, so it wasn't a major impact. But certainly, Russia has done well, and we would continue to look for assets there.

Next question comes from the line of David Buck of Buckingham Research.

Just a couple of quick ones. First on the North American generics, Paul and/or Siggi, can you talk a little bit about the impact that you've seen from the trade consolidation thus far? What generic pricing has been? And where you are in your own generic Concerta approval? And then for Paul, can you talk about, post-Forest, where you see the role of R&D and the importance of that to organic growth? And also can you talk a little bit about how we're going to be able to keep track of the various different synergy captures, including legacy Actavis, Warner Chilcott, Aptalis, Forest, et cetera. How we're going to be able to track that progress?

David, if I start on the North America trade consolidation, clearly, there has been a significant consolidation of our customers. We obviously -- Walgreens, Alliance Boots and ABC are top customers for sure. We understand that pretty well. We have agreement in place for 2013. We have a very good relationship with them. And overall, we have managed with our extensive portfolio to build a win-win relationship. We have grown in market share outside of the U.S. and we have managed, I think, that extremely well. But the next one up is CVS and Cardinal. We've worked very closely with both companies and will continue to do that going forward. We expect that to start to impact mid-year, that relationship. And then obviously the last one is McKesson and Rite Aid. They are partly tendering out the portfolio at this point in time. We don't know the outcome. We have modeled it. I think right for second quarter. So overall, we think the consolidation probably net-net impacts the price downwards for sure in this tendering of the portfolio. But overall, on a global scale, we, especially with Walgreens and Alliance Boots, we can see a positive win-win situation because of the size of Actavis today and our presence in markets where Alliance Boots is very strong today, including U.K, Norway and Russia plus Turkey. With regard to the Concerta approval, as we said, it's moving along at the FDA. We feel comfortable that we will have supply going into 2015. We work very closely with the FDA on this issue on our approval, and we hope to move forward in as soon as possible. It's very difficult to predict anything about when the FDA reacts, but we are still comfortable that we will have a supply of the product going into 2015.

And David, I think you asked about the role of R&D. I think as you know, and you've known me for a long time, I think R&D is a very important aspect of our business and we looked to it to drive organic growth. And I think we have a very efficient generic portfolio -- program and we have a very good brand program, which is being further supplemented by the strong team at Forest. So I would expect to continue to see us spending aggressively on the R&D side. We announced that we were $1 billion-plus in R&D. We expected to do $1 billion-plus in R&D in 2015. I don't see us ever wavering from that commitment. If you think about what we talked about and I just said it about Brazil, you overinvest your R&D assets into a country so that when you do an acquisition in that country, you have built-in synergies going in. And that is just one of the strategies and one of the reasons to spend money on R&D. But it is important to do it well. and I think we've proven that we can do it as well as anybody. With respect to the capture of the synergies, I think on the Actavis side, I can say that we've basically completed the capture of the legacy Actavis synergies. And I think we're almost complete, if not fully complete, on the Warner Chilcott synergy side. So for us, it'll just be a going forward number. But we also have spent some time making sure that we don't double count the Aptalis and the Rejuvenate synergies as we move into the combined entities. So we will do our best to make sure that we're not double counting things and making it clear that we're capturing synergies. But I guess the easiest thing to look at is the margins. And if you see margins continuing to improve and you see our SG&A numbers continuing to stay where they are, then you can bet we're doing the right job.

The next question comes from the line of David Risinger of Morgan Stanley.

So I missed part of the call. I apologize if my question or follow-up question had been asked. But first, on Concerta, there was a recent FDA warning that certain generic Concertas are not therapeutically equivalent to the brand, similar to what happened with Wellbutrin. Could you just comment on that, including whether the problem drug is Mallinckrodt's or Kudco's or both? And what is the opportunity for your Authorized Generic to benefit? And then my separate question is with respect to generic launch timing, could you comment on the exaljo -- sorry, on Exalgo? And also on, I think you said something about Pulmicort, whether we should assume that in 2015, or how we should think about Pulmicort?

Thank you, David. I think with regard to Concerta, yes, it has been highlighted. If you look at FDA website, they are investigating the efficacy of the generic product. Clearly, this doesn't affect our generic Concerta. We are the authorized generic of Johnson & Johnson. There has been some market movement. We have seen that already, both Actavis and Kudco have taken a little bit more share over the past few weeks. But overall we don't know the extent or impact of who is involved in the investigation. But overall, it's been a stable market. There has been a little bit of TRx movements with Kudco and Actavis taking more share. With regards to the generic Exalgo, again, it's very difficult to predict when the FDA will give us approval. It's moving forward. The brand now has a new label in place which opens up the door for us to have a label. I think that was the first hurdle that we have to overcome. The brand put a new label about 2 or 3 weeks ago, so that, hopefully, is out of the way. And the last issue with that approval is a possible REMS program that we are discussing with the FDA. That being said, I sincerely hope we get approval in second quarter. We are ready to launch whenever we get the approval. We don't think there's any technical hurdles. Label being in place now, we feel that the REMS program should be a non-issue going forward. But it's difficult to accurately point down when we get the approval, but overall, we feel comfortable. On generic Pulmicort, I think overall, your guess is as good as mine. We are waiting for the courts to move on that. Obviously, we feel good about the product itself. I think launch this year is highly unlikely. But there is a chance, there is a chance to go this year. But we really hope that at least in 2015, we will have a product to sell.

We have a hearing on the preliminary injunction on May 9. I think we'll know more after that.

Your next question comes from the line of Liav Abraham of Citi.

Two questions, please. Firstly, can you comment on the status of your generic restasis application and when you expect to have clarity on the potential acceptance of this application by the FDA? And then secondly, just going back to the theme of business development and capital allocation. Paul, you mentioned your appetite for opportunistic continued business development. Can you comment on your openness to a share buyback if you do choose to stand on the sidelines, as you mentioned a few minutes ago?

I think on generic restasis, we have said that we don't have acceptance for filing from the FDA. We have responded to clarifying questions from the FDA. We feel our application should be accepted for file, but at this point in time, we don't know the timing. There is nothing outstanding on us. We have sent in clarifying responses to the questions from the FDA.

Yes, with respect to capital allocation, I think one of the things we probably should have said coming out of the blocks is one of the most important things we can is pay down our debt. We want to make sure that we maintain the right flexibility with the balance sheet, and we will be, of course, doing that. I think we've highlighted that we intend to take out the old Warner Chilcott notes in 2000 -- in September this year. So that is still on track to be done. But in addition to doing debt paydown, we will continue to look for acquisition opportunities in the new organization around the way we've discussed. And then finally, we have said the combined organization is going to be generating -- we expect it to be generating a significant amount of free cash flow. We've talked about $4-plus billion in 2015. And you could certainly see a situation where we wouldn't be able to allocate all of that capital to the other 2 options, at which time, we would then think about what made sense, whether a share buyback or a dividend makes sense. And we are open to considering both, but at the moment our first priority is to pay down debt. Second priority remains allocating capital to support the growth of the business.

Your next question comes from the line of David Maris of BMO Capital Markets.

On the biosimilar programs, can you give us an update on what we should hear this year on that part of the pipeline? And any sort of color that you can provide on the current R&D spending of how much is branded and how much is generic and how much goes to the biosimilars, which might be a third category?

Sure. David, why don't -- Todd, why don't you take the second part of that question?

Yes, the -- in terms of the first quarter, the numbers, the breakdown between generic brand and biosimilar was $114 million, $33 million and $25 million. And we had given a guidance for the full year and that was roughly in line with that guidance in terms of the breakdown.

David, it's Bob. Just to weigh in on the biosimilar program. The FSH program is going according to plan. We have started Phase III in Europe, with 20 sites now up and running. The relationship with Amgen is going extremely well, with Phase III started both with Avastin as well as Herceptin. And the other programs are complete, are moving along on the timelines that we had previously expected. So overall it's going exactly according to plan.

Your next question comes from the line of Elliot Wilbur of Needham.

Paul, just wanted to ask you a quick question on the progestin-only contraceptive patch. I think you provided a bit of an update a little bit earlier, but maybe just a little bit more detail in terms of what the gating factors there are in terms of moving that forward. And whether or not you think at this point, based on what you know, that we could see a launch closer to year-end or more likely next year? And also, thinking about the commercial potential of the product. I mean, I guess it's surprising that after all the issues, they ever had still roughly $150 million product. And I know this is not a combination patch, but I'm not really sure how relevant that is in terms of thinking about the market opportunity. And just a quick question is, I mean, should we be potentially benchmarking this product against Ortho Evra or do you think it's just going to be -- have a much more limited commercial potential given more limited patient -- targeted patient population?

Yes. So, Elliot, it's Bob again. Just on the discussion on what is required yet for approval. We've got clarity from FDA, exactly what they were expecting. It's a small study that we needed to do to show equivalence between different patch size. And we've started accumulating that data and are planning on submitting that information to the agency later this year. And we would expect approval on that product in 2016 or at least that's what we're anticipating. Or 2015. 2015, I'm sorry.

Yes. I think, Elliot, on the commercial opportunity for this product. Clearly, this is an opportunity for progestin, is to have the -- the timing is right, because if you think of progestin as a contraceptive, timing is everything to have it safe and effective. When you have a patch, the timing is less critical for sure, so this is the opportunity with the patch. On top of that, it doesn't include any estrogen, so there are many women that don't tolerate the estrogen. I think at this point in time, it's difficult to say how you should model it. It's more, my guess, it's a little bit more limited on Ortho Evra as a product at this point in time. We need to see, we need to make the market. The efficacy is there. We know that. The patch is a great development by the product. When we launch in 2015, there will be a ramp up over the year, but I can't guide you exactly how you should model it or based on which product because in a way, it's a new product to the market.

Your next question comes from the line of Ronny Gal of Bernstein.

Just 2 quick product questions, the first one on Precedex. Any expectations on when we will hear about the carve out? And can you -- were you sued by Hospira on that product? On Lialda, can you just clarify -- you told us before you're pretty sure that you've got an approvable product. Have you done a new validation batch? We're hearing back and forth from Shire, and if you could just clarify that situation. And the last, Paul, a bigger question -- a bigger-picture question. You were often being kind of put in the same camp as Valeant as 2 companies who are growing primarily by acquisition. It will be really kind of useful if you could distinguish for us how do you see your business model going forward different from the Valeant business model?

Okay. You want to take the other one? So we were sued on Precedex. I'll just give you some quick dates. We just got sued earlier this month. It was -- I think it was April 18 when the lawsuit was filed in Delaware. There's 1 patent in suit, so it's very, very early stages of the litigation.

I think, on Lialda, we got the question back from the FDA. As I've outlined before, the issue has been that the overall guidance came out after the filing of the ANDA. Where we differentiated was on the dissolution -- on the dissolution methods and how we calculated the dissolution. We got the questions back from the FDA. I think we have done all the technical work necessary to receive approval. We don't think this issue should hinder the approval of the product. We have submitted that few months ago back to the FDA. So I think we are working closely with the FDA to gain approval of this product. But I say it again, I don't think the technical issue of dissolution method that was mentioned in the guidance document, I think we have addressed that appropriately with the FDA.

And do you have a response date for this file? Do you expect a response in 2014?

No, we have responded, so everything is with the FDA. So we have fully responded to the FDA on these questions.

I think the FDA now gives you response date. I guess, did you know when the FDA is going to respond to your filing, or is this still up in the air?

It's still up in the air. They haven't confirmed or give us any date when we hear back from them.

And then, Ronny, with respect to your question about the Valeant and perhaps distinguishing ourselves, let me first start by saying I think Valeant's built a very formidable company. They've done extraordinarily well for their shareholders and they continue to be creative in the way that they approach, not just acquisitions but their business model as well. I think we've also been very clear about how and what builds our business. We've talked about the 4 pillars, and I think that's probably the best way to try to distinguish ourselves from any company, not just Valeant. I think -- remember, our first pillar here is executing on the assets that we have, making sure we maximize those in every country, whether it's brand or generic, and that execution is incredibly important with respect to the sales and marketing of those products. Second pillar we have is our organic growth. We've aggressively spent on generic R&D, on branded R&D and also biosimilar R&D. We believe in the long term future of the company is built fundamentally on organic growth, and that everything else is a supplement to that. And then third -- the third pillar, of course, is commercial or -- I'm sorry, operational excellence, really. If you don't have high quality in our industry, you see exactly what happens. Your company gets hurt, you can't provide products, you get into trouble with the regulators and you're in a downward spiral that is very challenging to get out of. And we do know that if we do those 3 things very well, we will generate sufficient capital to be able to reinvest in our business, and that's what we use the fourth pillar of and that's reinvesting through acquisition. So we're really focused everyday on the top 3, the first 3 things. And the fourth one comes as -- it probably gets more of the news than anything else, of course, but it is ancillary and supplemental to the other 3.

Your next question comes from the line of Chris Schott of JPMorgan.

Just had 2 here. I guess one is on coming back to the business developments and the wide range of assets that a combined company can pursue. Can you just -- getting back to this organic growth element, can you just talk about how you kind of balanced that desire to work on this longer-term organic growth kind of opportunity that you're highlighting, relative to what might be some very attractive financial returns if you're looking at potentially lower growth assets that seem to be available in the market? I'm just trying to understand how you kind of -- I know you want to focus on the organic growth, but if you can get a really nice return on lower growth assets, how do you balance those 2? The second was on repo, can you sort of elaborate a little bit more about that prioritization of repo versus debt paydown given what seems to be a very attractive stock price here? I guess my question is why isn't repo higher in the priority of use of cash just given where the stock is trading?

Well, I think with respect to the capital allocation question, long term with respect to assets, so long-term versus shorter-term higher financial return. I mean, I'm not certainly suggesting we wouldn't consider short-term high-value assets. I think we're in a unique situation today. If you start building out the combined entities' portfolio of products, that's -- on the brand side, if you look at the number of products that are being launched over the next several years, including this year, and if you look at the generic portfolio and you look at the size of the pending applications not just in the U.S., but across the world, and you look at the number of dates certain launches that we've been able to, I guess, accumulate, if you want to put it that way, we're starting to build a very clear growth profile and have built a strong growth profile for the rest of '14, '15 and '16. And I think, as we've talked about, we're starting to consider assets to have now growth profiles '17, '18 and '19. And when we start providing guidance to our investors, I think they'll see that we feel very comfortable with the growth profile in the short-term and that the long-term is where we're kind of looking at. Yes, and that doesn't mean we wouldn't look at short-term assets that generate returns, because that would be a silly thing to not look at. With respect to repurchase versus the debt paydown, from a prioritization basis, I don't think, in the short-term, we're looking at a share buyback, even though I would personally agree with you that I think the share price is at a very attractive point. I also know that when we provide guidance, I think people will feel and start to understand where the right number should be for the company's stock and maybe we'll wait and see what happens after that before we consider whether a repurchase program is appropriate. For now, I think we want to get through the close. We want to get our debt structure in place, and we want to make sure we continue to take advantage of opportunities that present themselves. And a repurchase program will be certainly on the agenda to discuss, but I don't see it as a high priority at least for 2014.

Your next question comes from the line of Sumant Kulkarni of Bank of America.

A couple of product specific ones. First one is, could you remind us as to when you're expecting competition on Estrace? And the second one is could you characterize your interest level in participating in the generic Copaxone market given that Synthon has a partner in Blassett [ph], and we know you know that company in a different setting?

Yes. I think with regard to generic Estrace, we don't know of any filers. We obviously -- prior to the Warner Chilcott acquisition, we looked very closely at that product. It's extremely difficult to develop a generic Estrace. But at this point in time, we don't know of a generic competitor coming to the market. That being said, the patent -- there's not many patents left on this product, so we don't necessarily know that. But overall, there has been no indication of generic competition so far. With regard to generic Copaxone, I think we need to see how the market is. We obviously -- we worked very closely with Synthon on the generic -- or the Herceptin biosimilars where we acquired assets. We think they're a very strong company for sure. The have built up a good business and they're close partners, not only on Herceptin, but we also have in-license from them a few products, especially in our international markets. Overall, we are looking at the market, we are looking at the movement from 20 milligrams to 40 milligrams to evaluate what is the opportunity for generics coming to the market. But at this point in time, we don't have a generic Copaxone in our focus going forward.

Your next question comes from the line of Andrew Finkelstein of Susquehanna.

Maybe you can just talk a little bit, as you look at the portfolio, you're going to have in a couple of months, and I'm thinking, particularly on the brand side, what do you think are the imperatives for where you invest to continue the growth across this portfolio, both in terms of sales force promotion and marketing spending more broadly? Where are the best returns and how do you optimize spending maybe relative to what Forest or the industry has done in the past?

Well, let me start with a high level, and then I'll hand it over to Siggi. I think that is a very key question for the combined organization, is to prioritize the sales and marketing spending, allocating it between marketing spend and field force spend. I think the combined entity has a very strong and would have an extremely large sales force. We, of course, will be looking at making sure we have the optimum sales force size and then we will then look to allocate appropriate dollars to the marketing side. We know that Forest has started with the Linzess direct-to-consumer campaign. It appears to be doing quite well, at least it's hard to tell in the short term, of course, but certainly, all the near-term indications are positive. But anyway, I think that's a very high priority. Siggi, do you want to add a little bit more?

Yes, I think, in a way, this is a luxury program we have because we have, I think, in the specialty space, we have the strongest pipeline there is. If you look at the combined pipeline from Phase II, Phase III and then registration, we have 27 new products on top of the newly launched next 9 that Forest has on top of what we have from Warner Chilcott on the legacy Actavis. I think as Paul mentioned, clearly, GI will be a key therapeutic area. Linzess is growing extremely well. The response to the DTC is coming in. We see that as a key product. The switch on NAMENDA is important. It's important for the combined company going forward. We are very encouraged by the switch numbers as of today. We think Forest is executing on the switch extremely well. And they've worked with the managed care, they have done this extremely well. And I think we need to continue the investment in the CNS. And then there's opportunity also in Women's Health going forward. We are a leader. We have over 90 per share of voice in OCs. We have an E4 coming to the market down the line. So I think these are the 3 key therapeutic areas that we have. But we have this luxury problem of having a great portfolio that's early in its patent life, with 27 products in late-stage pipeline to come to the market. So I think we hope to explain that further to you when we close the transaction, how we are going to invest and execute it -- on it going forward.

And how should we think about launch expenses as you may have a number throughout 2015 in terms of the upfront spending to get some of these new products out?

I think we have a fixed cost in the sales force. We need to -- we are working very hard how we design our sales force. We have probably -- the combined company has 1 of the best sales force in the industry. I think when you see how they have performed over the last 6 to 12 months, even further, they have done an excellent job in execution. So we need to rightsize the -- we need to get the right size of the sales force to support the launches going forward. So I can't, I think, comment on the market spend or things like that for the launches. That will be different between different products and different categories. But you're asking the key questions we are designing around now, how will, for the next 2 to 3 years, with all this pipeline coming to the market with the early stage of the product that's already been launched, how can we best get the best return on our sales and marketing dollars going forward?

Ladies and gentlemen, we have reached the allotted time for questions and answers. I'll now return the call to Lisa DeFrancesco for any additional or closing remarks.

Thank you, everyone, very much. There's still a number of people in the queue and we'll follow up with you shortly. Thank you.

Thank you for participating in today's conference call. You may now disconnect.