Good morning. My name is Stephanie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Valeant Pharmaceuticals First Quarter Earnings Conference Call. [Operator Instructions] Thank you. Ms. Laurie Little, Head of Investor Relations, you may begin your conference.

Thank you, Stephanie. Good morning, everyone, and welcome to Valeant's Investor First Quarter 2015 Conference Call. Today, we will be discussing our financial results. And presenting on the call are J. Michael Pearson, Chairman and Chief Executive Officer; and Howard Schiller, Chief Financial Officer. Dr. Ari Kellen, Company Group Chairman, will also be available for questions after our prepared remarks. In addition to a live webcast, a copy of today's slide presentation can be found on our website under the Investor Relations section. Before we begin, 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 non-GAAP financial measures, please refer to Slide #1. Non-GAAP reconciliations can be found in the press release issued earlier today and posted on our website. Finally, the financial guidance in the presentation is effective only as of today. It is our policy to update our firm guidance only through broadly disseminated public disclosure. And with that, I will turn the call over to Mike.

Thank you, Laurie. Good morning, everyone, and thank you for joining us. Today, we announced very strong financial results for the first quarter of 2015. We plan to discuss more topics on today's call. First, we'll review our strong first quarter financial results. Second, provide you with the highlights of our first quarter business performance; next, we'll update you on the progress with the integrations of both Dendreon and Salix; and finally, we'll discuss our financial performance and update our 2015 guidance. This morning, we reported Valeant's first quarter results for 2015, which were driven by strong sales growth and profitability across all our regions, once again demonstrating the strength of our diversified and decentralized business model. Before we begin discussing the details of our performance, I wanted to provide the highlights of this quarter. The results announced today exceeded the Q1 guidance that we provided on our last call, despite losing $140 million in top line revenue and $0.12 in cash EPS to FX headwinds. We have very strong same-store organic growth of greater than 15%, driven by the strong performance for most of our business units around the world. The Dendreon and Salix integrations are largely complete. With Salix, we will exceed $530 million in synergies and exceed the $500 million run rate by the end of Q2. With Dendreon, we expect to achieve greater than $130 million in synergies and to achieve 90% of this run rate by the end of the year. Based on our strong base business outperformance and the contributions from Salix and Dendreon, we are raising our 2015 cash EPS guidance to $10.90 to $11.20. Finally, we are reconfirming that we expect 20% plus cash EPS accretion from Salix acquisition in 2016, and we remain confident in our ability to comfortably exceed $7.5…

Thanks, Mike. The decision to step down as CFO of Valeant was a very difficult one, which I came to after quite a bit of soul-searching. At this point in my life, I would like to pursue other business interests, likely in a private company setting. I will remain as CFO until Mike and the board find a successor and, of course, I will work closely with Mike and the new CFO to ensure a seamless transition. Since day 1, my journey at Valeant has been nothing short of incredible. I have completely bought into our unique strategy and culture, the transparency and fact-based approach to running our business, and our relentless focus on building a great company and on creating shareholder value. While I'll be resigning as an executive of Valeant, I'm thrilled and honored that the board has asked me to remain as a director and to stand for re-election in May. Valeant's business has never been stronger, and its prospects have never been brighter. I'm excited to remain in the Valeant family and have the opportunity to continue to contribute to its future success. I want to thank my 18,000-plus colleagues at Valeant and our Board of Directors for making this experience so special. In particular, I want to thank Mike for his partnership, mentorship and most importantly, friendship. Mike sets the tone at Valeant. He's the most talented person I've ever had the privilege to work with. He works tirelessly for the shareholders of Valeant, and he is a great guy. Now let's get back to our first quarter results and guidance for 2015. We're very excited to report exceptional Q1 results across all of our key businesses. Our revenue was $2.2 billion, with our U.S. and many of our emerging market businesses contributing strong double-digit…

[Operator Instructions] Your first question comes from the line of Chris Schott with JPMorgan.

And Howard, best of luck with your future endeavors. It's been great, great run you've had. So just a couple of quick questions. Maybe, first on this 20% accretion of the 2016 EPS from Salix. I guess, just with today's 2015 update, can you just give us a better sense of where that standalone, I think, $12.05 number that you provided last fall would be at this point? I guess, if I look at between Dendreon, Marathon, the core business performance, it's kind of like a $12.50 or greater earnings number, maybe a -- is that a reasonable thing to think about before considering the 20% accretion? Just anything that can help us on that front. And my second question was on Jublia. Can you just give us a better sense of where realized price per prescription is shaking out at this point? And maybe elaborate a little bit more on the impact that 8-milliliter launch is going to have on the franchise? And how to think about realized prices as that rolls through?

Great. Let me start with the second question, and then I'll let Howard address the first question. In terms of the Jublia, right now our net pricing on Jublia is probably about $240, $250 per script, but that's with a 0 co-pay on the 4-ml. And we're still in the midst of signing managed care contracts, but most of those are done. Obviously, the 8 ml will cost twice what the 4 ml cost, given its choice of product. And we will be increasing the -- we'll be eliminating the co-pay on the 4 ml, which will, obviously, help in terms of its average pricing. So you can sort of do the math, right now. We're buying down co-pays of anywhere from $30 to $50 on the product. In terms of conversion, the doctors have really been asking for the 8 ml. They -- many patients have more than one toe that's affected by onychomycosis. So we think the conversion of that should be quite high. If you look at Kerydin, I think 75% of their scripts are larger size. So we won't get there overnight. But we suspect that we'll eventually get to 75%, 80% of all of our scripts will be 8 ml, especially with the pricing difference. And in the gross to nets, on the larger size, will be actually a little bit bigger -- little -- or I mean smaller, because the retail administrative fee will only be one fee for twice the size. So you can sort of do the math. But it should have a real significant impact on our business in terms of almost a doubling of our business, I suspect, over the next 3 quarters.

And Chris, on the first question, I understand the desire to have more and more detail in terms of 2016. I think, at this point, that the easiest way to describe it is, if the updated guidance for 2015 for the Legacy Valeant business, for the entire business. And as I mentioned in my remarks, the growth rates that's embedded in our 2016 outlook are very consistent with the organic growth rates that we talked about in the summer and fall of 2014, which we gave you a lot of granularity around by business unit. And then on top of that, obviously, Marathon wasn't part of the portfolio at that point, and then Dendreon and Salix. So you can come in at 2 ways. You can start with, what is the cash EPS you need to get to the $7.5 billion of EBITDA and then where are we in 2015 and you could figure out what you need for those 2 to converge. And I think if you sit down with the facts that I just outlined, you can fill in the missing pieces.

Your question comes from the line of Corey Davis with Canaccord Genuity.

Just a couple of questions on Xifaxan. First, how soon after you get approval, assuming that it comes on May 28, could you launch? Secondly, I've noticed that you've taken two 9% price increases in Q1. Does that mean that you're feeling pretty good about where you stand with managed care? And maybe just elaborate a little bit more as to how that's going to roll out one once you launch for the IBS indication. And then, lastly, at the time you announced Salix, I think you said that Xifaxan would be about $900 million run rate. But that was assuming about a 30% volume growth, and it looks like scripts are below that right now. But if price is a little bit higher, is that still the right way to think about Xifaxan's run rate once inventory is normalized?

Sure. So in terms of the launch, we'll actually start promoting the next day. We'll use the package insert, just like we did with Jublia and ONEXTON. Then we'll prepare the marketing materials, review with the FDA, develop a DTC campaign and then we'll do a formal launch meeting sort of later in the summer. But we'll be able to promote off the package insert the very next day. The two 9% price increases were not taken by us. We didn't own Salix until April 1. So you'd have to talk to Salix's previous management to discuss those. In terms of the $900 million run rate for Xifaxan, I think that actually seems a little bit low, the fact that it is low. But once we get past the PDUFA date, I think that's the appropriate time to give everyone a sense of what we think Xifaxan is going to be.

Yes. And the number -- when we give that number at the time of the announcement, half of the year it was assumed it would be sold by Salix with their existing discounts, because we weren't sure the timing of the close at that time, and then half of the year in our hands. In terms of overall scripts, I think the business is operating, as Mike has mentioned, in line with what we would expect, and growth continues to be strong.

I'm sorry, can you just remind us about the level of discounting that was going on to the wholesalers that Salix had, and how that's changed in your hands?

Their discounts were sort of 15% to 20% and ours are -- the cost of our distributor arrangements are less than 5%.

Your next question comes from the line of Annabel Samimy from Stifel.

I just wanted to go back to the $7.5 billion in EBITDA. It seems like there's clearly a huge disconnect between where the street is and where that guidance is. So you talked a bit about the top line, maybe you can help us a little bit on any additional costs that might be coming out of the income statement, just sort of get to those numbers. And then, on emerging markets, it seems that recently it's been a little bit weak outside of just the FX impact. That used to be the high-growth markets. Everyone wanted to be there. Is there something fundamentally going on in those markets? Are we -- is there a new shift going on? And can you help us understand how to think about emerging markets as a growth opportunity going forward?

Let me take the emerging market question and then I'll -- saying about the $7.5 billion, and Howard can chime in as well. No, we're actually very excited about emerging markets. And if you look back, we've always broken it out since I've been here, 2008 through now. If you go quarter-by-quarter, like, it goes up, it goes down. Sometimes it's gone down as low as, I think, 3%, 4%, sometimes it's up 15%, but the pattern is not changing. We fully expect it will continue to grow at about 10% in terms of our emerging market organic growth, but there'll be big fluctuations quarter-to-quarter. These are not -- these markets are not -- it's not like a developed market. And so there's crises and -- as we've seen in places like Russia that -- it will fluctuate quite a bit. But, over the last couple of months we've been to Asia. And I had reviewed that business, its outlook is strong double-digit growth for the rest of this year and going forward. We've been over to Europe. And we actually are beginning to feel quite good about Russia that things are settling down a little bit. And the Middle East and North Africa is going to be a great market. And actually, our business is improving quite a bit in LATAM. So again, it's a bit of a bet on certain macroeconomics. But these countries continue to get more wealthy, and healthcare continues to increase as a percent of GDP. So I think that we feel quite comfortable. And we don't think FX is going to continue to work against us forever either. So we're very pleased that we're in the emerging markets. And quite frankly, right now it's a great opportunity to continue to pick up assets at low prices and build our business there, which we think will be very rewarding in the long term. In terms of the gap between us and the street in terms of the $7.5 billion, I don't think we can be any more clear, but that's what we're going to do. So there shouldn't be a gap. You guys should adjust your numbers to reflect the fact, but that's what we're going to do. We're going to comfortably deliver $7.5 billion in EBITDA. And actually there's enough facts in this presentation that this is, quite frankly, just a bit of a math exercise to get there.

Your next question comes from the line of Louise Chen with Guggenheim.

The first question I had was, with respect to the $7.5 billion EBITDA, just curious if you could talk more about if you include anything in there for tuck-ins and/or pipeline in that number, is that upside? And then secondly, just on the gross margin reaching 80% by the end of '15, could you give more color on what is going to be driving that?

Yes. No, there's nothing assumed in the $7.5 billion in terms of acquisitions where...

We did assume debt pay down.

Yes, a full debt pay down, okay. So what probably will happen, probably we'll do some acquisitions, which means we'll get even better. But it's the most conservative case.

Because the debt pay down doesn't impact EBITDA. It's just reducing interest expense and helping -- and increases net income, obviously.

In terms of the 80% gross margins, a couple of things are going on. One is, under our ownership, Salix gross margins will increase significantly, and that's because we will not be doing the discounting that they were doing to the wholesalers, which, obviously, affects their gross margin. So it will be -- so under our hands, it will be in the low 80s in terms of -- and that's before we actually negotiate better rates with wholesalers, et cetera. And then a lot of our launch brands in the Dermatology area have very high gross margins, and those will continue to grow disproportionately. In our Contact Lenses, once we get to a commercial line and we get the Ultra up, the yields will continue to improve. The yields are continuing to improve on BioTrue daily. And so we have a lot things going on in manufacturing that continue to -- and they're doing a great job in terms of improving the cost basis.

And then just quickly, just on the $7.5 billion, are you including anything for pipeline? I know you have a lot of potential new product approvals next year?

No, we assume nothing. That's why we feel very comfortable in terms of the $7.5 billion, because there's a lot things that will happen. Howard, there's one product that we do have built in, Luminesse, which we know will get approved.

The eye-whitening product.

But it's -- it's small. And...

And now it's consistent. Again, we had highlighted that over the summer and the fall. It's the only pipeline product that we included.

Your next question comes from the line of Gary Nachman with Goldman Sachs.

Howard, my best wishes to you as well as you move on. Mike, a couple more on Xifaxan for IBS. If approved, a little bit more in the initial marketing plans in terms of increasing the sales force? And how aggressive you'll be with DTC using Jublia as a comp? And then, if you could just quantify a little bit, how much was price versus volume that contributed to growth in 1Q? And what do you factor in your full year guidance price versus volume?

Sure. In terms of our marketing plan for Xifaxan, yes, we will be sort of taking the Jublia approach to Xifaxan, or maybe turbocharge it a little bit. There's huge, huge unmet need here, and people that are just not -- just like onychomycosis, people that have the medical condition and just sort of not getting any treatment because the treatments are not that good out there today. It's also like onychomycosis saying that it's pretty simple to self diagnose. It's a much more serious condition than onychomycosis. So we think that going directly to the patients, to make them aware that there's now a treatment for this and an excellent treatment for this will really drive demand. So you can -- you'll probably see sort of bit of a turbocharged-Jublia approach to this product. In terms of price volume, actually, volume was greater than price in terms of our growth. Outside the United States it's all volume. In fact, we have a negative price outside the U.S. with FX. And in the U.S. it's shifting more to volume than price, and we expect that to continue with our launch brands. A lot of our prices, for most of our products, are negotiated with managed care, and there's only a limited amount of price that we can take. And if you look at our Consumer business, very little -- Wal-Mart doesn't like price increases. If you look at our Contact Lens business, we're not discounting the contact lenses, we're keeping the prices the same. I think there's some noise in the market that there's discounting going on, we're not discounting, but that's all volume growth. And similarly, in the cataract surgery market, again, we're just holding our prices. So it's primarily volume and we expect that to continue.

Okay. And then just the follow up on Xifaxan with the sales force, if you could just comment. You said you're going to have more of a specialized sales force?

Well, now, right now, Salix had 3 sleeves of specialty sales force aimed to the GI community. In terms of primary care, we're not going to build out a huge primary care sales force. We don't think that's efficient. What we will do, just like we have done in dermatology, is we will, for a high rating [ph] primary care in the GI space, we will include them as part of our call plan. But we're not going to have -- we don't see the need to have a large, large primary care sales force. When we've done the analysis, it appears that return on investment is much higher in terms of things like DTC than the primary care sales force.

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

So first, on the Salix product, I'm not sure if you mentioned it, but if could you just tell us, where are inventory levels now? We know where you're going to take them, but I'm just curious now. Jublia, in the past you've mentioned that IMS is not really capturing all the sales. Can you just give us a sense of how much you think IMS is capturing versus how much in the channels that are not being captured? Just to give us that breakdown like you've done before. And then Salix's R&D, I was curious, what pipeline assets now that you own the assets, you own the company, which assets are you going to move forward, and which ones have you decided to stop? And then, can you just -- on contact lenses for the ONEday product, where is that around the world right now? You talked about that, I'm just curious. What countries has it been launched in?

Lot of questions. Let's start with Jublia. Where -- Jublia, I don't know what the IMS numbers are, because in terms of how many -- our scripts per week are about 25,000 at this point, with Jublia continuing to grow. So it sounds like you have IMS, so you can do the arithmetic there. Salix's R&D, actually most of the programs we're going to continue. And we'll -- probably next quarter, we will update our R&D slide for that. So we're still finalizing discussions, but most of the programs are going to be continuing. BioTrue daily, we're launched -- we just launched in -- we were just in China last week, so we just are launching in China, Japan and in Asia. So it's not really in Asia, really not in a lot of the emerging markets. It's more in the developed, mostly in at this point, I'd say U.S., Canada and Europe, or Western Europe, and so there's still a lot of geographies to go. Inventories...

The inventories, as I mentioned in my prepared remarks, Marc, the inventory levels are -- at close were in the 4 to 5 months range, that includes both the traditional, the 3 big wholesalers as well as some of the other wholesalers that Salix was dealing with.

Your next question comes from the line of Alex Arfaei with BMO Capital Markets.

Howard, congratulations on a strong track record with Valeant. You sounded very committed to the company last year, and we were under the impression that you were staying on for another 2 years. If you don't mind us asking, what changed since mid last year? And then, on the Salix synergies, can you give us more clarity on where the synergies are coming from, particularly given that you just said you're keeping much of the R&D projects? And I think you said you're increasing the sales force. So where are the synergies coming from?

I can't tell you there was any one moment. I mean, this has been a process. Lots of discussions with Mike and a lot of soul searching, as I mentioned. And conclusion that I recently drew that, at this point in my life, I was interested in doing some things on my own, as I mentioned, most likely in a private company setting. And it was very difficult decision. As I told Mike and the board, there's 90-plus percent of the time I'm sure I'm going to regret the decision, but it was -- it felt like the right decision for me today.

In terms of the synergies, basically all the back office, all the G&A was addressed. I've mentioned that we're not going to have a primary care sales force. So, yes, we're building out some other sales forces, but it's not a net increase in selling expense, in fact, it's little bit of a decrease. And in terms of the R&D programs, I think that -- I think what's really unique about Valeant is the amount we spend on a program tends to be a lot less than other companies, because of our approach and how we do it. So I think we've talked in the past at Jublia, the cumulative cost of Jublia was like $40 million, then we developed that product from preclinical all the way through. If I look at ONEXTON, the number I think was actually lower. If we look at the psoriasis product we're developing, again, the total cost had been less than $15 million. So I think it's our approach to -- we're able to do more with less. And I don't think that's fully appreciated. And so, a lot of how we can do the R&D is by spending less to get the same work done. So a fair amount of synergies come from there. Obviously, if there's purchasing synergies and all those types of things as well. But we have identified $530 million and that cost will largely all be gone by the end of this quarter.

Your next question comes of the line of Doug Tsao with Barclays.

Just in terms of -- 2 quick questions, in terms of the inventory work down, should we anticipate that being fairly linear through the course of the year? Or should this be something that is pretty heavy in 2Q and 3Q, and then sort of eases up in 4Q? And then in terms of the gross margins for Dendreon, which you expect to get to 60% by year end, is that sort of how we should think about that for 2016? Or as some of the other initiatives in terms of perhaps growing volumes, et cetera, take hold that you could start to inch up from that level and move up from that level? I think, when you announced the acquisition, you should have indicated that you thought you could get considerably above that 60% level.

Sure. So we're going to naturally let the Salix inventories come down. And so they will come down more quickly in Q2 and Q3, because not every wholesaler has the exact same amount of inventory of every product, so there's fluctuations in there. But we certainly aren't going to be giving discounts to get people to buy the products [indiscernible]. So we'll be heavier in Q2 and Q3, and hopefully Q4 returns -- begins to normalize in terms of the inventory levels. That indeed is the plan, and that's why we gave specific guidance for Q2, because it's impacted quite severely by the Salix draw down of inventory. In terms of the gross margins on Dendreon, I think we'll be above 60%. It should be 62%, 63% by the end of the year. And yes, we'll continue to work on that in 2016, and we have programs in place that should continue to improve that. We certainly expect to get over 70% in terms of Dendreon. I don't think we'll probably get to 80% in the foreseeable future.

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

So just on your comments on the expansion of the hospital sales organization, and then greater promotion into the pain specialist market, is -- should we take that to mean that you are now more open to acquisition activity in the hospital space, in the pain management space? Is that necessarily signaling a sea change in your thinking in terms of what your M&A interests are, at least in those areas going forward? Maybe you could elaborate on that.

Sure. We now have the capabilities in those 2 areas that we didn't have. And whenever we get into a new area, GI is the main area we're getting into. We're obviously looking already at opportunities in GI to add products to that franchise. And so I'm not sure I've characterized it as a sea change, but we're always opportunistic. And if we have a capability and we can find the right opportunity to create value for our shareholders, we'll look at it.

Next is going to be a follow up to that question, actually switching gears on Xifaxan. Salix had talked about historically, potentially launching a new SKU blister pack upon approval or sometime during the launch in IBS-D. Is that something that you're planning to do once you get the approval?

Assuming we get approval, yes. We are -- yes, we will have a different SKU for IBS-D.

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

Could you talk a little bit about pricing on some of the products, where it is a driver. I think it's certainly a contributor in the neurology and generic segment. Does that continue to be a year-on-year driver through this year? And then how do you think about it in 2016 for that segment in the U.S. in particular? And then in terms of your expectations for this year, has anything changed in terms of what you are expecting for generic competition to a couple of products, Xenazine being one. There were a couple of others that were potential cliffs this year.

Sure. If you go back to our '16 outlook, which I think we put out in the summer of 2014 or the fall in November? Yes, I think it was actually early we did it too. You can see that our growth rate for neuro and other is 5%, both this year and next year. Now obviously, we're growing a little bit faster than 5% so far this year, but in terms of how we look at our business going forward, we assume actually modest growth in that segment. That being said, if there are -- if we see that there are products are sort of mispriced and there's an opportunity, we will act appropriately in terms of doing what I assume our shareholders would like us to do. So -- but in terms of any kind of long-term forecast, we were at 5% in terms. So we're not planning on major price increases. Sometimes there's an opportunity to take a little bit more price then we'll do it, but that's not built into our -- remainder of this year or 2016 guidance, and if there's more, then that will be upsize. I think this -- what was the second question?

Generics.

Generics. Honestly, we thought we'd see a generic midway through this year. So right now, our guidance continues to assume that we will have a generic midway through this year. That being said, it's not a 100% clear that one will be coming out, so that could be upside, if it doesn't. And then Targretin, we also assumed we'd see a generic midway through this year. That one, I think, there's a little bit more evidence that one may come. So we have not adjusted our guidance at all for -- right now, they're both assumed to go generic this year, midway through the year. And for Targretin brand, there's only 1 of -- we have 2 SKUs, where we have what is now...

Gelatin capsule.

Gelatin capsule, so we're talking about the capsule, not on the gel. So we're assuming both Xifaxan -- we expect Targretin to happen, Xenazine we wouldn't be shocked if nothing happened. But if so, we'll update our guidance. We will not -- if we don't see a generic.

And you also -- you are still very interested in the emerging markets. Has the availability and end valuation on potential tuck-ins there got in any more attractive as those markets have become a bit choppier? And does that create opportunities for you?

Yes, and yes. And you should probably expect to see us make some acquisitions over the rest of the year, some of the more attractive emerging markets.

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

So I have one question for Mike, and one question for Howard. Mike, could you just update us on opportunities ahead to use stock for a large transaction? And whether there might be any opportunities to buy large assets out of Big Pharma? And then, Howard, as you're wrapping up in your role, could you just provide some perspective on, given your -- in light of your interactions with investors over the last 4 years and even more recently, what do you think investors on Wall Street, most under-appreciate about Valeant?

Well -- this is like everyone on the call knows that we really, really value our stock, and we're always reluctant to use it, because it's a scarce asset and we continue to believe it's quite undervalued. And if we can continue to put up numbers that we have this quarter, which we expect to do, it will be undervalued. That being said, if a great opportunity to create shareholder value. We will figure out that all in and do it. As we said at the beginning of the year, we're -- large deals are opportunistic. You can't predict when they're going to happen. And we were certainly not expecting to do a deal with Obagi and Salix this year, but when we got a call and we took a look at the asset, and we decided it made sense. So we are not right now out there trying to look for a large deal to do, but we will continue to be opportunistic and do whatever make sense for our shareholders.

And in terms of your second question, and I will give you an answer and I'll also give it more thought and we can -- the next time we see each other, we can talk about it in more detail. But the sort of 3 or 4 things that come to mind initially. I think 1, there's -- because deals get headlines, I think there's a little bit of a misconception that we spend all of our time running around doing deals, where it's pretty much the opposite. We spend most of our time running around, trying to squeeze as much growth out of our existing collection of assets as possible. And I -- related to that, I think is the value of our diversified business model, because very few of our products are well known to the broader world. I think it's harder to have an appreciation for the potential, growth potential, at which gets into the issue of terminal value, which I think is under-appreciated. The second area I'd say is the whole area of R&D, and maybe we're a little bit to blame though. I think we've got tagged with not believing in R&D, which is -- it couldn't be the furthest from the truth. And we have recognized like any technology company that innovation is the lifeblood. It's just how we go about doing at the risk rewards, and our openness and willingness to acknowledge that we may not be the right people to develop everything we need to grow our business. So our willingness to go to third parties, the licensing technology, get it through acquisitions. I'm hoping that the world, they look at our R&D pipeline last year, this year, next year and the year after and say, that the model really does work, combination of internal development, acquisitions, in-licensing, is going to work. But I think that's work in progress. I think, lastly, emerging markets, because our strategy is so much different, having a local company in an emerging market versus most pharma companies take their U.S. products and export them, and actually end up serving a very small percentage of the population. We're a local company serving really the local person on the street. So it's much more of a long-term macroeconomic play on GDP growth and healthcare spend, which we could all argue year-to-year. But over time I think we'd all agree that the emerging markets we're in, there's going to be tremendous growth in GDP and tremendous growth in healthcare spend, just won't be straight-lined. So I'll give it some more thought, but those were some initial thoughts.

Your next question comes from the line of Greg Fraser with Deutsche Bank.

It's Greg Fraser for Gregg Gilbert. On wholesale inventory levels for the Salix products, will there be any further work down in 2016? Or do you plan to maintain inventory at around the 1.5 months level? And then a question on Marathon, the sales figures for Isuprel and Nitropress on the top product table, those reflect any adjustments? Or was there any buy-in that occurred ahead of the price increases that you took for the effective sales for those products?

Yes. In terms of the wholesale, what we have said that they will be less than 1.5x. And usually we aim for about a month of inventory in the channel, but in the faster growing products it's usually a little bit more, that's a backwards looking month. And so if you have a product that's growing quickly, a forward-looking month is a lot higher than a backwards looking month. So most of the Salix products are growing quite nicely. So I guess it will be somewhere between 1 and 1.5 months by the end of the year, and that's probably the level we'll keep them at as long as the growth stays up, so -- which I think is kind of normal in the industry.

And also Mike, the IBS-D indication for Xifaxan, which we didn't factor in, could have a huge impact on those levels.

Absolutely, absolutely. Now, there was -- in terms of price increases on the 2 products you mentioned, there was -- it was -- the company that sold to us had done some pricing work and had identified the opportunities and had their consultant come in. So those happened immediately, so there was no buy-in.

Your next question comes from the line of Douglas Miehm with RBC Capital Markets.

A couple of questions, just some more housekeeping ones. Maybe you can tell us why it looks like the commercial line for Ultra slipped a little bit from the first quarter into May? And then I know that you're expecting to have several other lines for Ultra come on stream probably over the next 12 months as well. Maybe you can talk to the timing as to those. Second question just has to do with Vesneo. And maybe Ari, if he is around can talk about the competitive environment. And I know that you haven't put out data yet and you're likely going to publish that. But given a few things that happened in the marketplace, do you see the competitive positioning for that product having approved? And then finally, Mike, do you see an opportunity for PROVENGE to any degree in Europe? And I'll leave it there.

Okay. So Ultra -- you want to talk about the Ultra too. Okay. Ari will take all of them.

So I think on Ultra we're already producing commercial vendors who are just going through validation. So we have that underway. And we expect by the middle or third week in May to be able to release the commercial production pending quality, so that's good -- yes, that's a bit. So that's good. And that's line 1. And we have line 2 on track for September-ish this year, so that's Ultra.

Two lines next year.

Two lines next year, exactly.

Other questions, Ari.

Yes. Yes, business we've said, we've always been positive on Vesneo. It's a breakthrough in the monotherapy versus prostaglandins. So we've held to that thesis. Obviously, the news of the competitor trial makes us more confident about the outlook for Vesneo.

And PROVENGE, PROVENGE has been approved in Europe, but the pricing so far we've been able to get in Europe does not make it something we would probably want to do by ourselves. So we'll probably look for a partner in Western Europe to see if someone else wants to take the product. And right now, we are focusing our efforts on the U.S. And first, the focus was to make it profitable, which we have. The second priority is to grow it, which, hopefully, we can report back in another quarter or 2 that we're starting to grow it. And I think staying very focused in the U.S. and making it a growing or a profitable product is our short-term mission in terms of Provenge.

And maybe just more on Ultra, we're going to launch the multifocal at the end of this year. We'll already be validating and producing Toric towards the -- in sometime in Q4. So, again, well on track for release of commercial product early Tier 1 and maybe earlier.

And each of those lines can do $150 million?

That's a rough estimate. Obviously, as we release Ultra and Toric and multifocal, the ASPs will rise, so $150 million is a reasonable estimate.

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

Maybe a couple for Harvard -- for Howard, and one for Mike. Howard, best of luck to you. There's a lot of shareholder interest in this, so I'm compelled to ask a bit more. So I just wanted to understand the timing of news. We understand that right around your 3-year anniversary date, you had another 3-year equity award. So I just wanted to understand timing there. And then separately, do -- what's the EBITDA expectation for 2015, not 2016, but EBITDA expectation for 2015? And what was that number for 2014? And then Mike, my last question, Jublia is up 87% quarter-on-quarter on TRx. I think the sales were up about 20-ish percent, so just wanted to understand trends there.

Okay. So, again, in terms of the timings, this was a decision that was -- that while we've been discussions for a period of time, the decision that was just made. So -- and up until the decision was made, it was businesses as usual. So I wouldn't draw any connection between those 2. In terms of the EBITDA for '14, I mean that you can get from our public filings. I don't have that in front of me. For '15, you have the easiest -- we're giving you the guidance. We've told you what the interest expense. We're paying 5.1% on our interest expense for the rest of the year, and we are giving you our tax. You should assume tax rate stays roughly the same. So the only missing piece is stock-based comp and depreciation. Depreciation is running $50 million -- little over $50 million a quarter, so that's $200 million plus, and stock-based comp is a little over $100 million. So I think you can pretty easily -- from our updated guidance, you can get there very, very easily.

Yes. In terms of Jublia, in our prepared remarks I think we mentioned that the difference between the growth in the scripts and the growth in revenues is basically what's out there in the channel and inventory. And when you launch a product, people -- there's a fair amount of inventory that's put in, every pharmacy, every -- the wholesalers. So you need to -- only see that our launch brand that early on there is a lot of sales that are just filling up in the channel. And -- we -- so those have all been reduced. And our sales especially into specialty pharmacy, specialty pharmacy have our inventory levels very, very low, so -- well below 2 weeks. So I think going forward, what you'll see is, which is the important thing, is the growth in script trends and the growth in Jublia revenues will match dollar-to-dollar from Q2 going forward.

Okay. Thank you, everyone, and we'll talk to you next quarter.

This concludes today's conference call. You may now disconnect.