Good morning. My name is Christie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Perrigo Third Quarter 2017 Financial Results Conference Call. Thank you. I will now turn the call over to Brad Joseph. Please go ahead, sir.

Thank you. Good morning everyone, and welcome to Perrigo's third quarter 2017 earnings conference call. I hope you all had a chance to review the press release we issued earlier this morning. A copy of this release is available on our website, as is the slide presentation for this call. Leading today's call are John Hendrickson, Perrigo's Chief Executive Office, and Ron Winowiecki, Perrigo's acting Chief Financial Officer. I would like to remind everyone that during this call participants will make forward-looking statements. Please refer to the important information for investors and shareholders and Safe Harbor language regarding these statements in our press release issued earlier this morning. In addition, in the appendix for today's presentation we have provided reconciliations for all non-GAAP financial measures presented. Turning to the agenda on slide 3. First, John will highlight the durability of our business model, illustrated by the continued strong margin profile of our businesses. Next, he will discuss the financial and operational highlights from the third quarter. Ron will then provide details on our third quarter performance, along with comments on our balance sheet and our updated 2017 financial guidance. Finally, John will close out the call with our outlook on the business. Now I'd like to turn the call over to John.

Thank you, Brad, and good morning, everyone. Before jumping into results for the quarter, I would like to highlight some of the strategic initiatives that have enabled the strong business performance that we will discuss today. First, when I was appointed CEO, I laid out a strategy to simplify our portfolio, focus our business model, and execute against our long range plan. Over the past year and a half, we've taken several specific actions aligned with that strategy. And I am pleased to say that these actions are, once again, driving positive performance results. Perrigo is a well-positioned company that has the right to win in the markets where we compete. We offer quality, affordable health care products in an environment where governments, health care systems, and patients are focused on health care spending. Our unique business model and diversified product offerings are focused on a number of key OTC and prescription categories across North America and Europe. These categories not only represent solid growth opportunities for Perrigo, but also represent important treatment categories for patients and families, making Perrigo the ideal partner in a global effort to lower health care costs. On slide 6, you can see the established margin trends in our businesses remain strong and consistent. We remain excited about the durability of our unique business model led by our consumer-facing businesses, which comprise approximately 80% of our net sales. In our CHC Americas business, adjusted operating margin remains strong at over 20% for seven quarters in a row. And this quarter's 23.2% adjusted operating margin is a record third quarter for this business. This is a great performance by the CHCA team, a testament to our execution and strong customer relationships. In our CHC International business, we have increased the adjusted operating margin profile to the…

Thanks, John, and good morning everyone. Bear with me with my – as you listen to my raspy voice this morning. I helped kick off the 2017 and 2018 cough/cold season this week. Last quarter, the theme I used to describe our business performance was converting opportunities into bottom line results. We are pleased that this theme continues, which is reflected in our performance again this quarter. Each of our businesses have developed a keen focus on execution, action, and capitalizing on opportunities, all of which have provided the foundation of our financial results in the first nine months of the year. These results were achieved again against a challenging and dynamic market backdrop for each of our segments. Now let's turn to slide 10, where you can see our GAAP reporting results for the third quarter. Please reference the appendix for a more detailed reconciliation from reported to adjusted results. I would like to take a moment to outline the effect of the favorable adjusted effective tax rate, or ETR, in the quarter. As you can see in this slide, our adjusted ETR is approximately 12% in the quarter, which contributed approximately $0.09 of upside to our previous guidance. Year to date, our adjusted ETR is approximately 17%, which is lower than our previous guidance. Our ETR guidance has improved primarily first to the utilization of tax attributes supported by the improved business performance in the CHC International segment, and second, improved jurisdictional mix of income across the company. For the third quarter, recall that accounting principles require what is commonly known as annualization of the expected decrease or increase of the annual tax rate to be recorded in the current quarter. Accordingly, the third quarter tax rate is below the expected annual tax rate of 17%, due to…

Thanks, Ron. Slide 19, as you can see, store brand growth continues to outpace national brand growth in most categories. This was driven by continued consumer acceptance of store brand products and the launch of store brand products in categories where national brands previously held exclusive share. The growth of store brand is particularly prominent in the GI and smoking cessation categories, as new store brand products continue to offer consumers an expanded selection of high value, quality alternatives to national brand products. Turning to slide 20. We aim to be a retail customer's strategic partner in bringing innovation, content, and thought leadership in digital marketing and e-commerce merchandising, as we have done over the years with traditional brick and mortar retail. We are building and investing in marketing resources and tools to enable our leadership in digital marketing and e-commerce. We believe store brand share growth through e-commerce will emerge, as it provides our customers the opportunity to engage more directly and closely with the consumer to convey the compelling quality and value message of our products. We are working on these initiatives with virtually all of our key customers, including traditional brick and mortar customers, many of whom have online presence. Turning to slide 21. We continue to focus on profitability and steady operating margin expansion in the international business. The team is driving brands, innovation, enhancing e-commerce and digital capabilities, streamlining processes and functions, and engaging and developing our people. We still have a number of initiatives to optimize this business. And given its improved performance, we are now reinvesting to drive innovation in building out back office systems for further support of our sales strategies. I am pleased with the margin expansion that the team has realized this year. And we continue to target an adjusted…

Thanks, John. Operator, I would like to open up the call for questions. We ask everybody to please limit yourself to one question. Thank you.

Operator. Thank you. And your first question comes from Gregg Gilbert with Deutsche Bank.

Thank you. Good morning, team. John, on the e-commerce comments, for whatever set of reasons e-commerce has been very small in terms of purchase of store brand OTC products for the industry and therefore to Perrigo. Short of Amazon or someone getting in in a big splashy way and making a push, how do you think this will evolve? Is it a slow, steady evolution of more of these things going through to e-commerce and away from brick and mortar? Or could you see a more sort of abrupt change there? Thanks.

Yeah, thanks, Gregg. Thanks for the question. From my perspective, I would say until more – whether it's Amazon or others get more and more behind buying OTC and those kind of products online, it will be a slow and steady increase. If they put more energy, muscle behind it, I think it could grow faster than that. But I think it's a more of a slow and steady, versus a dramatic shift within a quarter or something of that sort. It still is a – it's a good part of the business for both retailers and Amazon as they're getting into it. But as you said, still a relatively small percentage of the overall OTC market sold through those venues.

Thank you. Next question, please.

Your next question is from Randall Stanicky with RBC Capital Markets.

Great, thanks, guys. John, the diversified footprint has been delivering across all the businesses, which is perhaps support to keep that overall business intact. But specifically on the U.S. Consumer business, that's still the primary value driver. Can you help us think about the growth in that business? And how do you get back to the 2% to 4% that you're targeting? We've now had two quarters in a row with $13 million in new product launches. You had some help from Nexium this quarter. Is there a way to get us comfortable that we're going to see an acceleration in some of those new launch – product launch opportunities over the next call it one quarter to three quarter to four quarters?

Yeah. Thanks, Randall. So a couple parts of that. I'd say first of all, just going to your – the new product side. First, just to be clear, Nexium, we launched it right at the end of last quarter. And so we'd expect to see bigger sales of that in the fourth quarter here and back half. I think as I look at the growth, what gives me confidence is that store brand in the U.S. continues to gain share over brands. In other words, we're doing all the right things to drive share, to gain share. The markets have been tough. So when you're looking at a relatively low growth market, I would assume over time it becomes a 1% to 2% growth market, in which case our numbers kick up higher than they are. Given what the overall market growth is, which right now over the quarter, Q3, was relatively small, less than a percent. For us to grow more than that and continue to grow 1 times, 1.5 times that, I think is good performance. So part of it has to be the market has to kick in. I do like the fact that we're gaining share, even in a lower growth market right now in the U.S.

Okay, great, thank you.

Your next question is from Chris Schott with JPMorgan.

Great, thanks very much. Just was hoping to get a little bit more color on the RX business and base kind of pricing trends. I guess specifically what was erosion this quarter? And how do you see the pricing dynamic shaping up as we start looking out to 2018? I guess specifically, it seems like you're talking about a 9% erosion in terms of the 2017 target. Is that a reasonable range to think about as we look out to 2018? Or could we actually think about a smaller erosion rate as we start to think about next year's numbers? Thank you.

Yeah, thanks, Chris. Appreciate the question. So I would say in the quarter the erosion that we experienced was in line with our expectation, sort of that high single digit kind of erosion level. So it was in line with that. That's what we experienced in the quarter. That's what we would plan going forward for the next quarter, high single digits. That's what's in our guidance numbers. I haven't seen it subsiding enough yet where I can see a trend change. So right now as we look at RX business, as we're looking at, say, the first half of next year, we would plan on relatively big erosion again as we look at that next year and going forward. So I'm not saying that that will happen for the next five years. But I just haven't seen the trend change yet to where I can say, boy, there's all of a sudden a 5% number or something like that.

Yeah. This is Ron, but now I could just add, sometimes we focus on pricing, but at the end of the day it's about new products. Right? So take a look at that business, and essentially in the evolution of this business this year, we had $217 million of sales in Q1, $240 million in Q2, $251 million in Q3, and you'll see a sequential growth again in Q4. So when we're focused on pricing, what I think we've asked you to do is looking at the quality of the business and how this business is growing with net pricing pressure. So although we're – and John has mentioned – experiencing the high single digits with new products – example, $30 million of new products contribution in Q3. We grew 4%. That to me is the story. So pricing, you bet. It's a challenge. But it comes back to, how do you offset new pricing? Is through pipeline, it's through new products. And we're proving our capability to show net growth in this business. And as we've talked, we expect net growth in the circa 2% in the second half of this year. So that to me is the ultimate metric of where the business trends are.

Thanks very much.

Great, Chris.

Your next question comes from David Maris with Wells Fargo.

Good morning. Ron, on taxes, what do you think the implication of the tax reform proposal would be if passed on Perrigo? And then, John, we've written a lot about Amazon as a potential disruptor in pharmacy. Just as a follow-up to the earlier question, do you think that they'll enter the pharmacy business? Thanks.

Yeah, thanks, David, for the question. Obviously, a very relevant and important topic for every company at this point. To start, Perrigo has always talked about we believe that tax reform is necessary. Modernizing what you could argue is an outdated United States tax code for competitiveness for the U.S. in jobs and investment is critical for the U.S. economy over the longer term. You step back and think about Perrigo, kind of going to your question, we have over 10,000 employees. Our largest manufacturing footprint is here in the U.S. And our goal and our priority is to enable and deliver quality affordable healthcare to consumers around the world. So that's the business of Perrigo. I think, David, we can agree to kind of three things to start with. Number one, we're very early in the process. The first H-1 bill was issued just a week ago. It still remains very dynamic. And I think we probably can agree the final reform to the extent it's achieved will not be like the first bill that was provided. So that's probably the first thing. Number two, it's very complex. It's a very complicated process. And this goes to some of the amendments we're seeing already in the process relative to some of the architecture of the current bill. Tax reform is not simple. The third part is every multinational company, of which Perrigo obviously is in that umbrella, will likely be affected by tax reform. And the question, kind of going a little bit to your question is, what's often asked, is this good or bad for you? In my mind, that not – it's not a binary question. I think the issue we're all faced with is looking at what I call the building blocks and the systematic changes of the entire reform package. And then coming back and saying, what does that mean for Perrigo, our investors, and our customers? So again, we applaud the U.S. government for being serious about tax reform. David, we're taking a very thoughtful process. We do see the House bill as what I'll call the opening bid. And we continue to monitor and evaluate again what I call the building blocks and systemic changes. But for us to provide a good/bad systemic indication at this point would not provide a very steady hand, thoughtful process. So we're looking for what final reform is. Where does the final delivery of the legislative process come forth to? And we'll be very proactive in communicating and addressing Perrigo's situation at that time.

And, David, on Amazon, and I'll say online or those kind of things. I probably can't speak on Amazon on their exact intentions any more than what's out there publicly. What I can say is my belief is that given our pharmaceutical delivery systems and everything, there will be disruptors in the market. There will be people, whether it's Amazon or others, that come and try and figure out ways to get products to consumers in a more efficient way and do those things. I believe that that's frankly healthy for us as a U.S. So I think there will be disruptors. I count on Perrigo as a company living up to our mantra. Our mantra has always been, fast, fluid, flexible. We're going to react to situations, we're going to be a leader once we see where it's going and driving it. So whether it's Amazon or someone else, I do believe there will be disruptors out there on the buying, on the way of getting pharma products to consumers, on those kind of things. And our view would be we plan to be right there with those as they take better shape.

Great.

Thanks, David.

Thanks.

Great. Thank you.

Your next question is from Louise Chen of Cantor.

Hi. Thanks for taking my question. So just another question here on this online vendor opportunity. So why have consumers not historically used online vendors more to purchase OTC drugs? You had mentioned that there have been a couple of endeavors in the space. And could you elaborate a little bit more specifically on if Amazon were to enter the market, how that could help your business? Thank you.

Yeah, so thanks, Louise. Thanks for the question. I would say I don't have the – I want to be clear. I don't have the exact consumer – we did not do consumer studies yet to say why aren't you buying online or anything like that. So I don't have that. My belief is in just my perspective in talking with others is that for the most part today, when you want to cure a migraine headache or do something and you go to your pantry and it's not there, you run to the store and get it. It's sort of a, as used as needed. You go get the cough/cold product when you have a cough or cold. Most people aren't necessarily saying, is my product in my cupboard expired, should I buy more. Those kind of things yet. So I think it's more of a, I need it when I use it. I go to get it. Got pretty convenient locations locally to run and get that. I don't have to go to a large grocery store. I can go to anything that's close by if I choose to. So I think that is part of it so far. I do think that Amazon, if you pull up Amazon and go through it, they have a number of products for sale there in the OTC categories. So it's not like the products are presented aren't out there. I think as they get more behind the merchandising of it, just as retailers get more behind the merchandising, it will continue to evolve and grow as a online purchase source.

Thanks, Louise.

Your next question is from Jami Rubin of Goldman Sachs. Candace Richardson - Goldman Sachs & Co. LLC: Hi, this is Candace Richardson on for Jami Rubin. I'm wondering if you're still considering strategic alternatives for the RX business? Or do you feel like you have enough flexibility to further invest and diversify away from derm? Or is derm relatively inflated at this point in your view? And then secondly, can you just comment on product mix this quarter in RX? I know it was a pretty big benefit last quarter. And to what extent was it a driver this quarter? And how should we think about that going forward? Thanks.

Yeah, so let me tell you, and it's probably pretty consistent to what I've said over the last couple quarters on RX. First of all, we like our business. We continue to invest in our business. We think we have a good pipeline, all those things. So despite the market dynamics and the craziness, we feel we have one of the better businesses out there. And I think I've continued to say that relatively consistently. When you do have that and you have market disruptions, dynamics like you have today, we're looking at every way still, with the RX business and frankly all of our businesses, but to say is there other ways to create value. Are there other things to do? Should we be adding products into our portfolio from the outside? Should we be doing other things? So I would say we continue to look at all of those options of increasing the value. But we think we do it from a position of strength. We don't feel we have to make moves. We feel there's enough products in our pipeline and the extended topical area is broader than derm. We have nasal sprays and inhalation products, et cetera. But it's broader than that. And we feel there's plenty of products to continue to invest in, to continue to increase our R&D investments, to keep growing that category, and do what we do. So with that, Ron, I don't know if you want to take her mix question.

Yeah, yeah. Yeah, you bet, John. So product mix was normal this quarter. We've kind of talked to investors across the board that if you look at a average gross profit margin, adjusted gross profit margin as the indicator, it's around 55%. This quarter, 55%. Now again, quarter by quarter we may vary off that 150 basis points plus or minus. But a standardized margin in this business right now, it's about that window. And we are right there this last quarter.

I would say the one thing as you think about the operating margin, is Ron talked about in his part, the R&D investment. And so we had lower R&D, some of that lower spend translated down the operating margin higher number this quarter. Excuse me, yeah, this quarter. So 100 basis points, 150 basis points normalize it between this quarter and next quarter, because we will be planning on spending that R&D in Q4, as Ron said in his comments.

Great. Next question, please.

Your next question is from Marc Goodman with UBS.

Yes, can you talk about the o-U.S. operating margin just a little more? You mentioned insourcing was a help in the quarter. How much was it a help in the quarter? And where are we in that process of starting to bring the products in? I mean is this the first quarter we've seen any impact? This is certainly first time you've actually mentioned it. And then I guess I'm just wondering, if you didn't spend and you got such great returns on the top line, how did you do that this quarter? And why is there a need to spend next quarter extra money? Just, I'm just curious. Thanks.

Hey, Marc. I, yeah, I can take that one.

Yeah. Well, Ron will take that one, please.

But yeah, kind of a two-part question there. So first of all, we have talked about insourcing for some time, so hopefully that message has been clear, Marc, at least in my mind. We provided systematic commentary that that strategy started about a year and a half ago and we're starting to see the benefits. If you look at the gross profit margin in this business, it's been running pretty much like clockwork at 51%, 52% adjusted GPs to sales. So pretty consistent performance. So we are seeing the phasing in. And as we've talked about before, just to put kind of an overarching metric on it, we acquired the assets of Omega, the branded business. They were about 80% outsourced. Now our goal is to get that down to under 60% outsourced. And again we've said we're just about halfway through that journey, not quite. So figure a third to halfway through that journey at this point. So it's phasing into our performance as we speak. On the A&P piece, it's seasonal. I mean if you look at the metrics, Marc, and trend backwards, this business, yeah, Q1, Q2, Q4, usually runs 12%. Q4 is a great example. You're spending into the cough/cold season. You're spending into lifestyle. We have lifestyle weight loss products. You want to advertise and promote into "the January renewal cycle." And Q3 is always running around that 10% of sales. So there's nothing I'll call out that we've done dynamically different. It is A&P aligned with our sales strategy is one of the key things Svend [Andersen] has done is ensuring our sales management model is aligned with our promotional programs. So we are making sure in a disciplined way that that A&P ties to our top line execution. And you're just seeing that in Q3. Nothing unusual other than business discipline and again some seasonally lower attribution, just given the product portfolio in Q3.

I would say, Marc, the other thing that – if you think evolution-wise we still feel – and this has been consistent as we've talked about that. Over the next three years we can get to that high teens. In order to get there we've got to continue to do things fundamentally different. So as opposed to just muscling through margin, doing some insourcing, it requires different infrastructures, different investments. We've been saving good money. We're making sure we're taking some of that and putting it back in the business to get to those higher margins. So those investments of $10 million to $20 million that it will take to create a better infrastructure, we feel we're at a good position to initiate those and add those in. And those will be key parts of our 2008 (sic) [2018] investment strategy when you look at the expense side to get to those higher end margins ultimately. Thanks, Marc.

Thank you. Next question, please.

Your next question comes from Annabel Samimy with Stifel. Annabel Eva Samimy - Stifel, Nicolaus & Co., Inc.: Hi. Thanks. So while we're on the topic of the International, so a lot of what you've done has been on the operating efficiencies, infrastructure, improving that margin. Is it time to think where you can start bringing around the revenue synergy to bringing new products onto the platform? And have you identified those first areas that you want to sort of drive some revenue synergies from?

Yeah, great question. So first of all, we are happy. We got out of the unprofitable distribution side. But we're happy with the 4% to 5% growth in that business that we had this quarter. We think that's very good growth for that business. So even without adding in all of those, we do have a new product pipeline, new product launch within CHCI that phases out over the next three years, as they look at those kind of products. And we are looking for both internal synergies I would say, Annabel, as well as inorganic opportunities to add in products. We feel like our infrastructure is more stable. Again as I said earlier, there's a lot more we need to do to get it to where it's U.S.-like, if you will. But it's a lot more stable. And we feel like we could add inorganic opportunities into that infrastructure and be able to absorb it and have gross profit flow pretty well down to the operating margin. So we are looking at all of those. And we feel better about the positioning of our international business now, as we've made some of the initial changes. Thanks, Annabel.

Thank you. Your next question is from Douglas Tsao with Barclays.

Hi, good morning. Thanks for taking the questions. Just on the Nexium launch, which you got off and you indicated it in the prepared remarks that you expected that to sort of build as we go through fourth quarter. We know there's at least one other competitive entrant into that category. So just sort of trying to think about how that will progress as we move through next year? And if you have any insight in terms of the competitive landscape in terms of how many you think there will be in say 2018?

Yeah. So first of all, there is a competitor out there. We have that – we had that in our initial plans as we talked. There were three initial companies. One got the approval. Those were in our plans. We launched the product, expect to continue to build that through the quarter. We would expect over time, as we've done in most of the other products, to have our fair share of that product category. Do we think we'll have other competition? I do. I believe ultimately there will be others out there. But we believe because of our strength, et cetera, we will have our ultimate fair share of a good GI category, as we do in the other products that we have within that category, lansoprazole, omeprazole, those kind of products, we have a fair share despite competition. And so we believe that we're able to do that, even though competition will be there.

Okay. Great. Thanks.

Thanks, Doug.

Thank you. Our final question is from David Risinger with Morgan Stanley.

Hey, David.

Morning, David. David R. Risinger - Morgan Stanley & Co. LLC: Thank you very much. Hi, congrats on the performance. I wanted to ask about consumer healthcare. So could you just provide a little bit more context? Obviously the performance that you delivered was well above expectations. But just sort of step back and put in for context for us why that segment revenue growth was only 1%, particularly when you launched Nexium? And then in terms of helping us understand how to think about that segment sequentially going into the December quarter, how much fourth quarter revenue variability is there with respect to the cough/cold/flu season? Meaning, is that a big swing factor in the fourth quarter? And maybe you could just talk about the range of possibilities for the cough/cold/flu season in the fourth quarter. Thank you.

Yeah, thank you. So let me take the kind of first part of that. And, Ron, I think I'll toss you over for the second if you think of it.

Yeah.

So in general, we actually feel very good about the growth in the quarter of the business. And just because of where the category growth is, where the market is, the actual performance of the brands, et cetera, we feel pretty good about growing share and being able to continue to grow that. We think then as market growth continues, we're a bigger share of that market, and it enables future growth. So in general, we feel good about that. I would say cough/cold – matter of fact, maybe, Ron, I'll toss both those over to you. Cough/cold and then variability. I will say last year Q3, not that I'm trying to do too much of that, but we had a really strong last year Q3 with launches, with a number of things going on. I think it was 4% to 5% growth last year. So the 1% for us over and above that 4% to 5% number last year was actually a pretty good achievement as we looked at it overall. Ron, you want to talk about cough/cold and/or the growth side?

Yeah, so certainly I'll kind of go through a couple things. So first of all, again to your question, we did grow last year Q3, roughly 4% in Q3, 5%. Just to kind of put the comps out there that we're growing off of. So again, still good performance against those relative comps, number one. The cough/cold dynamic, we've moderated – or I shouldn't say moderated. We put in a normalized cough/cold season. If you look at normal business patterns, it's usually a little higher in Q4 just due to some seasonality. If you look at our guidance model for this year, you're going to see in the 2.5%-ish to 3% uptick from Q3. But that's pretty traditional. There's not a lot of difference from what we've seen in our historical patterns. So again, we're modeling on a normalized cough/cold season. We're not looking at any other kind of product – any kind of product dynamics other than the Nexium new product penetration that we see in Q4. And again on a sequential basis if you model out in that 2% to 3% zone – that's what our guidance tells you to do – you'll come out what we expect in the Q4 sales line.

Thanks, David. David R. Risinger - Morgan Stanley & Co. LLC: Great, thank you very much.

Thank you. I will now turn the...

Great. Well, thank you, everybody. I appreciate your questions and comments. We're excited about the results we've had, and we're excited about the future for the company and where we're headed. So thank you very much for your time.

Thank you. This does conclude today's conference call. You may now disconnect.