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Executives

Lisa M. Defrancesco - Former Vice President of Global Investor Relations

Paul M. Bisaro - Chief Executive Officer, President and Director

Roger M. Boissonneault - Chief Executive Officer, President and Director

George Frederick Wilkinson - President of Global Brands and Biosimilars

R. Todd Joyce - Global Chief Financial Officer

Sigurdur Oli Olafsson - President of Global Generics

Paul S. Herendeen - Chief Financial Officer, Principal Accounting Officer and Executive Vice President

Analysts

Christopher T. Schott - JP Morgan Chase & Co, Research Division

Aaron Gal - Sanford C. Bernstein & Co., LLC., Research Division

David W. Maris - BMO Capital Markets U.S.

David Risinger - Morgan Stanley, Research Division

David G. Buck - The Buckingham Research Group Incorporated

Randall Stanicky - Canaccord Genuity, Research Division

Ken Cacciatore - Cowen and Company, LLC, Research Division

Marc Goodman - UBS Investment Bank, Research Division

Elliot Wilbur - Needham & Company, LLC, Research Division

David Amsellem - Piper Jaffray Companies, Research Division

Jami Rubin - Goldman Sachs Group Inc., Research Division

Shibani Malhotra - RBC Capital Markets, LLC, Research Division

Douglas D. Tsao - Barclays Capital, Research Division

Timothy Chiang - CRT Capital Group LLC, Research Division

Jason M. Gerberry - Leerink Swann LLC, Research Division

Louise Alesandra Chen - Guggenheim Securities, LLC, Research Division

Hima Inguva

Actavis, Inc. (ACT) CEO Hosts Acquisition of Warner Chilcott Conference May 20, 2013 8:00 AM ET

Operator

Good morning. My name is Jennifer, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Actavis-Warner Chilcott combination conference call. [Operator Instructions]

Thank you. I now would like to turn the call over to Lisa Defrancesco, Vice President of Global Investor Relations. Please go ahead.

Lisa M. Defrancesco

Thank you, Jennifer. Good morning, everyone. Thank you for joining us to discuss Actavis' acquisition of Warner Chilcott, which was announced in the press release earlier this morning. A copy of the press release is available on our website at www.actavis.com.

Participating in today's call from the Actavis side are Paul Bisaro, our President and CEO; Siggi Olafsson, President of our Actavis Pharma Division; Fred Wilkinson, President of Actavis Specialty Brands; Bob Stewart, our President of Global Operations; Todd Joyce, our Global Chief Financial Officer; and David Buchen, Global Chief Legal Officer.

From the Warner Chilcott side, we have Roger Boissonneault, Warner Chilcott's President and CEO; Paul Herendeen, Executive Vice President and Chief Financial Officer; and Rochelle Fuhrmann, Senior Vice President of Finance.

We will be using a slide presentation during today's call to provide an overview of the potential transaction, its benefits and potential timing, which is available on the webcast, as well as for download, in the Investor Relations section of our website.

I would like to remind everyone that, during the process of this call, management will make certain 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 this morning or on Slides 2, 3 and 4 in the accompanying Investor Presentation.

Under Irish Takeover Rules, we are under increased scrutiny between now and the close. And for those of you who are accustomed to our regular and open communications and disclosure, this will be a change, so please bear with us during this period. Following management's review of the presentation on the potential acquisition of Warner Chilcott, we will open up the call for questions from the audience.

With that, I will now turn the call over to Paul.

Paul M. Bisaro

Thanks, Lisa, and good morning, everyone. It certainly is a very exciting day for both Actavis and Warner Chilcott employees and shareholders alike. This really is a culmination of the Actavis strategy of building a global specialty pharmaceutical company. We couldn't be more delighted with the way things have progressed. It certainly fulfills many of the stated objectives that we've had. And through the slide presentation today, we'll take you through what those objectives are and why this particular transaction is so beneficial.

So turning first to Slide 5. Certainly, the combined company is now going to be in the top 20 in the global pharmaceutical companies in sales and substantial presence in both generics and in branded products.

Our Actavis Specialty Brand pro forma revenue will be approximately $3 billion for 2013. It augments our Specialty Brand business in our core therapeutic categories of Women's Health and Urology, and Fred will take you through what that expanded franchise looks like, as well as expanding into the GI and Dermatology sectors, new therapeutic categories that we're very excited about.

We expect to achieve substantial operational synergies and some tax synergies and overall tax structure benefits. We will be redomiciling our company into Ireland and become an Irish plc. The transaction will be immediately accretive to non-GAAP earnings, provide strong operating cash flow and will also provide the ability to delever our balance sheet. And finally and importantly, we expect to enhance our combined company's credit profile, and we expect the combined company to remain investment-grade.

With that -- oh, now we turn to Slide 6, sorry, the proposed transaction terms. With the transaction, the Warner Chilcott shareholders will receive an exchange ratio of 0.16 shares of the New Actavis entity. The new entity will be assuming $3.4 billion of Warner Chilcott net debt for a total transaction value of approximately $8.5 billion.

The transaction represents about a 43% premium to the unaffected exchange ratio, as described in the footnotes on Slide 6. And the pro forma Warner Chilcott ownership of the new entity will be about approximately 23%.

We do anticipate the close to be by the end of 2013, subject to customary closing conditions, including regulatory approvals and, of course, shareholder approvals from both companies. And the new company will be led by Actavis management. There, of course, will be a period of time, where we'll be discussing integration from signing to closing and more to come on that.

So turning now to Slide 7. I'm going to turn the call over to Roger. Roger?

Roger M. Boissonneault

Thanks, Paul. Happy to be here. I didn't have to travel far this morning. Actavis is about 5 minutes away from our Warner Chilcott headquarters, a little bit further up on Route 80.

A little bit about the background of Warner Chilcott. Actually, Warner Chilcott traces its origins -- I won't take you through every step of the way, but we go back to 1856, relatively small company, grew through the 1800s, became part of Warner-Lambert. And oddly enough, it was more of a specialty company in Urology and Respiratory. Along the way, Warner-Lambert also bought a company called Parke-Davis. And Warner Chilcott and Parke-Davis were integrated in the 1970s. Another interesting fact is in -- back in the '80s, Warner Chilcott became the generic arm of Warner-Lambert's pharmaceutical business. And then, in 1996, it was spun out as an independent company, went public as an Irish company. We began our history as a generic company and then reformed ourselves into a specialty branded company. And today, we're a company of, for the last 12 months, revenues of approximately $2.4 billion. Our corporate headquarters is located in Dublin, Ireland. We have approximately 2,100 employees, 1,500 of which are based in United States, Puerto Rico and Canada. As I said, our headquarters are -- is just up the road in Rockaway, New Jersey, although [ph] our R&D and manufacturing Puerto Rico, Northern Ireland and Germany. We focus primarily on Women's Health care, Gastroenterology, Urology and Dermatology. We see a lot of concentration of prescribing by specialists in this particular unit, thus the name Specialty Pharmaceuticals.

I think we've done a great job of building this business, and we look forward to working with Actavis to reach the next heights as a combined company.

And I'll turn it back to Paul.

Paul M. Bisaro

Well, thanks, Roger. Turning now to Slide 8. Certainly this is a financially compelling combination. As you can see on this slide, we highlight a number of things, including combined revenues of approximately $3 billion. We do expect the transaction to be roughly 30% accretive to Actavis' non-GAAP earnings for 2014, including anticipated synergies. As I mentioned earlier, we do expect significant cash flow generation, and we do expect substantial operational synergies and savings coupled with tax savings.

That certainly creates a platform for further growth. The all-stock transaction results in an overall de-levering of the new entity. It enhances our borrowing capacity with substantial cash flows. Then of course, the branded generic mix allows us to be even a stronger company by becoming a more balanced revenue generator across our business units.

Turning now to Slide 9. We also have a very strong compelling case on the commercial side. It enhances our Specialty Brand scale, achieving the stated objective to build a multibillion-dollar specialty brand franchise. This achieves that. It creates a top 3 specialty pharmaceutical company in the U.S. and one that is certainly going to have opportunities presented to itself because of its size and scale.

It makes us the premier Women's Health player in the United States and expands our portfolio. As I mentioned, it adds 2 very exciting new franchise opportunities to our Specialty Brand team, including sales infrastructure, which of course is critical to our long-term success. It expands our Urology portfolio. And probably most importantly, it creates even a stronger pipeline with 25 development projects combined, 15 of which are in Women's Health care alone. Again, it also diversifies our revenue mix, as I said, building us to approximately 25% pro forma revenue contribution from our brand franchise.

So with that, I'll turn the slides over to Fred.

George Frederick Wilkinson

Thank you, Paul. It's a pleasure to be making this announcement this morning and to really expand on the growth parameter we've been establishing for our Specialty Brands over the last several years. I think Paul has had a goal to get us well above $1 billion. This single transaction takes us to -- close to $3 billion.

Just a little bit about the Specialty business for Actavis on Slide 10. We do list our current products that we're promoting. In the Women's Health care area, we have an oral contraceptive, Generess Fe; we have a product in infertility, Crinone; and we also promote Gelnique in the -- for OAB in that category. In Urology, a product for BPH, which is Rapaflo; a product for prostate cancer, which is Trelstar. We compete in the testosterone replacement business with both Androderm and a co-promote on AndroGel. And then, we're in -- we have 2 products in the OAB category, Oxytrol and Gelnique.

Going to the Warner Chilcott side. We add a couple of core areas in Women's Health care, which we've been evaluating for several years. We enter into the osteoporosis business now with Actonel and Atelvia; obviously expanding our contraceptive line with Loestrin and Lo Loestrin; now in the hormone replacement business with Estrace. On the Urology side, we add Enablex to our Urology line. And the 2 new areas that we're excited to go into is into the Gastroenterology area and Dermatology with Asacol, Delzicol and Doryx.

On Slide 12, you now see the combined business for the 2 companies -- or for the company as they merge. This is a very impressive line, of which we're extremely excited. I think the thing that tops off the slide here is that we're now meeting most of the needs of our core specialists, the urologist and the OB/GYNs, while accentuating the opportunities that are handed to us in the Dermatology and the GI space.

Turning to Slide 13. We're starting to now show some of the information about our pipeline. We couldn't be more proud of this pipeline. This slide shows the Women's Health care side. And when you put now the aggressive work that we've done in trying to both build and acquire products in this area through the Uteron transaction and through some of our own work and some licensing work from Valeant. It gives us a line of 15 products in the Women's Health care portfolio and provides the opportunity for launches for many years to come.

On Slide 14, you now see the way we generally have presented our pipeline, which includes the phasing of the products. With the Warner Chilcott line, we'll have 8 products that are at the NDA stage or beyond. We have at least 8-s product that are in Phase III. We fill in our Phase II line with several products in Derm and Urology and as well as Women's Health care. And then, going backwards into the Phase I and preclinical, there are additional products along the lines.

This is actually a slide that also represents just a small molecule business. Remembering, on the top of that, we've got our biosimilar programs that are going on beside this. So we couldn't be more excited about it. We got a lot of work to do. We need to make sure that we effectuate the growth that's anticipated, but we've got the foundation now established, for which should be a magnificent specialty business.

And with that, let me turn it over to Todd.

R. Todd Joyce

Thanks, Fred, and good morning, everyone. Slide 15 provides a high-level overview of the transaction structure. We'll provide all the details of the merger plan in a Registration Statement and proxy materials that will be filed with the SEC.

The merger will be accomplished through the formation of a new holding company established and domiciled in Ireland. This newly formed company will acquire all the outstanding shares of Actavis and Warner Chilcott in a share-per-share exchange. Holders of Actavis stock will receive 1 share of New Actavis stock for each existing share, and Warner Chilcott stockholders will receive 0.16 shares of New Actavis stock in exchange for their existing shares. After the exchange, Actavis and Warner Chilcott will remain as subsidiaries of New Actavis.

Moving to Slide 16. The transaction structure is expected to be taxable to Actavis shareholders and nontaxable to Warner Chilcott shareholders. Of course, complete information on the tax transaction will be provided in the S4 Registration Statement and proxy that we will file with the SEC.

The merger will require Actavis and Warner Chilcott shareholder approval. Actavis will require approval by a majority of shareholders. And in the case of Warner Chilcott, the transaction must be approved by shareholders in accordance with Irish law, and the transaction must be approved by the Irish High Court. Again, further details on the structure and tax consequences will be provided in future filings in Ireland and with the SEC.

I will turn the call back to Paul for some final comments on the strategy and benefits we expect to realize from the transaction.

Paul M. Bisaro

Thanks, Todd. Thanks, Fred. Turning to Slide 17. This sort of graphically depicts us moving up to the top -- in the top 3 position in specialty sales in the United States based on the 2012 number. Additionally, we go back through some of the highlights, but one of the highlights we haven't yet touched on is the -- what this opportunity brings to our emerging markets business. Actavis Pharma will benefit from many of these assets that we can bring into, again, the emerging markets, Central and Eastern Europe, Southeast Asia, Russia, where we have strong sales presence commercially -- commercial teams on the ground there that will be able to sell these products. Again, an opportunity for us to drive additional growth.

Sliding -- turning now to Slide 18. Again, we do expect the transaction to be immediately accretive, more than $400 million in anticipated after-tax operational synergies and related cost reductions and tax savings. The majority of these are -- $400 million are expected to be operational and expected to be realized in 2014. These synergies exclude any significant potential revenue, manufacturing or interest rate savings that could be generated from this transaction. Again, the strong combined operating cash flow de-levers the balance sheet. We expect to be below 3x debt-to-EBITDA at the close. And the favorable combined company tax rate is anticipated at close to be approximately 17%, again, greater than 30% accretive to our 2014 Actavis standalone potential earnings.

Finally, the New Actavis will present, I think, an opportunity for continued long-term growth. If you look at our Actavis Pharma business, we expect to continue to see growth driven by our strong Paragraph IV portfolio, as well as all the work we've done down in our complex dosage forms and new product opportunities that present themselves, not just in the U.S. market but around the world and as we continue to lever -- leverage those assets in high-volume markets across the globe. We will also, as I said before, optimize our global commercial network by bringing many of these brand assets into markets, where we can use our sales force to its best advantage.

On the Actavis Specialty side, certainly, we've, in 1 step, taken a major leap in expanding our product portfolio, our therapeutic categories and our product pipeline. Now the strategy will turn to execution on the development and the launches and the next-generation strategies. And of course, we will continue to focus on the long-term growth strategy of biosimilars.

On our Global operations side, we will continue to focus on synergy capture and optimization of our global supply chain. We will continue to focus on high-quality end customer service metrics that make us the best performer in the industry, and we will continue to use our Anda Distribution business as a strategic asset to support both our Actavis Pharma and our Actavis Specialty Brands business.

In short, I think what we have become is a powerful, well-positioned specialty pharmaceutical company, with each of our business units supporting our long-term growth.

So with that, we'll open the floor up for questions. Lisa?

Question-and-Answer Session

Operator

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

Christopher T. Schott - JP Morgan Chase & Co, Research Division

That will be just 2 questions for you. First, on tax, I think you're looking at 17% at the close. How low can we think about the tax rate going as we move into 2015 and longer term? I guess, is it fair to think about a rate that could get closer to that 11% or 12% that Warner historically enjoyed? And if not, what are the hurdles to getting there? And then, the second thing, you used to talk about the interest expense opportunity here. I know it's not part of guidance, but it does seem like Warner's interest expense was well above -- or debt rate was well above Actavis'. I'm just -- it looks like an extra, like $50 million, of cost savings potentially. How much of a priority is restructuring that debt? When could that happen and -- again, if just there's any hurdles we should think about in getting that done?

R. Todd Joyce

Chris, this is Todd. I'll address both the tax structure and the financing. In terms of the redomicile, we're going to have a lot of flexibility on how we conduct our business going forward. We're not going to elaborate about any potential savings beyond what we have disclosed today, and there's reasons we can't do that as a result of the Irish Takeover Rules. But between now and closing, we will provide more details of any plans or opportunities that may exist to achieve greater savings. In terms of the refinancing opportunity, we view this as a credit-enhancing transaction. We'll review the transaction detail with the rating agencies in the coming weeks, as well as our key relationship banks. There are certainly opportunities we think are exist. We haven't quantified those at this point, but we -- in the coming weeks, we will share our plans on the structure of the debt, where it's going to be placed within the new entity and what the opportunity set is.

Operator

Your next question comes from Ronny Gal with Bernstein.

Aaron Gal - Sanford C. Bernstein & Co., LLC., Research Division

Two [ph] questions for you. First, why no debt? Is that required by the deal [indiscernible] low interest rate [indiscernible] structure is a bit higher? And second, you obviously had to look at the IP strength of both the osteoporosis and the ulcerative colitis IP. Can you just comment on [indiscernible] controversy on Warner Chilcott?

Paul M. Bisaro

Sure, Ronny. I'll -- let me take on the debt question. I think the rationale for no debt is very straightforward. We wanted to achieve a tax inversion strategy. And the way we had to accomplish that was to do it with stock. We weren't able to use any sort of debt financing to do that. So that's the simple answer to that. With respect to IP strength, we do diligence-ed both -- well, all of the IP in the portfolio. And, I would say we feel comfortable with the strategy and the growth prospects of those forecasts -- or, I'm sorry, those product lines. So we feel comfortable that we will achieve our objectives.

Aaron Gal - Sanford C. Bernstein & Co., LLC., Research Division

[indiscernible] I think one more [indiscernible] break-up fees for the deal, is that [indiscernible]?

Paul M. Bisaro

Yes. There -- I'm sorry we have some background stuff, yes. So break-up fees, I think, was your question, Ronny? There are -- okay. I don't know who that was. But anyway, the break-up fees are approximately 1% of each company's market cap at -- prior to the announcement of the deal. So a fair -- I think, a fair spot for both of us to be in.

Operator

Your next question comes from David Maris with BMO Capital Markets.

David W. Maris - BMO Capital Markets U.S.

A couple of questions. One is you mentioned that the deal pushes you into the top 3. And I want to talk about why does that matter from a buyer standpoint or partnering standpoint? And the second is, on the sales synergies and the top line growth of the company going forward, after you're combined, what do you think a investor should expect, from an organic growth basis, of the combined company?

Paul M. Bisaro

Okay. Well, David, I will start and then turn it over to Fred to handle some of this. I just will remind everybody, again, that due to the Irish Takeover Rules, there's very little we can say at the moment. We would probably -- we can be more aggressive and more open with you post close. But under the current rules, we have to be very circumspect about what we say. So while you're used to us probably being more forthright, that's just can't be done here at the moment. So with respect to why does it matter, well, when you become a premier company in any therapeutic category, I think opportunities present themselves because people want to deal with a company that has the biggest depth and breadth in the category. We also have a lot of reach in that category combined. And with that, I'll turn it over to Fred for more color on financing [ph].

George Frederick Wilkinson

Yes, sure. I think, probably, the top 3 is not the critical piece. It's -- as we've described, we've always, kind of, focused both our R&D and our in-licensing activities to try to meet the needs of what the specialists do in their practices all day long. In Women's Health care, particularly, you need to be in contraception, you need to be in hormone replacement. Osteoporosis is a nice category. This kind of takes us into now of the top 3 categories in the group. In Urology, obviously, the expansion to this area has always been critical, once again focusing, on what does a urologist do all day long. We have been evaluating and I think have been clear that we are evaluating other strategic -- or other specialty areas. So the idea of jumping into GI and Derm have always been something that we've been contemplating, and I think this just takes us there now.

Paul M. Bisaro

Yes. And I think -- with respect of the sales synergies, I think we'll have to respectfully decline to discuss that other than, because of the depth and breadth, I think there are some obvious things that should present itself.

Operator

Your next question comes from David Risinger with Morgan Stanley.

David Risinger - Morgan Stanley, Research Division

I have a couple of questions. First, could you just discuss pre-tax operating synergies? And second, when are you modeling the entry of Asacol, AB rated generics? And then, third, how did you assess the government investigation risk regarding sales and marketing practices that's ongoing?

Paul M. Bisaro

Sure, let me start with the last question first. I think, with respect to the ongoing investigation, we perform substantial due diligence. We understand the situation. We understand the significance of the situation. I think we believe it's manageable, and we will be working obviously between signing and closing to make sure that everything that can be done is possibly done to minimize the impact of that issue. With respect to the date of launches. Again, I have to sort of pass on that one and say we'll provide more details at closing. And then, on the pre-tax operating synergies, again, we are unfortunately precluded to getting into too much detail on that, other than to say that out of the $400 million that we mentioned, that's -- the majority of which is operational synergies and it doesn't include, as we said, revenue synergies, potential manufacturing synergies or interest rate savings.

Operator

Your next question comes from David Buck with Buckingham Research Group.

David G. Buck - The Buckingham Research Group Incorporated

Just a couple of quick questions. For the valuation, Paul, that you're paying for the company, I mean, it implies that you're looking at this as either a stable cash flow or declining cash flow company. And I guess, the question is how do you view the Warner Chilcott assets that you're buying? And maybe in terms of -- for Siggi, can you give a sense of what your expectations are for the sustainability of the GI franchise? And I'm not sure if we'll get an answer on just in terms of the Asacol franchise, how sustainable that might be.

Paul M. Bisaro

Okay. Well, I'll talk -- take a second on the valuation. I think, first of all, I believe both -- the directors of both companies, as well as the management, believes that we pay -- we are paying a fair price, and both companies are getting a fair deal. We believe we are getting a fair deal. We think the company has great growth potential, and we think, combined, we've enhanced the overall growth potential of both companies, frankly. So I don't think anything should be implied by the valuation other than it's a fair valuation.

Sigurdur Oli Olafsson

Maybe, David, on me commenting on the gastro opportunity, obviously, we are not going to comment on entities [ph] or opportunities there, but I've been quite vocal about Asacol and the generic competition. But it has been an eye opener for me to see how Warner Chilcott fills up the pipeline. We have been extremely impressed with how Roger and his team have built out, I think, the ever-greening [ph] line extension strategy behind the scenes. And hopefully, at closing, we can share more information with you on that further [ph].

David G. Buck - The Buckingham Research Group Incorporated

And if I could sneak one in maybe on Loestrin and the OC franchise. Can you maybe give us a sense of the view of the ability to diversify with Warner's new products?

R. Todd Joyce

So I think some of the next-generation products that are in the pipeline look like they're nice opportunities to continue to grow some of these franchises that have been established, and we look forward to working with the Warner Chilcott management on trying to effect this.

Operator

Your next question comes from Randall Stanicky with Canaccord Genuity.

Randall Stanicky - Canaccord Genuity, Research Division

Your cost savings, or even a portion of those, and the pro forma tax rate, you've given [indiscernible] through, the accretion looks pretty significant even relative to the 30% or better than 30% that you've thrown out. Can you talk about push and pulls or where is the easiest aspects of that to get done first. Is that going to play out over fiscal 2014? How should we think about? And then, I have one more.

Paul M. Bisaro

Sure. I think -- with respect to the synergies, I think we've said that we will be achieving most of those synergies in 2014 and -- which is fairly obvious since we'll be closing at the end of '13. And some of those synergies will carry over into '15. With respect to synergy capture, I think, like with every transaction, it depends on the synergy, in which we're talking about. Certain synergies are going to be easier than others to achieve. Structural synergies generally are the easiest to get to, like tax synergies, because those actually are performed within our control -- in a timeline within our control. Other synergies will have to be dealt with over time. But I think we've laid out a reasonable synergy approach and a reasonable synergy target. And I think we've shown with our past history our ability to achieve those synergies and, even in some cases, exceed those synergies. So our history would demonstrate that we can do what we say we're going to do and achieve the objectives that we set out for ourselves. So hopefully, we can do the same thing here.

Randall Stanicky - Canaccord Genuity, Research Division

That's helpful. Just one for Todd. If we think about the 7 3/4% notes that Warner has, I think this might be callable in September before the deal closes. How do you think about that and just the overall platform of financing to the extent that you can comment?

R. Todd Joyce

Well, actually, I can't comment. We -- as I mentioned earlier, we will be developing a comprehensive capital plan, and we'll be disclosing that in the near term. And that would involve some disclosure in our S4 Registration Statement as well.

Operator

Your next question comes from Ken Cacciatore with Cowen and Company.

Ken Cacciatore - Cowen and Company, LLC, Research Division

Just a question about other potential assets you might have been looking at. Paul, was this -- this is the asset you wanted and kind of zeroed in on it, or was there a process that you went through or maybe talked about a little bit from a higher level and then narrowed it down to the Warner Chilcott? And then, just to confirm, is it your view that Warner Chilcott -- I think you used the term a great growth company. I don't -- can you give us a little more context to your views on the growth of Warner Chilcott vis-à-vis maybe the Street's view. And then, lastly, anything you can talk about your generic business, as you diversify away any -- to show any concerns with the generic business?

Paul M. Bisaro

Okay. Well first of all, let me start by saying we've laid out a very thorough and careful strategy at many of our investor meetings, including our latest investor presentation at the end of January about what we were looking to try to accomplish to continue to drive Actavis' long-term growth. In addition to driving the growth of Actavis Pharma, we knew we needed to improve our overall Actavis Specialty Brands franchise and we also knew that we had a structural problem with our tax rate -- in our tax structure really. This transaction presented itself as an opportunity. And it, in one go, took care of 2 of the major strategic objectives we had, and it was a perfect fit for our Women's Health and Urology franchises. Not to mention, it gives us the ancillary -- 2 ancillary important benefits, 2 new therapeutic categories, as well as opportunities to take those assets into our Actavis Pharma franchises around the world. And if you remember back in January, we talked about why we changed our name from the Generics to Actavis Pharma, because outside of the U.S. and in many markets around the world, we are a pharmaceutical company. So I think from that perspective we just found an opportunity at the right time, both companies were in the right spot at the right time and like any transaction, that's the key to success. With respect to a growth company, I think Warner Chilcott has done a fantastic job at laying out a growth profile that it would be the envy of many companies. They've got a fantastic pipeline, very well thought out, very well developed. They've done spectacularly on the execution side of both the development, the regulatory approvals, as well as the execution on the revenue side. So I think it is a strong company, it is the kind of company we were looking for all the reasons I've mentioned, and I do think that it's a growth company. I will just start and then I'll hand it over to Siggi. Our commitment to generics is as strong as it's ever been because we believe it is part of making pharmaceuticals available to people around the world. And it is a major platform and will remain a major part of our business. Siggi?

Sigurdur Oli Olafsson

Yes. I think this transaction also is a great opportunity for Actavis Pharma as we are seeing. What we have -- how we are presenting ourselves outside of the U.S. and West Europe as a pharmaceutical company, what we deliver now is a significant line in Women's Health product. Remember we have 2,200 sales reps in Eastern Europe, Southeast Asia, Australia, to sell our pharmaceuticals todays, branded pharmaceuticals today. The addition of the line from Warner Chilcott into the sales force will be significant. Just remember, we have not come to this in the revenue synergies we are showing you today because we obviously need to get regulatory approvals to get to these numbers. But we feel that generics will be obviously a centerpiece of the company, but we also see a growth opportunity in the Actavis Pharma business with this acquisition going forward.

Operator

Your next question comes from Marc Goodman with UBS.

Marc Goodman - UBS Investment Bank, Research Division

You keep talking about operational synergies, I was wondering if you could actually go into a little more detail on how you view what those operational synergies are. Is this just -- what overlap are we talking about? And then second question is pipeline. There are a couple of products that we didn't know about in Warner Chilcott's pipeline, I was wondering if you could talk about those. There's 3064 [ph], there's 3011, a couple of products that are very late stage. And if you could give us a little more color on them.

Paul M. Bisaro

Sure. Marc, with respect to the synergies, again, we have to be very careful that. So I think it's probably best to wait until close to give you that kind of specificity. And that also gives us an opportunity to make sure we hit the ground running at time of close and work through an appropriate integration program with the Chilcott team. But as to the pipeline, I'll turn it over to Fred and to Roger to discuss that.

George Frederick Wilkinson

Yes. Sure, I mean, we couldn't be more excited about the pipeline. We've built -- we spent a lot of time over the last several years trying to rebuild the pipeline of the organization. And now put 25 products on to a list. I think there's more information that's being provided here about what those are. And what we like about it, is it includes not only next generations of existing lines, but 2 or 3 new chemical entities that'll allow us to jump into a couple of new spaces. And Roger, if you want to elaborate on it?

Roger M. Boissonneault

Yes. I think, Marc, that we told you that we had multiple products and we would unveil these products as time permit it. We're in an excellent position, we just had 2 of the OCs approved. I think we were also public with the fact that we have next-generation products for even the Lo Loe franchise and going beyond Lo Loe. So you're beginning to see some clarity on this. We are very proud of the fact that we've already had 4 NDAs approved so far this year. And now you're seeing the prospects of potentially a 5th NDA approved in a relatively short time line, I think it's July. And obviously putting the 2 companies together, we wanted to create greater clarity going forward.

Marc Goodman - UBS Investment Bank, Research Division

So it's 3064 [ph] another Lo Loe product extension strategy?

Roger M. Boissonneault

No. I think -- they're not product extensions, they're new products. And they're products using some of the existing technology that we have, and quite frankly, some of the new technology. The idea here is to -- I know the #1 variable in oral contraceptives is taking the oral contraceptive. And some of these enhanced the compliance of taking the oral contraceptive. And then as we said, the most recently you've had some 20-microgram products we told you, we also have 10-microgram products in the pipeline and even lower-dose products in the pipeline.

Marc Goodman - UBS Investment Bank, Research Division

And then what about 3011, the hormone therapy?

Roger M. Boissonneault

3011 really speaks to the ESTRACE Cream franchise. As you nod knowingly.

Operator

Your next question comes from Elliot Wilbur with Needham & Company.

Elliot Wilbur - Needham & Company, LLC, Research Division

I'm sure Roger and team, well -- obviously, not Roger and team, but the company hasn't been actively seeking bids for all 157 years of its existence, but certainly -- I think, people believe there's been a for sale sign in the front yard for a little while. Anything you could say in terms of the process here whether or not it's in fact was a competitive process and you had competing bids. And then I've got a follow-up for you, Paul, as well.

Roger M. Boissonneault

From my perspective, I haven't known Paul for 157 years. It just feels like it. Obviously, we travel in the same -- and I think we've got overboard with this process so to speak. But you have to remember that we are an Irish company, and anytime Andy makes an overture of that, we have to this a make public forum. And unfortunately, that got a little carried away. However, I think we've, over the period of years, have -- we've been in the same field. We go back to bar days and we've known one another, we've respected the accomplishments of each one of the companies. And it's probably time to put the 2 companies together. So it's been a process. It didn't happen over the last 2 weeks, let's put it that way.

Elliot Wilbur - Needham & Company, LLC, Research Division

Okay. And then just going back to the targeted synergy number. I know that there's a fairly significant step down in terms of the co-promote payment on active now that goes to say, I don't believe that occurs in 2014, but I just wanted to confirm that since we have Paul there. And just how do we think about that in '15 and beyond? Because I think it is a fairly sizable step down in terms of the payment there.

Paul S. Herendeen

Sure. Elliot, it's Paul Herendeen. We have 2 Pauls in the room, so I have to identify myself. But yes, there is a fairly sizable $50-odd billion step down in '14, '13. And that agreement in its entirety goes away. There obviously are continuing revenues associated with the Actonel franchise, both in the United States and o U.S. With actually the o U.S. piece being the more stable of the 2 revenue streams.

Elliot Wilbur - Needham & Company, LLC, Research Division

Okay. Then last question for you, Paul. I mean, I guess, obviously given the Chilcott's valuation certainly in the marketplace a lot of concern about long-term growth potential and the short -- perceived short-term duration of Chilcott's revenue streams. And obviously you're paying what seems to be very low multiple, you have a very favorable currency and a lot of immediate synergies. But in the end you are still paying $8.5 billion. So how do you sort of weigh this transaction versus deploying that capital towards, perhaps, a much smaller but faster-growing, longer-tailed revenue streams on the branded side that arguably give you much greater long-term visibility?

Paul M. Bisaro

Well, first of all, Elliot, I think, again, we come back to the fact that as we look at the strategic value of Warner Chilcott in Actavis' hands, it became a compelling story for us. It was compelling from a commercial perspective. We have direct overlap in Women's Health and Urology. If you look at the slide that Fred presented particularly in Urology, you see the creation of a, well, one the premier urology companies. This is not something that you can get by doing, unfortunately, small stepwise transactions to achieve that kind of commercial infrastructure. The second piece is, there is of course synergies in any deal since there is going to be overlap in certain categories, standard categories that everybody knows about. And then finally, we will receive the benefit of -- the combined company will receive the benefit of a better overall tax structure, which will then allow us to the use of our balance sheet and our tax structure to go and get many of those assets that we were handicapped trying to get before. And handicapped because we're competing against companies that already have -- those companies have those tax structures already in place. So if we're looking now at assets that are overseas and we can bring to the U.S. further enhancing our pipeline, we now have a vehicle to do that and be competitive with many of the companies that we're competing against for those assets. So I think, overall, it is the perfect strategy for us, at this time, to move. And finally, and not insignificantly, because we're using equity to perform this transaction, we delever the overall entity to below -- and we think maintain our investment-grade rating. So all of those factors are -- while pluses that I see and only bode well for the new company moving forward.

Operator

[Operator Instructions] Your next question comes from David Amsellem with Piper Jaffray.

David Amsellem - Piper Jaffray Companies, Research Division

This is more a question for Fred on acquiring a foothold in gastroenterology. And I guess first question is how do you think about building a business in that specialty and I guess cultivating a pipeline, looking at additional opportunities? What are your thoughts about your presence there and your level of excitement on that being having a presence in that space?

George Frederick Wilkinson

Yes. So we've taken a pretty strong evaluation of dermatology, GI and several other areas that needed an entry point. I think this gives us a nice entry point. There are a multitude of products that could potentially be available. There are other assets that we've evaluated in this area. And I think it gives us a foothold to be able to be thinking about whether those would be opportunities as we go forward. For me the opportunity here is really not just Warner Chilcott and Actavis coming together, it's kind of the buildup that we've done, particularly in Women's Health Care. If you look at Slide 13, the growth that we put together in our near-term Women's Health Care franchise coming out of this pipeline from what we're developing, from what we just acquired in the Uteron transaction, what we've licensed in from Valeant and now what we put together here, really gives us an enormous number of opportunities not only in the United States but outside the United States. And puts us in as a clear leader in kind of the contraceptive area, as well as many other areas. So we couldn't be more excited about the way this builds out a strategic platform that we've been establishing now for several years.

David Amsellem - Piper Jaffray Companies, Research Division

And then very quickly coming back to the $400 million number. Can you say if that includes a meaningful manufacturing component?

Paul M. Bisaro

Yes. It does not. There is no manufacturing component in that number.

Operator

Your next question comes from Jami Rubin from Goldman Sachs.

Jami Rubin - Goldman Sachs Group Inc., Research Division

Just a couple of questions on the synergies. Paul, I don't know if you can answer this. But is the step down from Actonel factored in the synergy number? And also you had talked about the opportunity to build out your branded franchise in emerging markets. I'm just wondering if you have existing infrastructure there or if that will require an investment? And just lastly to you, Roger, and I don't know if this was asked earlier, but a year ago, the company considered strategic alternatives and my understanding is that there had been an offer for around $22, $23 a share, which you rebuffed. Now a year later, after you've launched several products, arguably the outlook for Warner Chilcott looks better. You're accepting the $20 offer. I'm just wondering if you could discuss what's changed?

Paul M. Bisaro

Jami, with respect to the synergy numbers, again, we have to be a little careful here. But for purposes of synergies these are true synergies not -- we did not build in into that number any forecasting changes. Of course, we have other models that dealt with that. So Siggi, I may turn it over to you for the emerging markets question.

Sigurdur Oli Olafsson

Jami, I think we really have the infrastructure already in place to be able to take in on this portfolio. The interesting thing is, we will have a significant portfolio of OCs and also a new Women's Health products. We also have our Urology line, which we really can have an opportunity to take to Russia, to the CAS, Ukraine country, Eastern Europe, Southeast Asia, even Australia, where we have already an infrastructure in place, where we don't have to make significant investments. As I mentioned before, we already have 2,200 people on the ground to sell products and this would fit nicely within the portfolio they are promoting. But again, it's not included in the revenue synergies.

Roger M. Boissonneault

As far as rebuffing people, that's probably a strong term. But I'm talking about the difference between $22 and $20, I'd direct you that in the interim we have done a $4 special dividend and $0.50 in dividends, so if you add back the dividend number, it certainly brings it up a click. I think the other thing that you should focus on is that we are indeed tied to Actavis' share value. And we believe the combined value of the company will continue to grow. And that $20 is going to be probably the low end of this. So it's -- now we're shoulder to shoulder, we're building Actavis and certainly we're an active part of building it. And then we think there's certainly a premium over the $20. In addition to the fact that we've already paid dividends.

Operator

Your next question comes from Shibani Malhotra with RBC Capital.

Shibani Malhotra - RBC Capital Markets, LLC, Research Division

I guess, this just follows on from Roger's point. Can you just talk about the management structure of the new entity? How involved will Warner Chilcott management be in the new Actavis? And then I have a couple of others.

Paul M. Bisaro

Sure, Shibani. With respect to management structure, obviously, that's a process that we will engage in between now and closing. As we look to integrate the 2 entities. We will, of course, look to share each others' best practices, to coin a phrase from the consultants around the world. We're going to do our best to have a -- create a premier specialty company. And we think that the Warner Chilcott team brings enormous talent, and we will be looking to add that talent to our own. So I think we're good.

Shibani Malhotra - RBC Capital Markets, LLC, Research Division

Great. And then a question for Paul Herendeen. Paul, in the past you've always been extremely sensitive to NPV, I think what you've always said is, any deal can be accretive, but when you're valuing something you look at the value added. And I guess the question is, what term -- or rather Actavis' shares have gone up around over 25% since speculation of Valeant was looking at them. Do you believe that -- that's around $2.5 billion. Are the synergies from this deal in line with that? And if you could, can you talk to the mechanistic side of the tax synergies and how these would work?

Paul S. Herendeen

Sure. I'll start, it's Paul Herendeen speaking. I'll start with, yes, accretion is not enough. Both Boards of Directors looked at the relative values of the companies and we concluded that this was a good deal for both sets of shareholders. But you're quite right, accretion alone is not enough. I'll follow on what Roger said. We look at the roughly $20 a share consideration that our shareholders are set or hopefully set to receive. And we do think of that as a platform for the creation of value here in the future with the 2 combined companies. With respect to the question on how it would actually work, I'll turn that to Todd.

R. Todd Joyce

Yes. In terms of the structure, the savings coming from the original acquisition structure and as well as the capital structure within the consolidated new co. So it has to do with the -- where the debt is placed and that's generating the structural savings.

Shibani Malhotra - RBC Capital Markets, LLC, Research Division

Okay. Great. And just to confirm, Paul, what you're saying is that for Warner shareholders taking Actavis shares at $125.50 is still a good deal in your opinion based on NPV?

Paul S. Herendeen

Yes. That is correct.

Operator

Your next question comes from Douglas Tsao with Barclays.

Douglas D. Tsao - Barclays Capital, Research Division

Obviously, given the fact that co is off stock as you mentioned in the combined EBITDA, the combined companies are going to be generating, you're obviously going to be in a position, in theory, to do deals pretty quickly after closing. Just curious, we're 1 year after the Actavis acquisition, I don't think any is expected to be talking about this deal so quickly. So can you provide just some thoughts on the business development strategy and thoughts on a go-forward basis? And as well as sort of included your sort of perspectives on the need or urgency for additional cost consolidation in the generics industry?

Paul M. Bisaro

Well, as to the deal timing, again, it comes down to opportunity. And we've said that every time I was asked the question about when would you do another deal, it really depends on when the opportunity presents itself. And this opportunity happened to present itself at the right time, with right structure to achieve our set of objectives and we took it. And we weren't unmindful of the fact that we're still in a partial integration. We have certainly integrated a vast majority of the legacy Actavis transaction, but we still are in the integration strategy. However, I would point out, that this is a different group of people who are going to be doing integration work. Here, this is principally focused on the Specialty Brands franchise, which was not really all that affected with the legacy Actavis transaction. With the exception of the Global Supply Chain group, which will be taking on additional 4 facilities, which might seem like nothing compared to the number of facilities we got with the legacy Actavis, I think they're well positioned to be able to manage through that. I have really no concern about that. As to future business development, I think we need to take a deep breath and let the dust settle. We have to get through this transaction and then think about what happens next. I think we will continue to look for small opportunities in both the brand side, as well as the Actavis Pharma side. We've made no secret about the fact that we'd like to see tuck-in opportunities in Actavis Pharma, particularly in emerging markets, as well as potential OTC opportunities, so we'll continue to chase those. And you're quite right, the transaction does put us in a position to be able to move quickly on assets if they become available, which I think is one of the key factors to any company's success. With respect to consolidation in the generics industry, I'll let Siggi take that one.

Sigurdur Oli Olafsson

Doug, I think, as we have always said, we think there is an opportunity to grow. There's only a few global players, there's probably only 4 global players, then there's regional players and then there are local players. What we think is that the local players that -- it will be more and more difficult for them to perform going forward. So I think, especially in the emerging market, we are looking to expand our presence there. We have the infrastructure, we have the pipelines, we have the manufacturing capacity. But we don't need to be bigger in the U.S. I think Western Europe, we are exactly the right size. We are not too exposed in the low-cost Western European markets, but we want to grow in Eastern Europe, Southeast Asia, Australia and in Latin America. I think that's the opportunity for us to consolidate more and grow a bigger presence, because those are the markets which are growing double-digit growth in itself.

Operator

Your next question comes from with Tim Chiang with CRT Capital.

Timothy Chiang - CRT Capital Group LLC, Research Division

Warner Chilcott has these 3 line extensions, they're all coming out over the next 6 months or so. And I wanted to ask you, how much time did you guys spend on the IP due diligence side and how comfortable are you with these line extensions that are coming out?

Paul M. Bisaro

Well, Tim, we spent a lot of time on the due diligence front, both from a legal perspective, as well as from a commercial perspective. We evaluated them from both a generic and brand perspective. And I think that's important because we understand both sides of this particular equation. And we feel comfortable that these strategies are effective and will be effective in keeping the business going in the right direction.

Sigurdur Oli Olafsson

I think what we want to say is we feel we are the experts in first to files and finding around patent. I think we did a thorough review of the pipeline, it was very impressive. The teams that's in place and the pipeline they have built up. They have not been very vocal about the pipeline, which is probably the strength of the pipeline they have in place. But overall, I think, with our knowledge both on the patent side but also on the generic development, we felt good about the line extension capabilities and the new developments they are doing for the pipeline of Warner Chilcott.

Operator

Your next question comes from Jason Gerberry with Leerink Swann.

Jason M. Gerberry - Leerink Swann LLC, Research Division

I think a couple for Paul. I guess, some of us were surprised to hear that Actavis was actually getting some bids in the past few weeks. Just curious if you can comment at all, were you ever seriously considering selling the business? And then secondly, how much of the management team actually need to relocate to Ireland to get the invert?

Paul M. Bisaro

Sure. With respect the management team relocating, everybody loves New Jersey too much, so nobody's willing to go. With the possible exception of Siggi who seems to live everywhere. But no, there won't be any major relocation. Warner Chilcott currently has a significant presence in Ireland. And Ireland, we'll be spending a lot of time there, but we don't think anyone will be moving. With respect to any rumors you may have heard, I think our comments need to remain the same that we don't comment on speculation. And I think we have remained very focused on our objectives and those objectives were well stated and well laid out. We wanted to get bigger in our brand business. This was the perfect opportunity for that for all the reasons we have already discussed. And have the added benefit of being able to deal with something that was always troubling to me, which was the tax structure, and I think we've really found a way to deal with that and make us competitive in a global environment.

Operator

Your next question comes from Louise Chen with Guggenheim.

Louise Alesandra Chen - Guggenheim Securities, LLC, Research Division

So maybe just a follow-up on that question. In terms of -- there was a lot of headlines recently about potential bids for Actavis. And just curious, maybe from a more general perspective, should we assume that you continue to explore all options that create shareholder value for the company? And then secondly, given how fast the talks with Warner Chilcott have progressed, are you confident that you've given the best offer for the company and no additional bidders for Warner Chilcott might emerge? And then lastly, just the cash flow from operations, could you give us a sense of the order of magnitude of what that might be post-close since you mentioned a few times that it's going to be pretty significant?

Paul M. Bisaro

Well, I think, first of all, we are here at the shareholders' request to serve. And we have always and will continue to evaluate anything that's presented that could present shareholder value. In that though is implicit is the idea that we have a strategy that we think creates enormous shareholder value and we're going to execute on that strategy. So I think that's kind of where we're at. With respect to the transaction itself, we think both, as I said before, both Director, groups of Directors, both management teams support the transaction. We think it's a fair offer. We think it's going to be a great transaction. I'll remind everybody that this is a fixed exchange rate, so as people understand the value of the combined entity, we hope that we will see positive events occurring. So that we think is very good. And of course, should anything come up, we'll address it at the time, but won't speculate on to what might happen in the future at this time. With respect of cash flow, again, I'm going to have to, unfortunately, point on that one and say, more to follow on that at close or if we can before close so that you're -- we can get you as much information as possible. At the moment, we're a bit constrained. So sorry, Louise, about that.

Operator

Your last question comes from Hima Inguva with Bank of America.

Hima Inguva

Once again, on what seems to be a very accretive transaction, just -- I heard you say tuck-ins. But I just wanted to talk about your future appetite for acquisitions. Do you have a target on how large you envision the future of Actavis to be, let's say, the next year?

Paul M. Bisaro

Well, actually we don't have a built-in target like that. I think what we will do is what we've always done with respect to transactions around the world is look for those that have, first and foremost, a strategic fit. Second are accretive. And then third, build out our commercial infrastructure or provide us something that we don't otherwise have. Getting -- it's not necessarily -- we're just not trying to get bigger just to get bigger, we're trying to get bigger so that we can become a better company for growth. So that is really sort of our overall strategy.

Hima Inguva

And one last one for me. Do you expect to access debt market before the deal closes?

Paul M. Bisaro

I'm sorry?

Hima Inguva

Do you expect to access the debt markets before the deal closes? Do you expect to come to market?

R. Todd Joyce

We're not going to comment on that. But under the terms of the existing agreements, we will have to redo or get amendments on our bank facilities, both on the Warner Chilcott side as well as on the Actavis side.

Operator

There are no further questions. I will now turn the call back over to management.

Lisa M. Defrancesco

Okay. Thank you very much everybody. We'll be around all afternoon for some follow-up calls. Take care.

Paul M. Bisaro

Thanks, everyone.

Operator

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

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