Summary

On October 30, 2015, Pershing Square hosted a four-hour webcast to defend its investment in Valeant Pharmaceuticals. With Valeant's share price having fallen from above $250 to $111.50 in a matter of weeks, Ackman used the forum to address the escalating controversies: specialty pharmacy Philidor, accusations of channel stuffing, drug pricing scrutiny, and questions about Valeant's accounting and disclosure practices. The presentation itself was a 39-slide deck that walked through Valeant's business model, the facts Pershing Square believed it had verified, and a valuation case arguing that even losing all of Philidor's contribution left the stock inexpensive. The webcast is best understood not as a dispassionate research report but as a real-time attempt to hold a crumbling thesis together at the moment the market was most skeptical.

Full Text

Slide deck text extracted via PyMuPDF from the webcast presentation slides; no public transcript exists. Slide fragments verbatim, words unchanged.

Pershing Square Capital Management, L.P. Valeant Pharmaceuticals

October 30, 2015

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The analyses and conclusions of Pershing Square Capital Management, L.P. ("Pershing Square") contained in this presentation are based on publicly available information. Pershing Square recognizes that there may be nonpublic information in the possession of Valeant Pharmaceuticals International, Inc. (VRX) or other companies discussed in this presentation that could lead others to disagree with Pershing Square’s analyses, conclusions and opinions. This presentation and the information contained herein are not investment advice This presentation does not recommend the purchase or sale of any security nor is it intended to be, nor should it be construed as, an offer to sell or a solicitation to buy any securities. All investments involve risk, including the loss of principal. The analyses provided may include certain forward-looking statements, estimates and projections prepared with respect to, among other things, the historical and anticipated operating performance of VRX and the other companies discussed in this presentation, access to capital markets, market conditions and the values of assets and liabilities. Such statements, estimates, and projections reflect various assumptions by Pershing Square concerning anticipated results that are inherently subject to significant economic, competitive, and other uncertainties and contingencies and may, as a result, prove to be inaccurate. Such statements, estimates, and projections have been included solely for illustrative purposes. No representations, express or implied, are made as to the accuracy or completeness of such statements, estimates or projections or with respect to any other materials herein and Pershing Square disclaims any liability with respect thereto. Actual results may vary materially from the estimates and projected results contained herein. The information contained in this presentation may not contain all of the information required in order to evaluate the value of VRX and other companies discussed in this presentation. The opinions, analyses, conclusions and proposals presented herein represent the views of Pershing Square and not those of any third party. This presentation is intended to be read with reference to any and all footnotes and appendices. Funds managed by Pershing Square and its affiliates are invested in securities of VRX.

Pershing Square manages funds that are in the business of trading – buying and selling – securities and other financial instruments. It is possible that there will be developments in the future that cause Pershing Square to change its position regarding VRX or any other companies mentioned. Pershing Square may buy, sell, cover or otherwise change the form of its investment in these companies, at any time, for any or no reason. Pershing Square hereby disclaims any duty to provide any updates or changes to the data, analyses, or opinions contained herein including, without limitation, the manner or type of any Pershing Square investment. Disclaimer 1

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Our approach to transparency is to provide you with the information we would want if our positions were reversed, (i.e., if you were the portfolio manager and we were the investor)

We won’t, however, disclose information that would put us at a competitive disadvantage (generally what we are buying or selling) unless we are required to do so by law

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Valeant Pharmaceuticals International (VRX) Multinational specialty pharmaceutical company Leader in dermatology, ophthalmology, branded generics, and gastroenterology Significant presence in both developed and emerging markets Market cap of ~$40bn and TEV of $68bn Approximately 40 manufacturing plants worldwide 18,000 employees(1) Stock price: $111.50 3

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(1): Valeant company website.

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In February 2008, when Mike Pearson was named CEO, Valeant was a small, struggling company
Pearson changed Valeant’s strategy to incorporate: A durable, diverse portfolio of products in specialties where doctors are decision makers, with limited government reimbursement Decentralized, efficient, nimble organizational structure Return-driven capital allocation framework (M&A, high ROI R&D, buybacks) Rapid growth Diverse portfolio of products Numerous drivers of value creation Numerous acquisitions Purchased distressed assets, inherited multiple Corporate Integrity Agreements Utilized leverage Valeant: Context on the Company 4

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Valeant’s business and strategy are complicated to understand; GAAP accounting is an inadequate measure of an acquisitive company Investor base has historically consisted of sophisticated, long-term investors (Ruane Cunniff & Goldfarb, T Rowe Price, ValueAct, Lone Pine, Brave Warrior, Brahman Capital, etc.) Valeant’s complexity necessitates: Strong, high-integrity management High level of transparency Anything less than complete transparency leaves Valeant susceptible to attack Valeant’s implicit compact with shareholders: in exchange for high returns, investors accept complexity so long as there is transparency Valeant has underinvested in public relations, government relations, and investor relations. This has been a very costly mistake

Valeant: Context on the Company (cont’d.) 5

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50 100 150 200 250 300 Jan 2015 Feb 2015 Mar 2015 Apr 2015 May 2015 Jun 2015 Jul 2015 Aug 2015 Sep 2015 Oct 2015 Valeant Share Price – 1/1/15 to 10/29/15 Valeant: Share Price Performance 2/9/15: Pershing Square begins to accumulate Valeant shares; 16.5mm shares purchased at average cost of $196 per share through March 17th 2/22/15: Valeant announces initial agreement to acquire Salix for $14.5bn 3/16/15: Valeant announces revised agreement to acquire Salix for $15.8bn; Pershing Square acquires 3mm additional shares from Valeant at $199 to help finance revised transaction 4/29/15: Valeant announces strong Q1 earnings; CFO Howard Schiller announces retirement, but remains on Board and maintains stock ownership 7/23/15: Valeant announces strong Q2 earnings and raises FY2015 guidance

See next page

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Note: The performance of Valeant’s share price is provided for illustrative purposes only and is not an indication of future returns of the Pershing Square funds. Source: Bloomberg.
7/30/15: Former Valeant CFO and current Board Director Howard Schiller testifies in Congress on corporate tax rate

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50 100 150 200 250 300 Sep 1 Sep 8 Sep 15 Sep 22 Sep 29 Oct 6 Oct 13 Oct 20 Oct 27 Valeant Share Price – 9/1/15 to 10/29/15 Valeant: Recent Events 10/19/15: Valeant announces strong Q3 earnings but investors are confused by VRX’s perceived “strategy shift” 9/28/15: House Dems request Republican chairman subpoena VRX regarding price increases; Senator McCaskill releases letter to VRX 9/21/15: Hillary Clinton tweets about pharma “price gouging” 9/20/15: NYT article on price increases in pharma, with focus on Turing Pharmaceuticals after

5,000% drug price increase
Price Increases

• Volume is primary growth driver for ~90% of Valeant’s business
• Media reports are focused on gross prices; net realized prices to manufacturer are much lower
• Drugs improve health outcomes and can reduce overall cost of healthcare; returns on investment critical to drug innovation

VRX’s Perceived “Strategy Shift”

• VRX’s strategy is multi-faceted, focused on creating shareholder value, adapts with opportunities: • M&A: No more “price increase” deals (only 4 of ~150 historical acquisitions) • R&D: Increasing modestly to pursue attractive late-stage development opportunities Pershing Square’s Perspectives on Key Topics A A B B 7

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Note: The performance of Valeant’s share price is provided for illustrative purposes only and is not an indication of future returns of the Pershing Square funds. Source: Bloomberg.
10/14/15: Valeant discloses receipt of two Federal subpoenas regarding patient assistance programs among other topics 10/14/15: Valeant responds to Senator McCaskill

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50 100 150 200 250 300 Sep 1 Sep 8 Sep 15 Sep 22 Sep 29 Oct 6 Oct 13 Oct 20 Oct 27 Valeant Share Price – 9/1/15 to 10/29/15 Valeant: Recent Events (cont’d) 10/21/15: Pershing Square purchases 2mm additional shares at ~$108 10/26/15: Valeant hosts call, discloses details, confirms appropriateness of accounting, appoints ad hoc committee of Board to review Philidor Citron Report

• Claim that VRX “stuffed the channel” and falsely recognized revenue is verifiably false
• Accounting for sales to Philidor is more conservative than accounting rules applied for sales made to “traditional” distributors

Specialty Pharmacies / Philidor

• Increasingly important distribution channel for the industry
• Lack of early disclosure and details regarding VRX’s relationship with Philidor created uncertainty
• Facts continue to evolve Pershing Square’s Perspectives on Key Topics C D C D 8

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Note: The performance of Valeant’s share price is provided for illustrative purposes only and is not an indication of future returns of the Pershing Square funds. Source: Bloomberg.
10/21/15: Citron releases report claiming VRX is “next Enron” using specialty pharmacies to “stuff the channel” 10/29/15: Three large PBMs announce termination of relationship with Philidor

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9 Benefits of Specialty Pharmacies

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(1): Valeant investor presentation. October 26, 2015. ►Why patients and doctors like specialty pharmacies: Specialty pharmacies help patients get the drug their doctor prescribed and reduce administrative burden
Patients receive their medication quickly by mail, sometimes before claim has been adjudicated ►Benefits to doctors and patients have made specialty pharmacies an increasingly popular drug distribution channel Examples of Dermatology Rx manufacturers with specialty pharmacy relationships(1):

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►Valeant’s specialty pharmacy strategy originated from a program acquired with the acquisition of Medicis, a dermatology company ►Today Valeant makes certain products available through the specialty pharmacy channel – Philidor Rx has been Valeant’s largest specialty pharmacy ►Important facts about Valeant’s specialty pharmacy strategy: Valeant’s drugs are available at both retail pharmacies and through Philidor
Philidor offers low “cash-pay” prices on drugs to patients without insurance coverage Government-insured patients are not eligible for co-pay assistance Philidor represented only ~1% of Valeant sales last year, but grew to ~7% of total revenue in the most recent quarter 10 Valeant’s Use of Specialty Pharmacies

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► Payors/PBMs attempt to influence drug utilization to their benefit (tiered formulary co-pays, prior- authorizations, exclusion lists, etc.) ► Drug companies attempt to maintain patient access to physician-prescribed branded drugs ► Specialty pharmacies offer services to improve patient access, including drug dispensing, claims adjudication, coverage status determination, therapy monitoring/adherence, co-pay assistance, etc… Specialty pharmacies bring the manufacturer closer to the patient:

11 Valeant’s Specialty Pharmacy Strategy Cuts Out the Wholesaler & Improves Patient Access Standard US Drug Supply Chain VRX’s Specialty Pharmacy Supply Chain

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Source: Wall Street research.
(1): This is explicitly prohibited for patients seeking reimbursement from any federal or state health care programs.
Pharmaceutical Company Wholesale /
Distributor Retail Pharmacy Patient /
Consumer Employer Plan /
Health Insurer Pharmacy Benefits Manager (PBM) Product Payment Claims Adjudication Pharmaceutical Company Specialty Pharmacy Patient /
Consumer Employer Plan /
Health Insurer Pharmacy Benefits Manager (PBM) Co-Pay Support(1) Commercial Agreement Reimbursement Risk Co-Pay Support(1)

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Valeant and Philidor operate in a highly regulated industry It is legal for a manufacturer to own a pharmacy and several have/do
While Valeant consolidates Philidor for accounting purposes, Valeant has stated that they do not control Philidor Philidor has been accused by a former contractor and debtor of illegal activity Recent media reports indicate that Philidor may have engaged in fraudulent activity Effective October 29th, 2015, CVS Caremark, Express Scripts and UnitedHealth/Optum announced the termination of their relationship with Philidor, comprising the vast majority of the PBM market Government inquiries into potential legal and regulatory violations in the pharmaceutical industry are pervasive and highly fact specific 12 Valeant’s Use of Specialty Pharmacies (cont’d) Regulatory Risk:

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Valeant and Philidor Rx: Corporate Timeline 2014 10-K: Valeant determines Philidor is a variable interest entity (“VIE”) and begins consolidating Philidor’s and its pharmacy network for accounting purposes 13

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Source: Valeant public disclosure, Medicis public disclosure, various California state court proceedings between Isolani LLC, R&O Pharmacy, Russell Reitz and Valeant. (1): State of Delaware, Division of Corporations. File #: 5268955. (https://icis.corp.delaware.gov/Ecorp/EntitySearch/NameSearch.aspx) (2): Based on a June 18, 2013 license application with the Pennsylvania State Board of Pharmacy. Other owners are believed to be: Matthew Davenport, David Wing, Edward John Carne III, Gregory Blaszczynski, End Game Partnership LP, David Cowen, Elizabeth Kardos, Nick (Nicholas) Spuhler, David Ostrow, Jeffrey Gottesman, Gina Milner, Fabien Forrester-Charles, Francis Jennings, Michael Ostrow, Paula and Timothy Schuler and Gretchen Sprigg Wisehart. 2014 2015 N 2012 2015 YTD: VRX’s specialty pharmacy channel comprises 7.2% of VRX’s sales; Philidor is 5.9% Late 2013: Based on the success of the pilot program, Valeant expands its relationship with Philidor to include additional products and more states. Valeant frequently discusses it’s “alternative fulfillment” program in dermatology but never explicitly mentions Philidor Dec 2014: VRX pays $100mm (incl. additional earn-outs of up to $133mm) for the right to acquire Philidor for $0 (incl. certain governance rights). Philidor remains a separate limited liability entity. KGA Fulfillment Services – a wholly- owned subsidiary of VRX – owns the option to acquire Philidor. Hogan Lovells advised VRX on the structure and Philidor diligence Dec YTD 2014: Philidor contributes $111mm
(~1%) to VRX’s total sales Jan 2013: VRX signs a services agreement with Philidor Q4’2014: Philidor’s business
is growing rapidly; VRX recognizes the strategic nature of the Philidor commercial arrangement Legend Valeant Philidor Rx Services Isolani LLC R&O / Russell Reitz Other Dec 2012: VRX acquires Medicis Pharmaceutical Corp.

Jan 2, 2013: Philidor Rx Services LLC is created in Delaware;(1) Andy Davenport is believed to be the majority shareholder.(2) A common thread amongst owners appears to be a relationship to BQ6 Media Group – a pharmaceutical consultancy which lists VRX as a client (amongst many others) March 2012: Medicis launches their “Alternate Fulfillment Program” (prior to the acquisition of Medicis by Valeant). The pilot is focused on Solodyn and Ziana in select states. Some current Philidor employees previously consulted for Medicis 2013

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Philidor, R&O and Reitz: Timeline of Events 14

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Source: CA licensing documents and court filings in Isolani/R&O litigations. (1) Valeant company presentation. October 26, 2015. Jan 2015 2014 Aug 2015 N Nov 2014: Isolani negotiates a purchase agreement to acquire R&O for $350,000. 10% of the consideration is paid upfront ahead of regulatory approvals. Isolani, R&O and Russell Reitz enter into a Management Services Agreement (the “MSA”) transferring control of R&O’s operations to Isolani – Reitz remains the “pharmacist-in-charge” Aug 2015: Valeant ceases shipments to R&O July 2012: R&O created as an LLC in California; receives CA license on July 11, 2013 Oct 6, 2015: R&O sues VRX, claiming Valeant and R&O are parties to a fraud perpetrated by Isolani / Philidor Sep 4, 2015: VRX provides written notice to R&O demanding payment for outstanding invoices Oct 2014: Isolani LLC is created for the purpose of acquiring ownership of R&O. Philidor holds an unexercised option to acquire Isolani. May 2015: Reitz withholds necessary regulatory sign-off needed to execute the purchase agreement. Reitz begins confiscating checks owed to R&O (and by derivation Isolani / Philidor) breaching the terms of the MSA Aug 31, 2015: Reitz’s lawyers notify Isolani of their decision to unilaterally terminate the purchase agreement / MSA, claiming improper use of R&O’s NCPDP number, amongst other allegations. Reit’z counsel notes his clients intention to “retain any and all funds in R&O’s possession” Sep 8, 2015: Isolani initiates litigation against Russell Reitz and R&O in the Superior Court of California for breach of contract; Isolani is seeking emergency relief to protect its funds Aug 2013: Philidor applies for a nonresident pharmacy license in California May 2014: California Board of Pharmacy rejects Philidor’s license application July 2014: California Board of Pharmacy acknowledges Philidor’s request for an appeal; refers the request to the state AG Jan 2, 2013: Philidor Rx Services LLC is created in Delaware 2012 Legend Valeant Philidor Rx Services Isolani LLC R&O / Russell Reitz Other 2015: R&O’s sales meaningfully accelerate as Valeant (via Philidor / Isolani) begins shipping to R&O.

From March 2015-July 2015, R&O made payments of $18.4 million directly to Valeant for Valeant products (75 shipments)(1) July 30, 2015: Isolani counsel demands payment of withheld checks and the resignation of Reitz as pharmacist-in-charge Oct 29, 2015: VRX files counterclaim, detailing Reitz’ knowledge of Valeant and Philidor

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 R&O / Russell Reitz’s lawsuit against Valeant creates the impression that R&O was not aware of Valeant’s relationship with Philidor / Isolani

Recent Facts Discredit R&O’s Narrative 15 R&O Pharmacy LLC Complaint for Declaratory Judgment:

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 Email correspondence from Russell Reitz confirms that Reitz was aware of both Philidor and Valeant
Recent Facts Discredit R&O’s Narrative (cont’d) 16 Valeant’s Answer to Plaintiff Complaint for Declaratory Relief:

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Timeline of Disclosure Regarding Philidor / R&O 17

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Source: Valeant SEC filings.
Oct 2015 N 2012 Legend Valeant Philidor Rx Services Isolani LLC R&O / Russell Reitz Other Oct 26, 2015: VRX’s Audit and Risk Committee confirm VRX’s accounting treatment of Philidor is appropriate Oct 26, 2015: VRX announces the formation of an ad-hoc board committee to review VRX’s relationship with Philidor Sep 4, 2012: VRX discusses for the first time their newly acquired “alternate fulfillment” / mail- order strategy for dermatology Oct 20, 2014: Jefferies research analyst David Steinberg asked VRX on their Q3’2014 earnings call for the ratio of Jublia scripts written through VRX’s “specialty pharmacy Philidor;” Pearson discloses that their specialty pharmacy channel is comprised of “multiple specialty pharmacies” which collectively contribute ~40% of Jublia’s volume Oct 26, 2015: VRX releases its10-Q, including more detail on Philidor; Philidor accounts for 5.9% of Valeant net revenue YTD Dec 2012: VRX completes the acquisition of Medicis Pharmaceutical Corp. 2012-2015: VRX discusses their evolving “alternate fulfillment” strategy on 10 different occasions between 2012 and 2015
Oct 21, 2015: Short seller Citron Research accuses Valeant of engaging in fraud by using “phantom captive pharmacies” to engage in channel stuffing
Oct 22 – Present: Mainstream media begins to focus on the relationship between Valeant, Philidor, R&O, etc. Negative details begin to emerge on alleged Philidor business practices Oct 21, 2015: VRX issues a press release in response to Citron’s report, providing information on VRX’s relationship with Philidor and R&O Oct 26, 2015: VRX holds conference call to address investor concerns; certain questions remain unanswered Oct 19, 2015: VRX discusses their relationship and accounting practices with respect to Philidor, the first time VRX has discussed Philidor in detail Oct 19, 2015: In advance of VRX’s earnings, the Southern Investigative Reporting Foundation publishes an
article describing Valeant’s specialty pharmacy channel strategy, bringing Philidor and R&O into the spotlight Oct 14, 2015: A blogger tweets: “Does the word Philidor mean anything?” Oct 22, 2015: A blogger writes a post critical of Valeant’s specialty pharmacy strategy

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 The healthcare industry is highly regulated  All participants – manufacturers of pharmaceuticals/biologics/medical devices, doctors, pharmacies, hospitals, insurance companies – are subject to extensive federal and state legal and regulatory requirements  These regulatory regimes are not always intuitive  Areas of inquiry have included:  Marketing practices (off-label marketing, unsubstantiated claims)
 Manufacturing / product safety issues  Insurance fraud  Medicare fraud  Kickbacks  False claims  Misreporting of price information to CMS (Best Price requirements)  HIPAA/Patient privacy Healthcare Regulatory and Legal Overview Determination of compliance with the complex regulatory requirements is very fact specific 18

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Source: Public Citizen, Pharmaceutical Industry Criminal and Civil Penalties: An Update. 10 Largest Settlements and Judgments (’91-July ‘12)  Largest health care fraud settlement in history is $3bn  Many large fines involve unlawful promotion of drugs and safety concerns Healthcare Regulatory Impact (cont’d.) 19

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Source: Public Citizen, Pharmaceutical Industry Criminal and Civil Penalties: An Update. TBD TBD TBD TBD TBD TBD TBD

Healthcare Regulatory Impact (cont’d.) Pharmaceutical Cos. – Aggregate Penalties (‘91-July ‘12)  Many large pharmaceutical companies have received numerous fines over the decades, with total penalties in the billions  Valeant is notably absent from this list 20

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21 Novartis paid kickbacks to specialty pharmacies to induce them to recommend Novartis medications and increase sales of Novartis drugs
Novartis only contracted with pharmacies that represented that they would be able to convert patients to Novartis drugs The pharmacies actively tried to switch patients from competitor drugs to Novartis drugs, and the payments they received from Novartis depended on the success of these “conversion” efforts One of the pharmacies gave biased advice to encourage the use of Novartis drugs, and simultaneously understated serious, potentially life- threatening, side effects, using talking points that were approved by Novartis

“As alleged, using the lure of kickbacks disguised as rebates, Novartis co-opted the independence of certain pharmacists and turned them into salespeople for one of its drugs.”

• Manhattan U.S. Attorney Preet Bharara, April 23, 2013 Novartis: A Recent Case Study Allegations

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Oct 27 2015: announced an agreement in principle to settle the case for $390M; payment covers all claims related to five drugs 22

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Source: Company filings, legal filings, news reports. 2014 2013 2015 N 2011 June 2015: Government seeks $3.35bn in treble damages and civil penalties April 2013: DOJ intervened and filed a Complaint-in-Intervention July 2013: Novartis discloses civil investigative demand (CID) and related details in its quarterly 6K filing and states they are cooperating with investigation Nov 2011: qui tam / whistleblower complaint filed under seal by former Novartis employee, initiating an investigation by DOJ April 2013: Novartis said in a statement that it disputed the government’s claim and would defend itself Jan 2014: Specialty pharmacy BioScrip reached a settlement with the Government; agreed to pay $15mm to federal and state claimants, and to cooperate in the prosecution of claims against Novartis and admit numerous facts regarding its relationship with Novartis May 2015: Specialty pharmacy Accredo reached a settlement with the Government; agreed to pay $60mm to federal and state claimants, and to cooperate in the prosecution of claims against Novartis and admit numerous facts regarding its relationship with Novartis Jan 2014: DOJ filed Amended Complaint-In-Intervention
August 2014: DOJ filed Second Amended Complaint-In-Intervention Novartis: A Recent Case Study Timeline of Events

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Manhattan U.S. Attorney Preet Bharara alleged that Novartis was a “repeat offender” as the Company was already under a 2010 CIA over kickback allegations Alleged misconduct took place over nearly a decade and involved dozens of specialty pharmacies 161k+ false claims alleged which covered $507.5mm of reimbursements by government healthcare programs Volume of claims resulted in $3.35bn in damages and civil fines sought Fraud created safety risk for patients At least one of the products in question was alleged to cause “serious, potentially life-threatening” side-effects and had a “black-box” warning Pharmacists masquerading as objective medical advisors assured patients that their side-effects would improve with no consideration for their actual medical circumstances Novartis: A Recent Case Study Key Considerations 23

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On Oct. 27, 2015, Novartis announced it has reached a settlement in principle with the DOJ in the amount of $390 million Novartis acknowledges the seriousness of the alleged conduct
Novartis states that they intend to continue to use the Specialty Pharmacy channel It is unclear if any new Corporate Integrity Agreement will be put in place, but Novartis does not believe the settlement will impact their business
“Novartis said it cannot say much, but it does not expect any problems that would relate to Entresto [newly launching product], nor does it expect any significant impact on other businesses.”

• Bernstein, October 28, 2015 Novartis: A Recent Case Study Implications for Novartis 24

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25 Pershing Square’s Research At the time of Pershing Square’s investment in Valeant, Pershing Square was aware that Valeant had a Specialty Pharmacy strategy We believed this strategy was a small component of Valeant’s business By mid-2015, we became aware that Philidor was becoming a more significant part of Valeant’s business and in July we conducted due diligence on Philidor and the specialty pharmacy channel Our due diligence confirmed that specialty pharmacies offer many benefits to doctors, patients, and manufacturers and were playing an increasingly important role in the distribution of prescription drugs We believed Philidor’s business practices were similar to other specialty pharmacies We contacted Philidor and asked if the company was owned by Valeant; we were told “No.” Until last week, Pershing Square did not know that Valeant had acquired an undisclosed purchase option in December 2014

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26 Despite Improved Disclosure, Questions Remain 1. Why did Valeant not provide more disclosure about Philidor? Valeant’s answer: “We have viewed our relationship with Philidor and our other specialty pharmacies as proprietary and as one of our competitive advantages”(1) “Philidor was not specifically mentioned in our disclosures because it had not been material to the consolidated financial statements.”(2) 2. Why did Valeant structure the Philidor option with a $100mm premium and $0 strike price? Valeant’s answer: “Ultimately we determined that the structured option acquisition with the oversight rights we negotiated provided the security we were looking for and preserved the flexibility to acquire in the future a new growth platform.”(2) “The rationale to acquire the option was to keep Philidor focused on Valeant's business and to ensure continued strong customer service. The option also gave Valeant a level of contractual influence to benefit our business while providing an option on long-term ownership.” (2) 3. Did Philidor violate laws and regulations in the operation of its specialty pharmacy? Valeant’s board has formed an ad hoc committee to investigate Philidor’s compliance

On its October 26th conference call, Valeant management answered many important questions and disproved alleged accounting fraud, but did not adequately answer three important questions

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(1): Valeant Q3 2015 earnings presentation. October 19, 2015. (2): Valeant investor conference call. October 26, 2015.

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27 The Path From Here In the very near term, a decision to terminate the Philidor relationship and develop new channel partners Over the next several months, more negative press reports, scrutiny from regulators and politicians Completion of the ad hoc committee’s work
Over the next year, resilient operating performance from Valeant In the next two to four years, completion of recently announced investigations

We expect: We believe that with the passage of time Valeant’s share price will reflect the value of its franchises, its low-cost operating model, and its efficient capital allocation strategy

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What have investors forgotten?

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Valeant’s Franchises  Bausch & Lomb: 21% of sales(1) Global portfolio of consumer, prescription and surgical products Organic growth 11% 2014, 7% YTD 2015
 Gastrointestinal: 19% of sales(2) Acquired in April 2015; prescriptions for largest product grew 25% last quarter
 Emerging Markets: 18% of sales(2) Durable portfolio of branded generic products
 US Dermatology Rx: 16% of sales(2) One of the largest Dermatology Rx businesses in the United States Benefitting from recent product launches – Jublia, Onexton, RAM .08%, Luzu  Neurology /Other: 15% of sales(2) Older products, declining to ~10% of revenue in 2016

Valeant has built a diversified collection of platforms, including: 29

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(1): Sales percentage from last reported public disclosure in Q2 2015, adjusted for estimated Salix inventory wholesaler reduction and Amoun acquisition. Excludes B&L emerging markets sales. (2): Sales percentages calculated from reported Q3 2015 sales and pro-forma estimated Salix inventory wholesaler reduction and Amoun acquisition.

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Recent Business Performance 30 Strong organic revenue growth:  15% organic revenue growth YTD; 13% in Q3 Growth has been driven by a mix of volume and price: In Q3 2015, volume increased ~8% and net realized price increased ~4% Strong revenue growth, cost management, and capital allocation have contributed to a significant increase in earnings expectations: Consensus 2016 EPS expectations as of January 2015: $11.47(1) Consensus 2016 EPS expectations as of October 2015: $16.15(2) (+~41%)

Valeant’s business has performed well in 2015

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(1): Bloomberg January 5th, 2015. (2): Bloomberg October 29th, 2015.

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Valuation 31 Conservatively assuming all of Philidor’s sales were lost and not replaced through another channel, the stock is still inexpensive Assuming Valeant achieves “Floor” 2016 EBITDA guidance of $7.5bn, the stock is inexpensive as a multiple of 2016 EPS $7.5bn of EBITDA translates into ~$15.50 of Cash EPS(1)
At the Oct. 29 closing share price of $111.50, Valeant trades at ~7x this estimate of 2016 Cash EPS Eliminating Philidor’s earnings contribution would result in a reduction of Valeant’s “floor” 2016 EBITDA to ~$7.0bn, or ~$14 of Cash EPS(2) At the Oct. 29 closing share price of $111.50, Valeant trades at ~8x this alternate estimate of 2016 Cash EPS

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(1): Assumes $300mm depreciation and stock based compensation, 5% tax rate, 351mm shares, ~$1.5bn of interest expense. (2): Philidor EBITA contribution assumed to be 7%, equal to EBITA contributed in Q3 2015 per management presentation.

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 Assumptions: $7.25bn of 2016 EBITDA (assumes ~50% of Philidor profit contribution is lost) 5% organic EBITDA CAGR 2016-2020 De-levers to 3x LTM EBITDA and 6% cost of debt 10% 2020 tax rate Use of excess cash flow to buyback stock at 15x LTM EPS  Results: Valeant de-levers to ~3.5x LTM EBITDA by year end 2016 We anticipate Valeant will be an investment grade credit at these levels 2020 EPS of ~$22

Valuation – Conservative Long-Term Model 32 Conservatively assuming Valeant never makes another acquisition, has modest organic growth and reduces leverage significantly, the stock is inexpensive High return potential even using conservative modeling assumptions: 2020 EPS 22 $
22 $
22 $
Forward Multiple 12.0x 14.0x 16.0x 2019 Value (Year End) $264 $308 $352 Discounted Present Value (@10%) 180 $
210 $
240 $
Return From Current Share Price ($111.50) 62% 89% 116%

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Valuation – Long-Term Model 33  Assumptions: $7.25bn of 2016 EBITDA (assumes ~50% of Philidor profit contribution is lost) 7.5% organic EBITDA CAGR 2016-2020 De-levers to 3.5x LTM EBITDA and 6% cost of debt 10% 2020 tax rate Use of excess cash flow to make acquisitions at 7x Pro-Forma EBITDA Maximum $10bn of acquisitions per year Remaining free cash flow, if any, used to buyback stock at 15x LTM EPS

Assuming Valeant de-levers and maintains 3.5 turns of leverage, allocates free cash flow to acquisitions, and grows at a rate reflective of the strength of its franchises, the stock is tremendously undervalued High return potential : 2020 EPS 32 $
32 $
32 $
Forward Multiple 12.0x 14.0x 16.0x 2019 Value (Year End) $384 $448 $512 Discounted Present Value (@10%) 262 $
306 $
350 $
Return From Current Share Price ($111.50) 135% 174% 214%

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The Philidor Scandal of 2015 Reminds Us of…

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The Great Salad Oil Scandal of 1963  AmEx was known for its highly profitable, growing businesses in credit cards and travelers checks AmEx had a healthy franchise which was growing robustly, with revenues and operating income growing over the prior decade at 12% and 11% compound annual growth rates, respectively  AmEx’s Warehousing Division, a relatively new business line, made loans to a company called Allied Crude Vegetable Oil Refining Corp. run by con-man Anthony “Tino” De Angelis
 De Angelis had previously swindled the government under the National School Lunch program, and went bankrupt  AmEx’s security was Allied’s inventory of soybean oil stored in large tanks, valued at more than $150 million (~$1.2 billion in 2015 dollars). De Angelis’ claimed inventory exceeded the entire U.S. inventory of soybean oil as reported by the Department of Agriculture  The tanks were filled with water topped off with a thin layer of oil. When plumbed with a dip stick, the tanks appeared to be full of soybean oil

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The Great Salad Oil Scandal of 1963 (cont’d.)  Had AmEx done better due diligence, it would have never dealt with De Angelis
 AmEx’s share price fell over 40%, eliminating ~$110 million in AmEx’s market capitalization due to the perception that AmEx’s franchise was at risk  A 35-year-old hedge fund manager put 40% of his fund into AmEx . . .
“Every trust department in the United States panicked,” explained this 35-year-old hedge fund manager, “the stock just poured out”

 Although it wasn’t obvious to many at the time, the dislocation in the stock price due to the scandal provided a great buying opportunity. With the passage of time, the strength of AmEx’s business proved resilent “As described in other sections of this report, the extremely complex warehousing situation has not interfered with the continued growth and attainment of record highs in our main lines of business”

• American Express, 1964 Annual Report

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“A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors.”(1)

• Warren E. Buffett

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(1): Buffett, Warren. Buy American. I Am. The New York Times. Op-ed contribution. October 16, 2008.

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Pershing Square Capital Management, L.P. Q&A

Key Themes

• Volatility vs. Permanent Loss of Capital — the entire deck is framed as a distinction between price decline and business impairment; Ackman argued the collapse was a market overreaction, not a permanent impairment of value
• The Right CEO — the defense rests heavily on J. Michael Pearson's track record and Valeant's durable franchises, treating management quality as the bedrock of the investment case
• Capital Allocation Discipline — the valuation section emphasizes Valeant's ability to de-lever, buy back stock, and redeploy cash into high-return opportunities
• Inversion and Stress-Testing — Pershing Square attempted to model the worst case, including the complete loss of Philidor sales, and still concluded the stock was undervalued
• Wide Gap Valuation — multiple valuation cases, even under conservative assumptions, projected significant upside from the $111.50 price

Context & Significance

This webcast sits in the valley, the third act of Ackman's career, at the precise moment the Valeant thesis began to break. The mindset is defensive conviction under fire: every answer in the deck is internally consistent, every accusation has a rebuttal, and every valuation case points to the same conclusion — that the market has overreacted. What makes the document important is that it captures the logic of the position while the position was still held, before the 2016 board shakeup, the restatements, and the eventual exit in March 2017.

The honest retrospective is that the deck's errors were not in its arithmetic but in its premises. Pershing Square believed Valeant's specialty pharmacy channel was a small, containable part of the business; that Valeant's management had been transparent enough; and that the franchise value would overwhelm the regulatory and reputational damage. The deck acknowledges uncertainty — it lists unanswered questions about Philidor disclosure and flags the risk of more negative press — but it treats those uncertainties as surmountable rather than existential. The closing Buffett analogy reveals the mental model: a great business temporarily dislocated by scandal, offering a contrarian buying opportunity.

Read against the 2016 annual report and the eventual exit, the webcast is a case study in how a rigorous process can still arrive at the wrong conclusion when the facts it trusts are incomplete. The discipline of modeling worst cases did not fail; the discipline of asking whether the business itself was something other than what it appeared to be did. Ackman would later describe Valeant as "one very big mistake" and acknowledge that he had broken his own rules by investing in a company too complex to understand from the 10-K alone. At the time of this webcast, however, that admission was still months away — and the deck is the clearest record of the reasoning that delayed it.