Third Quarter 2004
Conference Call
November 2, 2004
Safe Harbor
Statements made in this press release include forward-looking
statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements, including
those relating to future financial expectations, involve certain
risks and uncertainties that could cause actual results to differ
materially from those in the forward looking statements.
Information on other significant potential risks and uncertainties
not discussed herein may be found in the Company’s filings
with the Securities and Exchange Commission including its
Form 10K/A for the year ended December 31, 2003.
This presentation was prepared for the November 2, 2004 earnings conference call.
Information contained within will not be updated.
The following slides should be read and considered in connection with the information
given orally during the conference call .
1
Agenda
Overview
Ingrid Wiik
Vice Chairman, President & CEO
FDA Compliance/
Research & Development
Dr. Ronald Warner
Executive VP Human
Pharmaceutical Scientific Affairs
& Global Compliance
Gabapentin
Fred Lynch
President, Global Generic
Pharmaceuticals
Financials
and Outlook
Matt Farrell
Executive VP & CFO
Closing Comments
Ingrid Wiik
Vice Chairman, President & CEO
2
Third Quarter Overview
•
•
•
•
•
•
•
•
GAAP results: $(0.09) DLPS
 Diluted loss per share (DLPS) includes a legal settlement, and inventory and fixed asset write-offs
totaling $(0.07), all related to a U.S. generics product
Excluding these charges, DLPS of $(0.02) versus guidance of approximately breakeven

USHP
 Generics: reduced sales due to wholesaler inventory reduction and pricing declines
 Kadian® : expanded sales force in place; 29% ytd script growth
International Generics
 Highly competitive markets
API
 Continued strong margins
AHD
 Solid quarter; revenue growth, margin gains
Other Income
 Includes $5.2M income from settlement of litigation
R&D investment ramping up
 Spending in Q3 2004 up 42% vs. year ago, year-to-date up 32%, in line with target of over 25% for
the full year
Targeting major increase in filings (10 in 2004 vs. 4 in 2003), 7 filings to date

Outlook for year 2004 increased from $0.45 - $0.55 to $0.60 to 0.70 driven by
gabapentin
3
FDA Compliance Status- USHP Sites
•
Elizabeth-solids




•
FDA has notified company the site is eligible for new product approvals
Received four new product approvals, including gabapentin tablets
Next inspection expected in 2005
Baltimore-liquids

•
FDA concluded inspection in September
Continued remediation, next inspection expected in 2005
Lincolnton-creams/ointments

General cGMP and new approval inspections in July 2004 – no
observations
All U.S sites, except Baltimore, eligible for new product approvals
Compliance remains a top priority
4
ANDA Filing History and Target
# of ANDAS
Filed
YTD R&D spending + 32%
20
18
16
14
12
10
8
6
4
2
0
15 - 20
10
10
Filings
YTD
6
2001
2002
4
7
2003
2004F
Long Term
Target
Increased investment in pipeline development
5
Gabapentin
•
Capsule launch in October



•
Pfizer’s preliminary injunction motion denied
Hearing on ALO summary judgment request in mid-November
FDA approval for tablets

•
Pricing competitive: Teva, Ivax, Greenstone, ALO
Launch date to be announced
Teva agreement

ALO to receive a portion of Teva’s profits upon favorable outcome of
Pfizer patent infringement litigation
Despite pricing pressure, good market
6
Third Quarter: Financial Performance
Third Quarter
2003
Revenue
Operating Margin
$315
6.6%
2004
$ 298
0.1%
DEPS / (DLPS)
Continuing Operations
$0.09
$(0.09)
Discontinued Operations
(0.08)
--
$0.01
$(0.09)
Total
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USHP
•
•
Revenue $ in millions
$131.7
$96.8
•
6.5%
Operating
Margins (17.7)%
•
Q3 2003
Q3 2004
Revenues declined 26%
U.S. generic revenues decline of $38
million due to
 volume/pricing
 wholesaler inventory reduction
Kadian® revenues increased
 continued sequential script
growth
 ytd script growth of 29%
Margins impacted by
 reduced volume / pricing pressure
 write-offs
 increased R&D
8
International Generics
Revenue $ in millions
$88.0
$90.5
•
•
•
7.0%
Q3 2003
Revenue declined 6% ex-Fx
Increased competition and
continuing pricing pressure
Increased R&D
Operating
Margins 6.2%
Q3 2004
9
API
Revenue $ in millions
$35.8
•
Revenues increased 44% ex-Fx
 Increased U.S. volumes
$24.3
 Weak Q3 in 2003 due to
customer inventory reductions
Operating
32.5% Margins 47.8%
Q3 2003
•
Increased R&D
Q3 2004
Continued strong margins
10
Animal Health
Revenue $ in millions
•
$73.9
9.6%
Q3 2003
$74.6
Operating
Margins 11.1%
•
•
•
5% revenue growth, excluding
Fx and aquatic divestiture
Strong sales of poultry products
Livestock: signs of stability
Improved margins
 cost reduction
 productivity initiatives
 product mix
Q3 2004
Solid quarter
11
Current Debt Profile
$ in millions
Bank debt
Dec. 31
2003
Sept. 30
2004
Term A
$ 86
$ 56
Term B
286
226
9
55
381
337
220
220
34
10
147
152
35
0
$817
$719
Revolver
8.625% Senior Notes
5.75% Converts
3% Converts (3.875% PIK)
Other
Effective Interest
Rate 5.5%
Free cash flow of $102 million year-to-date
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Key Financial Items
$ in millions
12/31/03
9/30/04
$258
$176
Inventory
309
360
A/P
123
138
Total Debt
817
719
59
67
A/R
Cash
Free cash flow in Q3 of $53 million - influenced by timing of
receivable collections
13
Other Financial Data
$ in millions
Q3
Depreciation and Amortization
CAPEX and Purchased Intangibles
Dividends
Interest expense*
*
2003
2004
$23.6
$23.9
14.9
11.3
2.3
2.4
15.7
14.9
Includes amortization of debt issuance costs of $0.8 million and $0.7 million for
2003 and 2004, respectively
Full year Capex estimate: $45 to $50M
14
2004 Outlook
Outlook
•
Increased outlook driven by gabapentin launch

Impact offset in part by weaker U.S. Generics base business and
disappointing contribution from new product launches in the U.S.

Other businesses on track
Fourth Quarter
•
•
•
DEPS $0.47 to $0.57
Approximately $0.50 DEPS related to gabapentin
No significant contribution from other new product launches
Full Year 2004
•
•
Outlook of $0.60-$0.70 DEPS
Full year free cash flow $75 - $90 million
15
Current Outlook
Full Year
$0.45 – 0.55
Previous Guidance
Q3 results
(0.09)
USGx – Q4
New Products
(0.15)
Gabapentin
0.50
Base Business
(0.11)
Current Outlook
0.24
$0.60 – 0.70
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Summary
•
Significant progress







New product launches-gabapentin and citalopram
FDA – Elizabeth site eligible for new product approvals
Four U.S. generic product approvals
Kadian script growth
API – continued strong margins
Animal Health revenue and margin growth
Significant free cash flow generation and debt reduction
•
Intensifying challenges in the U.S. generic industry
•
Gabapentin continues to be a significant opportunity


Tablet launch to be announced
Share of Teva profits – receipt upon favorable outcome of Pfizer patent
infringement litigation
17
QUESTIONS & ANSWERS
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