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Allergan Reiterates Its Belief That Valeant’s Business Model Is Unsustainable

Allergan, Inc. (NYSE: AGN) (“Allergan” or the “Company”) today reiterated the Company’s concern regarding Valeant Pharmaceuticals International, Inc.’s (“Valeant”) unsustainable business model, which relies on serial acquisitions and cost reductions, as opposed to top-line revenue growth and operational excellence. A number of different third parties have also publicly expressed similar views.

John Hempton, Chief Investment Officer, Bronte Capital “Valeant Pharmaceuticals: Part IIIA: Corrections and Amplifications on the Medicis Restructuring Charges.” Bronte Capital Blog, June 13, 2014

“There is a possibility that the whole Valeant exercise is something from the Wizard of Oz. Profits are going up nicely if you pay no attention to that man behind the curtain — the man being the large restructuring and one-time items.”*

Vicki Bryan, Senior High Yield Analyst, Gimme Credit “Valeant Debt-Loaded Deal Binge Casts Doubt on Strategy: Real M&A.” Bloomberg, May 27, 2014

“Valeant’s strategy depends on people continuing to drink this Kool Aid it’s serving… They have to keep buying at a heavier and heavier and more expensive pace to keep this up. What happens when they can’t? There’s no inherent growth, and the debt side of this is a very big part of the story that the stock market is ignoring.”*

Jim Chanos, President and Founder, Kynikos Associates CNBC Fast Money Halftime Report, May 15, 2014

“We're short because it's a roll up and roll ups present a unique set of problems. Roll ups are generally accounting-driven, and we certainly think that's the case in Valeant. We think Valeant is playing some very aggressive accounting games when they buy companies, write down the assets. But really, for us, and we were short before the Allergan announcement, a roll up is a roll up and you have to analyze a company that’s not growing organically and has to deliver value by doing bigger and bigger acquisitions, and usually the companies do an acquisition too far.”*

Matthew Herper, Senior Editor for Pharma and Healthcare, Forbes “Valeant Pharma's Arguments About Drug Research Are Misleading And Wrong.” Forbes , June 12, 2014

“…[Valeant’s] treatment of figures relating to the industry’s R&D productivity is so indefensible as to beg the question of whether its executives can really command the facts they are using, or whether they really understand the trends on which they say they are basing their business. A one-hour call with four of Valeant’s top executives last night did not convince me otherwise.”*

“…By picking only the largest companies, Valeant gets to not include Allergan, which, like Novartis, has an 8% return on R&D by Evans’s numbers … If Valeant is at war with inefficiency, shouldn’t it buy someone inefficient?”*

“The general trend is true — drug companies are buying innovation more often — but Valeant’s figure is at best so badly thought-out that it doesn’t make any sense. At worst it’s deceptive.”*

In addition, executives from Morgan Stanley, the investment bank understood to have recently been retained by Valeant, have sent emails directly to Allergan’s management team that suggest they share the concerns of Allergan and the above third parties.

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