Perrigo Company plc

Good morning, good afternoon, and good evening. On behalf of Perigo's executive leadership team, I'd like to welcome you to Perigo's 2023 Virtual Investor Day. For those who don't know me, my name is Brad Joseph, head of investor relations and communications at Perigo. Today, you're going to hear about Perigo's transformation journey over the last few years and how the company is extremely well positioned to drive outsized growth through 2025 and solid long-term growth beyond. by continuing to focus on operational execution, integrating acquired businesses and achieving synergies, and by delivering on the tremendous innovation opportunities we see ahead. This next phase of our strategy is called Optimize and Accelerate, which you'll hear much more about in just a moment. But before we do that, I would like to remind everyone that during this presentation, participants will make certain forward-looking statements. Please refer to the important information for shareholders and investors and Safe Harbor language regarding these statements in our press releases issued last night and earlier this morning, and of course, our most recent SEC filings. We'll also be referencing financial measures that are non-GAAP in nature, and we'll provide a reconciliation of our GAAP to non-GAAP financial measures on the Perigo Investor Relations website. A few quick items before we start. First, unless stated, all financial results discussed and presented are on a continuing operations basis. They do not include any contributions from the divested RX business, which was accounted for as discontinued operations prior to its sale. Unless stated, all financial results discussed and presented for those years prior to 2021 represent CSCA, CSCI, and corporate segments only. Second, as a reminder, organic net sales growth excludes the effect of acquisitions and divestitures and also the impact of currency. We also discussed net sales growth excluding divestitures, which includes both acquisitions and internal growth. Now, on to the agenda. Kicking us off will be Murray Kessler, President and CEO, who will walk you through our transformation journey along with lessons learned and strategic questions from our journey, after which we'll take a five-minute break. Then you will hear from Spend Anderson, President of CSCI, Jim Dillard, President of CSCA, Allison Ives, Chief Scientific Officer, Rania Anish, Head of Global Supply Chain, Grania Quinn, Chief Medical Officer, and Eduardo Bezerra, CFO, and he will take us through answers to inform Perigo's strategic direction. Eduardo will also cover how we will translate our strategic direction into shareholder value, after which Murray will come back with closing remarks and bring the presentation portion of the day to a close. After the presentation, we'll take a quick 10-minute break. That break will be followed by Q&A session with the entire team. You have the ability throughout the presentation to submit a question in the Ask a Question section on the webcast. We'll do our best to address all questions asked. Before I turn it over to Marty, just two more quick items. First, we're going to make a survey available throughout the event and post the event. We strongly encourage you to fill this out and provide us with your feedback. Second, all the presentations that you hear today, including the full replay of today's event, will be made available on the Perigo Investor Relations website within the next 24 hours. And with that, it's my pleasure to introduce Murray Kessler, CEO and President of Perigo.

Thank you, Brad. I get the pleasure today of walking you through the journey that my team and I have been on for the last... four years. And if you're a new investor, it's been an amazing journey as we have transformed ourselves from a a consumer health care company that had both health care for consumer products, but it also had Rx prescription products. And we had gotten together and built the strategy that we introduced that we believed there was a major opportunity to change the trajectory of the business if we focused on self-care. And if you had been here in the original presentation, which I believe was around May 2019, You would have seen that the team and I walked into a pretty tough situation. It was a long-term declining trend. You had about four years of declining 2% in total, kind of a flat consumer top-line business, but a declining Rx business and an overall declining operating income trajectory, and the share price was declining, and the business was continuing to erode. So we said, look, how do we change this? And again, we went back to this idea of a transformation that was based on this concept that the company had 130-year rich history of and was almost the very first in the world to launch private label, over-the-counter products that didn't need a a prescription and that that self-care vision was on trend and nobody was really trying to own that opportunity. And it could be a place where Parago could really stand out and, and, um, differentiate itself versus other companies in the space. And with that, it would open up tons of opportunities. So if you follow me in my career, I always start with, when I come into a company, creating a vision statement. And I've never usually, or in any of my jobs, have ever walked away from that vision because I believe you have to work day after day and commitment in everything you do to make that vision a reality. And for Paragoe, That vision was and is today to make lives better by bringing quality, affordable self-care products that consumers trust everywhere they're sold. And every person in the Perigo organization needs to be able to see themselves in that vision and say, what am I doing to make lives better for the people that buy Perigo products all around the world? Now, the beauty of that definition is it went from a traditional everything must go through the FDA. It opened up all kinds of avenues for growth for the company. New categories we could play in as long as they helped go and take consumers beyond just treating illness to a broader definition of not just treating illness, but. preventing illness, promoting wellness. And when you do that, you'll see how that has opened up explosive growth for Perigo over the last few years. So job one that we introduced in that strategy, again, May 2019, was revenue first. We needed to get the top line growing again. That was the key job. We had done a a whole lot of work with advisors on what were the drivers of value creation. And the first thing they said is you need to get that revenue opportunity growing again. And second, you needed to stabilize in the beginning your operating income, even though you're going to be investing, Murray. And then third, you need to reduce uncertainty. And we had tremendous uncertainty on the business that were scaring some investors away. And then the second phase would then become towards the end of the first three years, that we would then get the bottom line growing. And our goal was to deliver on a long-term basis, 3% on the top line, 5% operating income growth, 7% EPS. So you'll hear me refer in this presentation. You've heard me in the past refer to 357. So 357 was the goal. Year one and two, get the three, get rid of uncertainty in the organization, then start delivering 5.7. In order to make that happen, it was taking a massive, massive reconfiguration of this company. We literally, in the last three years, we have done – we've sold our generic RX business, almost an 800 million revenue business. We sold our Latin American operations. We sold our Rosemont RX business. We sold Animal Health, and we closed down our India R&D. Those were all non-strategic businesses that, when you look at them in their own right, they were a multiple drag on the company. We bought Nestle's Gateway infant formula facility recently. We bought a spectacular company, a growing consumer company in HRA Pharma. We bought Rainier Oral Care. We bought Dr. Fesher Oral Care. We bought Steropod Oral Care. We bought the Prevacid brand. We bought a number of Eastern European skin care products, and we invested in a company called Casmira that is on the leading edge of developing clean CBD products. So that was the portfolio reconfiguration. And, you know, imagine the amount of work it took to pull up like 13, 14 transactions like that in the last couple years. And I truly believe that M&A capability and integration capability is a core competency of Peridot's. Second, in the area of business, we needed to get our pipeline growing, our organic growth growing. We built a half a billion dollar pipeline of new products. We launched over $600 million in new products during the three years of the strategic plan. We set a goal of $100 million in cost savings, and we've already delivered 80 of it. And we just completed an important project on the financial side of the business that will get us to the $100 million. We've launched new e-culture frameworks. We've built e-commerce platforms. We're part of the solution of the most recent infant formula crisis and on and on. It brought in talent and rationalized SKUs. And that was critical to building a great company. You know, we had to reconfigure, then we had to build a great company, and then the third element was reduce uncertainty. And we, you know... when I was standing up there in May, we had billions and billions of dollars of tax liability and litigation concerns that have been dramatically reduced. And we also strengthened our cybersecurity. We, you know, as I said, we divested the most volatile businesses. We had invested in DEI and ESG. And, you know, the point is that the perigo that we started with, was very different than the perigo today. And that's what I hope to show you and my team hopes to show you over the next few hours. I just walked you through all the things we did, which I believe if you look back to that May presentation, you'll see we did everything we told you we were going to do. And as a result of that, we completely reversed the trend on the top line. We went from a declining business to a business that has grown on a 7% compound annual growth rate on the top over the last few years. And we stabilized our operating income, had flat operating income during a period of time that we invested in IT, we invested in capacity, and we invested in people, and we invested in brands. And we were able, like I said, to hold that and not give back any of the bottom line while all those investments were made for the future. One of the most popular slides three years ago, three and a half years ago, was this slide where we had diagnosed and be able to show folks that were interested in investing or had invested in the company that, why the business had slowed down because Perigo had a great track record for many, many years and drove value and grew the top line and it had stopped. And if you look at the first two columns on this slide, you'll see, you know, what our diagnosis was. We went back and we said, hey, listen, the revenue growth components and revenue was first. acquisitions, RxOTC switches, new products, and sort of the base core business, including pricing, what impact were those having? And in our winning years, those all added up to about a 9% compound annual growth rate or a billion dollars worth of revenue growth. Then we had this period of time that I started with in the first slide that showed you declines. And when you look at what happened, acquisitions stopped. So what had been a $590 million driver basically went away. OTC switches remained. New products was a fraction of what it had been in the prior years. And base business erosion had gotten worse. So you went from a billion dollars of growth in that plus 9% to no growth, you know, you had about $20 million over four years, basically growth. a flat business. And now look at the third column that I have. What's happened since we began all these transformation activities? We reignited our M&A arm and have delivered $660 million of new revenues through acquisition for the 18 to 22 period. RXOTC switches are actually down But if you go back to May 19, I'd said that number was going to be zero. We couldn't count on anything. So that's green because it was actually an upside to a plan. And you'll see later in this presentation that it's even a bigger upside opportunity going forward. New products pipeline, major priority, was reignited. 430 million, and our base business declines were completely stabilized. So then you go from, you know, the 9% flat back up to a 7% compound annual growth rate. I find it amazing, and I don't know your reaction, but when we decided that we were going to sell off the RX business, that's a big division for us. You know, it's a 25% of our sales, a big piece of our operating income, even though it was declining, it was a lot to replace. In only a year and a half since we sold it, we are bigger today than we were on the top line than when we had RX. That has been completely replaced through bolt-on acquisitions and through strong organic growth. We also diversified our portfolio and entered into important self-care categories that we had more freedom to get to market faster. So not everything had to go through the FDA. We added an oral care business that's now 9% of our total business worldwide. We supplemented our skincare, basically doubled our skincare business. That's now 14% of our business worldwide. And we added a new women's health section, which you will talk about later. I'm so excited about this opportunity. It's only 3% of the business now, but I think it could be a major growth driver. And we added amazing brands like, you know, the number one foot blister brand, Compete, or the number one cough cold remedy in a number of countries in Europe, Enthusiamere. And we're the number one store brand supplier of OTC products in the United States by far. We're the number one flosser and floss pick brands and kids toothbrushes and toothbrush protection in the USA. We're the number one store brand supplier. of infant formulas in the U.S., and it just goes on and on and on. This is a company that's diversified with global brands and super opportunities going forward with an expanded base of different product categories. We also diversified our portfolio across store brand and national brand. That was a big question when I came into the company, can you be both? Can you be a store brand company and can you be a branded company? Most aren't. There are a few who do it successfully. And we believe the answer to that question was yes, and that we could continue to grow our store brand business, but accelerate and kind of charge up our branded business. And we've done just that. If you look here in 2018 sales to 2023 sales, Branded was 40% of our business. It's now grown to half of our business on a global basis, so 50% of the business. We have strong brands, strong national brands, strong regional brands in different parts of the world, and we continue to have the number one store brands. And all facets of our business is growing, and I'll show you more of that in a few minutes. We also diversified our portfolio across geographies. So, again, we had that global 9% compound annual growth rate in total. I mean, excuse me, the 7% compound annual growth rate in total, but that was 9% compound growth in Europe, and it was with 7% compound annual growth rate in North America, so both. And with the acquisition of HRA and especially the women's health products, we're in more countries than we thought. ever have been before. So, yeah, I'm trying to show you that, you know, Perigo is this unique company. We're not just one brand. We're kind of the biggest company that no one's ever heard of because of the private label business and the regional nature of the business. But this is a business that's very diversified, global in nature, branded in store brand, growing across various different areas. And today, Perigo versus where it was is completely transformed. We are a pure play consumer self-care company, one of the leading ones in the world with an opportunity to even more differentiate ourselves over time. And this company, because of that balance between store brand and premium brands and geography, has a very, very unique set of attributes that are on trend for consumers. Our products are accessible. Our products are affordable. Our products are reliable. Our products are sustainable. And our products are profitable. Every country, no matter where you are in the value chain, you want self-care to succeed. We help reduce health care costs around the world. We provide access. We make lives better. with our products every day. The other thing I love about Perigo, and I didn't fully understand when I joined the company, but I sure do now four years later, is the emote that the company's been able to build around itself through its massive product portfolio scale and ability to handle complexity. I call it internally, I say we have a high CQ. A lot of people talk about IQ or you know, or other kind of cues. To me, the CQ is the complexity quotient and Perigo handles You know, we distribute in 80 countries through 21 manufacturing and packaging facilities, over 200 bands, 2,200 formulations, 13,300 SKUs, 48 billion solid doses a year, 17 billion liquid doses per year, a billion infant formula feedings a year, and 7 billion oral care units per year as well. And you can see all the dosage forms and regulatory classification. Perigo is a very big and nimble company. So four years, the transformation. If you're a new investor, I kind of gave it to you in trying to explain it in charts and numbers. Let's take a look at a video showing you the new Perigo.

Parago is a leading global self-care company dedicated to making lives better around the world. A rapidly growing company that empowers consumers to take control of their health and wellness. And as individuals engage in some form of self-care daily through their choices, Parago is there. Through its multiple product offerings, including premium brands, value brands, and store brands, we are meeting the needs of consumers across the value spectrum, wherever and however they want, in-store or online. Delivering our unique and needed self-care solutions is a dedicated and motivated workforce of more than 9,000 strong, working across 30 countries to deliver billions of doses to consumers each year. Every second of every day, nearly 2,500 consumers use a Perigo product. Perigo is there when you need us, whether you have a headache, backache, stomachache, heartburn, blisters, or looking to take control of your decisions with oral contraceptive products. More individuals are taking control of their health and wellness decisions, and our products are more important than ever. So wherever you take the next steps on your self-care journey, Perigo will be there to make your life better.