Third Quarter 2004 Conference Call

1
Third Quarter 2004 Conference Call

• November 2, 2004

2
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 Companys 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 .
3
Agenda

• Overview Ingrid Wiik Vice Chairman, President
  CEO
• FDA Compliance/ Dr. Ronald Warner Executive VP
  Human Research Development Pharmaceutical
  Scientific Affairs Global Compliance
• Gabapentin Fred Lynch President, Global
  Generic Pharmaceuticals
• Financials Matt Farrell Executive VP CFOand
  Outlook
• Closing Comments Ingrid Wiik Vice Chairman,
  President CEO

4
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
• RD 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

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FDA Compliance Status- USHP Sites

• Elizabeth-solids
• FDA concluded inspection in September
• 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
• 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
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ANDA Filing History and Target
YTD RD spending 32
of ANDAS Filed
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Increased investment in pipeline development
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Gabapentin

• Capsule launch in October
• Pricing competitive Teva, Ivax, Greenstone, ALO
• Pfizers preliminary injunction motion denied
• Hearing on ALO summary judgment request in
  mid-November
• FDA approval for tablets
• Launch date to be announced
• Teva agreement
• ALO to receive a portion of Tevas profits upon
  favorable outcome of Pfizer patent infringement
  litigation

Despite pricing pressure, good market
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Third Quarter Financial Performance
Third Quarter Third Quarter
2003 2004
Revenue 315 298
Operating Margin 6.6 0.1
DEPS / (DLPS)
Continuing Operations 0.09 (0.09)
Discontinued Operations (0.08) --
Total 0.01 (0.09)
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USHP
Revenue in millions

• Revenues declined 26
• U.S. generic revenues decline of 38 million due
  to
• volume/pricing
• wholesaler inventory reduction
• Kadian revenues increased
• continued sequential scriptgrowth
• ytd script growth of 29
• Margins impacted by
• reduced volume / pricing pressure
• write-offs
• increased RD

Operating 6.5 Margins (17.7)
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International Generics
Revenue in millions

• Revenue declined 6 ex-Fx
• Increased competition and continuing pricing
  pressure
• Increased RD

Operating 7.0 Margins 6.2
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API
Revenue in millions

• Revenues increased 44 ex-Fx
• Increased U.S. volumes
• Weak Q3 in 2003 due to customer inventory
  reductions
• Increased RD

Operating 32.5 Margins 47.8
Continued strong margins
12
Animal Health
Revenue in millions

• 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

Operating 9.6 Margins 11.1
Solid quarter
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Current Debt Profile
Dec. 31 2003 Sept. 30 2004
Bank debt Term A 86 56
Term B 286 226
Revolver 9 55
381 337
8.625 Senior Notes 220 220
5.75 Converts 34 10
3 Converts (3.875 PIK) 147 152
Other 35 0
817 719
in millions
Free cash flow of 102 million year-to-date
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Key Financial Items
in millions
12/31/03 9/30/04
A/R 258 176
Inventory 309 360
A/P 123 138
Total Debt 817 719
Cash 59 67
Free cash flow in Q3 of 53 million - influenced
by timing of receivable collections
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Other Financial Data
in millions
Q3 Q3
2003 2004
Depreciation and Amortization 23.6 23.9
CAPEX and Purchased Intangibles 14.9 11.3
Dividends 2.3 2.4
Interest expense 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
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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

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Current Outlook
Full Year
Previous Guidance 0.45 0.55
Q3 results (0.09)
USGx Q4
New Products (0.15)
Gabapentin 0.50
Base Business (0.11) 0.24
Current Outlook 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

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QUESTIONS ANSWERS