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Bill Miller - Next Generation Investing Event Presentation 10/15/19

Bill Miller, Value Investor and CIO of Miller Value Partners, gave the following presentation at the Next Generation Investing Event in Baltimore, MD on 10/15/19. Celebrating 10 years in 2019, the Next Generation Investing Event is an annual event to support non-profit organizations that help improve educational choices for children in the Baltimore community. Renown investors share their top equity investment ideas of the moment with insights into their thought process, providing a unique experience for attendees.

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Bill Miller - Next Generation Investing Event Presentation 10/15/19

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  1. The Sorrento Portfolio Bill Miller, CFA October 15, 2019

  2. Celebrating 10 years in 2019, the Next Generation Investing Event is an annual event to support non-profit organizations that help improve educational choices for children in the Baltimore community. Renown investors share their top equity investment ideas of the moment with insights into their thought process, providing a unique experience for attendees. Bill Miller gave the following presentation at the Next Generation Investing Event in Baltimore, Maryland on October 15, 2019. Any views expressed are subject to change at any time and Miller Value Partners disclaims any responsibility to update such views. The information presented should not be considered a recommendation to purchase or sell any security and should not be relied upon as investment advice. It should not be assumed that any purchase or sale decisions will be profitable or will equal the performance of any security mentioned. Past performance is no guarantee of future results, and there is no guarantee dividends will be paid or continued. ©2019 Miller Value Partners, LLC click the logos to learn more about each organization

  3. • Leading commercial provider of security systems in U.S. • Majority owned by Apollo • Purchased Red Hawk in 2018 and continues to expand commercial offering • Large and growing $15- $20Bn commercial security opportunity • Rolled out new DIY offering Ticker: ADT Highly Fragmented $15-20Bn Industry Miller Value Partners | millervalue.com

  4. • Went public in mid-Jan 2018 at $14, lower than filing range of $17-$19 • Traded off ~70% to a low of $4.25 in August of this year Ticker: ADT Price 52-Wk High Market Cap P/E1 EV/EBITDA1 $6.58 $8.39 $4.9 BN 6.3x 5.7x Miller Value Partners | millervalue.com 12020 Estimates

  5. •FCF remains strong •Expect the stock return to its original IPO filing range of $17-19 within 2 years. •Commercial opportunity not reflected in stock price Ticker: ADT 2019E $5,094 M $2,491 M $0.93 $539 M 11.5% 2.9x 5.9x 7.0x 2020E $5,276 M $2,597 M $1.04 $612 M 13.0% 2.8x 5.7x 6.3x 2021E $5,502 M $2,724 M $1.24 $727 M 15.5% 2.7x 5.4x 5.3x Revenue EBITDA Adj. EPS Free Cash Flow Free Cash Flow Yield EV/Revs EV/EBITDA P/E Miller Value Partners | millervalue.com

  6. • Largest generic pharmaceutical manufacturer in the world by total prescriptions • Portfolio of 3,500 medicines • Produces ~120Bn tablets per year across 70 manufacturing facilities • Active in 60 countries with 43,000 employees Ticker: TEVA 1 in 9 generic prescriptions in the US contains Teva products Price 52-Wk High Market Cap P/E1 EV/EBITDA1 $6.90 $23.97 $8.0 Bn 2.7x 7.7x 12020 Estimates Miller Value Partners | millervalue.com

  7. Liability Fears Typically Overdone Estimate $17Bn >$5Bn $2.5-$4.5Bn Actual $572M $335M ? J&J Chemours Teva Ticker: TEVA Price vs Opioid Headlines Teva settles Oklahoma opioid suit for $85M 18 UBS sees potential for larger-than-expected litigation expenses after Oklahoma Settlement Purdue files for Ch. 11 Protection to facilitate $10B settlement 16 Endo to pay $10M in Ohio settlement 14 12 10 8 Teva sued in expanded state price- fixing case 6 Teva hits 19YR low as lawsuit risks pile on Teva, Endo sink as opioid risk draws Morgan Stanley cut J&J ordered to pay $572M in Oklahoma Trial 4 2 0 Miller Value Partners | millervalue.com

  8. • Acquired Allergan’s generic business right before generic market collapse • Added $30B of debt to complete transaction Ticker: TEVA • Continuing to work through manufacturing optimization Spend Base Restructuring Progressing • 2019 will be trough year for earnings and FCF. Expected to grow at 5% CAGR 2019 (FY impact) $3Bn 2018 $1.5Bn+ • Generics business stabilizing and supported by new launches 2019E $17,203 M $4,614 M $2.39 $1,784 M 25.0% 2.1x 7.8x 2.9x 2020E $17,194 M $4,715 M $2.52 $2,668 M 37.4% 2.1x 7.7x 2.7x 2021E $17,276 M $4,936 M $2.66 $2,803 M 39.3% 2.1x 7.3x 2.6x Revenue EBITDA Adj. EPS Free Cash Flow Free Cash Flow Yield EV/Revs EV/EBITDA P/E Miller Value Partners | millervalue.com

  9. • Fast growing health and wellness company • Going after $17Bn US Weight-Loss Market • Direct selling model with no exposure to China • 30,600 active earning coaches and growing rapidly • Building global presence through measured expansion approach Ticker: MED Large and Growing Market Opportunity Miller Value Partners | millervalue.com 1CDC. 2Marketedata LLC. 3Euromonitor

  10. • Trading down 62% from 2018 highs • Dividend yield of 3% and growing at a 44% CAGR since inception • 30% short interest Ticker: MED Price 52-Wk High Market Cap P/E1 EV/EBITDA1 $97.02 $219.99 $1.1 BN 11.4x 7.4x Miller Value Partners | millervalue.com 12020 Estimates

  11. •Holds no debt and has $8/share in cash on balance sheet Ticker: MED •Management’s goal is to double the size of the business every 3-4 years •In early stages of an international expansion being funded by FCF 2019E $750 M $113 M $6.82 $77 M 6.4% 1.4x 9.3x 14.2x 2020E $923 M $141 M $8.51 $102 M 8.5% 1.2x 7.4x 11.4x 2021E $1,196 M $179 M $10.71 $125 M 10.4% 0.9x 5.8x 9.1x Revenue EBITDA Adj. EPS Free Cash Flow Free Cash Flow Yield EV/Revs EV/EBITDA P/E Miller Value Partners | millervalue.com

  12. • Biopharma company focused on non-opioid pain relief • Zilretta is the first and only extended-release, intra- articular therapy for patients with osteoarthritis- related knee pain • J-Code issued in beginning of 2019 gaining traction • Expanding pipeline Ticker: FLXN Osteoarthritis accounts for over $185Bn of annual healthcare expenditures, and affects ~30 million Americans with numbers expected to grow 15M # of Patients Treated for Knee-OA in 2017 Miller Value Partners | millervalue.com

  13. • Shares are off 50% since Zilretta launch in November 2017 despite huge sales growth, driven by acceleration in purchasing accounts and re-ordering rates Ticker: FLXN Price 52-Wk High Market Cap EV/Revs1 $13.36 $19.82 $0.5 BN 3.6x Miller Value Partners | millervalue.com 12020 Estimates

  14. •Could see peak sales close to $1Bn based on current size of injection market •Enough cash on the balance sheet to get to profitability, eliminating the need to come to market Ticker: FLXN 2019E $70 M 7.1x 2020E $139 M 3.6x 2021E $230 M 2.2x Revenue EV/Revs Zilretta Sales Growth Miller Value Partners | millervalue.com

  15. Return to Sorrento % Gain If Each Stock Returns to All-time & 52-Week Highs All-time High Return 52 Week High Return Current Price All-time High 52 Week High ADT TEVA MED FLXN Average Return $6.58 $14.00 113% $8.39 28% $6.90 $72.31 948% $23.97 247% $97.02 $260.98 169% $219.99 127% $13.36 $32.25 141% $19.82 48% 343% 112% Miller Value Partners | millervalue.com Return to Sorrento is a measure of the upside if a security returns to its 52-week high

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