Valeant Announces First Quarter 2017 Results And Raises Full Year Adjusted EBITDA Guidance Range

LAVAL, Quebec, May 9, 2017 /PRNewswire/ --

• First Quarter Financial Results
• Revenues of $2.109 Billion
• GAAP Net Income of $628 Million
• GAAP Cash Flow from Operations of $954 Million
• Adjusted EBITDA (non-GAAP) of $861 Million
• Adjusted Net Income (non-GAAP) of $273 Million
• Reduced Debt by $1.3 Billion in the quarter
• Raising 2017 Full Year Adjusted EBITDA Guidance Range

May 9, 2017 Valeant Pharmaceuticals International, Inc. (NYSE: VRX) (TSX: VRX) ("Valeant" or the "Company" or "we") today announced first quarter 2017 financial results.

"Our first quarter performance demonstrates that we are delivering on our commitments. We met our internal expectations, and we are continuing to make progress on our key initiatives, focus on the turnaround of our core businesses and improve internal operating efficiencies," said Joseph C. Papa, chairman and chief executive officer, Valeant. "Our divestiture efforts and cash flow generation have led to a $3.6 billion reduction in total debt to date, since the end of the first quarter of 2016, and our successful debt refinancing provides us with a more comfortable maturity profile."

First Quarter 2017 Highlights

Strengthening the Balance Sheet

• Delivered $954 million in cash flow from operations
• Completed more than $1.3 billion in asset sales, including the earlier than expected closure of the sale of the CeraVe, AcneFree and AMBI skincare brands
• On track to close the sale of Dendreon Pharmaceuticals for $819.9 million in cash proceeds in mid-year
• Reduced debt of $1.3 billion in the first quarter of 2017; reduced total debt to date by $3.6 billion since the end of the first quarter of 2016
• Successfully executed a debt refinancing that extended our debt maturity profile, increased our fixed vs. floating rate debt and increased covenant flexibility

Continued Focus on Core Business

• Obtained approval for SILIQ (brodalumab) from the U.S. Food and Drug Administration (FDA) and announced it will be the most competitively priced injectable biologic for moderate-to-severe plaque psoriasis when it launches later this year
• Advanced Bausch + Lomb business
• Received FDA 510(k) clearance for Vitesse
• Received FDA 510(k) clearance for Stellaris Elite
• Introduced Bausch + Lomb ULTRA® for Astigmatism contact lenses
• Expanded parameters for Bausch + Lomb ULTRA® for Presbyopia contact lenses
• Received FDA filing acceptance with Nicox S.A. for Vyzulta¹ (latanoprostene bunod) for glaucoma with a PDUFA action date of August 24, 2017
• Received FDA filing acceptance for Luminesse[1] (brimonidine tartrate ophthalmic solution, 0.025%) with a PDUFA action date of December 27, 2017
• Entered into an exclusive, worldwide licensing agreement for the EyeGate® II Delivery System and EGP-437 combination product candidate for the treatment of post-operative pain and inflammation in ocular surgery patients
• Stabilized average realized pricing within our dermatology business
• Expanded Salix sales force to reach untapped market potential in primary care
• Grew Bausch + Lomb Vision Care business in Australia, China and Japan, with notable 11% volume growth in China
• Announced new skincare product line collaboration with Suzan Obagi, M.D., and Nextcell Medical Company

First Quarter Revenue Performance

Total revenues were $2.109 billion for the first quarter of 2017, as compared to $2.372 billion in the first quarter of 2016, a decrease of $263 million, or 11%. The decline was primarily driven by lower volumes in our U.S. Diversified Products and Branded Rx segments as a result of the loss of exclusivity for a number of products and challenging market dynamics. Revenues were also negatively affected by foreign currencies, divestitures and discontinuations, and a modest decrease in average realized pricing. These decreases were partially offset by increased volumes in our Bausch + Lomb/International segment, mainly in Europe, the Middle East, South Africa, China and Australia.

Revenues by segment were as follows:

Bausch + Lomb/International Segment

The Bausch + Lomb/International segment revenues were $1.15 billion for the first quarter of 2017, as compared to $1.146 billion for first quarter of 2016, an increase of $4 million, or less than 1%. Growth was 4% on a constant currency basis. Gains were primarily driven by increases in our international volumes, particularly in Europe, the Middle East, South Africa, Asia and Australia, of $59 million, partially offset by declines in U.S. Bausch + Lomb volumes of $10 million. Average realized pricing across the segment increased $16 million mainly from the international business units. The U.S. Bausch + Lomb units saw average realized pricing increase by less than $1 million. Volume and pricing gains were partially offset by the unfavorable impact of foreign currencies of $41 million and the impact of divestitures and discontinuations of $21 million.

Branded Rx Segment

The Branded Rx segment revenues were $604 million for the first quarter of 2017, as compared to $665 million in the same period in 2016, a decrease of $61 million, or 9%. The decrease was primarily driven by decreased volumes in the dermatology and Salix business units due to the loss of exclusivity of certain product lines, continued generic competition and the impact of an increase in the prevalence of high deductible medical plans. The decrease in overall volume was partially offset by an increase in average realized prices across the segment. Pricing improved in the dermatology business, driven by lower customer subsidies and accommodations and higher wholesaler selling prices. In the Salix business, we benefitted from higher wholesale selling prices and from favorable chargebacks during the quarter. These increases were partially offset by higher managed care rebates particularly in the dermatology business. Segment revenues were also impacted by $7 million as a result of the divestiture of Ruconest.

U.S. Diversified Products Segment

The U.S. Diversified Products segment reported first quarter 2017 revenues of $355 million as compared to $561 million in the first quarter of 2016, reflecting a decline of $206 million, or 37%. The decrease was primarily driven by a $157 million decrease in volume and lower average realized prices of $47 million. The declines in both volume and average realized price were primarily driven by loss of exclusivity for products in the segment.

GAAP Operating Income

Operating income was $211 million for the first quarter of 2017 as compared to $66 million for the first quarter of 2016, an increase of $145 million. The decrease in operating expenses includes higher direct-to-consumer advertising expenses for Jublia® and Xifaxan® in the first quarter of 2016, which was partially offset by a higher run rate in general and administrative (G&A) expenses and asset impairments.

GAAP Net Income (Loss)

Net income for the three months ended March 31, 2017 was $628 million, as compared to a net loss of ($374) million for the same period in 2016, an increase of $1.002 billion. Net income in the first quarter of 2017 includes a one-time income tax benefit of $908 million from a non-cash internal restructuring that occurred during this time. In addition, net income included the loss on extinguishment of debt of $64 million associated with our debt refinancing and repurchases that occurred in the first quarter of 2017 and an increase in interest expense of $47 million, primarily from the increase in interest rates associated with amendments to our credit agreements in 2016.

Adjusted EBITDA(non-GAAP)

Adjusted EBITDA (non-GAAP) was $861 million for the first quarter of 2017, as compared to $1.008 billion for the first quarter of 2016, a decrease of $147 million, primarily due to the loss of exclusivity for products in the U.S. Diversified Products segment.

GAAP Earnings Per Share (EPS) - Diluted

GAAP EPS - Diluted for the first quarter of 2017 came in at $1.79 as compared to $(1.08) in the first quarter of 2016.

GAAP Cash Flow from Operations

Cash provided by operating activities was $954 million for the first quarter of 2017, attributable to changes in our working capital and cash we received from our fulfilment arrangement with Walgreens.

2017 Guidance

Valeant has raised guidance for 2017, as follows:

• 2017 Full Year Adjusted EBITDA (non-GAAP) in the range of $3.60 - $3.75 billion from $3.55 - $3.70 billion

This guidance reflects the impact of the sale of the CeraVe, AcneFree and AMBI skincare brands. This guidance does not reflect the impact of the sale of the Dendreon business, which is expected to close mid-year.

Other than with respect to GAAP Revenues, the Company only provides guidance on a non-GAAP basis. The Company does not provide a reconciliation of forward-looking Adjusted EBITDA (non-GAAP) to GAAP net income (loss), due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation. In periods where significant acquisitions or divestitures are not expected, the Company believes it might have a basis for forecasting the GAAP equivalent for certain costs, such as amortization, that would otherwise be treated as non-GAAP to calculate projected GAAP net income (loss). However, because other deductions (such as restructuring, gain or loss on extinguishment of debt and litigation and other matters) used to calculate projected net income (loss) vary dramatically based on actual events, the Company is not able to forecast on a GAAP basis with reasonable certainty all deductions needed in order to provide a GAAP calculation of projected net income (loss) at this time. The amounts of these deductions may be material and, therefore, could result in projected GAAP net income (loss) being materially less than projected Adjusted EBITDA (non-GAAP). As previously discussed, the Company is no longer providing guidance with respect to Adjusted Net Income or Adjusted EPS.

Reducing and Refinancing Debt

In the first quarter of 2017, we successfully executed a debt refinancing that extended our debt maturity profile, increased our fixed vs. floating rate debt and increased flexibility under our debt covenants. During the quarter, the Company reduced its outstanding debt by $1.3 billion.

These transactions and debt payments have had the effect of lowering our cash requirements for principal debt payments over the remainder of 2017 through 2020 by an aggregate $6.32 billion, providing us with a much improved liquidity profile during this timeframe and greater flexibility to execute our business plans. In April 2017, we announced that we reduced our term loans under our Senior Secured Credit Facilities by approximately an additional $220 million.

Valeant's corporate credit ratings remained unchanged during the first quarter of 2017. The Company's availability under the Revolving Credit Facility was approximately $925 million at March 31, 2017.

Other Matters

• The Company's cash and cash equivalents were $1.210 billion at March 31, 2017.
• Richard DeSchutter, prior chairman and chief executive officer of DuPont Pharmaceuticals Company, joined the Valeant Board of Directors.

Conference Call Details

About Valeant

Valeant Pharmaceuticals International, Inc. (NYSE/TSX:VRX) is a multinational specialty pharmaceutical company that develops, manufactures and  markets a broad range of pharmaceutical products primarily in the areas of dermatology, gastrointestinal disorders, eye health, neurology and branded generics. More information about Valeant can be found at www.valeant.com.

Forward-looking Statements

This press release may contain forward-looking statements, including, but not limited to, statements regarding Valeant's future prospects and performance (including the Company's revised guidance with respect to 2017 Full Year Adjusted EBITDA (non-GAAP) (as discussed and defined below)), the expected impact of the Company's debt refinancing activities, the anticipated timing of the closing of the divestiture of Dendreon Pharmaceuticals and the Company's plans and expectations for 2017. Forward-looking statements may generally be identified by the use of the words "anticipates," "expects," "intends," "plans," "should," "could," "would," "may," "will," "believes," "estimates," "potential," "target," or "continue" and variations or similar expressions. These statements are based upon the current expectations and beliefs of management and are subject to certain risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties include, but are not limited to, risks and uncertainties discussed in the Company's most recent annual and quarterly reports and detailed from time to time in Valeant's other filings with the Securities and Exchange Commission and the Canadian Securities Administrators, which factors are incorporated herein by reference. In addition, certain material factors and assumptions are applied in making these forward-looking statements, including the Company's 2017 full year guidance, and information regarding certain of these material factors and assumptions may also be found in such filings. Readers are cautioned not to place undue reliance on any of these forward-looking statements. These forward-looking statements speak only as of the date hereof. Valeant undertakes no obligation to update any of these forward-looking statements to reflect events or circumstances after the date of this press release or to reflect actual outcomes, unless required by law.

Non-GAAP Information

Recent Evaluation of Financial Performance Measures

Recently, the Company's new management team undertook an evaluation of how it would measure the financial performance of the Company going forward. In evaluating its financial performance measures, the Company considered its recent changes to its strategy (which included a transition away from growth by acquisition with a greater focus on R&D activity, strengthening of the balance sheet through the paydown of debt and rationalization of the product portfolio through divestitures of non-core assets) and sought to identify performance measures that best reflect the Company's current business operations, strategy and goals. As a result of that evaluation, new management identified the following primary financial performance measures for the Company: GAAP Revenues (measure for both guidance and actual results), GAAP Net Income (measure for actual results), Adjusted EBITDA (non-GAAP) (measure for both guidance and actual results) and GAAP Cash Flow from Operations (measure for actual results). These measures were selected as the Company believes that these measures most appropriately reflect how the Company measures the business internally and sets operational goals and incentives. For example, the Company believes that Adjusted EBITDA (non-GAAP) focuses management on the Company's underlying operational results and business performance, while GAAP Revenue focuses management on the overall growth of the business.

In addition, in connection with this evaluation of financial performance measures, the Company assessed the methodology with which it was calculating these non-GAAP measures and made updates where it deemed appropriate to better reflect the underlying business. For example, commencing with the first quarter of 2017, Adjusted EBITDA (non-GAAP) no longer includes adjustments for Foreign exchange gain/loss arising from intercompany transactions.

These new non-GAAP measures, and the new methodologies used to calculate these non-GAAP measures, are being used on a going forward basis, commencing with 2017 guidance and actual results for the first quarter of 2017. For the purposes of the Company's actual results for the first quarter of 2016, the Company has calculated and presented the non-GAAP measures using the historic methodologies in place as of the applicable historic dates; however, the Company has also provided a reconciliation that calculates the non-GAAP measures using the new methodologies, to allow investors and readers to evaluate the non-GAAP measures (such as Adjusted EBITDA) on the same basis for the periods presented.

Use of Non-GAAP Generally

To supplement the financial measures prepared in accordance with U.S. generally accepted accounting principles (GAAP), the Company uses certain non-GAAP financial measures including (i) Adjusted EBITDA (non-GAAP) and (ii) Adjusted Net Income (non-GAAP). These measures do not have any standardized meaning under GAAP and other companies may use similarly titled non-GAAP financial measures that are calculated differently from the way we calculate such measures.  Accordingly, our non-GAAP financial measures may not be comparable to similar non-GAAP measures.  We caution investors not to place undue reliance on such non-GAAP measures, but instead to consider them with the most directly comparable GAAP measures.  Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation.  They should be considered as a supplement to, not a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP.

The reconciliations of these historic non-GAAP measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are shown in the tables below.  However, for guidance purposes, the Company does not provide reconciliations of projected Adjusted EBITDA (non-GAAP) to projected GAAP net income (loss), due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliations. In periods where significant acquisitions or divestitures are not expected, the Company believes it might have a basis for forecasting the GAAP equivalent for certain costs, such as amortization, that would otherwise be treated as a non-GAAP adjustment to calculate projected GAAP net income (loss). 

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