MISSISSAUGA, Ontario, Feb. 24, 2011 /PRNewswire/ -- Valeant Pharmaceuticals International, Inc. (NYSE: VRX) (TSX: VRX) announces fourth quarter financial results for 2010.
Our results for the fourth quarter were ahead of our expectations, and reflect the successful integration work we have completed thus far, said J. Michael Pearson, chief executive officer. We are particularly pleased with the performance of our Canadian operations, especially as this business was principally impacted by the integration process. Our combined company has been building momentum since September 2010 and we believe we are on track to deliver strong 2011 financial results.
Revenue
Total reported revenue was $514.6 million in the fourth quarter of 2010 as compared to $241.1 million in the fourth quarter of 2009. Product sales were $488.7 million in the fourth quarter of 2010, as compared to $231.6 million in the year-ago quarter. These increases are primarily due to the acquisition of Valeant Pharmaceuticals International (Legacy Valeant) by Biovail Corporation (Legacy Biovail), which was completed in September 2010. In connection with the acquisition, Biovail was renamed Valeant Pharmaceuticals International, Inc. Results for the fourth quarter of 2009 only reflect Legacy Biovail revenues and do not include any revenues from Legacy Valeant. Pro forma organic growth for the combined company was approximately six percent for 2010.
Operating Expenses
The Companys cost of goods sold were $210.6 million in the fourth quarter of 2010 and represented 43% of product sales. This number in the fourth quarter of 2010 included a $53.3 million fair value adjustment to inventory and a $7.4 million amortization expense adjustment related to the acquisition of Legacy Valeant by Legacy Biovail. Excluding the adjustments, cost of goods for the fourth quarter of 2010 were 31% of product sales. This rise in cost of goods sold from historical levels is primarily due to contractual changes in the first quarter of 2010 that doubled the cost of goods for Zovirax, to greater than 45% of the products sales in 2010. As a result of the purchase of Zovirax rights in the U.S., which was completed on February 22, 2011, and the purchase of rights in Canada, which is expected to close by the end of the first quarter of 2011, total cost of goods sold is expected to be back to historical Legacy Valeant levels in the second half of 2011.
Selling, General and Administrative expenses were $127.8 million in the fourth quarter of 2010, which included a $16.4 million step-up in stock based compensation expenses related to the acquisition of Legacy Valeant. Research and Development expenses were $18.3 million in the fourth quarter of 2010 and reflect the termination of the majority of Legacy Biovails pipeline. These expenses reflect the achievement of approximately $50 million in cost synergies in the fourth quarter of 2010 from the acquisition.
Merger Related Costs & Expenses
We recorded restructuring and acquisition-related costs of $44.1 million in the quarter, virtually all of which arise from the acquisition and are primarily employee termination costs and research and development cancelation costs.
Net Loss and Cash Flow from Operating Activities
The Company reported a net loss of $31.1 million for the fourth quarter of 2010, or a loss of $0.10 per diluted share. On an adjusted Cash EPS basis, adjusted income was $167.6 million, or $0.51 per diluted share, as compared to guidance of $0.44 to $0.48 per diluted share.
GAAP cash flow from operating activities, which includes acquisition transaction fees, was negative $1.4 million in the quarter. Adjusted cash flow from operations was $209.1 million in the fourth quarter of 2010. Excluding working capital changes, adjusted cash flow from operations was $187.6 million, as compared to guidance of $170 to $190 million.
2011 Guidance
The Company is updating its previous Cash EPS guidance and is now targeting Cash EPS between $2.45 - $2.70 in 2011, up from prior guidance of $2.25 to $2.50. This guidance assumes the completion of the acquisitions of PharmaSwiss S.A. and the Canadian rights to Zovirax (U.S. acquisition closed February 22, 2011) in the next several months.
Share Repurchase Transaction
Valeant has agreed to repurchase common shares of the Companys common stock held by ValueAct Capital for $275 million, negotiated at a 5.77% discount over a 20-day trading day average, which was calculated in a similar manner to Legacy Valeants privately negotiated share repurchase completed in May 2010.
In connection with the pending $275 million share repurchase from ValueAct, the Company is evaluating debt financing alternatives.
Conference Call and Webcast Information
The Company will host a conference call and a live Internet webcast along with a slide presentation today at 10:00 a.m. ET (7:00 a.m. PT), February 24, 2011 to discuss its fourth quarter financial results for 2010. The dial-in number to participate on this call is (877) 295-5743, confirmation code 41335702. International callers should dial (973) 200-3961, confirmation code 41335702. A replay will be available approximately two hours following the conclusion of the conference call through March 3, 2011 and can be accessed by dialing (800) 642-1687, or (706) 645-9291, confirmation code 41335702. The live webcast of the conference call may be accessed through the investor relations section of the Companys corporate website at www.valeant.com.
About Valeant
Valeant Pharmaceuticals International, Inc. (NYSE/TSX:VRX) is a multinational specialty pharmaceutical company that develops and markets a broad range of pharmaceutical products primarily in the areas of neurology, dermatology 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 our performance, growth, achievement of long-term goals, anticipated Cash EPS and adjusted cash flows from operations for 2011, anticipated closing of pending acquisitions and share repurchases and financing alternatives. Forward-looking statements may be identified by the use of the words anticipates, expects, intends, plans, should, could, would, may, will, believes, estimates, potential, 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 or quarterly report filed with the Securities and Exchange Commission (SEC) and risks and uncertainties relating to the proposed merger, as detailed from time to time in Valeants filings with the SEC and the Canadian Securities Administrators (CSA), which factors are incorporated herein by reference. Readers are cautioned not to place undue reliance on any of these forward-looking statements. 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.
Note on Guidance
The guidance contained in this press release is only effective as of the date given, February 24, 2011, and will not be updated or confirmed until the Company publicly announces updated or affirmed guidance.
Non-GAAP Information
To supplement the financial measures prepared in accordance with generally accepted accounting principles (GAAP), the company uses non-GAAP financial measures that exclude certain items, such as amortization of inventory step-up, stock-based compensation step-up, restructuring and acquisition-related costs, acquired in-process research and development ("IPR&D"), legal settlements, amortization and other non-cash charges, amortization of deferred financing costs, debt discounts and ASC 470-20 (FSP APB 14-1) interest, loss on extinguishment of debt, and (gain) loss on investments, net, and adjusts tax expense to cash taxes. Management uses non-GAAP financial measures internally for strategic decision making, forecasting future results and evaluating current performance. By disclosing non-GAAP financial measures, management intends to provide investors with a meaningful, consistent comparison of the companys core operating results and trends for the periods presented. Non-GAAP financial measures are not prepared in accordance with GAAP; therefore, the information is not necessarily comparable to other companies and should be considered as a supplement to, not a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP.
Financial Tables follow.
Valeant Pharmaceuticals International, Inc. | Table 1 | |||||||||||
Condensed Consolidated Statement of Income (Loss) | ||||||||||||
For the Three and Twelve Months Ended December 31, 2010 and 2009 | ||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||
December 31, | December 31, | |||||||||||
(In thousands, except per share data) | 2010 | 2009 | % Change | 2010 | 2009 | % Change | ||||||
Product sales | $ 488,721 | $ 231,626 | NM | $ 1,133,371 | $ 789,026 | NM | ||||||
Alliance and royalty | 19,963 | 5,172 | NM | 35,109 | 15,418 | NM | ||||||
Service and other | 5,880 | 4,255 | NM | 12,757 | 15,986 | NM | ||||||
Total revenues | 514,564 | 241,053 | NM | 1,181,237 | 820,430 | NM | ||||||
Cost of goods sold | 210,648 | 58,743 | NM | 395,595 | 204,309 | NM | ||||||
Cost of services | 2,944 | 3,339 | NM | 10,155 | 13,849 | NM | ||||||
Selling, general and administrative ("SG&A") | 127,752 | 30,117 | NM | 276,546 | 167,633 | NM | ||||||
Research and development | 18,324 | 14,209 | NM | 68,311 | 47,581 | NM | ||||||
Acquired in-process research and development | 28,000 | 20,814 | NM | 89,245 | 59,354 | NM | ||||||
Legal settlements | 14,110 | 5,950 | NM | 52,610 | 6,191 | NM | ||||||
Restructuring and acquisition-related costs | 44,078 | 14,905 | NM | 179,102 | ||||||||
