Valeant Pharmaceuticals International Reports 2011 First Quarter Financial Results

MISSISSAUGA, Ontario, May 9, 2011 /PRNewswire/ --

• 2011 First Quarter Total Revenue $565 million, including $36 million related to out-license of Cloderm
• Pro forma organic growth for the combined company, excluding the impact of foreign exchange and acquisitions, was approximately 7%
  • Excluding impact from Diastat and Efudex, pro forma organic growth for the combined company was approximately 11%
• 2011 First Quarter GAAP EPS $0.02; Cash EPS $0.62
  • Excluding impact from Cloderm out-licensing, Cash EPS was $0.56
• 2011 First Quarter GAAP Cash Flow from Operations was $86 million; Adjusted Cash Flow from Operations was $204 million
• 2011 Guidance increased to $2.65 - $2.90 Cash EPS

Valeant Pharmaceuticals International, Inc. (NYSE: VRX) (TSX: VRX) announces first quarter financial results for 2011.

“Our performance in the first quarter is a strong start to what I believe will be another successful year for Valeant,” said J. Michael Pearson, chairman and chief executive officer. “Our specialty businesses performed well and our branded generic operations, in particular Central Europe, exceeded our expectations this quarter. This strong performance is a testament to our diversified business model that gives us the ability to pursue acquisition opportunities, while continuing to deliver strong operating results.”

Revenue

Total revenue was $565.0 million in the first quarter of 2011 as compared to $219.6 million in the first quarter of 2010. Included in total revenue was $36.0 million of alliance and royalty revenue related to the out-license of product rights for Cloderm, a mid-potency steroid with an annual revenue run rate of approximately $7 million, that was completed on March 31, 2011. Product sales were $500.4 million in the first quarter of 2011, as compared to $212.0 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 first quarter of 2010 only reflect Legacy Biovail revenues and do not include any revenues from Legacy Valeant.

Pro forma revenue growth for the combined company (combined Legacy Biovail and Legacy Valeant product sales and royalties) was approximately 21% for the first quarter of 2011. Pro forma organic revenue growth, excluding the impact of foreign exchange and acquisitions, for the combined company was approximately 7% for the first quarter of 2011. Excluding the genericization impact from Diastat and Efudex, pro forma organic growth for the combined company was approximately 11%. Wellbutrin and Zovirax, Valeant’s largest products, delivered 2% and 38% growth in the first quarter of 2011, respectively.

Operating Expenses

The Company’s cost of goods sold was $169.3 million in the first quarter of 2011 and represented 34% of product sales. This number in the first quarter of 2011 included a $29.9 million fair value adjustment to inventory and a $2.0 million amortization expense adjustment related to the acquisition of Legacy Valeant by Legacy Biovail. Excluding the adjustments, cost of goods for the first quarter of 2011 were 27% of product sales.

Selling, General and Administrative expenses were $139.5 million in the first quarter of 2011, which includes a $22.9 million step-up in stock based compensation expenses related to the acquisition of Legacy Valeant. Excluding the step-up in stock based compensation, SG&A was approximately 21% of revenue. Research and Development expenses were $13.7 million in the first quarter of 2011, or approximately 3% of revenue.

Net Income and Cash Flow from Operating Activities

The Company reported net income of $6.5 million for the first quarter of 2011, or $0.02 per diluted share. On an adjusted Cash EPS basis, adjusted income was $205.1 million, or $0.62 per diluted share. Excluding the purchase price adjustment on Cloderm as a result of the merger between Legacy Biovail and Legacy Valeant, adjusted income was $186.3 million, or $0.56 per diluted share.

GAAP cash flow from operating activities was $86.3 million in the first quarter of 2011, and adjusted cash flow from operations was $203.6 million in the first quarter of 2011.

Securities Repurchase Program

Since December 31st, 2010, under Valeant’s securities repurchase program, the company repurchased an additional $63.8 million principal amount of the 5.375% senior convertible notes due 2014, for an aggregate purchase price of $181.3 million, bringing the aggregate repurchases to $190 million of the $350 million face value of the 5.375% convertible notes.

As previously announced, Valeant repurchased 7.4 million common shares of the Company’s common stock held by ValueAct Capital in March 2011 for approximately $275 million. In addition on May 6, 2011, the Company entered into an agreement to purchase approximately 4.5 million of the Company’s common shares from ValueAct for $224.9 million. This purchase is expected to close in mid-May, in advance of the redemption of the 4.0% Convertible Notes, which we expect to settle fully in common shares upon conversion of the notes.

2011 Guidance

The Company is updating its previous Cash EPS guidance and is now targeting Cash EPS of $2.65 to $2.90 in 2011, up from prior guidance of $2.45 to $2.70.

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), May 9, 2011 to discuss its first quarter financial results for 2011. The dial-in number to participate on this call is (877) 295-5743, confirmation code 63195016. International callers should dial (973) 200-3961, confirmation code 63195016. A replay will be available approximately two hours following the conclusion of the conference call through May 16, 2011 and can be accessed by dialing (800) 642-1687, or (706) 645-9291, confirmation code 63195016. The live webcast of the conference call may be accessed through the investor relations section of the Company’s 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, acquisitions, the closing of the repurchase from ValueAct, the redemption and settlement of our 4% convertible notes, and anticipated Cash EPS for 2011. 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 Valeant’s 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, May 9, 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, amortization of alliance product assets and PP&E step up, stock-based compensation step-up, restructuring and acquisition-related costs, acquired in-process research and development (“IPR&D”), legal settlements, the impact of currency fluctuations, acquisitions, 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 Company’s 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.

Contact Information:
Laurie W. Little
949-461-6002
laurie.little@valeant.com

Financial Tables follow.