MONTREAL, May 3, 2012 /PRNewswire/ --
- 2012 First Quarter Total Revenue $856 million, including $66 million related to divestiture of certain dermatology assets
- Pro forma organic growth for the combined company, adjusting for the impact of foreign exchange and acquisitions, was approximately 11%
- 2012 First Quarter GAAP EPS Loss of $0.04; Cash EPS $1.14
- Excluding impact from dermatology divestiture, Cash EPS was $0.99
- 2012 First Quarter GAAP Cash Flow from Operations was $167 million; Adjusted Cash Flow from Operations was $322 million
- 2012 Guidance increased to $4.45 - $4.70 Cash EPS
Valeant Pharmaceuticals International, Inc. (NYSE: VRX) (TSX: VRX) announces first quarter financial results for 2012.
“We are pleased to see a solid start to what we expect will be another strong year for Valeant,” said J. Michael Pearson, chairman and chief executive officer. “With our current over performance in the base business, the achievement of higher synergies from our acquisitions completed in 2011 and the addition of the acquisitions consummated in 2012, we are pleased to significantly increase our Cash EPS guidance for 2012 to $4.45 - $4.70.”
Business Performance
Valeant’s business continued to perform well in the first quarter of 2012 and - with the exception of the U.S. Neurology and Other segment - each business delivered strong growth, both in total and organic. Total revenue was $856.1 million in the first quarter of 2012 as compared to $565.0 million in the first quarter of 2011, an increase of 52%. Product sales were $768.4 million in the first quarter of 2012, as compared to $500.4 million in the year-ago quarter, an increase of 54% over the prior year. Pro forma organic revenue growth, adjusting for the impact of foreign exchange and acquisitions, for the Company was approximately 11% for the first quarter of 2012.
Overall, Valeant’s base business continued to deliver strong growth while the acquisitions started to contribute nicely to the operations. Particularly positive were the Emerging Market contributions that include our consolidated operations in Europe, which still delivered 10% organic growth in a tough government reimbursement environment, Latin America, which grew 19% organically over the prior year, and our new South East Asia/South Africa operation, which increased 9% over the prior year.
Valeant’s U.S Dermatology operations performed well despite integrating three separate businesses into one, with several products contributing to the growth, most notably Zovirax, Atralin, Acanya and CeraVe.
The Canadian and Australian segment also delivered strong growth this quarter. This primarily reflects a favorable comparison to the prior year, but was also aided by the launch of two new products into the Canadian market - Sublinox and Lodalis. These launches, coupled with a number of smaller product introductions, will be important drivers to offset the generic erosion in Cesamet sales that the Company expects to occur in 2012.
Finally, the U.S. Neurology and Other portfolio continued to decline overall as expected, with Wellbutrin XL continuing its decline, and both Cardizem CD and Ultram ER losing patent protection after the fourth quarter of 2011. Revenues from the remaining core U.S. Neurology and Other products were $135.9 million, up 6% compared to the first quarter of 2011.
Included in total revenue for the first quarter of 2012 was $66.3 million of alliance and royalty revenue related to the divestiture of 1% clindamycin and 5% benzoyl peroxide gel (IDP-111), a generic version of Benzaclin, and 5% fluorouracil cream, (5-FU), an authorized generic of Efudex, as part of a consent order from the Federal Trade Commission (FTC) in regards to the acquisition of the U.S. assets of Dermik, a dermatology unit of Sanofi, while the first quarter of 2011 included $36.0 million related to the out-license of product rights for Cloderm. Excluding the two divestitures, total revenue was $789.8 million in the first quarter of 2012 as compared to $529.0 million in the first quarter of 2011.
Business Development
Thus far in 2012, Valeant entered into agreements for eleven transactions including
- Latin America - Probiotica, a leader in sports nutrition and food supplements and a 19.9% minority equity investment in Pele Nova Biotecnologia S.A. a research company focused on tissue regeneration, both in Brazil, and Atlantis Pharma, a branded generics pharmaceutical company located in Mexico;
- U.S. - Eyetech Inc., an ophthalmic biotechnology company dedicated to the treatment of sight-threatening diseases of the retina, Pedinol Pharmacal, Inc., a podiatry-focused, specialty pharmaceutical company, and AcneFree along with and certain assets from University Medical Pharmaceuticals, a specialty pharmaceutical company focused on skincare, which is expected to close by mid-year, all located in the U.S.;
- Europe - Certain assets in the Russian and CIS countries from Gerot Lannach, a branded generics pharmaceutical company based in Austria and Natur Produkt International, JSC, a specialty pharmaceutical company in Russia, which is not expected to close until mid-year 2012.
Total consideration for these transactions is approximately $600 million.
Financial Performance
The Company reported a net loss of $12.9 million for the first quarter of 2012, or $0.04 per diluted share. On an adjusted Cash EPS basis, adjusted income was $360.3 million, or $1.14 per diluted share. Excluding the divestiture of the dermatology products, adjusted income was $311.8 million, or $0.99 per diluted share.
GAAP cash flow from operations was $167.2 million in the first quarter of 2012, and adjusted cash flow from operations was $321.6 million in the first quarter of 2012, which includes proceeds of $66.3 million.
Valeant’s foreign operations having a functional currency other than the U.S. dollar are translated into U.S. dollars at the exchange rate prevailing at the balance sheet date, and at the average exchange rate for the reporting period for revenue and expense accounts. Due to the strengthening of the U.S. dollar in the first quarter of 2012, product sales were negatively impacted by approximately $20 million as compared to prior year rates.
In connection with the acquisition of iNova, Valeant realized approximately $30 million in a foreign exchange gain in the first quarter of 2012 on an intercompany loan, which is included in the P&L as part of other income (expense), net including translation and exchange.
The Company’s cost of goods sold (COGS) was $238.8 million in the first quarter of 2012 and represented 31% of product sales. This number included a $33.0 million fair value adjustment to inventory and a $3.6 million amortization expense adjustment related to acquisitions. Excluding the adjustments, cost of goods for the first quarter of 2012 were 26% of product sales. COGS had several negative trends in the quarter items, including increased contract manufacturing in Canada, product mix in the U.S. and Europe, unfavorable foreign exchange rates in Europe and delayed plant consolidations that contributed to a higher than expected run rate expenses in the first quarter, but the Company continues to expect COGS, as a percentage of product sales, to improve throughout 2012.
Selling, General and Administrative expenses were $177.3 million in the first quarter of 2012, which includes a $10.3 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 19% of revenue. Research and Development expenses were $22.0 million in the first quarter of 2011, or approximately 3% of revenue, a percentage the Company is expecting to maintain for the rest of 2012.
2012 Guidance
The Company is updating its previous Cash EPS guidance and is now targeting Cash EPS of $4.45 to $4.70 in 2012, up from prior guidance of $3.95 to $4.20, total revenue in the range of $3.4 to $3.6 billion and adjusted cash flow from operations of greater than $1.4 billion.
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 3, 2012 to discuss its first quarter financial results for 2012. The dial-in number to participate on this call is (877) 876-8393, confirmation code 70937718. International callers should dial (973) 200-3961, confirmation code 70937718. A replay will be available approximately two hours following the conclusion of the conference call through May 10, 2012 and can be accessed by dialing (855) 859-2056, or (404) 537-3406, confirmation code 70937718. 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.
