Valeant Pharmaceuticals Reports 2011 Third Quarter Financial Results

November 03, 2011

MISSISSAUGA, Ontario, Nov. 3, 2011 /PRNewswire via COMTEX/ --

  • 2011 Third Quarter Total Revenue $601 million
    • Total pro forma revenue growth for the combined company was approximately 40%
  • Pro forma organic growth, excluding the impact of foreign exchange and acquired sales, was 15%,
    • This organic growth rate has not been adjusted for the effect of the wholesaler inventory drawdown in the U.S. which would have had a positive impact
    • YTD pro forma organic growth was over 8%
  • 2011 Third Quarter GAAP EPS $0.13; Cash EPS $0.66
  • 2011 Third Quarter GAAP Cash Flow from Operations was $174 million; Adjusted Cash Flow from Operations was $208 million
  • 2011 Cash EPS Guidance updated to $2.80 - $2.95, which does not include the potential $45 million milestone for the U.S. launch of Potiga (now 1Q 2012 Event)
  • Board Approves New $1.5 Billion Securities Repurchase Program

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

"Our operations delivered strong double-digit organic revenue growth in the third quarter and we remain on track to deliver 8% plus pro forma organic growth for the year," stated J. Michael Pearson, chairman and chief executive officer. "We are especially pleased with the performance of our U.S. Dermatology division, which is outpacing our expectations, as well as both of our branded generic divisions that continue to outperform their respective markets. With strong third quarter performance, we are raising our fourth quarter Cash EPS guidance to $0.80 to $0.95, which does not include the potential milestone of $45 million from GlaxoSmithKline that is now scheduled to occur in the first quarter of 2012."

Revenue

Total revenue was $600.6 million in the third quarter of 2011 as compared to $208.3 million in the third quarter of 2010. Product sales were $570.4 million in the third quarter of 2011, as compared to $201.4 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 on September 27, 2010. In connection with the acquisition, Biovail was renamed Valeant Pharmaceuticals International, Inc. GAAP results for the third quarter of 2010 only reflect Legacy Biovail revenues and do not include any revenues from Legacy Valeant.

Total pro forma revenue growth for the combined company (Legacy Biovail and Legacy Valeant) was approximately 40% for the third quarter of 2011. Pro forma organic revenue growth for the combined company, excluding the impact of foreign exchange and acquired sales, was 15% for the third quarter of 2011. No adjustment as made for the third quarter wholesaler inventory impact.

Operating Expenses and Gain on Investments

The Company's cost of goods sold, excluding amortization of intangibles, was $162.6 million in the third quarter of 2011 and represented 28% of product sales. This number in the third quarter of 2011 included $5.0 million in acquisition step-up and amortization primarily related to the acquisition of Sanitas AB.

Selling, General and Administrative expenses were $134.8 million in the third quarter of 2011, which includes a $11.1 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 product sales and service and other revenue. Research and Development expenses were $17.5 million in the third quarter of 2011, or approximately 3% of revenue.

Net Income and Cash Flow from Operations

The Company reported net income of $40.9 million for the third quarter of 2011, or $0.13 per diluted share. On a Cash EPS basis, income was $212.1 million, or $0.66 per diluted share.

GAAP cash flow from operations was $174 million in the third quarter of 2011, and adjusted cash flow from operations was $208 million in the third quarter of 2011.

Securities Repurchase Program

Since June 30, 2011, under the Company's existing securities repurchase program, which expires on November 7, 2011, the Company repurchased 1.8 million shares and $95 million principal amount of the 5.375% senior convertible notes due 2014, for an aggregate purchase price of $275 million, bringing the aggregate repurchases to $328 million of the $350 million face value of the 5.375% convertible notes.

The Company's Board of Directors approved a new $1.5 billion securities repurchase program effective November 8, 2011.

2011 Guidance

The Company is revising its previous Cash EPS guidance to $2.80 to $2.95 in 2011, as compared to prior guidance of $2.70 to $3.00. The prior guidance included a potential $45 million milestone payment from GlaxoSmithKline in the fourth quarter for the U.S. launch of Potiga. The launch and subsequent milestone payment is now expected to occur in the first quarter of 2012.

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), November 3, 2011 to discuss its third quarter financial results for 2011. The dial-in number to participate on this call is (877) 295-5743, confirmation code 18668216. International callers should dial (973) 200-3961, confirmation code 18668216. A replay will be available approximately two hours following the conclusion of the conference call through November 10, 2011 and can be accessed by dialing (855) 859-2056, or (404) 537-3406, confirmation code 18668216. 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 expected growth and Cash EPS guidance for 2011 and our securities repurchase program. 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, factors that could affect our operating results, market conditions and the price of our securities, 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 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, November 3, 2011, and will not be updated or affirmed 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 such as Cash EPS measures, organic growth, and adjusted cash flow from operations. Non-GAAP financial measures exclude certain items, such as amortization of inventory step-up, amortization of alliance product assets & property, plant and equipment step up, stock-based compensation step-up, contingent consideration fair value adjustments, restructuring, integration and acquisition-related costs, acquired in-process research and development ("IPR&D"), legal settlements outside the ordinary course of business, 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, (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

(Logo: http://photos.prnewswire.com/prnh/20101025/LA87217LOGO)

Financial Tables follow.

Valeant Pharmaceuticals International, Inc.












Table 1

Condensed Consolidated Statement of Income













For the Three and Nine Months Ended September 30, 2011 and 2010


















Three Months Ended




Nine Months Ended





September 30,




September 30,



(In thousands, except per share data)


2011


2010

(a)

% Change


2011


2010

(a)

% Change














Product sales


$ 570,423


$ 201,372


NM


$ 1,600,879


$ 644,650


NM

Alliance and royalty


22,471


6,150


NM


146,873


15,146


NM

Service and other


7,690


745


NM


27,245


6,877


NM

Total revenues


600,584


208,267


NM


1,774,997


666,673


NM














Cost of goods sold (exclusive amortization of intangible assets shown separately below)


162,568


62,142


NM


501,767


184,947


NM

Cost of services


3,078


532


NM


9,683


7,211


NM

Cost of alliances


-


-


NM


30,735


-


NM

Selling, general and administrative ("SG&A")


134,801


60,187


NM


423,964


148,794


NM

Research and development


17,476


13,766


NM


48,910


49,987


NM

Contingent consideration fair value adjustments


6,904


-


NM


9,042


-


NM

Acquired in-process research and development


-


-


NM


4,000


61,245


NM

Legal settlements


-


38,500


NM


2,400


38,500


NM

Restructuring and acquisition-related costs


25,372


123,953


NM


73,913


135,024


NM

Amortization of intangible assets


138,027


35,499


NM


365,016


102,098


NM



488,226


334,579




1,469,430


727,806



Operating income (loss)


112,358


(126,312)




305,567


(61,133)
















Interest expense, net


(86,452)


(11,092)




(236,387)


(30,449)



Loss on extinguishment of debt


(10,315)


-




(33,325)


-



Gain (loss) on investments, net


(140)


(5,005)




22,787


(5,552)



Other income (expense), net including translation and exchange


(3,590)


(5,473)




64


(5,429)
















Income (loss) before (recovery) provision for income taxes


11,861


(147,882)




58,706


(102,563)
















(Recovery of) provision for income taxes


(29,001)


60,000




(44,998)


74,500
















Net income (loss)


$ 40,862


$ (207,882)




$ 103,704


$ (177,063)
















Earnings per share:


























Basic:













Net income (loss)


$ 0.13


$ (1.27)




$ 0.34


$ (1.11)



Shares used in per share computation


302,702


163,295




303,285


160,082
















Diluted:













Net income (loss)


$ 0.13


$ (1.27)




$ 0.32


$ (1.11)



Shares used in per share computation


322,783


163,295




329,010


160,082
















(a) Prior year amounts have been modified to conform to the 2011 disclosure.







Valeant Pharmaceuticals International, Inc.




Table 2


Reconciliation of GAAP EPS to Adjusted Non-GAAP (Cash) EPS



For the Three and Nine Months Ended September 30, 2011 and 2010


























Three Months Ended


Nine Months Ended




September 30,


September 30,


(In thousands, except per share data)


2011


2010


2011


2010

(a)











Net income (loss)


$ 40,862


$ (207,882)


$ 103,704


$ (177,063)












Non-GAAP adjustments (b)(c):










Inventory step-up (d)


2,768


-


48,939


-


Alliance product assets & pp&e step-up (e)


138


-


19,478


-


Stock-based compensation step-up (f)


11,149


-


50,556


-


Contingent consideration fair value adjustment


6,904


-


9,042


-


Restructuring, integration and acquisition-related costs (g)


25,372


123,953


73,913


135,024


Acquired in-process research and development (IPR&D)


-


-


4,000


61,245


Legal settlements


-


38,500


2,400


38,500


Amortization and other non-cash charges


140,500


38,147


371,897


110,225




186,831


200,600


580,225


344,994


Amortization of deferred financing costs, debt discounts and ASC 470-20 (FSP APB 14-1) interest


12,686


15,340


19,034


23,622


Loss on extinguishment of debt


10,315


-


33,325


-


(Gain) loss on investments, net


-


5,005


(1,769)


5,552


Tax


(38,601)


59,500


(77,098)


64,500


Total adjustments


171,231


280,445


553,717


438,668












Adjusted income


$ 212,093


$ 72,563


$ 657,421


$ 261,605












GAAP earnings per share - diluted


$ 0.13


$ (1.27)


$ 0.32


$ (1.11)












Adjusted Non-GAAP (Cash) earnings per share - diluted


$ 0.66


$ 0.42


$ 2.00


$ 1.58












Shares used in diluted per share calculation - Adjusted Non-GAAP (Cash) earnings per share


322,783


173,247


329,010


165,145





















(a) Prior year non-GAAP adjustments have been modified to conform to the 2011 disclosure.


(b) 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 & pp&e step up, stock-based compensation step-up, contingent consideration fair value adjustments, restructuring, integration and acquisition-related costs, acquired in-process research and development ("IPR&D"), legal settlements outside the ordinary course of business, 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, (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.


(c) This table includes Adjusted Non-GAAP (Cash) Earnings Per Share, which is a non-GAAP financial measure that represents earnings per share, excluding amortization of inventory step-up, alliance product assets & pp&e step up, stock-based compensation step-up, contingent consideration fair value adjustments, restructuring, integration and acquisition-related costs, acquired in-process research and development ("IPR&D"), legal settlements outside the ordinary course of business, 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, (gain) loss on investments, net, and adjusts tax expense to cash taxes.


(d) ASC 805, accounting for business combinations requires an inventory fair value step-up. The impact of the amortization of this step-up is included in cost of goods sold. For the three and nine months ended September 30, 2011 the total impact is $2.8 million and $48.9 million, respectively. For the three and nine months ended September 30, 2011 a total of $0.4 million and $27.7 million related to the merger with Valeant Pharmaceutical International, $0.0 million and $18.8 million related to the acquisition of Pharma Swiss SA on March 10, 2011, and $2.4 million and $2.4 million related to the acquisition of Sanitas on August 19th, 2011, respectively.


(e) Alliance product assets & pp&e step-up represents the step up to fair market value from Legacy Valeant's original cost resulting from the merger of Legacy Valeant into Legacy Biovail. The impact of the amortization of this step-up is included in cost of alliance and royalty & SG&A. For the three and nine months ended September 30, 2011 the total impact is $0.1 million and $19.5 million, respectively.


(f) Total stock-based compensation for the three and nine months ended September 30, 2011 was $17.1 million and $72.4 million, of which $11.1 million and $50.6 million reflect the amortization of the fair value step-up increment resulting from the merger, respectively.


(g) Restructuring, integration and acquisition-related costs for the three and nine months ended September 30, 2011 represent costs related to the merger of Legacy Valeant and Legacy Biovail, the acquisition of Pharma Swiss SA, and the acquisition of Sanitas. These include $0.9 million and $18.0 million related to facility related costs, $6.7 million and $16.9 million related to contract cancellation fees, consulting, legal and other, $5.0 million and $14.3 million related to employee severance costs, $(0.7) million and $2.9 million related to (decreases)/increases in deferred stock unit values related to directors retired as a result of the merger between Legacy Valeant and Legacy Biovail, $9.5 million and $12.9 million related to acquisition costs, $1.1 million and $4.4 million related to manufacturing integration, and $2.9 million and $4.5 million related to wind down costs, respectively.

Valeant Pharmaceuticals International, Inc.










Table 2 (a)

Reconciliation of Non-GAAP Adjustments












For the Three Months Ended September 30, 2011 and 2010



















































Three Months Ended



September 30, 2011



Inventory step-

up


Alliance

product

assets &

pp&e step-up


Stock-based

compensation

step-up


Contingent

consideration

fair value

adjustment


Restructuring,

integration and

acquisition-

related costs


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


Tax

Product Sales


- -


- -


- -


- -


- -


268


- -


- -


- -

Cost of goods sold (exclusive amortization of intangible assets shown separately below)


2,768


138


209


- -


- -


2,205


- -


- -


- -

Selling, general and administrative ("SG&A")


- -


- -


10,579


- -


- -


- -


- -


- -


- -

Research and development


- -


- -


361


- -


- -


- -


- -


- -


- -

Contingent consideration fair value adjustments


- -


- -


- -


6,904


- -


- -


- -


- -


- -

Restructuring and acquisition-related costs


- -


- -


- -


- -


25,372


- -


- -


- -


- -

Amortization of intangible assets


- -


- -


- -


- -


- -


138,027


- -


- -


- -

Interest expense, net


- -


- -


- -


- -


- -


- -


12,686


- -


- -

Loss on extinguishment of debt


- -


- -


- -


- -


- -


- -


- -


10,315


- -

Tax


- -


- -


- -


- -


- -


- -


- -


- -


(38,601)

Total Adjustments


$ 2,768


$ 138


$ 11,149


$ 6,904


$ 25,372


$ 140,500


$ 12,686


$ 10,315


$ (38,601)























































Three Months Ended



September 30, 2010




Restructuring,

integration and

acquisition-

related costs


Legal

settlements


Amortization

and other non-

cash charges


Amortization of

deferred

financing costs,

debt discounts

and ASC 470-20

(FSP APB 14-1)

interest


Gain (loss) on

investments,

net


Tax


Product Sales


- -


- -


268


- -


- -


- -


Cost of goods sold (exclusive amortization of intangible assets shown separately below)


- -


- -


2,118


- -


- -


- -


Legal settlements


- -


38,500


- -


- -


- -


- -


Restructuring and acquisition-related costs


123,953


- -


- -


- -


- -


- -


Amortization of intangible assets


- -


- -


35,499


- -


- -


- -


Interest expense, net


- -


- -


- -


15,340


- -


- -


Gain (loss) on investments, net


- -


- -


- -


- -


5,005


- -


Tax


- -


- -


262


- -


- -


59,500


Total Adjustments


$ 123,953


$ 38,500


$ 38,147


$ 15,340


$ 5,005


$ 59,500


Valeant Pharmaceuticals International, Inc.










Table 2 (b)

Reconciliation of Non-GAAP Adjustments











For the Nine Months Ended September 30, 2011 and 2010































































Nine Months Ended



September 30, 2011



Inventory step-

up


Alliance

product assets

& pp&e step-up


Stock-based

compensation

step-up


Contingent

consideration

fair value

adjustment


Restructuring,

integration 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


Gain (loss) on

investments,

net


Tax

Product Sales


- -


- -


- -


- -


- -


- -


- -


804


- -


- -


- -


- -

Cost of goods sold (exclusive amortization of intangible assets shown separately below)


48,939


643


529


- -


- -


- -


- -


6,077


- -


- -


- -


- -

Cost of alliances


- -


18,835


- -


- -


- -


- -


- -


- -


- -


- -


- -


- -

Selling, general and administrative ("SG&A")


- -


- -


49,401


- -


- -


- -


- -


- -


- -


- -


- -


- -

Research and development


- -


- -


626


- -


- -


- -


- -


- -


- -


- -


- -


- -

Contingent consideration fair value adjustments


- -


- -


- -


9,042


- -


- -


- -


- -


- -


- -


- -


- -

Acquired in-process research and development


- -


- -


- -


- -


- -


4,000


- -


- -


- -


- -


- -


- -

Legal settlements


- -


- -


- -


- -


- -


- -


2,400


- -


- -


- -


- -


- -

Restructuring and acquisition-related costs


- -


- -


- -


- -


73,913


- -


- -


- -


- -


- -


- -


- -

Amortization of intangible assets


- -


- -


- -


- -


- -


- -


- -


365,016


- -


- -


- -


- -

Interest expense, net


- -


- -


- -


- -


- -


- -


- -


- -


19,034


- -


- -


- -

Loss on extinguishment of debt


- -


- -


- -


- -


- -


- -


- -


- -


- -


33,325


- -


- -

Gain (loss) on investments, net


- -


- -


- -


- -


- -


- -


- -


- -


- -


- -


(1,769)


- -

Tax


- -


- -


- -


- -


- -


- -


- -


- -


- -


- -


- -


(77,098)

Total Adjustments


$ 48,939


$ 19,478


$ 50,556


$ 9,042


$ 73,913


$ 4,000


$ 2,400


$ 371,897


$ 19,034


$ 33,325


$ (1,769)


$ (77,098)


























































Nine Months Ended



September 30, 2010



Restructuring,

integration 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


Gain (loss) on

investments, net


Tax

Product Sales


- -


- -


- -


804


- -


- -


- -

Cost of goods sold (exclusive amortization of intangible assets shown separately below)


- -


- -


- -


6,536


- -


- -


- -

Legal settlements


- -


- -


38,500


- -


- -


- -


- -

Restructuring and acquisition-related costs


135,024


- -


- -


- -


- -


- -


- -

Acquired in-process research and development


- -


61,245











Amortization of intangible assets


- -


- -


- -


102,098


- -


- -


- -

Interest expense, net


- -


- -


- -


- -


23,622


- -


- -

Gain (loss) on investments, net


- -


- -


- -


- -


- -


5,552


- -

Tax


- -


- -


- -


787


- -


- -


64,500

Total Adjustments


$ 135,024


$ 61,245


$ 38,500


$ 110,225


$ 23,622


$ 5,552


$ 64,500

Valeant Pharmaceuticals International, Inc.



Table 3

Statement of Revenue - by Segment




For the Three and Nine Months Ended September 30, 2011 and 2010




(In thousands)















Three Months Ended



September 30,

Revenue (a)(b)


2011
GAAP


2010
GAAP


%
Change
(c)


2011
currency
impact


2011
excluding
currency
impact
non-GAAP


%
Change
(c)

U.S. Neurology & Other


$ 182,288


$ 138,035


32%


$ -


$ 182,288


32%

U.S. Dermatology


131,642


34,720


279%


(136)


131,506


279%

Total U.S.


313,930


172,755


82%


(136)


313,794


82%

Canada/Australia


84,644


27,750


205%


(7,268)


77,376


179%

Specialty Pharmaceuticals


398,574


200,505


99%


(7,404)


391,170


95%

Branded Generics - Europe


134,055


7,762


1627%


(7,054)


127,001


1536%

Branded Generics - Latin America


67,955


-


NM


(2,706)


65,249


NM

Branded Generics


202,010


7,762


NM


(9,760)


192,250


NM

Total Revenue


$ 600,584


$ 208,267


188%


$ (17,164)


$ 583,420


180%
















Nine Months Ended



September 30,

Revenue (a)(b)


2011
GAAP


2010
GAAP


%
Change
(c)


2011
currency
impact


2011
excluding
currency
impact
non-GAAP


%
Change
(c)

U.S. Neurology & Other


$ 626,390


$ 445,413


41%


$ -


$ 626,390


41%

U.S. Dermatology


394,202


115,112


242%


(354)


393,848


242%

Total U.S.


1,020,592


560,525


82%


(354)


1,020,238


82%

Canada/Australia


238,888


81,146


194%


(18,861)


220,027


171%

Specialty Pharmaceuticals


1,259,480


641,671


96%


(19,215)


1,240,265


93%

Branded generics - Europe


326,448


25,002


1206%


(21,412)


305,036


1120%

Branded generics - Latin America


189,069


-


NM


(11,314)


177,755


NM

Branded Generics


515,517


25,002


NM


(32,726)


482,791


NM

Total Revenue


$ 1,774,997


$ 666,673


166%


$ (51,941)


$ 1,723,056


158%














(a) Note: Currency effect for constant currency sales is determined by comparing 2011 reported amounts adjusted to exclude currency impact, calculated using 2010 monthly average exchange rates, to the actual 2010 reported amounts. Constant currency sales is not a GAAP-defined measure of revenue growth. Constant currency sales as defined and presented by us may not be comparable to similar measures reported by other companies.

(b) See footnote (b) to Table 2.













(c) The % change reflects revenue for the combined company for the three and nine months ended September 30, 2011 as compared to Legacy Biovail alone for the three and nine months ended September 30, 2010.

Valeant Pharmaceuticals International, Inc.




Table 4

Reconciliation of GAAP Statement of Cost of Goods Sold to Non-GAAP Statement Cost of Goods Sold - by Segment





For the Three Months Ended September 30, 2011





(In thousands)























Three Months Ended


Nine Months Ended

Cost of goods sold (a)


September 30,


September 30,



2011
as reported
GAAP


%
of
product
sales


2011
fair value step-
up adjustment
to inventory
and amortization (b)


2011
excluding fair
value step-up
adjustment to
inventory and
amortization
non-GAAP


%
of
product
sales


2011
as reported
GAAP


%
of
product
sales


2011
fair value step-
up adjustment
to inventory
and
amortization (b)


2011
excluding fair
value step-up
adjustment to
inventory and amortization
non-GAAP


%
of
product
sales

U.S. Neurology & Other


$ 32,826


19%


$ 2,205


$ 30,621


17%


$ 114,601


20%


$ 15,525


$ 99,076


17%

U.S. Dermatology


10,140


9%


-


10,140


9%


57,134


20%


7,696


49,438


17%

Canada/Australia


26,365


31%


419


25,946


31%


71,292


30%


3,885


67,407


28%

Branded Generics - Europe


64,331


49%


2,349


61,982


47%


176,553


54%


22,928


153,625


48%

Branded Generics - Latin America


28,640


42%


-


28,640


42%


81,186


43%


4,981


76,205


40%






















Corporate


266




-


266




1,001




-


1,001


























$ 162,568


28%


$ 4,973


$ 157,595


28%


$ 501,767


31%


$ 55,015


$ 446,752


28%






















(a) See footnote (b) to Table 2.



(b) For the three and nine months ended September 30, 2011 U.S. Neurology and Other and U.S. Dermatology include $0 and $9.4 million and $0 and $7.7 million of fair value step-up adjustment to inventory, respectively and in the three and nine months ended September 30, 2011 U.S. Neurology and Other includes $2.2 million and $6.1 million of amortization, respectively.


Valeant Pharmaceuticals International, Inc.



Table 5


Consolidated Balance Sheet and Other Data





(In thousands)






As of


As of



September 30,


December 31,

5.1

Cash

2011


2010







Cash and cash equivalents

$ 254,559


$ 394,269


Marketable securities

2,967


6,083


Total cash and marketable securities

$ 257,526


$ 400,352












Debt










Convertible notes

$ 41,798


$ 417,555


Senior notes

4,327,336


2,185,822


Senior Secured Term Loan facility

590,000


-


Term loan A facility

-


975,000


Revolving credit facility

200,000


-


Sanitas Term Loan Facility

45,312


-


Sanitas Revolving Credit Lines

4,943


-


Other

17,522


16,900



5,226,911


3,595,277


Less: Current portion

(38,943)


(116,900)



$ 5,187,968


$ 3,478,377


























5.2

Summary of Cash Flow Statement

Three Months Ended



September 30,



2011


2010


Cash flow provided by (used in):










Net cash provided by (used in) operating activities (GAAP)

$ 173,708


$ 110,924


Restructuring and acquisition-related costs

25,372


123,953


Effect of ASC 470-20 (FSP APB 14-1)

3,362


-


Tax benefits from stock options exercised (a)

2,042


-


Changes in working capital related to restructuring and acquisition-related costs

3,918


(127,860)


Adjusted cash flow from operations (Non-GAAP) (b)

$ 208,402


$ 107,017

















(a) Includes stock option tax benefit which will reduce taxes in future periods.


(b) See footnote (b) to Table 2.

Valeant Pharmaceuticals International



Pro Forma Organic Growth - by Segment



For the Three and Nine Months Ended September 30, 2011



(In thousands)








































Three Month Ending



September 30,



(b) (f)


(b) (c)


(g)








(a)







September 2011


September 2010


Total Proforma Acquisitions


Total Proforma QTD 2010


Divestitures/
Discontinuations


%
Change



September 2011 currency impact


September 2011 excluding currency impact


%
Change

U.S. Dermatology


$ 110,546


$ 65,820


$ 6,000


$ 70,122


$ 1,698


58%


$ -


$ 110,546


58%

U.S. Neurology & Other (d)


177,780


186,224


-


186,224


-


-5%


(301)


177,479


-5%

Total U.S.


288,326


252,044


6,000


256,346


1,698


12%


(301)


288,025


12%

Canada/Australia


83,144


64,120


-


64,120


-


30%


(6,464)


76,680


20%

Specialty Pharmaceuticals


371,470


316,164


6,000


320,466


1,698


16%


(6,765)


364,705


14%

Branded generics - Latin America


67,955


51,539


-


51,539


-


32%


(2,708)


65,247


27%

Branded generics - Europe


130,998


50,098


62,533


112,631


-


16%


(6,395)


124,603


11%

Branded Generics


198,953


101,637


62,533


164,170


-


21%


(9,103)


189,850


16%




















Total product sales


$ 570,423


$ 417,801


$ 68,533


$ 484,636


$ 1,698


18%


$ (15,868)


$ 554,555


14%




















Add: JV Revenue (e)


1,093


417


-


417


-




-


1,093






















Total


$ 571,516


$ 418,218


$ 68,533


$ 485,053


$ 1,698


18%


$ (15,868)


$ 555,648


15%




























































Nine Months Ended



September 30,



(b) (f)


(b) (c)


(g)








(a)







September 2011


September 2010


Total Proforma Acquisitions


Total Proforma QTD 2010


Divestitures/
Discontinuations


%
Change



September 2011 currency impact


September 2011 excluding currency impact


%
Change

U.S. Dermatology


$ 286,303


$ 216,334


$ 15,531


$ 228,210


$ 3,655


27%


$ -


$ 286,303


27%

U.S. Neurology & Other (d)


571,342


579,190


20,625


599,815


-


-5%


-


571,342


-5%

Total U.S.


857,646


795,524


36,156


828,025


3,655


4%


-


857,645


4%

Canada/Australia


234,777


188,460


5,034


193,494


-


21%


(17,908)


216,869


12%

Specialty Pharmaceuticals


1,092,423


983,984


41,190


1,021,519


3,655


7%


(17,908)


1,074,515


6%

Branded generics - Latin America


189,069


145,368


6,471


151,839


-


25%


(11,314)


177,755


17%

Branded generics - Europe


319,388


149,828


117,931


267,759


-


19%


(20,314)


299,074


12%

Branded Generics


508,456


295,196


124,402


419,598


-


21%


(31,628)


476,829


14%




















Total product sales


$ 1,600,879


$ 1,279,180


$ 165,592


$ 1,441,117


$ 3,655


11%


$ (49,536)


$ 1,551,343


8%




















Add: JV Revenue (e)


2,313


481


-


481


-




-


2,313






















Total


$ 1,603,192


$ 1,279,661


$ 165,592


$ 1,441,598


$ 3,655


11%


$ (49,536)


$ 1,553,656


8%







































(a) See footnote (a) to Table 3.

(b) See footnote (b) to Table 2.

(c) Combined Q3 Legacy Biovail and Legacy Valeant product sales of $201.4 million and $210.4 million, respectively (see note (d)). Total proforma revenue of $467.5 million also includes $7.0 million and $48.7 million of Service, Alliance and Royalty revenue recorded by Legacy Biovail and Legacy Valeant, respectively. Total proforma revenue includes $37.2 million of discontinued revenues relating to Ribavirin and GSK Alliance revenues. Combined YTD Legacy Biovail and Legacy Valeant product sales of $655.1 million and $953.9 million, respectively. Total proforma revenue of $1,609.0 million also includes $19.8 million and $146.2 million of Service, Alliance and Royalty revenue recorded by Legacy Biovail and legacy Valeant, respectively. Total proforma revenue includes $70.9 million of discontinued revenues relating to Ribavirin and GSK Alliance revenues.

(d) 2010 data includes adjustments for timing of revenues on certain partnered products of $5.8M in Sept QTD and $0.0M in Sept YTD.

(e) Represents Valeant's attributable portion of revenue from joint ventures (JV) not included in Consolidated Valeant revenues.

(f) Includes all acquisitions.

(g) Includes proforma historical revenue for acquisitions with a purchase price > $20 million.