EX-99.1 2 a57733exv99w1.htm EX-99.1 exv99w1
Exhibit 99.1
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International Headquarters
7150 Mississauga Road
Mississauga, Ontario L5N 8M5
Phone: 905.286.3000
Fax: 905.286.3050
Contact Information:
Laurie W. Little
949-461-6002
laurie.little@valeant.com
VALEANT PHARMACEUTICALS REPORTS
2010 THIRD QUARTER FINANCIAL RESULTS
  •   Legacy Biovail 2010 Third Quarter Revenue of $208.3 million
 
  •   Legacy Valeant 2010 Partial Third Quarter Revenue of $259.2 million, Third Quarter product shipments cut-off early across all markets (3 – 13 days)
 
  •   Strong Operating Cash Flow from Legacy Biovail of $110.9 million in the Third Quarter
 
  •   Integration Execution Ahead of Schedule
 
  •   Board Approves $1.5 Billion Securities Repurchase Program
     Mississauga, Ontario — November 4, 2010 — Valeant Pharmaceuticals International, Inc. (NYSE: VRX) (TSX: VRX) announces third quarter financial results for 2010. The merger of Biovail Corporation (Legacy Biovail) and Valeant Pharmaceuticals International (Legacy Valeant) was completed on September 28, 2010. Accordingly, as required under generally accepted accounting principles, the reported third quarter results reflect the full third quarter financial results of Legacy Biovail and only 3 days’ results for Legacy Valeant. The reported revenue included no contribution from Legacy Valeant; as an administrative accommodation, shipping for Legacy Valeant was cut-off in advance of the merger date. These financial statements also reflect the recognition of the assets and liabilities of Legacy Valeant acquired under the merger at their fair values.
     “The Legacy Biovail financial results for the quarter, from my perspective, were disappointing,” said J. Michael Pearson, chief executive officer. “The Legacy Valeant business continues to perform well. With one month behind us as a new company, I am pleased with the combined operating performance of our new company and the many new commercial initiatives underway. In the fourth quarter, we expect to generate approximately $500 million in revenue and $200 million in adjusted non-GAAP cash flows from operations, despite the anticipated loss of over $20 million of 4th quarter revenues from the impact of the entry of an authorized generic of Diastat, reduced ribavirin royalties and the elimination of both the Biovail R&D revenues and the GSK alliance payment. More important, with the merger now complete, we have already made the hard decisions about products, people, facilities and development programs, and have

 

 

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begun to put the combined company on a path to sustainable growth and strong cash flow generation.”
Revenue for Legacy Biovail
          Total reported revenue was $208.3 million in the third quarter of 2010 as compared to $212.5 million in the third quarter of 2009, a decrease of 2%.
          Product sales were $201.4 million in the third quarter of 2010, as compared to $204.3 million in the third quarter of 2009, a decrease of 1%. This decline was primarily due to decreased product sales for Wellbutrin XL®, Ultram® ER, Cardizem® LA and Generics, partially offset by increases in Xenazine®, Biovail Pharmaceuticals Canada and the Legacy portfolio.
          Research and development (R&D) revenue was $0.5 million in the third quarter of 2010 as compared to $3.4 million in the third quarter of 2009. This decrease is attributable to the divestiture of Biovail’s contract research division (CRD) to Lambda Therapeutic Research Inc. in July 2010.
Operating Expenses for Legacy Biovail
          The Company’s cost of goods sold increased 23% to $62.1 million in the third quarter of 2010 as compared to $50.7 million in the third quarter of 2009, primarily reflecting the increased supply price in effect for Zovirax® and increased sales of lower-margin Xenazine®.
          Selling, General and Administrative expenses increased 34% in the third quarter of 2010 to $60.2 million as compared to $44.8 million in the third quarter of 2009, primarily due to the inclusion of a non-cash $20.1 million charge, reflecting the valuation of replacement share-based awards arising from the merger transaction.
          Research and development expenses in the quarter of $14.3 million reflect a decrease of 38% or $8.9 million as compared to the third quarter of 2009. Included in the third quarter of 2009 was an IPR&D charge of $8.1 million related to the fipamezole acquisition.
Merger Related Costs & Expenses
     The Company recorded $28.0 million of merger-related transaction costs in the third quarter.
     Restructuring charges of $95.9 million were recorded in the quarter, virtually all of which arise from the merger and are primarily employee termination costs. The Company estimates it will incur costs of between $135 million and $180 million (of which the non-cash component, including share-based compensation, is expected to be approximately $55 million) in connection with the integration and cost-rationalization activities associated with the merger.
          The tax provision in the quarter ended September 30, 2010 of $60 million was impacted by a number of merger-related items and by the provision for legal settlements in jurisdictions with lower tax rates or where a full valuation allowance exists against available tax loss carryfowards.

 

 

(VALEANT LOGO)
Net Loss and Cash Flow from Operating Activities
     The Company reported a net loss of $207.9 million for the third quarter of 2010, or a loss of $1.27 per diluted share, as compared to net income of $40.4 million, or $0.25 per diluted share, for the third quarter of 2009.
     Cash flow from operating activities was $110.9 million in the quarter, as compared to $89.2 million for the third quarter of 2009.
     The Company has determined that the provision of a Cash EPS number in the third quarter is not useful given the significant impact of the merger on both earnings and the fully-diluted share computation.
Legacy Valeant Revenues
     Legacy Valeant revenues were $259.2 million for the partial third quarter of 2010 as compared to $220.3 million in the full third quarter of 2009, an increase of 18%. The partial third quarter of 2010 reflected a significant decrease from Diastat due to the impact of an authorized generic entering the market on September 1, 2010. Excluding Diastat, product sales increased 26%. It is also important to note that product sales only reflected a partial quarter given the decision to stop shipment of all products three to thirteen days prior to the quarter end.
Integration
     Significant progress has been made on the integration of Legacy Biovail and Legacy Valeant. Following a disciplined review of the Company’s pipeline assets, which focused on strategic and financial hurdles, the decision was made to terminate a number of these projects. The affected counterparties have all been notified. The estimated costs to terminate these arrangements (approximately $15 — $20 million in total) are included in our estimated restructuring costs. As these decisions were reached after the quarter end, none of the termination costs are reflected in the current quarter. We expect spending on all these terminated projects to be completed by the end of the first quarter of 2011.
     As committed, by October 15, 2010 all our employees had been notified as to their status with the ongoing Company. Approximately 500 jobs were eliminated and the majority of those terminated will be leaving by December 31, 2010. We are in the process of vacating several facilities, including Aliso Viejo, CA, Bridgewater, NJ, Carolina, PR, Chantilly, VA, Fort Worth, TX, Lawrenceville, NJ, and Redwood City, CA.

 

 

(VALEANT LOGO)
2010 Guidance
     Due to the recently completed merger, the Company will not be issuing full year guidance for 2010. For the fourth quarter of 2010, the Company is expecting approximately $500 million in total revenue and approximately $200 million in adjusted non-GAAP cash flows from operations. The Company expects to be in a position to provide financial guidance for 2011 in January of 2011.
Conference Call and Webcast Information
     The Company will host a conference call and a live Internet webcast along with a slide presentation today at 8:00 a.m. EDT (5:00 a.m. PDT), November 4, 2010 to discuss its third quarter financial results for 2010. The dial-in number to participate on this call is (877) 295-5743, confirmation code 18324045. International callers should dial (973) 200-3961, confirmation code 18324045. A replay will be available approximately two hours following the conclusion of the conference call through November 11, 2010 and can be accessed by dialing (800) 642-1687, or (706) 645-9291, confirmation code 18324045. 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 and growth in 2010, anticipated fourth quarter revenues and adjusted cash flows from operations and the expected integration of Legacy Biovail and Legacy Valeant, including spending on Legacy Biovail R&D projects and the departure of employees from the combined company. 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”),

 

 

(VALEANT LOGO)
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 4, 2010, and will not be updated or confirmed until the Company publicly announces updated or affirmed guidance.
Non-GAAP Financial Measures
     The company has provided guidance with respect to adjusted non-GAAP cash flow from operations, which is a non-GAAP financial measure that represents adjusted non-GAAP cash flow from operation. The company has not provided a reconciliation of this forward-looking non-GAAP financial measure due to the difficulty in forecasting and quantifying the exact amount of the items excluded from the non-GAAP financial measure that will be included in the comparable GAAP financial measure.
Financial Tables follow.
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VALEANT PHARMACEUTICALS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(All dollar amounts are expressed in thousands of U.S. dollars, except per share data)
(Unaudited)
                                 
    Three Months Ended     Nine Months Ended  
    September 30     September 30  
    2010     2009     2010     2009  
REVENUE
                                
 
                                
Product sales
   $ 201,372     $ 204,291     $ 644,650     $ 557,400  
Research and development
     455       3,392       6,096       10,362  
Royalty and other
     6,440       4,840       15,927       11,615  
 
                        
 
     208,267       212,523       666,673       579,377  
 
                        
 
                                
EXPENSES
                                
Cost of goods sold (exclusive of amortization of intangible assets shown separately below)
     62,142       50,669       184,947       145,566  
Research and development
     14,298       23,202       118,443       82,422  
Selling, general and administrative
     60,187       44,774       148,794       137,516  
Amortization of intangible assets
     35,499       33,121       102,098       70,402  
Restructuring costs and other costs
     95,916       2,413       99,410       15,128  
Acquisition-related costs
     28,037       —       35,614       5,596  
Legal settlements
     38,500       —       38,500       241  
 
                        
 
     334,579       154,179       727,806       456,871  
 
                        
Operating income (loss)
     (126,312 )     58,344       (61,133 )     122,506  
Interest income
     126       238       548       823  
Interest expense
     (11,218 )     (10,998 )     (30,997 )     (14,850 )
Write-down of deferred financing charges
     (5,774 )     —       (5,774 )     (537 )
Foreign exchange gain
     301       197       345       918  
Loss on auction rate securities
     (5,005 )     (385 )     (5,552 )     (4,709 )
Gain on disposal of investments
     —       466       —       804  
Gain on auction rate security settlement
     —       —       —       22,000  
 
                        
Income (loss) before provision for income taxes
     (147,882 )     47,862       (102,563 )     126,955  
Provision for income taxes
     60,000       7,500       74,500       23,500  
 
                        
Net income (loss)
   $ (207,882 )   $ 40,362     $ (177,063 )   $ 103,455  
 
                        
 
                                
Basic and diluted earnings (loss) per share
   $ (1.27 )   $ 0.25     $ (1.11 )   $ 0.65  
 
                        
 
                                
Weighted-average number of common shares outstanding (000s)
                                
Basic
     163,295       158,231       160,082       158,225  
Diluted
     163,295       158,652       160,082       158,418  
 
                        
 
                                
Cash dividends declared per share
   $ 0.095     $ 0.090     $ 0.280     $ 0.555  
 
                        

 

 

VALEANT PHARMACEUTICALS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(All dollar amounts are expressed in thousands of U.S. dollars)
(Unaudited)
                 
    At     At  
    September 30     December 31  
    2010     2009  
ASSETS
                
Cash, cash equivalents and marketable securities
   $ 598,245     $ 124,029  
Other current assets
     702,203       226,611  
 
            
 
     1,300,448       350,640  
Marketable securities
     3,645       11,516  
Property, plant and equipment, net
     280,161       103,848  
Intangible assets, net
     6,470,596       1,335,222  
Goodwill
     2,963,947       100,294  
Deferred tax assets, net of valuation allowance
     88,646       132,800  
Other long-term assets, net
     28,460       32,724  
 
            
 
   $ 11,135,903     $ 2,067,044  
 
            
 
                
 
                
LIABILITIES AND SHAREHOLDERS’ EQUITY
                
Current liabilities
   $ 845,922     $ 256,906  
Long-term liabilities
     4,940,317       455,766  
Shareholders’ equity
     5,349,664       1,354,372  
 
            
 
   $ 11,135,903     $ 2,067,044  
 
            

 

 

VALEANT PHARMACEUTICALS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(All dollar amounts are expressed in thousands of U.S. dollars)
(Unaudited)
                                 
    Three Months Ended     Nine Months Ended  
    September 30     September 30  
    2010     2009     2010     2009  
CASH FLOWS FROM OPERATING ACTIVITIES
                                
Net income (loss)
   $ (207,882 )   $ 40,362     $ (177,063 )   $ 103,455  
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
                                
Depreciation and amortization
     42,338       43,293       122,619       102,447  
Amortization of deferred revenue
     (4,775 )     (5,300 )     (14,326 )     (15,901 )
Amortization of discounts on long-term obligations
     2,712       2,682       8,350       3,246  
Amortization and write-down of deferred financing costs
     6,854       1,228       9,498       2,326  
Acquired in-process research and development
     —       8,126       61,245       38,540  
Deferred income taxes
     59,500       3,800       64,500       12,000  
Payment of accrued legal settlements
     —       (24,648 )     (5,950 )     (30,806 )
Addition to accrued legal settlements
     38,500       —       38,500       241  
Share-based compensation
     68,284       1,126       71,836       4,217  
Impairment charges
     5,405       385       5,952       12,392  
Gain on disposal of investments
     —       (466 )     —       (804 )
Other
     (346 )     (89 )     (1,022 )     80  
Changes in operating assets and liabilities
     100,334       18,698       80,451       1,817  
 
                        
Net cash provided by operating activities
     110,924       89,197       264,590       233,250  
Net cash provided by (used in) investing activities
     315,367       (4,514 )     262,135       (748,309 )
Net cash provided by (used in) financing activities
     (10,590 )     (89,214 )     (48,794 )     245,475  
Effect of exchange rate changes on cash and cash equivalents
     387       1,019       260       1,443  
 
                        
Net increase (decrease) in cash and cash equivalents
     416,088       (3,512 )     478,191       (268,141 )
Cash and cash equivalents, beginning of period
     176,566       52,918       114,463       317,547  
 
                        
Cash and cash equivalents, end of period
   $ 592,654     $ 49,406     $ 592,654     $ 49,406