EX-99.1 2 a58781exv99w1.htm EX-99.1 exv99w1
Exhibit 99.1
(VALEANT LOGO)
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 FOURTH QUARTER FINANCIAL RESULTS
  •   2010 Fourth Quarter Total Revenue $515 million
 
  •   2010 Fourth Quarter GAAP EPS ($0.10); Cash EPS $0.51
 
  •   2010 Fourth Quarter GAAP Operating Cash Flow ($1) million; Adjusted Operating Cash Flow $209 million
 
  •   2011 Guidance increased to $2.45 – $2.70 Cash EPS
 
  •   Valeant agrees to repurchase common shares from ValueAct Capital for $275 million
     Mississauga, Ontario — February 24, 2014 — 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.

 

 

(VALEANT LOGO)
Operating Expenses
     The Company’s 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 product’s 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 Biovail’s 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.

 

 

(VALEANT LOGO)
Share Repurchase Transaction
     Valeant has agreed to repurchase common shares of the Company’s 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 Valeant’s 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 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, 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

 

 

(VALEANT LOGO)
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, 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 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.
Financial Tables follow.
###

 

 

Table 1
Valeant Pharmaceuticals International, Inc.
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       35,629     NM
Amortization of intangible assets
     117,660       34,328     NM     219,758       104,730     NM
 
                                        
 
                                                
 
     563,516       182,405               1,291,322       639,276          
 
                                        
Operating income (loss)
     (48,952 )     58,648               (110,085 )     181,154          
 
                                                
Interest expense, net
     (52,564 )     (9,736 )             (83,013 )     (23,763 )        
Loss on extinguishment of debt
     (32,413 )     —               (32,413 )     —          
Gain (loss) on investments, net
     —       (501 )             (5,552 )     17,594          
Other income (expense), net including translation and exchange
     229       (411 )             (5,200 )     (30 )        
 
                                        
 
                                                
Income (loss) before recovery of income taxes
     (133,700 )     48,000               (236,263 )     174,955          
 
                                                
Recovery of income taxes
     (102,570 )     (25,000 )             (28,070 )     (1,500 )        
 
                                        
 
                                                
Net income (loss)
   $ (31,130 )   $ 73,000             $ (208,193 )   $ 176,455          
 
                                        
 
                                                
Earnings per share:
                                                
 
                                                
Basic:
                                                
Net income (loss)
   $ (0.10 )   $ 0.46             $ (1.06 )   $ 1.11          
 
                                        
Shares used in per share computation
     302,005       158,271               195,808       158,236          
 
                                        
 
                                                
Diluted:
                                                
Net income (loss)
   $ (0.10 )   $ 0.46             $ (1.06 )   $ 1.11          
 
                                        
Shares used in per share computation
     302,005       158,785               195,808       158,510          
 
                                        

 

 

Table 2
Valeant Pharmaceuticals International, Inc.
Reconciliation of GAAP EPS to Adjusted Non-GAAP (Cash) EPS
For the Three and Twelve Months Ended December 31, 2010 and 2009 (a)
                                 
    Three Months Ended     Twelve Months Ended  
    December 31,     December 31,  
(In thousands, except per share data)   2010     2009(a)     2010     2009(a)  
 
                                
Net income (loss)
   $ (31,130 )   $ 73,000     $ (208,193 )   $ 176,455  
 
                                
Non-GAAP adjustments (b)(c):
                                
Inventory step-up (d)
     53,266       —       53,266       —  
Stock-based compensation step-up (e)
     17,040       —       17,040       —  
Restructuring and acquisition-related costs (f)
     44,078       14,905       179,102       35,629  
Acquired in-process research and development
     28,000       20,814       89,245       59,354  
Legal settlements
     14,110       5,950       52,610       6,191  
Amortization and other non-cash charges
     122,729       42,868       232,954       130,496  
 
                        
 
     279,223       84,537       624,217       231,670  
Amortization of deferred financing costs, debt discounts and ASC 470-20 (FSP APB 14-1) interest
     3,624       4,034       15,698       9,069  
Loss on extinguishment of debt
     32,413       —       32,413       —  
(Gain) loss on investments, net
     —       501       5,552       (17,594 )
Write-down of deferred financing costs
     —       —       5,774       537  
Tax
     (116,570 )     (28,500 )     (54,370 )     (13,500 )
 
                        
Total adjustments
     198,690       60,572       629,284       210,182  
 
                                
Adjusted income
   $ 167,560     $ 133,572     $ 421,091     $ 386,637  
 
                        
 
                                
GAAP earnings per share — diluted
   $ (0.10 )   $ 0.46     $ (1.06 )   $ 1.11  
 
                        
 
                                
Adjusted Non-GAAP (Cash) earnings per share — diluted
   $ 0.51     $ 0.84     $ 2.05     $ 2.44  
 
                        
 
                                
Shares used in diluted per share calculation — GAAP earnings per share
     302,005       158,785       195,808       158,510  
 
                        
 
                                
Shares used in diluted per share calculation — Adjusted Non-GAAP (Cash) earnings per share
     330,452       158,785       205,529       158,510  
 
                        
 
(a)   Prior year non-GAAP adjustments have been modified to conform to the 2010 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, stock-based compensation step-up, restructuring 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 more 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, stock-based compensation step-up, restructuring 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 months and year ended December 31, 2010 the impact is $53.3 million for the merger with Valeant Pharmaceutical International.
 
(e)   Total stock-based compensation for the three and twelve months ended December 31, 2010 was $26.2 million and $98.0 million, respectively, of which $17.0 million reflects the amortization of the fair value increment resulting from the merger.
 
(f)   Restructuring and acquisition-related costs for the three months and twelve months ended December 31, 2010 relate to costs related to the merger with Valeant Pharmaceuticals International and include $13.8 million of expenses related to R&D program cancelation costs, $11.2 million and $58.6 million related to employee severance, $5.2 million related to R&D wind down costs, $3.9 million and $49.5 million related to accelerated equity compensation, $4.9 million related to facility closure costs, and $2.5 million and $8.8 million of other miscellaneous costs related to the merger. Acquisition-related costs of $2.6 million and $38.3 million for the three months and year ended December 31, 2010, respectively, relate to the merger with Valeant Pharmaceuticals International.

 

 

Table 3
Valeant Pharmaceuticals International, Inc.
Statement of Revenue — by Segment
For the Three Months Ended December 31, 2010 and 2009
(In thousands)
                                                 
    Three Months Ended  
    December 31,  
                                    2010        
                                    excluding        
                    %     2010     currency     %   
    2010     2009     Change     currency     impact     Change  
    GAAP     GAAP     (c)     impact     non-GAAP     (c)  
Revenue (a)(b)
                                                
U.S. Neurology & Other
   $ 212,899     $ 161,441       32 %   $ —     $ 212,899       32 %
U.S. Dermatology
     103,896       46,254       125 %     121       104,017       125 %
 
                                        
Total U.S.
     316,795       207,695       53 %     121       316,916       53 %
Canada/Australia
     80,421       28,205       185 %     (4,319 )     76,102       170 %
 
                                        
Specialty Pharmaceuticals
     397,216       235,900       68 %     (4,198 )     393,018       67 %
 
                                        
Branded Generics — Europe
     48,310       5,153       838 %     2,643       50,953       889 %
Branded Generics — Latin America
     69,038       —     NM       (2,772 )     66,266     NM  
 
                                        
Branded Generics
     117,348       5,153     NM       (129 )     117,219     NM  
 
                                        
 
                                                
Total revenue
   $ 514,564     $ 241,053       113 %   $ (4,327 )   $ 510,237       112 %
 
                                        
 
(a)   Note: Currency effect for constant currency sales is determined by comparing 2010 reported amounts adjusted to exclude currency impact, calculated using 2009 monthly average exchange rates, to the actual 2009 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 (a) to Table 2.
 
(c)   The % change reflects revenue for the combined company for the three months ended December 31, 2010 as compared to Legacy Biovail alone for the three months ended December 31, 2009.

 

 

Table 4
Valeant Pharmaceuticals International, Inc.
Reconciliation of GAAP Statement of Cost of Goods Sold to Non-GAAP Statement Cost of Goods Sold — by Segment
For the Three Months Ended December 31, 2010
(In thousands)
                                         
    Three Months Ended  
    December 31,  
                            2010        
                    2010     excluding        
                    fair value     fair value        
                    adjustment     adjustment        
                    to inventory     to inventory        
    2010     %     and     and     %  
    as reported     of product     amortization     amortization     of product  
    GAAP     sales     (b)     non-GAAP     sales  
Cost of goods sold (a)
                                        
U.S. Neurology & Other
   $ 70,924       35 %   $ 22,436     $ 48,488       24 %
U.S. Dermatology
     42,775       47 %     11,300       31,475       35 %
Canada/Australia
     33,693       42 %     11,409       22,284       28 %
Branded Generics — Europe
     24,320       50 %     5,975       18,345       38 %
Branded Generics — Latin America
     38,475       56 %     9,534       28,941       42 %
 
                                        
Corporate
     461               —       461          
 
                                  
 
                                        
 
   $ 210,648       43 %   $ 60,654     $ 149,994       31 %
 
                                  
 
(a)   See footnote (a) to Table 2.
 
(b)   U.S. Neurology and Other and U.S. Dermatology include $15.1 million and $11.2 million of fair value adjustment to inventory and $7.3 million and $0.1 million of amortization, respectively.

 

 

Table 5
Valeant Pharmaceuticals International, Inc.
Consolidated Balance Sheet and Other Data
(In thousands)
5.1 Cash
                 
    As of     As of  
    December 31,     December 31,  
    2010     2009  
 
                
Cash and cash equivalents
   $ 394,269     $ 114,463  
Marketable securities
     6,083       9,566  
 
            
Total cash and marketable securities
   $ 400,352     $ 124,029  
 
            
5.2 Summary of Cash Flow Statement
                 
    Three Months Ended  
    December 31,  
    2010     2009  
 
                
Cash flow provided by (used in):
                
 
                
Adjusted cash flow from operations (Non-GAAP) (a)
   $ 209,052     $ 142,552  
Restructuring and acquisition-related costs
     (44,078 )     (14,905 )
Payment of accrued legal settlements
     (38,500 )     —  
Effect of ASC 470-20 (FSP APB 14-1)
     (4,934 )     —  
Changes in Working Capital Related to Acquisition and Restructuring Costs
     (122,939 )     —  
 
            
Net cash provided by (used in) operating activities (GAAP)
   $ (1,399 )   $ 127,647  
 
            
 
(a)   See footnote (b) to Table 2. 2010 includes $21.5 million reduction in working capital unrelated to merger/restructuring activities and 2009 includes $1.0 million increase in working capital.