SECURITIES REPURCHASE PROGRAM

9 Months Ended

Sep. 30, 2011

SECURITIES REPURCHASE PROGRAM

SECURITIES REPURCHASE PROGRAM

12.   SECURITIES REPURCHASE PROGRAM

• On November 4, 2010, the Company announced that its board of directors had approved a securities repurchase program, pursuant to which the Company may make purchases of its common shares, convertible notes and/or senior notes, from time to time, up to an aggregate maximum value of $1.5 billion, subject to any restrictions in the Company's financing agreements and applicable law.

  On August 29, 2011, the Company announced that its board of directors had approved an increase of $300.0 million under its securities repurchase program (the "Securities Repurchase Program"). Under the Securities Repurchase Program, the Company may now repurchase up to $1.8 billion of its convertible notes, senior notes, common shares and/or other notes or shares that may be issued prior to the completion of the program. The Securities Repurchase Program will terminate on November 7, 2011 or at such time as the Company completes its purchases.

  In the nine-month period ended September 30, 2011, the Company repurchased $177.2 million aggregate principal amount of the 5.375% senior convertible notes due 2014 (the "5.375% Convertible Notes") for an aggregate purchase price of $549.9 million. The carrying amount of the 5.375% Convertible Notes purchased was $153.2 million (net of $4.9 million of related unamortized deferred financing costs) and the estimated fair value of the 5.375% Convertible Notes exclusive of the conversion feature was $181.4 million. The difference of $28.2 million between the net carrying amount and the estimated fair value was recognized as a loss on extinguishment of debt. The difference of $368.5 million between the estimated fair value of $181.4 million and the purchase price of $549.9 million resulted in charges to additional paid-in capital and accumulated deficit of $28.7 million and $339.8 million, respectively. The portion of the purchase price attributable to accreted interest on the debt discount amounted to $8.3 million, and is presented in the consolidated statements of cash flows as payment of accreted interest in cash flows from operating activities. The remaining portion of the payment of $541.6 million is presented in the consolidated statement of cash flows as an outflow from financing activities, which includes a payment to the note holders of a $5.4 million premium above the carrying value.

  In March 2011, the Company repurchased 7,366,419 of its common shares from ValueAct for an aggregate purchase price of $274.8 million. These common shares were subsequently cancelled. As of September 30, 2011, the Company had recorded an estimated $24.2 million receivable from ValueAct in relation to withholding taxes on the March 2011 repurchase. In May 2011, a subsidiary of the Company purchased 4,498,180 of the Company's common shares from ValueAct for an aggregate purchase price of $224.8 million. In June 2011, the Company purchased these common shares from its subsidiary and the common shares were subsequently cancelled. G. Mason Morfit is a partner and a member of the Management Committee of ValueAct Capital. Mr. Morfit joined the Company's board of directors on September 28, 2010, effective with the Merger, and prior thereto served as a member of Valeant's board of directors since 2007. ValueAct Capital is the general partner and the manager of ValueAct.

  During the three-month period ended September 30, 2011, the Company repurchased 1,800,000 of its common shares for an aggregate purchase price of $74.5 million. These common shares were subsequently cancelled.

  In connection with the Securities Repurchase Program, through September 30, 2011, the Company had repurchased a total of $303.5 million principal amount of the 5.375% Convertible Notes for consideration of $809.1 million and 15,969,599 of its common shares for consideration of $634.2 million. Subsequent to September 30, 2011, the Company repurchased an additional $24.5 million principal amount of the 5.375% Convertible Notes for cash consideration of $63.6 million. As of September 30, 2011, the Company had repurchased approximately $1.4 billion, in the aggregate, of its convertible notes and common shares under the Securities Repurchase Program.

As described below under "SUBSEQUENT EVENTS AND PENDING ACQUISITIONS — New Securities Repurchase Program", on November 3, 2011, the Company announced that its board of directors has approved a new securities repurchase program (the "New Securities Repurchase Program"). Under the New Securities Repurchase Program, which commences November 8, 2011, the Company may make purchases of up to $1.5 billion of its convertible notes, senior notes, common shares and/or other future debt or shares.