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SHARE-BASED COMPENSATION (Tables)

12 Months Ended

Dec. 31, 2011

SHARE-BASED COMPENSATION

Summary of the components and classification of share-based compensation expense

			2011			2010			2009

	Stock options⁽¹⁾		$	45,465		$	56,851		$	2,613
	RSUs			48,558			41,182			3,000

	Stock-based compensation expense		$	94,023		$	98,033		$	5,613

	Cost of goods sold⁽¹⁾⁽²⁾		$	1,330		$	1,258		$	525
	Research and development expenses⁽¹⁾⁽²⁾			1,329			2,487			726
	Selling, general and administrative expenses⁽¹⁾⁽²⁾			90,379			44,806			4,362
	Restructuring and integration costs (as described in note 6)			985			49,482			—

	Stock-based compensation expense		$	94,023		$	98,033		$	5,613

(1)

On March 9, 2011, the Company's compensation committee of the board of directors approved an equitable adjustment to all stock options outstanding as of that date for employees and directors as of such date, in connection with the post-Merger special dividend of $1.00 per common share declared on November 4, 2010 and paid on December 22, 2010. As the Company's stock option awards do not automatically adjust for dividend payments, this adjustment was treated as a modification of the terms and conditions of the outstanding options. The incremental fair value of the modified awards was determined to be $15.4 million, of which $9.2 million related to vested options, which was expensed as of March 9, 2011 as follows: cost of goods sold ($0.2 million), selling, general and administrative expenses ($8.8 million) and research and development expenses ($0.2 million). The remaining $6.2 million is being recognized over the remaining requisite service period of the unvested options.

(2)

Includes the excess of the fair value of Biovail stock options and time-based RSUs over the fair value of the vested and partially vested Valeant stock options and time-based RSUs of $20.9 million (as described in note 3), which was recognized immediately as post-Merger compensation expense and allocated as follows: cost of goods sold ($0.4 million), research and development expenses ($0.4 million), and selling, general and administrative expenses ($20.1 million).

Schedule of compensation cost and weighted average service period related to unvested portion

				Stock Options			Time-Based RSUs			Performance- Based RSUs

	Number of awards issued (000s)				12,464			2,217			1,212
	Total compensation cost related to unvested awards to be
		recognized		$	66,520		$	30,558		$	24,998
	Weighted-average service period over which compensation
		cost is expected to be recognized (months)			18			25			34

Schedule of weighted-average assumption as of the date of grant using the Black Scholes option-pricing model

			2011			2010			2009

	Expected stock option life (years)⁽¹⁾			4.0			4.0			4.0
	Expected volatility⁽²⁾			42.8	%		37.1	%		45.2	%
	Risk-free interest rate⁽³⁾			1.4	%		1.5	%		1.6	%
	Expected dividend yield⁽⁴⁾			0.0	%		1.5	%		14.6	%

(1)

Determined based on historical exercise and forfeiture patterns.

(2)

Determined based on historical volatility of the Company's common shares over the expected life of the stock option.

(3)

Determined based on the rate at the time of grant for zero-coupon U.S. or Canadian government bonds with maturity dates equal to the expected life of the stock option.

(4)

Determined based on the stock option's exercise price and expected annual dividend rate at the time of grant.

Summary of stock option activity

			Options (000s)			Weighted- Average Exercise Price			Weighted- Average Remaining Contractual Term (Years)			Aggregate Intrinsic Value

	Outstanding, January 1, 2011			12,203		$	11.99
	Granted			1,294			47.83
	Equitable adjustment			380			11.00
	Exercised			(2,898	)		13.91
	Expired or forfeited			(499	)		19.82

	Outstanding, December 31, 2011			10,480		$	15.10			6.0		$	335,744

	Vested and exercisable, December 31, 2011			4,484		$	7.42			5.4		$	176,061

Summary of stock options outstanding and exercisable by range of exercise prices

	Range of Exercise Prices		Outstanding (000s)			Weighted- Average Remaining Contractual Life (Years)			Weighted- Average Exercise Price			Exercisable (000s)			Weighted- Average Exercise Price

	$3.46 - $5.19			3,321			5.9		$	4.26			2,560		$	4.27
	$5.33 - $8.00			971			5.3			6.47			753			6.22
	$8.03 - $12.05			428			2.7			8.85			401			8.78
	$12.87 - $19.31			3,278			8.0			13.20			444			13.48
	$20.42 - $30.63			1,248			4.0			25.01			316			24.66
	$39.95 - $54.76			1,234			4.6			48.23			10			39.35

				10,480			6.0		$	15.10			4,484		$	7.42

Summary of non-vested time-based RSU activity

			Time-Based RSUs (000s)			Weighted- Average Grant-Date Fair Value

	Non-vested, January 1, 2011			2,213		$	24.61
	Granted			425			44.96
	Vested			(672	)		24.14
	Forfeited			(137	)		25.15

	Non-vested, December 31, 2011			1,829		$	29.47

Share-based compensation

Summary of non-vested performance-based RSU activity

			Performance- Based RSUs (000s)			Weighted- Average Grant-Date Fair Value

	Non-vested, January 1, 2011			2,496		$	33.25
	Granted			411			55.10
	Vested			(765	)		52.06
	Forfeited			(82	)		17.82

	Non-vested, December 31, 2011			2,060		$	31.24

Summary of deferred share unit ("DSU") activity

			DSUs (000s)			Weighted- Average Grant-Date Fair Value

	Outstanding, January 1, 2011			382		$	14.43
	Granted			18			39.79
	Settled for cash			(252	)		14.85

	Outstanding, December 31, 2011			148		$	16.78

After merger

Share-based compensation

Schedule of assumptions used to calculate the fair values of performance-based RSUs

			2011		2010

	Contractual term (years)		3.0		4.1-4.6
	Expected Company share volatility⁽¹⁾		34.6% - 60.8%		32.4% - 33.2%
	Risk-free interest rate⁽²⁾		1.0% - 1.9%		1.2% - 2.3%

(1)

Determined based on historical volatility over the contractual term of the performance-based RSU.

(2)

Determined based on the rate at the time of grant for zero-coupon U.S. government bonds with maturity dates equal to the contractual term of the performance-based RSUs.

Prior to merger

Share-based compensation

Schedule of assumptions used to calculate the fair values of performance-based RSUs

			2010			2009

	Contractual term (years)			5.0			5.0
	Expected Company share volatility⁽¹⁾			43.2	%		44.0	%
	Average comparator group share price volatility⁽¹⁾			34.7	%		35.9	%
	Risk-free interest rate⁽²⁾			2.4	%		3.1	%

(1)

Determined based on historical volatility over the contractual term of the performance-based RSU.

(2)

Determined based on the rate at the time of grant for zero-coupon U.S. government bonds with maturity dates equal to the contractual term of the performance-based RSUs