EX-99.1 2 a11404exv99w1.htm EXHIBIT 99.1 Exhibit 99.1
 

Exhibit 99.1
VALEANT LOGO
Contact:
Jeff Misakian, Valeant Pharmaceuticals
714-545-0100 ext. 3309
VALEANT PHARMACEUTICALS REPORTS
SECOND QUARTER 2005 RESULTS
— Revenues Increase 20 Percent; Product Sales Advance 22 Percent —
     COSTA MESA, Calif., August 4, 2005 – Valeant Pharmaceuticals International (NYSE: VRX) today announced results for the second quarter of 2005 that reflect higher product sales and increased operating profit driven by strong marketing efforts and continued focus on operating expenses.
Second Quarter 2005 vs. Second Quarter 2004 Highlights:
  •   Revenues increased 20 percent to $205.0 million compared to $170.4 million.
 
  •   Product sales increased 22 percent to $180.8 million compared to $147.7 million.
 
  •   Ribavirin royalties increased 6 percent to $24.2 million compared to $22.7 million.
 
  •   Net loss was $0.5 million, or $0.01 per diluted share, compared to a net loss of $41.3 million, or $0.49 per diluted share.
 
  •   Adjusting for certain non-GAAP items, adjusted income from continuing operations was $7.6 million, or $0.08 per diluted share, compared to $2.0 million, or $0.02 per diluted share.
     A reconciliation of GAAP to non-GAAP results is provided in Tables 2-4.
     “Our specialty pharmaceuticals business continues to deliver excellent results and reflects the success of our strategic initiatives,” said Timothy C. Tyson, Valeant’s president and chief executive officer. “Our plan to grow the top line is clearly working. We have rapidly integrated newly acquired products to quickly deliver top line results and continued to focus on our global brands and important regional products with strong marketing and medical support. Our success in growing the North America business has been accelerated with products acquired from Xcel. We are making great progress in achieving our financial metrics; operating income from the specialty pharmaceuticals business is up 63 percent in the quarter. In addition to our excellent results in the base business, our research and development pipeline is advancing rapidly. We now have four important products in late-stage development. We recently announced the start of Viramidine® trials in Japan, exciting 24-week interim results for pradefovir and the initiation of Phase 3 trials for retigabine, while we also await approval for Zelapar™ from the U.S. Food and Drug Administration.”

 

 

VALEANT LOGO
Revenues:
     Growth in product sales in the 2005 second quarter was led by a combination of products that were acquired in the acquisition of Xcel Pharmaceuticals in the 2005 first quarter, continued global brand growth and strong sales of important regional products. Sales of promoted products in North America, where the company has focused specific growth initiatives, were particularly strong. Global brand growth of 25 percent was led by increased sales of Efudex® and Kinerase®.
     The impact of foreign currency translation increased product sales by $8.0 million in the 2005 second quarter, while the net impact to operating income was $2.4 million in the same period.
     The increase in ribavirin royalty revenues was primarily due to increased sales of Rebetol in Japan, offset by declining sales in the United States due to generic competition.
Regional Sales Performance:
     North America product sales increased 71 percent in the 2005 second quarter to $60.4 million compared to $35.3 million in the same period last year. The increase in North America was primarily driven by sales of acquired products and continued strong growth of promoted brands, including Efudex, Kinerase and Cesamet™, moderated by a decline in sales of other products. Sales of products acquired in the Xcel transaction totaled $24.3 million in the 2005 second quarter, 54 percent higher than the $15.8 million in sales recorded by Xcel in the 2004 second quarter. The rapid integration of the Xcel sales force and new sales training has resulted in increased demand, corresponding acceleration of Diastat® sales, which were $14.3 million in the second quarter of 2005, and the successful launch of the improved Migranal® nasal spray.
     European product sales increased 3 percent in the 2005 second quarter to $61.8 million, compared to $60.1 million in the same period last year. The European region benefited from the impact of foreign currency translation of $4.6 million. A number of products in Europe, including Mestinon, Bisocard and Dermatix™ performed well; however, the challenging environment in Europe continues to be very difficult and performance in the quarter was impacted by government-imposed price reductions in many countries.
     Sales in Latin America increased 13 percent to $41.4 million in the 2005 second quarter, compared to $36.5 million in the same period last year. The increase was primarily due to a 97 percent increase in sales of Bedoyecta™ in the quarter as a result of increased promotional activities and strong consumer demand. The Latin America region also benefited from the impact of foreign currency translation of $2.1 million.
     Sales in the Asia, Australia and Africa (AAA) region increased 9 percent in the 2005 second quarter to $17.3 million, compared to $15.8 million in the same period last year, primarily due to increased sales of Nyal™ in Australia.
Financial Metrics:
     The company’s gross margin increased for the 2005 second quarter to 71 percent, compared to 69 percent in the same period last year. The improved gross margin primarily reflects increased sales in North America and a favorable mix of higher margin products.

 

 

VALEANT LOGO
     Selling expenses as a percent of sales were 34 percent for the 2005 second quarter, the same rate experienced in the 2004 second quarter, adjusted for non-GAAP items. General and administrative expenses were 14 percent of sales for the 2005 second quarter, compared to 16 percent, adjusted for non-GAAP items, in the same period last year.
     Research and development expenses were 15 percent of sales for the 2005 second quarter, compared to 14 percent in the same period last year. The increase reflects investments in the company’s late-stage pipeline for the continued development of Viramidine® and pradefovir, and early expenses associated with the start of Phase 3 clinical trials for retigabine.
Balance Sheet Information:
     Cash and marketable securities at June 30, 2005 totaled $357 million, compared to $462 million at December 31, 2004. The reduction of cash was primarily due to the acquisition of Xcel Pharmaceuticals.
Conference Call Information:
     Valeant will host a conference call today at 10:00 a.m. EDT (7:00 a.m. PDT) to discuss its 2005 second quarter results. The dial-in number to participate on this call is (877) 295-5743, confirmation code 7748675. International callers should dial (706) 679-0845, confirmation code 7748675. The company will also webcast the conference call live over the Internet. The webcast may be accessed through the investor relations section of Valeant’s corporate Web site at www.valeant.com.
About Valeant:
     Valeant Pharmaceuticals International (NYSE: VRX) is a global, publicly traded, research-based specialty pharmaceutical company that discovers, develops, manufactures and markets pharmaceutical products primarily in the areas of neurology, infectious disease and dermatology. More information about Valeant can be found at www.valeant.com.
     Viramidine, Diastat, Efudex, Kinerase, Bedoyecta, Cesamet and Nyal are trademarks or registered trademarks of Valeant Pharmaceuticals International or its related companies. All other trademarks are the trademarks or the registered trademarks of their respective owners.
FORWARD-LOOKING STATEMENTS:
     This press release contains forward-looking statements that are based on management’s current expectations and involve risks and uncertainties, including, but not limited to, risks and uncertainties relating to projections of future sales, returns on invested assets and clinical development, regulatory approval processes, marketplace acceptance of the company’s products, success of the company’s strategic repositioning initiatives and the ability of management to execute them, cost-cutting measures, success of the company’s strategic plan and the ability to achieve financial targets and cost reduction goals, general economic factors and business and capital market conditions, general industry trends, changes in tax law requirements and government regulation, adverse events that would require clinical trials to be prematurely terminated, clinical results that

 

 

VALEANT LOGO
indicate continuing clinical and commercial pursuit of product candidates is not advisable, and the fact that Phase 2 clinical trial results are not always indicative of those seen in Phase 3 clinical trials, and other risks detailed from time to time in Valeant’s SEC filings. Valeant wishes to caution the reader that these factors, as well as other factors described in Valeant’s SEC filings, are among the factors that could cause actual results to differ materially from the expectations described in the forward-looking statements.
Financial Tables Follow
###

 

 

Table 1
Valeant Pharmaceuticals International
Consolidated Condensed Statement of Income
For the three and six months ended June 30, 2005 and 2004
                                                 
    Three Months Ended             Six Months Ended        
    June 30,             June 30,        
(In thousands, except per share data)   2005     2004     % Change     2005     2004     % Change  
Product sales
   $ 180,828     $ 147,634       22 %   $ 342,631     $ 279,959       22 %
Ribavirin royalties
     24,206       22,734       6 %     43,541       48,111       -9 %
 
                                        
Total revenues
     205,034       170,368       20 %     386,172       328,070       18 %
 
                                        
 
Cost of goods sold
     52,940       45,938       15 %     101,661       92,650       10 %
Selling expenses
     61,454       53,575       15 %     114,269       101,317       13 %
General and administrative expenses
     25,985       24,849       5 %     50,562       48,724       4 %
Research and development costs
     27,559       20,921       32 %     53,283       39,384       35 %
Acquired in-process research and development (a)
     —       384       —       126,399       11,770       974 %
Restructuring charges (b)
     (1,324 )     20,185       —       371       20,185       -98 %
Amortization expense
     17,211       14,133       22 %     31,179       27,420       14 %
 
     183,825       179,985       2 %     477,724       341,450       40 %
 
                                        
Income (loss) from operations
     21,209       (9,617 )             (91,552 )     (13,380 )        
 
                                                
Interest, net
     (6,944 )     (11,174 )             (13,610 )     (23,073 )        
Loss on early extinguishment of debt
     —       (5,898 )             —       (5,898 )        
Other expense, net including translation and exchange
     (2,631 )     (632 )             (4,422 )     (1,678 )        
 
                                        
Income (loss) from continuing operations before provision for income taxes and minority interest
     11,634       (27,321 )             (109,584 )     (44,029 )        
 
                                                
Provision for income taxes
     10,059       (99 )             26,426       (6,281 )        
Minority interest
     134       103               305       89          
 
                                        
Income (loss) from continuing operations
     1,441       (27,325 )             (136,315 )     (37,837 )        
 
                                                
Loss from discontinued operations, net
     (1,988 )     (13,966 )             (3,491 )     (17,027 )        
 
                                        
 
                                                
Net loss
   $ (547 )   $ (41,291 )           $ (139,806 )   $ (54,864 )        
 
                                        
 
                                                
Basic earnings per common share
                                                
Income (loss) from continuing operations
   $ 0.02     $ (0.32 )           $ (1.50 )   $ (0.45 )        
Discontinued operations, net
     (0.03 )     (0.17 )             (0.04 )     (0.21 )        
 
                                        
Net loss
   $ (0.01 )   $ (0.49 )           $ (1.54 )   $ (0.66 )        
 
                                        
Shares used in per share computation
     92,568       83,880               90,712       83,663          
 
                                        
 
                                                
Diluted earnings per common share
                                                
Income (loss) from continuing operations
   $ 0.02     $ (0.32 )           $ (1.50 )   $ (0.45 )        
Discontinued operations, net
     (0.03 )     (0.17 )             (0.04 )     (0.21 )        
 
                                        
Net loss
   $ (0.01 )   $ (0.49 )           $ (1.54 )   $ (0.66 )        
 
                                        
Shares used in per share computation
     95,591       83,880               90,712       83,663          
 
                                        
 
(a)   Expense associated with the write-off of acquired in-process research and development (“IPR&D”) related to the Xcel Pharmaceuticals, Inc. acquisition in 2005 and the Amarin acquisition in 2004.
 
(b)   Restructuring charges related to our manufacturing rationalization plan. In the second quarter of 2005, we sold two manufacturing sites and recorded a net gain on the sale of these sites.

 

 

Table 2
Valeant Pharmaceuticals International
Consolidated Condensed Statements of Operations and Reconciliation of Non-GAAP Adjustments
                         
    Three Months Ended  
    June 30, 2005  
            Non-GAAP        
    GAAP     Adjustments     Adjusted  
(In thousands, except per share data)                        
Product sales
   $ 180,828     $ —     $ 180,828  
Ribavirin royalties
     24,206       —       24,206  
 
                  
Total revenues
     205,034       —       205,034  
 
                  
 
                        
Cost of goods sold
     52,940       —       52,940  
Selling expenses
     61,454       —       61,454  
General and administrative expenses
     25,985       —       25,985  
Research and development costs
     27,559       —       27,559  
Restructuring charges
     (1,324 )     1,324 (a)     —  
Amortization expense
     17,211       (1,532 )(b)     15,679  
 
                  
 
     183,825       (208 )     183,617  
 
                  
Income from operations
     21,209       208       21,417  
 
                        
Interest, net
     (6,944 )     —       (6,944 )
Other expense, net including translation and exchange
     (2,631 )     —       (2,631 )
 
                  
Income from continuing operations before provision for income taxes and minority interest
     11,634       208       11,842  
 
Provision for income taxes
     10,059       (5,914 )(c)     4,145  
Minority interest
     134       —       134  
 
                  
Income from continuing operations
     1,441       6,122       7,563  
 
                        
Loss from discontinued operations, net
     (1,988 )     —       (1,988 )
 
                  
 
                        
Net income (loss)
   $ (547 )   $ 6,122     $ 5,575  
 
                  
 
                        
Basic earnings per common share
                        
Income from continuing operations
   $ 0.02             $ 0.08  
Discontinued operations, net
     (0.03 )             (0.02 )
 
                    
Net income (loss)
   $ (0.01 )           $ 0.06  
 
                    
Shares used in per share computation
     92,568               92,568  
 
                    
 
                        
Diluted earnings per common share
                        
Income from continuing operations
   $ 0.02             $ 0.08  
Discontinued operations, net
     (0.03 )             (0.02 )
 
                    
Net income (loss)
   $ (0.01 )           $ 0.06  
 
                    
Shares used in per share computation
     95,591               95,591  
 
                    
 
(a)   Net gain on sale of two manufacturing sites.
 
(b)   Impairment charges on products sold in Spain and North America.
 
(c)   The tax adjustment of $5.9 million includes $6.8 million attributable to tax benefits from U.S. net operating losses (“NOL”) not recognized for GAAP purposes partially offset by the reversal of foreign tax valuation allowances and the net tax benefit of the non-GAAP adjustments.
We use certain non-GAAP financial measures, including adjusted net income (loss) from continuing operations and adjusted earnings per share, both of which exclude acquired IPR&D, sales force reduction costs, restructuring costs, impairment charges and various tax issues. We exclude these items in assessing our financial performance, primarily due to their non-operational nature or because they are outside of our normal operations. The non-GAAP financial measures should not be considered as an alternative to, or more meaningful than the GAAP financial measures.

 

Table 2.1
Valeant Pharmaceuticals International
Consolidated Condensed Statements of Operations and Reconciliation of Non-GAAP Adjustments
                         
    Three Months Ended  
    June 30, 2004  
            Non-GAAP        
    GAAP     Adjustments     Adjusted  
(In thousands, except per share data)                        
Product sales
     147,634     $ —     $ 147,634  
Ribavirin royalties
     22,734       —       22,734  
 
                  
Total revenues
     170,368       —       170,368  
 
                  
 
                        
Cost of goods sold
     45,938       —       45,938  
Selling expenses
     53,575       (3,351 )(a)     50,224  
General and administrative expenses
     24,849       (1,159 )(a)     23,690  
Research and development costs
     20,921       —       20,921  
Acquired in-process research and development
     384       (384 )(b)     —  
Restructuring charges
     20,185       (20,185 )(c)     —  
Amortization expense
     14,133       —       14,133  
 
                  
 
     179,985       (25,079 )     154,906  
 
                  
Income (loss) from operations
     (9,617 )     25,079       15,462  
 
                        
Interest, net
     (11,174 )     —       (11,174 )
Other expense, net including translation and exchange
     (6,530 )     5,898 (d)     (632 )
 
                  
Income (loss) from continuing operations before provision for income taxes and minority interest
     (27,321 )     30,977       3,656  
 
                        
Provision for income taxes
     (99 )     1,635 (e)     1,536  
Minority interest
     103       —       103  
 
                  
Income (loss) from continuing operations
     (27,325 )     29,342       2,017  
 
                        
Loss from discontinued operations, net
     (13,966 )     10,080 (f)     (3,886 )
 
                  
 
                        
Net loss
   $ (41,291 )   $ 39,422     $ (1,869 )
 
                  
 
                        
Basic earnings per common share
                        
Income (loss) from continuing operations
   $ (0.32 )           $ 0.02  
Discontinued operations, net
     (0.17 )             (0.04 )
 
                    
Net loss
   $ (0.49 )           $ (0.02 )
 
                    
Shares used in per share computation
     83,880               83,880  
 
                    
 
                        
Diluted earnings per common share
                        
Income (loss) from continuing operations
   $ (0.32 )           $ 0.02  
Discontinued operations, net
     (0.17 )             (0.04 )
 
                    
Net loss
   $ (0.49 )           $ (0.02 )
 
                    
Shares used in per share computation
     83,880               86,435 (g)
 
                    
 
(a)   Sales force reduction costs.
 
(b)   In-process research and development charge related to the acquisition of Amarin.
 
(c)   Restructuring charges were primarily related to our manufacturing rationalization plan and include impairment charges on manufacturing sites and severance charges.
 
(d)   Loss on early extinguishment of debt.
 
(e)   Tax effect for non-GAAP adjustments.
 
(f)   Environmental reserve, net of tax.
 
(g)   Shares used in adjusted diluted EPS includes the effect of diluted shares which are anti-dilutive to GAAP EPS.
See non-GAAP financial measure disclosure on Table 2.

 

 

Table 3
Valeant Pharmaceuticals International
Consolidated Condensed Statements of Operations and Reconciliation of Non-GAAP Adjustments
                         
    Six Months Ended  
    June 30, 2005  
            Non-GAAP        
    GAAP     Adjustments     Adjusted  
In thousands, except per share data                        
Product sales
   $ 342,631     $ —     $ 342,631  
Ribavirin royalties
     43,541       —       43,541  
 
                  
Total revenues
     386,172       —       386,172  
 
                        
Cost of goods sold
     101,661       —       101,661  
Selling expenses
     114,269       —       114,269  
General and administrative expenses
     50,562       —       50,562  
Research and development costs
     53,283       —       53,283  
Acquired in-process research and development
     126,399       (126,399 )(a)     —  
Restructuring charges
     371       (371 )(b)     —  
Amortization expense
     31,179       (1,532 )(c)     29,647  
 
                  
 
     477,724       (128,302 )     349,422  
 
                  
Income (loss) from operations
     (91,552 )     128,302       36,750  
 
                        
Interest, net
     (13,610 )     —       (13,610 )
Other income (expense), net including translation and exchange
     (4,422 )     —       (4,422 )
 
                  
Income (loss) from continuing operations before provision for income taxes and minority interest
     (109,584 )     128,302       18,718  
 
                        
Provision for income taxes
     26,426       (19,875 )(d)     6,551  
Minority interest
     305       —       305  
 
                  
Income (loss) from continuing operations
     (136,315 )     148,177       11,862  
 
                        
Income (loss) from discontinued operations, net
     (3,491 )     —       (3,491 )
 
                  
 
                        
Net income (loss)
   $ (139,806 )   $ 148,177     $ 8,371  
 
                  
 
                        
Basic earnings per common share
                        
Income (loss) from continuing operations
   $ (1.50 )           $ 0.13  
Discontinued operations, net
     (0.04 )             (0.04 )
 
                    
Net income (loss)
   $ (1.54 )           $ 0.09  
 
                    
Shares used in per share computation
     90,712               90,712  
 
                    
 
                        
Diluted earnings per common share
                        
Income (loss) from continuing operations
   $ (1.50 )           $ 0.13  
Discontinued operations, net
     (0.04 )             (0.04 )
 
                    
Net income (loss)
   $ (1.54 )           $ 0.09  
 
                    
Shares used in per share computation
     90,712               94,213 (e)
 
                    
 
(a)   Expense associated with the write-off of acquired IPR&D related to the Xcel Pharmaceuticals acquisition.
 
(b)   Impairment charge on our manufacturing site in China and net gain on sale of three manufacturing sites.
 
(c)   Impairment charges on products sold in Spain and North America.
 
(d)   The acquired IPR&D charge and the restructuring charge are not deductible for income tax purposes. The tax adjustment of $19.9 million includes $21.7 million relating to our estimate of expenses associated with various tax issues raised by the Internal Revenue Service and $10.2 million attributable to U.S. NOLs not recognized for GAAP purposes partially offset by the reversal of foreign tax valuation allowances.
 
(e)   Shares used in adjusted diluted earnings per share (“EPS”) includes the effect of diluted shares which are anti-dilutive to GAAP EPS.
See non-GAAP financial measure disclosure on Table 2.

 

Table 3.1
Valeant Pharmaceuticals International
Consolidated Condensed Statements of Operations and Reconciliation of Non-GAAP Adjustments
                         
    Six Months Ended  
    June 30, 2004  
            Non-GAAP        
    GAAP     Adjustments     Adjusted  
In thousands, except per share data                        
Product sales
   $ 279,959     $ —     $ 279,959  
Ribavirin royalties
     48,111       —       48,111  
 
                  
Total revenues
     328,070       —       328,070  
 
                        
Cost of goods sold
     92,650       —       92,650  
Selling expenses
     101,317       (3,351 )(a)     97,966  
General and administrative expenses
     48,724       (1,159 )(a)     47,565  
Research and development costs
     39,384       —       39,384  
Acquired in-process research and development
     11,770       (11,770 )(b)     —  
Restructuring charges
     20,185       (20,185 )(c)     —  
Amortization expense
     27,420       —       27,420  
 
                  
 
     341,450       (36,465 )     304,985  
 
                  
Income (loss) from operations
     (13,380 )     36,465       23,085  
 
                        
Interest, net
     (23,073 )     —       (23,073 )
Other income (expense), net including translation and exchange
     (7,576 )     5,898 (d)     (1,678 )
 
                  
Loss from continuing operations before provision for income taxes and minority interest
     (44,029 )     42,363       (1,666 )
 
                        
Provision for income taxes
     (6,281 )     5,848 (e)     (433 )
Minority interest
     89       —       89  
 
                  
Loss from continuing operations
     (37,837 )     36,515       (1,322 )
 
                        
Loss from discontinued operations, net
     (17,027 )     10,080 (f)     (6,947 )
 
                  
 
                        
Net loss
   $ (54,864 )   $ 46,595     $ (8,269 )
 
                  
 
                        
Basic earnings per common share
                        
Loss from continuing operations
   $ (0.45 )           $ (0.02 )
Discontinued operations, net
     (0.21 )             (0.08 )
 
                    
Net loss
   $ (0.66 )           $ (0.10 )
 
                    
Shares used in per share computation
     83,663               83,663  
 
                    
 
                        
Diluted earnings per common share
                        
Loss from continuing operations
   $ (0.45 )           $ (0.02 )
Discontinued operations, net
     (0.21 )             (0.08 )
 
                    
Net loss
   $ (0.66 )           $ (0.10 )
 
                    
Shares used in per share computation
     83,663               83,663  
 
                    
 
(a)   Sales force reduction costs.
 
(b)   In-process research and development charge related to the acquisition of Amarin.
 
(c)   Restructuring charges were primarily related to our manufacturing rationalization plan and include impairment charges on manufacturing sites and severance charges.
 
(d)   Loss on early extinguishment of debt.
 
(e)   Tax effect for non-GAAP adjustments.
 
(f)   Environmental reserve, net of tax.
See non-GAAP financial measure disclosure on Table 2.

 

 

Table 4
Valeant Pharmaceuticals International
GAAP reconciliation of basic and diluted earnings per share
For the three and six months ended June 30, 2005 and 2004
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
(In thousands, except per share data)   2005     2004     2005     2004  
Income (loss) from continuing operations
   $ 1,441     $ (27,325 )   $ (136,315 )   $ (37,837 )
 
                                
Non-GAAP pre-tax adjustments:
                                
Acquired IPR&D
     —       384       126,399       11,770  
Sales force reduction costs
     —       4,510       —       4,510  
Product impairment charges
     1,532       —       1,532       —  
Restructuring charges
     (1,324 )     20,185       371       20,185  
Loss on early extinguishment of debt
     —       5,898       —       5,898  
Tax effect on the above charges and tax settlements
     5,914       (1,635 )     19,875       (5,848 )
 
                        
 
                                
Adjusted income (loss) from continuing operations before the above charges
   $ 7,563     $ 2,017     $ 11,862     $ (1,322 )
 
                        
 
                                
Adjusted basic EPS from continuing operations
   $ 0.08     $ 0.02     $ 0.13     $ (0.02 )
 
                        
 
                                
Adjusted diluted EPS from continuing operations
   $ 0.08     $ 0.02     $ 0.13     $ (0.02 )
 
                        
 
                                
Shares used in basic per share calculation
     92,568       83,880       90,712       83,663  
 
                        
 
                                
Shares used in diluted per share calculation
     95,591       86,435       94,213       83,663  
 
                        
Reconciliation of consolidated operating income to non-GAAP adjusted
earnings before interest, taxes, depreciation and amortization
(“EBITDA”)
                                                 
    Three Months Ended             Six Months Ended        
    June 30,             June 30,        
    2005     2004     % Change     2005     2004     % Change  
Consolidated operating income (loss) (GAAP)
   $ 21,209     $ (9,617 )     —     $ (91,552 )   $ (13,380 )     —  
Depreciation and amortization
     24,460       20,212       21 %     45,498       41,869       9 %
 
                                        
EBITDA (non-GAAP) (a)
     45,669       10,595       331 %     (46,054 )     28,489       —  
Non-GAAP adjustments (b)
     (1,324 )     25,079               126,770       36,465          
 
                                        
 
                                                
Adjusted EBITDA (non-GAAP) (a)
   $ 44,345     $ 35,674       24 %   $ 80,716     $ 64,954       24 %
 
                                        
 
(a)   We believe that EBITDA is a meaningful non-GAAP financial measure as an earnings-derived indicator that approximates cashflow. We calculate EBITDA by adding depreciation and amortization back to consolidated operating income. Adjusted EBITDA excludes the additional costs set forth in note (b) below. Adjusted EBITDA, as defined and presented by us, may not be comparable to similar measures reported by other companies.
 
(b)   See tables 2, 2.1, 3 and 3.1 for explanation of non-GAAP adjustments.
See non-GAAP financial measure disclosure in Table 2.

 

Table 5
Valeant Pharmaceuticals International
Supplemental Sales Information
For the three and six months ended June 30, 2005 and 2004
 (in thousands)
                                                 
    Three Months Ended     %     Six Months Ended     %  
    June 30,     Increase/     June 30,     Increase/  
    2005     2004     (Decrease)     2005     2004     (Decrease)  
Dermatology
                                                
Efudix/Efudex®(G)(T)
   $ 12,231     $ 6,852       79 %   $ 31,507     $ 18,774       68 %
Kinerase®(G)(T)
     5,821       4,161       40 %     10,256       8,098       27 %
Oxsoralen-Ultra®(G)(T)
     4,126       5,224       (21 %)     7,094       6,612       7 %
Dermatix®(G)
     2,566       1,927       33 %     4,462       3,304       35 %
Other Dermatology
     10,162       (a)       —       20,341       (a)       —  
 
                                                
Infectious Disease
                                                
Virazole®(G)(T)
     4,039       3,674       10 %     8,234       8,491       (3 %)
Other Infectious Disease
     4,245       (a)       —       10,098       (a)       —  
 
                                                
Neurology
                                                
Mestinon®(G)(T)
     10,434       10,274       2 %     20,294       19,260       5 %
Diastat(T) *
     14,291       —       —       19,468       —       —  
TASMAR®(G)**
     1,533       584       163 %     2,472       584       323 %
Other Neurology
     28,196       (a)       —       49,609       (a)       —  
 
                                                
Other Therapeutic Classes
                                                
Bedoyecta®(T)
     10,976       5,579       97 %     20,220       11,102       82 %
Solcoseryl(T)
     3,911       5,159       (24 %)     8,105       9,212       (12 %)
Nyal(T)
     5,366       4,270       26 %     7,840       6,514       20 %
Vision Care(T)
     2,911       2,779       5 %     6,746       5,685       19 %
Other Pharmaceutical Products
     60,020       97,151       (38 %)     115,885       182,323       (36 %)
 
                                        
 
                                                
Total Product Sales
   $ 180,828     $ 147,634       22 %   $ 342,631     $ 279,959       22 %
 
                                        
 
                                                
Total Top Ten Product Sales(T)
   $ 74,106     $ 47,972       54 %   $ 139,764     $ 93,748       49 %
 
                                        
 
                                                
Total Global Brand Product Sales(G)
   $ 40,750     $ 32,696       25 %   $ 84,319     $ 65,123       29 %
 
                                        
 
(a)   In 2004, the Company tracked other products, but not by therapeutic classes; therefore, our ability to provide additional data by therapeutic classes is not practicable at this time.
 
*   Diastat was acquired in March 2005; total sales of products acquired in the Xcel transaction were $24.3 million and $31.6 million for the three and six months ended June 30, 2005, respectively.
 
**   Tasmar was acquired in April 2004.

 

Table 6
Valeant Pharmaceuticals International
Consolidated Condensed Statement of Revenue and Operating Income — Regional
For the three and six months ended June 30, 2005 and 2004
 (in thousands)
                                                 
    Three Months Ended             Six Months Ended        
    June 30,             June 30,        
Revenues   2005     2004     % Change     2005     2004     % Change  
Pharmaceuticals
                                                
 
                                                
North America
     60,398       35,258       71 %   $ 109,341     $ 62,887       74 %
Latin America
     41,397       36,491       13 %     73,457       65,644       12 %
Europe
     61,753       60,080       3 %     127,628       123,199       4 %
AAA
     17,280       15,805       9 %     32,205       28,229       14 %
 
                                        
Total pharmaceuticals
     180,828       147,634       22 %     342,631       279,959       22 %
 
                                                
Ribavirin royalty revenues
     24,206       22,734       6 %     43,541       48,111       -9 %
 
                                        
 
                                                
Consolidated revenues
   $ 205,034     $ 170,368       20 %   $ 386,172     $ 328,070       18 %
 
                                        
 
                                                
Cost of goods sold
   $ 52,940     $ 45,938       15 %   $ 101,661     $ 92,650       10 %
 
                                        
 
                                                
Gross profit margin on pharmaceutical sales
     71 %     69 %             70 %     67 %        
 
                                        
 
                                                
Operating Income (Loss)
                                                
 
                                                
Pharmaceuticals
                                                
 
                                                
North America
   $ 16,552     $ 10,903       52 %   $ 33,246     $ 17,787       87 %
Latin America
     13,032       12,891       1 %     22,850       18,704       22 %
Europe
     9,137       2,913       214 %     20,871       11,527       81 %
AAA
     2,129       1,619       32 %     2,919       1,496       95 %
 
                                        
 
     40,850       28,326       44 %     79,886       49,514       61 %
 
                                                
Corporate expenses
     (14,344 )     (12,059 )     19 %     (28,711 )     (24,652 )     16 %
 
                                        
Total specialty pharmaceuticals
     26,506       16,267       63 %     51,175       24,862       106 %
 
                                                
Restructuring charges
     1,324       (20,185 )     —       (371 )     (20,185 )     —  
R&D
     (6,621 )     (5,315 )     25 %     (15,957 )     (6,287 )     154 %
Acquired IPR&D
     —       (384 )     —       (126,399 )     (11,770 )     —  
 
                                        
Total consolidated operating income (loss)
   $ 21,209     $ (9,617 )           $ (91,552 )   $ (13,380 )        
 
                                        
                                                                 
    Three Months Ended             Six Months Ended        
Gross Profit   June 30, 2005     %     June 30, 2004     %     June 30, 2005     %     June 30, 2004     %  
Pharmaceuticals
                                                                
 
                                                                
North America
   $ 47,069       78 %   $ 29,301       83 %   $ 87,565       80 %   $ 52,823       84 %
Latin America
     30,963       75 %     27,986       77 %     54,555       74 %     48,228       73 %
Europe
     40,690       66 %     36,455       61 %     82,152       64 %     73,202       59 %
AAA
     9,166       53 %     7,954       50 %     16,698       52 %     13,056       46 %
 
                                                        
 
                                                                
Total pharmaceuticals
   $ 127,888       71 %   $ 101,696       69 %   $ 240,970       70 %   $ 187,309       67 %
 
                                                        

 

Table 7
Valeant Pharmaceuticals International
Consolidated Balance Sheet and Other Data
 (in thousands)
                 
    June 30,     December 31,  
    2005     2004  
Balance Sheet Data
                
 
                
Cash and cash equivalents
   $ 326,155     $ 222,590  
Marketable securities
     31,093       238,918  
 
            
Total cash and marketable securities
   $ 357,248     $ 461,508  
 
            
Accounts receivable, net
   $ 171,763     $ 171,860  
Inventory, net
     122,673       112,250  
Long-term debt
     793,047       793,139  
Total equity
     495,501       476,223  
                 
    Six Months Ended  
    June 30,     June 30,  
    2005     2004  
Other Data
                
 
                
Cash flow provided by (used in) continuing operations
                
 
                
Operating activities
   $ 22,405     $ 24,980  
Investing activities
     (83,998 )     (74,337 )
Financing activities
     174,125       (104,623 )
Effect of exchange rate changes on cash and cash equivalents
     (8,967 )     (287 )
 
            
 
                
Net increase (decrease) in cash and cash equivalents
     103,565       (154,267 )
Net increase (decrease) in marketable securities
     (207,825 )     13,476  
 
            
 
                
Net decrease in cash and marketable securities
   $ (104,260 )   $ (140,791 )
 
            

 

Table 8
Valeant Pharmaceuticals International
Supplemental Non-GAAP Information on Currency Effect
 (in thousands)
                                 
    Three Months Ended   Six Months Ended
    June 30,   June 30,
    2005   2004   2005   2004
Consolidated
                                
 
                                
Product sales
   $ 180,828     $ 147,634     $ 342,631     $ 279,959  
Currency effect
     (8,030 )             (15,334 )        
Product sales, excluding currency impact
   $ 172,798             $ 327,297          
 
                                
Operating income (loss)
   $ 21,209     $ (9,617 )   $ (91,552 )   $ (13,380 )
Currency effect
     (2,432 )             (4,445 )        
Operating income, excluding currency impact
   $ 18,777             $ (95,997 )        
 
                                
Geographic Product Sales
                                
 
                                
North America pharmaceuticals
   $ 60,398     $ 35,258     $ 109,341     $ 62,887  
Currency effect
     (586 )             (1,032 )        
North America pharmaceuticals, excluding currency impact
   $ 59,812             $ 108,309          
 
                                
Latin America pharmaceuticals
   $ 41,397     $ 36,491     $ 73,457     $ 65,644  
Currency effect
     (2,139 )             (1,948 )        
Latin America pharmaceuticals, excluding currency impact
   $ 39,258             $ 71,509          
 
                                
Europe pharmaceuticals
   $ 61,753     $ 60,080     $ 127,628     $ 123,199  
Currency effect
     (4,592 )             (10,974 )        
Europe pharmaceuticals, excluding currency impact
   $ 57,161             $ 116,654          
 
                                
AAA pharmaceuticals
   $ 17,280     $ 15,805     $ 32,205     $ 28,229  
Currency effect
     (713 )             (1,380 )        
AAA pharmaceuticals, excluding currency impact
   $ 16,567             $ 30,825          
Note: Currency effect is determined by comparing adjusted 2005 reported amounts, calculated using 2004 monthly average exchange rates, to the actual 2004 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.