8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of the earliest event reported): November 3, 2005

Valeant Pharmaceuticals International

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization) 1-11397
(Commission File Number) 33-0628076
(I.R.S Employer
Identification No.)

3300 Hyland Avenue
Costa Mesa, California 92626
(Address of principal executive offices) (Zip Code)

(714) 545-0100
(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

	Item 2.02 Results of Operations and Financial Condition
	Item 9.01 Financial Statements and Exhibits
SIGNATURES
Index to Exhibits
EXHIBIT 99.1

Item 2.02 Results of Operations and Financial Condition

     On November 3, 2005, Valeant Pharmaceuticals International issued a press release announcing results of operations for the third quarter of 2005 and financial condition as of September 30, 2005. A copy of the press release is attached as Exhibit 99.1 to this report and is incorporated herein by this reference.

     The information in this Item 2.02, including the exhibit attached hereto, will not be treated as filed for the purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section. This information will not be incorporated by reference into any filing under the Securities Act of 1933, or into another filing under the Exchange Act, unless that filing expressly refers to such information.

Item 9.01 Financial Statements and Exhibits

     (c) Exhibits

Exhibit Number	Description
99.1	Press release, dated November 3, 2005.

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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	VALEANT PHARMACEUTICALS INTERNATIONAL
Date: November 3, 2005	By:	/s/ Bary G. Bailey
		Bary G. Bailey
		Executive Vice President and Chief Financial Officer

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Index to Exhibits

Exhibit Number	Description
99.1	Press release, dated November 3, 2005.

-4-

EX-99.1

Investor Relations Contact:
Jeff Misakian, Valeant Pharmaceuticals
714-545-0100 ext. 3309 Media Relations Contact:
Dan Springer, Valeant Pharmaceuticals
714-545-0100 ext. 3381

VALEANT PHARMACEUTICALS REPORTS
THIRD QUARTER 2005 RESULTS

— Revenues Increase 23 Percent; Product Sales Advance 21 Percent —

     COSTA MESA, Calif., November 3, 2005 — Valeant Pharmaceuticals International (NYSE: VRX) today announced results for the third quarter of 2005 that reflect double-digit growth in product sales, continued focus on operating expenses and improved operating profitability.

Third Quarter 2005 vs. Third Quarter 2004 Highlights:

• Revenues increased 23 percent to $205.0 million compared to $166.4 million.

• Product sales increased 21 percent to $183.0 million compared to $151.1 million.

• Ribavirin royalties increased 43 percent to $22.0 million compared to $15.3 million.

• Net loss was $3.7 million, or $0.04 per diluted share, compared to a net loss of $15.9 million, or $0.19 per diluted share.

• Adjusting for certain non-GAAP items, adjusted income from continuing operations was $6.9 million, or $0.07 per diluted share, compared to $2.4 million, or $0.03 per diluted share.

     A reconciliation of GAAP to non-GAAP results is provided in Tables 2-4.

     Timothy C. Tyson, Valeant’s president and chief executive officer, said, “Our performance in the third quarter was fueled by the growth of our key promoted brands, including strategic products acquired earlier in the year. In particular, the launch of the Diastat(R) AcuDial™ brand generated significant sales and was achieved quickly because of the efforts of our regulatory and marketing teams who worked closely with the FDA. Because of our revenue expansion and continued improvement in metric performance, operating income from our specialty pharmaceutical business was up 17 percent in the quarter and adjusted income from continuing operations was substantially ahead of the prior year.”

Revenues:

     The increase in product sales in the 2005 third quarter was led by the addition and growth of products that were purchased from Xcel Pharmaceuticals in early 2005 and growth in other key promoted brands. Acquired products have become a key component of the company’s promoted

brands and, per the company’s strategic plan, have contributed significantly to growth. Overall, promoted brands grew 55 percent in the 2005 third quarter, primarily due to the addition and growth of products acquired in the Xcel transaction, including Diastat(R) and Migranal(R), and increased sales of other products such as Bedoyecta™ and Kinerase(R). Sales of Xcel products totaled $22.9 million in the 2005 third quarter, 30 percent higher than the $17.5 million in sales recorded by Xcel in the 2004 third quarter.

     The impact of foreign currency translation increased product sales by $6.2 million and operating income by $2.0 million in the 2005 third quarter, compared to the same period last year.

     The increase in ribavirin royalty revenue was primarily due to sales of ribavirin in Japan.

Regional Sales Performance:

     North America product sales increased 65 percent in the 2005 third quarter to $60.5 million compared to $36.6 million in the same period last year. The increase in North America was primarily driven by the addition and growth of acquired products, particularly Diastat and Migranal. Diastat sales were $17.5 million in the 2005 third quarter and reflected higher demand and the launch of the Diastat AcuDial delivery system. Growth of other promoted brands, such as Kinerase and Cesamet™ also contributed to the increase in North America.

     European product sales increased slightly in the 2005 third quarter to $61.7 million, compared to $61.5 million in the same period last year. Foreign currency translation in the European region increased sales by $1.8 million. A number of products in Europe, including Bisocard, Mestinon(R), and Dermatix™ performed well. The pricing environment in Europe continues to be challenging and performance in the quarter was impacted by government-imposed price reductions in many countries.

     Sales in Latin America increased 13 percent to $43.4 million in the 2005 third quarter, compared to $38.5 million in the same period last year. The increase was primarily due to a 90 percent increase in sales of Bedoyecta in the quarter. Foreign currency translation contributed $3.3 million to the Latin American sales increase.

     Sales in the Asia, Australia and Africa (AAA) region increased 20 percent in the 2005 third quarter to $17.4 million, compared to $14.5 million in the same period last year, primarily due to increased sales of regional products such as Nyal™ and Reptilase(R).

Financial Metrics:

     The company’s gross margin on product sales increased for the 2005 third quarter to 70 percent, compared to 67 percent in the same period last year. The improved gross margin primarily reflects increased sales in North America, a favorable mix of higher margin products and the company’s manufacturing improvement efforts. In addition, the company took a $1.1 million charge in its Latin America cost of goods sold for assets that should have been eliminated in 1999 associated with products sold through its Brazilian operations.

     Selling expense as a percent of product sales was 32 percent for the 2005 third quarter, compared to 30 percent in the same period last year. General and administrative expenses were 15

2

percent of product sales for the 2005 third quarter, compared to 14 percent, adjusted for non-GAAP items, in the same period last year. The increases reflect the company’s expanded neurology business, promotional costs related to increased activity and line extensions for promoted products and investments in infrastructure to support the growth of the company.

     Research and development expenses were 16 percent of product sales for the 2005 third quarter, compared to 17 percent in the same period last year. Research and development costs continue to reflect investments in the company’s late-stage pipeline for the development of Viramidine(R), pradefovir and retigabine.

Balance Sheet Information:

     Cash and marketable securities at September 30, 2005 totaled $385 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. EST (7:00 a.m. PST) to discuss its 2005 third quarter results. The dial-in number to participate on this call is (877) 295-5743, confirmation code 1259446. International callers should dial (706) 679-0845, confirmation code 1259446. 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, Diastat AcuDial, Migranal, Kinerase, Mestinon, Bedoyecta, Dermatix, Cesamet, Nyal and Reptilase 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 may contain 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

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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 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. Valeant also cautions the reader that undue reliance should not be placed on any of the forward-looking statements, which speak only as of the date of this release. The company undertakes no responsibility to update any of these forward-looking statements to reflect events or circumstances after the date of this release or to reflect actual outcomes.

Financial Tables Follow

###

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Table 1

Valeant Pharmaceuticals International
Consolidated Condensed Statement of Income
For the three and nine months ended September 30, 2005 and 2004

	Three Months Ended									Nine Months Ended
	September 30,									September 30,
	2005			2004			% Change			2005			2004			% Change
(In thousands, except per share data)
Product sales	$	183,004		$	151,099			21	%	$	525,635		$	431,058			22	%
Ribavirin royalties		21,953			15,333			43	%		65,494			63,444			3	%
Total revenues		204,957			166,432			23	%		591,129			494,502			20	%
Cost of goods sold		55,694			49,264			13	%		157,355			141,914			11	%
Selling expenses		59,017			45,046			31	%		173,286			146,363			18	%
General and administrative expenses		26,665			24,962			7	%		77,227			73,686			5	%
Research and development costs		28,883			25,045			15	%		82,166			64,429			28	%
Acquired in-process research and development (a)		—			—			—			126,399			11,770			974	%
Restructuring charges (b)		135			(69	)		(296	%)		506			20,116			(97	%)
Amortization expense		15,782			14,094			12	%		46,961			41,514			13	%
		186,176			158,342			18	%		663,900			499,792			33	%
Income (loss) from operations		18,781			8,090						(72,771	)		(5,290	)
Interest expense, net		(6,884	)		(7,748	)					(20,494	)		(30,821	)
Loss on early extinguishment of debt		—			(13,994	)					—			(19,892	)
Other expense, net including translation and exchange		(1,207	)		(515	)					(5,629	)		(2,193	)
Income (loss) from continuing operations before provision for income taxes and minority interest		10,690			(14,167	)					(98,894	)		(58,196	)
Provision (benefit) for income taxes		15,319			(5,550	)					41,745			(11,831	)
Minority interest		184			(81	)					489			8
Loss from continuing operations		(4,813	)		(8,536	)					(141,128	)		(46,373	)
Income (loss) from discontinued operations, net		1,123			(7,365	)					(2,368	)		(24,392	)
Net loss	$	(3,690	)	$	(15,901	)				$	(143,496	)	$	(70,765	)
Basic earnings per common share
Loss from continuing operations	$	(0.05	)	$	(0.10	)				$	(1.54	)	$	(0.55	)
Discontinued operations, net		0.01			(0.09	)					(0.03	)		(0.29	)
Net loss	$	(0.04	)	$	(0.19	)				$	(1.57	)	$	(0.84	)
Shares used in per share computation		92,626			84,055						91,357			83,795
Diluted earnings per common share
Loss from continuing operations	$	(0.05	)	$	(0.10	)				$	(1.54	)	$	(0.55	)
Discontinued operations, net		0.01			(0.09	)					(0.03	)		(0.29	)
Net loss	$	(0.04	)	$	(0.19	)				$	(1.57	)	$	(0.84	)
Shares used in per share computation		92,626			84,055						91,357			83,795

(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 third quarter of 2005, we sold a manufacturing site and recorded a net gain on the sale of this site.

Table 2

Valeant Pharmaceuticals International
Consolidated Condensed Statements of Operations and Reconciliation of Non-GAAP Adjustments

	Three Months Ended
	September 30, 2005
				Non-GAAP
	GAAP			Adjustments			Adjusted
(In thousands, except per share data)
Product sales	$	183,004		$	—		$	183,004
Ribavirin royalties		21,953			—			21,953
Total revenues		204,957			—			204,957
Cost of goods sold		55,694			—			55,694
Selling expenses		59,017			—			59,017
General and administrative expenses		26,665			—			26,665
Research and development costs		28,883			—			28,883
Restructuring charges		135			(135	)(a)		—
Amortization expense		15,782			—			15,782
		186,176			(135	)		186,041
Income from operations		18,781			135			18,916
Interest expense, net		(6,884	)		—			(6,884	)
Other expense, net including translation and exchange		(1,207	)		—			(1,207	)
Income from continuing operations before provision for income taxes and minority interest		10,690			135			10,825
Provision for income taxes		15,319			(11,530	)(b)		3,789
Minority interest		184			—			184
Income (loss) from continuing operations		(4,813	)		11,665			6,852
Income (loss) from discontinued operations, net		1,123			(1,780	)(c)		(657	)
Net income (loss)	$	(3,690	)	$	9,885		$	6,195
Basic earnings per common share
Income (loss) from continuing operations	$	(0.05	)				$	0.07
Discontinued operations, net		0.01						—
Net income (loss)	$	(0.04	)				$	0.07
Shares used in per share computation		92,626						92,626
Diluted earnings per common share
Income (loss) from continuing operations	$	(0.05	)				$	0.07
Discontinued operations, net		0.01						—
Net income (loss)	$	(0.04	)				$	0.07	(d)
Shares used in per share computation		92,626						95,316

(a)	Related to net loss on sale of manufacturing sites.
(b)	The tax adjustment of $11.5 million includes $5.5 million attributable to tax benefits from U.S. net operating losses (“NOL”) not recognized for GAAP purposes and $3.9 million related to the repatriation of foreign earnings related to the American Jobs Creation Act of 2004.
(c)	Net gain on sale of Hungary discontinued operations.
(d)	Shares used in adjusted diluted earnings per share (“EPS”) includes the effect of diluted shares which are anti-dilutive to GAAP EPS.

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
	September 30, 2004
				Non-GAAP
	GAAP			Adjustments			Adjusted
(In thousands, except per share data)
Product sales		151,099		$	—		$	151,099
Ribavirin royalties		15,333			—			15,333
Total revenues		166,432			—			166,432
Cost of goods sold		49,264			—			49,264
Selling expenses		45,046			(210	)(a)		44,836
General and administrative expenses		24,962			(3,190	)(a),(b)		21,772
Research and development costs		25,045			—			25,045
Restructuring charges		(69	)		69	(c)		—
Amortization expense		14,094			—			14,094
		158,342			(3,331	)		155,011
Income from operations		8,090			3,331			11,421
Interest expense, net		(7,748	)		—			(7,748	)
Other expense, net including translation and exchange		(14,509	)		13,994	(d)		(515	)
Income (loss) from continuing operations before provision for income taxes and minority interest		(14,167	)		17,325			3,158
Provision (benefit) for income taxes		(5,550	)		6,370	(e)		820
Minority interest		(81	)		—			(81	)
Income (loss) from continuing operations		(8,536	)		10,955			2,419
Loss from discontinued operations, net		(7,365	)		—			(7,365	)
Net loss	$	(15,901	)	$	10,955		$	(4,946	)
Basic earnings per common share
Income (loss) from continuing operations	$	(0.10	)				$	0.03
Discontinued operations, net		(0.09	)					(0.09	)
Net loss	$	(0.19	)				$	(0.06	)
Shares used in per share computation		84,055						84,055
Diluted earnings per common share
Income (loss) from continuing operations	$	(0.10	)				$	0.03
Discontinued operations, net		(0.09	)					(0.09	)
Net loss	$	(0.19	)				$	(0.06	)
Shares used in per share computation		84,055						86,543	(f)

(a)	Sales force reduction costs.
(b)	Legal expenses related to the settlement of a bondholder class action lawsuit.
(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)	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

	Nine Months Ended
	September 30, 2005
				Non-GAAP
	GAAP			Adjustments			Adjusted
In thousands, except per share data
Product sales	$	525,635		$	—		$	525,635
Ribavirin royalties		65,494			—			65,494
Total revenues		591,129			—			591,129
Cost of goods sold		157,355			—			157,355
Selling expenses		173,286			—			173,286
General and administrative expenses		77,227			—			77,227
Research and development costs		82,166			—			82,166
Acquired in-process research and development		126,399			(126,399	)(a)		—
Restructuring charges		506			(506	)(b)		—
Amortization expense		46,961			(1,532	)(c)		45,429
		663,900			(128,437	)		535,463
Income (loss) from operations		(72,771	)		128,437			55,666
Interest expense, net		(20,494	)		—			(20,494	)
Other expense, net including translation and exchange		(5,629	)		—			(5,629	)
Income (loss) from continuing operations before provision for income taxes and minority interest		(98,894	)		128,437			29,543
Provision for income taxes		41,745			(31,405	)(d)		10,340
Minority interest		489			—			489
Income (loss) from continuing operations		(141,128	)		159,842			18,714
Loss from discontinued operations, net		(2,368	)		(1,780	)(e)		(4,148	)
Net income (loss)	$	(143,496	)	$	158,062		$	14,566
Basic earnings per common share
Income (loss) from continuing operations	$	(1.54	)				$	0.20
Discontinued operations, net		(0.03	)					(0.04	)
Net income (loss)	$	(1.57	)				$	0.16
Shares used in per share computation		91,357						91,357
Diluted earnings per common share
Income (loss) from continuing operations	$	(1.54	)				$	0.20
Discontinued operations, net		(0.03	)					(0.04	)
Net income (loss)	$	(1.57	)				$	0.16
Shares used in per share computation		91,357						94,612	(f)

(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 four 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 $31.4 million includes $22.2 million relating to our estimate of expenses associated with various tax issues raised by the Internal Revenue Service, $15.7 million attributable to U.S. NOLs not recognized for GAAP purposes and $3.9 million related to the repatriation of foreign earnings related to the American Jobs Creation Act of 2004, partially offset by the reversal of foreign tax valuation allowances.
(e)	Net gain on sale of Hungary discontinued operations.
(f)	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

	Nine Months Ended
	September 30, 2004
				Non-GAAP
	GAAP			Adjustments			Adjusted
In thousands, except per share data
Product sales	$	431,058		$	—		$	431,058
Ribavirin royalties		63,444			—			63,444
Total revenues		494,502			—			494,502
Cost of goods sold		141,914			—			141,914
Selling expenses		146,363			(3,561	)(a)		142,802
General and administrative expenses		73,686			(4,349	)(b)		69,337
Research and development costs		64,429			—			64,429
Acquired in-process research and development		11,770			(11,770	)(c)		—
Restructuring charges		20,116			(20,116	)(d)		—
Amortization expense		41,514			—			41,514
		499,792			(39,796	)		459,996
Income (loss) from operations		(5,290	)		39,796			34,506
Interest expense, net		(30,821	)		—			(30,821	)
Other expense, net including translation and exchange		(22,085	)		19,892	(e)		(2,193	)
Income (loss) from continuing operations before provision for income taxes and minority interest		(58,196	)		59,688			1,492
Provision (benefit) for income taxes		(11,831	)		12,218	(f)		387
Minority interest		8			—			8
Income (loss) from continuing operations		(46,373	)		47,470			1,097
Loss from discontinued operations, net		(24,392	)		10,080	(g)		(14,312	)
Net loss	$	(70,765	)	$	57,550		$	(13,215	)
Basic earnings per common share
Income (loss) from continuing operations	$	(0.55	)				$	0.01
Discontinued operations, net		(0.29	)					(0.17	)
Net loss	$	(0.84	)				$	(0.16	)
Shares used in per share computation		83,795						83,795
Diluted earnings per common share
Income (loss) from continuing operations	$	(0.55	)				$	0.01
Discontinued operations, net		(0.29	)					(0.16	)
Net loss	$	(0.84	)				$	(0.15	)
Shares used in per share computation		83,795						86,543	(h)

(a)	Sales force reduction costs.
(b)	Legal expenses related to the settlement of the bondholder class action lawsuit.
(c)	In-process research and development charge related to the acquisition of Amarin.
(d)	Restructuring charges were primarily related to our manufacturing rationalization plan and include impairment charges on manufacturing sites and severance charges.
(e)	Loss on early extinguishment of debt.
(f)	Tax effect for non-GAAP adjustments.
(g)	Environmental reserve, net of tax.
(h)	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 4

Valeant Pharmaceuticals International
GAAP reconciliation of basic and diluted earnings per share
For the three and nine months ended September 30, 2005 and 2004

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2005			2004			2005			2004
(In thousands, except per share data)
Loss from continuing operations	$	(4,813	)	$	(8,536	)	$	(141,128	)	$	(46,373	)
Non-GAAP pre-tax adjustments:
Acquired IPR&D		—			—			126,399			11,770
Sales force reduction costs, net		—			175			—			4,685
Product impairment charges		—			—			1,532			—
Restructuring charges		135			(69	)		506			20,116
Loss on early extinguishment of debt		—			13,994			—			19,892
Settlement of class action lawsuit		—			3,225			—			3,225
Tax effect on the above charges and tax settlements		11,530			(6,370	)		31,405			(12,218	)
Adjusted income from continuing operations before the above charges	$	6,852		$	2,419		$	18,714		$	1,097
Adjusted basic EPS from continuing operations	$	0.07		$	0.03		$	0.20		$	0.01
Adjusted diluted EPS from continuing operations	$	0.07		$	0.03		$	0.20		$	0.01
Shares used in basic per share calculation		92,626			84,055			91,357			83,795
Shares used in diluted per share calculation		95,316			86,543			94,612			86,543

Reconciliation of consolidated operating income to non-GAAP adjusted
earnings before interest, taxes, depreciation and amortization
(“EBITDA”)

	Three Months Ended							Nine Months Ended
	September 30,							September 30,
	2005		2004		% Change			2005			2004			% Change
Consolidated operating income (loss) (GAAP)	$	18,781	$	8,090		132	%	$	(72,771	)	$	(5,290	)		—
Depreciation and amortization		22,823		20,652		11	%		68,321			62,521			9	%
EBITDA (non-GAAP) (a)		41,604		28,742		45	%		(4,450	)		57,231			—
Non-GAAP adjustments (b)		135		3,331					126,905			39,796
Adjusted EBITDA (non-GAAP) (a)	$	41,739	$	32,073		30	%	$	122,455		$	97,027			26	%

(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 nine months ended September 30, 2005 and 2004
(in thousands)

	Three Months Ended					%			Nine Months Ended					%
	September 30,					Increase/			September 30,					Increase/
	2005		2004			(Decrease)			2005		2004			(Decrease)
Dermatology
Efudix/Efudex®(G)(P)	$	14,365	$	15,442			(7	%)	$	45,872	$	34,216			34	%
Kinerase®(G)(P)		5,921		3,777			57	%		16,177		11,875			36	%
Oxsoralen-Ultra®(G)(P)		449		1,530			(71	%)		7,544		8,142			(7	%)
Dermatix™(G)(P)		2,249		1,794			25	%		6,711		5,098			32	%
Other Dermatology		14,203		(a	)		—			34,543		(a	)		—
Infectious Disease
Virazole®(G)(P)		2,939		1,622			81	%		11,173		10,118			10	%
Other Infectious Disease		4,952		(a	)		—			15,049		(a	)		—
Neurology
Mestinon®(G)(P)		12,206		11,067			10	%		32,500		30,327			7	%
Diastat(P)*		17,525		—			—			36,993		—			—
Librax(P)		4,042		2,811			44	%		9,792		11,314			(13	%)
Migranal(P)*		3,744		—			—			8,648		—			—
Dalmane/Dalmadorm(P)		2,597		3,155			(18	%)		8,568		8,870			(3	%)
Cesamet(P)		2,919		1,474			98	%		6,893		3,252			112	%
Limbitrol(P)		1,430		1,527			(6	%)		4,348		4,106			6	%
TASMAR®(G)(P)**		1,438		2,121			(32	%)		3,910		2,705			45	%
Other Neurology		10,958		(a	)		—			37,050		(a	)		—
Other Therapeutic Classes
Bedoyecta™(P)		14,549		7,652			90	%		34,769		17,415			100	%
Solcoseryl		5,837		4,426			32	%		13,942		13,637			2	%
Nyal(P)		4,191		2,892			45	%		12,031		9,406			28	%
Bisocard(P)		3,284		2,493			32	%		9,303		7,051			32	%
Calcitonin(P)		1,835		1,509			22	%		7,154		8,122			(12	%)
Espaven(P)		2,324		1,751			33	%		5,395		4,555			18	%
Aclotin(P)		1,379		1,506			(8	%)		4,269		4,163			3	%
Espacil(P)		1,909		1,336			43	%		4,000		3,591			11	%
Other Pharmaceutical Products		45,759		81,214	(a)		(44	%)		149,001		233,095	(a)		(36	%)
Total Product Sales	$	183,004	$	151,099			21	%	$	525,635	$	431,058			22	%
Total Global Brand Product Sales(G)	$	39,567	$	37,353			6	%	$	123,887	$	102,481			21	%
Total Promoted Product Sales(P)	$	101,295	$	65,459			55	%	$	276,050	$	184,326			50	%

(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. A total for other pharmaceutical products is not provided as the amount would not be comparable to 2005 periods.
(G)	Global products represent those products with targeted centralized promotional strategy.
(P)	Promoted products represent promoted products with annualized sales greater than $5 million.
*	Diastat and Migranal were acquired in March 2005; total sales of products acquired in the Xcel transaction were $22.9 million and $54.5 million for the three and nine months ended September 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 nine months ended September 30, 2005 and 2004
(in thousands)

	Three Months Ended									Nine Months Ended
	September 30,									September 30,
	2005			2004			% Change			2005			2004			% Change
Revenues
Pharmaceuticals
North America		60,524			36,613			65	%	$	169,865		$	99,500			71	%
Latin America		43,420			38,514			13	%		116,877			104,158			12	%
Europe		61,698			61,472			—			189,326			184,671			3	%
AAA		17,362			14,500			20	%		49,567			42,729			16	%
Total pharmaceuticals		183,004			151,099			21	%		525,635			431,058			22	%
Ribavirin royalty revenues		21,953			15,333			43	%		65,494			63,444			3	%
Consolidated revenues	$	204,957		$	166,432			23	%	$	591,129		$	494,502			20	%
Cost of goods sold	$	55,694		$	49,264			13	%	$	157,355		$	141,914			11	%
Gross profit margin on pharmaceutical sales		70	%		67	%					70	%		67	%
Operating Income (Loss)
Pharmaceuticals
North America	$	16,117		$	12,060			34	%	$	49,363		$	29,847			65	%
Latin America		14,492			10,532			38	%		37,342			29,236			28	%
Europe		9,858			14,245			(31	%)		30,729			25,772			19	%
AAA		2,334			1,278			83	%		5,253			2,774			89	%
		42,801			38,115			12	%		122,687			87,629			40	%
Corporate expenses		(14,955	)		(14,408	)		4	%		(43,666	)		(39,060	)		12	%
Total specialty pharmaceuticals		27,846			23,707			17	%		79,021			48,569			63	%
Restructuring charges		(135	)		69			—			(506	)		(20,116	)		(97	%)
R&D		(8,930	)		(15,686	)		(43	%)		(24,887	)		(21,973	)		13	%
Acquired IPR&D		—			—			—			(126,399	)		(11,770	)		974	%
Total consolidated operating income (loss)	$	18,781		$	8,090					$	(72,771	)	$	(5,290	)

	Three Months Ended										Nine Months Ended
	Sept. 30, 2005		%			Sept. 30, 2004		%			Sept. 30, 2005		%			Sept. 30, 2004		%
Gross Profit
Pharmaceuticals
North America	$	49,092		81	%	$	29,528		81	%	$	136,657		80	%	$	82,351		83	%
Latin America		31,712		73	%		25,757		67	%		86,267		74	%		73,985		71	%
Europe		37,420		61	%		38,488		63	%		119,572		63	%		111,690		60	%
AAA		9,086		52	%		8,062		56	%		25,784		52	%		21,118		49	%
Total pharmaceuticals	$	127,310		70	%	$	101,835		67	%	$	368,280		70	%	$	289,144		67	%

Table 7

Valeant Pharmaceuticals International
Consolidated Balance Sheet and Other Data
(in thousands)

	September 30,		December 31,
	2005		2004
Balance Sheet Data
Cash and cash equivalents	$	369,818	$	222,590
Marketable securities		15,222		238,918
Total cash and marketable securities	$	385,040	$	461,508
Accounts receivable, net	$	168,611	$	171,860
Inventory, net		130,260		112,250
Long-term debt		789,721		793,139
Total equity		487,844		476,223

	Nine Months Ended
	September 30,			September 30,
	2005			2004
Other Data
Cash flow provided by (used in) continuing operations
Operating activities	$	57,257		$	37,933
Investing activities		(85,864	)		(170,147	)
Financing activities		183,905			(362,237	)
Effect of exchange rate changes on cash and cash equivalents		(8,070	)		1,082
Net increase (decrease) in cash and cash equivalents		147,228			(493,369	)
Net increase (decrease) in marketable securities		(223,696	)		91,298
Net decrease in cash and marketable securities	$	(76,468	)	$	(402,071	)

Table 8

Valeant Pharmaceuticals International
Supplemental Non-GAAP Information on Currency Effect
(in thousands)

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2005			2004		2005			2004
Consolidated
Product sales	$	183,004		$	151,099	$	525,635		$	431,058
Currency effect		(6,166	)				(21,500	)
Product sales, excluding currency impact	$	176,838				$	504,135
Operating income (loss)	$	18,781		$	8,090	$	(72,771	)	$	(5,290	)
Currency effect		(2,013	)				(6,458	)
Operating income, excluding currency impact	$	16,768				$	(79,229	)
Geographic Product Sales
North America pharmaceuticals	$	60,524		$	36,613	$	169,865		$	99,500
Currency effect		(633	)				(1,665	)
North America pharmaceuticals, excluding currency impact	$	59,891				$	168,200
Latin America pharmaceuticals	$	43,420		$	38,514	$	116,877		$	104,158
Currency effect		(3,288	)				(5,236	)
Latin America pharmaceuticals, excluding currency impact	$	40,132				$	111,641
Europe pharmaceuticals	$	61,698		$	61,472	$	189,326		$	184,671
Currency effect		(1,838	)				(12,812	)
Europe pharmaceuticals, excluding currency impact	$	59,860				$	176,514
AAA pharmaceuticals	$	17,362		$	14,500	$	49,567		$	42,729
Currency effect		(407	)				(1,787	)
AAA pharmaceuticals, excluding currency impact	$	16,955				$	47,780

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.