Valeant Pharmaceuticals Reports 2010 Third Quarter Financial Results
- Legacy Biovail 2010 Third Quarter Revenue of $208.3 million
- Legacy Valeant 2010 Partial Third Quarter Revenue of $259.2 million,
Third Quarter product shipments cut-off early across all markets (3 - 13
days)
- Strong Operating Cash Flow from Legacy Biovail of $110.9 million in the
Third Quarter
- Integration Execution Ahead of Schedule
- Board Approves $1.5 Billion Securities Repurchase Program
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<p>MISSISSAUGA, Ontario, <span class="xn-chron">Nov. 4, 2010</span> /CNW/ -- Valeant Pharmaceuticals International, Inc. (NYSE: VRX) (TSX: VRX) announces third quarter financial results for 2010. The merger of Biovail Corporation (Legacy Biovail) and Valeant Pharmaceuticals International (Legacy Valeant) was completed on <span class="xn-chron">September 28, 2010</span>. Accordingly, as required under generally accepted accounting principles, the reported third quarter results reflect the full third quarter financial results of Legacy Biovail and only 3 days' results for Legacy Valeant. The reported revenue included no contribution from Legacy Valeant; as an administrative accommodation, shipping for Legacy Valeant was cut-off in advance of the merger date. These financial statements also reflect the recognition of the assets and liabilities of Legacy Valeant acquired under the merger at their fair values.</p>
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<p>"The Legacy Biovail financial results for the quarter, from my perspective, were disappointing," said J. <span class="xn-person">Michael Pearson</span>, chief executive officer. "The Legacy Valeant business continues to perform well. With one month behind us as a new company, I am pleased with the combined operating performance of our new company and the many new commercial initiatives underway. In the fourth quarter, we expect to generate approximately <span class="xn-money">$500 million</span> in revenue and <span class="xn-money">$200 million</span> in adjusted non-GAAP cash flows from operations, despite the anticipated loss of over <span class="xn-money">$20 million</span> of 4th quarter revenues from the impact of the entry of an authorized generic of Diastat, reduced ribavirin royalties and the elimination of both the Biovail R&D revenues and the GSK alliance payment. More important, with the merger now complete, we have already made the hard decisions about products, people, facilities and development programs, and have begun to put the combined company on a path to sustainable growth and strong cash flow generation."</p>
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Revenue for Legacy Biovail
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<p>Total reported revenue was <span class="xn-money">$208.3 million</span> in the third quarter of 2010 as compared to <span class="xn-money">$212.5 million</span> in the third quarter of 2009, a decrease of 2%.</p>
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<p>Product sales were <span class="xn-money">$201.4 million</span> in the third quarter of 2010, as compared to <span class="xn-money">$204.3 million</span> in the third quarter of 2009, a decrease of 1%. This decline was primarily due to decreased product sales for Wellbutrin XL®, Ultram® ER, Cardizem® LA and Generics, partially offset by increases in Xenazine®, Biovail Pharmaceuticals <span class="xn-location">Canada</span> and the Legacy portfolio.</p>
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<p>Research and development (R&D) revenue was <span class="xn-money">$0.5 million</span> in the third quarter of 2010 as compared to <span class="xn-money">$3.4 million</span> in the third quarter of 2009. This decrease is attributable to the divestiture of Biovail's contract research division (CRD) to Lambda Therapeutic Research Inc. in <span class="xn-chron">July 2010</span>.</p>
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Operating Expenses for Legacy Biovail
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<p>The Company's cost of goods sold increased 23% to <span class="xn-money">$62.1 million</span> in the third quarter of 2010 as compared to <span class="xn-money">$50.7 million</span> in the third quarter of 2009, primarily reflecting the increased supply price in effect for Zovirax® and increased sales of lower-margin Xenazine®.</p>
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<p>Selling, General and Administrative expenses increased 34% in the third quarter of 2010 to <span class="xn-money">$60.2 million</span> as compared to <span class="xn-money">$44.8 million</span> in the third quarter of 2009, primarily due to the inclusion of a non-cash <span class="xn-money">$20.1 million</span> charge, reflecting the valuation of replacement share-based awards arising from the merger transaction.</p>
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<p>Research and development expenses in the quarter of <span class="xn-money">$14.3 million</span> reflect a decrease of 38% or <span class="xn-money">$8.9 million</span> as compared to the third quarter of 2009. Included in the third quarter of 2009 was an IPR&D charge of <span class="xn-money">$8.1 million</span> related to the fipamezole acquisition.</p>
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Merger Related Costs & Expenses
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<p>The Company recorded <span class="xn-money">$28.0 million</span> of merger-related transaction costs in the third quarter.</p>
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<p>Restructuring charges of <span class="xn-money">$95.9 million</span> were recorded in the quarter, virtually all of which arise from the merger and are primarily employee termination costs. The Company estimates it will incur costs of between <span class="xn-money">$135 million</span> and <span class="xn-money">$180 million</span> (of which the non-cash component, including share-based compensation, is expected to be approximately <span class="xn-money">$55 million</span>) in connection with the integration and cost-rationalization activities associated with the merger.</p>
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<p>The tax provision in the quarter ended <span class="xn-chron">September 30, 2010</span> of <span class="xn-money">$60 million</span> was impacted by a number of merger-related items and by the provision for legal settlements in jurisdictions with lower tax rates or where a full valuation allowance exists against available tax loss carryfowards.</p>
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Net Loss and Cash Flow from Operating Activities
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<p>The Company reported a net loss of <span class="xn-money">$207.9 million</span> for the third quarter of 2010, or a loss of <span class="xn-money">$1.27</span> per diluted share, as compared to net income of <span class="xn-money">$40.4 million</span>, or <span class="xn-money">$0.25</span> per diluted share, for the third quarter of 2009.</p>
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<p>Cash flow from operating activities was <span class="xn-money">$110.9 million</span> in the quarter, as compared to <span class="xn-money">$89.2 million</span> for the third quarter of 2009.</p>
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<p>The Company has determined that the provision of a Cash EPS number in the third quarter is not useful given the significant impact of the merger on both earnings and the fully-diluted share computation.</p>
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Legacy Valeant Revenues
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<p>Legacy Valeant revenues were <span class="xn-money">$259.2 million</span> for the partial third quarter of 2010 as compared to <span class="xn-money">$220.3 million</span> in the full third quarter of 2009, an increase of 18%. The partial third quarter of 2010 reflected a significant decrease from Diastat due to the impact of an authorized generic entering the market on <span class="xn-chron">September 1, 2010</span>. Excluding Diastat, product sales increased 26%. It is also important to note that product sales only reflected a partial quarter given the decision to stop shipment of all products three to thirteen days prior to the quarter end.</p>
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Integration
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<p>Significant progress has been made on the integration of Legacy Biovail and Legacy Valeant. Following a disciplined review of the Company's pipeline assets, which focused on strategic and financial hurdles, the decision was made to terminate a number of these projects. The affected counterparties have all been notified. The estimated costs to terminate these arrangements (approximately <span class="xn-money">$15 - $20 million</span> in total) are included in our estimated restructuring costs. As these decisions were reached after the quarter end, none of the termination costs are reflected in the current quarter. We expect spending on all these terminated projects to be completed by the end of the first quarter of 2011.</p>
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<p>As committed, by <span class="xn-chron">October 15, 2010</span> all our employees had been notified as to their status with the ongoing Company. Approximately 500 jobs were eliminated and the majority of those terminated will be leaving by <span class="xn-chron">December 31, 2010</span>. We are in the process of vacating several facilities, including Aliso Viejo, CA, Bridgewater, NJ, Carolina, PR, Chantilly, VA, <span class="xn-location">Fort Worth</span>, TX, Lawrenceville, NJ, and Redwood City, CA.</p>
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2010 Guidance
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<p>Due to the recently completed merger, the Company will not be issuing full year guidance for 2010. For the fourth quarter of 2010, the Company is expecting approximately <span class="xn-money">$500 million</span> in total revenue and approximately <span class="xn-money">$200 million</span> in adjusted non-GAAP cash flows from operations. The Company expects to be in a position to provide financial guidance for 2011 in January of 2011.</p>
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Conference Call and Webcast Information
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<p>The Company will host a conference call and a live Internet webcast along with a slide presentation today at <span class="xn-chron">8:00 a.m. EDT</span> (<span class="xn-chron">5:00 a.m. PDT</span>), <span class="xn-chron">November 4, 2010</span> to discuss its third quarter financial results for 2010. The dial-in number to participate on this call is (877) 295-5743, confirmation code 18324045. International callers should dial (973) 200-3961, confirmation code 18324045. A replay will be available approximately two hours following the conclusion of the conference call through <span class="xn-chron">November 11, 2010</span> and can be accessed by dialing (800) 642-1687, or (706) 645-9291, confirmation code 18324045. The live webcast of the conference call may be accessed through the investor relations section of the Company's corporate website at <a href="http://www.valeant.com">www.valeant.com</a>.</p>
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About Valeant
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<p>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 <a href="http://www.valeant.com">www.valeant.com</a>.</p>
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Forward-looking Statements
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<p>This press release may contain forward-looking statements, including, but not limited to, statements regarding our performance and growth in 2010, anticipated fourth quarter revenues and adjusted cash flows from operations and the expected integration of Legacy Biovail and Legacy Valeant, including spending on Legacy Biovail R&D projects and the departure of employees from the combined company. 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 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.</p>
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Note on Guidance
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<p>The guidance contained in this press release is only effective as of the date given, <span class="xn-chron">November 4, 2010</span>, and will not be updated or confirmed until the Company publicly announces updated or affirmed guidance.</p>
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Non-GAAP Financial Measures
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<p>The company has provided guidance with respect to adjusted non-GAAP cash flow from operations, which is a non-GAAP financial measure that represents adjusted non-GAAP cash flow from operation. The company has not provided a reconciliation of this forward-looking non-GAAP financial measure due to the difficulty in forecasting and quantifying the exact amount of the items excluded from the non-GAAP financial measure that will be included in the comparable GAAP financial measure.</p>
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Contact Information:
Laurie W. Little
949-461-6002
[email protected]
Financial Tables follow.
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<p> </p>
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VALEANT PHARMACEUTICALS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(All dollar amounts are expressed in thousands of U.S. dollars,
except per share data)
(Unaudited)
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<p> </p>
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Three Months Ended
September 30
------------
2010 2009
---- ----
REVENUE
Product sales $201,372 $204,291
Research and development 455 3,392
Royalty and other 6,440 4,840
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208,267 212,523
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EXPENSES
Cost of goods sold (exclusive of
amortization of intangible assets
shown separately below) 62,142 50,669
Research and development 14,298 23,202
Selling, general and
administrative 60,187 44,774
Amortization of intangible assets 35,499 33,121
Restructuring costs and other
costs 95,916 2,413
Acquisition-related costs 28,037 -
Legal settlements 38,500 -
------ ---
334,579 154,179
------- -------
Operating income (loss) (126,312) 58,344
Interest income 126 238
Interest expense (11,218) (10,998)
Write-down of deferred financing
charges (5,774) -
Foreign exchange gain 301 197
Loss on auction rate securities (5,005) (385)
Gain on disposal of investments - 466
Gain on auction rate security
settlement - -
--- ---
Income (loss) before provision for
income taxes (147,882) 47,862
Provision for income taxes 60,000 7,500
------ -----
Net income (loss) $(207,882) $40,362
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<p> </p>
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Basic and diluted earnings (loss)
per share $(1.27) $0.25
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<p> </p>
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Weighted-average number of common
shares outstanding (000s)
Basic 163,295 158,231
Diluted 163,295 158,652
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Cash dividends declared per share $0.095 $0.090
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<p> </p>
<p> </p>
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Nine Months Ended
September 30
------------
2010 2009
---- ----
REVENUE
Product sales $644,650 $557,400
Research and development 6,096 10,362
Royalty and other 15,927 11,615
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666,673 579,377
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EXPENSES
Cost of goods sold (exclusive of
amortization of intangible assets
shown separately below) 184,947 145,566
Research and development 118,443 82,422
Selling, general and
administrative 148,794 137,516
Amortization of intangible assets 102,098 70,402
Restructuring costs and other
costs 99,410 15,128
Acquisition-related costs 35,614 5,596
Legal settlements 38,500 241
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727,806 456,871
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Operating income (loss) (61,133) 122,506
Interest income 548 823
Interest expense (30,997) (14,850)
Write-down of deferred financing
charges (5,774) (537)
Foreign exchange gain 345 918
Loss on auction rate securities (5,552) (4,709)
Gain on disposal of investments - 804
Gain on auction rate security
settlement - 22,000
Income (loss) before provision for
income taxes (102,563) 126,955
Provision for income taxes 74,500 23,500
------ ------
Net income (loss) $(177,063) $103,455
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Basic and diluted earnings (loss)
per share $(1.11) $0.65
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<p> </p>
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Weighted-average number of common
shares outstanding (000s)
Basic 160,082 158,225
Diluted 160,082 158,418
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Cash dividends declared per share $0.280 $0.555
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VALEANT PHARMACEUTICALS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(All dollar amounts are expressed in thousands of U.S. dollars)
(Unaudited)
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<p> </p>
<p> </p>
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At At
September 30 December 31
2010 2009
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ASSETS
Cash, cash equivalents and
marketable securities $598,245 $124,029
Other current assets 702,203 226,611
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1,300,448 350,640
Marketable securities 3,645 11,516
Property, plant and
equipment, net 280,161 103,848
Intangible assets, net 6,470,596 1,335,222
Goodwill 2,963,947 100,294
Deferred tax assets, net of
valuation allowance 88,646 132,800
Other long-term assets, net 28,460 32,724
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$11,135,903 $2,067,044
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<p> </p>
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LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities $845,922 $256,906
Long-term liabilities 4,940,317 455,766
Shareholders' equity 5,349,664 1,354,372
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$11,135,903 $2,067,044
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<p> </p>
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VALEANT PHARMACEUTICALS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(All dollar amounts are expressed in thousands of U.S. dollars)
(Unaudited)
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<p> </p>
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Three Months Ended
September 30
------------
2010 2009
--- ---
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(207,882) $40,362
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 42,338 43,293
Amortization of deferred revenue (4,775) (5,300)
Amortization of discounts on long-
term obligations 2,712 2,682
Amortization and write-down of
deferred financing costs 6,854 1,228
Acquired in-process research and
development - 8,126
Deferred income taxes 59,500 3,800
Payment of accrued legal settlements - (24,648)
Addition to accrued legal settlements 38,500 -
Share-based compensation 68,284 1,126
Impairment charges 5,405 385
Gain on disposal of investments - (466)
Other (346) (89)
Changes in operating assets and
liabilities 100,334 18,698
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Net cash provided by operating
activities 110,924 89,197
Net cash provided by (used in)
investing activities 315,367 (4,514)
Net cash provided by (used in)
financing activities (10,590) (89,214)
Effect of exchange rate changes on
cash and cash equivalents 387 1,019
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Net increase (decrease) in cash and
cash equivalents 416,088 (3,512)
Cash and cash equivalents, beginning
of period 176,566 52,918
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Cash and cash equivalents, end of
period $592,654 $49,406
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<p> </p>
<p> </p>
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Nine Months Ended
September 30
------------
2010 2009
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(177,063) $103,455
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 122,619 102,447
Amortization of deferred revenue (14,326) (15,901)
Amortization of discounts on long-
term obligations 8,350 3,246
Amortization and write-down of
deferred financing costs 9,498 2,326
Acquired in-process research and
development 61,245 38,540
Deferred income taxes 64,500 12,000
Payment of accrued legal settlements (5,950) (30,806)
Addition to accrued legal settlements 38,500 241
Share-based compensation 71,836 4,217
Impairment charges 5,952 12,392
Gain on disposal of investments - (804)
Other (1,022) 80
Changes in operating assets and
liabilities 80,451 1,817
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Net cash provided by operating
activities 264,590 233,250
Net cash provided by (used in)
investing activities 262,135 (748,309)
Net cash provided by (used in)
financing activities (48,794) 245,475
Effect of exchange rate changes on
cash and cash equivalents 260 1,443
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Net increase (decrease) in cash and
cash equivalents 478,191 (268,141)
Cash and cash equivalents, beginning
of period 114,463 317,547
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Cash and cash equivalents, end of
period $592,654 $49,406
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(Logo: http://photos.prnewswire.com/prnh/20101025/LA87217LOGO)
(Logo: http://www.newscom.com/cgi-bin/prnh/20101025/LA87217LOGO)
For further information: Laurie W. Little of Valeant Pharmaceuticals International, Inc., +1-949-461-6002, [email protected] Web Site: http://www.valeant.com
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