Valeant Pharmaceuticals Reports 2010 Second Quarter Financial Results

-- Revenue increased 33% to $255.6 million; Product Sales increased 32%

ALISO VIEJO, Calif. Aug. 2 /PRNewswire-FirstCall/ -- Valeant Pharmaceuticals International (NYSE: VRX) today announced second quarter financial results for 2010.

“The team at Valeant accomplished a great deal this quarter, both operationally and strategically,” stated J. Michael Pearson, chairman and chief executive officer.  “We completed five acquisitions in the quarter and grew our top and bottom line over 30% over 2009.  We also embarked upon an exciting new strategic opportunity with our announcement of the proposed merger between Biovail and Valeant, which we hope to complete before the end of the year.  These activities continue the transformation of Valeant into a diversified, specialty pharmaceutical company focused on growth and cash flow generation.”

Revenues

Total revenue was $255.6 million in the second quarter of 2010 as compared to $191.7 million in the second quarter of 2009, an increase of 33%.

Product sales in the Specialty Pharmaceuticals segment were $126.9 million in the second quarter of 2010, as compared to $96.6 million in the second quarter of 2009, an increase of 31%.  At constant exchange rates, Specialty Pharmaceuticals product sales increased 27%.  Within the Specialty Pharmaceuticals segment, alliance and service revenue was $30.1 million in the second quarter of 2010 as compared to $12.2 million in the year-ago quarter, which included an $11.2 million profit share related to the 1% clindamycin and 5% benzoyl peroxide product (IDP-111) that was launched by Mylan in August 2009.

Product sales in Branded Generics - Latin America were $51.8 million in the second quarter of 2010 as compared to $36.2 million in the same period in 2009, an increase of 43%.  At constant exchange rates, product sales in Latin America increased 33%.

Product sales in Branded Generics - Europe were $40.8 million in the second quarter of 2010 as compared to $34.0 million in the same period in 2009, an increase of 20%. At constant exchange rates, product sales in Europe increased 17%.

Ribavirin royalties were $6.0 million in the second quarter of 2010 as compared to $12.6 million in the second quarter of 2009, a decrease of 53%.  This expected decrease is primarily attributable to the expiration of royalty terms in most European countries.

Organic Growth

Organic growth for total product sales in the second quarter of 2010 was 6% as compared to the second quarter of 2009. This included the Specialty Pharmaceutical organic growth rate of 7%; Branded Generics - Latin America organic growth rate of 1% and Branded Generics - Europe organic growth rate of 9%. Organic growth for the first six months of 2010 was 9% as compared to the first six months of 2009.  This included the Specialty Pharmaceutical organic growth rate of 15%; Branded Generics - Latin America organic growth rate of 2% and Branded Generics - Europe organic growth rate of 0%.

Income and Cash Flow

Income from continuing operations was $32.2 million for the second quarter of 2010, or $0.39 per diluted share, as compared to $33.0 million, or $0.39 per diluted share, for the second quarter of 2009.  On an adjusted non-GAAP (Cash) EPS basis, adjusted income from continuing operations was $57.1 million, or $0.69 per diluted share, in the second quarter of 2010 as compared to adjusted income from continuing operations of $43.2 million, or $0.52 per diluted share, in the second quarter of 2009, an increase of 33%.  

GAAP cash flow from operations, which includes acquisition transaction fees, for the second quarter of 2010 was $59.9 million as compared to $44.5 million for the second quarter of 2009. Adjusted non-GAAP cash flow from operations for the second quarter of 2010 was $61.7 million as compared to $55.0 million for the second quarter of 2009.

Merger With Biovail Corporation

On June 20, 2010, Valeant and Biovail entered into a definitive merger agreement providing for a business combination whereby Valeant will merge with a wholly owned subsidiary of Biovail and the name of the combined company will be changed to Valeant Pharmaceuticals International, Inc.  Valeant and Biovail currently expect to complete the merger before the end of 2010, subject to the receipt of required shareholder and regulatory approvals and the satisfaction or waiver of the financing and other conditions to the merger described in the merger agreement. On July 22, 2010, the Federal Trade Commission granted early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, with respect to the proposed merger.

2010 Guidance

The company is updating its previous adjusted non-GAAP (Cash) EPS target and is now targeting adjusted non-GAAP (cash) EPS between $2.80 - $3.05 in 2010, up from prior guidance of $2.65 to $2.90. This guidance does not assume the completion of any business-development transactions not completed as of August 2, 2010 and excludes the potential effect of certain costs incurred and expected to be incurred in connection with the pending Biovail merger.  

Conference Call and Webcast Information

Valeant will host a conference call and a live Internet webcast along with a slide presentation today at 10:00 a.m. EDT (7:00 a.m. PDT) to discuss its second quarter financial results for 2010. The dial-in number to participate on this call is (877) 295-5743, confirmation code 87267374. International callers should dial (973) 200-3961, confirmation code 87267374. A replay will be available approximately two hours following the conclusion of the conference call through August 9, 2010 and can be accessed by dialing (800) 642-1687, or (706) 645-9291, confirmation code 87267374. The live webcast of the conference call 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 multinational specialty pharmaceutical company that develops and markets a broad range of pharmaceutical products primarily in the areas of neurology and dermatology. More information about Valeant can be found at www.valeant.com.

Forward-looking Statements

This press release may contain forward-looking statements, including, but not limited to, statements regarding our performance and growth in 2010 and guidance with respect to expected adjusted non-GAAP (cash) earnings per share, the transformation of Valeant, and the expected timing and consummation of the proposed merger with Biovail. 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 and Biovail’s filings with the SEC and, in Biovail’s case, 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.

Non-GAAP Information  

To supplement the financial measures prepared in accordance with generally accepted accounting principles (GAAP), the company uses non-GAAP financial measures that exclude certain items. Management uses non-GAAP financial measures internally for strategic decision making, forecasting future results and evaluating current performance. By disclosing non-GAAP financial measures, management intends to provide investors with a more meaningful, consistent comparison of the company’s core operating results and trends for the periods presented. Non-GAAP financial measures are not prepared in accordance with GAAP; therefore, the information is not necessarily comparable to other companies and should be considered as a supplement to, not a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP.  A reconciliation of GAAP to non-GAAP measures can be found in the tables below.  The company has provided guidance with respect to adjusted non-GAAP (cash) earnings per share, which is a non-GAAP financial measure that represents earnings per share, excluding special charges and credits, restructuring and acquisition-related costs, amortization expense, ASC 470-20 (FSP APB 14-1) interest, gain on early extinguishment of debt and the non-GAAP tax effect of such charges. 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.

Note on Guidance

The guidance contained in this press release is only effective as of the date given, August 3, 2010, and will not be updated or confirmed until the Company publicly announces updated or affirmed guidance.

Financial Tables, including a reconciliation of GAAP to non-GAAP financial measures, follow.

Additional Information

In connection with the proposed merger, Biovail has filed with the SEC a Registration Statement on Form S-4 that includes a preliminary joint proxy statement of Valeant and Biovail that also constitutes a prospectus of Biovail.  Valeant and Biovail will mail the definitive joint proxy statement/prospectus to their respective shareholders. INVESTORS ARE URGED TO READ THE PRELIMINARY JOINT PROXY STATEMENT/PROSPECTUS AND THE DEFINITIVE VERSION THEREOF WHEN IT BECOMES AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION.  Investors may obtain the preliminary joint proxy statement/prospectus and the definitive version thereof when it becomes available, as well as other filings containing information about Valeant and Biovail, free of charge, at the website maintained by the SEC at www.sec.gov and, in Biovail’s case, on SEDAR at www.sedar.com.  Investors may also obtain these documents, free of charge, from Valeant’s website (www.valeant.com) under the tab “Investor Relations” and then under the heading “SEC Filings,” or by directing a request to Valeant, One Enterprise, Aliso Viejo, California, 92656, Attention: Corporate Secretary.  Investors may also obtain these documents, free of charge, from Biovail’s website (www.biovail.com) under the tab “Investor Relations” and then under the heading “Regulatory Filings” and then under the item “Current SEC Filings,” or by directing a request to Biovail, 7150 Mississauga Road, Mississauga, Ontario, Canada, L5N 8M5, Attention: Corporate Secretary.

The respective directors and executive officers of Valeant and Biovail and other persons may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction.  Information regarding Valeant’s directors and executive officers is available in its Annual Report on Form 10-K for the fiscal year ended December 31, 2009, which was filed with the SEC on February 24, 2010, and in its definitive proxy statement filed with the SEC by Valeant on March 25, 2010.  Information regarding Biovail’s directors and executive officers is available in its Annual Report on Form 10-K for the fiscal year ended December 31, 2009, which was filed with the SEC on February 26, 2010, and in its definitive proxy statement filed with the SEC and CSA by Biovail on April 21, 2010.  Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, is contained in the preliminary joint proxy statement/prospectus filed with the SEC.  These documents can be obtained free of charge from the sources indicated above.  Other information regarding the interests of the participants in the proxy solicitation will be included in the joint proxy statement/prospectus and other relevant materials to be filed with the SEC and the CSA when they become available.  This communication shall not constitute an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.  No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.

Contact:

Laurie W. Little

Valeant Pharmaceuticals

949-461-6002

[email protected]



Valeant Pharmaceuticals International

Table 1

Statement of Income


For the Three and Six Months Ended June 30, 2010 and 2009















Three Months Ended




Six Months Ended




June 30,




June 30,



(In thousands, except per share data)

2010


2009


% Change


2010


2009


% Change













Product sales

$ 219,458


$ 166,865


32%


$ 423,965


$ 319,698


33%

Service revenue

4,396


5,606


-22%


9,356


12,344


-24%

Alliance revenue

31,720


19,227


65%


54,244


37,579


44%

Total revenues

255,574


191,698


33%


487,565


369,621


32%













Cost of goods sold

60,638


42,750


42%


114,841


82,447


39%

Cost of services

3,279


5,337


-39%


6,445


9,663


-33%

Selling, general and administrative ("SG&A")

73,485


61,626


19%


144,026


125,842


14%

Research and development costs, net

11,951


9,146


31%


22,353


17,880


25%

Special charges and credits

1,012


1,974




1,550


1,974



Restructuring and acquisition-related costs

10,706


2,603




11,730


3,814



Amortization expense

22,335


17,105


31%


41,665


34,109


22%


183,406


140,541


30%


342,610


275,729


24%

Income from operations

72,168


51,157




144,955


93,892















Interest expense, net

(20,171)


(7,825)




(32,802)


(14,004)



Gain on early extinguishment of debt

-


2,777




-


7,376



Other income (expense), net including translation and exchange

(1,413)


(647)




(1,938)


564















Income from continuing operations before income taxes

50,584


45,462




110,215


87,828















Provision for income taxes

18,348


12,427




42,378


23,996



Income from continuing operations

32,236


33,035




67,837


63,832















Income (loss) from discontinued operations, net

17


(175)




432


223















Net income

$   32,253


$   32,860




$   68,269


$   64,055















Earnings per share:
























Basic:












Income from continuing operations

$       0.42


$       0.40




$       0.87


$       0.77



Discontinued operations

-


-




0.01


-



Basic earnings per share

$       0.42


$       0.40




$       0.88


$       0.77



Shares used in per share computation

77,136


82,794




77,797


82,733















Diluted:












Income from continuing operations

$       0.39


$       0.39




$       0.82


$       0.76



Discontinued operations

-


-




0.01


0.01



Diluted earnings per share

$       0.39


$       0.39




$       0.83


$       0.77



Shares used in per share computation

82,638


83,673




82,355


83,566





Valeant Pharmaceuticals International

Table 2

Reconciliation of GAAP EPS to Adjusted Non-GAAP (Cash) EPS


For the Three and Six Months Ended June 30, 2010 and 2009






















Three Months Ended


Six Months Ended



June 30,


June 30,

(In thousands, except per share data)


2010


2009


2010


2009










Income from continuing operations


$ 32,236


$ 33,035


$   67,837


$ 63,832










Non-GAAP adjustments (a)(b):









Inventory step-up (c)


2,500


-


2,500


-

Special charges and credits


1,012


1,974


1,550


1,974

Restructuring and acquisition-related costs (d)


10,706


2,603


11,730


3,814

Amortization expense


22,335


17,105


41,665


34,109



36,553


21,682


57,445


39,897

ASC 470-20 (FSP APB 14-1) interest


2,037


2,695


4,034


6,174

Gain on early extinguishment of debt


-


(2,778)


-


(7,376)

Tax


(13,755)


(11,388)


(19,432)


(21,225)

Total adjustments


24,835


10,211


42,047


17,470










Adjusted income from continuing operations


$ 57,071


$ 43,246


$ 109,884


$ 81,302










GAAP earnings  per share - diluted


$     0.39


$     0.39


$       0.82


$     0.76










Adjusted Non-GAAP (Cash) earnings per share - diluted


$     0.69


$     0.52


$       1.33


$     0.97










Shares used in diluted per share calculation - GAAP earnings per share


82,638


83,673


82,355


83,566










Shares used in diluted per share calculation - Adjusted Non-GAAP (Cash) earnings per share


82,638


83,673


82,355


83,566



















(a) To supplement the financial measures prepared in accordance with generally accepted accounting principles (GAAP), the company uses non-GAAP financial measures
that exclude certain items, such as amortization of inventory step-up, special charges and credits, restructuring and acquisition-related costs, amortization expense, ASC
470-20 (FSP APB 14-1) interest, gain on early extinguishment of debt and the non-GAAP tax effect of such charges. Management uses non-GAAP financial measures
internally for strategic decision making, forecasting future results and evaluating current performance. By disclosing non-GAAP financial measures, management intends to
provide investors with a more meaningful, consistent comparison of the company’s core operating results and trends for the periods presented. Non-GAAP financial
measures are not prepared in accordance with GAAP; therefore, the information is not necessarily comparable to other companies and should be considered as a
supplement to, not a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP.

(b) This table includes Adjusted Non-GAAP (Cash) Earnings Per Share, which is a non-GAAP financial measure that represents earnings per share, excluding amortization
of inventory step-up, special charges and credits, restructuring and acquisition-related costs, amortization expense, ASC 470-20 (FSP APB 14-1) interest, gain on early
extinguishment of debt and the non-GAAP tax effect of such charges.

(c) ASC 805, accounting for business combinations requires an inventory fair value step-up. The impact of the amortization of this step-up is included in cost of goods sold.
For the three and six months ended June 30, 2010 the impact is $0.6 million for Instituto Terapeutico Delta, $0.8 million for another acquired company in Brazil and $1.1 million for our acquisition of Aton Pharma, Inc.

(d) Restructuring and acquisition-related costs for the three and six months ended June 30, 2010 include $4.8 million of expenses related to the merger with Biovail, $3.2
million related to the acquisition and integration of Aton Pharma, Inc. in the U.S., $0.2 million related to the acquisition and integration of Dr. Renaud and Vital Sciences in
Canada, as well as $1.8 million and $2.2 million related to the acquisition and integration of Instituto Terapeutico Delta and another acquired company in
Brazil, $0.6 million  and $0.8 million related to the acquisition and integration of PFI in Australia, and $0.1 million and $0.4 million related to the acquisition and integration of
Tecnofarma S.A. de C.V. in Mexico. Restructuring charges in the six months ended June 30, 2010 were $0.2 million.




Valeant Pharmaceuticals International


Table 3


Statement of Revenue - by Segment



For the Three and Six Months Ended June 30, 2010 and 2009



(In thousands)





Three Months Ended




June 30,


Revenue (a)(b)


2010


2009


%
Change


2010
currency
impact


2010
excluding
currency
impact


%
Change


2010
acquisition
impact at
2009 rates


2010
excluding
currency &
acquisition
impact


Q2 2010
growth at
constant
currency, net
of
acquisitions


Specialty pharmaceuticals




















U.S.




















     Dermatology


$   35,694


$   29,486


21%


$        (17)


$   35,677


21%


$      (3,668)


$     32,009


9%


     Neurology & Other


54,727


41,842


31%


-


54,727


31%


(7,822)


46,905


12%


     Total U.S.


90,421


71,328


27%


(17)


90,404


27%


(11,490)


78,914


11%


Canada


22,817


15,831


44%


(2,674)


20,143


27%


(3,543)


16,600


5%


Australia


13,663


9,475


44%


(1,936)


11,727


24%


(3,936)


7,791


-18%


     Specialty pharmaceuticals product sales


126,901


96,634


31%


(4,627)


122,274


27%


(18,969)


103,305


7%


Services and alliance revenue


30,143


12,196


NM


13


30,156


NM


-


30,156


NM


Total specialty pharmaceuticals revenue


157,044


108,830


44%


(4,614)


152,430


40%


(18,969)


133,461


23%






















Branded generics - Latin America product sales


51,772


36,199


43%


(3,464)


48,308


33%


(11,837)


36,471


1%


Branded generics - Europe product sales


40,785


34,032


20%


(979)


39,806


17%


(2,713)


37,093


9%






















Alliances (ribavirin royalties only)


5,973


12,637


-53%


-


5,973


-53%


-


5,973


NM






















Total revenue


$ 255,574


$ 191,698


33%


$   (9,057)


$ 246,517


29%


$    (33,519)


$   212,998


11%


Total product sales included above


$ 219,458


$ 166,865


32%


$   (9,070)


$ 210,388


26%


$    (33,519)


$   176,869


6%






Six Months Ended




June 30,


Revenue (a)(b)


2010


2009


%
Change


2010
currency
impact


2010
excluding
currency
impact


%
Change


2010
acquisition
impact at
2009 rates


2010
excluding
currency &
acquisition
impact


Jun Ytd 2010
growth at
constant
currency, net
of
acquisitions


Specialty pharmaceuticals




















U.S.




















     Dermatology


$   70,219


$   60,454


16%


$        (37)


$   70,182


16%


$      (4,634)


$     65,548


8%


     Neurology & Other


106,480


77,853


37%


-


106,480


37%


(7,822)


98,658


27%


     Total U.S.


176,699


138,307


28%


(37)


176,662


28%


(12,456)


164,206


19%


Canada


44,640


30,319


47%


(6,219)


38,421


27%


(5,572)


32,849


8%


Australia


26,304


14,321


84%


(5,282)


21,022


47%


(8,408)


12,614


-12%


Specialty pharmaceuticals product sales


247,643


182,947


35%


(11,538)


236,105


29%


(26,436)


209,669


15%


Services and alliance revenue


52,666


24,101


NM


(113)


52,553


NM


-


52,553


NM


Total specialty pharmaceuticals revenue


300,309


207,048


45%


(11,651)


288,658


39%


(26,436)


262,222


27%






















Branded generics - Latin America
  product sales


93,829


67,381


39%


(9,037)


84,792


26%


(15,976)


68,816


2%


Branded generics - Europe
  product sales


82,493


69,370


19%


(7,909)


74,584


8%


(4,983)


69,601


0%






















Alliances (ribavirin royalties only)


10,934


25,822


-58%


-


10,934


-58%


-


10,934


NM






















Total revenue


$ 487,565


$ 369,621


32%


$ (28,597)


$ 458,968


24%


$    (47,395)


$   411,573


11%


Total product sales included above


$ 423,965


$ 319,698


33%


$ (28,484)


$ 395,481


24%


$    (47,395)


$   348,086


9%








Three Months Ended




Six Months Ended






June 30,




June 30,






2010


2009




2010


2009


Alliance Revenue


Segment












Ribavirin royalty


Alliances


$     5,973


$     12,637




$   10,934


$     25,822


1% clindamycin and 5% benzoyl peroxide (IDP 111) profit share


Specialty


11,232


-




20,530


-


Other royalties


Specialty


4,160


3,790




7,585


5,639


License payments


Specialty


765


-




1,466


-


GSK collaboration


Specialty


9,590


2,800




13,729


6,118
















Total alliance revenue




$   31,720


$     19,227




$   54,244


$     37,579
















(a) Note: Currency effect for constant currency sales is determined by comparing 2010 reported amounts adjusted to exclude currency impact, calculated using 2009 monthly
average exchange rates, to the actual 2009 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.


(b) See footnote (a) to Table 2.




Valeant Pharmaceuticals International

Table 4


Statement of Cost of Goods Sold and Non-GAAP Operating Income - by Segment



For the Three and Six Months Ended June 30, 2010 and 2009



(In thousands)


4.1

Cost of goods sold





Three Months Ended


Six Months Ended




June 30,


June 30,




2010


% of
product
sales


2009


% of
product
sales


2010


% of
product
sales


2009


% of
product
sales


Specialty pharmaceuticals


$           22,120


17%


$        18,181


19%


$         45,123


18%


$     33,544


18%


Branded generics - Latin America


20,656


40%


9,598


27%


33,621


36%


17,496


26%


Branded generics - Europe


17,638


43%


14,984


44%


35,770


43%


31,401


45%




















Corporate


224




(13)




327




6
























$           60,638


28%


$        42,750


26%


$       114,841


27%


$     82,447


26%



4.2

Non-GAAP operating income excluding currency impact (a)(b)
































Three Months Ended




June 30,




2010


% of
revenue


2010
currency
impact


2010
excluding
currency
impact


% of
revenue


2009


% of
revenue


Specialty pharmaceuticals


$           88,853


57%


$        (1,516)


$        87,337


56%


$        49,842


46%


Branded generics - Latin America


15,097


29%


(844)


14,253


28%


14,628


40%


Branded generics - Europe


10,830


27%


(342)


10,488


26%


8,196


24%




















114,780


46%


(2,702)


112,078


45%


72,666


41%


















Alliances & Corporate


(6,059)




-


(6,059)




174






















$         108,721


43%


$        (2,702)


$      106,019


41%


$        72,840


38%






Six Months Ended




June 30,




2010


% of
revenue


2010
currency
impact


2010
excluding
currency
impact


% of
revenue


2009


% of
revenue


Specialty pharmaceuticals


$         167,520


56%


$        (3,574)


$      163,946


55%


$        94,083


45%


Branded generics - Latin America


29,623


32%


(2,909)


26,714


28%


27,615


41%


Branded generics - Europe


22,530


27%


(2,481)


20,049


24%


17,294


25%




















219,673


46%


(8,964)


210,709


44%


138,992


40%


















Alliances & Corporate


(17,273)




-


(17,273)




(5,203)






















$         202,400


42%


$        (8,964)


$      193,436


40%


$      133,789


36%


















(a) See footnote (a) to Table 2


(b) Non-GAAP operating income of $108.7 million and $202.4 million for the three  and six months ended June 30, 2010 excludes the following GAAP items from GAAP operating income of $72.2 million and $145.0 million: amortization of inventory step-up of $2.5 million and $2.5 million, special charges and credits of $1.0 million and $1.5 million, restructuring and acquisition-related costs of $10.7 million and $11.7 million and amortization expense of $22.3 million and $41.7 million respectively. Non-GAAP operating income of $72.8 million and $133.8 million for the three and six months ended June 30, 2009 excludes the following GAAP items from GAAP operating income of $51.2 million and $93.9 million: special charges and credits of $2.0 million and $2.0 million, restructuring and acquisition-related costs of $2.6 million and $3.8 million and amortization expense of $17.0 million and $34.1 million respectively.



Valeant Pharmaceuticals International

Table 5

Consolidated  Balance Sheet and Other Data


(In thousands)




As of


As of







June 30,


December 31,





5.1

Cash

2010


2009















Cash and cash equivalents

$        75,383


$          68,080






Marketable securities

-


13,785






Total cash and marketable securities

$        75,383


$          81,865







5.2

Summary of Cash Flow Statement

Three Months Ended


Six Months Ended



June 30,


June 30,



2010


2009


2010


2009


Cash flow provided by (used in):


















Operating activities, continuing operations (GAAP)

$        59,881


$          44,461


$                      128,071


$   82,283


Effect of ASC 470-20 (FSP APB 14-1) (a)(b)

-


9,710


-


22,987


Acquisition transaction fees (a)(b)

1,814


866


2,774


866


Operating activities, continuing operations (Non-GAAP) (a)(b)

61,695


55,037


130,845


106,136


Operating activities, discontinued operations

30


(285)


(11)


(2,434)











Investing activities (GAAP) (c)

(448,972)


(151,028)


(461,200)


(187,594)


Acquisition transaction fees (a)(b)

(1,814)


(866)


(2,774)


(866)


Investing activities (Non-GAAP) (a)(b)(c)

(450,786)


(151,894)


(463,974)


(188,460)











Financing activities (GAAP)

319,108


305,512


341,155


261,775


Effect of ASC 470-20 (FSP APB 14-1) (a)(b)

-


(9,710)


-


(22,987)


Financing activities (Non-GAAP) (a)(b)

319,108


295,802


341,155


238,788


Effect of exchange rate changes on cash and cash equivalents

(1,967)


7,051


(712)


(7,992)











Net increase (decrease) in cash and cash equivalents (c)

(71,920)


205,711


7,303


146,038


Net decrease in marketable securities

(7,979)


101,429


(13,785)


88,166











Net increase (decrease) in cash and marketable securities (c)

$       (79,899)


$        307,140


$                         (6,482)


$ 234,204











(a) See footnote (a) to Table 2.


(b) Cash flow for the three and six months ended June 30, 2010 includes $1.3 million and $1.5 million for acquisition fees related to the
purchase of Delta and another acquired company in Brazil, $0.2 million and $0.4 million for acquisition fees related to the purchase of Dr. Renaud and Vital
Science in Canada, $0.2 million and $0.2 million for acquisition fees related to the purchase of Aton in the US, $0.1 million and $0.1 million for acquisition
fees related to the merger with Biovail in Canada and $0.0 million and $0.6 million for acquisition fees related to the purchase of PFI in Australia,
respectively.  Cash flow for the three and six months ended June 30, 2009 includes $9.7 million and $23.0 million, respectively relating to
payments of accreted interest on long-term debt and notes payable made during these periods as determined by and pursuant to FSP APB 14-1,
as well as $0.9 million in both the three and six months ended June 30, 2009 for acquisition fees related to the purchase of Emo-Farm in Poland.


(c) Includes results from discontinued operations.









Three Months Ended

5.3

GSK Collaboration - Retigabine





June 30, 2010









Valeant SG&A





$                               54


Valeant R&D





3,673







3,727


GSK incurred cost





9,009







$                        12,736


Equalization (difference between individual partner costs and 50% of total)





$                         (2,641)





Three Months Ended June 30, 2010



Balance sheet


Alliance
revenue


SG&A


R&D


Accounting impact


















Upfront payment from GSK

$      125,000


$                  -


$                                -


$           -


Release from upfront payment in prior quarters

(67,835)


-


-


-


Incurred cost in current quarter

-


-


54


3,673


Release from upfront payment in current quarter

(15,958)


(9,590)


(661)


(5,707)


Remaining upfront payment from GSK

$        41,207


-


-


-











Equalization payable to GSK

$         (2,641)


-


607


2,034





$           (9,590)


$                                -


$           -



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SOURCE Valeant Pharmaceuticals International

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