Valeant Pharmaceuticals Reports 2010 First Quarter Financial Results
-- Revenue up 30% to $232.0 million; Actual Product Sales Growth 34%; Organic Product Sales Growth 12% -- GAAP EPS $0.43; Adjusted Non-GAAP (Cash) EPS $0.64 -- GAAP Cash Flow from Operations $68 million; Adjusted Non-GAAP Cash Flow from Operations $69 million -- 2010 Guidance increased to $2.65 - $2.90 Adjusted Non-GAAP (Cash) EPS -- Valeant to acquire Aton Pharma, Inc. for approximately $318 million -- Valeant repurchases 2.6 million shares from ValueAct Capital under the Company's Securities Repurchase program for $107 million
ALISO VIEJO, Calif., May 3, 2010 /PRNewswire via COMTEX/ --Valeant Pharmaceuticals International (NYSE: VRX) today announced first quarter financial results for 2010.
"We are pleased to report that the positive trend of 2009 has continued into the first quarter of 2010, which has historically been our softest quarter of the year," stated J. Michael Pearson, chairman and chief executive officer. "Our strong performance this quarter, coupled with the additional transactions we have announced so far in 2010, puts us in a position to increase our adjusted non-GAAP (Cash) EPS guidance for the year to $2.65 - $2.90, and expected total product sales growth to greater than 30%."
Revenues:
Total revenue was $232.0 million in the first quarter of 2010 as compared to $177.9 million in the first quarter of 2009, an increase of 30%.
Product sales in the Specialty Pharmaceuticals segment were $120.7 million in the first quarter of 2010, as compared to $86.3 million in the first quarter of 2009, an increase of 40%. At constant exchange rates, Specialty Pharmaceuticals product sales increased 32%. Within the Specialty Pharmaceuticals segment, alliance and service revenue was $22.5 million in the first quarter of 2010 as compared to $11.9 million in the year-ago quarter.
Product sales in Branded Generics - Latin America were $42.1 million in the first quarter of 2010 as compared to $31.2 million in the same period in 2009, an increase of 35%. At constant exchange rates, product sales in Latin America increased 17%.
Product sales in Branded Generics - Europe were $41.7 million in the first quarter of 2010 as compared to $35.3 million in the same period in 2009, an increase of 18%. At constant exchange rates, product sales in Europe decreased 2%. This decrease was primarily attributable to underlying market conditions in the first quarter of 2010 and we expect to see growth in subsequent quarters in 2010 over comparable quarters in 2009.
Ribavirin royalties were $5.0 million in the first quarter of 2010 as compared to $13.2 million in the first quarter of 2009, a decrease of 62%. This expected decrease is primarily attributable to the expiration of royalty terms in most European countries.
Income and Cash Flow:
Income from continuing operations was $35.6 million for the first quarter of 2010, or $0.43 per diluted share, as compared to $30.8 million, or $0.37 per diluted share, for the first quarter of 2009. On an adjusted non-GAAP (Cash) EPS basis, adjusted income from continuing operations was $52.8 million, or $0.64 per diluted share, in the first quarter of 2010 as compared to adjusted income from continuing operations of $38.1 million, or $0.46 per diluted share, in the first quarter of 2009.
GAAP cash flow from operations, which includes acquisition transaction fees, for the first quarter of 2010 was $68 million as compared to $38 million for the first quarter of 2009. Adjusted non-GAAP cash flow from operations for the first quarter of 2010 was $69 million as compared to $51 million for the first quarter of 2009.
2010 Guidance:
The company is updating its previous adjusted non-GAAP (Cash) EPS target and is now targeting adjusted non-GAAP (cash) EPS between $2.65 - $2.90 in 2010, up from prior guidance of $2.45 to $2.70.
Aton Pharma, Inc. Acquisition:
Valeant is also announcing that it has signed an agreement to acquire Aton Pharma, Inc., a specialty pharmaceutical company focused on ophthalmology and certain orphan drug indications, located in Lawrenceville, New Jersey. The transaction significantly enhances Valeant's neurology and other products franchise in the United States through the acquisition of a specialty pharmaceutical company with both an in-line business and a development pipeline consisting primarily of orphan drug compounds. Valeant will pay certain milestones based predominately on the achievement of development and commercial targets for certain pipeline products still in development. Future development of a portion of the pipeline portfolio will be co-funded by the Sellers under a profit sharing agreement with Valeant. In addition, Valeant will retain global rights to the majority of the Aton products.
Under the terms of the agreement, Valeant will pay approximately $318 million. Aton is expected to have $80 - $100 million in annual revenue in 2010. The transaction is subject to certain closing adjustments and is expected to be accretive in 2010. Aton is owned by affiliates of Cerberus Capital Management, L.P.
"The acquisition of Aton fits into our long-term strategy to pursue diversified opportunities within the pharmaceutical market and offers us another platform for future growth," stated J. Michael Pearson, chairman and chief executive officer. "With a business that has historically grown over 30% on an annual basis, and operating margins around 35%, along with a solid pipeline of niche products under development, we now have significantly strengthened our Neuro and Other business which we expect to drive significant value for shareholders."
Share Repurchase Transaction:
Valeant has repurchased 2.6 million shares of the Company's common stock held by ValueAct Capital for $107 million, negotiated at a discount calculated in a similar manner to the Company's privately negotiated, share repurchase completed in November 2009. To date, the Company has repurchased approximately $520 million, in total, of its convertible debt and its common stock out of the $1.0 billion currently authorized under the securities repurchase program.
"We are very committed to the company and intend to keep Valeant as a top position in our portfolio," said G. Mason Morfit, partner, ValueAct Capital and Valeant board member. "We pursued this transaction for portfolio management reasons given Valeant's significant outperformance and we remain confident in the company's strategy for future growth."
Conference Call and Webcast Information:
Valeant will host a conference call and a live Internet webcast along with a slide presentation today at 11:00 a.m. EDT (8:00 a.m. PDT) to discuss its first quarter financial results for 2010. The dial-in number to participate on this call is (877) 295-5743, confirmation code 68923004. International callers should dial (973) 200-3961, confirmation code 68923004. A replay will be available approximately two hours following the conclusion of the conference call through May 10, 2010 and can be accessed by dialing (800) 642-1687, or (706) 645-9291, confirmation code 68923004. 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 impact of the Aton acquisition on our business, our ability to enhance our product franchise and drive value for shareholders and the expected timing and consummation of the Aton acquisition. 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, 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, May 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.
Contact:
Laurie W. Little
Valeant Pharmaceuticals
949-461-6002
[email protected]
Valeant Pharmaceuticals International Table 1
Statement of Income
For the Three Months Ended March 31, 2010 and 2009
Three Months Ended
March 31,
--------------------------
In thousands, except per share data) 2010 2009 % Change
------ ------ --------
Product sales $204,507 $152,833 34%
Service revenue 4,960 6,738 -26%
Alliance revenue 22,524 18,352 23%
------ ------
Total revenues 231,991 177,923 30%
------- -------
Cost of goods sold 54,203 39,697 37%
Cost of services 3,166 4,326 -27%
Selling, general and administrative
("SG&A") 70,541 64,216 10%
Research and development costs, net 10,402 8,734 19%
Special charges and credits 538 -
Restructuring and acquisition-
related costs 1,024 1,211
Amortization expense 19,330 17,004 14%
------ ------
159,204 135,188 18%
------- -------
Income from operations 72,787 42,735
Interest expense, net (12,631) (6,179)
Gain on early extinguishment of debt - 4,599
Other income (expense), net including
translation and exchange (525) 1,211
Income from continuing operations
before income taxes 59,631 42,366
Provision for income taxes 24,030 11,569
------ ------
Income from continuing operations 35,601 30,797
Income from discontinued operations,
net 415 398
--- ---
Net income $36,016 $31,195
======= =======
Earnings per share:
Basic:
Income from continuing operations $0.45 $0.37
Discontinued operations 0.01 0.01
---- ----
Basic earnings per share $0.46 $0.38
===== =====
Shares used in per share computation 78,465 82,548
====== ======
Diluted:
Income from continuing operations $0.43 $0.37
Discontinued operations 0.01 -
---- ---
Diluted earnings per share $0.44 $0.37
===== =====
Shares used in per share computation 82,332 83,402
====== ======
Valeant Pharmaceuticals International Table 2
Reconciliation of GAAP EPS to Cash EPS
For the Three Months Ended March 31, 2010 and 2009
Three Months Ended
March 31,
---------
(In thousands, except per share data) 2010 2009
---- ----
Income from continuing operations $35,601 $30,797
Non-GAAP adjustments (a)(b):
Special charges and credits 538 -
Restructuring and acquisition-related costs 1,024 1,211
Amortization expense 19,330 17,004
------ ------
20,892 18,215
ASC 470-20 (FSP APB 14-1) interest 1,997 3,479
Gain on early extinguishment of debt - (4,599)
Tax (5,677) (9,837)
------ ------
Total adjustments 17,212 7,258
Adjusted income from continuing operations $52,813 $38,055
======= =======
GAAP earnings per share - diluted $0.43 $0.37
===== =====
Adjusted Non-GAAP (Cash) earnings per share
- diluted $0.64 $0.46
===== =====
Shares used in diluted per share calculation
- GAAP earnings per share 82,332 83,402
====== ======
Shares used in diluted per share
calculation - Adjusted Non-GAAP
(Cash) earnings per share 82,332 83,402
====== ======
(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
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 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.
Valeant Pharmaceuticals International Table 3
Statement of Revenue - by Segment
For the Three Months Ended March 31, 2010 and 2009
(In thousands)
Three Months Ended
March 31,
------------------------
3.1 Revenue 2010 2009 % Change
------ ------ ---------
Specialty pharmaceuticals
U.S.
Dermatology $34,525 $30,968 11%
Neurology & Other 51,753 36,011 44%
------ ------
Total U.S. 86,278 66,979 29%
Canada 21,823 14,488 51%
Australia 12,641 4,846 161%
Specialty pharmaceuticals product
sales 120,742 86,313 40%
Services and alliance revenue 22,523 11,905 89%
Total specialty pharmaceuticals
revenue 143,265 98,218 46%
Branded generics -Latin America
product sales 42,057 31,182 35%
Branded generics -Europe product
sales 41,708 35,338 18%
Alliances (ribavirin royalties
only) 4,961 13,185 -62%
----- ------
Total revenue $231,991 $177,923 30%
======== ========
Total product sales included
above $204,507 $152,833 34%
3.2 Currency impact and revenue
excluding currency impact (a)(b)
Three Months Ended
March 31,
--------------------------------
2010
2010 excluding
currency currency %
impact impact 2009 Change
-------- -------- ------ -------
Specialty pharmaceuticals
U.S. $(20) $86,258 $66,979 29%
Canada (3,545) 18,278 14,488 26%
Australia (3,346) 9,295 4,846 92%
------ ----- -----
Specialty pharmaceuticals product
sales (6,911) 113,831 86,313 32%
Services and alliance revenue (126) 22,397 11,905 88%
---- ------ ------
Total specialty pharmaceuticals
revenue (7,037) 136,228 98,218 39%
Branded generics -Latin America
product sales (5,573) 36,484 31,182 17%
Branded generics -Europe product
sales (6,930) 34,778 35,338 -2%
Alliances (ribavirin royalties only) - 4,961 13,185 -62%
--- ----- ------
Total revenue $(19,540) $212,451 $177,923 19%
======== ======== ========
Total product sales included above $(19,414) $185,093 $152,833 21%
Three Months Ended
March 31,
---------
2010 2009
---- ----
3.3 Alliance Revenue
Ribavirin royalty $4,961 $13,185
1% clindamycin and 5% benzoyl peroxide
(IDP 111) profit share 9,298 -
Other royalties 3,425 1,849
License payments 701 -
GSK collaboration 4,139 3,318
----- -----
Total alliance revenue $22,524 $18,352
======= =======
(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 Months Ended March 31, 2010 and 2009
(In thousands)
Three Months Ended
4.1 Cost of goods sold March 31,
----------------------------------
% of % of
product product
2010 sales 2009 sales
---- ------- ---- --------
Specialty pharmaceuticals $23,003 19% $15,363 18%
Branded generics - Latin America 12,965 31% 7,898 25%
Branded generics - Europe 18,132 43% 16,417 46%
Corporate 103 19
--- ---
$54,203 27% $39,697 26%
======= =======
4.2 Non-GAAP operating income excluding currency impact (a)(b)
Three Months Ended
March 31,
--------------------------------------------
2010
2010 excluding
% of currency currency % of
2010 revenue impact impact revenue 2009
---------------------------------------------
Specialty
pharmaceuticals $78,672 55% $(2,058) $76,614 56% $44,241
Branded generics -
Latin America 14,526 35% (2,065) 12,461 34% 12,988
Branded generics -
Europe 11,700 28% (2,139) 9,561 27% 9,098
------ ------ ----- -----
104,898 46% (6,262) 98,636 48% 66,327
Alliances & Corporate (11,219) - (11,219) (5,377)
------- --- ------- ------
$93,679 40% $(6,262) $87,417 41% $60,950
======= ======= ======= =======
(a) See footnote (a) to Table 2
(b) Non-GAAP operating income of $93.7 million for the three months
ended March 31, 2010 excludes the following GAAP items from GAAP
operating income of $72.8 million: special charges and credits of
$0.5 million, restructuring and acquisition-related costs of $1.0
million and amortization expense of $19.4 million. Non-GAAP
operating income of $61.0 million for the three months ended March
31, 2009 excludes the following GAAP items from GAAP operating
income of $42.7 million: restructuring costs of $1.2 million and
amortization expense of $17.1 million.
Table 5
Valeant Pharmaceuticals International
Consolidated Balance Sheet and Other Data
(In thousands)
As of As of
March December
31, 31,
5.1 Cash 2010 2009
---- ----
Cash and cash equivalents $147,303 $68,080
Marketable securities 7,979 13,785
----- ------
Total cash and marketable securities $155,282 $81,865
======== =======
5.2 Summary of Cash flow Statement Three Months Ended
March 31,
---------
2010 2009
---- ----
Cash flow provided by (used in):
Operating activities, continuing
operations (GAAP) $68,190 $37,822
Effect of ASC 470-20 (FSP APB 14-1)
(a)(b) - 13,277
Acquisition transaction fees (a)(b) 960 -
--- ---
Operating activities, continuing
operations (Non-GAAP) (a)(b) 69,150 51,099
Operating activities, discontinued
operations (41) (2,149)
Investing activities (GAAP) (c) (12,228) (36,566)
Acquisition transaction fees (a)(b) (960) -
---- ---
Investing activities (Non-GAAP) (a)(b)(c) (13,188) (36,566)
Financing activities (GAAP) 22,047 (43,737)
Effect of ASC 470-20 (FSP APB 14-1)
(a)(b) - (13,277)
--- -------
Financing activities (Non-GAAP) (a)(b) 22,047 (57,014)
Effect of exchange rate changes on cash
and cash equivalents 1,255 (15,043)
----- -------
Net increase (decrease) in cash and cash
equivalents (c) 79,223 (59,673)
Net decrease in marketable securities (5,806) (13,263)
------ -------
Net increase (decrease) in cash and
marketable securities (c) $73,417 $(72,936)
======= ========
(a) See footnote (a) to Table 2.
(b) Cash flow for the three months ended March 31, 2010 includes
$0.6 million, $0.2 million and $0.2 million for acquisition fees
related to the purchase of PFI in Australia, Delta in Brazil and
Dr. Renaud in Canada, respectively. Cash flow for the three
months ended March 31, 2009 includes $13.3 million relating to
accreted interest on long-term debt and notes payable made
during the period as determined by and pursuant to ASC 470-20
(FSP APB 14-1).
(c) Includes results from discontinued operations.
Three Months Ended
5.3 GSK Collaboration - Retagibine March 31, 2010
--------------
Valeant SG&A $28
Valeant R&D 3,691
-----
3,719
GSK incurred cost 7,556
-----
$11,275
=======
Equalization (difference between individual
partner costs and 50% of total) $(1,919)
=======
Three Months Ended March 31, 2010
-------------------------------
Balance Alliance
sheet revenue SG&A R&D
-------- -------- ---- ---
Accounting impact
Upfront payment from GSK $125,000 $- $- $-
Release from upfront payment in
prior quarters (58,058) - - -
Incurred cost in current quarter - - 28 3,691
Release from upfront payment in
current quarter (9,777) (4,139) (479) (5,159)
Remaining upfront payment from GSK $57,165 - - -
Equalization payable to GSK $(1,919) - 451 1,468
======= --- --- -----
$(4,139 $- $-
======= === ===
Valeant Pharmaceuticals International
Reconciliation of Product Sales Excluding Acquisitions and Currency Impact
For the Three Months Ended March 31, 2010 and 2009
(In thousands)
Three Months Ended
March 31, 2010
--------------
2010
2010 excluding
acquisition 2010 currency &
2010 as impact at currency acquisition
reported 2010 rates (a) impact impact
Specialty
pharmaceuticals
Dermatology $34,525 $(984) $- 33,541
Neurology &
Other 51,753 - - 51,753
------ --- --- ------
U.S. 86,278 (984) - 85,294
Canada 21,823 (2,427) (3,147) 16,249
Australia 12,641 (6,078) (1,743) 4,820
------ ------ ------ -----
Specialty
pharmaceuticals
product sales 120,742 (9,489) (4,890) 106,363
Branded generics
-Latin America
product sales 42,057 (4,674) (5,038) 32,345
Branded generics
-Europe
product sales 41,708 (2,738) (6,462) 32,508
------ ------ ------ ------
Total product
sales $204,507 $(16,901) $(16,390) $171,216
-------- -------- -------- --------
Three Months
Ended
March 31, 2009
--------------
Q1 2010
growth at
constant
currency,
2009 net of
as reported acquisitions
------------
Specialty pharmaceuticals
Dermatology $30,968 8%
Neurology & Other 36,011 44%
------
U.S. 66,979 27%
Canada 14,488 12%
Australia 4,846 -1%
-----
Specialty pharmaceuticals
product sales 86,313 23%
Branded generics -Latin America
product sales 31,182 4%
Branded generics -Europe
product sales 35,338 -8%
------
Total product sales $152,833 12%
--------
(a) Acquisitions excluded from 2010 product sales include PFI in the
U.S. and Australia, Dr. Renaud in the U.S. and Canada, other
acquired products in Australia and the U.S., Tecnofarma S.A. de C.V.
in Branded generics-Latin America and EMO-Farm in Branded
generics-Europe.
See footnote (a) to Table 2 and Table 3.
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SOURCE Valeant Pharmaceuticals International