Valeant Pharmaceuticals Reports 2007 First Quarter Results.

ALISO VIEJO, Calif. -- Valeant Pharmaceuticals International (NYSE:VRX) today reported results for the first quarter of 2007.

First Quarter 2007 vs. 2006 Highlights:

* Revenues increased seven percent to $213.4 million compared to $199.5 million.

* Product sales decreased two percent to $176.9 million compared to $181.4 million.

* Alliance revenue totaled $36.5 million compared to $18.1 million. Included in alliance revenue in the 2007 first quarter was a milestone payment of $19.2 million related to the out-licensing of pradefovir.

* Income from continuing operations was $8.6 million, or $0.09 per diluted share, compared to a loss of $5.8 million, or $0.06 per diluted share.

* Adjusted for non-GAAP items, income from continuing operations was $16.6 million, or $0.17 per diluted share, compared to a loss of $4.2 million, or $0.05 per diluted share. Excluding the pradefovir milestone payment, adjusted income from continuing operations was $0.03 per diluted share in the 2007 first quarter.

Timothy C. Tyson, president and chief executive officer, said, "This clearly was a soft quarter for product sales. In many ways, this is typical for our business in that we often have lower sales in the first quarter along with higher marketing costs to support annual growth. This year, however, the first quarter was particularly impacted by a significant reduction in sales to certain wholesalers in Mexico and by lower sales of Infergen[R] and Efudex[R] in the United States. The reduced sales in Mexico were precipitated by a negotiating tactic of two major wholesalers, which we believe to be a transitory issue that is not reflective of underlying demand for our products. We were able to mitigate the effect of these challenging top-line issues on our margins and earnings in the quarter through expense management. We remain encouraged that underlying demand is stable or growing for most of our key products, and continue to believe that we will achieve growth at industry average rates or better in the year."

Revenues:

Product sales declined in the 2007 first quarter compared to the same period last year, primarily due to the aforementioned issues in the Mexican distribution chain, which significantly impacted sales of Bedoyecta[TM]. In addition, sales of Infergen and Efudex were lower in the 2007 first quarter, while sales of Cesamet[R], Kinerase[R], Solcoseryl[TM] and Bisocard[TM] were higher. The effects of foreign currency exchange increased product sales by $4.1 million and operating income by $0.4 million in the 2007 first quarter.

Alliance revenue in the 2007 first quarter included a milestone payment of $19.2 million from Schering-Plough upon the closing of the company's out-licensing agreement for pradefovir. Also included in alliance revenue were royalties from the sale of ribavirin, which totaled $17.3 million in the 2007 first quarter, compared to $18.1 million in the same period last year.

Regional Sales Performance:

North America product sales decreased six percent in the 2007 first quarter compared to the same period last year, primarily due to lower sales of Infergen and Efudex, partially offset by higher sales of Cesamet and Kinerase. The decrease in sales of Infergen largely reflects a decline in the overall market for interferon products in the United States. The decline in Efudex sales primarily reflects the pull-through of inventory from the launch of the company's generic product at the end of 2006.

Sales in the International region in the 2007 first quarter were $9.7 million, or 22 percent lower than the same period last year predominantly due to the distribution chain issues in Mexico, which affected sales of Bedoyecta and nearly all products in the country.

Sales in the Europe, Middle East and Africa (EMEA) region increased 16 percent in the 2007 first quarter. Approximately half of the increase relates to the effects of foreign currency. In spite of continued government imposed price pressures in many European markets, Mestinon[R], Solcoseryl, Bisocard and several other promoted products grew significantly. Much of this growth was generated in Central and Eastern Europe.

Financial Metrics:

The company's gross margin on product sales was 71 percent in the 2007 first quarter, compared to 68 percent in the same period last year. The improvement in gross margin was primarily due to fewer inventory write-offs in the current period and the impact on last year's margin from a scheduled shutdown of the company's manufacturing facility in Mexico.

Selling expense was 36 percent of product sales in the 2007 first quarter compared to 35 percent in the same period last year. Selling expenses are typically higher in the first half of the year to support annual growth. General and administrative expenses were 14 percent of product sales in the 2007 first quarter compared to 16 percent in the same period last year. Included in general and administrative expenses in the 2007 first quarter was an expense of $3.8 million for an unfavorable arbitration decision in the company's indemnification claim against former Xcel Pharmaceuticals shareholders relating to pre-acquisition sales, partially offset by a $2.2 million gain from the sale of the company's contact lens business in Europe.

Research and development expenses were 13 percent of product sales in the 2007 first quarter compared to 16 percent in the same period last year. The decline was primarily due to the sale of the company's discovery operations at the end of 2006.

Recent Developments and Expectations:

The company previously excluded stock-based compensation expense from its metric performance and guidance figures in the year of implementation of SFAS 123R. Beginning with the first quarter of 2007, the company will no longer exclude these expenses, but has provided details of them in Table 6 for reference. The following table summarizes adjusted metric performance and expectations (including stock-based compensation expense):

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Note: Includes non-GAAP adjustments.

Conference Call and Webcast Information:

Valeant will host a conference call today at 10:00 a.m. EST (7:00 a.m. PST) to discuss its 2007 first quarter results. The dial-in number to participate on this call is [phone], confirmation code 5535846. International callers should dial [phone], confirmation code 5535846. A replay will be available approximately two hours following the conclusion of the conference call through Tuesday, May 8, 2007 and can be accessed by dialing [phone], or [phone], confirmation code 5535846. 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 specialty pharmaceutical company that develops, manufactures and markets a broad range of pharmaceutical products primarily in the areas of neurology, infectious disease and dermatology. More information about Valeant can be found at www.valeant.com.

Efudex, Cesamet, Kinerase, Mestinon, Bedoyecta, Solcoseryl and Bisocard are trademarks or registered trademarks of Valeant Pharmaceuticals International or its related companies. Infergen is a registered trademark of Amgen, Inc., and Valeant Pharmaceuticals North America is the exclusive licensee from Amgen of this mark. All other trademarks are the trademarks or the registered trademarks of their respective owners.

FORWARD-LOOKING STATEMENTS:

This press release contains forward-looking statements, including, but not limited to, statements regarding demand for the company's products in Mexico and elsewhere, anticipated growth rates, and the company's expected margins and expenses. 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 related to projections of future sales, product development and regulatory approval, the execution and success of the company's restructuring initiative and strategic plans, and other risks and uncertainties discussed in the company's filings with the SEC. Valeant wishes to caution the reader that these factors 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 obligation to update any of these forward-looking statements to reflect events or circumstances after the date of this release or to reflect actual outcomes.

NON-GAAP INFORMATION:

To supplement the consolidated financial results 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, stock-based compensation expense, gains on litigation settlements, and results of discontinued businesses. Management does not consider the excluded items part of day-to-day business or reflective of the core operational activities of the company as they result from transactions outside the ordinary course of business. Management uses non-GAAP financial measures internally for strategic decision making, forecasting future results and evaluating current performance. Guidance is provided only on a non-GAAP basis due to the inherent difficulty in forecasting such items. 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.

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