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Valeant Pharmaceuticals Reports Second Quarter 2007 Results.

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

Second Quarter 2007 vs. 2006 Highlights:

* Revenues totaled $231.0 million, compared to $230.4 million.

* Product sales increased two percent to $212.1 million, compared to $208.8 million.

* Income from continuing operations was $16.8 million, or $0.18 per diluted share, compared to a loss of $42.3 million, or $0.46 per diluted share.

* Adjusted for non-GAAP items, income from continuing operations was $11.3 million, or $0.12 per diluted share, compared to $11.4 million, or $0.12 per diluted share.

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

Timothy C. Tyson, president and chief executive officer, said, "We are encouraged that product sales improved in the second quarter, led by growth in many promoted products in North America and EMEA. Although it still had a negative impact on the quarter as a whole, we resolved the wholesaler distribution issue in Mexico toward the end of the quarter and sales in that market are returning to normal. We continue to believe that we will achieve our goal of industry-average growth for the full year. We remained disciplined in our spending, controlling overhead costs while investing in promoted products and advancing our development pipeline."

Revenues:

Product sales increased two percent in the second quarter of 2007 compared to the same period last year, led by a 10 percent increase in promoted products in the same period. The largest contributors to the increase included Efudex[R], Cesamet[R], Mestinon[R], Solcoseryl[TM], Bisocard[TM] and Zelapar[R], offset in part by a decline in Infergen[R] sales.

Alliance revenue (ribavirin royalties) decreased 12 percent in the second quarter of 2007 compared to the same period last year, primarily due to lower sales of ribavirin in Japan.

Regional Sales Performance:

North America product sales increased eight percent in the 2007 second quarter, primarily due to increased sales of Efudex, Cesamet and Migranal[R]. Sales of Zelapar, which was launched in the second half of 2006, totaled $1.4 million in the 2007 second quarter. Sales of Infergen declined in the 2007 second quarter compared to the same period last year, partly due to a weakening in the U.S. market for interferon products, but improved four percent from the first quarter of 2007. Cesamet sales continued to increase in Canada where the product now holds a 90 percent share of the cannabinoid market.

Sales in the International region decreased 12 percent in the 2007 second quarter, essentially due to the issues in the Mexican distribution chain that began earlier in the year. These issues were resolved toward the end of the second quarter and the company has resumed shipments of products to the major wholesalers in that country, leading to a 60 percent increase in overall sales in the International region compared to the first quarter of 2007. Sales of Bedoyecta[TM] were $12.6 million in the 2007 second quarter, slightly higher than the same period last year. Underlying demand for Bedoyecta in Mexico remained strong, allowing sales to improve more quickly than other products.

Sales in the Europe, Middle East and Africa (EMEA) region increased seven percent in the 2007 second quarter, primarily due to the effects of foreign currency. EMEA benefited from increased sales of promoted products in Central and Eastern Europe and the acquisition of new products. Sales of several promoted products were higher, including Solcoseryl, Bisocard and Mestinon. Offsetting these improvements were lower sales of Kinerase[R] and a decrease in vision care products due to the divestment of the company's ophthalmic business in the Netherlands earlier in 2007.

Financial Metrics:

The company's gross margin on product sales was 71 percent in the 2007 second quarter, compared to 68 percent in the same period last year. The increased gross margin was primarily due to improvements in the mix of products sold, a reduction in royalties paid on certain products and fewer inventory write-offs.

Selling expense was 35 percent of product sales in the 2007 second quarter, compared to 32 percent in the same period last year. The increase in selling expenses compared to a year ago was primarily due to higher selling and advertising costs in the International and EMEA regions. 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 second quarter, compared to 15 percent in the same period last year.

Research and development expenses were 12 percent of product sales in the 2007 second quarter, compared to 13 percent in the same period last year. The decrease primarily reflects close control of clinical trial costs and the divestiture of the company's discovery operations.

Share Repurchase Update:

On June 11, 2007, the company announced that its board of directors had approved a share repurchase program that authorized the company to repurchase up to $200 million of its outstanding common stock over a two-year period. In connection with this program, the company has repurchased 3.7 million shares of its common stock through July 31, 2007 at an aggregate amount of $63 million. Of the cumulative total, 1.6 million shares were repurchased in the 2007 second quarter at an aggregate amount of $28 million.

Restructuring Update:

The company completed the sale of its manufacturing facilities in Switzerland and Puerto Rico in June 2007, which concludes the restructuring plan announced in April 2006. Restructuring charges in the 2007 second quarter totaled $6.3 million, bringing the overall total restructuring charges to $152 million, of which $34 million is cash related. The restructuring will result in cost savings of more than $50 million annually.

Conference Call and Webcast Information:

Valeant will host a conference call today at 10:00 a.m. EDT (7:00 a.m. PDT) to discuss its 2007 second quarter results. The dial-in number to participate on this call is (877) 295-5743, confirmation code 5796687. International callers should dial (706) 679-0845, confirmation code 5796687. A replay will be available approximately two hours following the conclusion of the conference call through August 8, 2007 and can be accessed by dialing (800) 642-1687, or (706) 645-9291, confirmation code 5796687. 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, Zelapar, Migranal, 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 in the U.S. market. 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 sales of and demand for the company's products in Mexico and elsewhere, anticipated growth rates, spending, and cost savings from the restructuring initiative. 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 the resumption of sales through the company's Mexican distribution channel, 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. 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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Publication:Business Wire
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Date:Aug 2, 2007
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