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Valeant Pharmaceuticals International Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: August 3, 2010 04:35PM

Valeant Pharmaceuticals International (VRX) filed Quarterly Report for the period ended 2010-06-30. Valeant Pharmaceuticals International has a market cap of $4.36 billion; its shares were traded at around $57.59 with a P/E ratio of 24 and P/S ratio of 5.3.

VRX is in the portfolios of Jean-Marie Eveillard of First Eagle Investment Management, LLC, Jim Simons of Renaissance Technologies LLC, Bruce Kovner of Caxton Associates, George Soros of Soros Fund Management LLC.

Highlight of Business Operations:

During the three and six months ended June 30, 2010, the combined research and development expenses and pre-commercialization expenses incurred under the Collaboration Agreement by us and GSK were $12.7 million and $24.0 million, respectively, compared to $13.5 million and $26.9 million in the corresponding periods in 2009. Alliance revenue related to the Collaboration Agreement in the second quarter of 2010 was $9.6 million compared to $2.8 million in the second quarter of 2009. The increased alliance revenue is a result of revised projections of the mix and level of activity undertaken by us and GSK as we meet our remaining participatory obligations to the collaboration. Total combined expenses by us and GSK for the Collaboration Agreement through June 30, 2010 were $102.3 million. For further information regarding the Collaboration Agreement see Note 4 of notes to condensed consolidated financial statements included elsewhere in this Quarterly Report.

Product Sales Revenues: In the Specialty pharmaceuticals segment, revenues from product sales for the three months ended June 30, 2010 were $126.9 million, compared to $96.6 million for the corresponding period in 2009, representing an increase of $30.3 million (31%). Revenues from product sales for the six months ended June 30, 2010 were $247.6 million, compared to $182.9 million for the corresponding period in 2009, representing an increase of $64.7 million (35%). The increase in product sales in the three months ended June 30, 2010 was driven primarily by sales of products acquired in 2010 as part of the acquisitions of Aton and VitalScience, which contributed $11.0 million, and sales of products acquired in late 2009 as part of the acquisitions of Private Formula International Holdings Pty Limited (“PFI”) and Laboratoire Dr. Renaud (“Dr. Renaud”), which contributed $7.3 million in the three months ended June 30, 2010. Net sales growth of existing products added $4.3 million in the three months ended June 30, 2010 and the appreciation of the Canadian Dollar and Australian Dollar relative to the U.S. Dollar resulted in additional increases of $3.6 million. Revenues also increased due to the completion of our periodic review of our returns reserve in the second quarter of 2010, which resulted in a $4.0 million reduction in estimated reserves for future product returns to reflect the effect of recent actual product returns. Product sales increases in the six months ended June 30, 2010 were driven by net growth of $26.2 million in existing products, including Acanya which was launched in March 2009; as well as from sales of products acquired in late 2009 as part of the acquisitions of PFI and Dr. Renaud, which contributed $14.6 million and sales of products acquired in 2010 as part of the acquisitions of Aton and VitalScience which contributed $11.0 million in the six months ended June 30, 2010. In the six months ended June 30, 2010, the appreciation of the Canadian Dollar and Australian Dollar relative to the U.S. Dollar resulted in additional increases of $8.9 million.

In the Branded generics — Europe segment, revenues for the three months ended June 30, 2010 were $40.8 million, compared to $34.0 million for the corresponding period in 2009, representing an increase of $6.8 million (20%). Revenues for the six months ended June 30, 2010 were $82.5 million, compared to $69.4 million for the corresponding period in 2009, representing an increase of $13.1 million (19%). Sales increases in the three months ended June 30, 2010 were primarily attributable to growth in sales of existing products of $2.4 million, incremental revenues of $1.9 million in the three months ended June 30, 2010 from the April 2009 acquisition of EMO-FARM sp. z o.o (“Emo-Farm”) and sales of products acquired in the second quarter of 2010 of $1.5 million. The appreciation of foreign currencies, particularly the Polish Zloty, relative to the U.S. Dollar resulted in increases of $0.9 million in

In the Branded generics — Latin America segment, revenues for the three months ended June 30, 2010 were $51.8 million, compared to $36.2 million for the corresponding period in 2009, representing an increase of $15.6 million (43%). Revenues for the six months ended June 30, 2010 were $93.8 million, compared to $67.4 million for the corresponding period in 2009, representing an increase of $26.4 million (39%). Revenues attributable to the April 2010 acquisitions in Brazil contributed $7.7 million of revenues in the three and six months ended June 30, 2010. The third quarter 2009 acquisition of Tecnofarma S.A. de C.V. (“Tecnofarma”) contributed an additional $5.2 million in the second quarter of 2010. Product sales revenue increased $2.3 million due to the appreciation of foreign currencies, particularly the Mexican Peso, relative to the U.S. Dollar in the three months ended June 30, 2010, and $0.3 million attributable to increases in sales of existing products. Revenues attributable to the third quarter 2009 acquisition of Tecnofarma contributed revenues of $9.9 million in the six months ended June 30, 2010. Product sales revenue increased $7.4 million due to the appreciation of foreign currencies, particularly the Mexican Peso, relative to the U.S. Dollar in the six months ended June 30, 2010, and $1.4 million attributable to increases in sales of existing products.

We receive royalties from patent protected formulations developed by Dow and licensed to third parties. These royalties were $4.2 million and $7.6 million for the three and six months ended June 30, 2010, respectively, compared to $3.8 million and $5.6 million in the corresponding periods in 2009. Beginning in the third quarter of 2009, we receive profit sharing payments equal to a majority portion of the net profits on the sale of 1% clindamycin and 5% benzoyl peroxide gel by Mylan, which totaled $11.2 million and $20.5 million in the three and six months ended June 30, 2010, respectively. We received $0.8 million and $1.5 million in initial fees pursuant to licensing agreements for various products in the three and six months ended June 30, 2010, respectively.

Gross Profit Margin: Gross profit margin on product sales, net of product-related intangible amortization, was 63% and 64% for the three and six months ended June 30, 2010, respectively, compared to 66% and 65% for the corresponding periods in 2009. Product amortization expense was $19.9 million and $36.7 million in the three and six months ended June 30, 2010, respectively, compared to $14.8 million and $29.5 million in the corresponding periods in 2009. The increase in product amortization expense is primarily attributable to products acquired in the first half of 2010 and in the second through fourth quarters of 2009.

Read the The complete Report



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