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Valeant Pharmaceuticals International Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: November 2, 2009 04:17PM

Valeant Pharmaceuticals International (VRX) filed Quarterly Report for the period ended 2009-09-30. Valeant Pharmaceuticals International is a global publicly traded research-based specialty pharmaceutical company that discovers develops manufactures and markets a broad range of pharmaceutical products. Valeant Pharmaceuticals International has a market cap of $2.39 billion; its shares were traded at around $29.4 with a P/E ratio of 18.38 and P/S ratio of 3.64. Valeant Pharmaceuticals International had an annual average earning growth of 2.9% over the past 5 years.

Highlight of Business Operations:

Beginning in January 2009, we also receive revenue from contract research services performed by Dow in the areas of dermatology and topical medication. These services are primarily focused on contract research for external development and clinical research in areas such as formulations development, in vitro drug penetration studies, analytical sciences and consulting in the areas of labeling and regulatory affairs. This service revenue was $4.8 million and $17.1 million for the three and nine months ended September 30, 2009, respectively. Other service revenue totaled $0.2 million and $0.3 million in the three and nine months ended September 30, 2009, respectively.

GSK has the right to terminate the Collaboration Agreement at any time prior to the receipt of the approval by the FDA of a new drug application (“NDA”) for a retigabine product, which right may be irrevocably waived at any time by GSK. The period of time prior to such termination or waiver is referred to as the “Review Period”. In February 2009, the Collaboration Agreement was amended to, among other matters, reduce the maximum amount that we would be required to refund to GSK to $40.0 million through March 31, 2010, with additional reductions in the amount of the required refund over the time the Collaboration Agreement is in effect. During the three and nine months ended September 30, 2009, the combined research and development expenses and pre-commercialization expenses incurred under the Collaboration Agreement by us and GSK were $17.5 million and $44.4 million, respectively, as outlined in the table below. We recorded a charge of $1.3 million and $1.1 million in the three and nine months ended September 30, 2009, respectively, against our share of the expenses to equalize our expenses with GSK, pursuant to the terms of the Collaboration Agreement.

Product Sales Revenues: In the Specialty Pharmaceuticals segment, revenues from product sales for the three months ended September 30, 2009 were $101.6 million, compared with $70.1 million for the corresponding period in 2008, representing an increase of $31.5 million (45%). Revenues from product sales for the nine months ended September 30, 2009 were $284.6 million, compared with $214.6 million for the corresponding period in 2008, representing an increase of $70.0 million (33%). The increase in product sales in the three months ended September 30, 2009 was driven by growth in existing products as well as from sales of products acquired in late 2008 as part of the Coria and DermaTech acquisitions, which contributed $13.8 million and $36.7 million in the three and nine months ended September 30, 2009, respectively. In the three months ended September 30, 2009, these increases were partly offset by a $1.7 million reduction from the depreciation of the Canadian Dollar and Australian Dollar relative to the U.S. Dollar. Sales increases in the nine months ended September 30 were partly offset by a $7.2 million reduction in sales of Efudex as a result of generic competition, a reduction of $5.8 million due to the sale of business operations in Argentina, Uruguay and Asia and $11.6 million from the depreciation of the Canadian Dollar and Australian Dollar relative to the U.S. Dollar. In the nine months ended September 30, 2008, as part of our restructuring efforts, we reduced shipments to wholesaler customers aggregating approximately $17.4 million to reduce the amount of inventory in the wholesale channel.

In the Branded Generics — Europe segment, revenues for the three months ended September 30, 2009 were $40.2 million, compared with $40.4 million for the corresponding period in 2008, representing a decrease of $0.2 million (0%). Revenues for the nine months ended September 30, 2009 were $109.6 million, compared with $116.9 million for the corresponding period in 2008, representing a decrease of $7.3 million (6%). The depreciation of foreign currencies, particularly the Polish Zloty, relative to the U.S. Dollar resulted in decreases of $12.1 million and $41.0 million in product sales revenue in the three and nine months ended September 30, 2009, respectively. This reduction was partly offset by growth in existing products, increased revenue from a distribution contract and $3.0 million and $5.3 million in the three and nine months ended September 30, 2009, respectively, from the April 2009 acquisition of Emo-Farm.

In the Branded Generics — Latin America segment, revenues for the three months ended September 30, 2009 were $40.7 million, compared with $42.6 million for the corresponding period in 2008, representing a decrease of $1.9 million (4%). Revenues for the nine months ended September 30, 2009 were $108.1 million, compared with $99.7 million for the corresponding period in 2008, representing an increase of $8.4 million (8%). Product sales increased across substantially all products primarily from the improvement of trading relationships with the major

Alliance Revenue (Ribavirin Royalties only): Ribavirin royalty revenue was $12.2 million and $38.0 million for the three and nine months ended September 30, 2009, respectively, compared with $15.2 million and $42.8 million for the corresponding periods in 2008, representing decreases of $3.0 million and $4.8 million, respectively. We expect ribavirin royalties to continue to decline in 2009 and in 2010 as royalty payments from Schering-Plough will continue for European sales only until the ten-year anniversary of the launch of the product, which varied by European country and started in May 1999. We expect that royalties from Schering-Plough in Japan will continue after 2009.

Read the The complete Report

VRX is in the portfolios of Jean-Marie Eveillard of Arnhold & S. Bleichroeder Advisers, LLC.


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