Valeant Pharmaceuticals Reports Fourth Quarter and Full Year 2004 Resu

Valeant Pharmaceuticals Reports Fourth Quarter and Full Year 2004 Results

    Pharmaceutical Writers/Business Editors

    COSTA MESA, Calif.--(BUSINESS WIRE)--Feb. 24, 2005--

    Specialty Pharmaceuticals Business Improves Significantly; Product
    Sales Increase 20 Percent in the Fourth Quarter; 17 Percent in the
    Year

    Valeant Pharmaceuticals International (NYSE:VRX) today announced fourth quarter and full year results for 2004. The results primarily reflect the significant decrease in royalty revenue and increased investments in research and development and selling efforts, partially offset by higher product sales and lower general and administrative expenses and cost of goods sold.

    Fourth Quarter 2004:

--	Revenues in the 2004 fourth quarter were $188.0 million compared to $176.2 million in the 2003 fourth quarter.
--	Product sales increased 20 percent to $175.0 million compared to $145.5 million.
--	Ribavirin royalties decreased 58 percent to $13.0 million compared to $30.7 million.
--	Net income was $3.0 million, or $0.03 per diluted share, compared to a net loss of $1.8 million, or $0.02 per diluted share.
--	Income from continuing operations was $5.8 million, or $0.07 per diluted share, compared to $2.9 million, or $0.03 per diluted share.
--	Including certain non-GAAP items, adjusted income from continuing operations was $4.9 million, or $0.06 per diluted share, compared to $10.8 million, or $0.13 per diluted share.

    "Our results continue to demonstrate the remarkable progress we have made in transforming our specialty pharmaceuticals business," said Timothy C. Tyson, Valeant's President and Chief Executive Officer. "Product sales were strong in the quarter and year and almost completely compensated for the decline in revenue from ribavirin royalties on the top line. The strength in product sales performance and our continued progress in driving operational efficiencies allowed us to meet all of our metric targets, even those we made more challenging during the course of the year. We expect this progress to continue in 2005 and that our operating metrics will also improve slightly with the integration of Xcel Pharmaceuticals during the year."

    Full Year 2004:

    -- Revenues were $682.5 million in 2004 compared to $686.0
    million in 2003.

    -- Product sales increased 17 percent to $606.1 million versus
    $518.5 million.

    -- Ribavirin royalties decreased 54 percent to $76.4 million
    versus $167.5 million.

    -- Net loss was $67.8 million, or $0.81 per diluted share,
    compared to a net loss of $55.6 million, or $0.67 per diluted
    share.

    -- Loss from continuing operations was $40.6 million, or $0.48
    per diluted share, versus a loss from continuing operations of
    $65.0 million, or $0.78 per diluted share.

    -- Including certain non-GAAP items, adjusted income from
    continuing operations was $6.0 million, or $0.07 per diluted
    share, compared to $60.6 million, or $0.71 per diluted share.

    Non-GAAP items are discussed in detail in the reconciliation of GAAP to non-GAAP results provided in Tables 2-4.

    Revenue Performance:

    Growth in product sales in the 2004 fourth quarter and year reflects increased sales of global and regional brands, sales of products that were acquired during the year and favorable foreign currency adjustments. Sales of global brands increased 4 percent in the 2004 fourth quarter and 24 percent in the year and reflect increased sales of Efudex(R), Oxsoralen(R), Dermatix(R) and Kinerase(R), partially offset by lower sales of Virazole(R) and Mestinon(R). Sales of global brands represented 23 percent of total sales in 2004 versus 21 percent in 2003.
    Sales of products acquired during 2004, including Tasmar(R) and Amarin products, totaled $9.7 million and $18.7 million in the 2004 fourth quarter and year, respectively. The company also reported increased sales of products due to the impact of positive foreign currency translation of $8.4 million and $20.9 million in the 2004 fourth quarter and year, respectively, although the net impact to operating income was only $1.4 million and $2.8 million in the 2004 fourth quarter and year, respectively.
    The decline in ribavirin royalties in the 2004 fourth quarter and year was primarily due to lower revenue from royalties in the United States.

    Regional Performance:

    North America reported the strongest regional growth with a 53 percent increase in fourth quarter 2004 sales to $43.3 million, compared with $28.2 million in the same quarter last year. The improvement was primarily due to increased sales of Efudex and sales of products that were acquired during the year, partially offset by reduced sales from Mestinon due to continued generic competition in the United States. North American product sales for the 2004 year were up 44 percent compared to 2003 primarily due to global brand sales growth and sales of products that were acquired during the year.
    European product sales increased 10 percent in the 2004 fourth quarter to $69.1 million, compared to $62.6 million in the same period last year. Sales in Europe in 2004 were up 9 percent compared to 2003. Sales of global brands in the company's core therapeutic areas of dermatology and neurology increased during these periods, as did sales of local products in Poland and Central Europe. These factors were offset by government imposed price reductions in certain markets, and declines in sales of older brands. Foreign currency translation adjustments had a positive impact in most markets in the region.
    Sales in Latin America increased 15 percent to $47.6 million in the fourth quarter of 2004, compared with $41.2 million in the same period last year, primarily due to increased sales of Bedoyecta. Latin America sales in the 2004 year were up 12 percent compared to 2003. Sales in the AAA region increased 12 percent in the 2004 fourth quarter to $15.1 million, compared to the $13.4 million recorded in the same period last year, primarily due to sales of Reptilase(R) and Nyal(R). Sales in AAA in the 2004 year were up 13 percent over 2003.

    Financial Metrics:

    The company's gross margin was 67 percent in the 2004 fourth quarter, compared to 63 percent in the same period last year. For the 2004 full year, the gross margin was 67 percent, compared to 64 percent in 2003. The improved gross margin for the fourth quarter and the year primarily reflects a favorable mix of higher margin products and increased sales from North America. For the 2004 year these factors were partially offset by costs associated with the implementation of the company's manufacturing and supply chain cost improvement program.
    Selling expenses as a percent of sales decreased to 29 percent in the 2004 fourth quarter, compared to 32 percent in the same period last year. Selling expenses were 32 percent of sales for 2004 and 2003.
    General and administrative (G&A) expenses as a percent of sales were 14 percent in the 2004 fourth quarter. Including certain non-GAAP items, adjusted G&A expenses were 16 percent of sales in the 2004 fourth quarter, compared to 18 percent in the same period last year. For the 2004 full year, G&A expenses were 16 percent of sales, compared to 22 percent in 2003.
    Research and development expenses were up significantly as a result of the company's increased investment in Viramidine(R) and pradefovir (formerly referred to as remofovir) clinical trials. Research and development expenses were 16 percent of sales in the 2004 fourth quarter, compared to 11 percent in the same period last year. For the 2004 year, research and development expenses were 15 percent of sales versus 9 percent in 2003.
    Amortization expense increased 39 percent to $17.8 million in the 2004 fourth quarter, compared to $12.8 million in the same period last year, primarily due to product impairment charges of $4.8 million in Italy and Latin America. For the full year, amortization expense increased 54 percent to $59.3 million, compared to $38.6 million in 2003, primarily due to acquisitions during the year and the purchase in 2003 of the minority interest in Ribapharm.

    Recent Developments and Expectations:

    On February 18, 2005, Valeant received early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvement Act of 1976 with respect to its acquisition of Xcel Pharmaceuticals. The Xcel transaction is expected to close in the near future and be modestly accretive to earnings in 2005, excluding the impact of acquired in-process research and development estimated to be approximately $120 million.
    On February 9, 2005, the company completed an equity offering of 8,280,000 shares, which included the exercise of the underwriters' over-allotment option. The offering resulted in net proceeds to the company of $189.8 million, which will be used to pay in part for the Xcel acquisition.
    The company currently expects operating metrics in 2005 as follows:

Gross Margin 68-70 Percent Cost of Goods Sold 30-32 Percent Selling Expense 30-32 Percent General and Administrative Expense 14-16 Percent Research and Development Expense 16-18 Percent Income Tax Expense 33-35 Percent

    Balance Sheet Information:

    Cash and marketable securities at December 31, 2004 totaled $467 million, compared with $874 million at December 31, 2003. The decrease was primarily due to the planned repurchase of the company's 6 1/2 percent convertible notes and acquisitions during the year. As a result of the convertible notes repurchase, long-term debt decreased to $793 million at December 31, 2004, from $1.1 billion at December 31, 2003.
    The company's independent auditors have not yet finalized their assessment of internal controls required under Sarbanes-Oxley section 404 and have not completed their audit of Valeant's 2004 financial statements. Based on management's review of internal controls to date, which review will continue through the filing of the company's financial statements to be included in the company's annual report on Form 10-K, management believes the company's internal controls are operating effectively.
    Included in the audit is a review of the ability of the company to realize the tax benefit of approximately $100 million as of December 31, 2004 from net operating losses in the United States. Current accounting standards require that a valuation allowance be established when it is more likely than not that all or a portion of a deferred tax asset may not be realized. Cumulative losses weigh heavily in the assessment of the need for a valuation allowance. Forecasts of future taxable income are not generally considered sufficient evidence to outweigh a history of losses.
    If the company is unable to demonstrate its ability to realize the tax benefit from the net operating losses, the company would be required to provide a valuation allowance for all or a portion of the tax benefit for GAAP reporting purposes. There will be no cash impact to this valuation allowance since the company does not currently pay taxes in the United States. The company believes that it will realize the benefit from these losses in the future through implementation of our strategic plan including the commercialization of Viramidine.

    Conference Call and Webcast Information:

    Valeant will host a conference call today at 10:00 a.m. ET (7:00 a.m. PT) to discuss its 2004 fourth quarter and year-end results. The dial-in number to participate live on this call is (877) 295-5743, confirmation code 3443228. International callers should dial (706) 679-0845, confirmation code 3443228. A replay will be available approximately two hours following the conclusion of the conference call through Thursday, March 3, 2005, and can be accessed by dialing (800) 642-1687, confirmation code 3443228. The company will also webcast the call live over the Internet, which will be hosted in the investor relations section of its corporate Web site at www.valeant.com.

    About Valeant

    Valeant Pharmaceuticals International (NYSE: VRX) is a global, publicly traded, research-based specialty pharmaceutical company that discovers, develops, manufactures and markets a broad range of pharmaceutical products. More information about Valeant can be found at www.valeant.com.

    FORWARD-LOOKING STATEMENTS

    This press release contains forward-looking statements that involve risk and uncertainty, including, but not limited to, projections of future sales, royalty income, operating income, returns on invested assets, clinical development, regulatory approval processes, competition from generic products, marketplace acceptance of the company's products, the company's ability to successfully close the Xcel transaction and integrate Xcel's operations into those of Valeant, success of the company's strategic repositioning initiatives and the ability of management to execute them, cost-cutting measures, success of the company's strategic plan and the ability to achieve financial targets and cost reduction goals, and other risks detailed from time to time in Valeant's SEC filings. These statements are based on management's current expectations and involve risks and uncertainties which include, Valeant's ability to retain key employees, reduce costs, general economic factors and business and capital market conditions, general industry trends and changes in tax law requirements and government regulation. Valeant wishes to caution the reader that these factors, as well as other factors described in Valeant's SEC filings, are among the factors that could cause actual results to differ materially from the expectations described in the forward-looking statements.

Valeant Pharmaceuticals International Table 1 Consolidated Condensed Statement of Income for the three and twelve months ended December 31, 2004 and 2003

Three Months Ended Twelve Months Ended December 31, December 31, ------------------- ------------------- In thousands, except per % % share data 2004 2003 Change 2004 2003 Change --------- --------- ------ --------- -------- ------

Product sales $175,035 $145,515 20% $606,093 $518,471 17% Ribavirin royalties 12,983 30,727 -58% 76,427 167,482 -54% --------- --------- --------- --------- Total revenues 188,018 176,242 7% 682,520 685,953 -1%

Cost of goods sold 58,399 54,472 7% 200,313 184,669 8% Selling expenses 50,204 46,861 7% 196,567 166,707 18% General and administrative expenses 24,880 26,771 -7% 98,566 111,532 -12% Research and development costs 28,067 15,585 80% 92,496 45,286 104% Acquired in- process research and development (1) - - - 11,770 117,609 -90% Restructuring charges (2) (772) - - 19,344 - - Amortization expense 17,789 12,772 39% 59,303 38,577 54% --------- --------- --------- --------- 178,567 156,461 14% 678,359 664,380 2% --------- --------- --------- --------- Income from operations 9,451 19,781 -52% 4,161 21,573 -81%

Interest, net (6,012) (6,431) (36,833) (27,257) Other income, net including translation and exchange 2,334 4,231 141 4,727 Loss on early extinguishment of debt - (12,803) (19,892) (12,803) --------- --------- --------- --------- Income (loss) from continuing operations before provision for income taxes and minority interest 5,773 4,778 (52,423) (13,760)

Provision (benefit) for income taxes (220) 1,816 (12,051) 39,463 Minority interest 225 96 233 11,763 --------- --------- --------- --------- Income (loss) from continuing operations 5,768 2,866 (40,605) (64,986)

Income (loss) from discontinued operations, net (2,790) (4,646) (27,182) 9,346 --------- --------- --------- ---------

Net Income (loss) $2,978 $(1,780) $(67,787) $(55,640) ========= ========= ========= =========

Basic earnings per common share Income (loss) from continuing operations $0.07 $0.04 $(0.48) $(0.78) Discontinued operations, net (0.03) (0.06) (0.33) 0.11 --------- --------- --------- --------- Net income (loss) $0.04 $(0.02) $(0.81) $(0.67) ========= ========= ========= ========= Shares used in per share computation 84,161 83,137 83,887 83,602 ========= ========= ========= =========

Diluted earnings per common share Income (loss) from continuing operations $0.07 $0.03 $(0.48) $(0.78) Discontinued operations, net (0.04) (0.05) (0.33) 0.11 --------- --------- --------- --------- Net income (loss) $0.03 $(0.02) $(0.81) $(0.67) ========= ========= ========= ========= Shares used in per share computation 87,327 85,856 83,887 83,602 ========= ========= ========= =========

(1) Expense associated with the write-off of acquired in-process research and development ("IPR&D") related to the Amarin acquisition in 2004 and the Ribapharm tender offer in 2003. (2) Restructuring charges are primarily related to our manufacturing rationalization plan and include impairment charges on manufacturing sites and severance charges.

Valeant Pharmaceuticals International Table 2 Consolidated Condensed Statements of Operations and Reconciliation of Non-GAAP Adjustments

Three Months Ended December 31, 2004 ------------------------------- Non-GAAP GAAP Adjustments Adjusted -------- ------------ --------- In thousands, except per share data

Product sales $175,035 $ - $175,035 Ribavirin royalties 12,983 - 12,983 -------- ------- --------- Total revenues 188,018 - 188,018

Cost of goods sold 58,399 - 58,399 Selling expenses 50,204 (50) (a) 50,154 General and administrative expenses 24,880 2,973 (a)(b) 27,853 Research and development costs 28,067 - 28,067 Restructuring charges (772) 772 (c) - Amortization expense 17,789 (4,797) (d) 12,992 -------- ------- --------- 178,567 (1,102) 177,465 -------- ------- --------- Income from operations 9,451 1,102 10,553

Interest, net (6,012) - (6,012) Other income, net including translation and exchange 2,334 - 2,334 -------- ------- --------- Income from continuing operations before provision for income taxes and minority interest 5,773 1,102 6,875

Provision for income taxes (220) 2,009 (e) 1,789 Minority interest 225 - 225 -------- ------- --------- Income from continuing operations 5,768 (907) 4,861

Loss from discontinued operations, net (2,790) - (2,790) -------- ------- ---------

Net Income $2,978 $(907) $2,071 ======== ======= =========

Basic earnings per common share Income from continuing operations $0.07 $0.06 Discontinued operations, net (0.03) (0.03) --------- --------- Net income $0.04 $0.03 ========= ========= Shares used in per share computation 84,161 84,161 ========= =========

Diluted earnings per common share Income from continuing operations $0.07 $0.06 Discontinued operations, net (0.04) (0.03)(f) --------- --------- Net income $0.03 $0.03 ========= ========= Shares used in per share computation 87,327 87,327 ========= =========

(a) Net reversal of sales force reduction costs of ($423K). $50K of the original accrual was reclassed to selling expense in the fourth quarter. (b) ($2,500K) of insurance refund related to the settlement of a bondholder class action lawsuit. (c) Reversal of restructuring charges primarily related to our manufacturing rationalization plan and include impairment charges on manufacturing sites and severance charges ($772K). (d) Product impairment charges of $4,797K. Includes an impairment charge of $3,700K related to products sold in Italy for which the patent life was reduced by a decree by the Italian Government. (e) Tax effect on non-GAAP adjustments. Includes a state tax benefit of $1,308K and an increased benefit of $731K on the charges in Spain, which were previously not benefitted due to the uncertainty of the realization of these benefits. (f) Change from GAAP to adjusted amount is to aid in accuracy of rounding.

We use certain non-GAAP financial measures, including adjusted net income (loss) from continuing operations and adjusted earnings per share, both of which exclude IPR&D, sales force reduction costs, restructuring costs,product impairment charges, settlement on tax dispute and early extinguishment of debt. We exclude these items in assessing our financial performance, primarily due to their non- operational nature or because they are outside of our normal operations. The non-GAAP financial measures should not be considered as an alternative to, or more meaningful than the GAAP financial measures.

Valeant Pharmaceuticals International Table 2.1 Consolidated Condensed Statements of Operations and Reconciliation of Non-GAAP Adjustments

Three Months Ended December 31, 2003 ---------------------------------- Non-GAAP GAAP Adjustments Adjusted --------- ----------- --------- In thousands, except per share data

Product sales $145,515 $ - $145,515 Ribavirin royalties 30,727 - 30,727 --------- ----------- --------- Total revenues 176,242 - 176,242

Cost of goods sold 54,472 - 54,472 Selling expenses 46,860 - 46,860 General and administrative expenses 26,772 - 26,772 Research and development costs 15,585 - 15,585 Acquired in-process research and development - - - Amortization expense 12,772 - 12,772 --------- ----------- --------- 156,461 - 156,461 --------- ----------- --------- Income from operations 19,781 - 19,781

Interest, net (6,431) - (6,431) Other (expense), net including translation and exchange (8,572) 12,803 (a) 4,231 --------- ----------- --------- Income from continuing operations before provision for income taxes and minority interest 4,778 12,803 17,581

Provision for income taxes 1,816 4,865 (b) 6,681 Minority interest 96 - 96 --------- ----------- --------- Income from continuing operations 2,866 7,938 10,804

Loss from discontinued operations, net (4,646) - (4,646) --------- ----------- ---------

Net income (loss) $(1,780) $7,938 $6,158 ========= =========== =========

Basic earnings per common share Income from continuing operations $0.04 $0.13 Discontinued operations, net (0.06) (0.06) --------- --------- Net income (loss) $(0.02) $0.07 ========= ========= Shares used in per share computation 83,137 83,137 ========= =========

Diluted earnings per common share Income from continuing operations $0.03 $0.13 Discontinued operations, net (c) (0.05) (0.06) (c) --------- --------- Net income (loss) $(0.02) $0.07 ========= ========= Shares used in per share computation 85,856 85,856 ========= =========

(a) Loss on early extinguishment of debt. (b) Tax effect for loss on early extinguishment of debt. (c) Change from GAAP to adjusted amount is to aid in accuracy of rounding.

See non-GAAP financial measure disclosure in Table 2.

Valeant Pharmaceuticals International Table 3 Consolidated Condensed Statements of Operations and Reconciliation of Non-GAAP Adjustments

Twelve Months Ended December 31, 2004 --------------------------------- Non-GAAP GAAP Adjustments Adjusted --------- ------------ --------- In thousands, except per share data

Product sales $606,093 $- $606,093 Ribavirin royalties 76,427 - 76,427 --------- -------- --------- Total revenues 682,520 - 682,520

Cost of goods sold 200,313 - 200,313 Selling expenses 196,567 (3,611) (a) 192,956 General and administrative expenses 98,566 (1,376) (a)(b) 97,190 Research and development costs 92,496 - 92,496 Acquired in-process research and development 11,770 (11,770) (c) - Restructuring charges 19,344 (19,344) (d) - Amortization expense 59,303 (4,797) (e) 54,506 --------- -------- --------- 678,359 (40,898) 637,461 --------- -------- --------- Income from operations 4,161 40,898 45,059

Interest, net (36,833) - (36,833) Other income (expense), net including translation and exchange (19,751) 19,892 (f) 141 --------- -------- --------- Income (loss) from continuing operations before provision for income taxes and minority interest (52,423) 60,790 8,367

Provision (benefit) for income taxes (12,051) 14,227 (g) 2,176 Minority interest 233 - 233 --------- -------- --------- Income (loss) from continuing operations (40,605) 46,563 5,958

Income (loss) from discontinued operations, net (27,182) 10,080 (h) (17,102) --------- -------- ---------

Net income (loss) $(67,787)$56,643 $(11,144) ========= ======== =========

Basic earnings per common share Income (loss) from continuing operations $(0.48) $0.07 Discontinued operations, net (0.33) (0.20) --------- --------- Net loss $(0.81) $(0.13) ========= ========= Shares used in per share computation 83,887 83,887 ========= =========

Diluted earnings per common share Income (loss) from continuing operations $(0.48) $0.07 Discontinued operations, net (0.33) (0.20) --------- --------- Net loss $(0.81) $(0.13) ========= ========= Shares used in per share computation 83,887 86,742 ========= =========

(a) Sales force reduction costs $4,262K of which $3,611K is recorded in selling expenses and $651K is recorded in general and administrative expenses. (b) Legal expenses related to the settlement of the bondholder class action lawsuit $725K, net of an insurance refund of ($2,500K). (c) IPR&D charge related to the acquisition of Amarin. (d) Restructuring charges are primarily related to our manufacturing rationalization plan and include impairment charges on manufacturing sites and severance charges $19,344K. (e) Product impairment $4,797K. (f) Loss on early extinguishment of debt. (g) Tax effect for non-GAAP adjustments. (h) Environmental reserve, net of tax $10,080K.

See non-GAAP financial measure disclosure in Table 2.

Valeant Pharmaceuticals International Table 3.1 Consolidated Condensed Statements of Operations and Reconciliation of Non-GAAP Adjustments

Twelve Months Ended December 31, 2003 ---------------------------------- Non-GAAP GAAP Adjustments Adjusted --------- ----------- --------- In thousands, except per share data

Product sales $518,471 $ - $518,471 Ribavirin royalties 167,482 - 167,482 --------- ----------- --------- Total revenues 685,953 - 685,953

Cost of goods sold 184,669 - 184,669 Selling expenses 166,707 - 166,707 General and administrative expenses 111,532 - 111,532 Research and development costs 45,286 - 45,286 Acquired in-process research and development 117,609 (117,609) (a) - Amortization expense 38,577 - 38,577 --------- ----------- --------- 664,380 (117,609) 546,771 --------- ----------- --------- Income from operations 21,573 117,609 139,182

Interest, net (27,257) - (27,257) Other (expense), net including translation and exchange (8,076) 12,803 (b) 4,727 --------- ----------- --------- Income (loss) from continuing operations before provision for income taxes and minority interest (13,760) 130,412 116,652

Provision for income taxes 39,463 4,865 (c) 44,328 Minority interest 11,763 - 11,763 --------- ----------- --------- Income (loss) from continuing operations (64,986) 125,547 60,561

Income from discontinued operations, net 9,346 - 9,346 --------- ----------- ---------

Net income (loss) $(55,640) $125,547 $69,907 ========= =========== =========

Basic earnings per common share Income (loss) from continuing operations $(0.78) $0.72 Discontinued operations, net 0.11 0.11 --------- --------- Net income (loss) $(0.67) $0.83 ========= ========= Shares used in per share computation 83,602 83,602 ========= =========

Diluted earnings per common share Income (loss) from continuing operations $(0.78) $0.71 Discontinued operations, net 0.11 0.11 --------- --------- Net income (loss) $(0.67) $0.82 ========= ========= Shares used in per share computation 83,602 84,763 ========= =========

(a) IPR&D charge related to the Ribapharm tender offer. (b) Loss on early extinguishment of debt. (c) Tax effect for loss on early extinguishment of debt.

See non-GAAP financial measure disclosure in Table 2.

Valeant Pharmaceuticals International Table 4 GAAP reconciliation of diluted earnings per share for the three and twelve months ended December 31, 2004 and 2003

Three Months Twelve Months Ended Ended December 31, December 31, ---------------- ------------------- In thousands, except per share data 2004 2003 2004 2003 ------- -------- --------- ---------

Income (loss) from continuing operations $5,768 $2,866 $(40,605) $(64,986)

Non-GAAP pre-tax adjustments: IPR&D - - 11,770 117,609 Sales force reduction costs (1) (423) - 4,262 - Product impairment charges 4,797 - 4,797 - Restructuring charges (772) - 19,344 - Loss on early extinguishment of debt - 12,803 19,892 12,803 Settlement of bondholder class action lawsuit (2,500) - 725 - Tax effect on the above charges and tax settlements (2) (2,009) (4,865) (14,227) (4,865) ------- -------- --------- ---------

Adjusted income from continuing operations before the above charges $4,861 $10,804 $5,958 $60,561 ======= ======== ========= =========

Adjusted diluted EPS from continuing operations $0.06 $0.13 $0.07 $0.71 ======= ======== ========= =========

Shares used in per share calculation 87,327 85,856 86,742 84,763 ======= ======== ========= =========

(1) Relates to sales force reduction in Spain.

(2) For the twelve months ended December 31, 2004, we have recorded minimum tax benefits on the restructuring charges and sales force reduction costs, which reflects the uncertainty of the realization of these tax benefits in some of the markets in which these costs were incurred. Additionally, this amount includes resolution of a tax dispute with the Puerto Rico tax authority on our 1998-1999 tax returns.

Reconciliation of consolidated operating income to non-GAAP adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA")

Three Months Ended Twelve Months Ended December 31, December 31, ----------------- ------------------- 2004 2003 % Change 2004 2003 % Change -------- -------- -------- --------- --------- ---------

Consolidated operating income (GAAP) $9,451 $19,781 -52% $4,161 $21,573 -81% Depreciation and amortization (1) 24,617 20,546 20% 87,138 64,807 34% -------- -------- --------- --------- EBITDA (non- GAAP) (2) 34,068 40,327 -16% 91,299 86,380 6% Non-GAAP adjustments (3) (3,695) - 36,101 117,609 -------- -------- --------- ---------

Adjusted EBITDA (non- GAAP) (2) $30,373 $40,327 -25% $127,400 $203,989 -38% ======== ======== ========= =========

(1) Amortization expenses includes $4,797K of product impairment charges. (2) We believe that EBITDA is a meaningful non-GAAP financial measure as an earnings-derived indicator that approximates cashflow. We calculate EBITDA by adding depreciation and amortization back to consolidated operating income. Adjusted EBITDA excludes the additional costs set forth in note (3) below. Adjusted EBITDA, as defined and presented by the Company, may not be comparable to similar measures reported by other companies. (3) Non-GAAP adjustments include IPR&D, restructuring charges, sales force reduction costs and an accrual for a class action suit (see previous tables for detailed amounts). We exclude these costs due to their non-operational nature or because they are outside of our normal operations.

See non-GAAP financial measure disclosure in Table 2.

Valeant Pharmaceuticals International Table 5 Supplemental Sales Information For the three and twelve months ended December 31, 2004 and 2003 (in thousands)

Three Months Ended % Twelve Months Ended % December 31, Increase/ December 31, Increase/ ------------------- ------------------ 2004 2003 (Decrease) 2004 2003 (Decrease) --------- --------- ---------- -------- --------- ---------- Derma- tology Efudix/ Efudex(R) (G)(T) $11,237 $8,915 26% $45,453 $26,821 69% Kinerase(R) (G)(T) 3,744 3,720 1% 15,619 12,628 24% Oxsoralen- Ultra(R) (G)(T) 2,768 2,438 14% 10,910 8,501 28% Dermatix(R) (G) 1,936 1,064 82% 7,034 2,493 182%

Infectious Disease Virazole(R) (G)(T) 3,704 4,448 (17%) 13,822 18,716 (26%)

Neurology Mestinon(R) (G)(T) 11,304 13,643 (17%) 41,631 41,879 (1%) Librax(R) (T) 5,554 4,454 25% 16,868 11,774 43% Dalmane(R)/ Dalmadorm (T) 3,276 3,411 (4%) 12,146 10,636 14% Tasmar(R) (G) 846 - - 3,551 - -

Primary Care Bedoyecta(R) (T) 13,239 7,627 74% 30,654 26,955 14% Solcoseryl (T) 4,009 4,855 (17%) 14,397 16,186 (11%) Nyal(R) (T) 2,498 2,005 25% 11,904 8,969 33% Other Pharma- ceutical Products 110,920 88,935 25% 382,104 332,913 15% --------- --------- --------- ---------

Total Product Sales $175,035 $145,515 20% $606,093 $518,471 17% ========= ========= ========= =========

Total Top Ten Product Sales(T) $61,333 $55,516 10% $213,404 $183,065 17% ========= ========= ========= =========

Total Global Product Sales(G) $35,539 $34,228 4% $138,020 $111,038 24% ========= ========= ========= =========

Valeant Pharmaceuticals International Table 6 Consolidated Condensed Statement of Revenue and Operating Income - Regional for the three and twelve months ended December 31, 2004 and 2003 (in thousands)

Three Months Ended Twelve Months Ended December 31, December 31, --------------------- --------------------- Revenues % % 2004 2003 Change 2004 2003 Change --------- --------- ------- --------- -------- ------

North America $43,299 $28,237 53% $142,799 $99,074 44% Latin America 47,568 41,206 15% 151,726 136,008 12% Europe 69,077 62,635 10% 253,748 232,031 9% AAA 15,091 13,437 12% 57,820 51,358 13% --------- --------- --------- --------- Total pharma- ceuticals 175,035 145,515 20% 606,093 518,471 17%

Ribavirin royalty revenues 12,983 30,727 -58% 76,427 167,482 -54% --------- --------- --------- ---------

Consolidated revenues $188,018 $176,242 7% $682,520 $685,953 -1% ========= ========= ========= =========

Cost of goods sold $58,399 $54,472 7% $200,313 $184,669 8% ========= ========= ========= =========

Gross profit margin on product sales 67% 63% 67% 64% ========= ========= ========= =========

Operating Income (Loss)

North America $14,591 $11,577 26% $44,438 $29,972 48% Latin America 16,888 13,475 25% 46,124 42,671 8% Europe 5,575 2,349 137% 31,347 24,425 28% AAA 329 806 -59% 3,103 3,570 -13% --------- --------- --------- --------- 37,383 28,207 33% 125,012 100,638 24%

Restructur- ing charges 772 - (19,344) - --------- --------- --------- ---------

Total pharma- ceuticals 38,155 28,207 35% 105,668 100,638 5%

R&D (16,887) 8,012 -- (38,860) 95,151 -- IPR&D - - -- (11,770) (117,609) -- --------- --------- --------- ---------

Consolidated segment operating income 21,268 36,219 -41% 55,038 78,180 -30%

Corporate expenses (11,817) (16,438) -28% (50,877) (56,607) -10% --------- --------- --------- ---------

Total consolidated operating income (loss) $9,451 $19,781 $4,161 $21,573 ========= ========= ========= =========

Three Months Ended Twelve Months Ended Gross Dec. 31, Dec. 31, Dec. 31, Dec. 31, Profit 2004 % 2003 % 2004 % 2003 % ------- --- ---------- --- ------- --- ----------- ---

North America $33,289 77% $24,808 88% $115,640 81% 80,760 82% Latin America 36,779 77% 28,748 70% 110,764 73% 97,205 71% Europe 39,140 57% 31,642 51% 150,830 59% 129,958 56% AAA 7,428 49% 5,845 43% 28,546 49% 25,879 50% --------- --------- --------- ---------

Total pharma- ceuticals $116,636 67% $91,043 63% $405,780 67%$333,802 64% ========= ========= ========= =========

Valeant Pharmaceuticals International Table 7 Consolidated Balance Sheet Data as of December 31, 2004 and December 31, 2003 (in thousands)

December December 31, 2004 31, 2003 --------- ----------

Cash and marketable securities $466,992 $873,981 Accounts receivable, net 171,859 162,402 Inventory, net 112,250 91,906 Long-term debt (1) 793,139 1,119,802 Total equity 582,942 605,361

(1) On July 21, 2004 we redeemed all of our outstanding 6 1/2 % convertible notes due 2008.

Valeant Pharmaceuticals International Table 8 Supplemental Non-GAAP Information on Currency Effect (in thousands)

Three Months Ended Twelve Months Ended December 31, December 31, ------------------- ------------------- 2004 2003 2004 2003 --------- --------- --------- --------- Consolidated

Product sales $175,035 $145,515 $606,093 $518,471 Currency effect (8,385) (20,936) Product sales, excluding currency impact $166,650 $585,157

Operating income (loss) $9,451 $19,781 $4,161 $21,573 Currency effect (1,353) (2,839) Operating income, excluding currency impact $8,098 $1,322

Geographic Product Sales

North America pharmaceuticals $43,299 $28,237 $142,799 $99,074 Currency effect (321) (1,696) North America pharmaceuticals, excluding currency impact $42,978 $141,103

Latin America pharmaceuticals $47,568 $41,206 $151,726 $136,008 Currency effect 270 4,405 Latin America pharmaceuticals, excluding currency impact $47,838 $156,131

Europe pharmaceuticals $69,077 $62,635 $253,748 $232,031 Currency effect (8,006) (21,083) Europe pharmaceuticals, excluding currency impact $61,071 $232,665

AAA pharmaceuticals $15,091 $13,437 $57,820 $51,358 Currency effect (328) (2,562) AAA pharmaceuticals, excluding currency impact $14,763 $55,258

Note: Currency effect is determined by comparing adjusted 2004 reported amounts, calculated using 2003 monthly average exchange rates, to the actual 2003 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.

--30--JC/la*

CONTACT: Valeant Pharmaceuticals Jeff Misakian, 714-545-0100 ext. 3309

KEYWORD: CALIFORNIA INDUSTRY KEYWORD: PHARMACEUTICAL EARNINGS CONFERENCE CALLS SOURCE: Valeant Pharmaceuticals International

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