Valeant Pharmaceuticals CEO Discusses Q3 2010 Results - Earnings Call Transcript

Valeant Pharmaceuticals International, Inc. ( VRX)

Q3 2010 Earnings Call

November 4, 2010 8:00 AM EST


Laurie Little – IR

Mike Pearson – CEO

Rajiv De Silva – President and COO, Specialty Pharmaceuticals.

Peggy Mulligan – CFO


Randall Stanicky – Goldman Sachs

Gregg Gilbert – Bank of America Merrill Lynch

Marc Goodman – UBS

Corey Davis – Jefferies

Douglas Miehm – RBC Capital Markets

Annabel Samimy – Stifel Nicolaus

Lennox Gibbs – TD Securities

Michael Tong – Wells Fargo

Hari Sambasivam – National Bank Financial

Graham Tanaka – Tanaka Capital

Juan Sanchez – Ladenburg



Good morning. My name is Amanda and I will be your conference operator today. At this time, I would like to welcome everyone to the Valeant third quarter 2010 earnings conference call.

All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session. (Operator Instructions). Thank you.

Ms. Laurie Little, you may begin your conference.

Laurie Little

Good morning, and welcome, everyone to Valeant's third quarter 2010 financial results conference call. Joining us on the call today are Mike Pearson, Chief Executive Officer; Peggy Mulligan, Chief Financial Officer; and Rajiv De Silva, President and Chief Operating Officer of Specialty Pharmaceuticals.

In addition to this live webcast, a copy of today's slide presentation can be found on our website under the Investor Relations section within the webcast event details.

Before we begin, please turn your attention to the slide containing our cautionary statement regarding forward-looking statements. Certain statements made in this presentation and other statements made during this call and the Q&A session afterwards may constitute forward-looking statements.

In addition to supplement the consolidated financial results prepared in accordance with generally accepted accounting principles, the company uses non-GAAP financial measures that exclude certain item.

The company has provided guidance with respect to adjusted non-GAAP cash flow from operations, which is a non-GAAP financial measure that represents adjusted cash flow from operations. The company has not provided reconciliation of this forward-looking non-GAAP financial measure due to the difficulty in forecasting and quantifying the exact amount of the items excluded from the non-GAAP financial measure that will be included in the comparable GAAP financial measure.

Statements made on this call do not and will not constitute an offer to sell or the solicitation of an offer to purchase common shares of the company. Valeant intends to file a registration statement including the perspective with the Securities and Exchange Commission for the offering of the common shares pursuant to the Special Dividend Reinvestment Plan.

Before investing an eligible shareholder should read the prospectus in that Registration Statement and other documents that company has filed with the SEC and with the CSA for more complete information about the company and the offering. You may also obtain these documents free of charge from Valeant's website or by directing a request to Investor Relations at our corporate headquarters.

Information related to the Special Dividend Reinvestment Plan is being provided here pursuant to and in accordance with Rule 135 under the Securities Act of 1933, as amended.

And, with that, I will turn the call over to Mike Pearson.

Mike Pearson

Thank you, Laurie. Good morning, everyone, and thank you for joining us. This quarter is an unusual quarter from a financial reporting perspective with the merger of Valeant and Biovail closing three days before the end of the quarter.

Up to the close the Legacy Biovail business continued to be managed by Legacy Biovail management and the Legacy Valeant business continued to be managed by the Legacy Valeant management. Since September 28 th, the combined business has been managed by the new Valeant team.

Due to GAAP requirements reported third quarter results reflect the full third quarter financial results of Legacy Biovail and the last three days of Legacy Valeant. However, to allow for a less complex operational transition, Legacy Valeant product shipments were cut off anywhere from three to 13 days before the end of the quarter depending on the geographic market. As a result, reported Legacy Valeant revenues only represent a partial quarter and reported new Valeant revenues only contain Legacy Biovail revenues.

Finally, a large portion of all integration costs, including all severance costs flow through the third quarter income statement. Therefore the third quarter performance of the new Valeant is difficult to assess based on reported numbers, although I will attempt to make some sense to the numbers on this morning's call.

On today's call, I plan to first discuss our operational results for the third quarter; second, have Rajiv update you on our integration efforts; third, have Peggy provide you with the financial overview; and finally, I'll come back and discuss high-level elements of our fourth quarter financial outlook.

Turning to the operational results, first for Legacy Biovail; Legacy Biovail results for the quarter, especially top line sales were poor. This was primarily due to the fact that most line managers in Legacy Biovail knew they would not be continuing in the new Valeant, and their hearts and minds were clearly not focused on the business. However, there is a silver lining. The underlying script trends for the most important Biovail products, Wellbutrin XL, Zovirax and Xenazine, continued their historic trends so there has been no change in trajectory for an overall market demand sampling.

I'm also pleased to note that the Biovail Canadian business continued to perform well showing 32% quarter-on-quarter growth.

Since the end of the quarter, we have also seen an uptick on Wellbutrin XL weekly script trends. More important, as new Valeant management begins to familiarize itself with Legacy Biovail's businesses we see many of the same opportunities to improve performance that we saw two-and-a-half years ago at old Valeant.

By restructuring partnerships, optimizing the marketing mix, cut in spending, and through innovative managed care strategies we feel cautiously optimistic that we can significantly improve the already strong cash flows being generated by Legacy Biovail products.

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