Start time: 10:00
End time: 10:44
Valeant Pharmaceuticals International (VRX)
Q3 2008 Earnings Call
November 6, 2008 10:00 a.m.
Michael Pearson - Chairman and Chief Executive Officer
Peter J. Blott - Chief Financial Officer, Executive VP and Group Financial Controller
Laurie Little - Investor Contact
Michael Tong - Wachovia Capital
Jonathan Aschoff - Brean Murray, Carret & Co.
Gene Mack - Lazard Capital Markets
[Raheev Jashnani] - [Civic]
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Thank you, Ms. Little, you may being your conference.
Thank you, Leslie. Good morning, everyone, and welcome to Valeant’s 2008 Third Quarter Financial Results conference call. Joining us on the call today are Mike Pearson, Chairman and Chief Executive Officer, and Peter Blott, Chief Financial Officer.
Before we begin, I would like to call your attention to the fact that this conference call may contain forward-looking statements, including, but not limited to, expectations and plans relating to Retigabine and Taribavirin, cost reductions, sales growth, restoring Mexico and other prospects of our restructuring plan, the effect of financial markets and foreign exchange impact and the benefit of these efforts we expect to see in 2009. These statements are based upon current expectations and beliefs of management and are subject to 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 our ability to carry our restructuring program, our relationships with our existing and future partners, and our ability to manage exposure to changes and foreign exchange rates and other risks and uncertainties discussed in the company's filings with the SEC. These risks are among the factors that could cause actual results to differ materially from the expectations described in the forward-looking statements. An undue reliance should not be placed on any of these forward-looking statements. Valeant undertakes no obligation to update any of these forward-looking statements to reflect events or circumstances after the date of this call or to reflect actual outcome.
Certain figures discussed in today's presentation will be based on adjusted or non-GAAP information. A reconciliation of historical GAAP to non-GAAP results can be found in the tables to the company's press release issued earlier today and on Valeant's Web site at www.valeant.com.
And now, I’d like to turn the call over to Mike.
Thank you, Laurie. Good morning, everyone, and thank you for joining us.
Today I would like to update you on our six key initiatives, most of which are nearing completion, and then have Peter discuss our financial results in further detail.
Our first initiative was to sell our IPO Europe. We announced our plans to divest the majority of our European operations in July and successfully closed the transaction in September. We sold these operations for $392 million, and after normal closing adjustments we have received $428 million in cash from Meda.
We feel that we were very fortunate to have completed this transaction when we did, as credit markets are definitely not as favorable today as they were just a few short months ago. While we continue to work through some transitional matters, this business is now under Meda’s leadership and they are working diligently to integrate our employees and products into their operations.
As for the possible IPO or sale of our remaining central European operations, we are no longer considering a near-term IPO due to current market conditions. While an IPO or a sale does remain a possibility down the road, the business continues to deliver double-digit growth and strong cash flows from operations and our current plans are to keep it as part of the Valeant business.
Now that this business has been separated from the previous WEMEA operations, we will better depict the strength of this business and its solid growth prospects. We will be renaming these operations as our Europe business and our financials in upcoming quarters.
Our second initiative was to fix Mexico. I am pleased to say that Mexico continues to show strong signs of improvement as the turnaround continues. We have completed the inventory drawdown process that we began in the second quarter and we are keeping a close eye on wholesaler inventory levels. We are now able to track wholesale inventory levels at five of our largest wholesalers who account for roughly 60% of our sales volume.
Wholesale inventory levels are now at 30 to 40 days, a vast improvement from the three-plus months of inventory held by wholesalers when I arrived at Valeant. To demonstrate the improvement we are seeing in our Mexican business, let me fill you in on the sales that we have received so far in 2008.
Sales in our first quarter were $17.3 million; second quarter sales were in Mexico were $29.9 million; and third quarter sales were $36.4 million. Corresponding income from operations has also showed sequential improvement.
In the first quarter we lost $800,000 in Mexico; in the second quarter we earned $4.3 million in Mexico; and in quarter three we earned $9 million in Mexico. As we mentioned on our last call, the increased sales team of over 350 people that we have put in Mexico have now been in place for several months and is actively calling on both doctors and pharmacists.