Valeant Pharmaceuticals International, Inc. (VRX)

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Valeant Pharmaceuticals International (VRX)

Q3 2009 Earnings Call

November 2, 2009 10:00 am ET


Laurie W. Little – Vice President of Investor Relations

J. Michael Pearson – Chairman and Chief Executive Officer

Peter J. Blott – Executive Vice President and Chief Financial Officer

Rajiv De Silva – Chief Operating Officer of Specialty Pharmaceuticals

Bhaskar Chaudhuri – President of Valeant


Gary Nachman – Leerink Swann

David Amsellem – Piper Jaffray

Michael Tong – Wells Fargo Securities

[Greg Fraser] – Bank of America Merrill Lynch

Juan Sanchez – Ladenburg Thalmann & Co.



At this time I would like to welcome everyone to the third quarter earnings conference call. (Operator Instructions). Ms. Laurie Little you may begin your conference.

Laurie Little

Good morning everyone and welcome to Valeant's 2009 Third Quarter Financial Results conference call. Joining us on the call today are Mike Pearson, chairman and chief executive officer. Peter Blott, chief financial officer. Bhaskar Chaudhuri, president of Valeant and Rajiv De Silva, chief operating officer of Specialty Pharmaceuticals.

In addition to a live webcast, a copy of today's slide presentation can be found on our website under the Investor Relations section. Certain statements made in this presentation and other statements made during this call and the Q&A session afterwards may constitute forward-looking statements. Please refer to the current slide for our cautionary statement regarding these 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. These non-GAAP financial measures include measures such as, cash EPS, organic product sales growth and adjusted cash flow from operations.

Reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in the table to our third quarter earnings press release, which was issued earlier today and can be found in the investor relations section of our website at and with that I'd like to turn the call over to Mr. Pearson.

Michael Pearson

Good morning everyone and thank you for joining us. Valeant's third quarter results again delivered solid growth in cash flows across all of our operating units. Total revenue in the third quarter of 2009 is $220 million as compared to $168 million in the same period last year, an increase of 31%. Our cash EPS is $0.58 per share and adjusted cash flow from operations is $65 million for the quarter.

The solid business performance that we have achieved so far this year provides a platform for us to again raise our earnings guidance for 2009 from our previous range of $1.90 to $2.10 cash EPS to our new guidance range from $2.10 to $2.20 cash EPS.

Our confidence and the continuing strength of our base business and our management team here at Valeant is reflected in our guidance. Additionally, I am very pleased to report that on October 30, we and our colleagues at GSK submitted both the NDA and MAA registration packages for retigabine.

This is a major achievement and I would like to publicly thank both the GSK and Valeant members of the joint development team for their hard work and dedication to getting this file completed. And I would like to note that while the submission took longer than we expected, what matters is when a drug gets approved, not when it is submitted.

And we believe that with GSK's assistance a very high quality file has been put together and we are hopeful that this potentially important medication for epilepsy patients will be available sooner rather than later.

Today, I would like to spend some time on the following three areas. First, the performance of our core business and continued improvement in our cash generation, second a review of how we have deployed our cash, first by reviewing the performance of our acquisitions and second, by reviewing our securities repurchase program.

And third, our new strategic objectives for 2010, including an early outlook on our expected grow and revenues and earnings. I will then turn the call over to Peter to discuss our third quarter financial results in more detail.

One of our core operating principles of Valeant is to achieve double-digit top and bottom line growth. Similar to our first and second quarter results, our third quarter product sales, net of currency and acquisitions, delivered strong double-digit organic growth of 18%. While Specialty Pharma in Europe had high double-digit organic growth, our organic growth in Mexico did not.

This is largely due to the fact that we chose not to extend credit terms to our Mexican distributors who are unfortunately experienced delayed payments from their customers, the retailers. We are committed to continuing our very conservative fiscal policy in Latin America given the problems we had there before I joined Valeant. If this translates into slower growth in Latin America [per] quarter, we will live with it.

In addition to our healthy sales growth, our businesses continued to deliver strong earnings in cash generation. Our Specialty Pharmaceutical segment had non-GAAP operating margins well in excess of our 40% operating margin target, due in part to the inclusion of generic BenzaClin and the total contributed $34 million this quarter to our adjusted cash flow number.

Our two branded generic businesses delivered operating margins above the 30% level and generated $27 million of adjusted cash flow. We expect our branded generic margins to improve in 2010 as we integrate our past acquisitions and become more efficient.

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