Valeant Pharmaceuticals International 8-K Valeant Pharmaceuticals Reports 2006 Second Quarter Results

Exhibit 99.1

Investor Contact:	Media Contact:
Jeff Misakian, Valeant Pharmaceuticals	Angie McCabe, Valeant Pharmaceuticals
714-545-0100 ext. 3309	714-545-0100 ext. 3381

VALEANT PHARMACEUTICALS REPORTS
2006 SECOND QUARTER RESULTS

— Product Sales Increase 15 Percent; Restructuring Initiative Taking Hold —

     COSTA MESA, Calif., August 3, 2006 — Valeant Pharmaceuticals International (NYSE: VRX) today announced results for the 2006 second quarter.

Second Quarter 2006 vs. Second Quarter 2005 Highlights:

• Revenues increased 12 percent to $230.2 million compared to $205.0 million.

• Product sales increased 15 percent to $208.5 million compared to $180.8 million.

• Ribavirin royalties decreased 11 percent to $21.6 million compared to $24.2 million.

• Net loss from continuing operations was $44.9 million, or $0.49 per diluted share, including the impact of stock-based compensation expense of $5.0 million, compared to net income of $1.4 million, or $0.02 per diluted share.

• Adjusted for non-GAAP items, income from continuing operations was $14.2 million, or $0.15 per diluted share, compared to $7.6 million, or $0.08 per diluted share.

     A reconciliation of GAAP to non-GAAP results is provided in Tables 2-4.

     Timothy C. Tyson, president and chief executive officer, said, “We’re very pleased with the results for the second quarter of 2006, which reflect an improvement in product sales and a continued control of expenses. Sales were higher due to acquired products and an overall growth in promoted brands. All of our regions did an excellent job in holding the line on expenses in the quarter. Our restructuring initiative has begun to take hold and will further improve costs, driving significant benefits to the bottom line. The expected growth in product sales and the benefits from our restructuring plan continue to give us confidence in our ability to achieve our metric targets for the year and our previously communicated earnings targets.”

Revenues:

     Product sales increases in the 2006 second quarter compared to the same period last year were led by the addition of Infergen^® to the product portfolio this year and strong growth in sales of Efudex^®, Kinerase^®, Mestinon^®, Bedoyecta™ and Cesamet™, partially offset by a decline in sales of Diastat^® and Migranal^®.

     Infergen was acquired at the end of last year and had sales of $11.3 million in the 2006 second quarter. Excluding Infergen, product sales increased nine percent in the 2006 second quarter, compared to the same period last year.

     Sales of promoted products increased 23 percent in the 2006 second quarter, compared to the same period last year. Excluding sales of Infergen, promoted products increased 11 percent in the quarter.

Regional Sales Performance:

     Valeant realigned its regional operations in the second quarter in connection with the company’s restructuring program. The company currently operates in three regions — North America, International (Latin America, Asia and Australia) and Europe, Middle East and Africa (EMEA). Prior periods have been presented in accordance with the current reporting structure.

     North American sales increased 19 percent in the 2006 second quarter compared to the same period last year, primarily due to the addition of Infergen. Excluding Infergen sales, North American sales were generally flat compared to the same period last year. The region reported increased sales in the quarter of Efudex, Kinerase and Cesamet, which were offset by declines in sales of Diastat and Migranal in the period, along with decreased sales of non-promoted products.

     North America launched the company’s Parkinson’s disease product, Zelapar^®, in the United States on July 18, 2006. The company expects to launch Cesamet in the United States in the 2006 third quarter.

     Sales in the International region increased 18 percent in the 2006 second quarter, primarily due to increased sales of Bedoyecta in Latin America. EMEA sales increased nine percent in the 2006 second quarter, primarily due to increased sales of Kinerase, Mestinon and Bisocard™.

Financial Metrics:

     The company’s gross margin on product sales in the 2006 second quarter was 68 percent. Adjusted for non-GAAP items, the gross margin was 69 percent, compared to 71 percent in the same period last year. The decline was primarily due to an increase in cost of goods sold that resulted from manufacturing variances in the quarter, principally for the write-off of inventory. The company continues to expect to achieve its gross margin target of 69-71 percent in 2006.

     Selling expense was 32 percent of product sales in the 2006 second quarter. Adjusted for non-GAAP items, selling expense was 31 percent, compared to 34 percent in the same period last year. The decline was due to reduced sales and marketing costs, partially offset by expenses associated with pre-launch activities in the quarter for Zelapar and Cesamet.

     General and administrative expenses were 15 percent of product sales in the 2006 second quarter. Adjusted for non-GAAP items, general and administrative expenses were 14 percent, the same ratio reported in the same period last year. Adjusted general and administrative expenses in the current period include a $2.4 million charge to reflect the previously announced judgment against the company in its lawsuit with Caleel + Hayden.

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     Research and development expenses were 13 percent of sales in the 2006 second quarter, compared to 15 percent in the same period last year.

     A reconciliation of GAAP to non-GAAP results is provided in Tables 2-4.

Restructuring Update:

     The company continued to make progress in the implementation of its restructuring initiative announced earlier this year. The company expects to record restructuring charges in connection with this initiative of between $90-115 million, of which $53.1 million and $79.5 million were recorded in the three and six months ended June 30, 2006, respectively. The company continues to expect that between $20-30 million of the restructuring costs in 2006 will be in cash.

     The company expects to save approximately $20-30 million in expenses in 2006 as a result of the restructuring initiative, nearly all of which will be in the second half of the year. In 2007 and 2008, cost savings are expected to be approximately $50-70 million in each year.

Litigation Update:

     The company also announced that it settled its lawsuit in the Delaware Court of Chancery against Milan Panic, the company’s former chairman and chief executive officer, for $20 million. The settlement requires an initial cash payment to the company of $8 million in the 2006 third quarter with the remainder due within one year. The settlement resolves all outstanding claims between Mr. Panic and the company. The settlement will result in a gain of approximately $18 million, which will be recorded in the 2006 third quarter.

Conference Call and Webcast Information:

     Valeant will host a conference call today at 10:00 a.m. EDT (7:00 a.m. PDT) to discuss its 2006 second quarter results. The dial-in number to participate on this call is (877) 295-5743, confirmation code 2984855. International callers should dial (706) 679-0845, confirmation code 2984855. A replay will be available approximately two hours following the conclusion of the conference call through August 10, 2006 and can be accessed by dialing (800) 642-1687, confirmation code 2984855. The company will also webcast the conference call live over the Internet. The webcast may be accessed through the investor relations section of Valeant’s corporate Web site atwww.valeant.com.

About Valeant:

     Valeant Pharmaceuticals International (NYSE: VRX) is a global, science-based specialty pharmaceutical company that develops, manufactures and markets pharmaceutical products primarily in the areas of neurology, infectious disease and dermatology. More information about Valeant can be found atwww.valeant.com.

     Efudex, Diastat, Migranal, Kinerase, Infergen, Bedoyecta, Mestinon, Cesamet, Bisocard and Zelapar are trademarks or registered trademarks of Valeant Pharmaceuticals International or its related companies. All other trademarks are the trademarks or the registered trademarks of their respective owners.

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FORWARD-LOOKING STATEMENTS:

     This press release contains forward-looking statements, including, but not limited to, statements regarding the company’s restructuring initiative and its anticipated effect on the company’s expenses, the charges associated with the restructuring initiative, the company’s expected sales, margins, expenses, and earnings, that are based on management’s current expectations and involve risks and uncertainties, including, but not limited to, risks and uncertainties relating to projections of future sales, product development and regulatory approval, the execution and success of the company’s restructuring and strategic plans and other risks detailed from time to time in Valeant’s SEC filings. Valeant wishes to caution the reader that these factors are among the factors that could cause actual results to differ materially from the expectations described in the forward-looking statements. Valeant also cautions the reader that undue reliance should not be placed on any of the forward-looking statements, which speak only as of the date of this release. The company undertakes no responsibility to update any of these forward-looking statements to reflect events or circumstances after the date of this release or to reflect actual outcomes.

NON-GAAP INFORMATION:

     To supplement the consolidated financial results prepared in accordance with generally accepted accounting principles (GAAP), the company uses non-GAAP financial measures that exclude certain items, such as in-process research and development expenses, special charges and credits, stock compensation expense, and results of discontinued businesses. Management does not consider the excluded items part of day-to-day business or reflective of the core operational activities of the company as they result from transactions outside the ordinary course of business. Management uses non-GAAP financial measures internally for strategic decision making, forecasting future results and evaluating current performance. Guidance is provided only on a non-GAAP basis due to the inherent difficulty in forecasting such items. By disclosing non-GAAP financial measures, management intends to provide investors with a more meaningful, consistent comparison of the company’s core operating results and trends for the periods presented. Non-GAAP financial measures are not prepared in accordance with GAAP; therefore, the information is not necessarily comparable to other companies and should be considered as a supplement to, not a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP.

Financial Tables Follow

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Valeant Pharmaceuticals International	Table 1
Consolidated Condensed Statement of Income
For the Three and Six Months Ended June 30, 2006 and 2005

	Three Months Ended									Six Months Ended
	June 30,									June 30,
(In thousands, except per share data)	2006			2005			% Change			2006			2005			% Change
Product sales	$	208,517		$	180,828			15	%	$	389,274		$	342,631			14	%
Ribavirin royalties		21,635			24,206			-11	%		39,726			43,541			-9	%
Total revenues		230,152			205,034			12	%		429,000			386,172			11	%
Cost of goods sold (a)		65,744			52,940			24	%		124,324			101,661			22	%
Selling expenses (a)		66,268			61,454			8	%		130,538			114,269			14	%
General and administrative expenses (a)		31,553			25,985			21	%		60,093			50,562			19	%
Research and development costs (a)		26,842			27,559			-3	%		56,377			53,283			6	%
Acquired in-process research and development (b)		—			—						—			126,399			—
Gain on litigation settlement (c)		—			—						(34,000	)		—
Restructuring charges (d)		53,082			(1,324	)					79,548			371			—
Amortization expense		17,514			17,211			2	%		35,037			31,179			12	%
		261,003			183,825			42	%		451,917			477,724			-5	%
Income (loss) from operations		(30,851	)		21,209						(22,917	)		(91,552	)
Interest expense, net		(8,146	)		(6,944	)					(15,926	)		(13,610	)
Other income (expense), net including translation and exchange		757			(2,631	)					1,694			(4,422	)
Income (loss) from continuing operations before provision for income taxes and minority interest		(38,240	)		11,634						(37,149	)		(109,584	)
Provision for income taxes		6,633			10,059						13,875			26,426
Minority interest		—			134						1			305
Income (loss) from continuing operations		(44,873	)		1,441						(51,025	)		(136,315	)
Loss from discontinued operations, net		(197	)		(1,988	)					(409	)		(3,491	)
Net loss	$	(45,070	)	$	(547	)				$	(51,434	)	$	(139,806	)
Basic and diluted earnings per common share
Income (loss) from continuing operations	$	(0.49	)	$	0.02					$	(0.55	)	$	(1.50	)
Discontinued operations, net		—			(0.03	)					—			(0.04	)
Net loss	$	(0.49	)	$	(0.01	)				$	(0.55	)	$	(1.54	)
Shares used in per share computation		92,818			92,568						92,794			90,712

(a) In 2006 Valeant adopted a new accounting standard FAS 123(R) which requires that the estimated value of employee stock options and stock purchase plans be recorded as an expense. Stock compensation expense in the three months ended June 30, 2006 totaled $5.0 million, consisting of $0.4 million in cost of sales, $0.9 million in selling expenses, $0.7 million in research and development and $3.0 million in general and administrative expenses. In the six months ended June 30, 2006 stock compensation expense totaled $10.7 million, consisting of $0.8 million in cost of sales, $1.7 million in selling expenses, $1.5 million in research and development and $6.7 million in general and administrative expenses.

In 2005, Valeant recorded $0.6 million and $1.1 million of stock compensation expense in the three and six month periods ended June 30, 2005, respectively. The 2005 amounts did not include provisions for the value of employee stock options granted at the market price or the Valeant employee stock purchase plan which permits employees to purchase stock at a discount to market price. Had the new accounting standard been adopted in 2005, stock compensation expense would have been increased by 5.1 million and $10.1 million in the three and six month periods ended June, 30 2005.

(b) In-process research and development (IPR&D) charges related to the acquisition of Xcel.

(c) Gain results from settlement of a long-standing dispute with Republic of Serbia over joint venture. In March 2006 Valeant collected $28 million of this amount; an additional $6 million will be paid in 2007.

(d) Charges relate to our restructuring program which includes the write-down of manufacturing plants which will be sold, the write off of certain information system costs and a portion of the employee severance costs associated with our restructuring plan. The $79.5 million for the six months ended June 30,2006 includes approximately $12 million for employee severance benefits associated with the restructuring program.

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

	Three Months Ended
	June 30, 2006
				Non-GAAP
	GAAP			Adjustments			Adjusted
(In thousands, except per share data)
Product sales	$	208,517		$	—		$	208,517
Ribavirin royalties		21,635			—			21,635
Total revenues		230,152			—			230,152
Cost of goods sold		65,744			(352	)(a)		65,392
Selling expenses		66,268			(858	)(a)		65,410
General and administrative expenses		31,553			(3,050	)(a)		28,503
Research and development costs		26,842			(758	)(a)		26,084
Acquired in-process research and development		—			—			—
Gain on litigation settlement		—			—			—
Restructuring charges		53,082			(53,082	)(b)		—
Amortization expense		17,514			—			17,514
		261,003			(58,100	)		202,903
Income (loss) from operations		(30,851	)		58,100			27,249
Interest expense, net		(8,146	)		—			(8,146	)
Other expense, net including translation and exchange		757			—			757
Income (loss) from continuing operations before provision for income taxes and minority interest		(38,240	)		58,100			19,860
Provision for income taxes		6,633			(972	)(c)		5,661
Minority interest		—			—			—
Income (loss) from continuing operations		(44,873	)		59,072			14,199
Loss from discontinued operations, net		(197	)		—			(197	)
Net Income (loss)	$	(45,070	)	$	59,072		$	14,002
Basic and diluted earnings per common share
Income (loss) from continuing operations	$	(0.49	)				$	0.15
Discontinued operations, net		—						—
Net income (loss)	$	(0.49	)				$	0.15
Shares used in per share computation		92,818						94,695	(d)

(a) Consists of stock-based compensation expense totalling $5.0 million. After income taxes, the effect on non-GAAP adjusted net income is $3.6 million or $.04 per share.

(b) Charges relate to our restructuring program which includes the write-down of manufacturing plants which will be sold and a portion of the employee severance costs associated with our restructuring plan. The $53.1 million for the three months ended June 30, 2006 includes approximately $5 million for employee severance benefits associated with the restructuring program.

(c) Tax effect for non-GAAP adjustments, including tax benefits from U.S. net operating losses not recognized for GAAP purposes.

(d) Shares used in adjusted diluted earnings per share (“EPS”) includes the effect of diluted shares which are anti-dilutive to GAAP EPS.

To supplement the consolidated financial results prepared in accordance with Generally Accepted Accounting Principles (GAAP), the company uses non-GAAP financial measures that exclude certain items, such as in-process research and development expenses, special charges and credits, stock compensation expense and results of discontinued businesses. Management does not consider the excluded items part of day-to-day business or reflective of the core operational activities of the company as they result from transactions outside the ordinary course of business. Management uses non-GAAP financial measures internally for strategic decision making, forecasting future results and evaluating current performance. Guidance is provided only on a non-GAAP basis due to the inherent difficulty in forecasting such items.

By disclosing non-GAAP financial measures, management intends to provide investors with a more meaningful, consistent comparison of the company’s core operating results and trends for the periods presented. Non-GAAP financial measures are not prepared in accordance with GAAP; therefore, the information is not necessarily comparable to other companies and should be considered as a supplement to, not a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP.

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

	Three Months Ended
	June 30, 2005
				Non-GAAP
	GAAP			Adjustments			Adjusted
(In thousands, except per share data)
Product sales	$	180,828		$	—		$	180,828
Ribavirin royalties		24,206			—			24,206
Total revenues		205,034			—			205,034
Cost of goods sold		52,940			—			52,940
Selling expenses		61,454			—			61,454
General and administrative expenses		25,985			—			25,985
Research and development costs		27,559			—			27,559
Acquired in-process research and development		—			—			—
Restructuring charges		(1,324	)		1,324	(a)		—
Amortization expense		17,211			(1,532	)(b)		15,679
		183,825			(208	)		183,617
Income from operations		21,209			208			21,417
Interest expense, net		(6,944	)		—			(6,944	)
Other expense, net including translation and exchange		(2,631	)		—			(2,631	)
Income from continuing operations before provision for income taxes and minority interest		11,634			208			11,842
Provision for income taxes		10,059			(5,914	)(c)		4,145
Minority interest		134			—			134
Income from continuing operations		1,441			6,122			7,563
Loss from discontinued operations, net		(1,988	)		—			(1,988	)
Net income (loss)	$	(547	)	$	6,122		$	5,575
Basic earnings per common share
Income from continuing operations	$	0.02					$	0.08
Discontinued operations, net		(0.03	)					(0.02	)
Net Income (loss)	$	(0.01	)				$	0.06
Shares used in per share computation		92,568						92,568
Diluted earnings per common share
Income from continuing operations	$	0.02					$	0.08
Discontinued operations, net		(0.03	)					(0.02	)
Net Income (loss)	$	(0.01	)				$	0.06
Shares used in per share computation		95,591						95,591	(d)

(a) Net gain on sale of two manufacturing sites.

(b) Impairment charges on products sold in Spain and North America.

(c) The tax adjustment of $5.9 million includes $6.8 million attributable to U.S. NOLs not recognized for GAAP purposes partially offset by the reversal of foreign tax valuation allowances and the net tax benefit of the non-GAAP adjustments.

(d) Shares used in adjusted diluted EPS include the effect of diluted shares which are anti-dilutive to GAAP EPS.

See non-GAAP financial measure disclosure on Table 2.

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

	Six Months Ended
	June 30, 2006
				Non-GAAP
	GAAP			Adjustments			Adjusted
(In thousands, except per share data)
Product sales	$	389,274		$	—		$	389,274
Ribavirin royalties		39,726			—			39,726
Total revenues		429,000			—			429,000
Cost of goods sold		124,324			(765	)(a)		123,559
Selling expenses		130,538			(1,705	)(a)		128,833
General and administrative expenses		60,093			(6,691	)(a		53,402
Research and development costs		56,377			(1,538	)(a)		54,839
Acquired in-process research and development		—			—			—
Gain on litigation settlement (b)		(34,000			34,000	)(b)		—
Restructuring charges		79,548			(79,548	)(c)		—
Amortization expense		35,037			—			35,037
		451,917			(56,247	)		395,670
Income (loss) from operations		(22,917	)		56,247			33,330
Interest expense, net		(15,926	)		—			(15,926	)
Other expense, net including translation and exchange		1,694			—			1,694
Income (loss) from continuing operations before provision for income taxes and minority interest		(37,149	)		56,247			19,098
Provision for income taxes		13,875			(8,420	)(d)		5,455
Minority interest		1			—			1
Income (loss) from continuing operations		(51,025	)		64,667			13,642
Loss from discontinued operations, net		(409	)		—			(409	)
Net income (loss)	$	(51,434	)	$	64,667		$	13,233
Basic and diluted earnings per common share
Income (loss) from continuing operations	$	(0.55	)				$	0.14
Discontinued operations, net		—						—
Net income (loss)	$	(0.55	)				$	0.14
Shares used in per share computation		92,794						94,667	(e)

(a) Consists of stock based compensation expense totalling $10.7 million. After income taxes, the effect on non-GAAP adjusted net income is $7.6 million or $.08 per share.

(b) Gain results from settlement of a long-standing dispute with Republic of Serbia over joint venture. In March 2006 Valeant collected $28 million of this amount; an additional $6 million will be paid in 2007.

(c) Charges relate to our restructuring program which includes the write-down of manufacturing plants which will be sold, the write off of certain information system costs and a portion of the employee severance costs associated with our restructuring plan. The $79.5 million for the six months ended June 30, 2006 includes approximately $12 million for employee severance benefits associated with the restructuring program.

(d) Tax effect for non-GAAP adjustments, including tax benefits from U.S. net operating losses not recognized for GAAP purposes.

(e) Shares used in adjusted diluted EPS includes the effect of diluted shares which are anti-dilutive to GAAP EPS.

See non-GAAP financial measure disclosure on Table 2.

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

	Six Months Ended
	June 30, 2005
				Non-GAAP
	GAAP			Adjustments			Adjusted
(In thousands, except per share data)
Product sales	$	342,631		$	—		$	342,631
Ribavirin royalties		43,541			—			43,541
Total revenues		386,172			—			386,172
Cost of goods sold		101,661			—			101,661
Selling expenses		114,269			—			114,269
General and administrative expenses		50,562			—			50,562
Research and development costs		53,283			—			53,283
Acquired in-process research and development		126,399			(126,399	)(a)		—
Restructuring charges		371			(371	)(b)		—
Amortization expense		31,179			(1,532	)(c)		29,647
		477,724			(128,302	)		349,422
Income (loss) from operations		(91,552	)		128,302			36,750
Interest expense, net		(13,610	)		—			(13,610	)
Other expense, net including translation and exchange		(4,422	)		—			(4,422	)
Income (loss) from continuing operations before provision for income taxes and minority interest		(109,584	)		128,302			18,718
Provision for income taxes		26,426			(19,875	)(d)		6,551
Minority interest		305			—			305
Income (loss) from continuing operations		(136,315	)		148,177			11,862
Loss from discontinued operations, net		(3,491	)		—			(3,491	)
Net income (loss)	$	(139,806	)	$	148,177		$	8,371
Basic and diluted earnings per common share
Income (loss) from continuing operations	$	(1.50	)				$	0.13
Discontinued operations, net		(0.04	)					(0.04	)
Net income (loss)	$	(1.54	)				$	0.09
Shares used in per share computation		90,712						94,213	(e)

(a) In-process research and development charge related to the acquisition of Xcel.

(b) Impairment charge on our manufacturing site in China and net gain on sale of two manufacturing sites.

(c) Impairment charges on products sold in Spain and North America.

(d) The IPR&D charge and the restructuring charge are not deductible for income tax purposes. The tax adjustment of $19.9 million includes $21.7 million relating to our estimate of expenses associated with various tax issues raised by the Internal Revenue Service partially and $10.2 million attributable to U.S. NOLs not recognized for GAAP purposes partially offset by the reversal of foreign tax valuation allowances.

(e) Shares used in adjusted diluted EPS includes the effect of diluted shares which are anti-dilutive to GAAP EPS.

See non-GAAP financial measure disclosure on Table 2.

Valeant Pharmaceuticals International	Table 4
GAAP reconciliation of basic and diluted earnings per share
For the Three and Six Months Ended June 30, 2006 and 2005

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(In thousands, except per share data)	2006			2005			2006			2005
Income (loss) from continuing operations	$	(44,873	)	$	1,441		$	(51,025	)	$	(136,315	)
Non-GAAP adjustments:
Acquired IPR&D		—			—			—			126,399
Stock based compensation expense		5,018			—			10,699			—
Product impairment		—			1,532			—			1,532
Gain on litigation settlement		—			—			(34,000	)		—
Restructuring charges		53,082			(1,324	)		79,548			371
Tax effect on the above charges and tax settlements		972			5,914			8,420			19,875
Adjusted income from continuing operations before the above charges	$	14,199		$	7,563		$	13,642		$	11,862
Adjusted basic and diluted EPS from continuing operations	$	0.15		$	0.08		$	0.14		$	0.13
Shares used in basic per share calculation		92,818			92,568			92,794			90,712
Shares used in diluted per share calculation		94,695			95,591			94,667			94,213

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

	Three Months Ended									Six Months Ended
	June 30,									June 30,
	2006			2005			% Change			2006			2005			% Change
Consolidated operating income (loss) (GAAP)	$	(30,851	)	$	21,209			—		$	(22,917	)	$	(91,552	)		—
Depreciation and amortization		23,588			24,460			-4	%		47,070			45,498			3	%
EBITDA (non-GAAP) (a)		(7,263	)		45,669			—			24,153			(46,054	)		—
Stock based compensation expense (b)		5,018			—			—			10,699			—			—
Other Non-GAAP adjustments (b)		53,082			(1,324	)		—			45,548			126,770			-64	%
Adjusted EBITDA (non-GAAP) (a)	$	50,837		$	44,345			15	%	$	80,400		$	80,716			0	%

(a) We believe that EBITDA is a meaningful non-GAAP financial measure as an earnings-derived indicator of the cash flow generation ability of the company. We calculate EBITDA by adding depreciation and amortization back to consolidated operating income. Adjusted EBITDA excludes the additional costs set forth in note (b) below. Adjusted EBITDA, as defined and presented by us, may not be comparable to similar measures reported by other companies.

(b) See Tables 2 and 3 for explanation of non-GAAP adjustments.

See non-GAAP financial measure disclosure on Table 2.

Valeant Pharmaceuticals International	Table 5
Supplemental Sales Information
For the Three and Six Months Ended June 30, 2006 and 2005
(In thousands)

	Three Months Ended				%			Six Months Ended				%
	June 30,				Increase/			June 30,				Increase/
	2006		2005		(Decrease)			2006		2005		(Decrease)
Dermatology
Efudix/Efudex(P)	$	14,978	$	12,231		22	%	$	30,560	$	31,507		(3	%)
Kinerase(P)		9,024		5,821		55	%		15,884		10,256		55	%
Oxsoralen-Ultra(P)		3,593		4,126		(13	%)		7,101		7,094		0	%
Dermatix(P)		2,977		2,566		16	%		4,811		4,462		8	%
Eldoquin (P)		1,571		1,116		41	%		2,753		2,521		9	%
Other Dermatology		10,612		7,783		36	%		17,826		14,511		23	%
Infectious Disease
Infergen(P) (a)		11,309		—		—			25,014		—		—
Virazole(P)		3,541		4,039		(12	%)		8,698		8,234		6	%
Other Infectious Disease		4,890		4,245		15	%		9,622		10,098		(5	%)
Neurology
Diastat(P) (b)		11,709		14,291		(18	%)		23,731		19,468		—
Mestinon(P)		12,326		10,434		18	%		22,143		20,294		9	%
Librax(P)		5,004		1,670		200	%		7,924		5,751		38	%
Cesamet(P)		4,042		1,919		111	%		7,345		3,974		85	%
Migranal(P) (b)		2,701		4,130		(35	%)		5,816		4,904		19	%
Dalmane/Dalmadorm(P)		2,544		3,329		(24	%)		5,010		5,971		(16	%)
TASMAR(P)		1,666		1,533		9	%		2,851		2,472		15	%
Limbitrol(P)		1,318		1,623		(19	%)		2,828		2,917		(3	%)
Other Neurology		15,575		15,525		0	%		30,165		26,092		16	%
Other Therapeutic Classes
Bedoyecta(P)		12,512		10,976		14	%		23,092		20,220		14	%
Solcoseryl(P)		4,597		3,911		18	%		7,974		8,105		(2	%)
Bisocard(P)		3,912		3,363		16	%		7,477		6,018		24	%
Nyal(P)		4,803		5,366		(10	%)		6,557		7,840		(16	%)
Calcitonin(P)		2,228		2,733		(18	%)		4,078		5,318		(23	%)
Espaven(P)		2,983		1,509		98	%		4,285		3,071		40	%
Aclotin(P)		1,219		1,370		(11	%)		2,591		2,890		(10	%)
Other Pharmaceutical Products		56,883		55,219		3	%		103,138		108,643		(5	%)
Total Product Sales	$	208,517	$	180,828		15	%	$	389,274	$	342,631		14	%
Total Promoted Product Sales(P)	$	120,557	$	98,056		23	%	$	228,523	$	183,287		25	%

(a) Infergen was acquired from InterMune on December 30, 2005.

(b) Diastat and Migranal were acquired with the Xcel transaction on March 1, 2005.

(P) Promoted products represent promoted products with estimated annualized sales greater than $5 million.

Valeant Pharmaceuticals International	Table 6
Consolidated Condensed Statement of Revenue and Operating Income — Regional
For the Three and Six Months Ended June 30, 2006 and 2005
(In thousands)

	Three Months Ended									Six Months Ended
	June 30,									June 30,
Revenues	2006			2005			% Change			2006			2005			% Change
North America	$	72,065		$	60,398			19	%	$	147,277		$	109,341			35	%
International		64,471			54,430			18	%		109,661			96,346			14	%
EMEA		71,981			66,000			9	%		132,336			136,944			-3	%
Total specialty pharmaceuticals		208,517			180,828			15	%		389,274			342,631			14	%
Ribavirin royalty revenues		21,635			24,206			-11	%		39,726			43,541			-9	%
Consolidated revenues	$	230,152		$	205,034			12	%	$	429,000		$	386,172			11	%
Cost of goods sold	$	65,744		$	52,940			24	%	$	124,324		$	101,661			22	%
Gross profit margin on pharmaceutical sales		68	%		71	%					68	%		70	%

	Three Months Ended									Six Months Ended
	June 30,									June 30,
Operating Income (Loss)(a)	2006			2005			% Change			2006			2005			% Change
North America	$	13,850		$	16,552			-16	%	$	36,342		$	33,246			9	%
International		22,934			15,431			49	%		32,106			25,761			25	%
EMEA		12,393			8,867			40	%		16,609			20,879			-20	%
		49,177			40,850			20	%		85,057			79,886			6	%
Corporate expenses	$	(16,262	)	$	(14,344	)		13	%	$	(39,452	)	$	(28,711	)		37	%
Total specialty pharmaceuticals		32,915			26,506			24	%		45,605			51,175			-11	%
Restructuring charges		(53,082	)		1,324			—			(79,548	)		(371	)		—
Gain on litigation settlement		—			—						34,000			—
R&D		(10,684	)		(6,621	)		61	%		(22,974	)		(15,957	)		44	%
Acquired IPR&D		—			—			—			—			(126,399	)		—
Total consolidated operating income (loss)	$	(30,851	)	$	21,209					$	(22,917	)	$	(91,552	)

	Three Months Ended										Six Months Ended
Gross Profit	June 30, 2006		%			June 30, 2005		%			June 30, 2006		%			June 30, 2005		%
North America	$	57,441		80	%	$	47,069		78	%	$	120,005		81	%	$	87,565		80	%
International		43,935		68	%		38,001		70	%		72,374		66	%		66,932		69	%
EMEA		41,397		58	%		42,818		65	%		72,571		55	%		86,473		63	%
Total specialty pharmaceuticals	$	142,773		68	%	$	127,888		71	%	$	264,950		68	%	$	240,970		70	%

(a) Includes $5.7 million and $10.7 million of stock-based compensation expense in the three and six months ended June 30, 2006, respectively, and $0.5 million and $1.1 million in the three and six months ended June 30, 2005, respectively.

Valeant Pharmaceuticals International	Table 7
Consolidated Balance Sheet and Other Data
(In thousands)

	June 30,		December 31,
Balance Sheet Data	2006		2005
Cash and cash equivalents	$	244,607	$	224,856
Marketable securities		8,208		10,210
Total cash and marketable securities	$	252,815	$	235,066
Accounts receivable, net	$	201,567	$	187,987
Inventory, net		144,505		136,034
Long-term debt		779,483		788,439
Total equity		395,915		439,251

Other Data

	Six Months Ended
	June 30,			June 30,
	2006			2005
Cash flow provided by (used in) continuing operations
Operating activities	$	51,129		$	22,405
Investing activities		(16,970	)		(83,998	)
Financing activities		(17,909	)		174,125
Effect of exchange rate changes on cash and cash equivalents		3,501			(8,967	)
Net increase in cash and cash equivalents		19,751			103,565
Net increase (decrease) in marketable securities		(2,002	)		(207,825	)
Net increase (decrease) in cash and marketable securities	$	17,749		$	(104,260	)

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

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2006			2005		2006			2005
Consolidated
Product sales	$	208,517		$	180,828	$	389,274		$	342,631
Currency effect		(610	)				940
Product sales, excluding currency impact	$	207,907				$	390,214
Operating income (loss)	$	(30,851	)	$	21,209	$	(22,917	)	$	(91,552	)
Currency effect		31					(950	)
Operating income, excluding currency impact	$	(30,820	)			$	(23,867	)
Geographic Product Sales
North America pharmaceuticals	$	72,065		$	60,398	$	147,277		$	109,341
Currency effect		(918	)				(1,407	)
North America pharmaceuticals, excluding currency impact	$	71,147				$	145,870
International pharmaceuticals	$	64,471		$	54,430	$	109,661		$	96,346
Currency effect		891					(838	)
Latin America pharmaceuticals, excluding currency impact	$	65,362				$	108,823
EMEA pharmaceuticals	$	71,981		$	66,000	$	132,336		$	136,944
Currency effect		(583	)				3,185
Europe pharmaceuticals, excluding currency impact	$	71,398				$	135,521

Note: Currency effect is determined by comparing adjusted 2006 reported amounts, calculated using 2005 monthly average exchange rates, to the actual 2005 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.