Valeant Pharmaceuticals International 8-K Valeant Pharmaceuticals Reports Fourth Quarter and Full Year 2006 Results

Exhibit 99.1

Contact:
Jeff Misakian, Valeant Pharmaceuticals
949.461.6184

VALEANT PHARMACEUTICALS REPORTS
FOURTH QUARTER AND FULL YEAR 2006 RESULTS

— Product Sales Increase 15 Percent in Fourth Quarter; 13 Percent in Year —

     ALISO VIEJO, Calif., February 28, 2007 — Valeant Pharmaceuticals International (NYSE: VRX) today announced fourth quarter and full-year results for 2006 reflecting higher product sales and increased operating profit.

Fourth Quarter 2006 vs. Fourth Quarter 2005 Highlights:

• Revenues increased 11 percent to $257.4 million compared to $232.2 million.

• Product sales increased 15 percent to $236.8 million compared to $206.1 million.

• Ribavirin royalties decreased 21 percent to $20.5 million compared to $26.2 million.

• Net loss from continuing operations was $22.1 million, or $0.23 per diluted share, compared to $44.8 million, or $0.48 per diluted share.

• Adjusted for non-GAAP items, income from continuing operations increased 54 percent to $26.0 million, or $0.28 per diluted share, compared to $16.9 million, or $0.18 per diluted share.

     Timothy C. Tyson, president and chief executive officer, said, “We are very pleased to report strong top and bottom line improvements in 2006. We achieved our earnings goal for the year with an increase in adjusted earnings of more than 50 percent. Sales benefited from the addition and launch of important products and continued growth in our promoted brands. We reduced costs significantly in 2006 through our restructuring initiative and through our ongoing efforts to lower expenses. The restructuring saved the company $30 million in 2006 and is expected to save more than $50 million annually in 2007 and beyond. We are confident in our strategy to achieve continued sales growth and improvements in the bottom line through a focus on key products, continued development of our pipeline and the pursuit of opportunities in multiple markets around the world.”

Full Year 2006 vs. 2005 Highlights:

• Revenues increased 10 percent to $907.2 million compared to $823.9 million.

• Product sales increased 13 percent to $826.0 million compared to $732.2 million.

• Ribavirin royalties decreased 11 percent to $81.2 million compared to $91.6 million.

• Net loss from continuing operations was $64.1 million, or $0.69 per diluted share, compared to $185.8 million, or $2.03 per diluted share.

• Adjusted for non-GAAP items, income from continuing operations increased 53 percent to $57.7 million, or $0.61 per diluted share, compared to $37.7 million, or $0.40 per diluted share.

Revenues:

     Product sales improvements in the fourth quarter and full year were led by the acquisition of Infergen^®, the launch of Zelapar^® and growth in key promoted brands, principally Efudex^®, Cesamet^®, Kinerase^®, Mestinon^® and Diastat^® AcuDial™. Infergen was acquired at the end of 2005 and recorded sales in 2006 of $42.7 million. Excluding Infergen, sales increased 11 percent in the 2006 fourth quarter and seven percent in the 2006 year.

     Promoted products increased 40 percent in the 2006 fourth quarter and 27 percent in the year, compared to the same periods last year. Excluding sales of Infergen, promoted products increased 31 percent and 16 percent in the 2006 fourth quarter and year, respectively.

     The effects of foreign currency exchange increased product sales by $5.5 million in the 2006 fourth quarter and by $7.0 million in the 2006 year. Foreign currency had an unfavorable impact on operating income of $0.8 million in the 2006 fourth quarter and a favorable impact of $0.4 million in the year.

Regional Sales Performance:

     North America product sales increased 42 percent in the 2006 fourth quarter and 32 percent in the year, compared to the same periods last year. Increases in both periods were primarily due to the acquisition of Infergen, new product launches and continued growth in promoted brands, principally Efudex, Cesamet, Kinerase, and Diastat AcuDial. Excluding Infergen, North America sales grew by 28 percent in the 2006 fourth quarter and 14 percent in the year. Efudex sales grew 30 percent in 2006 and were particularly strong in the fourth quarter due to a combination of factors, including the launch at the end of the year of the company’s generic product, changes in wholesaler buying patterns, price increases taken earlier in the year and increased demand.

     Sales in the International region increased five percent in the 2006 fourth quarter and 10 percent in the year, primarily due to increased sales of Bedoyecta™ and MVI^®. Sales in Europe, Middle East and Africa (EMEA) grew two percent in the 2006 fourth quarter, but declined slightly in the year. The effects of foreign currency exchange increased EMEA product sales by $5.5 million in the 2006 fourth quarter and $4.6 million in the year. Several promoted products performed well in

2

 

Europe, including Mestinon, Efudex, Solcoseryl™ and Bisocard™. Europe continues to experience government controlled pricing pressures in many markets.

Financial Metrics:

     The company’s gross margin on product sales was 69 percent in 2006, compared to 70 percent in 2005. The decline was primarily due to the write off of inventory and a change in the mix of products that occurred during the year. In addition, the company recorded a $5.2 million charge to cost of goods sold in the 2006 fourth quarter for the transfer of manufacturing technology for Infergen.

     Adjusted for non-GAAP items, selling expense was 32 percent of sales in 2006, compared to 31 percent in 2005. The increase primarily reflects costs for Infergen and product launches during the year. Adjusted for non-GAAP items, general and administrative expense was 12 percent of sales in 2006 versus 15 percent in 2005. The decline reflects reductions in overhead costs resulting from the company’s restructuring initiative.

     Research and development expense was 13 percent of sales in 2006, compared to 16 percent in 2005. The decrease primarily reflects cost control measures and a reduction in clinical trial activity compared to last year. Included in research and development expense in the fourth quarter was a $7.0 million milestone payment related to the development of retigabine.

Recent Developments and Expectations:

     The company expects to continue to grow sales at or above pharmaceutical market growth rates and expects its operating metrics (excluding the impact of stock-based compensation) in 2007 and 2008 to be within the ranges specified in the table below. These metrics are compared to the company’s performance in 2005 and 2006 as follows:

	2005A*	2006A*	2007E*	2008E*
Gross Margin	70%	69%	70-72%	72-75%
Cost of Goods Sold	30%	31%	28-30%	25-28%
Selling Expense	31%	32%	31-33%	28-32%
G & A	15%	12%	11-13%	10-12%

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

Conference Call and Webcast Information:

     Valeant will host a conference call today at 9:00 a.m. EST (6:00 a.m. PST) to discuss its 2006 fourth quarter and year results. The dial-in number to participate on this call is (877) 295-5743, confirmation code 6658657. International callers should dial (706) 679-0845, confirmation code

3

6658657. A replay will be available approximately two hours following the conclusion of the conference call through Wednesday, March 7, 2007 and can be accessed by dialing (800) 642-1687, or (706) 645-9291, confirmation code 6658657. 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 specialty pharmaceutical company that develops, manufactures and markets a broad range of pharmaceutical products primarily in the areas of neurology, infectious disease and dermatology. More information about Valeant can be found atwww.valeant.com.

     Zelapar, Efudex, Cesamet, Kinerase, Mestinon, Diastat AcuDial, Bedoyecta, Solcoseryl and Bisocard are trademarks or registered trademarks of Valeant Pharmaceuticals International or its related companies. MVI is a registered trademark in Mexico of Valeant Pharmaceuticals International or its related companies. Infergen is a registered trademark of Amgen, Inc., and Valeant Pharmaceuticals North America is the exclusive licensee from Amgen of this mark. All other trademarks are the trademarks or the registered trademarks of their respective owners.

FORWARD-LOOKING STATEMENTS:

     This press release contains forward-looking statements, including, but not limited to, statements regarding expected savings from the company’s restructuring initiative, the company’s strategic focus and anticipated results, and the company’s expected sales, margins, expenses, and earnings. These statements are based upon the current expectations and beliefs of management and are subject to certain 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 projections of future sales, product development and regulatory approval, the execution and success of the company’s restructuring initiative and strategic plans, and other risks and uncertainties discussed in the company’s filings with the SEC. 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 obligation 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-based compensation expense, gains on litigation settlements, and results of discontinued businesses. Management does not consider the excluded items part of day-to-day

4

business or reflective of the core operational activities of the company as they result from transactions outside the ordinary course of business, or, as in the case of stock-based compensation expense, adjusts for this impact since such amounts were not included in comparative periods. 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

###

5

Table 1

Valeant Pharmaceuticals International
Consolidated Condensed Statement of Income
For the Three and Twelve Months Ended December 31, 2006 and 2005

	Three Months Ended									Twelve Months Ended
	December 31,									December 31,
	2006			2005			% Change			2006			2005			% Change
	(In thousands, except per share data)
Product sales	$	236,833		$	206,074			15	%	$	825,996		$	732,240			13	%
Ribavirin royalties		20,548			26,152			-21	%		81,242			91,646			-11	%
Total revenues		257,381			232,226			11	%		907,238			823,886			10	%
Cost of goods sold (a)		72,315			65,935			10	%		256,980			222,358			16	%
Selling expenses (a)		66,707			58,925			13	%		264,834			232,316			14	%
General and administrative expenses (a)		30,847			30,645			1	%		117,172			108,252			8	%
Research and development costs (a)		32,348			31,679			2	%		109,618			114,100			-4	%
Acquired in-process research and development (b)		—			47,200						—			173,599			—
Gain on litigation settlement (c)		—			—						(51,550	)		—
Restructuring charges (d)		41,494			747			—			138,181			1,253			—
Amortization expense		18,415			21,871			-16	%		71,876			68,832			4	%
		262,126			257,002			2	%		907,111			920,710			-1	%
Income (loss) from operations		(4,745	)		(24,776	)					127			(96,824	)
Interest expense, net		(7,439	)		(6,663	)					(31,116	)		(27,157	)
Other income (expense), net including translation and exchange		(88	)		(729	)					1,152			(6,358	)
Loss from continuing operations before provision for income taxes and minority interest		(12,272	)		(32,168	)					(29,837	)		(130,339	)
Provision for income taxes		9,868			12,811						34,219			55,151
Minority interest		1			(202	)					3			287
Loss from continuing operations		(22,141	)		(44,777	)					(64,059	)		(185,777	)
Income (loss) from discontinued operations, net		357			1						7,494			(2,366	)
Net Loss	$	(21,784	)	$	(44,776	)				$	(56,565	)	$	(188,143	)
Basic and diluted earnings per common share
Loss from continuing operations	$	(0.23	)	$	(0.48	)				$	(0.69	)	$	(2.03	)
Discontinued operations, net		—			—						0.08			(0.02	)
Net Loss	$	(0.23	)	$	(0.48	)				$	(0.61	)	$	(2.05	)
Shares used in per share computation		94,274			92,701						93,251			91,696

(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 December 31, 2006 totaled $4.7 million, consisting of $0.2 million in cost of sales, $1.1 million in selling expenses, $0.4 million in research and development and $3.0 million in general and administrative expenses. In the twelve months ended December 31, 2006 stock compensation expense totaled $21.0 million, consisting of $1.2 million in cost of sales, $3.6 million in selling expenses, $2.5 million in research and development and $13.7 million in general and administrative expenses.

In 2005, Valeant recorded $0.9 million and $3.3 million of stock compensation expense in the three and twelve month periods ended December 31, 2005, respectively.

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

(c) Gain on litigation settlement in the year ended December 31, 2006 relates to the settlement of disclosed litigation with Milan Panic, $17.6 million and the Republic of Serbia, $34.0 million.

(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 $138.2 million for the year ended December 31, 2006 includes approximately $17.0 million for employee severance benefits associated with the restructuring program.

Table 2

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

	Three Months Ended
	December 31, 2006
				Non-GAAP
	GAAP			Adjustments			Adjusted
	(In thousands, except per share data)
Product sales	$	236,833		$	—		$	236,833
Ribavirin royalties		20,548			—			20,548
Total revenues		257,381			—			257,381
Cost of goods sold		72,315			(229)	(a)		72,086
Selling expenses		66,707			(1,122)	(a)		65,585
General and administrative expenses		30,847			(5,327)	(a)(b)		25,520
Research and development costs		32,348			(388)	(a)		31,960
Restructuring charges		41,494			(41,494)	(c)		—
Amortization expense		18,415			(392)	(d)		18,023
		262,126			(48,952	)		213,174
Income (loss) from operations		(4,745	)		48,952			44,207
Interest expense, net		(7,439	)		—			(7,439	)
Other expense, net including translation and exchange		(88	)		—			(88	)
Income (loss) from continuing operations before provision for income taxes and minority interest		(12,272	)		48,952			36,680
Provision for income taxes		9,868			771	(e)		10,639
Minority interest		1			—			1
Income (loss) from continuing operations		(22,141	)		48,181			26,040
Income from discontinued operations, net		357			—			357
Net Income (loss)	$	(21,784	)	$	48,181		$	26,397
Basic earnings per common share
Income (loss) from continuing operations	$	(0.23	)				$	0.28
Discontinued operations, net		—						—
Net Income (loss)	$	(0.23	)				$	0.28
Shares used in per share computation		94,274						94,274
Diluted earnings per common share
Income (loss) from continuing operations	$	(0.23	)				$	0.28
Discontinued operations, net		—						—
Net income (loss)	$	(0.23	)				$	0.28
Shares used in per share computation		94,274						95,879	(f)

(a) Stock-based compensation expense totaling $4.7million, consisting of $0.2 million in cost of sales, $1.1 million in selling expenses, $0.4 million in research and development and $3.0 million in general and administrative expenses. After income taxes, the effect on non-GAAP adjusted net income is $3.3 million or $.03 per share.

(b) Non-recurring professional fees relating to the investigation of the Special Committee into stock option practices and the related restatement of financial statements, $2.4 million.

(c) 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 $41.5 million for the three months ended December 31, 2006 includes approximately $3.1 million for employee severance benefits associated with the restructuring program.

(d) Impairment charges on products sold predominantly in Spain.

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

(f) Shares used in adjusted diluted 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 the 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.

Table 2.1

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

	Three Months Ended
	December 31, 2005
				Non-GAAP
	GAAP			Adjustments			Adjusted
	(In thousands, except per share data)
Product sales	$	206,074		$	—		$	206,074
Ribavirin royalties		26,152			—			26,152
Total revenues		232,226			—			232,226
Cost of goods sold		65,935			(64)	(a)		65,871
Selling expenses		58,925			(3,076)	(a)(b)		55,849
General and administrative expenses		30,645			(703)	(a)(b)		29,942
Research and development costs		31,679			(236)	(a)		31,443
Acquired in-process research and development		47,200			(47,200)	(c)		—
Restructuring charges		747			(747)	(d)		—
Amortization expense		21,871			(5,885)	(e)		15,986
		257,002			(57,911	)		199,091
Income (loss) from operations		(24,776	)		57,911			33,135
Interest expense, net		(6,663	)		—			(6,663	)
Other expense, net including translation and exchange		(729	)		—			(729	)
Income (loss) from continuing operations before provision for income taxes and minority interest		(32,168	)		57,911			25,743
Provision for income taxes		12,811			(3,800)	(f)		9,011
Minority interest		(202	)		—			(202	)
Income (loss) from continuing operations		(44,777	)		61,711			16,934
Income from discontinued operations, net		1			54	(g)		55
Net Income (loss)	$	(44,776	)	$	61,765		$	16,989
Basic earnings per common share
Income (loss) from continuing operations	$	(0.48	)				$	0.18
Discontinued operations, net		—						—
Net income (loss)	$	(0.48	)				$	0.18
Shares used in per share computation		92,701						92,701
Diluted earnings per common share
Income (loss) from continuing operations	$	(0.48	)				$	0.18
Discontinued operations, net		—						—
Net income (loss)	$	(0.48	)				$	0.18
Shares used in per share computation		92,701						95,338	(h)

(a) Consists of stock-based compensation expense totaling $0.9 million.

(b) European sales force reduction costs totaling $3.2 million.

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

(d) Related to net loss on sale of manufacturing sites.

(e) Impairment charges on product sold primarily in Germany, $5.1 million, UK $0.6 million and Brazil $0.2 million.

(f) The tax adjustment of $3.8 million includes tax benefits attributable to U.S. net operating losses (“NOL”) not recognized for GAAP purposes and $3.9 million related to the repatriation of foreign earnings related to the American Jobs Creation Act of 2004.

(g) Net gain on sale of Hungary discontinued operations.

(h) 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.

Table 3

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

	Twelve Months Ended
	December 31, 2006
				Non-GAAP
	GAAP			Adjustments			Adjusted
	(In thousands, except per share data)
Product sales	$	825,996		$	—		$	825,996
Ribavirin royalties		81,242			—			81,242
Total revenues		907,238			—			907,238
Cost of goods sold		256,980			(1,255)	(a)		255,725
Selling expenses		264,834			(3,580)	(a)		261,254
General and administrative expenses		117,172			(16,079)	(a)(b)		101,093
Research and development costs		109,618			(2,504)	(a)		107,114
Gain on litigation settlement		(51,550	)		51,550	(c)		—
Restructuring charges		138,181			(138,181)	(d)		—
Amortization expense		71,876			(1,075)	(e)		70,801
		907,111			(111,124	)		795,987
Income from operations		127			111,124			111,251
Interest expense, net		(31,116	)		—			(31,116	)
Other income, net including translation and exchange		1,152			—			1,152
Income (loss) from continuing operations before provision for income taxes and minority interest		(29,837	)		111,124			81,287
Provision for income taxes		34,219			(10,646)	(f)		23,573
Minority interest		3			—			3
Income (loss) from continuing operations		(64,059	)		121,770			57,711
Income from discontinued operations, net		7,494			—			7,494
Net Income (loss)	$	(56,565	)	$	121,770		$	65,205
Basic earnings per common share
Income (loss) from continuing operations	$	(0.69	)				$	0.62
Discontinued operations, net		0.08						0.08
Net income (loss)	$	(0.61	)				$	0.70
Shares used in per share computation		93,251						93,251
Diluted earnings per common share
Income (loss) from continuing operations	$	(0.69	)				$	0.61
Discontinued operations, net		0.08						0.08
Net income (loss)	$	(0.61	)				$	0.69
Shares used in per share computation		93,251						95,114	(g)

(a) Stock based compensation expense totaling $21.0 million, consisting of $1.2 million in cost of sales, $3.6 million in selling expenses, $2.5 million in research and development and $13.7 million in general and administrative expenses. After income taxes, the effect on non-GAAP adjusted net income is $14.9 million or $.16 per share.

(b) Non-recurring professional fees relating to the investigation of the Special Committee into stock option practices and the related restatement of financial statements, $2.4 million.

(c) Gain of $51.6 million results from settlements of litigation with Milan Panic and the dispute with the Republic of Serbia.

(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 $138.2 million for the year ended December 31, 2006 includes approximately $17.0 million for employee severance benefits associated with the restructuring program.

(e) Impairment charges on products sold predominantly in Spain.

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

(g) 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.

Table 3.1

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

	Twelve Months Ended
	December 31, 2005
				Non-GAAP
	GAAP			Adjustments			Adjusted
	(In thousands, except per share data)
Product sales	$	732,240		$	—		$	732,240
Ribavirin royalties		91,646			—			91,646
Total revenues		823,886			—			823,886
Cost of goods sold		222,358			(252)	(a)		222,106
Selling expenses		232,316			(3,181)	(a)(b)		229,135
General and administrative expenses		108,252			(2,188)	(a)(b)		106,064
Research and development costs		114,100			(910)	(a)		113,190
Acquired in-process research and development		173,599			(173,599)	(c)		—
Restructuring charges		1,253			(1,253)	(d)		—
Amortization expense		68,832			(7,417)	(e)		61,415
		920,710			(188,800	)		731,910
Income (loss) from operations		(96,824	)		188,800			91,976
Interest expense, net		(27,157	)		—			(27,157	)
Other expense, net including translation and exchange		(6,358	)		—			(6,358	)
Income (loss) from continuing operations before provision for income taxes and minority interest		(130,339	)		188,800			58,461
Provision for income taxes		55,151			(34,689)	(f)		20,462
Minority interest		287			—			287
Income (loss) from continuing operations		(185,777	)		223,489			37,712
Loss from discontinued operations, net		(2,366	)		(1,725)	(g)		(4,091	)
Net Income (loss)	$	(188,143	)	$	221,764		$	33,621
Basic earnings per common share
Income (loss) from continuing operations	$	(2.03	)				$	0.41
Discontinued operations, net		(0.02	)					(0.04	)
Net income (loss)	$	(2.05	)				$	0.37
Shares used in per share computation		91,696						91,696
Diluted earnings per common share
Income (loss) from continuing operations	$	(2.03	)				$	0.40
Discontinued operations, net		(0.02	)					(0.05	)
Net income (loss)	$	(2.05	)				$	0.35
Shares used in per share computation		91,696						94,844	(h)

(a) Consists of stock-based compensation expense totaling $3.3 million.

(b) European sales force reduction costs totaling $3.2 million.

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

(d) Related to net loss on sale of manufacturing sites.

(e) Impairment charges on products sold in Spain, Germany, UK, U.S. and Brazil.

(f) The IPR&D charge and the restructuring charge are not deductible for income tax purposes. The tax adjustment of $34.7 million includes $22.2 million relating to our estimate of expenses associated with various tax issues raised by the Internal Revenue Service and $15.7 million attributable to U.S. NOLs not recognized for GAAP purposes partially offset by the reversal of foreign tax valuation allowances.

(g) Net gain on sale of Hungary discontinued operations.

(h) 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.

Table 4

Valeant Pharmaceuticals International
GAAP reconciliation of basic and diluted earnings per share
For the Three and Twelve Months Ended December 31, 2006 and 2005

	Three Months Ended						Twelve Months Ended
	December 31,						December 31,
	2006			2005			2006			2005
	(In thousands, except per share data)
Loss from continuing operations	$	(22,141	)	$	(44,777	)	$	(64,059	)	$	(185,777	)
Non-GAAP adjustments:
Acquired IPR&D		—			47,200			—			173,599
Sales force reduction costs		—			3,198			—			3,198
Stock-based compensation expense		4,684			881			21,036			3,333
Product impairment		392			5,885			1,075			7,417
Gain on litigation settlement		—			—			(51,550	)		—
Professional fees related to Special Committee option investigation		2,382			—			2,382			—
Restructuring charges		41,494			747			138,181			1,253
Tax effect on the above charges and tax settlements		(771	)		3,800			10,646			34,689
Adjusted income from continuing operations before the above charges	$	26,040		$	16,934		$	57,711		$	37,712
Adjusted basic EPS from continuing operations	$	0.28		$	0.18		$	0.62		$	0.41
Adjusted diluted EPS from continuing operations	$	0.28		$	0.18		$	0.61		$	0.40
Shares used in basic per share calculation		94,274			92,701			93,251			91,696
Shares used in diluted per share calculation		95,879			95,338			95,114			94,844

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,
	2006			2005			% Change			2006		2005			% Change
Consolidated operating income (loss) (GAAP)	$	(4,745	)	$	(24,776	)		—		$	127	$	(96,824	)		—
Depreciation and amortization		22,714			29,030			-22	%		93,421		97,351			-4	%
EBITDA (non-GAAP) (a)		17,969			4,254			322	%		93,548		527			—
Stock-based compensation expense (b)		4,684			881			432	%		21,036		3,333			531	%
Other Non-GAAP adjustments (b)		43,876			51,145			-14	%		89,013		178,050			-50	%
Adjusted EBITDA (non-GAAP) (a)	$	66,529		$	56,280			18	%	$	203,597	$	181,910			12	%

(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 in Table 2.

Table 5

Valeant Pharmaceuticals International
Supplemental Sales Information
For the Three and Twelve Months Ended December 31, 2006 and 2005
(In thousands)

	Three Months Ended							Twelve Months Ended
	December 31,				%			December 31,				%
					Increase/							Increase/
	2006		2005		(Decrease)			2006		2005		(Decrease)
Neurology
Diastat AcuDial(P) (b)	$	12,145	$	10,638		14	%	$	50,678	$	47,631		6	%
Mestinon(P)		14,057		11,030		27	%		47,649		43,530		9	%
Cesamet(P)		5,153		3,117		65	%		18,985		10,010		90	%
Librax		3,909		8,367		(53	%)		14,835		18,159		(18	%)
Migranal(P) (b)		4,643		4,300		8	%		11,592		12,948		(10	%)
Dalmane/Dalmadorm(P)		3,417		3,716		(8	%)		10,965		12,284		(11	%)
Tasmar(P)		2,048		1,919		7	%		6,534		5,829		12	%
Melleril(P)		2,122		2,328		(9	%)		6,463		3,084		110	%
Zelapar (P)		157		—		—			3,981		—		—
Other Neurology		16,740		16,791		(0	%)		63,051		57,433		10	%
Dermatology
Efudix/Efudex(P)		32,295		14,307		126	%		78,357		60,179		30	%
Kinerase(P)		6,431		6,090		6	%		28,937		22,267		30	%
Oxsoralen-Ultra(P)		2,814		1,820		55	%		10,528		9,364		12	%
Dermatix(P)		2,782		2,478		12	%		10,146		9,189		10	%
Other Dermatology		11,548		10,688		8	%		42,441		38,309		11	%
Infectious Disease
Infergen(P) (a)		8,568		—		—			42,716		—		—
Virazole(P)		4,878		4,854		—			16,601		16,557		—
Other Infectious Disease		6,091		6,414		(5	%)		20,160		21,464		(6	%)
Other Therapeutic Classes
Bedoyecta(P)		13,396		12,115		11	%		50,366		46,884		7	%
Solcoseryl(P)		6,034		5,041		20	%		18,916		18,983		—
Bisocard(P)		4,405		3,544		24	%		15,927		12,847		24	%
MVI (multi-vitamin infusion)(P)		4,071		2,349		73	%		13,468		7,624		77	%
Espaven(P)		3,610		3,877		(7	%)		11,235		9,272		21	%
Nyal(P)		1,526		1,716		(11	%)		10,216		13,747		(26	%)
Protamin(P)		1,664		1,422		17	%		6,386		6,044		6	%
Espacil(P)		1,474		1,979		(26	%)		5,565		5,979		(7	%)
Other Pharmaceutical Products		60,855		65,174		(7	%)		209,298		222,623		(6	%)
Total Product Sales	$	236,833	$	206,074		15	%	$	825,996	$	732,240		13	%
Total Promoted Product Sales(P)	$	137,690	$	98,640		40	%	$	476,211	$	374,252		27	%

(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.

Table 6

Valeant Pharmaceuticals International
Consolidated Condensed Statement of Revenue and Operating Income — Regional
For the Three and Twelve Months Ended December 31, 2006 and 2005
(In thousands)

	Three Months Ended									Twelve Months Ended
	December 31,									December 31,
	2006			2005			% Change			2006			2005			% Change
Revenues
North America	$	87,725		$	61,946			42	%	$	307,110		$	232,342			32	%
International		70,833			67,166			5	%		241,024			219,690			10	%
EMEA		78,275			76,962			2	%		277,862			280,208			-1	%
Total specialty pharmaceuticals		236,833			206,074			15	%		825,996			732,240			13	%
Ribavirin royalty revenues		20,548			26,152			-21	%		81,242			91,646			-11	%
Consolidated revenues	$	257,381		$	232,226			11	%	$	907,238		$	823,886			10	%
Cost of goods sold	$	72,315		$	65,935			10	%	$	256,980		$	222,358			16	%
Gross profit margin on pharmaceutical sales		69	%		68	%					69	%		70	%

	Three Months Ended									Twelve Months Ended
	December 31,									December 31,
	2006			2005			% Change			2006			2005			% Change
Operating Income (Loss)(a)
North America	$	32,777		$	19,392			69	%	$	86,435		$	69,285			25	%
International		22,556			22,781			-1	%		73,251			65,777			11	%
EMEA		17,529			4,625			279	%		44,797			36,074			24	%
		72,862			46,798			56	%		204,483			171,136			19	%
Corporate expenses	$	(20,386	)	$	(10,025	)		103	%	$	(75,658	)	$	(54,619	)		39	%
Total specialty pharmaceuticals		52,476			36,773			43	%		128,825			116,517			11	%
Restructuring charges		(41,494	)		(747	)		—			(138,181	)		(1,253	)		—
Gain on litigation settlement		—			—						51,550			—
R&D		(15,727	)		(13,602	)		16	%		(42,067	)		(38,489	)		9	%
Acquired IPR&D		—			(47,200	)		—			—			(173,599	)		—
Total consolidated operating income (loss)	$	(4,745	)	$	(24,776	)				$	127		$	(96,824	)

	Three Months Ended										Twelve Months Ended
	December 31, 2006		%			December 31, 2005		%			December 31, 2006		%			December 31, 2005		%
Gross Profit
North America	$	67,549		77	%	$	49,561		80	%	$	244,712		80	%	$	186,561		80	%
International		47,710		67	%		46,320		69	%		163,396		68	%		152,567		69	%
EMEA		49,259		63	%		44,258		58	%		160,908		58	%		170,754		61	%
Total specialty pharmaceuticals	$	164,518		69	%	$	140,139		68	%	$	569,016		69	%	$	509,882		70	%

(a) Includes $4.7 million and $21.0 million of stock-based compensation expense in the three and twelve months ended December 31, 2006, respectively, and $0.9 million and $3.3 million in the three and twelve months ended December 31, 2005, respectively.

Table 7

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

	December 31,		December 31,
	2006		2005
Balance Sheet Data
Cash and cash equivalents	$	326,002	$	224,856
Marketable securities		9,743		10,210
Total cash and marketable securities	$	335,745	$	235,066
Accounts receivable, net	$	227,452	$	187,987
Inventory, net		142,679		136,034
Long-term debt		778,196		788,439
Total equity		425,920		433,944

	Twelve Months Ended
	December 31,			December 31,
	2006			2005
Other Data
Cash flow provided by (used in) continuing operations
Operating activities	$	127,100		$	65,115
Investing activities		(35,275	)		(223,887	)
Financing activities		(5,871	)		169,440
Effect of exchange rate changes on cash and cash equivalents		15,192			(8,402	)
Net increase in cash and cash equivalents		101,146			2,266
Net increase (decrease) in marketable securities		(467	)		(228,708	)
Net increase (decrease) in cash and marketable securities	$	100,679		$	(226,442	)

Table 8

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

	Three Months Ended						Twelve Months Ended
	December 31,						December 31,
	2006			2005			2006			2005
Consolidated
Product sales	$	236,833		$	206,074		$	825,996		$	732,240
Currency effect		(5,483	)					(7,047	)
Product sales, excluding currency impact	$	231,350					$	818,949
Operating income (loss)	$	(4,745	)	$	(24,776	)	$	127		$	(96,824	)
Currency effect		794						(417	)
Operating income, excluding currency impact	$	(3,951	)				$	(290	)
Geographic Product Sales
North America pharmaceuticals	$	87,725		$	61,946		$	307,110		$	232,342
Currency effect		(337	)					(2,478	)
North America pharmaceuticals, excluding currency impact	$	87,388					$	304,632
International pharmaceuticals	$	70,833		$	67,166		$	241,024		$	219,690
Currency effect		328						28
International pharmaceuticals, excluding currency impact	$	71,161					$	241,052
EMEA pharmaceuticals	$	78,275		$	76,962		$	277,862		$	280,208
Currency effect		(5,474	)					(4,597	)
EMEA pharmaceuticals, excluding currency impact	$	72,801					$	273,265

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.