Full Press Release Details
International Headquarters
Laval, Quebec H7L 4A8
Contact Information:
877-281-6642 (toll free)
Chris Kittredge/Jared Levy
Sard Verbinnen & Co.
VALEANT REPORTS THIRD QUARTER
2016 FINANCIAL RESULTS
LAVAL, Quebec, November 8, 2016 Valeant
Pharmaceuticals International, Inc. (NYSE: VRX) (TSX: VRX) ( Valeant or the Company ) today announced third quarter 2016 financial results.
This past quarter, we made further progress toward establishing the new Valeant, said Joseph C. Papa, Chairman and Chief Executive
Officer. We have, where appropriate, begun to centralize some parts of the business, and hired two key senior executives: Paul Herendeen, Chief Financial Officer, and Dr. Louis Yu, Chief Quality Officer. We also have started to present
our financial results under three operating and reportable segments, which we believe will help clarify areas of strength and provide additional transparency. While we have revised our expectations for the remainder of 2016, I continue to be
encouraged by the commitment of our employees who work each day toward meeting our mission of helping improve people s lives through our healthcare products.
Total Revenues in the third quarter of
2016 were $2.48 billion as compared to $2.79 billion in the third quarter of 2015, a decrease of 11%, primarily due to a decline in product sales revenues from our existing businesses. Third quarter revenues were also impacted by negative foreign
currency exchange, as well as divestitures and discontinuations, which were partially offset by incremental product sales revenues from acquisitions completed in 2015.
On a sequential basis, revenues grew from a base of $2.37 billion in the first quarter of 2016 to $2.42 billion in the second quarter to $2.48 billion in the
International Headquarters
Laval, Quebec H7L 4A8
GAAP Earnings Per Share (EPS)
GAAP EPS for the third quarter of 2016 came in at ($3.49) as compared to $0.14 in the third quarter of 2015. On a sequential basis, GAAP EPS moved from
($1.08) in the first quarter of 2016 to ($0.88) in the second quarter to ($3.49) in the third quarter.
Adjusted EPS (non-GAAP)
Adjusted EPS (non-GAAP) for the third quarter of 2016 came in at $1.55 as compared to $2.41 in the third quarter of 2015. On a sequential basis, adjusted
EPS (non-GAAP) grew from $1.27 in the first quarter of 2016 to $1.40 in the second quarter to $1.55 in the third quarter.
Net loss in the third quarter of 2016 was ($1.22) billion as compared to net income of $49.5 million in the third quarter of 2015. As a result of the
goodwill impairment analyses conducted in connection with the change in its reporting units, the Company recognized a goodwill impairment charge of $1.05 billion in the three months ended September 30, 2016, mainly attributable to the lower fair
value in certain US businesses, mainly the Salix business. The net loss in the third quarter was mainly attributable to this goodwill impairment charge.
Adjusted Net Income (non-GAAP)
(non-GAAP) in the third quarter of 2016 was $543 million as compared to $845 million in the third quarter of 2015. On a sequential basis, adjusted net income (non-GAAP) was $443 million in the first quarter of 2016, growing to $488 million the
second quarter followed by $543 million in the third quarter.
Adjusted EBITDA (non-GAAP)
Adjusted EBITDA (non-GAAP) for the third quarter of 2016 came in at $1.16 billion, an improvement over second quarter results of $1.09 billion and first
quarter results of $1.01 billion, reflecting growth.
As announced on August 9, 2016, Valeant now presents results in three operating and reportable segments: Bausch + Lomb / International, Branded Rx, and U.S.
Diversified Products.
The Bausch + Lomb / International segment consists of (i) sales in the U.S. of pharmaceutical products, OTC products
and medical device products in the area of eye health, primarily comprised of Bausch & Lomb products, with a focus on four product offerings (Vision Care, Surgical, Consumer and Ophthalmology Rx), and (ii) branded pharmaceutical products,
branded generic pharmaceutical products, OTC products, medical devices, and Bausch + Lomb products sold in Europe, Asia, Australia and New Zealand, Latin America, Africa and the Middle East.
International Headquarters
Laval, Quebec H7L 4A8
In the third quarter of 2016, the Bausch + Lomb / International segment reported revenues of
$1.16 billion, an increase of 4% from $1.12 billion in the third quarter of 2015. The segment, which contributed 47% of total company revenues, reflected an increase in product sales revenues of $67 million in the third quarter of 2016 from all 2015
acquisitions, partially offset by a $4 million decline in product sales revenues from our existing businesses. The decline was primarily due to lower realized prices related to our ophthalmology products as a result of the implementation of rebates
and other price adjustments versus prior year.
The decline in product sales due to lower realized prices was partially offset by higher volumes in U.S.
consumer product sales, as well as product sales in Eastern Europe (excluding Poland) and China. The results were also affected by, to a lesser extent, the negative impact of foreign exchange on the existing business and from divestitures and
product discontinuations.
On a sequential basis, segment revenues grew from $1.07 billion in the first quarter of 2016 to $1.2 billion in the second
quarter and $1.16 billion in the third quarter.
The Branded Rx segment consists of sales of pharmaceutical products related to (i) the
Salix product portfolio in the U.S., (ii) the Dermatological product portfolio in the U.S., (iii) the Canadian product portfolio, and (iv) product portfolios in the U.S., in the areas of oncology, dentistry and women s health.
The Branded Rx segment reported third quarter 2016 revenues of $847 million, a decline from $1.1 billion in the third quarter of 2015. The segment,
which contributed 34% of total company revenues, reflected a decline in product sales revenue from our existing business of $251 million in the third quarter. The gap was primarily a result of lower average realized prices resulting from higher
managed care rebates in dermatology and Salix, lower price appreciation credits in dermatology and Salix, and changes in the fulfillment model which led to reduced volumes.
Wholesaler inventory levels at Salix were reduced to approximately 1.5 months as of September 30, 2016, consistent with the overall inventory levels at
our U.S. wholesalers for branded products (excluding generic products).
On a sequential basis, segment revenues grew from $739 million in the first
quarter of 2016 and $732 million in the second quarter to $847 million in the third quarter.
The U.S. Diversified Products segment consists
of (i) sales in the U.S. of pharmaceutical products, OTC products and medical device products in the areas of neurology and certain other therapeutic classes, including aesthetics (which includes the Solta and Obagi businesses), and (ii) sales of
generic products in the U.S.
The U.S. Diversified Products segment reported third quarter 2016 revenues of $471 million, a decline from $564
million in the third quarter of 2015. The segment, which contributed 19% of total company revenues, reflected a decline in product sales revenue from our existing business of $92 million, primarily due to our neurology products being challenged
by generic competition.
International Headquarters
Laval, Quebec H7L 4A8
To a lesser extent, the decline in product sales was due to lower average realized prices of our neurology
products, which resulted from higher managed care rebates, lower price appreciation credits and higher group purchasing organization chargebacks on Nitropress and Isuprel , as well as the negative impact from divestitures and discontinuations. These factors were partially offset by the incremental product sales revenue from all 2015 acquisitions.
On a sequential basis, segment revenues lagged from $560 million in the first quarter of 2016 to $491 million in the second quarter to $471 million in the
Goods Sold increased $15 million, or 2%, to $649 million in the third quarter of 2016 as compared to $635 million in the third quarter of 2015, primarily due to an increase related to acquisitions completed in 2015, as well as costs
associated with the voluntary recall of PeroxiClear , partially offset by a decline in sales volumes, and decreases related to divestitures and discontinuations.
As a percentage of total revenues, COGS was 26% in the third quarter of 2016, as compared to 23% in the same period in 2015. The increase in COGS
percentage was primarily driven by unfavorable foreign exchange, the impact of mix mainly lower neurology revenues due to generic competition, and lower dermatology revenues. Those factors were partially offset by a favorable sales impact from
certain products acquired in the Salix acquisition in 2015, such as Xifaxan , which represent higher margin products as compared to our overall portfolio.
On a sequential basis, COGS rose from $620 million in the first quarter of 2016 to $647 million in the second quarter and $649 million in the third quarter of
2016. COGS as a percentage of total revenues was 26% in the first quarter of 2016, followed by 27% in the second quarter and 26% in the third quarter.
Selling, General and Administrative (SG&A) expenses decreased $37 million, or 5%, to $661 million in the third quarter of 2016 as compared
to $698 million in the third quarter of 2015. As a percentage of total revenues, SG&A was 27% in the third quarter of 2016, as compared to 25% in the same period in 2015. SG&A reflected lower expenses of approximately $73 million
incurred by the U.S. operations, primarily due to lower advertising and promotional expenses for our dermatology business. This was offset by higher corporate expenditures of $22 million primarily driven by increased personnel costs resulting
from changes in our senior management team as well as professional fees incurred related to our material weakness remediation efforts, higher expenses of $17 million related to 2015 acquisitions, and professional fees of $18 million in the
third quarter in connection with recent legal and governmental proceedings, investigations and information requests relating to, among other matters, our distribution, marketing, pricing, disclosure and accounting practices.
SG&A has shown a quarterly sequential decline from $813 million in the first quarter of 2016 to $672 million in the second quarter and $661 million in the
third quarter. As a percentage of total revenues, SG&A has shown a sequential quarterly decline from 34% in the first quarter of 2016 to 28% in the second quarter and 27% in the third quarter.
International Headquarters
Laval, Quebec H7L 4A8
Research and development (R&D) expenses remained flat at $101 million in the third quarter
of 2016 as compared to the third quarter of 2015. In the first nine months of 2016, R&D increased $90 million, or 38%, to $328 million as compared to $239 million in the first nine months of 2015, primarily due to the development programs
related to the Company s dermatology product portfolio, as well as spending on brodalumab and programs acquired from Salix.
GAAP Cash flow from operations was $570 million in the third quarter of 2016 as compared to $733 million in the third quarter of
2015. On a sequential basis, GAAP Cash flow from operations was $557 million in the first quarter of 2016, $448 million in the second quarter and $570 million in the third quarter.
2016 Full Year Guidance Revised
Valeant has revised its
full year 2016 guidance as follows:
Other than with respect to Total Revenues, the Company only provides guidance on a non-GAAP basis. The Company does not provide reconciliations of
forward-looking Adjusted EPS (non-GAAP) and Adjusted EBITDA (non-GAAP) to GAAP, due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliations. In periods where there are not expected to be
significant acquisitions or divestitures, the Company believes it might have a basis for forecasting the GAAP equivalent for certain costs, such as amortization, that would otherwise be treated as non-GAAP to calculate projected net income
(loss). However, because other deductions (such as restructuring, gain or loss on extinguishment of debt and litigation settlements) used to calculate projected net income (loss) vary dramatically based on actual events, the Company is not able