Mr. Joseph Papa reports
VALEANT ANNOUNCES SECOND-QUARTER 2017 RESULTS
Valeant Pharmaceuticals International Inc. has released its second quarter 2017 financial results.
All currency figures are in U.S. dollars.
"The investments we are making in our core business are delivering results," said Joseph C. Papa, chairman and chief executive officer, Valeant. "The Bausch + Lomb/international segment and Salix business, which together represented 73 per cent of our revenue in the quarter, delivered strong organic growth1, and we are continuing to reduce debt and resolve legacy issues.
"Additionally, we confirm that we are maintaining our 2017 full-year adjusted EBITDA [earnings before interest, taxes, depreciation and amortization] guidance range despite the impact of divestitures we've made this year," added Mr. Papa.
Company highlights
Strengthening the balance sheet:
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Completed sale of Dendreon Pharmaceuticals LLC and used net proceeds to pay down $811-million of senior secured term loans;
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Announced that Valeant will redeem the remaining $500-million aggregate principal amount of its outstanding 6.75 per cent senior notes due 2018, using cash on hand, on Aug. 15, 2017. Upon redemption, the company expects to:
- Have reduced total debt by more than $4.8-billion since the end of the first quarter of 2016;
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Have no debt maturities and no mandatory amortization requirements until 2020;
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Announced agreements to sell iNova Pharmaceuticals and Obagi Medical Products businesses for $930-million and $190-million in cash, respectively; both remain on track to close in the second half of 2017;
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Generated $268-million and $1,222-million in cash flow from operations in the second quarter and for the six months that ended June 30, 2017, respectively;
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Delivered GAAP (generally accepted accounting principles) net loss of $38-million and adjusted EBITDA (non-GAAP) of $951-million;
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Achieving positive outcomes in resolving and managing litigation and investigations, including settling the Salix securities class action litigation;
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Expects to exceed commitment to pay down $5-billion in debt from divestiture proceeds and free cash flow before February, 2018.
Executing on core businesses:
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Grew revenue in the Salix business by 13 per cent compared with the second quarter of 2016 and organically grew revenue in the Salix business by 16 per cent compared with the second quarter of 2016:
- Xifaxan (rifaximin) revenues rose by 16 per cent compared with the second quarter of 2016;
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Strong Xifaxan growth, with prescriptions up 6 per cent sequentially and 2 per cent versus the second quarter of 2016, and extended Rx unit volume up 4 per cent versus second quarter of 2016;
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Apriso (mesalamine) prescriptions grew by 7 per cent compared with the second quarter of 2016;
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Relistor (methylnaltrexone bromide) prescriptions grew by 33 per cent compared wiht the second quarter of 2016;
- Revenue of the Bausch + Lomb/international segment decreased by 3 per cent compared with the second quarter of 2016; however, the segment revenue increased organically by approximately 6 per cent compared with the second quarter of 2016:
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Grew revenue in the Bausch + Lomb business in China by 4 per cent compared with the second quarter of 2016 despite currency headwinds and organically grew revenue in this business by 9 per cent, compared with the second quarter of 2016, driven by volume;
- Advanced Bausch + Lomb business:
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Introduced Bausch + Lomb Aqualox biweekly contact lenses in Japan in June;
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Introduced Bausch + Lomb renu advanced formula multipurpose contact lens solution;
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Received filing acceptance from the U.S. Food and Drug Administration (FDA) for the new drug application (NDA) for Luminesse (brimonidine tartrate ophthalmic solution, 0.025 per cent) with a PDUFA action date of Dec. 27, 2017;
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Received FDA 510(k) clearances for Vitesse and Stellaris Elite vision enhancement system;
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Continued to focus on stabilizing the dermatology business:
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Launched Siliq (brodalumab) injection in July as the lowest-priced injectable biologic for moderate-to-severe plaque psoriasis in the United States;
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Rebranded the business as Ortho Dermatologics in July;
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Received FDA filing acceptance for the NDA for Plenvu (NER1006), a novel, low-volume polyethylene glycol-based bowel preparation for colonoscopies.
Second quarter revenue performance
Total revenues were $2,233-million for the second quarter of 2017, as compared with $2.42-billion in the second quarter of 2016, a decrease of $187-million, or 8 per cent. The decrease was primarily driven by decreases in volume and price in the company's U.S. diversified products segment, attributed to the previously reported loss of exclusivity for a basket of products, and the dermatology business. The decline also reflects the unfavourable impact of divestitures and discontinuations, primarily the skin care divestiture within the Bausch + Lomb/international segment.
Bausch + Lomb/international segment
The Bausch + Lomb/international segment revenues were $1,241-million for the second quarter of 2017, as compared with $1,277-million for second quarter of 2016, a decrease of $36-million, or 3 per cent. Excluding the impact of the skin care divestiture and foreign exchange, the Bausch + Lomb/international segment organically grew by approximately 6 percent compared with the second quarter of 2016, driven by performance in China, Europe and Africa/Middle East, and the global ophthalmology business.
Branded Rx segment
The branded Rx segment revenues were $636-million for the second quarter of 2017, as compared with $653-million for second quarter of 2016, a decrease of $17-million, or 3 per cent. The decrease in sales primarily was due to lower volumes in the dermatology business and the impact of divestitures and discontinuations in the Salix business. The decline was largely offset by 13-per-cent revenue growth in the Salix business compared with the second quarter of 2016, despite the impact of the divestiture of Ruconest, and organic growth in the Salix business of 16 per cent compared with the second quarter of 2016.
U.S. diversified products segment
The U.S. diversified products segment revenues were $356-million for the second quarter of 2017, as compared with $490-million for second quarter of 2016, a decrease of $134-million, or 27 per cent. The decline was primarily driven by decreases in volume and price attributed to the previously reported loss of exclusivity for a basket of products.
Operating income
Operating income was $175-million for the second quarter of 2017 as compared with $81-million for the second quarter of 2016, an increase of $94-million. The increase in operating income primarily reflects lower asset impairments and amortization charges partially offset by a decrease in contribution margin as a result of the decline in product sales from existing businesses.
Net loss for the three months ended June 30, 2017, was $38-million, as compared with $302-million for the same period in 2016, an improvement of $264-million. The decrease in net loss primarily reflects the increase in recovery for income taxes, increase in operating income and the net change in foreign exchange.
Cash provided by operating activities was $268-million for the second quarter of 2017. Cash flows from operations were negatively affected by $190-million of net payments made in resolution of the Salix securities class action litigation. Excluding these payments, the company generated a normalized cash flow of $458-million.
GAAP earnings per share (EPS) diluted for the second quarter of 2017 came in at a loss of 11 cents as compared with a loss of 88 cents in the second quarter of 2016.
Adjusted EBITDA
(non-GAAP)
Adjusted EBITDA (non-GAAP) was $951-million for the second quarter of 2017, as compared with $1,087-million for the second quarter of 2016, a decrease of $136-million, primarily due to lower revenues attributed to the previously reported loss of exclusivity for a basket of products, divestitures and discontinuations, and declines in the company's dermatology business, partially offset by strong organic growth in the Bausch + Lomb/international segment and the Salix business. Adjusted EBITDA grew by 10 per cent sequentially versus the prior quarter.
2017 guidance
Valeant has updated guidance for 2017, as follows:
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Full-year revenues in the range of $8.7-billion to $8.9-billion from $8.9-billion to $9.1-billion.
The company confirms it will maintain its full-year adjusted EBITDA (non-GAAP) guidance range of $3.6-billion to $3.75-billion despite the impact of divestitures that have closed in 2017.
This updated guidance reflects the impact of the sale of the CeraVe, AcneFree and AMBI skin care brands and the sale of Dendreon Pharmaceuticals LLC. This guidance does not reflect the impact of the sales of the iNova Pharmaceuticals and Obagi Medical Products businesses, which are both expected to close in the second half of the year.
Additional highlights:
- Valeant's cash, cash equivalents and restricted cash were $2,025-million at June 30, 2017.
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The company's availability under the revolving credit facility was approximately $930-million at June 30, 2017.
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Valeant's corporate credit ratings remained unchanged during the second quarter of 2017.
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John Paulson, president of Paulson & Co. Inc., a New York-based investment firm, joined the company's board of directors.
Conference call details:
Date:
Tuesday, Aug. 8, 2017
Time: 8 a.m. Eastern Daylight Time
Participant event dial-in numbers: 877-876-8393 (North America);
443-961-0178 (international)
Participant pass code: 35736021
Replay dial-in numbers: 855-859-2056 (North America);
404-537-3406 (international)
Replay pass code: 31833 (replay available until Oct. 8, 2017)
About Valeant Pharmaceuticals International Inc.
Valeant is a multinational specialty pharmaceutical company that develops, manufactures and markets a broad range of pharmaceutical products primarily in the areas of dermatology, gastrointestinal disorders, eye health, neurology and branded generics.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions)
Three months ended June 30 Six months ended June 30
2017 2016 2017 2016
Product sales $2,200 $2,389 $4,276 $4,725
Other revenues 33 31 66 67
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Total revenues 2,233 2,420 4,342 4,792
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Cost of goods sold (excluding amortization
and impairments of intangible assets) 635 648 1,219 1,268
Cost of other revenues 11 10 23 20
Selling, general and administrative 659 671 1,320 1,484
Research and development 94 124 190 227
Amortization of intangible assets 623 673 1,258 1,351
Asset impairments 85 230 223 246
Restructuring and integration costs 18 20 36 58
Acquired in-process research and development costs 1 2 5 3
Acquisition-related contingent consideration
(loss) (49) 7 (59) 9
Other income (loss) (19) (46) (259) (21)
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2,058 2,339 3,956 4,645
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Operating income 175 81 386 147
Interest (expense), net (456) (470) (927) (896)
Loss on extinguishment of debt - - (64) -
Foreign exchange and other 39 12 68 6
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(Loss) before recovery for income taxes (242) (377) (537) (743)
Recovery (loss) of income taxes (205) (73) (1,129) (66)
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Net (loss) income (37) (304) 592 (677)
Less: net income (loss) attributable
to non-controlling interest 1 (2) 2 (1)
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Net (loss) income attributable to Valeant
Pharmaceuticals International (38) (302) 590 (676)
We seek Safe Harbor.
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