##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
      Form 10-Q/A
   (Mark One)þ

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended
    March 31, 2006oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission file number: 1-11397
      Valeant Pharmaceuticals
    International
 (Exact name of registrant as
    specified in its charter)
  Delaware

33-0628076(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. EmployerIdentification No.)One Enterprise,
    Aliso Viejo, California(Address of principal
    executive offices)

92656(Zip Code)   (949) 461-6000
 (Registrants telephone
    number, including area code)
  o þ
   þ o o
  o þ




---



##### 



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  INDEX
  PageNumberExplanatory
    Note


2PART I 
    FINANCIAL INFORMATIONItem 1.

Financial
    StatementsConsolidated
    Condensed Balance Sheets as of March 31, 2006 and
    December 31, 2005 (as restated)


4Consolidated
    Condensed Statements of Operations for the three months ended
    March 31, 2006 and 2005 (as restated)


5Consolidated
    Condensed Statements of Comprehensive Income for the three
    months ended March 31, 2006 and 2005 (as
    restated)


6Consolidated
    Condensed Statements of Cash Flows for the three months ended
    March 31, 2006 and 2005 (as restated)


7Notes to
    Consolidated Condensed Financial Statements (as
    restated)


8Item 2.

Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


36Item 3.

Quantitative and
    Qualitative Disclosures About Market Risk


62Item 4.

Controls and
    Procedures


63PART II 
    OTHER INFORMATIONItem 1.

Legal
    Proceedings


65Item 1A.

Risk
    Factors


65Item 6.

Exhibits


67SIGNATURES


68EXHIBIT 15.1EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1   1




---



##### Table of Contents



Explanatory
    Note  Form 10-Q Form 10-K/A
  Form 10-Q/A
  ®
      Form 10-K Form 10-K/A, Form 10-Q Form 10-Q Form 10-K Form 10-Q Form 10-Q/A Form 10-Q/A Form 10-K/A
 2




---



##### Table of Contents



Form 10-Q/A Form 10-Q/A Form 10-Q/A
        Form 10-Q/A Form 10-K/A Form 8-K Form 10-Q/A
 3




---



##### Table of Contents



PART I 
    FINANCIAL INFORMATION  Item 1.
    Financial
    Statements  VALEANT
    PHARMACEUTICALS INTERNATIONAL
    CONSOLIDATED CONDENSED BALANCE SHEETS
    As of March 31, 2006 and December 31, 2005
    (In thousands, except par value data)  March 31,


December 31,2006


2005(Restated)(1)


(Restated)(1)(Unaudited)ASSETSCurrent Assets:Cash and cash equivalents

$
244,362


$
224,856Marketable securities


11,121



10,210Accounts receivable, net


174,433



187,987Inventories, net


137,729



136,034Prepaid expenses and other current
    assets


38,862



40,354Total current assets


606,507



599,441Property, plant and equipment, net


217,813



230,126Deferred tax assets, net


21,510



25,342Goodwill


79,767



79,486Intangible assets, net


519,614



536,319Other assets


45,284



43,176Assets of discontinued operations


105



127Total non-current assets


884,093



914,576$
1,490,600


$
1,514,017LIABILITIES AND
    STOCKHOLDERS EQUITYCurrent Liabilities:Trade payables

$
48,708


$
55,279Accrued liabilities


138,551



140,838Notes payable and current portion
    of long-term debt


346



495Income taxes


39,465



47,324Total current liabilities


227,070



243,936Long-term debt, less current
    portion


785,850



788,439Deferred tax liabilities, net


5,126



8,208Other liabilities


19,918



16,372Liabilities of discontinued
    operations


23,024



23,118Total non-current liabilities


833,918



836,137Commitments and contingenciesStockholders Equity:Common stock, $0.01 par
    value; 200,000 shares authorized; 92,793 (March 31,
    2006) and 92,760 (December 31, 2005) shares
    outstanding (after deducting shares in treasury of 1,094 as of
    March 31, 2006 and December 31, 2005)


928



928Additional capital


1,230,955



1,224,907Accumulated deficit


(783,487
)


(770,350
)Accumulated other comprehensive
    income (loss)


(18,784
)


(21,541
)Total stockholders equity


429,612



433,944$
1,490,600


$
1,514,017     (1)
    
    See Note 2, Restatement of Consolidated Financial
    Statements.   4




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  CONSOLIDATED CONDENSED STATEMENTS OF
    OPERATIONS
 For the three months ended March 31, 2006 and 2005
 (Unaudited, in thousands, except per share data)
  Three Months Ended March 31,2006


2005(Restated)(1)


(Restated)(1)Revenues:Product sales

$
181,401


$
161,782Ribavirin royalties


18,091



19,335Total revenues


199,492



181,117Costs and expenses:Cost of goods sold (excluding
    amortization)


58,601



48,783Selling expenses


64,276



52,850General and administrative expenses


28,446



24,705Research and development costs


29,553



25,831Acquired in-process research and
    development






126,399Gain on settlement of litigation


(34,000
)


Restructuring charges


26,466



1,695Amortization expense


17,523



13,968Total costs and expenses


190,865



294,231Income (loss) from operations


8,627



(113,114
)Other income (loss), net,
    including translation and exchange


937



(1,791
)Interest income


2,657



3,015Interest expense


(10,437
)


(9,681
)Income (loss) from continuing
    operations before income taxes and minority interest


1,784



(121,571
)Provision for income taxes


7,542



16,514Minority interest, net


1



171Loss from continuing operations


(5,759
)


(138,256
)Loss from discontinued operations


(212
)


(1,503
)Net loss

$
(5,971
)

$
(139,759
)Basic and diluted loss per share:Loss from continuing operations

$
(0.06
)

$
(1.55
)Loss from discontinued operations






(0.02
)Basic and diluted net loss per
    share

$
(0.06
)

$
(1.57
)Basic and diluted shares used in
    per share computation


92,770



88,836Dividends paid per share of common
    stock

$
0.08


$
0.08Dividends declared per share of
    common stock

$
0.08


$
0.08     (1)
    
    See Note 2, Restatement of Consolidated Financial
    Statements.   5




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  CONSOLIDATED CONDENSED STATEMENTS OF
    COMPREHENSIVE INCOME
 For the three months ended March 31, 2006 and 2005
 (Unaudited, in thousands)
  Three Months EndedMarch 31,2006


2005(Restated)(1)


(Restated)(1)Net loss

$
(5,971
)

$
(139,759
)Other comprehensive income (loss):Foreign currency translation
    adjustments


2,346



(15,363
)Unrealized gain (loss) on
    marketable equity securities and other


411



3,258Reclassification adjustment for
    loss realized included in net loss






Comprehensive income (loss)

$
(3,214
)

$
(151,864
)     (1)
    
    See Note 2, Restatement of Consolidated Financial
    Statements.   6




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  CONSOLIDATED CONDENSED STATEMENTS OF CASH
    FLOWS
 For the three months ended March 31, 2006 and 2005
 (Unaudited, in thousands)
  Three Months EndedMarch 31,2006


2005(Restated)(1)


(Restated)(1)Cash flows from operating
    activities:Net Loss

$
(5,971
)

$
(139,759
)Loss from discontinued operations


(212
)


(1,503
)Loss from continuing operations


(5,759
)


(138,256
)Adjustments to reconcile net loss
    to net cash provided by operating activities:Depreciation and amortization


23,482



21,038Provision for losses on accounts
    receivable and inventory


3,597



1,594Stock compensation expense


5,618



863Translation and exchange (gains)
    losses, net


(937
)


1,791Impairment charges and other
    non-cash items


20,426



1,461Acquired in-process research and
    development






126,399Deferred income taxes


1,910



(13,879
)Change in assets and liabilities,
    net of effects of acquisitions:Accounts Receivable


13,779



6,482Inventories


(3,736
)


(10,951
)Prepaid expenses and other assets


4,918



(129
)Trade payables and accrued
    liabilities


(9,886
)


(7,706
)Income taxes


(13,116
)


15,960Other liabilities


842



3,995Cash flow from operating
    activities in continuing operations


41,138



8,662Cash flow from operating
    activities in discontinued operations


(281
)


(471
)Net cash provided by operating
    activities


40,857



8,191Cash flows from investing
    activities:Capital expenditures


(13,351
)


(4,848
)Proceeds from sale of assets


135



762Proceeds from investments


2,000



498,600Purchase of investments


(3,940
)


(296,213
)Acquisition of businesses, license
    rights and product lines






(281,778
)Cash flow from investing
    activities in continuing operations


(15,156
)


(83,477
)Cash flow from investing
    activities in discontinued operations


(1
)


1Net cash used in investing
    activities


(15,157
)


(83,476
)Cash flows from financing
    activities:Payments on long-term debt and
    notes payable


(157
)


(593
)Proceeds from issuance of stock


430



640Proceeds from stock offering






189,393Dividends paid


(7,173
)


(6,502
)Net cash provided by (used in)
    financing activities


(6,900
)


182,938Effect of exchange rate changes on
    cash and cash equivalents


728



(4,794
)Net increase (decrease) in cash
    and cash equivalents


19,528



102,859Cash and cash equivalents at
    beginning of period


224,903



222,719Cash and cash equivalents at end
    of period


244,431



325,578Cash and cash equivalents of
    discontinued operations


(69
)


(132
)Cash and cash equivalents of
    continuing operations

$
244,362


$
325,446     (1)
    
    See Note 2, Restatement of Consolidated Financial
    Statements.   7




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL



NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

March 31, 2006

(Unaudited)



In the consolidated condensed financial statements included
    herein, we, us, our,
    Valeant and the Company refer to Valeant
    Pharmaceuticals International and its subsidiaries. The
    condensed consolidated financial statements have been prepared
    by the Company, without audit, pursuant to the rules and
    regulations of the Securities and Exchange Commission. Certain
    information and footnote disclosures normally included in
    financial statements prepared on the basis of accounting
    principles generally accepted in the United States of America
    have been condensed or omitted pursuant to such rules and
    regulations. The results of operations presented herein are not
    necessarily indicative of the results to be expected for a full
    year. Although we believe that all adjustments (consisting only
    of normal, recurring adjustments) necessary for a fair
    presentation of the interim periods presented are included and
    that the disclosures are adequate to make the information
    presented not misleading, these consolidated condensed financial
    statements should be read in conjunction with the consolidated
    financial statements and notes thereto included in our annual
    report on
    Form 10-K/A
    for the year ended December 31, 2005. 1.
    Organization
    and Summary of Significant Accounting Policies  Organization:
  Principles of Consolidation:
  Marketable Securities: available-for-sale
  Acquired In-Process Research and
    Development:
     8




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
   Derivative Financial Instruments:
  Comprehensive Income: Reporting Comprehensive
    Income.
  Per Share Information:
  Stock-Based Compensation Expense:
       9




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
      Three Months EndedMarch 31, 2005(In thousands, exceptper share amounts)(Restated)Net loss as reported

$
(139,759
)Stock compensation expense
    recorded at intrinsic value for stock incentive plans


862Stock compensation expense
    determined under fair value method for stock incentive plans


(5,560
)Pro forma net loss

$
(144,457
)Net loss per share:Basic and diluted  as
    reported

$
(1.57
)Basic and diluted  pro
    forma

$
(1.63
)       Assets Held for Sale:
  Use of Estimates:
  Reclassifications:
  2.
    Restatement
    of Consolidated Financial Statements  Form 10-Q Form 10-K
   10




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
  ®
    e-mail
      Options
    Granted Prior to the Change in Control
   11




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
  in-the-money
        Accounting
    for Certain Transactions involving Stock Compensation
    in-the-money, in-the-money
  Cash
    Surrender of Options at Change in Control in 2002
   12




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
    in-the-money
  Options
    Granted After the Change in Control
    in-the-money
   13




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
  rank-and-file
    New
    Hire Grant Practices
      Income
    Tax Effects
       14




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
    Summary
    and Other Items
    TotalThree Months











Cumulative


AdditionalEnded March 31,


Year Ended December 31,


Effect


Expense2006


2005


2005


2004


2003


1982 -2002


(Income)(In thousands)Stock option grants prior to 2002
    Change in Control:Broad-based option grants with
    improper measurement dates

$



$



$



$



$



$
11,488


$
11,488Option grants to directors with
    improper measurement dates






















148



148Other option grants with improper
    measurement dates






















4,538



4,538Re-priced option grant






















997



997Improper measurement dates for
    option grants
    1982-1994






















1,375



1,375Incremental charge in connection
    with Change in Control






















10,105



10,105Sub total pre Change in Control






















28,651



28,651Stock option grants after 2002
    Change in Control:Company-wide option grants with
    improper measurement dates


(64
)


312



1,171



1,085



172







2,364Other stock option matters after
    June 2002






6



21



(7
)


20







34Sub total post Change in Control


(64
)


318



1,192



1,078



192







2,398Total impact of additional stock
    compensation on operating income


(64
)


318



1,192



1,078



192



28,651



31,049Other items corrected in
    connection with restatement


(629
)


35



(2,273
)


(1,265
)


(90
)


7,766



3,509Tax effects of above and other tax
    items


300



147



964



(14,957
)


1,785



3,357



(8,551
)Net income decrease (increase)
    resulting from all restatement items

$
(393
)

$
500


$
(117
)

$
(15,144
)

$
1,887


$
39,774


$
26,007  15




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
        March 31,2006


2005(In thousands)RevenuesAs previously reported

$
198,848


$
181,138Adjustment


644



(21
)As restated

$
199,492


$
181,117Cost of goods soldAs previously reported

$
58,580


$
48,721Adjustment


21



62As restated

$
58,601


$
48,783Selling expensesAs previously reported

$
64,270


$
52,815Adjustment


6



35As restated

$
64,276


$
52,850Research and development costsAs previously reported

$
29,535


$
25,724Adjustment


18



107As restated

$
29,553


$
25,831General and administrative expensesAs previously reported

$
28,540


$
24,577Adjustment


(94
)


128As restated

$
28,446


$
24,705Income (loss) from operations,
    before interest, taxes and other itemsAs previously reported

$
7,934


$
(112,761
)Adjustment


693



(353
)As restated

$
8,627


$
(113,114
)Income (loss) from continuing
    operations before income taxes income taxes and minority interestAs previously reported

$
1,091


$
(121,218
)Adjustment


693



(353
)As restated

$
1,784


$
(121,571
) 16




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
  March 31,2006


2005(In thousands)Provision for income taxesAs previously reported

$
7,242


$
16,367Adjustment


300



147As restated

$
7,542


$
16,514Income (loss) from continuing
    operationsAs previously reported

$
(6,152
)

$
(137,756
)Adjustment


393



(500
)As restated

$
(5,759
)

$
(138,256
)Net income (loss)As previously reported

$
(6,364
)

$
(139,259
)Adjustment


393



(500
)As restated

$
(5,971
)

$
(139,759
)Basic and diluted earnings per
    share from continuing operationsAs previously reported

$
(0.07
)

$
(1.55
)Adjustment


0.01



As restated

$
(0.06
)

$
(1.55
)Basic and diluted earnings per
    shareAs previously reported

$
(0.07
)

$
(1.57
)Adjustment


0.01



As restated

$
(0.06
)

$
(1.57
)     March 31,


December 31,2006


2005(In thousands)Other current assets (deferred
    taxes)As previously reported

$
38,862


$
36,652Adjustment






3,702As restated

$
38,862


$
40,354Deferred tax assets, NetAs previously reported

$
21,510


$
45,904Adjustment






(20,562
)As restated

$
21,510


$
25,342Accrued liabilities (reserve for
    product returns)As previously reported

$
135,043


$
136,701Adjustment


3,508



4,137As restated

$
138,551


$
140,838 17




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
  March 31,


December 31,2006


2005(In thousands)Income taxes  currentAs previously reported

$
37,995


$
42,452Adjustment


1,470



4,872As restated

$
39,465


$
47,324Deferred taxesAs previously reported

$
5,126


$
28,770Adjustment






(20,562
)As restated

$
5,126


$
8,208Additional capitalAs previously reported

$
1,209,926


$
1,203,814Adjustment


21,029



21,093As restated

$
1,230,955


$
1,224,907Accumulated deficitAs previously reported

$
(757,480
)

$
(743,950
)Adjustment


(26,007
)


(26,400
)As restated

$
(783,487
)

$
(770,350
)Stockholders equityAs previously reported

$
434,590


$
439,251Adjustment


(4,978
)


(5,307
)As restated

$
429,612


$
433,944  18




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
    Three Months Ended


Three Months EndedMarch 31, 2006


March 31, 2005As Previously








As PreviouslyReported


Adjustments


As Restated


Reported


Adjustments


As RestatedCash flows from operating
    activities:Net Loss

$
(6,364
)

$
393


$
(5,971
)

$
(139,259
)

$
(500
)

$
(139,759
)Loss from discontinued operations


(212
)






(212
)


(1,503
)






(1,503
)Loss from continuing operations


(6,152
)


393



(5,759
)


(137,756
)


(500
)


(138,256
)Adjustments to reconcile net loss
    to net cash provided by operating activities:Depreciation and amortization


23,482







23,482



21,038







21,038Provision for losses on accounts
    receivable and inventory


3,597







3,597



1,594







1,594Stock compensation expense


5,682



(64
)


5,618



544



319



863Translation and exchange (gains)
    losses, net


(937
)






(937
)


1,791







1,791Impairment charges and other
    non-cash items


20,426







20,426



1,461







1,461Acquired in-process research and
    development














126,399







126,399Deferred income taxes


1,910







1,910



(14,026
)


147



(13,879
)Change in assets and liabilities,
    net of effects of acquisitions:Accounts Receivable


13,779







13,779



6,482







6,482Inventories


(3,736
)






(3,736
)


(10,951
)






(10,951
)Prepaid expenses and other assets


1,216



3,702



4,918



(129
)






(129
)Trade payables and accrued
    liabilities


(9,886
)






(9,886
)


(7,740
)


34



(7,706
)Income taxes


(9,085
)


(4,031
)


(13,116
)


15,960







15,960Other liabilities


842







842



3,995







3,995Cash flow from operating activities
    in continuing operations


41,138







41,138



8,662







8,662Cash flow from operating activities
    in discontinued operations


(281
)






(281
)


(471
)






(471
)Net cash provided by operating
    activities

$
40,857


$



$
40,857


$
8,191


$



$
8,191   3.
    Restructuring   19




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
               4.
    Acquisitions  Infergen:
 20




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
    Xcel Pharmaceuticals, Inc.:
        March 31, 2005(in thousands, exceptper share amounts)(Restated)Net revenues

$
200,471Loss from continuing operations


(196,021
)Net loss


(197,524
)Basic and diluted net loss per
    share:Loss from continuing operations

$
(2.12
)Net loss

$
(2.13
)     5.
    Discontinued
    Operations   21




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
      Three Months EndedMarch 31,2006


2005Revenues

$



$
2,092Loss before income taxes

$
(212
)

$
(1,285
)Loss on disposal of discontinued
    operations






(218
)Income (loss) from discontinued
    operations

$
(212
)

$
(1,503
)     March 31,


December 31,2006


2005Cash

$
69


$
47Accounts receivable, net


29



45Property, plant and equipment, net






18Other assets


7



17Assets of discontinued operations

$
105


$
127Accounts payable

$
7


$
13Accrued liabilities


19,018



19,118Other liabilities


3,999



3,987Liabilities of discontinued
    operations

$
23,024


$
23,118    22




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
   6.
    Earnings
    Per Share    Three Months EndedMarch 31,2006


2005(Restated)


(Restated)Income (loss):Numerator for basic and dilutive
    earnings per share  loss attributable to stockholders

$
(5,971
)

$
(139,759
)Shares:Denominator for basic and dilutive
    earnings per share  adjusted weighted-average shares
    outstanding


92,770



88,836Basic and diluted loss per share:Loss from continuing operations

$
(0.06
)

$
(1.55
)Loss from discontinued operations






(0.02
)Basic and diluted net loss per
    share

$
(0.06
)

$
(1.57
)      23




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
   7.
    Detail of
    Certain Accounts    March 31,


December 31,2006


2005Accounts receivable,
    net:Trade accounts receivable

$
134,912


$
153,497Royalties receivable


18,111



27,306Other receivables


27,222



12,669180,245



193,472Allowance for doubtful accounts


(5,812
)


(5,485
)$
174,433


$
187,987Inventories, net:Raw materials and supplies

$
34,448


$
34,931Work-in-process


27,520



28,726Finished goods


89,604



85,152151,572



148,809Allowance for inventory
    obsolescence


(13,843
)


(12,775
)$
137,729


$
136,034Property, plant and equipment,
    net:Property, plant and equipment, at
    cost

$
393,408


$
401,613Accumulated depreciation and
    amortization


(175,595
)


(171,487
)$
217,813


$
230,126   Intangible assets:
  March 31, 2006


December 31, 2005Gross


Accumulated


Gross


AccumulatedAmount


Amortization


Amount


AmortizationIntangible assets:Product rights

$
764,471


$
(271,743
)

$
763,653


$
(257,380
)License agreements


67,376



(40,490
)


67,376



(37,330
)Total intangible assets

$
831,847


$
(312,233
)

$
831,029


$
(294,710
)    24




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
   8.
    Income
    Taxes      9.
    Common
    Stock and Share Compensation  Stock Incentive Plan:
  Stock Options Issued Under the Incentive
    Plan:
  WeightedAverageNumber of


ExerciseShares


PriceShares under option,
    December 31, 2004


13,336


$
17.93Granted


2,192


$
18.16Exercised


(160
)

$
20.10Canceled


(736
)

$
22.28Shares under option,
    December 31, 2005


14,632


$
17.80Granted


130


$
17.22Exercised


(33
)

$
13.07Canceled


(257
)

$
27.64Shares Under Option,
    March 31, 2006


14,472


$
17.63Exercisable at December 31,
    2005


7,197


$
17.82Exercisable at March 31, 2006


7,387


$
17.39Options available for grant at
    December 31, 2005


513Options available for grant at
    March 31, 2006


635  25




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
    Outstanding


Exercisable


WeightedWeighted





Weighted


AverageAverage





Average


RemainingNumber


Exercise


Number


Exercise


ContractualRange of Exercise Prices

of Shares


Price


of Shares


Price


Term (Years)$8.10 to $13.08


4,845


$
10.29



3,308


$
10.07



6.71$13.67 to $18.55


5,250


$
17.87



1,657


$
17.90



8.3418.70 to 46.25


4,377


$
25.46



2,422


$
27.05



7.1714,472







7,387     2006


2005Weighted-average life (years)


4.1



4.1Volatility


39
%


41
%Expected dividend per share

$
0.31


$
0.31Risk-free interest rate


4.80
%


4.33
%Weighted-average fair value of
    options

$
5.48


$
6.10     Restricted Stock Units Issued Under the Incentive
    Plan:
  2003 Employee Stock Purchase Plan:
 26




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
      Recorded as Expense


To be Recorded asThrough


Expense inMarch 31, 2006


Future Periods(Restated)


(Restated)Employee stock options

$
4,861


$
23,838Phantom and Restrictred stock units


637



1,872Employee Stock Pruchase Plan


120



Total stock based compensation
    expense

$
5,618


$
25,710     Three Months EndedMarch 31,2006


2005(Restated)


(Restated)Cost of goods sold

$
434


$
62Selling expenses


854



35General and administrative expenses


3,532



525Research and development costs


798



240$
5,618


$
862     (In Thousands)Remainder of 2006

$
13,5802007


8,2552008


3,1082009 and thereafter


767$
25,710   Dividends:
 27




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
  10.
    Commitments
    and Contingencies    Securities
    Class Actions:
  Section 10b-5
    Litigation: Rule 10b-5
    Derivative Actions: James Herrig, IRA v.
    Milan Panic et al. and/or
  Paul Gerstley v. Norman
    Barker, Jr. et al.
     28




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
  Ribapharm Bonuses.
  Patent Oppositions:
    Serbia & Montenegro: predecessors-in-interest
 29




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
    Argentina Antitrust Matter:
  Permax
    Product Liability Cases:
  Valvular Heart Disease.
  Compulsive Gambling.
    Kali Litigation: No. 76-843 ® No. 04-3238 No. 76-843
 30




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
      Trademark litigation:
  Breach of contract:
  Other:
  11.
    Business
    Segments   31




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
     Three Months EndedMarch 31,2006


2005(Restated)


(Restated)RevenuesSpecialty pharmaceuticalsNorth America

$
75,856


$
48,922Latin America


35,788



32,060Europe


56,257



65,875AAA


13,500



14,925Total specialty pharmaceuticals


181,401



161,782Ribavirin royalties


18,091



19,335Total revenues

$
199,492


$
181,117Operating Income
    (Loss)Specialty pharmaceuticalsNorth America

$
23,136


$
16,673Latin America


8,684



9,818Europe


4,550



11,734AAA


154



79036,524



39,015Corporate expenses(1)


(23,141
)


(14,699
)Total specialty pharmaceuticals


13,383



24,316Restructuring charges(2)


(26,466
)


(1,695
)Gain on settlement of litigation


34,000



Research and development


(12,290
)


(9,336
)Acquired IPR&D(2)






(126,399
)Consolidated segment operating
    income (loss)


8,627



(113,114
)Interest income


2,657



3,015Interest expense


(10,437
)


(9,681
)Other, net


937



(1,791
)Income (loss) from continuing
    operations before provision for income taxes and minority
    interest

$
1,784


$
(121,571
)     (1)
    
    All stock based compensation expense has been considered a
    corporate cost as management excludes this item in assessing the
    financial performance of individual business segments and
    considers it a function of valuation factors that pertain to
    overall corporate stock performance.(2)
    
    Restructuring charges and IPR&D are not included in the
    applicable segments as management excludes these items in
    assessing the financial performance of these segments, primarily
    due to their non-operational nature. 32




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
    March 31,


December 31,2006


2005(Restated)North America

$
500,161


$
503,196Latin America


134,882



131,070Europe


379,841



373,974AAA


60,403



62,886Corporate


202,054



223,821Research and development division


213,154



218,943Discontinued operations


105



127Total

$
1,490,600


$
1,514,017     Long-Term AssetsMarch 31,


December 31,2006


2005(Restated)North America

$
418,779


$
426,745Latin America


38,970



39,287Europe


130,274



129,952AAA


21,072



21,762Corporate


121,814



138,239Research and development division


153,184



158,464Total

$
884,093


$
914,449     Three Months Ended


%March 31,


Increase/2006


2005


(Decrease)(Restated)


(Restated)DermatologyEfudix/Efudex®(T)

$
15,581


$
19,276



(19
)%Kinerase®(T)


6,860



4,435



55
%Oxsoralen-Ultra®(T)


3,508



2,968



18
%Dermatixtm


1,834



1,896



(3
)%Other Dermatology


8,569



8,133



5
%Infectious
    DiseaseInfergen®(T)


13,705







Virazole®(T)


5,801



4,174



39
%Other Infectious Disease


4,731



5,853



(19
)% 33




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
  Three Months Ended


%March 31,


Increase/2006


2005


(Decrease)(Restated)


(Restated)NeurologyDiastat(T)


12,022



5,177



132
%Mestinon®(T)


9,817



9,860



0
%Cesamet


3,303



2,055



61
%Migranal


3,115



774



302
%Librax


2,919



4,080



(28
)%Dalmane/Dalmadorm


2,466



2,642



(7
)%Limbitrol


1,510



1,294



17
%TASMAR®


1,185



939



26
%Other Neurology


14,591



10,568



38
%Other Therapeutic
    ClassesBedoyectatm(T)


10,580



9,244



14
%Bisocard(T)


3,565



2,655



34
%Solcoseryl(T)


3,377



4,194



(19
)%Calcitonin


1,850



2,585



(28
)%Nyal


1,754



2,474



(29
)%Aclotin


1,372



1,520



(10
)%Espaven


1,302



1,562



(17
)%Other pharmaceutical products


46,084



53,424



(14
)%Total product sales

$
181,401


$
161,782



12
%Total promoted product sales(a)

$
107,426


$
83,804



28
%Total top 10 products based on
    2006 sales

$
84,816


$
61,983



37
%     (a)
    
    The products named above are all promoted products with
    estimated annualized sales in excess of $5 million.(T)
    
    Represents ten products with the largest amount of sales in the
    first quarter of 2006.    12.
    Subsequent
    events relating to the restatement  Form 10-Q Form 10-Q Form 10-Q
 34




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
   Form 10-Q/A
  ®
    Derivative Actions: and/or
 35




---



##### Table of Contents



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Form 10-Q Form 10-K
  ®
    e-mail
     36




---



##### Table of Contents



Options
    Granted Prior to the Change in Control
  in-the-money
        Accounting for Certain
    Transactions involving Stock Compensation
    in-the-money, in-the-money
 37




---



##### Table of Contents



Cash
    Surrender of Options at Change in Control in 2002
    in-the-money
  Options
    Granted After the Change in Control
    in-the-money
   38




---



##### Table of Contents



rank-and-file
    New
    Hire Grant Practices
      Income
    Tax Effects
       39




---



##### Table of Contents



Summary
    and Other Items
    TotalThree Months











Cumulative


AdditionalEnded March 31,


Year Ended December 31,


Effect


Expense2006


2005


2005


2004


2003


1982 -2002


(Income)(In thousands)Stock option grants prior to 2002
    Change in Control:Broad-based option grants with
    improper measurement dates

$



$



$



$



$



$
11,488


$
11,488Option grants to directors with
    improper measurement dates






















148



148Other option grants with improper
    measurement dates






















4,538



4,538Re-priced option grant






















997



997Improper measurement dates for
    option grants
    1982-1994






















1,375



1,375Incremental charge in connection
    with Change in Control






















10,105



10,105Sub total pre Change in Control






















28,651



28,651Stock option grants after 2002
    Change in Control:Company-wide option grants with
    improper measurement dates


(64
)


312



1,171



1,085



172







2,364Other stock option matters after
    June 2002






6



21



(7
)


20







34Sub total post Change in Control


(64
)


318



1,192



1,078



192







2,398Total impact of additional stock
    compensation on operating income


(64
)


318



1,192



1,078



192



28,651



31,049Other items corrected in
    connection with restatement


(629
)


35



(2,273
)


(1,265
)


(90
)


7,766



3,509Tax effects of above and other tax
    items


300



147



964



(14,957
)


1,785



3,357



(8,551
)Net income decrease (increase)
    resulting from all restatement items

$
(393
)

$
500


$
(117
)

$
(15,144
)

$
1,887


$
39,774


$
26,007      40




---



##### Table of Contents



Three Months Ended


Three Months EndedMarch 31, 2006


March 31, 2005As Previously








As PreviouslyReported


Adjustments


As Restated


Reported


Adjustments


As RestatedRevenues:Product sales

$
180,757


$
644


$
181,401


$
161,803


$
(21
)

$
161,782Ribavirin royalties


18,091







18,091



19,335







19,335Total revenues


198,848



644



199,492



181,138



(21
)


181,117Costs and expenses:Cost of goods sold (excluding
    amortization)


58,580



21



58,601



48,721



62



48,783Selling expenses


64,270



6



64,276



52,815



35



52,850General and administrative expenses


28,540



(94
)


28,446



24,577



128



24,705Research and development costs


29,535



18



29,553



25,724



107



25,831Acquired in -process research and
    development














126,399







126,399Gain on settlement of litigation


(34,000
)






(34,000
)










Restructuring charges


26,466







26,466



1,695







1,695Amortization expense


17,523







17,523



13,968







13,968Total costs and expenses


190,914



(49
)


190,865



293,899



332



294,231Income (loss ) from operations


7,934



693



8,627



(112,761
)


(353
)


(113,114
)Other income (loss), net,
    including translation and exchange


937







937



(1,791
)






(1,791
)Interest income


2,657







2,657



3,015







3,015Interest expense


(10,437
)






(10,437
)


(9,681
)






(9,681
)Income (loss) from continuing
    operations before income taxes and minority interest


1,091



693



1,784



(121,218
)


(353
)


(121,571
)Provision for income taxes


7,242



300



7,542



16,367



147



16,514Minority interest, net


1







1



171







171Loss from continuing operations


(6,152
)


393



(5,759
)


(137,756
)


(500
)


(138,256
)Loss from discontinued operations


(212
)






(212
)


(1,503
)






(1,503
)Net loss

$
(6,364
)

$
393


$
(5,971
)

$
(139,259
)

$
(500
)

$
(139,759
)Basic and diluted loss per share:Loss from continuing operations

$
(0.07
)

$
0.01


$
(0.06
)

$
(1.55
)

$



$
(1.55
)Loss from discontinued operations

$











$
(0.02
)






(0.02
)Basic and diluted net loss per
    share

$
(0.07
)

$



$
(0.06
)

$
(1.57
)

$



$
(1.57
)Basic and diluted shares used in
    per share computation


92,770







92,770



88,836







88,836  41




---



##### Table of Contents



Three Months Ended


Three Months EndedMarch 31, 2006


March 31, 2005As Previously








As PreviouslyReported


Adjustments


As Restated


Reported


Adjustments


As RestatedCash flows from operating
    activities:Net Loss

$
(6,364
)

$
393


$
(5,971
)

$
(139,259
)

$
(500
)

$
(139,759
)Loss from discontinued operations


(212
)






(212
)


(1,503
)






(1,503
)Loss from continuing operations


(6,152
)


393



(5,759
)


(137,756
)


(500
)


(138,256
)Adjustments to reconcile net loss
    to net cash provided by operating activities:Depreciation and amortization


23,482







23,482



21,038







21,038Provision for losses on accounts
    receivable and inventory


3,597







3,597



1,594







1,594Stock compensation expense


5,682



(64
)


5,618



544



319



863Translation and exchange (gains)
    losses, net


(937
)






(937
)


1,791







1,791Impairment charges and other
    non-cash items


20,426







20,426



1,461







1,461Acquired in-process research and
    development














126,399







126,399Deferred income taxes


1,910







1,910



(14,026
)


147



(13,879
)Change in assets and liabilities,
    net of effects of acquisitions:Accounts Receivable


13,779







13,779



6,482







6,482Inventories


(3,736
)






(3,736
)


(10,951
)






(10,951
)Prepaid expenses and other assets


1,216



3,702



4,918



(129
)






(129
)Trade payables and accrued
    liabilities


(9,886
)






(9,886
)


(7,740
)


34



(7,706
)Income taxes


(9,085
)


(4,031
)


(13,116
)


15,960







15,960Other liabilities


842







842



3,995







3,995Cash flow from operating
    activities in continuing operations


41,138







41,138



8,662







8,662Cash flow from operating
    activities in discontinued operations


(281
)






(281
)


(471
)






(471
)Net cash provided by operating
    activities

$
40,857


$



$
40,857


$
8,191


$



$
8,191  42




---



##### Table of Contents



March 31, 2006


December 31, 2005As Previously








As PreviouslyReported


Adjustments


As Restated


reported


Adjustments


As RestatedASSETSCurrent Assets:Cash and cash equivalents

$
244,362


$



$
244,362


$
224,856


$



$
224,856Marketable securities


11,121







11,121



10,210







10,210Accounts receivable, net


174,433







174,433



187,987







187,987Inventories, net


137,729







137,729



136,034







136,034Prepaid expenses and other current
    assets


38,862







38,862



36,652



3,702



40,354Total current assets


606,507







606,507



595,739



3,702



599,441Property, plant and equipment, net


217,813







217,813



230,126







230,126Deferred tax assets, net


21,510







21,510



45,904



(20,562
)


25,342Goodwill


79,767







79,767



79,486







79,486Intangible assets, net


519,614







519,614



536,319







536,319Other assets


45,284







45,284



43,176







43,176Assets of discontinued operations


105







105



127







127Total non-current assets


884,093







884,093



935,138



(20,562
)


914,576$
1,490,600


$



$
1,490,600


$
1,530,877


$
(16,860
)

$
1,514,017LIABILITIES AND
    STOCKHOLDERS EQUITYCurrent Liabilities:Trade payables

$
48,708


$



$
48,708


$
55,279


$



$
55,279Accrued liabilities


135,043



3,508



138,551



136,701



4,137



140,838Notes payable and current portion
    of long-term


346







346



495







495Income taxes


37,995



1,470



39,465



42,452



4,872



47,324Total current liabilities


222,092



4,978



227,069



234,927



9,009



243,936Long-term debt, less current
    portion


785,850







785,850



788,439







788,439Deferred tax liabilities, net


5,126







5,126



28,770



(20,562
)


8,208Other liabilities


19,918







19,918



16,372







16,372Liabilities of discontinued
    operations


23,024







23,024



23,118







23,118Total non-current liabilities


833,918







833,918



856,699



(20,562
)


836,137Commitments and contingenciesCommon stock


928







928



928







928Additional capital


1,209,926



21,029



1,230,955



1,203,814



21,093



1,224,907Accumulated deficit


(757,480
)


(26,007
)


(783,487
)


(743,950
)


(26,400
)


(770,350
)Accumulated other comprehensive
    income (loss)


(18,784
)






(18,784
)


(21,541
)






(21,541
)Total stockholders equity


434,590



(4,978
)


429,612



439,251



(5,307
)


433,944$
1,490,600


$



$
1,490,601


$
1,530,877


$
(16,860
)

$
1,514,017  43




---



##### Table of Contents



Three Months EndedMarch 31,2006


2005(In thousands)RevenuesAs previously reported

$
198,848


$
181,138Adjustment


644



(21
)As restated

$
199,492


$
181,117Cost of goods soldAs previously reported

$
58,580


$
48,721Adjustment


21



62As restated

$
58,601


$
48,783Selling expensesAs previously reported

$
64,270


$
52,815Adjustment


6



35As restated

$
64,276


$
52,850Research and development costsAs previously reported

$
29,535


$
25,724Adjustment


18



107As restated

$
29,553


$
25,831General and administrative expensesAs previously reported

$
28,540


$
24,577Adjustment


(94
)


128As restated

$
28,446


$
24,705Income (loss) from operations,
    before interest, taxes and other itemsAs previously reported

$
7,934


$
(112,761
)Adjustment


693



(353
)As restated

$
8,627


$
(113,114
)Income (loss) from continuing
    operations before income taxes income taxes and minority interestAs previously reported

$
1,091


$
(121,218
)Adjustment


693



(353
)As restated

$
1,784


$
(121,571
)Provision for income taxesAs previously reported

$
7,242


$
16,367Adjustment


300



147As restated

$
7,542


$
16,514Income (loss) from continuing
    operationsAs previously reported

$
(6,152
)

$
(137,756
)Adjustment


393



(500
)As restated

$
(5,759
)

$
(138,256
)Net income (loss)As previously reported

$
(6,364
)

$
(139,259
)Adjustment


393



(500
)As restated

$
(5,971
)

$
(139,759
)Basic and diluted earnings per
    share from continuing operationsAs previously reported

$
(0.07
)

$
(1.55
)Adjustment


0.01



As restated

$
(0.06
)

$
(1.55
)Basic and diluted earnings per shareAs previously reported

$
(0.07
)

$
(1.57
)Adjustment


0.01



As restated

$
(0.06
)

$
(1.57
)  44




---



##### Table of Contents



March 31,


December 31,2006


2005(In thousands)Other current assets (deferred
    taxes)As previously reported

$
38,862


$
36,652Adjustment






3,702As restated

$
38,862


$
40,354Deferred tax assets, NetAs previously reported

$
21,510


$
45,904Adjustment






(20,562
)As restated

$
21,510


$
25,342Accrued liabilities (reserve for
    product returns)As previously reported

$
135,043


$
136,701Adjustment


3,508



4,137As restated

$
138,551


$
140,838Income taxes  currentAs previously reported

$
37,995


$
42,452Adjustment


1,470



4,872As restated

$
39,465


$
47,324Deferred taxesAs previously reported

$
5,126


$
28,770Adjustment






(20,562
)As restated

$
5,126


$
8,208Additional capitalAs previously reported

$
1,209,926


$
1,203,814Adjustment


21,029



21,093As restated

$
1,230,955


$
1,224,907Accumulated deficitAs previously reported

$
(757,480
)

$
(743,950
)Adjustment


(26,007
)


(26,400
)As restated

$
(783,487
)

$
(770,350
)Stockholders equityAs previously reported

$
434,590


$
439,251Adjustment


(4,978
)


(5,307
)As restated

$
429,612


$
433,944   Overview
   45




---



##### Table of Contents



Specialty
    Pharmaceuticals
      Clinical
    Development
      Ribavirin
    Royalties
    Company
    Strategy and Restructuring
    Targeted Growth of Existing Products.
 46




---



##### Table of Contents



Efficient Manufacturing and Supply Chain
    Organization.
  Clinical Development Activities.
  Product Acquisitions.
         47




---



##### Table of Contents



Results
    of Operations
        Three Months EndedMarch 31,


Increase/


Percent2006


2005


(Decrease)


Change(Restated)


(Restated)RevenuesSpecialty pharmaceuticalsNorth America

$
75,856


$
48,922


$
26,934



55
%Latin America


35,788



32,060



3,728



12
%Europe


56,257



65,875



(9,618
)


(15
)%AAA


13,500



14,925



(1,425
)


(10
)%Total specialty pharmaceuticals


181,401



161,782



19,619



12
%Ribavirin royalties


18,091



19,335



(1,244
)


(6
)%Total revenues


199,492



181,117



18,375



10
%Costs and
    ExpensesCost of goods sold (excluding
    amortization)


58,601



48,783



9,818



20
%Selling expenses


64,276



52,850



11,426



22
%General and administrative expenses


28,446



24,705



3,741



15
%Research and development costs


29,553



25,831



3,722



14
%Gain on settlement of litigation


(34,000
)






(34,000
)


NMAcquired IPR&D






126,399



(126,399
)


NMRestructuring charges


26,466



1,695



24,771



NMAmortization expense


17,523



13,968



3,555



25
%Operating income (loss)

$
8,627


$
(113,114
)

$
121,741



NM
%Gross profit on product sales
    (excluding amortization)

$
122,800


$
112,999


$
9,801



9
%Gross profit margin on product
    sales


68
%


70
%     Specialty Pharmaceutical Revenues:
   48




---



##### Table of Contents



direct-to-consumer
      Ribavirin Royalties:
    Gross Profit Margin (excluding
    amortization):
  Selling Expenses:
  General and Administrative Expenses:
 49




---



##### Table of Contents



Research and Development:
  Gain on litigation settlement:
  Acquired In-Process Research and
    Development:
  Restructuring Charges:
      Amortization:
  Other Income, Net, Including Translation and
    Exchange:
  Interest Expense and Income:
  Income Taxes:
 50




---



##### Table of Contents



Loss from Discontinued Operations, Net of
    Taxes:
  Liquidity
    and Capital Resources
                  Form 10-Q
 51




---



##### Table of Contents



Form 10-Q Form 10-Q
  Products
    in Development
  Viramidine (taribavirin):
          Retigabine: End-of-Phase 2
  Central/South year-and-a-half
      Infergen:
 52




---



##### Table of Contents



follow-up
  Zelapar: ® agreed-upon
  Pradefovir (formerly called
    remofovir): once-a-day
  VRX-840773:
  Foreign
    Operations
   53




---



##### Table of Contents



Critical
    Accounting Estimates
      Revenue
    Recognition
           54




---



##### Table of Contents



ordinary-course-of-business
  Income
    Taxes
      Impairment
    of Property, Plant and Equipment
   55




---



##### Table of Contents



Valuation
    of Intangible Assets
        Purchase
    Price Allocation Including Acquired In-Process Research and
    Development
    Assets
    Acquired in Business Combinations to be Used in Research and
    Development Activities: A Focus in Software, Electronic Devices
    and Pharmaceutical Industries.
   56




---



##### Table of Contents



Stock-based
    Compensation Expense
    Three Months EndedMarch 31, 2005(In thousands, exceptper share amounts)(Restated)Net loss as reported

$
(139,759
)Stock compensation expense
    recorded at intrinsic value for stock incentive plans


862Stock compensation expense
    determined under fair value method for stock incentive plans


(5,560
)Pro forma net loss

$
(144,457
)Net loss per share:Basic and diluted  as
    reported

$
(1.57
)Basic and diluted  pro
    forma

$
(1.63
)    57




---



##### Table of Contents



2006Weighted-average life (years)


4.1Volatility


39
%Expected dividend per share

$
0.31Risk-free interest rate


4.80
%Weighted-average fair value of
    options

$
5.48       (In Thousands)Remainder of 2006

$
13,5802007


8,2552008


3,1082009 and thereafter


767$
25,710     Contingencies
  Accounting
    for Contingencies
  Other
    Financial Information
    Forward-Looking
    Statements
  Form 10-Q
 58




---



##### Table of Contents



Form 10-Q/A, Form 10-K
  RISK
    FACTORS
  Form 10-K
  
    The future growth of our business depends on the development and
    approval of new products, including Viramidine, pradefovir and
    retigabine. The process of developing new drugs has an inherent
    risk of failure. For example, product candidates may turn out to
    be ineffective or unsafe in clinical testing; their patent
    protection may become compromised; other therapies may prove
    safer or more effective; or the prevalence of the disease for
    which they are being developed may decrease. Our inability to
    successfully develop our products due to these or other factors
    could have a material adverse effect on future revenues.
    We can protect our products from generic substitution by third
    parties only to the extent that our technologies are covered by
    valid and enforceable patents, are effectively maintained as
    trade secrets or are protected by data exclusivity. However, our
    pending or future patent applications may not issue as patents.
    Any patent issued may be challenged, invalidated, held
    unenforceable or circumvented. Furthermore, our patents may not
    be sufficiently broad to prevent third parties competing
    products. The expiration of patent protection for ribavirin has
    resulted in significant competition from generic substitutes and
    declining royalty revenues and may negatively impact future
    financial results.
    Trade secret protection is less effective than patent protection
    because competitors may discover the technology or develop
    parallel technology.
    The scope of protection afforded by a patent can be highly
    uncertain. A pending claim or a result unfavorable to us in a
    patent dispute may preclude development or commercialization of
    products or impact sales of existing products, result in
    cessation of royalty payments to us
    and/or
    result in payment of monetary damages.
    Obtaining drug approval in the United States and other countries
    is costly and time consuming. Uncertainties and delays inherent
    in the process can preclude or delay development and
    commercialization of our products.
    Our current business plan includes targeted expansion through
    acquisitions of compatible businesses and product lines and the
    formation of strategic alliances, joint ventures and other
    business combinations, in addition to the development of new
    products. If we are unable to successfully execute on our
    expansion plans to find attractive acquisition candidates at
    appropriate prices, and to integrate successfully any acquired
    companies or products, the expected growth of our business may
    be negatively affected.
    We and our competitors are always striving to develop products
    that are more effective, safer, more easily tolerated or less
    costly. If our competitors succeed in developing better
    alternatives to our current products 59




---



##### Table of Contents



before we do, we will lose sales and revenues to their
    alternative products. If vaccines are introduced to prevent the
    diseases treated by our products, our potential sales and
    revenues will decrease.  
    The pharmaceutical industry is subject to substantial government
    regulation, including the approval of new pharmaceutical
    products, labeling, advertising and, in most countries, pricing,
    as well as inspection and approval of manufacturing facilities.
    The costs of complying with these regulations are high, and
    failure to comply could result in fines or interruption in our
    business.
    We collect and pay a substantial portion of our sales and
    expenditures in currencies other than the U.S. dollar. As a
    result, fluctuations in foreign currency exchange rates affect
    our operating results. Additionally, future exchange rate
    movements, inflation or other related factors may have a
    material adverse effect on our sales, gross profit or operating
    expenses. At March 31, 2006 we have in place foreign
    currency hedge transactions to reduce our exposure to
    variability in the Polish Zloty. We continue to evaluate the
    possibility of entering into additional hedge arrangements.
    A significant part of our revenue is derived from products
    manufactured by third parties. We rely on their quality level,
    compliance with the FDA regulations or similar regulatory
    requirements enforced by regulatory agencies in other countries
    and continuity of supply. Any failure by them in these areas
    could disrupt our product supply and negatively impact our
    revenues.
    Our flexibility in maximizing commercialization opportunities
    for our compounds may be limited by our obligations to
    Schering-Plough. In November 2000, we entered into an agreement
    that provides Schering-Plough with an option to acquire the
    rights to up to three of our products intended to treat
    hepatitis C that Schering-Plough designates prior to our
    entering Phase 2 clinical trials and a right for first/last
    refusal to license various compounds we may develop and elect to
    license to others. Viramidine was not subject to the option of
    Schering-Plough, but it would be subject to their right of
    first/last refusal if we elected to license it to a third party.
    The interest of potential collaborators in obtaining rights to
    our compounds or the terms of any agreement we ultimately enter
    into for these rights may be hindered by our agreement with
    Schering-Plough.
    To purchase our products, many patients rely on reimbursement by
    third party payors such as insurance companies, HMOs and
    government agencies. These third party payors are increasingly
    attempting to contain costs by limiting both coverage and the
    level of reimbursement of new drug products. The reimbursement
    levels established by third party payors in the future may not
    be sufficient for us to realize an appropriate return on our
    investment in product development and our continued manufacture
    and sale of existing drugs.
    Some of our development programs are based on the library of
    nucleoside compounds we have developed. It is not practicable to
    create backups for our nucleoside library, and accordingly it is
    at risk of loss in earthquakes, fire and other natural disasters
    and catastrophes. Any insurance we maintain may not be adequate
    to cover our losses.
    All drugs have potential harmful side effects and can expose
    drug manufacturers and distributors to liability. In the event
    one or more of our products is found to have harmed an
    individual or individuals, we may be responsible for paying all
    or substantially all damages awarded. A successful product
    liability claim against us could have a material negative impact
    on our financial position and results of operations.
    Our debt agreements permit us to incur additional debt, subject
    to certain restrictions, but there is no guaranty that we will
    actually be able to borrow any money should the need for it
    arise.
    We are involved in several legal proceedings, including those
    described in Notes 10 and 12 to notes to consolidated
    condensed financial statements, any of which could result in
    substantial cost and divert managements attention and
    resources.
    Dependence on key personnel leaves us vulnerable to a negative
    impact if they leave. Our continued success will depend, to a
    significant extent, upon the efforts and abilities of the key
    members of management. The loss of their services could have a
    negative impact on us.
    Our research and development activities involve the controlled
    use of potentially harmful biological materials as wells as
    hazardous materials, chemicals and various radioactive
    compounds. We cannot 60




---



##### Table of Contents



completely eliminate the risk of accidental contamination or
    injury from the use, storage, handling or disposal of these
    materials. In the event of contamination or injury, we could be
    held liable for damages that result. Any liability could exceed
    our resources.  
    Our stockholder rights plan, provisions of our certificate of
    incorporation and provisions of the Delaware General Corporation
    Law could provide our Board of Directors with the ability to
    deter hostile takeovers or delay, deter or prevent a change in
    control of our company, including transactions in which
    stockholders might otherwise receive a premium for their shares
    over then current market prices.
    We are authorized to issue, without stockholder approval,
    approximately 10,000,000 shares of preferred stock,
    200,000,000 shares of common stock and securities
    convertible into either shares of common stock or preferred
    stock. If we issue additional equity securities, the price of
    our securities may be materially and adversely affected. The
    Board of Directors can also use issuances of preferred or common
    stock to deter a hostile takeover or change in control of our
    company.
    We are subject to a consent order with the Securities and
    Exchange Commission, which permanently enjoins us from violating
    securities laws and regulations. The consent order also
    precludes protection for forward-looking statements under the
    safe harbor provisions of the Private Securities Litigation
    Reform Act of 1995 with respect to forward-looking statements we
    made prior to November 28, 2005. The existence of the
    permanent injunction under the consent order, and the lack of
    protection under the safe harbor with respect to forward-looking
    statements made prior to November 28, 2005 may limit our
    ability to defend against future allegations. 61




---



##### Table of Contents



Item 3.
    Quantitative
    and Qualitative Disclosures About Market Risk      Notional/


Assets (Liabilities)Contract


Carrying


FairDescription

Amount


Value


ValueForward contracts

$
45,000


$
(2,345
)

$
(2,345
)Interest rate swaps


150,000



(6,982
)


(6,982
)Outstanding debt


780,000



(780,000
)


(720,000
)      62




---



##### Table of Contents



Item 4.
    Controls
    and Procedures  Form 10-Q/A,
    e-mail
  Disclosure
    Controls and Procedures
    Form 10-K
     63




---



##### Table of Contents



Remediation
    Plan
    Changes
    in Internal Control over Financial Reporting
   64




---



##### Table of Contents



PART II 
    OTHER INFORMATION  Item 1.
    Legal
    Proceedings    Item 1A.
    Risk
    Factors  Form 10-K/A Form 10-Q, Form 10-K/A. Form 10-K/A Form 10-Q/A.
  If we
    do not realize the expected benefits from the restructuring plan
    we announced in April 2006, our operating results and financial
    conditions would be negatively impacted.
  and/or
  If we
    or our third-party manufacturers are unable to manufacture our
    products or the manufacturing process is interrupted due to
    failure to comply with regulations or for other reasons, the
    manufacture of our products could be interrupted.
       65




---



##### Table of Contents



The
    matters relating to the Special Committees review of our
    historical stock option granting practices and the restatement
    of our consolidated financial statements have resulted in
    increased litigation and regulatory proceedings against us and
    could have a material adverse effect on us.
  10-K Form 10-Q
    The
    delay in filing the quarterly report on
    Form 10-Q
    may increase the resources to file registration
    statements.
  Form 10-Q Form S-3
 66




---



##### Table of Contents



The
    pending SEC inquiry could adversely affect our business and the
    trading price of our securities.
  ®
  Item 6.
    Exhibits  (a)
    Exhibits  Exhibit10
.1

Description of Registrants
    Executive Incentive Plan, previously filed as Item 1.01 in
    the Registrants Current Report on
    Form 8-K,
    dated April 19, 2006, which is incorporated herein by
    reference.15
.1

Review Report of Independent
    Registered Public Accounting Firm.31
.1

Certification of Chief Executive
    Officer pursuant to
    Rule 13a-14(a)
    under the Exchange Act and Section 302 of the
    Sarbanes-Oxley Act of 2002.31
.2

Certification of Chief Financial
    Officer pursuant to
    Rule 13a-14(a)
    under the Exchange Act and Section 302 of the
    Sarbanes-Oxley Act of 2002.32
.1

Certification of Chief Executive
    Officer and Chief Financial Officer of Periodic Financial
    Reports pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002, 18 U.S.C. § 1350.  67




---



##### Table of Contents



SIGNATURES  Form 10-Q
  Valeant Pharmaceuticals
    International
   /s/  Timothy
    C. Tyson   President and Chief Executive Officer
    Bary
    G. Bailey
   Executive Vice President and Chief Financial Officer
 (Principal Financial and Accounting Officer)
   68




---



##### Table of Contents



EXHIBIT INDEX
  Exhibit10
.1

Description of Registrants
    Executive Incentive Plan, previously filed as Item 1.01 in
    the Registrants Current Report on
    Form 8-K,
    dated April 19, 2006, which is incorporated herein by
    reference.15
.1

Review Report of Independent
    Registered Public Accounting Firm.31
.1

Certification of Chief Executive
    Officer pursuant to
    Rule 13a-14(a)
    under the Exchange Act and Section 302 of the
    Sarbanes-Oxley Act of 2002.31
.2

Certification of Chief Financial
    Officer pursuant to
    Rule 13a-14(a)
    under the Exchange Act and Section 302 of the
    Sarbanes-Oxley Act of 2002.32
.1

Certification of Chief Executive
    Officer and Chief Financial Officer of Periodic Financial
    Reports pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002, 18 U.S.C. § 1350.  69