##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
      Form 10-Q
  (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, 2008oro

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(State or other jurisdiction
    of
    incorporation or organization)

33-0628076(I.R.S. Employer
    Identification No.)One Enterprise,
    Aliso Viejo, California(Address of principal
    executive offices)

92656(Zip
    Code)   (949) 461-6000
 (Registrants telephone
    number, including area code)
  þ o
  Rule 12b-2
  Large accelerated
    filer þ

Accelerated
    filer o

Non-accelerated
    filer o

Smaller reporting
    company o(Do not check if a smaller reporting company)   Rule 12b-2 o þ




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##### Table of Contents





VALEANT
    PHARMACEUTICALS INTERNATIONAL
  INDEX
   
 PageNumberPART I  FINANCIAL
    INFORMATIONItem 1.


Financial Statements (unaudited)


2Consolidated Condensed Balance Sheets as of
    March 31, 2008 and December 31, 2007


2Consolidated Condensed Statements of Operations
    for the three months ended March 31, 2008 and 2007


3Consolidated Condensed Statement of Comprehensive
    Income for the three months ended March 31, 2008 and
    2007


4Consolidated Condensed Statements of Cash Flows
    for the three months ended March 31, 2008 and 2007


5Notes to Consolidated Condensed Financial
    Statements


6Item 2.


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


24Item 3.


Quantitative and Qualitative Disclosures About
    Market Risk


36Item 4.


Controls and Procedures


37PART II  OTHER
    INFORMATIONItem 1.


Legal Proceedings


38Item 1A.


Risk Factors


38Item 6.


Exhibits


39SIGNATURES


40EXHIBIT 15.1EXHIBIT 15.2EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1  1




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##### Table of Contents



PART I 
    FINANCIAL INFORMATION  Item 1.
    Financial
    Statements  VALEANT
    PHARMACEUTICALS INTERNATIONALCONSOLIDATED CONDENSED BALANCE SHEETS
    As of March 31, 2008 and December 31, 2007
    (In thousands, except par value data)
  March 31,


December 31,2008


2007(Unaudited)ASSETSCurrent Assets:Cash and cash equivalents

$
498,097


$
309,365Marketable securities


21,162



52,122Accounts receivable, net


169,400



191,796Inventories, net


118,199



115,177Assets held for sale and assets of discontinued operations


17,261



66,247Prepaid expenses and other current assets


19,741



21,713Current deferred tax assets, net


12,923



11,819Income taxes


25,426



26,433Total current assets


882,209



794,672Property, plant and equipment, net


122,320



116,376Deferred tax assets, net


64,967



65,950Goodwill


80,346



80,346Intangible assets, net


387,252



401,575Other assets


49,414



35,343Total non-current assets


704,299



699,590$
1,586,508


$
1,494,262LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Trade payables

$
45,740


$
49,203Accrued liabilities


154,805



139,754Notes payable and current portion of long-term debt


1,080



1,655Income taxes


11,967



10,239Liabilities held for sale and liabilities of discontinued
    operations


1,676



4,194Current liabilities for uncertain tax positions


9,890



616Total current liabilities


225,158



205,661Long-term debt, less current portion


785,862



782,552Deferred tax liabilities, net


7,300



5,337Liabilities for uncertain tax positions


59,974



68,749Other liabilities


26,254



17,860Total non-current liabilities


879,390



874,498Total liabilities


1,104,548



1,080,159Commitments and contingenciesStockholders Equity:Common stock, $0.01 par value; 200,000 shares
    authorized; 89,286 shares outstanding (after deducting
    shares in treasury of 7,585) as of March 31, 2008 and
    December 31, 2007


893



893Additional capital


1,199,852



1,192,559Accumulated deficit


(850,109
)


(859,559
)Accumulated other comprehensive income


131,324



80,210Total stockholders equity


481,960



414,103$
1,586,508


$
1,494,262    2




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##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONALCONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
    For the three months ended March 31, 2008 and 2007
    (Unaudited, in thousands, except per share data)
  Three Months EndedMarch 31,2008


2007Revenues:Product sales

$
181,913


$
167,933Alliance revenue (including ribavirin royalties)


12,773



36,470Total revenues


194,686



204,403Costs and expenses:Cost of goods sold (excluding amortization)


54,890



46,901Selling expenses


63,790



58,440General and administrative expenses


26,106



26,115Research and development costs


29,392



20,990Restructuring, asset impairments and dispositions


(12,664
)


7,238Amortization expense


18,066



17,481Total costs and expenses


179,580



177,165Income from operations


15,106



27,238Other income (loss), net including translation and exchange


(3,252
)


1,136Interest income


4,946



4,511Interest expense


(9,719
)


(10,952
)Income from continuing operations before income taxes and
    minority interest


7,081



21,933Provision for income taxes


7,651



8,410Minority interest, net


2



Income (loss) from continuing operations


(572
)


13,523Income (loss) from discontinued operations


10,022



(4,200
)Net income

$
9,450


$
9,323Basic income per share:Income (loss) from continuing operations

$
(0.01
)

$
0.14Income (loss) from discontinued operations


0.12



(0.04
)Net income per share:

$
0.11


$
0.10Diluted income per share:Income (loss) from continuing operations

$
(0.01
)

$
0.14Income (loss) from discontinued operations


0.12



(0.04
)Net income per share:

$
0.11


$
0.10Shares used in per share computations  Basic


89,590



94,730Shares used in per share computation  Diluted


89,590



96,019    3




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VALEANT
    PHARMACEUTICALS INTERNATIONALCONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE
    INCOME
    For the three months ended March 31, 2008 and 2007
    (Unaudited, in thousands)
  Three Months EndedMarch 31,2008


2007Net income

$
9,450


$
9,323Other comprehensive income:Foreign currency translation adjustments


58,979



118Unrealized gain (loss) on marketable equity securities and other


(7,879
)


227Pension liability adjustment


14



443Comprehensive income

$
60,564


$
10,111    4




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##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONALCONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWSFor the three months ended March 31, 2008 and 2007
    (Unaudited, in thousands)
  Three Months EndedMarch 31,2008


2007Cash flows from operating activities:Net income

$
9,450


$
9,323Income (loss) from discontinued operations


10,022



(4,200
)Income (loss) from continuing operations


(572
)


13,523Adjustments to reconcile income (loss) from continuing
    operations to net cash provided by operating activities in
    continuing operations:Depreciation and amortization


22,890



21,395Provision for losses on accounts receivable and inventory


6,818



1,568Stock compensation expense


2,514



3,917Translation and exchange (gains) losses, net


3,252



(1,136
)Impairment charges and other non-cash items


(22,371
)


(447
)Deferred income taxes


2,156



33,022Change in assets and liabilities, net of effects of acquisitions:Accounts receivable


38,508



41,909Inventories


(5,256
)


(4,213
)Prepaid expenses and other assets


(564
)


(3,373
)Trade payables and accrued liabilities


4,789



(31,467
)Income taxes


2,207



(44,376
)Other liabilities


(842
)


785Cash flow from operating activities in continuing operations


53,529



31,107Cash flow from operating activities in discontinued operations


(10,560
)


(4,132
)Net cash provided by operating activities


42,969



26,975Cash flows from investing activities:Capital expenditures


(4,789
)


(4,431
)Proceeds from sale of assets


36,606



38,493Proceeds from investments


34,892



8,631Purchase of investments


(500
)


(6,800
)Acquisition of businesses, license rights and product lines


(504
)


(31,325
)Cash flow from investing activities in continuing operations


65,705



4,568Cash flow from investing activities in discontinued operations


70,800



(135
)Net cash provided by investing activities


136,505



4,433Cash flows from financing activities:Payments on long-term debt and notes payable


(398
)


(7,601
)Proceeds from capitalized lease financing, long-term debt and
    notes payable


50



395Stock option exercises and employee stock purchases






4,214Cash flow from financing activities in continuing operations


(348
)


(2,992
)Cash flow from financing activities in discontinued operations






(14
)Net cash used in financing activities


(348
)


(3,006
)Effect of exchange rate changes on cash and cash equivalents


9,606



816Net increase in cash and cash equivalents


188,732



29,218Cash and cash equivalents at beginning of period


309,365



325,579Cash and cash equivalents at end of period

$
498,097


$
354,797    5




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##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 March 31, 2008
 (Unaudited)
  Form 10-K
  1.
    Organization
    and Summary of Significant Accounting Policies  Organization:
  Principles of Consolidation:
  Marketable Securities:
  Derivative Financial Instruments:
  Comprehensive Income: Reporting Comprehensive
    Income.
  Per Share Information:
  Stock-Based Compensation Expense: Share-Based
    Payment
 6




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VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
    Assets Held for Sale: Accounting for the Impairment or
    Disposal of Long-lived Assets
  Discontinued Operations:
  Use of Estimates:
  Recent
    Accounting Pronouncements:
  SFAS No. 157. Fair Value Measurements
  SFAS No. 159. The Fair Value Option for
    Financial Assets and Financial Liabilities,
    (
    Business Combinations
 7




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##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
    Noncontrolling Interests in Consolidated Financial
    Statements  an amendment of ARB No. 51
  No. 07-1, Accounting for Collaborative Arrangements (EITF 07-1). EITF 07-1 EITF 07-1 EITF 07-1 EITF 07-1
  Disclosures about Derivative Instruments and Hedging
    Activities  an amendment of FASB Statement
    No. 133
  FASB Proposed Statement of Position APB
    14-a (not
    yet implemented). 14-a 14-a) 14-a 14-a 14-a
  2.
    Restructuring  2008
    Restructuring
   8




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##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
          2006
    Restructuring
       9




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


Three Months


CumulativeEnded


Ended


TotalDecember 31,


March 31,


Incurred2008 Restructuring Program

2007


2008Cash-related charges:Employee severances (contractual obligations)

$
957


$
6,742


$
7,699Contract cancellation and other cash costs


8,644



4,886



13,530Subtotal: cash charges


9,601



11,628



21,229Stock compensation






4,778



4,778Impairment of long-lived assets






7,853



7,853Subtotal: non-cash charges






12,631



12,631Total:

$
9,601


$
24,259


$
33,860   Three MonthsEndedMarch 31,2006 Restructuring Program

2007Employee severances (approximately 480 employees,
    cumulatively)

$
3,781Contract cancellation and other cash costs


2,081Subtotal: cash charges


5,862Impairment of manufacturing and research facilities


1,376Subtotal: non-cash charges


1,376Total:

$
7,238    10




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##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
  Reconciliation
    of Cash Restructuring Payments with Restructuring
    Accrual
    2006
    Restructuring: Reconciliation of Cash Payments and
    Accruals
  Restructuring accrual, December 31, 2007

$
3,979Charges to earnings


Cash paid


(213
)Restructuring accrual, March 31, 2008

$
3,766   2008
    Restructuring: Reconciliation of Cash Payments and
    Accruals
  Restructuring accrual, December 31, 2007

$
8,521Charges to earnings


11,628Cash paid


(6,926
)Restructuring accrual, March 31, 2008

$
13,223   3.
    Fair
    Value Measurements  Fair Value Measurements
  157-1 157-2. FSP 157-1 Accounting for Leases FSP 157-2
       11




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##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
        March 31, 2008Level 1


Level 2


Level 3Available-for-Sale Securities

$
5,906







Interest rate swap





$
4,444



Undesignated hedges





$
58



Net investment derivative contr





$
(4,935
)


Cash flow derivative contracts





$
(979
)


Fair value derivative contracts





$
(24
)


       4.
    Acquisitions  paid-up
  5.
    Discontinued
    Operations     12




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##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
    Three Months EndedMarch 31,2008


2007Infergen:Product sales

$
1,050


$
8,970Costs and expenses:Cost of goods sold (excluding amortization)


2,076



3,270Selling expenses


1,365



5,994General and administrative expenses






145Research and development costs


9,684



2,120Amortization expense






1,650Total costs and expenses


13,125



13,179Loss from discontinued operations, Infergen


(12,075
)


(4,209
)Provision (benefit) for income taxes


1,299



(8
)Loss from discontinued operations


(13,374
)


(4,201
)Disposal of discontinued operations, net


23,396



1Income (loss) from discontinued operations, net

$
10,022


$
(4,200
)       March 31,


December 31,2008


2007ASSETSInventories, net

$



$
1,051Property, plant and equipment, net






132Goodwill






4,816Intangible assets, net






54,450Assets of discontinued operations

$



$
60,449LIABILITIESAccrued liabilities


133



1,897Liabilities of discontinued operations

$
133


$
1,897  13




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##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
  6.
    Earnings
    Per Share    Three Months Ended March 31,2008


2007Income:Numerator for basic and diluted earnings per shareIncome (loss) from continuing operations

$
(572
)

$
13,523Income (loss) from discontinued operations


10,022



(4,200
)Net income

$
9,450


$
9,323Shares:Denominator for basic earnings per share:Weighted shares outstanding


89,286



94,574Vested stock equivalents (not issued)


304



156Denominator for basic earnings per share


89,590



94,730Denominator for diluted earnings per share:Employee stock options






1,232Other dilutive securities






57Dilutive potential common shares






1,289Denominator for diluted earnings per share:


89,590



96,019Basic income per share:Income (loss) from continuing operations

$
(0.01
)

$
0.14Income (loss) from discontinued operations


0.12



(0.04
)Net income per share

$
0.11


$
0.10Diluted income per share:Income (loss) from continuing operations

$
(0.01
)

$
0.14Income (loss) from discontinued operations


0.12



(0.04
)Net income per share

$
0.11


$
0.10      14




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##### Table of Contents



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


December 31,2008


2007Accounts receivable, net:Trade accounts receivable

$
133,551


$
162,591Royalties receivable


13,649



18,620Other receivables


35,834



23,513183,034



204,724Allowance for doubtful accounts


(13,634
)


(12,928
)$
169,400


$
191,796Inventories, net:Raw materials and supplies

$
32,266


$
30,935Work-in-process


13,729



13,707Finished goods


95,246



89,363141,241



134,005Allowance for inventory obsolescence


(23,042
)


(18,828
)$
118,199


$
115,177Property, plant and equipment, net:Property, plant and equipment, at cost

$
229,612


$
215,172Accumulated depreciation and amortization


(107,292
)


(98,796
)$
122,320


$
116,376       Intangible assets:
  WeightedAverage


March 31, 2008


December 31, 2007Lives


Gross


Accumulated


Net


Gross


Accumulated


Net(Years)


Amount


Amortization


Amount


Amount


Amortization


AmountProduct rightsNeurology


13


$
305,496


$
(135,586
)

$
169,910


$
306,398


$
(128,267
)

$
178,131Infectious diseases


11



15,992



(12,355
)


3,637



21,992



(14,054
)


7,938Dermatology


19



98,808



(49,462
)


49,346



111,934



(54,178
)


57,756Other products


11



360,232



(199,681
)


160,551



343,831



(192,253
)


151,578Total product rights


14



780,528



(397,084
)


383,444



784,155



(388,752
)


395,403License agreement


5



67,376



(63,568
)


3,808



67,376



(61,204
)


6,172Total intangible assets





$
847,904


$
(460,652
)

$
387,252


$
851,531


$
(449,956
)

$
401,575  15




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##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
    Scheduled Future Amortization ExpenseRemainingNine Months of2008


2009


2010


2011


2012


ThereafterProduct rightsNeurology

$
22,044


$
29,391


$
28,169


$
22,545


$
21,157


$
46,604Infectious diseases


722



935



360



360



360



900Dermatology


7,147



9,430



9,180



8,918



3,890



10,781Other products


15,043



20,162



20,260



19,863



19,753



65,470Total product rights


44,956



59,918



57,969



51,686



45,160



123,755License agreement


3,808



















Total

$
48,764


$
59,918


$
57,969


$
51,686


$
45,160


$
123,755     8.
    Income
    Taxes      non-U.S. unrecognized
 16




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##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
      9.
    Common
    Stock and Share Compensation  Share-Based Payment
  Three Months EndedMarch 31,2008


2007Employee stock options

$
1,382


$
3,434Restricted stock units


844



457Performance stock units


222



Employee stock purchase plan


66



26Total stock-based compensation expense

$
2,514


$
3,917   Dividends:
  10.
    Commitments
    and Contingencies    Securities
    Class Actions:
  SEC Investigation:
  Derivative Actions Related to Stock
    Option and/or
 17




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##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
    and/or
  Argentina Antitrust Matter:
  Permax Product Liability Cases: No. 2008-24P
  Former ICN Yugoslavia Employees:
 18




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##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
  Alfa Wasserman:
  Spear Pharmaceuticals, Inc.: No. 07-821,
    Other:
 19




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##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
  11.
    Business
    Segments    Three Months EndedMarch 31,2008


2007RevenuesSpecialty pharmaceuticalsNorth America

$
72,276


$
62,599International


29,151



35,275EMEA


80,486



70,059Total specialty pharmaceuticals


181,913



167,933Alliance revenues (including ribavirin royalties)


12,773



36,470Consolidated revenues

$
194,686


$
204,403Operating IncomeSpecialty pharmaceuticalsNorth America

$
27,413


$
17,331International


(2,653
)


273EMEA


11,087



18,70935,847



36,313Corporate expenses(1)


(15,427
)


(15,960
)Total specialty pharmaceuticals


20,420



20,353Restructuring, asset impairments and dispositions(2)


12,664



(7,238
)Research and development


(17,978
)


14,123Consolidated segment operating income


15,106



27,238Interest income


4,946



4,511Interest expense


(9,719
)


(10,952
)Other, net


(3,252
)


1,136Income from continuing operations before income taxes and
    minority interest

$
7,081


$
21,933     (1)
    
    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 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. 20




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##### Table of Contents



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


December 31,Total Assets

2008


2007North America

$
368,310


$
367,869International


177,706



200,955EMEA


550,110



493,452Corporate


446,948



319,335Research and Development Division


43,434



52,202Discontinued operations






60,449Total

$
1,586,508


$
1,494,262     March 31,


December 31,Long-term Assets

2008


2007North America

$
287,651


$
285,712International


46,497



57,510EMEA


234,285



221,596Corporate


113,902



110,484Research and Development Division


21,964



24,288Total

$
704,299


$
699,590  21




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##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
    Three Months EndedMarch 31,Therapeutic Area/Product

2008


2007NeurologyDiastat
AcuDialtm

$
12,179


$
11,072Mestinon®


11,531



10,538Cesamet®


9,996



5,911Librax®


3,582



3,667Migranal®


2,556



3,036Tasmar®


2,423



1,982Dalmane®/Dalmadorm®


2,174



2,336Zelapar®


1,939



195Melleril


1,104



1,538Other Neurology


12,799



15,689Total Neurology


60,283



55,964DermatologyEfudix/Efudex®


23,194



12,477Kinerase®


5,610



8,378Dermatixtm


3,471



2,771Oxsoralen-Ultra®


2,745



3,883Other Dermatology


7,020



8,013Total Dermatology


42,040



35,522Infectious DiseaseVirazole®


5,496



5,519Other Infectious Disease


4,954



5,155Total Infectious Disease


10,450



10,674Other therapeutic classesBisocard


6,825



4,694Solcoseryl


6,285



5,347Bedoyectatm


3,987



4,561Nyal


2,388



1,763MVI (multi-vitamin infusion)


2,258



2,482Protamin


1,644



2,070Espaven


1,076



1,862Other products


44,677



42,994Total other therapeutic classes


69,140



65,773Total product sales

$
181,913


$
167,933  22




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##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
    12.
    Alliance
    Revenue    Three Months EndedMarch 31,2008


2007Ribavirin royalty

$
12,773


$
17,220Licensing payment






19,200Other






50Total alliance revenue

$
12,773


$
36,470    23




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##### Table of Contents



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Overview
      Company
    Strategy and Restructuring
    Focus the busines
  Maximize the pipeline.
  Rebase and grow.
     24




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##### Table of Contents



Specialty
    Pharmaceuticals
    Clinical
    Development
    Alliance
    Revenues
    Results
    of Operations
   25




---



##### Table of Contents



Three Months EndedMarch 31,


Increase/


Percent2008


2007


(Decrease)


ChangeRevenuesSpecialty pharmaceuticalsNorth America

$
72,276


$
62,599


$
9,677



15
%International


29,151



35,275



(6,124
)


(17
)%EMEA


80,486



70,059



10,427



15
%Total specialty pharmaceuticals


181,913



167,933



13,980



8
%Alliance revenues (including ribavirin royalties)


12,773



36,470



(23,697
)


(65
)%Total revenues


194,686



204,403



(9,717
)


(5
)%Costs and ExpensesCost of goods sold (excluding amortization)


54,890



46,901



7,989



17
%Selling expenses


63,790



58,440



5,350



9
%General and administrative expenses


26,106



26,115



(9
)


0
%Research and development costs


29,392



20,990



8,402



40
%Restructuring, asset impairments and dispositions


(12,664
)


7,238



(19,902
)


NMAmortization expense


18,066



17,481



585



3
%Operating income

$
15,106


$
27,238


$
(12,132
)


(45
)%Gross profit on product sales (excluding amortization)

$
127,023


$
121,032


$
5,991



5
%Gross margin


70
%


72
%          26




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##### Table of Contents



Gross Profit Margin (excluding
    amortization):
  Selling Expenses:
  General and Administrative Expenses:
    Research and Development:
  Restructuring
    Charges:
  2008
    Restructuring
         27




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##### Table of Contents



Form 10-Q,
  2006
    Restructuring
          Year


Three MonthsEnded


Ended


CumulativeDecember 31,


March 31,


Total2007


2008


Incurred2008 Restructuring ProgramCash-related charges:Employee severances (contractual obligations)

$
957


$
6,742


$
7,699Contract cancellation and other cash costs


8,644



4,886



13,530Subtotal: cash charges


9,601



11,628



21,229Stock compensation






4,778



4,778Impairment of long-lived assets






7,853



7,853Subtotal: non-cash charges






12,631



12,631Total:

$
9,601


$
24,259


$
33,860   28




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##### Table of Contents



Three MonthsEndedMarch 31,20072006 Restructuring ProgramEmployee severances (approximately 480 employees,
    cumulatively)

$
3,781Contract cancellation and other cash costs


2,081Subtotal: cash charges


5,862Impairment of manufacturing and research facilities


1,376Subtotal: non-cash charges


1,376Total:

$
7,238     Reconciliation
    of Cash Restructuring Payments with Restructuring
    Accrual
    2006
    Restructuring: Reconciliation of Cash Payments and
    Accruals
  Restructuring accrual, December 31, 2007

$
3,979Charges to earnings


Cash paid


(213
)Restructuring accrual, March 31, 2008

$
3,766   2008
    Restructuring: Reconciliation of Cash Payments and
    Accruals
  Restructuring accrual, December 31, 2007

$
8,521Charges to earnings


11,628Cash paid


(6,926
)Restructuring accrual, March 31, 2008

$
13,223   Amortization:
  Other Income (expense), Net, Including Translation and
    Exchange:
 29




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##### Table of Contents



Interest Expense, net:
  Income Taxes:
  Income (loss) from Discontinued Operations, Net of
    Taxes:
  Liquidity
    and Capital Resources
         30




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##### Table of Contents



Off-Balance
    Sheet Arrangements
  Form 10-K.
  Products
    in Development
  Late
    Stage Development of New Chemical Entities
  Retigabine:
      intent-to-treat 28-day 3 28-day
 31




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##### Table of Contents



Form 10-K Products in
    Development
        Taribavirin:
    38-40%
  30 mg/kg 13-18 mg/kg).
  (800/1,000/1,200/1,400 mg follow-up
 32




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##### Table of Contents



12-week
  Form 10-K Products in
    Development
    Other
    Development Activities
  Diastat Intranasal:
  Foreign
    Operations
    Critical
    Accounting Estimates
    Other
    Financial Information
   33




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##### Table of Contents



Forward-Looking
    Statements
  Form 10-Q Form 10-Q,
    
    The results from our first Phase III study for retigabine
    may not be predictive of results from our second Phase III
    study for retigabine and the results from the initial
    12 weeks of our Phase IIb study for taribavirin may not be
    predictive of the final results of the Phase IIb study or of any
    subsequent clinical trial necessary for approval of taribavirin.
    Thus we give no assurance that RESTORE 2 will meet either of its
    clinical efficacy endpoints or that taribavirin will ultimately
    meet its clinical efficacy or safety endpoints, that we will
    conduct additional trials necessary for approval of taribavirin
    or that, if we conduct such additional trials, the results will
    lead to approval of taribavirin by the FDA or similar authority
    or any foreign government.
    We have identified a material weakness in our internal control
    over financial reporting that could adversely affect our stock
    price and ability to prepare complete and accurate financial
    statements in a timely manner.
    We are involved in several legal proceedings, including our
    current SEC investigation and those other proceedings described
    in Note 10 to notes to consolidated condensed financial
    statements, any of which could result in substantial cost and
    divert managements attention and resources.
    We may have to withdraw those products that cause, or are
    alleged to cause, serious or widespread personal injury from the
    market
    and/or incur
    significant costs, including payment of substantial sums in
    damages.
    Our future growth will depend, in large part, upon our ability
    or the ability of our partners or licensees to develop or obtain
    and commercialize new products and new formulations of, or
    indications for, current products.
    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 our technology or develop
    parallel technology. 34




---



##### Table of Contents




    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 prior restructuring plan was, and the restructuring plan
    resulting from our 2008 Strategic Review is, intended to improve
    operational efficiencies and our competitiveness. If we are
    unable to realize the benefits from our restructuring plans, our
    business prospects may suffer and our operating results and
    financial condition would be adversely 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 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, 2008 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. Taribavirin 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.
    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. 35




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##### Table of Contents



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


Assets (Liabilities)Contract


Carrying


FairDescription

Amount


Value


ValueUndesignated hedges

$
86,270


$
58


$
58Net investment hedges

$
45,000


$
(4,935
)

$
(4,935
)Cash flow hedges

$
12,703


$
(979
)

$
(979
)Fair value hedges

$
25,339


$
(24
)

$
(24
)Interest rate swaps

$
150,000


$
4,444


$
4,444Outstanding debt

$
780,000


$
(780,000
)

$
(710,760
)    36




---



##### Table of Contents



Item 4.
    Controls
    and Procedures  Disclosure
    Controls and Procedures
        Remediation
    Plan
    
    We engaged professional actuarial and accounting consultants to
    review our accounting for our foreign pension plans. Such review
    was conducted for the first quarter of 2008 and will continue
    for the foreseeable future. We have also developed modified
    controls with regard to our accounting for pension obligations.
    We have implemented enhancements to our accounting for product
    returns and credit memos in foreign markets.
    We have reviewed the qualifications and performance of our
    accounting staff in key roles in our foreign locations and
    identified some critical roles in certain foreign markets where
    accounting staff will be retrained or new accounting staff will
    be recruited. We have assigned qualified accounting staff from
    Corporate and our North American offices to review accounting
    procedures in certain foreign countries and have begun to
    enhance our accounting staff in various foreign locales.
    We have modified our revenue recognition procedures in Italy and
    other locations in order to ensure that, when required by
    specific circumstances, we recognize revenue on a cash basis.
    We have implemented revised review procedures over tax
    accounting. 37




---



##### Table of Contents



Changes
    in Internal Control over Financial Reporting
   PART II 
    OTHER INFORMATION  Item 1.
    Legal
    Proceedings    Item 1A.
    Risk
    Factors  Form 10-K Form 10-Q, Form 10-K. Form 10-K Form 10-Q.
  The
    current SEC investigation could adversely affect our business
    and the trading price of our securities.
   38




---



##### Table of Contents



Item 6.
    Exhibits  (a)
    Exhibits  Exhibit3
.1

Restated Certificate of Incorporation, as amended to date,
    previously filed as Exhibit 3.1 to the Registrants
    Form 10-Q
    for the quarter ended September 30, 2003, which is
    incorporated herein by reference.3
.2

Certificate of Designation, Preferences and Rights of
    Series A Participating Preferred Stock previously filed as
    Exhibit 3.1 to the Registrants Current Report on
    Form 8-K,
    dated October 6, 2004, which is incorporated herein by
    reference.3
.3

Certificate of Correction to Restated Certificate of
    Incorporation, dated April 3, 2006, previously filed as
    Exhibit 3.3 to the Registrants
    Form 10-Q
    for the quarter ended September 30, 2007, which is
    incorporated herein by reference.3
.4

Amended and Restated Bylaws of the Registrant previously filed
    as Exhibit 3.1 to the Registrants Current Report on
    Form 8-K,
    dated February 25, 2008, which is incorporated herein by
    reference.10
.1**

Side Letter dated January 11, 2008 between Three Rivers
    Pharmaceuticals, LLC and Valeant Pharmaceuticals North America,
    previously filed as of Exhibit 10.28 to the
    Registrants Annual Report on
    Form 10-K
    for the year ended December 31, 2007 and incorporated
    herein by reference.10
.2

Employment Agreement dated as of February 1, 2008 between
    Valeant Pharmaceuticals International and J. Michael Pearson,
    previously filed as of Exhibit 10.1 to the
    Registrants Current Report on
    Form 8-K
    dated February 6, 2008 and incorporated herein by reference.10
.3

Separation Agreement dated as of February 1, 2008 between
    Valeant Pharmaceuticals International and Timothy C. Tyson,
    previously filed as of Exhibit 10.2 to the
    Registrants Current Report on
    Form 8-K
    dated February 6, 2008 and incorporated herein by reference.10
.4

Release Agreement dated as of February 1, 2008 between
    Valeant Pharmaceuticals International and Timothy C. Tyson,
    previously filed as of Exhibit 10.3 to the
    Registrants Current Report on
    Form 8-K
    dated February 6, 2008 and incorporated herein by reference.15
.1

Review Report of Independent Registered Public Accounting Firm.15
.2

Awareness Letter 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.     **
    
    Portions of this exhibit have been omitted pursuant to a request
    for confidential treatment.
    
    Management contract or compensatory plan or arrangement. 39




---



##### Table of Contents



SIGNATURES  Form 10-Q
  Valeant Pharmaceuticals
    International
   /s/  J.
    Michael Pearson   Chairman and Chief Executive Officer
    Peter
    J. Blott
   Executive Vice President and Chief Financial Officer
 (Principal Financial and Accounting Officer)
   40




---



##### Table of Contents



EXHIBIT INDEX
  Exhibit3
.1

Restated Certificate of Incorporation, as amended to date,
    previously filed as Exhibit 3.1 to the Registrants
    Form 10-Q
    for the quarter ended September 30, 2003, which is
    incorporated herein by reference.3
.2

Certificate of Designation, Preferences and Rights of
    Series A Participating Preferred Stock previously filed as
    Exhibit 3.1 to the Registrants Current Report on
    Form 8-K,
    dated October 6, 2004, which is incorporated herein by
    reference.3
.3

Certificate of Correction to Restated Certificate of
    Incorporation, dated April 3, 2006, previously filed as
    Exhibit 3.3 to the Registrants
    Form 10-Q
    for the quarter ended September 30, 2007, which is
    incorporated herein by reference.3
.4

Amended and Restated Bylaws of the Registrant previously filed
    as Exhibit 3.1 to the Registrants Current Report on
    Form 8-K,
    dated February 25, 2008, which is incorporated herein by
    reference.10
.1**

Side Letter dated January 11, 2008 between Three Rivers
    Pharmaceuticals, LLC and Valeant Pharmaceuticals North America,
    previously filed as of Exhibit 10.28 to the
    Registrants Annual Report on
    Form 10-K
    for the year ended December 31, 2007 and incorporated
    herein by reference.10
.2

Employment Agreement dated as of February 1, 2008 between
    Valeant Pharmaceuticals International and J. Michael Pearson,
    previously filed as of Exhibit 10.1 to the
    Registrants Current Report on
    Form 8-K
    dated February 6, 2008 and incorporated herein by reference.10
.3

Separation Agreement dated as of February 1, 2008 between
    Valeant Pharmaceuticals International and Timothy C. Tyson,
    previously filed as of Exhibit 10.2 to the
    Registrants Current Report on
    Form 8-K
    dated February 6, 2008 and incorporated herein by reference.10
.4

Release Agreement dated as of February 1, 2008 between
    Valeant Pharmaceuticals International and Timothy C. Tyson,
    previously filed as of Exhibit 10.3 to the
    Registrants Current Report on
    Form 8-K
    dated February 6, 2008 and incorporated herein by reference.15
.1

Review Report of Independent Registered Public Accounting Firm.15
.2

Awareness Letter 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.     **
    
    Portions of this exhibit have been omitted pursuant to a request
    for confidential treatment.
    
    Management contract or compensatory plan or arrangement.