##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
      Form 10-Q/A
 Amendment No. 1
  (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, 2007oro

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. 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)
  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




---



##### 



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  INDEX
   
 PageNumberExplanatory Note


2PART I  FINANCIAL
    INFORMATIONItem 1.


Financial Statements


4Consolidated Condensed Balance Sheets as of
    March 31, 2007 and December 31, 2006 (as restated)


4Consolidated Condensed Statements of Operations
    for the three months ended March 31, 2007 and 2006 (as
    restated)


5Consolidated Condensed Statement of Comprehensive
    Income for the three months ended March 31, 2007 and 2006
    (as restated)


6Consolidated Condensed Statements of Cash Flows
    for the three months ended March 31, 2007 and 2006 (as
    restated)


7Notes to Consolidated Condensed Financial
    Statements (as restated)


8Item 2.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations (as restated)


38Item 3.


Quantitative and Qualitative Disclosures About
    Market Risk


53Item 4.


Controls and Procedures


54PART II  OTHER
    INFORMATIONItem 1.


Legal Proceedings


56Item 1A.


Risk Factors


56Item 6.


Exhibits


56SIGNATURES


57EXHIBIT 15.1EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1   1




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##### Table of Contents



Explanatory
    Note  Form 10-Q
  Form 8-K Form 10-K Form 10-K
    Form 10-K Form 10-Q/A, Form 10-Q
  Form 10-K Form 10-Q.
  Identification
    of Material Weakness
  Form 10-K Form 10-Q/A,
  Form 10-Q/A
  Form 10-Q/A Form 10-Q/A
 2




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##### Table of Contents



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




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##### Table of Contents



PART I 
    FINANCIAL INFORMATION  Item 1.
    Financial
    Statements  VALEANT
    PHARMACEUTICALS INTERNATIONALCONSOLIDATED CONDENSED BALANCE SHEETSAs of March 31, 2007 and December 31, 2006
    (In thousands, except par value data)
  March 31,


December 31,2007


2006(Restated)(1)


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

$
354,797


$
325,376Marketable securities


8,955



10,370Accounts receivable, net


185,008



227,151Inventories, net


134,117



130,747Assets held for sale and assets of discontinued operations


83,537



124,821Prepaid expenses and other current assets


18,601



16,398Current deferred tax assets, net


83,890



8,550Income taxes


12,078



2,526Total current assets


880,983



845,939Property, plant and equipment, net


93,291



94,121Deferred tax assets, net


20,699



21,218Goodwill


75,346



75,346Intangible assets, net


433,168



414,915Other assets


49,881



53,927Assets of discontinued operations






226Total non-current assets


672,385



659,753$
1,553,368


$
1,505,692LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Trade payables

$
39,762


$
60,621Accrued liabilities


130,283



146,705Notes payable and current portion of long-term debt


2,908



9,237Income taxes


4,915



39,646Liabilities held for sale and liabilities of discontinued
    operations


12,472



Current liabilities for uncertain tax positions


80,413



Total current liabilities


270,753



256,209Long-term debt, less current portion


778,756



778,196Deferred tax liabilities, net


3,630



3,705Liabilities for uncertain tax positions


29,154



Other liabilities


23,939



24,506Liabilities of discontinued operations






12,686Total non-current liabilities


835,479



819,093Total liabilities


1,106,232



1,075,302Commitments and contingenciesStockholders Equity:Common stock, $0.01 par value; 200,000 shares
    authorized; 94,786 (March 31, 2007) and 94,416
    (December 31, 2006) shares outstanding (after
    deducting shares in treasury of 1,094 as of March 31, 2007
    and December 31, 2006)


949



944Additional capital


1,271,508



1,263,318Accumulated deficit


(844,049
)


(851,812
)Accumulated other comprehensive income


18,728



17,940Total stockholders equity


447,136



430,390$
1,553,368


$
1,505,692      4




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##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONALCONSOLIDATED CONDENSED STATEMENTS OF OPERATIONSFor the three months ended March 31, 2007 and 2006
    (Unaudited, in thousands, except per share data)
  Three Months EndedMarch 31,2007


2006(Restated)(1)


(Restated)(1)Revenues:Product sales

$
167,933


$
167,454Alliance revenue (including ribavirin royalties)


36,470



18,091Total revenues


204,403



185,545Costs and expenses:Cost of goods sold (excluding amortization)


46,901



54,413Selling expenses


58,440



59,891General and administrative expenses


26,115



28,387Research and development costs


20,990



27,693Gain on litigation settlements






(34,000
)Restructuring charges and asset impairment


7,238



26,466Amortization expense


17,481



15,873Total costs and expenses


177,165



178,723Income from operations


27,238



6,822Other income, net including translation and exchange


1,136



938Interest income


4,511



2,657Interest expense


(10,952
)


(10,437
)Income (loss) from continuing operations before income taxes and
    minority interest


21,933



(20
)Provision for income taxes


8,410



7,395Income (loss) from continuing operations


13,523



(7,415
)Income (loss) from discontinued operations


(4,200
)


1,269Net income (loss)

$
9,323


$
(6,146
)Basic income (loss) per share:Income (loss) from continuing operations

$
0.14


$
(0.08
)Income (loss) from discontinued operations


(0.04
)


0.01Net income (loss) per share:

$
0.10


$
(0.07
)Diluted income (loss) per share:Income (loss) from continuing operations

$
0.14


$
(0.08
)Income (loss) from discontinued operations


(0.04
)


0.01Net income (loss) per share:

$
0.10


$
(0.07
)Shares used in per share computations  basic


94,730



92,878Shares used in per share computation  diluted


96,019



92,878Dividends paid per share of common stock

$



$
0.08Dividends declared per share of common stock

$



$
0.08      5




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##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONALCONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE
    INCOMEFor the three months ended March 31, 2007 and 2006
    (Unaudited, in thousands)
  Three Months Ended March 31,2007


2006(Restated)(1)


(Restated)(1)Net income (loss)

$
9,323


$
(6,146
)Other comprehensive income (loss):Foreign currency translation adjustments


118



2,369Unrealized gain on marketable equity securities and other


227



443Pension liability adjustment


443



Comprehensive income (loss)

$
10,111


$
(3,334
)      6




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##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONALCONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWSFor the three months ended March 31, 2007 and 2006
    (Unaudited, in thousands)
  Three Months Ended March 31,2007


2006(Restated)(1)


(Restated)(1)Cash flows from operating activities:Net income (loss)

$
9,323


$
(6,146
)Income (loss) from discontinued operations


(4,200
)


1,269Income (loss) from continuing operations


13,523



(7,415
)Adjustments to reconcile income (loss) from continuing
    operations to net cash provided by operating activities in
    continuing operations:Depreciation and amortization


21,395



21,816Provision for losses on accounts receivable and inventory


1,568



3,597Stock compensation expense


3,917



5,574Translation and exchange gains, net


(1,136
)


(937
)Impairment charges and other non-cash items


(447
)


20,378Deferred income taxes


33,022



5,963Change in assets and liabilities, net of effects of acquisitions:Accounts receivable


41,909



21,923Inventories


(4,213
)


(5,725
)Prepaid expenses and other assets


(3,373
)


627Trade payables and accrued liabilities


(31,467
)


(13,474
)Income taxes


(44,376
)


(12,452
)Other liabilities


785



610Cash flow from operating activities in continuing operations


31,107



40,485Cash flow from operating activities in discontinued operations


(4,132
)


72Net cash provided by operating activities


26,975



40,557Cash flows from investing activities:Capital expenditures


(4,431
)


(13,351
)Proceeds from sale of assets


38,493



135Proceeds from investments


8,631



2,260Purchase of investments


(6,800
)


(3,900
)Acquisition of businesses, license rights and product lines


(31,325
)


Cash flow from investing activities in continuing operations


4,568



(14,856
)Cash flow from investing activities in discontinued operations


(135
)


(1
)Net cash provided by (used in) investing activities


4,433



(14,857
)Cash flows from financing activities:Payments on long-term debt and notes payable


(7,601
)


(157
)Proceeds from capitalized lease financing, long-term debt and
    notes payable


395



Stock option exercises and employee stock purchases


4,214



430Dividends paid






(7,173
)Cash flow from financing activities in continuing operations


(2,992
)


(6,900
)Cash flow from financing activities in discontinued operations


(14
)


Net cash used in financing activities


(3,006
)


(6,900
)Effect of exchange rate changes on cash and cash equivalents


816



715Net increase in cash and cash equivalents


29,218



19,515Cash and cash equivalents at beginning of period


325,579



224,341Cash and cash equivalents at end of period


354,797



243,856Cash and cash equivalents classified as part of discontinued
    operations






(69
)Cash and cash equivalents of continuing operations

$
354,797


$
243,787      7




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##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 March 31, 2007
 (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
   8




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##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
    Discontinued Operations: Accounting for the Impairment or Disposal of Long-lived
    Assets
  Assets Held for Sale:
  Use of Estimates:
  Recent
    Accounting Pronouncements:
  FIN 48.
    SFAS No. 155.
  SFAS No. 157.
 9




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##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
    SFAS 159. The Fair Value Option
    for Financial Assets and Financial Liabilities,
    (
  EITF 06-3. No. 06-3, (EITF 06-3). EITF 06-3 EITF 06-3 EITF 06-3
  2.
    Restatement
    of Consolidated Financial Statements  Form 10-K Form 10-K
          Employers Accounting for Pensions Employers
    Accounting for Defined Benefit Pension and Other Postretirement
    Plans
 10




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##### Table of Contents



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


Three Months











TotalEnded


Ended











AdditionalMarch 31,


March 31,


Year Ended December 31,





IncomeIncome (Expense)

2007


2006


2006


2005


Prior Periods


(Expense)(In thousands)Returns reserve and credit memos in Latin America

$
(182
)

$
(241
)

$
(1,554
)

$
(371
)

$
(2,155
)

$
(4,262
)Reversal of revenue in Italy


194







(290
)










(96
)Cost of goods bookkeeping in the UK and France


1,926



















1,926European pension accounting


(73
)


(57
)


1,401



(256
)


(626
)


446Total impact before taxes


1,865



(298
)


(443
)


(627
)


(2,781
)


(1,986
)Tax effect on above


(1,110
)


123



204



139



988



221Other deferred tax items










(764
)


(61
)






(825
)Total impact of restatement

$
755


$
(175
)

$
(1,003
)

$
(549
)

$
(1,793
)

$
(2,590
)  11




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##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
    Three Months Ended March 31,2007


2006Product salesAs previously reported

$
176,892


$
181,400Adjustments for error correction


11



(241
)176,903



181,159Adjustments for restatement for discontinued operations


(8,970
)


(13,705
)As restated

$
167,933


$
167,454Cost of goods soldAs previously reported

$
52,098


$
58,601Adjustments for error correction


(1,927
)


50,171



58,601Adjustments for restatement for discontinued operations


(3,270
)


(4,188
)As restated

$
46,901


$
54,413Selling expensesAs previously reported

$
64,434


$
64,275Adjustments for error correction






64,434



64,275Adjustments for restatement for discontinued operations


(5,994
)


(4,384
)As restated

$
58,440


$
59,891General and administrative expensesAs previously reported

$
26,187


$
28,446Adjustments for error correction


73



5726,260



28,503Adjustments for restatement for discontinued operations


(145
)


(116
)As restated

$
26,115


$
28,387Research and development expensesAs previously reported

$
23,110


$
29,554Adjustments for error correction






23,110



29,554Adjustments for restatement for discontinued operations


(2,120
)


(1,861
)As restated

$
20,990


$
27,693Amortization expenseAs previously reported

$
19,131


$
17,523Adjustments for error correction






19,131



17,523Adjustments for restatement for discontinued operations


(1,650
)


(1,650
)As restated

$
17,481


$
15,873 12




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##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
  Three Months Ended March 31,2007


2006Income from operations, before interest, taxes and other itemsAs previously reported

$
21,164


$
8,626Adjustments for error correction


1,865



(298
)23,029



8,328Adjustments for restatement for discontinued operations


4,209



(1,506
)As restated

$
27,238


$
6,822Income (loss) from continuing operations before income taxes and
    minority interestAs previously reported

$
15,859


$
1,784Adjustments for error correction


1,865



(298
)17,724



1,486Adjustments for restatement for discontinued operations


4,209



(1,506
)As restated

$
21,933


$
(20
)Provision for income taxesAs previously reported

$
7,292


$
7,543Adjustments for error correction


1,110



(123
)8,402



7,420Adjustments for restatement for discontinued operations


8



(25
)As restated

$
8,410


$
7,395Income (loss) from continuing operationsAs previously reported

$
8,567


$
(5,759
)Adjustments for error correction


755



(175
)9,322



(5,934
)Adjustments for restatement for discontinued operations


4,201



(1,481
)As restated

$
13,523


$
(7,415
)Income (loss) from discontinued operationsAs previously reported

$
1


$
(212
)Adjustments for error correction






1



(212
)Adjustments for restatement for discontinued operations


(4,201
)


1,481As restated

$
(4,200
)

$
1,269Net income (loss)As previously reported

$
8,568


$
(5,971
)Adjustments for error correction


755



(175
)9,323



(6,146
)Adjustments for restatement for discontinued operations






As restated

$
9,323


$
(6,146
)  13




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##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
    Three Months Ended March 31,2007


2006Basic and diluted income (loss) per share  as
    previously reportedFrom continuing operations

$
0.09


$
(0.06
)From discontinued operations






Net income (loss)

$
0.09


$
(0.06
)Basic and diluted income (loss) per share 
    adjustments for error correctionFrom continuing operations

$
0.01


$
From discontinued operations






(0.01
)Net income (loss)

$
0.01


$
(0.01
)Basic and diluted income (loss) per share  as
    restated for adjustments for error correctionFrom continuing operations

$
0.10


$
(0.06
)From discontinued operations






(0.01
)Net income (loss)

$
0.10


$
(0.07
)Basic and diluted income per share  adjustments for
    restatement for discontinued operationsFrom continuing operations

$
0.04


$
(0.02
)From discontinued operations


(0.04
)


0.02Net income

$



$
Basic and diluted income (loss) per share  as
    restated for error correction and discontinued operationsFrom continuing operations

$
0.14


$
(0.08
)From discontinued operations


(0.04
)


0.01Net income (loss)

$
0.10


$
(0.07
)  14




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##### Table of Contents



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


December 31,2007


2006Cash and cash equivalentsAs previously reported

$
355,432


$
326,002Adjustments for error correction and balance sheet
    reclassification


(635
)


(626
)354,797



325,376Adjustments for restatement for discontinued operations






As restated

$
354,797


$
325,376Marketable securitiesAs previously reported

$
8,321


$
9,743Adjustments for error correction and balance sheet
    reclassification


634



6278,955



10,370Adjustments for restatement for discontinued operations






As restated

$
8,955


$
10,370Accounts receivable, netAs previously reported

$
185,384


$
227,452Adjustments for error correction and balance sheet
    reclassification


(376
)


(301
)185,008



227,151Adjustments for restatement for discontinued operations






As restated

$
185,008


$
227,151Inventories, netAs previously reported

$
142,111


$
142,679Adjustments for error correction and balance sheet
    reclassification


1,962



144,073



142,679Adjustments for restatement for discontinued operations


(9,956
)


(11,932
)As restated

$
134,117


$
130,747Assets held for sale and assets of discontinued operationsAs previously reported

$
11,441


$
49,104Adjustments for error correction and balance sheet
    reclassification


(591
)


(589
)10,850



48,515Adjustments for restatement for discontinued operations


72,687



76,306As restated

$
83,537


$
124,821Current deferred tax assets, netAs previously reported

$
84,107


$
8,071Adjustments for error correction and balance sheet
    reclassification


(217
)


47983,890



8,550Adjustments for restatement for discontinued operations






As restated

$
83,890


$
8,550Property, plant and equipment, netAs previously reported

$
93,456


$
94,279Adjustments for error correction and balance sheet
    reclassification






93,456



94,279Adjustments for restatement for discontinued operations


(165
)


(158
)As restated

$
93,291


$
94,121 15




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##### Table of Contents



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


December 31,2007


2006Deferred tax assets, netAs previously reported

$
21,353


$
21,514Adjustments for error correction and balance sheet
    reclassification


(654
)


(296
)20,699



21,218Adjustments for restatement for discontinued operations






As restated

$
20,699


$
21,218GoodwillAs previously reported

$
80,162


$
80,162Adjustments for error correction and balance sheet
    reclassification






80,162



80,162Adjustments for restatement for discontinued operations


(4,816
)


(4,816
)As restated

$
75,346


$
75,346Intangible assets, netAs previously reported

$
490,918


$
474,315Adjustments for error correction and balance sheet
    reclassification






490,918



474,315Adjustments for restatement for discontinued operations


(57,750
)


(59,400
)As restated

$
433,168


$
414,915Other assetsAs previously reported

$
48,402


$
52,966Adjustments for error correction and balance sheet
    reclassification


1,479



96149,881



53,927Adjustments for restatement for discontinued operations






As restated

$
49,881


$
53,927Accrued liabilitiesAs previously reported

$
126,198


$
142,532Adjustments for error correction and balance sheet
    reclassification


4,085



4,173130,283



146,705Adjustments for restatement for discontinued operations






As restated

$
130,283


$
146,705Income taxesAs previously reported

$
4,722


$
39,818Adjustments for error correction and balance sheet
    reclassification


193



(172
)4,915



39,646Adjustments for restatement for discontinued operations






As restated

$
4,915


$
39,646Liabilities held for sale and liabilities of discontinued
    operationsAs previously reported

$



$
Adjustments for error correction and balance sheet
    reclassification


12,472



12,472



Adjustments for restatement for discontinued operations






As restated

$
12,472


$
 16




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##### Table of Contents



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


December 31,2007


2006Deferred tax liabilities, netAs previously reported

$
3,177


$
3,255Adjustments for error correction and balance sheet
    reclassification


453



4503,630



3,705Adjustments for restatement for discontinued operations






As restated

$
3,630


$
3,705Other liabilitiesAs previously reported

$
18,004


$
18,182Adjustments for error correction and balance sheet
    reclassification


5,935



6,32423,939



24,506Adjustments for restatement for discontinued operations






As restated

$
23,939


$
24,506Liabilities of discontinued operationsAs previously reported

$
18,112


$
18,343Adjustments for error correction and balance sheet
    reclassification


(18,112
)


(5,657
)



12,686Adjustments for restatement for discontinued operations






As restated

$



$
12,686Accumulated deficitAs previously reported

$
(841,460
)

$
(848,467
)Adjustments for error correction and balance sheet
    reclassification


(2,589
)


(3,345
)(844,049
)


(851,812
)Adjustments for restatement for discontinued operations






As restated

$
(844,049
)

$
(851,812
)Accumulated other comprehensive incomeAs previously reported

$
19,563


$
19,458Adjustments for error correction and balance sheet
    reclassification


(835
)


(1,518
)18,728



17,940Adjustments for restatement for discontinued operations






As restated

$
18,728


$
17,940  17




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
    Three Months Ended March 31, 2007Adjustments for





Adjustments forError Correction


As Restated for


Restatement forAs Previously


and Balance Sheet


Adjustments for


DiscontinuedReported


Reclassification


Error Correction


Operations


As RestatedCash flows from operating activities:Net income

$
8,568


$
755


$
9,323


$



$
9,323Income (loss) from discontinued operations


1







1



(4,201
)


(4,200
)Income from continuing operations


8,567



755



9,322



4,201



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


23,195







23,195



(1,800
)


21,395Provision for losses on accounts receivable and inventory


1,568







1,568







1,568Stock compensation expense


3,981







3,981



(64
)


3,917Translation and exchange gains, net


(1,136
)






(1,136
)






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


(447
)






(447
)






(447
)Deferred income taxes


31,910



1,112



33,022







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


41,517



76



41,593



316



41,909Inventories


(311
)


(1,926
)


(2,237
)


(1,976
)


(4,213
)Prepaid expenses and other assets


(3,176
)


(197
)


(3,373
)






(3,373
)Trade payables and accrued liabilities


(34,641
)


(87
)


(34,728
)


3,261



(31,467
)Income taxes


(44,373
)


(3
)


(44,376
)






(44,376
)Other liabilities


532



253



785







785Cash flow from operating activities in continuing operations


27,186



(17
)


27,169



3,938



31,107Cash flow from operating activities in discontinued operations


(211
)


17



(194
)


(3,938
)


(4,132
)Net cash provided by operating activities


26,975







26,975







26,975Cash flows from investing activities:Capital expenditures


(4,566
)






(4,566
)


135



(4,431
)Proceeds from sale of assets


38,493







38,493







38,493Proceeds from investments


8,631







8,631







8,631Purchase of investments


(6,800
)






(6,800
)






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


(31,325
)






(31,325
)






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


4,433







4,433



135



4,568Cash flow from investing activities in discontinued operations














(135
)


(135
)Net cash provided by investing activities


4,433







4,433







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


(7,750
)






(7,750
)


149



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


530







530



(135
)


395Stock option exercises and employee stock purchases


4,214







4,214







4,214Dividends paid


















Cash flow from financing activities in continuing operations


(3,006
)






(3,006
)


14



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














(14
)


(14
)Net cash used in financing activities


(3,006
)






(3,006
)






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


825



(9
)


816







816Net increase in cash and cash equivalents


29,227



(9
)


29,218







29,218Cash and cash equivalents at beginning of period


326,205



(626
)


325,579







325,579Cash and cash equivalents at end of period


355,432



(635
)


354,797







354,797Cash and cash equivalents classified as part of discontinued
    operations


















Cash and cash equivalents of continuing operations

$
355,432


$
(635
)

$
354,797


$



$
354,797   18




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
  Three Months Ended March 31, 2006Adjustments for





Adjustments forError Correction


As Restated for


Restatement forAs Previously


and Balance Sheet


Adjustments for


DiscontinuedReported


Reclassification


Error Correction


Operations


As RestatedCash flows from operating activities:Net loss

$
(5,971
)

$
(175
)

$
(6,146
)

$



$
(6,146
)Income (loss) from discontinued operations


(212
)






(212
)


1,481



1,269Loss from continuing operations


(5,759
)


(175
)


(5,934
)


(1,481
)


(7,415
)Adjustments to reconcile loss from continuing operations to net
    cash provided by operating activities in continuing operations:Depreciation and amortization


23,482







23,482



(1,666
)


21,816Provision for losses on accounts receivable and inventory


3,597







3,597







3,597Stock compensation expense


5,618







5,618



(44
)


5,574Translation and exchange gains, net


(937
)






(937
)






(937
)Impairment charges and other non-cash items


20,378







20,378







20,378Deferred income taxes


5,577



386



5,963







5,963Change in assets and liabilities, net of effects of acquisitions:Accounts receivable


13,778







13,778



8,145



21,923Inventories


(3,736
)






(3,736
)


(1,989
)


(5,725
)Prepaid expenses and other assets


963



(336
)


627







627Trade payables and accrued liabilities


(10,513
)


369



(10,144
)


(3,330
)


(13,474
)Income taxes


(12,452
)






(12,452
)






(12,452
)Other liabilities


842



(232
)


610







610Cash flow from operating activities in continuing operations


40,838



12



40,850



(365
)


40,485Cash flow from operating activities in discontinued operations


(281
)


(12
)


(293
)


365



72Net cash provided by operating activities


40,557







40,557







40,557Cash flows from investing activities:Capital expenditures


(13,351
)






(13,351
)






(13,351
)Proceeds from sale of assets


135







135







135Proceeds from investments


2,260







2,260







2,260Purchase of investments


(3,900
)






(3,900
)






(3,900
)Acquisition of businesses, license rights and product lines


















Cash flow from investing activities in continuing operations


(14,856
)






(14,856
)






(14,856
)Cash flow from investing activities in discontinued operations


(1
)






(1
)






(1
)Net cash used in investing activities


(14,857
)






(14,857
)






(14,857
)Cash flows from financing activities:Payments on long-term debt and notes payable


(157
)






(157
)






(157
)Proceeds from capitalized lease financing, long-term debt and
    notes payable


















Stock option exercises and employee stock purchases


430







430







430Dividends paid


(7,173
)






(7,173
)






(7,173
)Cash flow from financing activities in continuing operations


(6,900
)






(6,900
)






(6,900
)Cash flow from financing activities in discontinued operations


















Net cash used in financing activities


(6,900
)






(6,900
)






(6,900
)Effect of exchange rate changes on cash and cash equivalents


728



(13
)


715







715Net increase in cash and cash equivalents


19,528



(13
)


19,515







19,515Cash and cash equivalents at beginning of period


224,903



(562
)


224,341







224,341Cash and cash equivalents at end of period


244,431



(575
)


243,856







243,856Cash and cash equivalents classified as part of discontinued
    operations


(69
)






(69
)






(69
)Cash and cash equivalents of continuing operations

$
244,362


$
(575
)

$
243,787


$



$
243,787  19




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
  3.
    Restructuring            Three Months


Year


Three Months


CumulativeEnded


Ended


Ended


TotalMarch 31,


December 31,


March 31,


Incurred2006


2006


2007(In thousands)Employee severances (approximately 480 employees)

$
6,644


$
16,997


$
3,781


$
20,778Contract cancellation and other cash costs






1,662



2,081



3,743Subtotal: cash charges


6,644



18,659



5,862



24,521Abandoned software and other capital assets


19,822



22,178







22,178Impairment of manufacturing and research facilities






97,344



1,376



98,720Subtotal: non-cash charges


19,822



119,522



1,376



120,898Total:

$
26,466


$
138,181


$
7,238


$
145,419    20




---



##### Table of Contents



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


March 31,2006


2007Opening accrual

$
4,453


$
5,216Charges to earnings


3,699



6,024Cash paid


(2,936
)


(5,309
)Closing accrual

$
5,216


$
5,931     4.
    Acquisitions  paid-up
  5.
    Discontinued
    Operations  Accounting for the
    Impairment or Disposal of Long-lived Assets
 21




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
    Three Months EndedMarch 31,2007


2006(In thousands)Infergen:Product sales

$
8,970


$
13,705Costs and expenses:Cost of goods sold (excluding amortization)


3,270



4,188Selling expenses


5,994



4,384General and administrative expenses


145



116Research and development costs


2,120



1,861Amortization expense


1,650



1,650Total costs and expenses


13,179



12,199Income (loss) from discontinued operations, Infergen


(4,209
)


1,506Other discontinued operations:Other loss






(243
)Consolidated discontinued operations:Income (loss) from discontinued operations


(4,209
)


1,263Provision for income taxes


8



(25
)Income (loss) from discontinued operations


(4,201
)


1,238Disposal of discontinued operations, net


1



31Income (loss) from discontinued operations, net

$
(4,200
)

$
1,269    22




---



##### Table of Contents



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


December 31,2007


2006(Restated)


(Restated)ASSETSCash

$



$
203Accounts receivable, net






21Inventories, net


9,956



11,932Prepaid expenses and other current assets






2Property, plant and equipment, net


165



158Goodwill


4,816



4,816Intangible assets, net


57,750



59,400Assets of discontinued operations

$
72,687


$
76,532LIABILITIESAccrued liabilities


12,472



12,686Liabilities of discontinued operations

$
12,472


$
12,686    23




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
  6.
    Earnings
    Per Share    Three Months EndedMarch 31,2007


2006(Restated)


(Restated)Income:Numerator for basic and dilutive earnings per shareIncome (loss) from continuing operations

$
13,523


$
(7,415
)Income (loss) from discontinued operations


(4,200
)


1,269Net income (loss)

$
9,323


$
(6,146
)Shares:Denominator for basic earnings per share:Weighted shares outstanding


94,574



92,770Vested stock equivalents (not issued)


156



108Denominator for basic earnings per share


94,730



92,878Denominator for diluted earnings per share:Employee stock options


1,232



Other dilutive securities


57



Dilutive potential common shares


1,289



Denominator for diluted earnings per share:


96,019



92,878Basic and diluted earnings (loss) per share:Income (loss) from continuing operations

$
0.14


$
(0.08
)Income (loss) from discontinued operations


(0.04
)


0.01Net income (loss) per share

$
0.10


$
(0.07
)      24




---



##### Table of Contents



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


December 31,2007


2006(Restated)


(Restated)Accounts receivable, net:Trade accounts receivable

$
151,971


$
180,466Royalties receivable


16,885



22,212Other receivables


23,637



31,487192,493



234,165Allowance for doubtful accounts


(7,485
)


(7,014
)$
185,008


$
227,151Inventories, net:Raw materials and supplies

$
36,193


$
37,045Work-in-process


23,146



21,477Finished goods


88,840



86,522148,179



145,044Allowance for inventory obsolescence


(14,062
)


(14,297
)$
134,117


$
130,747Property, plant and equipment, net:Property, plant and equipment, at cost

$
184,771


$
183,597Accumulated depreciation and amortization


(91,480
)


(89,476
)$
93,291


$
94,121   Intangible assets:
  Weighted


March 31, 2007


December 31, 2006Average


Gross


Accumulated


Net


Gross


Accumulated


NetLives (years)


Amount


Amortization


Amount


Amount


Amortization


AmountProduct rightsNeurology


13


$
301,546


$
(110,161
)

$
191,385


$
291,388


$
(99,090
)

$
192,298Infectious diseases


11



6,480



(3,510
)


2,970



20,500



(11,771
)


8,729Dematology


19



110,315



(45,217
)


65,098



87,105



(44,029
)


43,076Other products


11



325,899



(166,860
)


159,039



310,633



(157,331
)


153,302Total product rights


14



744,240



(325,748
)


418,492



709,626



(312,221
)


397,405License agreement


5



67,376



(52,700
)


14,676



67,376



(49,866
)


17,510Total intangible assets





$
811,616


$
(378,448
)

$
433,168


$
777,002


$
(362,087
)

$
414,915  25




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
    Scheduled Future Amortization Expense2007


2008


2009


2010


2011


ThereafterProduct rightsNeurology

$
21,680


$
28,765


$
28,623


$
27,706


$
21,933


$
63,120Infectious diseases


270



360



360



360



360



1,260Dermatology


7,494



9,992



9,990



9,982



9,877



17,902Other products


19,770



18,885



18,007



16,945



16,049



68,802Total product rights


49,214



58,002



56,980



54,993



48,219



151,084License agreement


8,504



6,172















Total

$
57,718


$
64,174


$
56,980


$
54,993


$
48,219


$
151,084     8.
    Income
    Taxes           26




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
    non-U.S. subsidiaries
      9.
    Common
    Stock and Share Compensation   27




---



##### Table of Contents



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


ExerciseShares


PriceShares under option, December 31, 2005


14,632


$
17.80Granted


2,014


$
18.54Exercised


(1,592
)

$
19.38Canceled


(1,703
)

$
21.81Shares under option, December 31, 2006


13,351


$
18.28Granted


79


$
17.32Exercised


(347
)

$
17.32Canceled


(353
)

$
20.58Shares under option, March 31, 2007


12,730


$
18.41Exercisable at December 31, 2005


7,197


$
17.82Exercisable at December 31, 2006


8,374


$
18.00Exercisable at March 31, 2007


8,020


$
18.15Awards available for grant at December 31, 2006


4,376Awards available for grant at March 31, 2007


4,643     Outstanding


ExercisableWeighted





Weighted


WeightedAverage





Average


AverageNumber


Exercise


Number


Exercise


RemainingRange of Exercise Prices

of Shares


Price


of Shares


Price


Life (Years)$8.10 to $17.72


5,102


$
13.44



3,395


$
11.77



6.85$18.01 to $22.11


4,283


$
18.70



2,047


$
18.68



7.84$22.66 to $46.25


3,345


$
25.61



2,578


$
26.12



6.1812,730







8,020   SFAS No. 123(R) Assumptions and Fair
    Value:
  2007


2006Weighted-average life (years)


5.73



4.10 - 5.80Stock price volatility


36%-37%



37%-39%Expected dividend per share

$
0.00


$
0.00-$0.31Risk-free interest rate


4.52-4.70%



4.54-4.80%Weighted-average fair value of options (per share)

$
7.37


$
7.83    28




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
    2003 Employee Stock Purchase Plan:
  Phantom Stock Awards:
    Recorded as


To be RecordedExpense Through


as Expense inMarch 31, 2007


Future PeriodsEmployee stock options

$
3,434


$
19,325Employee stock purchase plan


26



Phantom and restricted stock units


457



911Total stock-based compensation expense

$
3,917


$
20,236  29




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
    Three Months EndedMarch 31,2007


2006Cost of goods sold

$
190


$
434Selling expenses


929



810General and administrative expenses


2,493



3,532Research and development costs


305



798Total stock compensation expense

$
3,917


$
5,574     Remainder of 2007

$
11,0132008


6,0022009


2,4622010 and thereafter


759$
20,236   Dividends:
  10.
    Commitments
    and Contingencies    Securities
    Class Actions:
  Derivative Actions Related to Ribapharm
    Bonuses: James Herrig, IRA v. Milan
    Panic et al. and/or
  Paul Gerstley v. Norman
    Barker, Jr. et al.
   30




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
      SEC Investigation:
  Derivative Actions Related to Stock
    Options: Michael Pronko v.
    Timothy C. Tyson et al Kenneth
    Lawson v. Timothy C. Tyson et al. and/or Lawson Pronko Pronko
  Sherwood v. Tyson, et. al and/or
  Patent Oppositions:
   31




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
  Argentina Antitrust Matter:
  Permax Product Liability Cases:
  Kali Litigation: No. 76-843 ® No. 04-3238 No. 76-843
    Trademark Litigation:
 32




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
    Former ICN Yugoslavia Employees:
  Republic of Serbia Litigation:
  Xcel Pharmaceuticals:
  Other:
  11.
    Business
    Segments    
    North America, comprising the United States and Canada.
    International. The Latin America, Asia, and Australasia regions
    are now described as International.
    Europe, Middle East, and Africa (EMEA). 33




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
         Three Months EndedMarch 31,2007


2006(Restated)


(Restated)RevenuesSpecialty pharmaceuticalsNorth America

$
62,599


$
62,151International


35,275



44,948EMEA


70,059



60,355Total specialty pharmaceuticals


167,933



167,454Alliance revenues (including ribavirin royalties)


36,470



18,091Total revenues

$
204,403


$
185,545Operating IncomeSpecialty pharmaceuticalsNorth America

$
17,331


$
19,726International


273



8,930EMEA


18,709



4,02036,313



32,676Corporate expenses(1)


(15,960
)


(22,959
)Total specialty pharmaceuticals


20,353



9,717Restructuring charges and asset impairment(2)


(7,238
)


(26,466
)Gain on litigation settlement






34,000Research and development


14,123



(10,429
)Acquired IPR&D






Consolidated segment operating income


27,238



6,822Interest income


4,511



2,657Interest expense


(10,952
)


(10,437
)Other, net


1,136



938Income (loss) from continuing operations before provision for
    income taxes

$
21,933


$
(20
)     (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. 34




---



##### Table of Contents



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


December 31,Total Assets

2007


2006(Restated)


(Restated)North America

$
369,654


$
381,198International


203,288



203,292EMEA


526,967



514,600Corporate


291,073



207,802Research and Development Division


89,699



122,268Discontinued operations


72,687



76,532Total

$
1,553,368


$
1,505,692     March 31,


December 31,Long-term Assets

2007


2006(Restated)


(Restated)North America

$
294,499


$
288,889International


74,192



58,607EMEA


203,122



201,420Corporate


68,595



75,506Research and Development Division


31,977



35,105Total

$
672,385


$
659,527    35




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##### Table of Contents



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

2007


2006(Restated)


(Restated)NeurologyDiastat AcuDial(P)

$
11,072


$
12,022Mestinon(P)


10,538



9,813Cesamet(P)


5,911



3,303Librax


3,667



2,919Migranal(P)


3,036



3,115Dalmane/Dalmadorm(P)


2,336



2,464Tasmar(P)


1,982



1,185Melleril(P)


1,538



1,400Zelapar(P)


195



Other Neurology


15,592



14,687Total Neurology


55,867



50,908DermatologyEfudix/Efudex(P)


12,477



15,576Kinerase(P)


8,378



6,859Oxsoralen-Ultra(P)


3,883



3,508Dermatix(P)


2,771



1,833Other Dermatology


8,013



8,374Total Dermatology


35,522



36,150Infectious DiseaseVirazole(P)


5,519



5,793Other Infectious Disease


5,155



4,729Total Infectious Disease


10,674



10,522Other therapeutic classesSolcoseryl(P)


5,347



3,377Bisocard(P)


4,694



3,565Bedoyecta(P)


4,561



10,510MVI (multi-vitamin infusion)(P)


2,482



2,248Protamin(P)


2,070



1,552Espaven(P)


1,862



1,287Nyal(P)


1,763



1,754Other products


43,091



45,581Total other therapeutic classes


65,870



69,874Total product sales

$
167,933


$
167,454Total Promoted Product sales

$
92,415


$
91,164     (P)
    
    Promoted Products represent products promoted in at least one
    major territory with estimated global annual sales greater than
    $5 million. 36




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##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
     12.
    Alliance
    Revenue    Three Months EndedMarch 31,2007


2006Ribavirin royalty

$
17,220


$
18,091Licensing payment


19,200



Other


50



Total alliance revenue

$
36,470


$
18,091    37




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##### Table of Contents



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Form 10-Q
  Form 8-K Form 10-K Form 10-K
          Employers Accounting for Pensions Employers
    Accounting for Defined Benefit Pension and Other Postretirement
    Plans
 38




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##### Table of Contents



Three Months


Three Months











TotalEnded


Ended











AdditionalMarch 31,


March 31,


Year Ended December 31,


Prior


IncomeIncome (Expense)

2007


2006


2006


2005


Periods


(Expense)(In thousands)Returns reserve and credit memos in Latin America

$
(182
)

$
(241
)

$
(1,554
)

$
(371
)

$
(2,155
)

$
(4,262
)Reversal of revenue in Italy


194







(290
)










(96
)Cost of goods bookkeeping in the UK and France


1,926



















1,926European pension accounting


(73
)


(57
)


1,401



(256
)


(626
)


446Total impact before taxes


1,865



(298
)


(443
)


(627
)


(2,781
)


(1,986
)Tax effect on above


(1,110
)


123



204



139



988



221Other deferred tax items










(764
)


(61
)






(825
)Total impact of restatement

$
755


$
(175
)

$
(1,003
)

$
(549
)

$
(1,793
)

$
(2,590
)     Overview
      Specialty
    Pharmaceuticals
   39




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##### Table of Contents



Clinical
    Development
    Alliance
    Revenues
    Company
    Strategy and Restructuring
    Targeted Growth Opportunities.
  Product Acquisitions.
  Efficient Manufacturing and Supply Chain
    Organization.
  Clinical Development Activities.
 40




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##### Table of Contents



Results
    of Operations
      Three Months EndedMarch 31,


Increase/


Percent2007


2006


(Decrease)


Change(Restated)


(Restated)RevenuesSpecialty pharmaceuticalsNorth America

$
62,599


$
62,151


$
448



1
%International


35,275



44,948



(9,673
)


(22
)%EMEA


70,059



60,355



9,704



16
%Total specialty pharmaceuticals


167,933



167,454



479



0
%Alliance revenues (including ribavirin royalties)


36,470



18,091



18,379



102
%Total revenues


204,403



185,545



18,858



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


46,901



54,413



(7,512
)


(14
)%Selling expenses


58,440



59,891



(1,451
)


(2
)%General and administrative expenses


26,115



28,387



(2,272
)


(8
)%Research and development costs


20,990



27,693



(6,703
)


(24
)%Gain on litigation settlements






(34,000
)


34,000



NMRestructuring charges and asset impairment


7,238



26,466



(19,228
)


NMAmortization expense


17,481



15,873



1,608



10
%Operating income

$
27,238


$
6,822


$
20,416



NMGross profit on product sales (excluding amortization)

$
121,032


$
113,041


$
7,991



7
%Gross margin


72
%


68
%        41




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##### Table of Contents



Alliance Revenue (including Ribavirin
    royalties):
  Gross Profit Margin (excluding
    amortization): paid-up
  Selling Expenses:
  General and Administrative Expenses:
  Research and Development:
 42




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##### Table of Contents



Gain on Litigation Settlement:
  Restructuring
    Charges:
        Restructuring
    Charge Details (in thousands)
  Three Months


Year


Three MonthsEnded


Ended


Ended


Cumulative


EstimatedMarch 31,


December 31,


March 31,


Total


Total Upon2006


2006


2007


Incurred


Completion(In thousands)Employee severances (approximately 480 employees)

$
6,644


$
16,997


$
3,781


$
20,778


$
20,000-$23,000Contract cancellation and other cash costs






1,662



2,081



3,743


$
3,000-$ 5,000Subtotal: cash charges


6,644



18,659



5,862



24,521


$
23,000-$28,000Abandoned software and other capital assets


19,822



22,178







22,178


$
22,000-$23,000Impairment of manufacturing and research facilities






97,344



1,376



98,720


$
100,000-$104,000Subtotal: non-cash charges


19,822



119,522



1,376



120,898


$
122,000-$127,000Total:

$
26,466


$
138,181


$
7,238


$
145,419


$
145,000-$155,000  43




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##### Table of Contents



Reconciliation
    of Cash Restructuring Payments with Restructuring
    Accrual
    Three Months EndedDecember 31,


March 31,2006


2007Opening accrual

$
4,453


$
5,216Charges to earnings


3,699



6,024Cash paid


(2,936
)


(5,309
)Closing accrual

$
5,216


$
5,931     Amortization:
  Other Income (expense), Net, Including Translation and
    Exchange:
  Interest Expense, net:
  Income Taxes:
  Income (loss) from Discontinued Operations, Net of
    Taxes:
  Liquidity
    and Capital Resources
     44




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##### Table of Contents



Off-Balance
    Sheet Arrangements
  Form 10-K.
 45




---



##### Table of Contents



Products
    in Development
  Late
    Stage Development of New Chemical Entities
  Taribavirin:
      38-40 percent
      Retigabine:
   46




---



##### Table of Contents



Pradefovir: once-a-day
    24-month
  Other
    Development Activities
  Infergen (Reported in Discontinued
    Operations):
    follow-up
   47




---



##### Table of Contents



Cesamet:
  Foreign
    Operations
    Critical
    Accounting Estimates
      Revenue
    Recognition
       48




---



##### Table of Contents



Income
    Taxes
   49




---



##### Table of Contents



Impairment
    of Property, Plant and Equipment
    Valuation
    of Intangible Assets
        Stock-based
    Compensation Expense
     50




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##### Table of Contents



2007

2006Weighted-average life (years)

5.73

4.10-5.80Stock price volatility

36% - 37%

37% - 39%Expected dividend per share

$0.00

$0.00 - $0.31Risk-free interest rate

4.52 - 4.70%

4.54 - 4.80%Weighted-average fair value of options (per share)

$7.37

$7.83         Contingencies
    Other
    Financial Information
    Forward-Looking
    Statements
  Form 10-Q/A Form 10-Q/A, Form 10-Q/A).
 51




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##### Table of Contents




    The future growth of our business depends on the development and
    approval of new products by us and our licensees, including
    taribavirin, 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 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 our 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 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, 2007 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 52




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##### Table of Contents



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.
    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 Note 10 to notes to consolidated condensed
    financial statements, any of which could result in substantial
    cost and divert managements attention and 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.  Item 3.
    Quantitative
    and Qualitative Disclosures About Market Risk   53




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##### Table of Contents



Notional/


Assets (Liabilities)Contract


Carrying


FairDescription

Amount


Value


ValueForward contracts

$
114,000


$
(434
)

$
(434
)Interest rate swaps


150,000



(3,681
)


(3,681
)Outstanding debt


780,000



(780,000
)


(724,000
)       Item 4.
    Controls
    and Procedures  Disclosure
    Controls and Procedures
       54




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##### Table of Contents



Remediation
    Plan
    
    We have engaged professional actuarial and accounting
    consultants to review our calculation of assets and liabilities
    under and accounting for our foreign pension plans. We are also
    working to develop modified controls with regard to our
    accounting for pension obligations.
    We have designed and commenced implementation of 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.  Form 8-K
    Changes
    in Internal Control over Financial Reporting
   55




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##### Table of Contents



PART II 
    OTHER INFORMATION  Item 1.
    Legal
    Proceedings    Item 1A.
    Risk
    Factors  Form 10-K
  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

Amended and Restated Bylaws of the Registrant previously filed
    as Exhibit 3.1 to the Registrants Current Report on
    Form 8-K,
    dated November 6, 2006, which is incorporated herein by
    reference.10
.1

Description of Registrants Executive Incentive Plan,
    previously filed as Item 5.02 in the Registrants
    Current Report on
    Form 8-K,
    dated March 28, 2007, 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.  56




---



##### Table of Contents



SIGNATURES  Form 10-Q/A
  Valeant Pharmaceuticals
    International
  J.
    Michael Pearson
  Chairman and Chief Executive Officer
    Peter
    J. Blott
   Executive Vice President and Chief Financial Officer
    (Principal Financial and Accounting Officer)
   57




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##### 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

Amended and Restated Bylaws of the Registrant previously filed
    as Exhibit 3.1 to the Registrants Current Report on
    Form 8-K,
    dated November 6, 2006, which is incorporated herein by
    reference.10
.1

Description of Registrants Executive Incentive Plan,
    previously filed as Item 5.02 in the Registrants
    Current Report on
    Form 8-K,
    dated March 28, 2007, 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.  58