##### 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
    September 30, 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
  12b-2
  Large
    accelerated
    filer þ
    Accelerated
    filer o
    Non-accelerated
    filer o
    Smaller
    reporting
    company o   Rule 12b-2 o þ




---



##### 



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  INDEX
   
 PageNumberExplanatory Note


2PART I  FINANCIAL
    INFORMATIONItem 1.


Financial Statements


3Consolidated Condensed Balance Sheets as of
    September 30, 2007 and December 31, 2006 (as
    restated)


3Consolidated Condensed Statements of Operations
    for the three months and nine months ended September 30,
    2007 and 2006 (as restated)


4Consolidated Condensed Statements of
    Comprehensive Income (Loss) for the three months and nine months
    ended September 30, 2007 and 2006 (as restated)


5Consolidated Condensed Statements of Cash Flows
    for the nine months ended September 30, 2007 and 2006 (as
    restated)


6Notes to Consolidated Condensed Financial
    Statements (as restated)


7Item 2.


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


32Item 3.


Quantitative and Qualitative Disclosures About
    Market Risk


49Item 4.


Controls and Procedures


50PART II  OTHER
    INFORMATIONItem 1.


Legal Proceedings


51Item 1A.


Risk Factors


51Item 2.


Purchases of Equity Securities by the Issuer and
    Affiliated Purchasers


51Item 6.


Exhibits


52SIGNATURES


53EXHIBIT 15.1EXHIBIT 15.2EXHIBIT 23EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1   1




---



##### 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
  
   Form 10-Q/A Form 10-K Form 10-Q/A
 2




---



##### Table of Contents



PART I 
    FINANCIAL INFORMATION  Item 1.
    Financial
    Statements  VALEANT
    PHARMACEUTICALS INTERNATIONAL
  CONSOLIDATED
    CONDENSED BALANCE SHEETS
 As of September 30, 2007 and December 31, 2006
 (In thousands, except par value data)
  September 30,


December 31,2007


2006(Restated)(1)


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

$
354,318


$
325,376Marketable securities


14,511



10,370Accounts receivable, net


197,028



227,151Inventories, net


122,045



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


65,395



124,821Prepaid expenses and other current assets


14,831



16,398Current deferred tax assets, net


6,648



8,550Income taxes


8,365



2,526Total current assets


783,141



845,939Property, plant and equipment, net


110,591



94,121Deferred tax assets, net


65,397



21,218Goodwill


80,346



75,346Intangible assets, net


411,414



414,915Other assets


44,299



53,927Assets of discontinued operations






226Total non-current assets


712,047



659,753$
1,495,188


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

$
39,476


$
60,621Accrued liabilities


145,515



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


2,842



9,237Income taxes


6,522



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


6,289



Total current liabilities


200,644



256,209Long-term debt, less current portion


780,318



778,196Deferred tax liabilities, net


2,106



3,705Liabilities for uncertain tax positions


59,242



Other liabilities


21,721



24,506Liabilities of discontinued operations






12,686Total non-current liabilities


863,387



819,093Total liabilities


1,064,031



1,075,302Commitments and contingenciesStockholders Equity:Common stock, $0.01 par value; 200,000 shares
    authorized; 90,964 (September 30, 2007) and 94,416
    (December 31, 2006) shares outstanding (after
    deducting shares in treasury of 5,817 as of September 30,
    2007 and 1,094 as of December 31, 2006)


910



944Additional capital


1,209,194



1,263,318Accumulated deficit


(839,224
)


(851,812
)Accumulated other comprehensive income


60,277



17,940Total stockholders equity


431,157



430,390$
1,495,188


$
1,505,692     (1)
    
    See Note 2, Restatement of Consolidated Financial
    Statements.   3




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  CONSOLIDATED
    CONDENSED STATEMENTS OF OPERATIONS
 For the three months and nine months ended
    September 30, 2007 and 2006
 (Unaudited, in thousands, except per share data)
  Three Months Ended September 30,


Nine Months Ended September 30,2007


2006


2007


2006(Restated)(1)


(Restated)(1)


(Restated)(1)


(Restated)(1)Revenues:Product sales

$
192,976


$
189,262


$
562,496


$
553,901Alliance revenue (including ribavirin royalties)


14,078



20,968



69,503



60,694Total revenues


207,054



210,230



631,999



614,595Costs and expenses:Cost of goods sold (excluding amortization)


57,864



57,326



162,379



173,804Selling expenses


64,397



62,635



190,482



183,254General and administrative expenses


29,159



26,301



84,017



84,006Research and development costs


24,885



20,328



68,612



73,999Gain on litigation settlements






(17,550
)






(51,550
)Restructuring charges and asset impairment






17,138



13,575



96,687Amortization expense


18,130



16,774



54,277



48,511Total costs and expenses


194,435



182,952



573,342



608,711Income from operations


12,619



27,278



58,657



5,884Other income (loss), net including translation and


(262
)


(454
)


2,556



1,240Interest income


3,601



3,209



12,881



8,581Interest expense


(10,365
)


(10,960
)


(32,199
)


(32,258
)Income (loss) from continuing operations before income taxes and
    minority interest


5,593



19,073



41,895



(16,553
)Provision for income taxes


7,868



11,538



8,767



24,276Minority interest, net


2



2



2



2Income (loss) from continuing operations


(2,277
)


7,533



33,126



(40,831
)Income (loss) from discontinued operations


(9,813
)


6,004



(18,979
)


6,097Net income (loss)

$
(12,090
)

$
13,537


$
14,147


$
(34,734
)Basic income (loss) per share:Income (loss) from continuing operations

$
(0.02
)

$
0.08


$
0.35


$
(0.44
)Income (loss) from discontinued operations


(0.11
)


0.07



(0.20
)


0.07Net income (loss) per share:

$
(0.13
)

$
0.15


$
0.15


$
(0.37
)Diluted income (loss) per share:Income (loss) from continuing operations

$
(0.02
)

$
0.08


$
0.35


$
(0.44
)Income (loss) from discontinued operations


(0.11
)


0.06



(0.20
)


0.07Net income (loss) per share:

$
(0.13
)

$
0.14


$
0.15


$
(0.37
)Shares used in per share computations  Basic


91,889



93,244



93,896



93,036Shares used in per share computation  Diluted


91,889



95,264



95,003



93,036Dividends paid per share of common stock

$



$
0.08


$



$
0.24Dividends declared per share of common stock

$



$



$



$
0.16     (1)
    
    See Note 2, Restatement of Consolidated Financial
    Statements.   4




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  CONSOLIDATED CONDENSED STATEMENTS OF
    COMPREHENSIVE INCOME (LOSS)
 For the three months and nine months ended
    September 30, 2007 and 2006
 (Unaudited, in thousands)
  Three Months Ended September 30,


Nine Months Ended September 30,2007


2006


2007


2006(Restated)(1)


(Restated)(1)


(Restated)(1)


(Restated)(1)Net income (loss)

$
(12,090
)

$
13,537


$
14,147


$
(34,734
)Other comprehensive income (loss):Foreign currency translation adjustments


25,257



4,668



37,307



14,955Unrealized gain (loss) on marketable equity securities and other


(1,262
)


155



6,375



(817
)Pension liability adjustment


638







(1,345
)


Comprehensive income (loss)

$
12,543


$
18,360


$
56,484


$
(20,596
)     (1)
    
    See Note 2, Restatement of Consolidated Financial
    Statements.   5




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
 CONSOLIDATED
    CONDENSED STATEMENTS OF CASH FLOWS

For the nine months ended September 30, 2007 and
    2006

(Unaudited, in thousands) Nine Months Ended September 30,2007


2006(Restated)(1)


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

$
14,147


$
(34,734
)Income (loss) from discontinued operations


(18,979
)


6,097Income (loss) from continuing operations


33,126



(40,831
)Adjustments to reconcile income (loss) from continuing
    operations to net cash provided by operating activities in
    continuing operations:Depreciation and amortization


66,170



64,987Provision for losses on accounts receivable and inventory


6,953



11,697Stock compensation expense


10,729



16,229Translation and exchange gains, net


(2,556
)


(1,240
)Impairment charges and other non-cash items


6,445



83,578Deferred income taxes


15,507



7,527Change in assets and liabilities, net of effects of acquisitions:Accounts receivable


32,423



(17,583
)Inventories


(1,830
)


(11,886
)Prepaid expenses and other assets


(2,162
)


(3,227
)Trade payables and accrued liabilities


(18,185
)


(14,047
)Income taxes


(40,138
)


(17,744
)Other liabilities


(2,862
)


1,778Cash flow from operating activities in continuing operations


103,620



79,238Cash flow from operating activities in discontinued operations


(18,633
)


826Net cash provided by operating activities


84,987



80,064Cash flows from investing activities:Capital expenditures


(24,683
)


(26,177
)Proceeds from sale of assets


37,923



8,337Proceeds from sale of businesses


30,120



Proceeds from investments


19,967



20,501Purchase of investments


(22,100
)


(20,200
)Acquisition of businesses, license rights and product lines


(35,487
)


(4,129
)Cash flow from investing activities in continuing operations


5,740



(21,668
)Cash flow from investing activities in discontinued operations


(5,942
)


(459
)Net cash used in investing activities


(202
)


(22,127
)Cash flows from financing activities:Payments on long-term debt and notes payable


(8,935
)


(6,372
)Proceeds from capitalized lease financing, long-term debt and
    notes payable


1,923



120Stock option exercises and employee stock purchases


14,517



7,898Proceeds from sales of stock (purchase of treasury stock)


(79,599
)


Dividends paid






(21,550
)Cash flow from financing activities in continuing operations


(72,094
)


(19,904
)Cash flow from financing activities in discontinued operations


573



408Net cash used in financing activities


(71,521
)


(19,496
)Effect of exchange rate changes on cash and cash equivalents


15,475



4,638Net increase in cash and cash equivalents


28,739



43,079Cash and cash equivalents at beginning of period


325,579



224,341Cash and cash equivalents at end of period


354,318



267,420Cash and cash equivalents classified as part of discontinued
    operations






(136
)Cash and cash equivalents of continuing operations

$
354,318


$
267,284     (1)
    
    See Note 2, Restatement of Consolidated Financial
    Statements.   6




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 September 30, 2007
 (Unaudited)
  Form 10-K
  1.
    Organization
    and Summary of Significant Accounting Policies  Organization:
  Principles of Consolidation:
  Marketable Securities:
  Derivative Financial Instruments:
  Comprehensive Income (Loss): Reporting Comprehensive
    Income.
  Per Share Information:
  Stock-Based Compensation Expense:
 7




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
    Discontinued Operations:
  Assets Held for Sale:
  Use of Estimates:
  Treasury Stock:
  Recent
    Accounting Pronouncements:
  FIN 48.
   8




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
  SFAS No. 157.
  SFAS 159.
  FASB Proposed Statement of Position APB
    14-a (not
    yet implemented). 14-a 14-a) 14-a 14-a 14-a
  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
 9




---



##### Table of Contents



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


Nine Months











TotalEnded


Ended











AdditionalSeptember 30,


September 30,


Year Ended December 31,


Prior


IncomeIncome (Expense)

2007


2006


2006


2005


Periods


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

$
(1,120
)

$
(774
)

$
(1,554
)

$
(371
)

$
(2,155
)

$
(5,200
)Reversal of revenue in Italy


(1,550
)


(340
)


(290
)










(1,840
)Cost of goods bookkeeping in the UK and France


4,710



















4,710European pension accounting


(279
)


1,078



1,401



(256
)


(626
)


240Total impact before taxes


1,761



(36
)


(443
)


(627
)


(2,781
)


(2,090
)Tax effect on above


(613
)


84



204



139



988



718Other deferred tax items










(764
)


(61
)






(825
)Total impact of restatement

$
1,148


$
48


$
(1,003
)

$
(549
)

$
(1,793
)

$
(2,197
)     Three Months Ended


Nine Months EndedSeptember 30,


September 30,2007


2006


2007


2006Product salesAs previously reported

$
194,545


$
189,872


$
565,166


$
555,015Adjustment


(1,569
)


(610
)


(2,670
)


(1,114
)As restated

$
192,976


$
189,262


$
562,496


$
553,901Cost of goods soldAs previously reported

$
59,033


$
57,326


$
167,089


$
173,804Adjustment


(1,169
)






(4,710
)


As restated

$
57,864


$
57,326


$
162,379


$
173,804General and administrative expensesAs previously reported

$
29,276


$
26,620


$
83,738


$
85,084Adjustment


(117
)


(319
)


279



(1,078
)As restated

$
29,159


$
26,301


$
84,017


$
84,006Income from operations, before interest, taxes and other itemsAs previously reported

$
12,902


$
27,569


$
56,896


$
5,920Adjustment


(283
)


(291
)


1,761



(36
)As restated

$
12,619


$
27,278


$
58,657


$
5,884Income (loss) from continuing operations before income taxes and
    minority interestAs previously reported

$
5,876


$
19,364


$
40,134


$
(16,517
)Adjustment


(283
)


(291
)


1,761



(36
)As restated

$
5,593


$
19,073


$
41,895


$
(16,553
) 10




---



##### Table of Contents



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


Nine Months EndedSeptember 30,


September 30,2007


2006


2007


2006Provision for income taxesAs previously reported

$
8,080


$
11,658


$
8,154


$
24,360Adjustment


(212
)


(120
)


613



(84
)As restated

$
7,868


$
11,538


$
8,767


$
24,276Income (loss) from continuing operationsAs previously reported

$
(2,206
)

$
7,704


$
31,978


$
(40,879
)Adjustment


(71
)


(171
)


1,148



48As restated

$
(2,277
)

$
7,533


$
33,126


$
(40,831
)Net income (loss)As previously reported

$
(12,019
)

$
13,708


$
12,999


$
(34,782
)Adjustment


(71
)


(171
)


1,148



48As restated

$
(12,090
)

$
13,537


$
14,147


$
(34,734
)     Three Months Ended


Nine Months EndedSeptember 30,


September 30,2007


2006


2007


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

$
(0.02
)

$
0.08


$
0.34


$
(0.44
)From discontinued operations


(0.11
)


0.07



(0.20
)


0.07Net income (loss)

$
(0.13
)

$
0.15


$
0.14


$
(0.37
)Basic income per share  adjustmentsFrom continuing operations

$



$



$
0.01


$
From discontinued operations














Net income

$



$



$
0.01


$
Basic income (loss) per share  as restatedFrom continuing operations

$
(0.02
)

$
0.08


$
0.35


$
(0.44
)From discontinued operations


(0.11
)


0.07



(0.20
)


0.07Net income (loss)

$
(0.13
)

$
0.15


$
0.15


$
(0.37
)Diluted income (loss) per share  as previously
    reportedFrom continuing operations

$
(0.02
)

$
0.08


$
0.34


$
(0.44
)From discontinued operations


(0.11
)


0.06



(0.20
)


0.07Net income (loss)

$
(0.13
)

$
0.14


$
0.14


$
(0.37
)Diluted income per share  adjustmentsFrom continuing operations

$



$



$
0.01


$
From discontinued operations














Net income

$



$



$
0.01


$
Diluted income (loss) per share  as restatedFrom continuing operations

$
(0.02
)

$
0.08


$
0.35


$
(0.44
)From discontinued operations


(0.11
)


0.06



(0.20
)


0.07Net income (loss)

$
(0.13
)

$
0.14


$
0.15


$
(0.37
)  11




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
    September 30,


December 31,2007


2006(In thousands)Cash and cash equivalentsAs previously reported

$
354,996


$
326,002Adjustment


(678
)


(626
)As restated

$
354,318


$
325,376Marketable securitiesAs previously reported

$
13,833


$
9,743Adjustment


678



627As restated

$
14,511


$
10,370Accounts receivable, netAs previously reported

$
200,742


$
227,452Adjustment


(3,714
)


(301
)As restated

$
197,028


$
227,151Inventories, netAs previously reported

$
117,105


$
130,747Adjustment


4,940



As restated

$
122,045


$
130,747Current deferred tax assets, netAs previously reported

$
6,561


$
8,071Adjustment


87



479As restated

$
6,648


$
8,550Deferred tax assets, netAs previously reported

$
65,824


$
21,514Adjustment


(427
)


(296
)As restated

$
65,397


$
21,218Other assetsAs previously reported

$
46,408


$
53,555Adjustment


(2,109
)


372As restated

$
44,299


$
53,927Accrued liabilitiesAs previously reported

$
142,009


$
142,532Adjustment


3,506



4,173As restated

$
145,515


$
146,705 12




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
  September 30,


December 31,2007


2006(In thousands)Income taxesAs previously reported

$
6,424


$
39,818Adjustment


98



(172
)As restated

$
6,522


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

$
6,380


$
Adjustment


(91
)


As restated

$
6,289


$
Deferred tax liabilities, netAs previously reported

$
1,610


$
3,255Adjustment


496



450As restated

$
2,106


$
3,705Other liabilitiesAs previously reported

$
20,145


$
18,182Adjustment


1,576



6,324As restated

$
21,721


$
24,506Liabilities of discontinued operationsAs previously reported

$
2,104


$
18,343Adjustment


(2,104
)


(5,657
)As restated

$



$
12,686Accumulated deficitAs previously reported

$
(837,029
)

$
(848,467
)Adjustment


(2,195
)


(3,345
)As restated

$
(839,224
)

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

$
62,786


$
19,458Adjustment


(2,509
)


(1,518
)As restated

$
60,277


$
17,940  13




---



##### Table of Contents



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


Nine Months EndedSeptember 30, 2007


September 30, 2006As








AsPreviously








Previouslyreported


Adjustments


As Restated


reported


Adjustments


As RestatedCash flows from operating activities:Net income (loss)

$
12,999


$
1,148


$
14,147


$
(34,782
)

$
48


$
(34,734
)Income (loss) from discontinued operations


(18,979
)






(18,979
)


6,097







6,097Income (loss) from continuing operations


31,978



1,148



33,126



(40,879
)


48



(40,831
)Adjustments to reconcile income (loss) from continuing
    operations to net cash provided by operating activities in
    continuing operations:Depreciation and amortization


66,170







66,170



64,987







64,987Provision for losses on accounts receivable and inventory


6,953







6,953



11,697







11,697Stock compensation expense


10,729







10,729



16,229







16,229Translation and exchange gains, net


(2,556
)






(2,556
)


(1,240
)






(1,240
)Impairment charges and other non-cash items


6,445







6,445



83,578







83,578Deferred income taxes


14,889



618



15,507



7,610



(83
)


7,527Change in assets and liabilities, net of effects of acquisitions:Accounts receivable


29,086



3,337



32,423



(17,928
)


345



(17,583
)Inventories


2,879



(4,709
)


(1,830
)


(11,886
)






(11,886
)Prepaid expenses and other assets


(2,049
)


(113
)


(2,162
)


(2,203
)


(1,024
)


(3,227
)Trade payables and accrued liabilities


(17,520
)


(665
)


(18,185
)


(14,949
)


902



(14,047
)Income taxes


(40,130
)


(8
)


(40,138
)


(17,744
)






(17,744
)Other liabilities


208



(3,070
)


(2,862
)


1,742



36



1,778Cash flow from operating activities in continuing operations


107,082



(3,462
)


103,620



79,014



224



79,238Cash flow from operating activities in discontinued operations


(22,095
)


3,462



(18,633
)


1,050



(224
)


826Net cash provided by operating activities


84,987







84,987



80,064







80,064Cash flows from investing activities:Capital expenditures


(24,683
)






(24,683
)


(26,177
)






(26,177
)Proceeds from sale of assets


37,923







37,923



8,337







8,337Proceeds from sale of businesses


30,120







30,120











Proceeds from investments


19,967







19,967



20,501







20,501Purchase of investments


(22,100
)






(22,100
)


(20,200
)






(20,200
)Acquisition of businesses, license rights and product lines


(35,487
)






(35,487
)


(4,129
)






(4,129
)Cash flow from investing activities in continuing operations


5,740







5,740



(21,668
)






(21,668
)Cash flow from investing activities in discontinued operations


(5,942
)






(5,942
)


(459
)






(459
)Net cash used in investing activities


(202
)






(202
)


(22,127
)






(22,127
)Cash flows from financing activities:Payments on long-term debt and notes payable


(8,935
)






(8,935
)


(6,372
)






(6,372
)Proceeds from capitalized lease financing, long-term debt and
    notes payable


1,923







1,923



120







120Stock option exercises and employee stock purchases


14,517







14,517



7,898







7,898Proceeds from sales of stock (purchase of treasury stock)


(79,599
)






(79,599
)










Dividends paid














(21,550
)






(21,550
)Cash flow from financing activities in continuing operations


(72,094
)






(72,094
)


(19,904
)






(19,904
)Cash flow from financing activities in discontinued operations


573







573



408







408Net cash used in financing activities


(71,521
)






(71,521
)


(19,496
)






(19,496
)Effect of exchange rate changes on cash and cash equivalents


15,527



(52
)


15,475



4,679



(41
)


4,638Net increase in cash and cash equivalents


28,791



(52
)


28,739



43,120



(41
)


43,079Cash and cash equivalents at beginning of period


326,205



(626
)


325,579



224,903



(562
)


224,341Cash and cash equivalents at end of period


354,996



(678
)


354,318



268,023



(603
)


267,420Cash and cash equivalents classified as part of discontinued
    operations














(136
)






(136
)Cash and cash equivalents of continuing operations

$
354,996


$
(678
)

$
354,318


$
267,887


$
(603
)

$
267,284  14




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
  3.
    Restructuring      24-month
       15




---



##### Table of Contents



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


Nine Months


YearEnded


Ended


EndedSeptember 30,


September 30,


December 31,2006


2006


2006(In thousands)Employee severances

$
1,922


$
13,935


$
16,997Contract cancellation and other cash costs


665



1,657



1,662Subtotal: cash charges


2,587



15,592



18,659Abandoned software and other capital assets


192



21,546



22,178Impairment of manufacturing and research facilities


14,359



59,549



97,344Subtotal: non-cash charges


14,551



81,095



119,522Total:

$
17,138


$
96,687


$
138,181   Three Months


Nine Months


CumulativeEnded


Ended


TotalSeptember 30,


September 30,


Incurred2007


2007Employee Severances (approximately 490 employees)

$



$
5,130


$
22,127Contract cancellation and other cash costs






3,115



4,777Subtotal: cash charges






8,245



26,904Abandoned software and other capital assets










22,178Write-off of accumulated foreign currency translation adjustments






2,891



2,891Impairment of manufacturing and research facilities






2,439



99,783Subtotal: Non-cash charges






5,330



124,852Total:

$



$
13,575


$
151,756   Reconciliation
    of Cash Restructuring Payments with Restructuring
    Accrual
    Three MonthsEndedSeptember 30,2007Opening accrual

$
9,977Charges to earnings


Cash paid


(4,771
)Closing accrual

$
5,206   4.
    Acquisitions  paid-up
 16




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
      5.
    Discontinued
    Operations        Three Months Ended


Nine Months EndedSeptember 30,


September 30,2007


2006


2007


2006Infergen:Product sales

$
8,636


$
9,134


$
26,959


$
34,148Costs and expenses:Cost of goods sold (excluding amortization)


8,365



2,978



14,523



10,860Selling expenses


6,586



4,948



19,619



14,874General and administrative expenses


679



591



1,367



1,241Research and development costs


1,279



521



5,279



3,271Amortization expense


1,650



1,650



4,950



4,950Total costs and expenses


18,559



10,688



45,738



35,196Loss from discontinued operations, Infergen


(9,923
)


(1,554
)


(18,779
)


(1,048
)Other discontinued operations:Other income






6,064







5,738Consolidated discontinued operations:Income (loss) from discontinued operations


(9,923
)


4,510



(18,779
)


4,690Benefit for income taxes


160



12



231



9Income (loss) from discontinued operations


(9,763
)


4,522



(18,548
)


4,699Disposal of discontinued operations, net


(50
)


1,482



(431
)


1,398Income (loss) from discontinued operations, net

$
(9,813
)

$
6,004


$
(18,979
)

$
6,097  17




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
      September 30,


December 31,2007


2006(Restated)


(Restated)ASSETSCash

$



$
203Accounts receivable, net






21Inventories, net


5,986



11,932Prepaid expenses and other current assets






2Property, plant and equipment, net


143



158Goodwill


4,816



4,816Intangible assets, net


54,450



59,400Assets of discontinued operations

$
65,395


$
76,532LIABILITIESAccrued liabilities


6,289



12,686Liabilities of discontinued operations

$
6,289


$
12,686    18




---



##### Table of Contents



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


Nine Months EndedSeptember 30,


September 30,2007


2006


2007


2006(Restated)


(Restated)


(Restated)


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

$
(2,277
)

$
7,533


$
33,126


$
(40,831
)Income (loss) from discontinued operations


(9,813
)


6,004



(18,979
)


6,097Net income (loss)

$
(12,090
)

$
13,537


$
14,147


$
(34,734
)Shares:Denominator for basic earnings per share:Weighted shares outstanding


91,705



93,093



93,705



92,907Vested stock equivalents (not issued)


184



151



191



129Denominator for basic earnings per share


91,889



93,244



93,896



93,036Denominator for diluted earnings per share:Employee stock options






1,939



1,046



Other dilutive securities






81



61



Dilutive potential common shares






2,020



1,107



Denominator for diluted earnings per share:


91,889



95,264



95,003



93,036Basic income (loss) per share:Income (loss) from continuing operations

$
(0.02
)

$
0.08


$
0.35


$
(0.44
)Income (loss) from discontinued operations


(0.11
)


0.07



(0.20
)


0.07Net income (loss) per share

$
(0.13
)

$
0.15


$
0.15


$
(0.37
)Diluted income (loss) per share:Income (loss) from continuing operations

$
(0.02
)

$
0.08


$
0.35


$
(0.44
)Income (loss) from discontinued operations


(0.11
)


0.06



(0.20
)


0.07Net income (loss) per share

$
(0.13
)

$
0.14


$
0.15


$
(0.37
)      19




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
  7.
    Detail of
    Certain Accounts    September 30,


December 31,2007


2006(Restated)


(Restated)Accounts receivable, net:Trade accounts receivable

$
162,486


$
180,466Royalties receivable


15,272



22,212Other receivables


27,310



31,487205,068



234,165Allowance for doubtful accounts


(8,040
)


(7,014
)$
197,028


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

$
30,932


$
37,045Work-in-process


16,087



21,477Finished goods


90,246



86,522137,265



145,044Allowance for inventory obsolescence


(15,220
)


(14,297
)$
122,045


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

$
214,124


$
183,597Accumulated depreciation and amortization


(103,533
)


(89,476
)$
110,591


$
94,121   Intangible assets:
  Weighted


September 30, 2007


December 31, 2006Average


Gross


Accumulated


Net


Gross


Accumulated


NetLives (Years)


Amount


Amortization


Amount


Amount


Amortization


AmountProduct rightsNeurology


13


$
305,624


$
(121,016
)

$
184,608


$
291,388


$
(99,090
)

$
192,298Infectious diseases


11



6,480



(3,690
)


2,790



20,500



(11,771
)


8,729Dematology


19



111,879



(51,553
)


60,326



87,105



(44,029
)


43,076Other products


11



347,419



(192,264
)


155,155



310,633



(157,331
)


153,302Total product rights


14



771,402



(368,523
)


402,879



709,626



(312,221
)


397,405License agreement


5



67,376



(58,841
)


8,535



67,376



(49,866
)


17,510Total intangible assets





$
838,778


$
(427,364
)

$
411,414


$
777,002


$
(362,087
)

$
414,915  20




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
    Scheduled Future Amortization ExpenseRemainingThreeMonths of2007


2008


2009


2010


2011


ThereafterProduct rightsNeurology

$
7,349


$
29,262


$
29,262


$
29,178


$
22,593


$
66,964Infectious diseases


90



360



360



360



360



1,260Dermatology


2,580



10,439



10,110



9,798



9,672



17,728Other products


4,707



19,145



18,392



17,802



17,300



77,808Total product rights


14,726



59,206



58,124



57,138



49,925



163,760License agreement


2,363



6,172















Total

$
17,089


$
65,378


$
58,124


$
57,138


$
49,925


$
163,760     8.
    Income
    Taxes    Three MonthsEndedSeptember 30,2007Taxes payable on earnings in tax jurisdictions outside the
    U.S.

$
8,308Interest and penalties on U.S. liabilities, state taxes and other


(440
)$
7,868    21




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
              9.
    Common
    Stock and Share Compensation  24-month
   22




---



##### 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


185


$
16.66Exercised


(1,208
)

$
17.49Canceled


(1,604
)

$
21.78Shares under option, September 30, 2007


10,724


$
18.47Exercisable at December 31, 2005


7,197


$
17.82Exercisable at December 31, 2006


8,374


$
18.00Exercisable at September 30, 2007


6,854


$
18.08Awards available for grant at December 31, 2006


4,376Awards available for grant at September 30, 2007


5,742     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


4,158


$
13.63



2,871


$
11.88



6.40$18.55 to $18.75


3,589


$
18.61



1,700


$
18.55



6.43$18.84 to $46.25


2,977


$
25.07



2,283


$
25.52



5.2310,724







6,854   SFAS No. 123(R) Assumptions and Fair
    Value:
  2007


2006Average life of option (years)


5.73



4.10-5.80Stock price volatility


35%-37
%


37%-39
%Expected dividend per share

$
0.00


$
0.00-$0.31Risk-free interest rate


4.24%-4.76
%


4.54%-4.80
%Weighted-average fair value of options

$
7.00


$
7.83    23




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
    2003 Employee Stock Purchase Plan:
  Restricted Stock Units:
    Three Months


Nine MonthsEnded


EndedSeptember 30,


September 30,2007


2006


2007


2006Employee stock options

$
2,916


$
5,086


$
9,479


$
14,407Employee stock purchase plan


79



69



158



337Restricted stock units


368



462



1,092



1,485Total stock-based compensation expense

$
3,363


$
5,617


$
10,729


$
16,229     Three Months


Nine MonthsEnded


EndedSeptember 30,


September 30,2007


2006


2007


2006Cost of goods sold


151



226



504



1,026Selling expenses


846



707



2,660



2,335General and administrative expenses


2,219



4,151



6,932



10,752Research and development costs


147



533



633



2,116Total stock compensation expense

$
3,363


$
5,617


$
10,729


$
16,229  24




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
    Remainder of 2007

$
2,1532008


6,0362009


2,3942010 and thereafter


800$
11,383   Dividends:
  10.
    Commitments
    and Contingencies    Securities
    Class Actions:
  Derivative Actions Related to Ribapharm
    Bonuses: and/or
  Paul Gerstley v. Norman
    Barker, Jr. et al.
     25




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
   SEC Investigation:
  Derivative Actions Related to Stock
    Option and/or
  and/or
  Patent Oppositions:
  Argentina Antitrust Matter:
  Permax Product Liability Cases:
 26




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
    Kali Litigation: No. 76-843 ® No. 04-3238 No. 76-843
    Former ICN Yugoslavia Employees:
  Other:
 27




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
   11.
    Business
    Segments    Three Months Ended


Nine Months EndedSeptember 30,


September 30,2007


2006


2007


2006(Restated)


(Restated)


(Restated)


(Restated)RevenuesSpecialty pharmaceuticalsNorth America

$
65,295


$
62,091


$
196,504


$
185,237International


54,290



60,259



145,394



169,416EMEA


73,391



66,912



220,598



199,248Total specialty pharmaceuticals


192,976



189,262



562,496



553,901Alliance revenues (including ribavirin royalties)


14,078



20,968



69,503



60,694Consolidated revenues

$
207,054


$
210,230


$
631,999


$
614,595Operating IncomeSpecialty pharmaceuticalsNorth America

$
21,139


$
17,429


$
64,934


$
51,313International


12,726



18,318



21,340



49,921EMEA


11,639



10,653



46,250



27,90545,504



46,400



132,524



129,139Corporate expenses(1)(2)


(20,422
)


(16,689
)


(56,330
)


(55,049
)Total specialty pharmaceuticals


25,082



29,711



76,194



74,090Restructuring charges and asset impairment(3)






(17,138
)


(13,575
)


(96,687
)Gain on litigation settlement






17,550







51,550Research and development


(12,463
)


(2,845
)


(3,962
)


(23,069
)Consolidated segment operating income


12,619



27,278



58,657



5,884Interest income


3,601



3,209



12,881



8,581Interest expense


(10,365
)


(10,960
)


(32,199
)


(32,258
)Other, net


(262
)


(454
)


2,556



1,240Income (loss) from continuing operations before provision for
    income taxes

$
5,593


$
19,073


$
41,895


$
(16,553
)     (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)
    
    The corporate expense total above includes certain corporate
    marketing expenses in 2007 for our products in development. In
    the three and nine months ended September 30, 2006,
    $1,700,000 and $6,400,000 of similar costs were allocated out of
    the corporate segment and reassigned to the research and
    development division, due to the ownership of certain
    intellectual property by a foreign subsidiary within this
    division. This foreign subsidiary no longer owns this
    intellectual property and the corresponding costs in 2007 are
    recognized as corporate expenses.(3)
    
    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. 28




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
     September 30,


December 31,Total Assets

2007


2006(Restated)


(Restated)North America

$
351,234


$
381,198International


219,928



203,292EMEA


481,188



514,600Corporate


329,633



207,802Research and Development Division


47,810



122,268Discontinued operations


65,395



76,532Total

$
1,495,188


$
1,505,692     September 30,


December 31,Long-Term Assets

2007


2006(Restated)


(Restated)North America

$
286,144


$
288,889International


78,383



58,607EMEA


210,780



201,420Corporate


110,057



75,506Research and Development Division


26,683



35,105Total

$
712,047


$
659,527    29




---



##### Table of Contents



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


Nine Months EndedSeptember 30,


September 30,Therapeutic Area/Product

2007


2006


2007


2006(Restated)


(Restated)


(Restated)


(Restated)NeurologyDiastat
AcuDialtm(P)

$
15,676


$
14,802


$
39,134


$
38,533Mestinon®(P)


13,819



11,444



38,371



33,579Cesamet®(P)


7,278



6,487



20,048



13,832Librax®


4,301



3,002



12,423



10,926Migranal®(P)


2,614



1,133



9,395



6,949Dalmane®/Dalmadorm®(P)


3,048



2,536



8,143



7,542Tasmar®(P)


2,714



1,636



7,067



4,487Melleril(P)


1,970



1,558



5,319



4,316Zelapar®(P)


1,825



3,824



3,401



3,824Other Neurology


15,258



16,088



47,242



46,299Total Neurology


68,503



62,510



190,543



170,287DermatologyEfudix/Efudex®(P)


17,010



15,498



47,002



46,049Kinerase®(P)


5,725



6,621



22,236



22,502Dermatixtm(P)


4,055



2,552



10,384



7,360Oxsoralen-Ultra®(P)


1,033



613



8,969



7,713Other Dermatology


9,171



9,950



26,550



30,481Total Dermatology


36,994



35,234



115,141



114,105Infectious DiseaseVirazole®(P)


2,451



2,133



11,015



11,698Other Infectious Disease


4,950



4,444



15,327



14,060Total Infectious Disease


7,401



6,577



26,342



25,758Other therapeutic classesBedoyectatm(P)


14,244



13,800



31,042



36,745Solcoseryl(P)


4,993



4,908



18,788



12,882Bisocard(P)


5,864



4,045



16,133



11,522Nyal(P)


3,340



2,134



9,094



8,691MVI (multi-vitamin infusion)(P)


3,191



3,608



8,361



9,334Espaven(P)


1,864



3,324



5,934



7,579Protamin(P)


1,531



1,397



4,951



4,721Other products


45,051



51,725



136,167



152,277Total other therapeutic classes


80,078



84,941



230,470



243,751Total product sales

$
192,976


$
189,262


$
562,496


$
553,901Total promoted product sales

$
114,245


$
104,053


$
324,787


$
299,858     (P)
    
    Promoted Products represent products promoted in at least one
    major territory with estimated global annual sales greater than
    $5 million. 30




---



##### Table of Contents



VALEANT
    PHARMACEUTICALS INTERNATIONAL
  NOTES TO
    CONSOLIDATED CONDENSED FINANCIAL
    STATEMENTS  (Continued)
    12.
    Alliance
    Revenue    For the Three Months


For the Nine MonthsEnded


EndedSeptember 30,


September 30,2007


2006


2007


2006Ribavirin royalty

$
14,078


$
20,968


$
50,253


$
60,694Licensing payment










19,200



Other










50



Total alliance revenue

$
14,078


$
20,968


$
69,503


$
60,694      31




---



##### 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
    Nine Months


Nine Months











TotalEnded


Ended











AdditionalSeptember 30,


September 30,


Year Ended December 31,





IncomeIncome (Expense)

2007


2006


2006


2005


Prior Periods


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

$
(1,120
)

$
(774
)

$
(1,554
)

$
(371
)

$
(2,155
)

$
(5,200
)Reversal of revenue in Italy


(1,550
)


(340
)


(290
)










(1,840
)Cost of goods bookkeeping in the UK and France


4,710



















4,710European pension accounting


(279
)


1,078



1,401



(256
)


(626
)


240Total impact before taxes


1,761



(36
)


(443
)


(627
)


(2,781
)


(2,090
)Tax effect on above


(613
)


84



204



139



988



718Other deferred tax items










(764
)


(61
)






(825
)Total impact of restatement

$
1,148


$
48


$
(1,003
)

$
(549
)

$
(1,793
)

$
(2,197
)  32




---



##### Table of Contents



Overview
      Company
    Strategy and Restructuring
    Targeted Growth Opportunities.
  Product Acquisitions.
  Efficient Manufacturing and Supply Chain
    Organization.
  Clinical Development Activities.
 33




---



##### Table of Contents



Results
    of Operations
    ® tm ® ® ® tm tm
   34




---



##### Table of Contents



Three Months EndedSeptember 30,


Increase/


Percent2007


2006


(Decrease)


Change(Restated)


(Restated)RevenuesSpecialty pharmaceuticalsNorth America

$
65,295


$
62,091


$
3,204



5
%International


54,290



60,259



(5,969
)


(10
)%EMEA


73,391



66,912



6,479



10
%Total specialty pharmaceuticals


192,976



189,262



3,714



2
%Alliance revenues (including ribavirin royalties)


14,078



20,968



(6,890
)


(33
)%Total revenues


207,054



210,230



(3,176
)


(2
)%Costs and ExpensesCost of goods sold (excluding amortization)


57,864



57,326



538



1
%Selling expenses


64,397



62,635



1,762



3
%General and administrative expenses


29,159



26,301



2,858



11
%Research and development costs


24,885



20,328



4,557



22
%Gain on litigation settlements






(17,550
)


17,550



NMRestructuring charges and asset impairment






17,138



(17,138
)


NMAmortization expense


18,130



16,774



1,356



8
%Operating income

$
12,619


$
27,278


$
(14,659
)Gross profit on product sales (excluding amortization)

$
135,112


$
131,936


$
3,176



2
%Gross margin


70
%


70
%   Nine Months EndedSeptember 30,


Increase/


Percent2007


2006


(Decrease)


Change(Restated)


(Restated)RevenuesSpecialty pharmaceuticalsNorth America

$
196,504


$
185,237


$
11,267



6
%International


145,394



169,416



(24,022
)


(14
)%EMEA


220,598



199,248



21,350



11
%Total specialty pharmaceuticals


562,496



553,901



8,595



2
%Alliance revenues (including ribavirin royalties)


69,503



60,694



8,809



15
%Total revenues


631,999



614,595



17,404



3
%Costs and ExpensesCost of goods sold (excluding amortization)


162,379



173,804



(11,425
)


(7
)%Selling expenses


190,482



183,254



7,228



4
%General and administrative expenses


84,017



84,006



11



0
%Research and development costs


68,612



73,999



(5,387
)


(7
)%Gain on litigation settlements






(51,550
)


51,550



NMRestructuring charges and asset impairment


13,575



96,687



(83,112
)


NMAmortization expense


54,277



48,511



5,766



12
%Operating income

$
58,657


$
5,884


$
52,773Gross profit on product sales (excluding amortization)

$
400,117


$
380,097


$
20,020



5
%Gross margin


71
%


69
%      35




---



##### Table of Contents



Alliance Revenue (including Ribavirin
    royalties):
 36




---



##### Table of Contents



Schering-Ploughs
        Gross Profit Margin (excluding
    amortization): paid-up
  Selling Expenses:
  General and Administrative Expenses:
  Research and Development:
 37




---



##### Table of Contents



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


Nine Months


YearEnded


Ended


EndedSeptember 30,


September 30,


December 31,2006


2006


2006Employee severances

$
1,922


$
13,935


$
16,997Contract cancellation and other cash costs


665



1,657



1,662Subtotal: cash charges


2,587



15,592



18,659Abandoned software and other capital assets


192



21,546



22,178Impairment of manufacturing and research facilities


14,359



59,549



97,344Subtotal: non-cash charges


14,551



81,095



119,522Total:

$
17,138


$
96,687


$
138,181   38




---



##### Table of Contents



Three Months


Nine Months


CumulativeEnded


Ended


TotalSeptember 30,


September 30,


Incurred2007


2007Employee Severances (approximately 490 employees)

$



$
5,130


$
22,127Contract cancellation and other cash costs






3,115



4,777Subtotal: cash charges






8,245



26,904Abandoned software and other capital assets










22,178Write-off of accumulated foreign currency translation adjustments






2,891



2,891Impairment of manufacturing and research facilities






2,439



99,783Subtotal: Non-cash charges






5,330



124,852Total:

$



$
13,575


$
151,756   Reconciliation
    of Cash Restructuring Payments with Restructuring
    Accrual
    Three MonthsEndedSeptember 30,2007Opening accrual

$
9,977Charges to earnings


0Cash paid


(4,771
)Closing accrual

$
5,206   Amortization:
  Other Income (expense), Net, Including Translation and
    Exchange:
  Interest Expense, net:
  Income Taxes:
 39




---



##### Table of Contents



Income (loss) from Discontinued Operations, Net of
    Taxes:
  Liquidity
    and Capital Resources
           40




---



##### Table of Contents



24-month
  Form 10-K
  Off-Balance
    Sheet Arrangements
  Form 10-K.
 41




---



##### Table of Contents



Products
    in Development
  Late
    Stage Development of New Chemical Entities
  Retigabine:
        Taribavirin:
    38-40 percent
   42




---



##### Table of Contents



Other
    Development Activities
  Infergen (Reported in Discontinued
    Operations):
    Cesamet:
  Foreign
    Operations
    Critical
    Accounting Estimates
     43




---



##### Table of Contents



Revenue
    Recognition
                 44




---



##### Table of Contents



Sales
    Incentives
    Income
    Taxes
      Impairment
    of Property, Plant and Equipment
    Valuation
    of Intangible Assets
       45




---



##### Table of Contents



Stock-based
    Compensation Expense
      2007

2006Average life of option (years)

5.73

4.10 - 5.80Stock price volatility

35% - 37%

37% - 39%Expected dividend per share

$0.00

$0.00 - $0.31Risk-free interest rate

4.24% - 4.76%

4.54% - 4.80%Weighted-average fair value of options

$7.00

$7.83         Contingencies
  Accounting for Contingencies
   46




---



##### Table of Contents



Other
    Financial Information
    Forward-Looking
    Statements
  Form 10-Q/A Form 10-Q/A, Form 10-Q/A).
    
    The future growth of our business depends on the development and
    approval of new products by us and our licensees, including
    taribavirin 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 has negatively impacted 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. 47




---



##### Table of Contents




    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 relationships with wholesale distributors, including those
    in Mexico, can affect sales results and, if there is a change in
    any of these relationships, our results may not meet our
    expectations.
    The successful commercialization of product candidates and the
    conduct of clinical trials are subject to many risks, including
    the ability to complete enrollment of the requisite number of
    patients in clinical trials and to conclude clinical trials
    within expected timeframes, adverse events that would require
    clinical trials to be prematurely terminated, clinical results
    that indicate continuing clinical and commercial pursuit of
    clinical candidates is not advisable, and the fact that Phase 2
    clinical trial results are not always indicative of those seen
    in Phase 3 clinical trials.
    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.
    Although we expect to divest assets held for sale, we may not be
    able to sell such assets or may receive less consideration than
    expected.
    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.
    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. 48




---



##### Table of Contents




    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 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      Notional/


Assets (Liabilities)Contract


Carrying


FairDescription

Amount


Value


ValueForward contracts

$
89,050


$
1,440


$
1,440Interest rate swaps


150,000



(2,648
)


(2,648
)Outstanding fixed-rate debt


780,000



(780,000
)


(732,553
)    49




---



##### Table of Contents



Item 4.
    Controls
    and Procedures  Disclosure
    Controls and Procedures
        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. 50




---



##### Table of Contents




    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
    PART II 
    OTHER INFORMATION
  Item 1.
    Legal
    Proceedings    Item 1A.
    Risk
    Factors  Form 10-K
  Item 2.
    Purchases
    of Equity Securities by the Issuer and Affiliated
    Purchasers  24-month
 51




---



##### Table of Contents



ApproximateDollar ValueAverage


of Shares thatTotal Number


Price Paid


May Yet bePeriod

of Shares Purchased


per Share


Purchased(In thousands)7/2/07 - 7/31/07


2,100,000


$
16.95


$
136,8638/1/07 - 8/17/07


1,022,600


$
16.08



120,401Total Share Repurchases


3,122,600


$
16.68


$
120,401   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
.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 November 6, 2006, which is incorporated herein by
    reference.15
.1

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

Awareness Letter of Independent Registered Public Accounting
    Firm.23


Consent of PricewaterhouseCoopers LLP31
.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.  52




---



##### 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)
   53




---



##### 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
.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 November 6, 2006, which is incorporated herein by
    reference.15
.1

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

Awareness Letter of Independent Registered Public Accounting
    Firm.23


Consent of PricewaterhouseCoopers LLP31
.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.  54