UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 Form 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2009
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number: 1-11397
 
 Valeant Pharmaceuticals International
 (Exact name of registrant as specified in its charter)
 Delaware(State or other jurisdiction of 
incorporation or organization)
    
    33-0628076(I.R.S. Employer
Identification No.)One Enterprise 
Aliso Viejo, California(Address of principal executive offices)
    
    92656(Zip Code)
 (949) 461-6000  (Registrants telephone number, including area code)
 þ o
 o o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ




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##### 



VALEANT PHARMACEUTICALS INTERNATIONAL
 INDEX
 PageNumberPART I  FINANCIAL INFORMATIONItem 1. Financial Statements (unaudited)
    
    
    2Consolidated Condensed Balance Sheets as of June 30, 2009 and December 31, 2008
    
    
    2Consolidated Condensed Statements of Operations for the three and six months ended June 30,
2009 and 2008
    
    
    3Consolidated Condensed Statements of Comprehensive Income for the three and six months ended
June 30, 2009 and 2008
    
    
    4Consolidated Condensed Statements of Cash Flows for the six months ended June 30, 2009 and 2008
    
    
    5Notes to Consolidated Condensed Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    33Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    50Item 4. Controls and Procedures
    
    
    50PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    51Item 1A. Risk Factors
    
    
    51Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    53Item 4. Submission of Matters to a Vote of Security Holders
    
    
    54Item 6. Exhibits
    
    
    55SIGNATURES
    
    
    57
 1




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##### 



PART I  FINANCIAL INFORMATION
 
 Item 1.
    
    Financial Statements
 VALEANT PHARMACEUTICALS INTERNATIONAL
 
 CONSOLIDATED CONDENSED BALANCE SHEETS
As of June 30, 2009 and December 31, 2008 (unaudited)
 June 30,
    
    
    December 31,2009
    
    
    2008(In thousands, except par value data)ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    345,620
    
    
    $
    199,582Marketable securities
    
    
    107,359
    
    
    
    19,193Accounts receivable, net
    
    
    145,622
    
    
    
    144,509Inventories, net
    
    
    85,159
    
    
    
    72,972Prepaid expenses and other current assets
    
    
    14,178
    
    
    
    17,605Current deferred tax assets, net
    
    
    19,029
    
    
    
    16,179Income taxes
    
    
    3,638
    
    
    
    Total current assets
    
    
    720,605
    
    
    
    470,040Property, plant and equipment, net
    
    
    95,435
    
    
    
    90,228Deferred tax assets, net
    
    
    2,151
    
    
    
    14,850Goodwill
    
    
    108,585
    
    
    
    114,634Intangible assets, net
    
    
    452,015
    
    
    
    467,795Other assets
    
    
    16,488
    
    
    
    28,385Total non-current assets
    
    
    674,674
    
    
    
    715,892$
    1,395,279
    
    
    $
    1,185,932LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Trade payables
    
    $
    31,608
    
    
    $
    41,638Accrued liabilities
    
    
    198,734
    
    
    
    231,450Notes payable and current portion of long-term debt
    
    
    766
    
    
    
    666Deferred revenue
    
    
    11,599
    
    
    
    15,415Income taxes payable
    
    
    8,354
    
    
    
    2,497Current deferred tax liabilities, net
    
    
    
    
    
    
    2,446Current liabilities for uncertain tax positions
    
    
    
    
    
    
    478Total current liabilities
    
    
    251,061
    
    
    
    294,590Long-term debt, less current portion
    
    
    649,447
    
    
    
    398,136Deferred revenue
    
    
    10,389
    
    
    
    11,841Deferred tax liabilities, net
    
    
    14,430
    
    
    
    812Liabilities for uncertain tax positions
    
    
    13,652
    
    
    
    53,425Other liabilities
    
    
    139,287
    
    
    
    175,380Total non-current liabilities
    
    
    827,205
    
    
    
    639,594Total liabilities
    
    
    1,078,266
    
    
    
    934,184Commitments and contingenciesStockholders Equity:Common stock, $0.01 par value; 200,000 shares authorized; 82,332 (June 30, 2009)
and 81,753 (December 31, 2008) shares outstanding (after deducting shares in
treasury of 19,787 as of June 30, 2009 and 18,688 as of December 31, 2008)
    
    
    824
    
    
    
    818Additional capital
    
    
    1,143,037
    
    
    
    1,138,575Accumulated deficit
    
    
    (841,729
    )
    
    
    (905,784
    )Accumulated other comprehensive income
    
    
    14,862
    
    
    
    18,122Total Valeant stockholders equity
    
    
    316,994
    
    
    
    251,732Noncontrolling interest
    
    
    19
    
    
    
    17Total stockholders equity
    
    
    317,013
    
    
    
    251,748$
    1,395,279
    
    
    $
    1,185,932
  2




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##### 



VALEANT PHARMACEUTICALS INTERNATIONAL
 
 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
For the three and six months ended June 30, 2009 and 2008
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Unaudited, in thousands, except per share data)Revenues:Product sales
    
    $
    166,865
    
    
    $
    138,751
    
    
    $
    319,698
    
    
    $
    277,961Service revenue
    
    
    5,606
    
    
    
    
    
    
    
    12,344
    
    
    
    Alliances (including ribavirin royalties)
    
    
    19,227
    
    
    
    14,805
    
    
    
    37,579
    
    
    
    27,578Total revenues
    
    
    191,698
    
    
    
    153,556
    
    
    
    369,621
    
    
    
    305,539Costs and expenses:Cost of goods sold (excluding amortization)
    
    
    42,750
    
    
    
    47,874
    
    
    
    82,447
    
    
    
    83,629Cost of services
    
    
    5,337
    
    
    
    
    
    
    
    9,663
    
    
    
    Selling, general and administrative
    
    
    62,535
    
    
    
    70,772
    
    
    
    126,751
    
    
    
    140,211Research and development costs, net
    
    
    9,145
    
    
    
    22,567
    
    
    
    17,880
    
    
    
    51,861Special charges and credits including acquired in-process research and
development
    
    
    1,974
    
    
    
    
    
    
    
    1,974
    
    
    
    Restructuring, asset impairments and dispositions
    
    
    1,694
    
    
    
    13,957
    
    
    
    2,905
    
    
    
    767Amortization expense
    
    
    17,105
    
    
    
    12,799
    
    
    
    34,109
    
    
    
    26,128Total costs and expenses
    
    
    140,540
    
    
    
    167,969
    
    
    
    275,729
    
    
    
    302,596Income (loss) from operations
    
    
    51,158
    
    
    
    (14,413
    )
    
    
    93,892
    
    
    
    2,943Other income (expense), net including translation and exchange
    
    
    (646
    )
    
    
    (298
    )
    
    
    566
    
    
    
    (1,829
    )Gain on early extinguishment of debt
    
    
    2,777
    
    
    
    
    
    
    
    7,376
    
    
    
    Interest income
    
    
    725
    
    
    
    5,236
    
    
    
    2,560
    
    
    
    9,960Interest expense
    
    
    (8,551
    )
    
    
    (13,325
    )
    
    
    (16,564
    )
    
    
    (26,709
    )Income (loss) from continuing operations before income taxes
    
    
    45,463
    
    
    
    (22,800
    )
    
    
    87,830
    
    
    
    (15,635
    )Provision for income taxes
    
    
    12,427
    
    
    
    29,215
    
    
    
    23,996
    
    
    
    33,874Income (loss) from continuing operations
    
    
    33,036
    
    
    
    (52,015
    )
    
    
    63,834
    
    
    
    (49,509
    )Income (loss) from discontinued operations, net of tax
    
    
    (175
    )
    
    
    (26,313
    )
    
    
    223
    
    
    
    (23,020
    )Net income (loss)
    
    
    32,861
    
    
    
    (78,328
    )
    
    
    64,057
    
    
    
    (72,529
    )Less: Net income attributable to noncontrolling interest
    
    
    1
    
    
    
    2
    
    
    
    2
    
    
    
    4Net income (loss) attributable to Valeant
    
    $
    32,860
    
    
    $
    (78,330
    )
    
    $
    64,055
    
    
    $
    (72,533
    )Basic income (loss) per share attributable to Valeant:Income (loss) from continuing operations attributable to Valeant
    
    $
    0.40
    
    
    $
    (0.58
    )
    
    $
    0.77
    
    
    $
    (0.55
    )Loss from discontinued operations attributable to Valeant
    
    
    
    
    
    
    (0.29
    )
    
    
    
    
    
    
    (0.26
    )Net income (loss) per share attributable to Valeant
    
    $
    0.40
    
    
    $
    (0.87
    )
    
    $
    0.77
    
    
    $
    (0.81
    )Diluted income (loss) per share attributable to Valeant:Income (loss) from continuing operations attributable to Valeant
    
    $
    0.39
    
    
    $
    (0.58
    )
    
    $
    0.76
    
    
    $
    (0.55
    )Income (loss) from discontinued operations attributable to Valeant
    
    
    
    
    
    
    (0.29
    )
    
    
    0.01
    
    
    
    (0.26
    )Net income (loss) per share attributable to Valeant
    
    $
    0.39
    
    
    $
    (0.87
    )
    
    $
    0.77
    
    
    $
    (0.81
    )Shares used
in per share computation - Basic
    
    
    82,794
    
    
    
    89,802
    
    
    
    82,733
    
    
    
    89,696Shares used
in per share computation - Diluted
    
    
    83,673
    
    
    
    89,802
    
    
    
    83,566
    
    
    
    89,696
  3




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##### 



VALEANT PHARMACEUTICALS INTERNATIONAL
 
 CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
For the three and six months ended June 30, 2009 and 2008
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Unaudited, in thousands)Net income (loss)
    
    $
    32,861
    
    
    $
    (78,328
    )
    
    $
    64,057
    
    
    $
    (72,529
    )Other comprehensive income (loss):Foreign currency translation adjustments
    
    
    26,011
    
    
    
    16,970
    
    
    
    (3,474
    )
    
    
    70,539Unrealized gain on marketable equity
securities
    
    
    172
    
    
    
    2,958
    
    
    
    172
    
    
    
    1,084Unrealized gain (loss) on hedges
    
    
    (155
    )
    
    
    622
    
    
    
    56
    
    
    
    27Pension liability adjustment
    
    
    (83
    )
    
    
    147
    
    
    
    (14
    )
    
    
    161Comprehensive income (loss)
    
    $
    58,806
    
    
    $
    (57,631
    )
    
    $
    60,797
    
    
    $
    (718
    )
  4




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##### 



VALEANT PHARMACEUTICALS INTERNATIONAL
 
 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
For the six months ended June 30, 2009 and 2008
 Six Months EndedJune 30,2009
    
    
    2008(Unaudited, in thousands)Cash flows from operating activities:Net income (loss)
    
    $
    64,057
    
    
    $
    (72,529
    )Income (loss) from discontinued operations
    
    
    223
    
    
    
    (23,020
    )Income (loss) from continuing operations
    
    
    63,834
    
    
    
    (49,509
    )Adjustments to reconcile income (loss) from continuing operations to net cash provided
by operating activities in continuing operations:Depreciation and amortization
    
    
    41,753
    
    
    
    35,686Provision for losses on accounts receivable and inventory
    
    
    1,505
    
    
    
    16,152Stock compensation expense
    
    
    7,703
    
    
    
    (1,687
    )Excess tax deduction from stock options exercised
    
    
    (734
    )
    
    
    Translation and exchange (gains) losses, net
    
    
    (625
    )
    
    
    1,829Impairment charges and other non-cash items
    
    
    8,320
    
    
    
    (21,045
    )Payments of accreted interest on long-term debt
    
    
    (22,987
    )
    
    
    Deferred income taxes
    
    
    (501
    )
    
    
    27,436Gain on extinguishment of debt
    
    
    (7,376
    )
    
    
    Change in assets and liabilities, net of effects of acquisitions:Accounts receivable
    
    
    11,850
    
    
    
    37,566Inventories
    
    
    (9,662
    )
    
    
    (16,565
    )Prepaid expenses and other assets
    
    
    4,603
    
    
    
    677Trade payables and accrued liabilities
    
    
    4,965
    
    
    
    12,838Income taxes
    
    
    2,790
    
    
    
    12,769Other liabilities
    
    
    (23,155
    )
    
    
    (90
    )Cash flow from operating activities in continuing operations
    
    
    82,283
    
    
    
    56,057Cash flow from operating activities in discontinued operations
    
    
    (2,434
    )
    
    
    (4,354
    )Net cash provided by operating activities
    
    
    79,849
    
    
    
    51,703Cash flows from investing activities:Capital expenditures
    
    
    (9,108
    )
    
    
    (5,769
    )Proceeds from sale of assets
    
    
    484
    
    
    
    418Proceeds from sale of businesses
    
    
    3,342
    
    
    
    48,575Proceeds from investments
    
    
    20,408
    
    
    
    77,904Purchase of investments
    
    
    (108,012
    )
    
    
    (100,172
    )Acquisition of businesses, license rights and product lines
    
    
    (84,098
    )
    
    
    (980
    )Cash flow from investing activities in continuing operations
    
    
    (176,984
    )
    
    
    19,976Cash flow from investing activities in discontinued operations
    
    
    (10,610
    )
    
    
    67,741Net cash provided by (used in) investing activities
    
    
    (187,594
    )
    
    
    87,717Cash flows from financing activities:Payments on long-term debt and notes payable
    
    
    (94,301
    )
    
    
    (595
    )Proceeds from capitalized lease financing, long-term debt and notes payable
    
    
    349,603
    
    
    
    101Stock option exercises and employee stock purchases
    
    
    31,445
    
    
    
    7,867Excess tax deduction from stock options exercised
    
    
    734
    
    
    
    Purchase of treasury stock
    
    
    (25,706
    )
    
    
    (6,819
    )Cash flow from financing activities in continuing operations
    
    
    261,775
    
    
    
    554Cash flow from financing activities in discontinued operations
    
    
    
    
    
    
    Net cash provided by financing activities
    
    
    261,775
    
    
    
    554Effect of exchange rate changes on cash and cash equivalents
    
    
    (7,992
    )
    
    
    16,961Net increase in cash and cash equivalents
    
    
    146,038
    
    
    
    156,935Cash and cash equivalents at beginning of period
    
    
    199,582
    
    
    
    309,365Cash and cash equivalents at end of period
    
    
    345,620
    
    
    
    466,300Cash and cash equivalents classified as part of discontinued operations
    
    
    
    
    
    
    (127,263
    )Cash and cash equivalents of continuing operations
    
    $
    345,620
    
    
    $
    339,037
  5




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##### 



VALEANT PHARMACEUTICALS INTERNATIONAL
 
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(all amounts in thousands, except share and per share amounts, unless otherwise indicated)
  1. Organization and Summary of Significant Accounting Policies
 Organization:
 Principles of Consolidation:
 Marketable Securities:
 Accumulated Other Comprehensive Income
 Discontinued Operations Accounting for the Disposal and Impairment of Long-Lived Assets Applying the Conditions in Paragraph 42 of FASB Statement No. 144 in Determining Whether to Report Discontinued
Operations
 Derivative Financial Instruments
 6




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VALEANT PHARMACEUTICALS INTERNATIONAL
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (Continued)
 Use of Estimates:
 Recently Adopted Accounting Standards:
 Noncontrolling Interests in Consolidated
Financial Statements-an amendment of ARB No. 51
 Effective Date of FASB Statement No. 157 Fair Value Measurements
 Business Combinations
 Accounting for Collaborative Arrangements
 Disclosures about Derivative Instruments and
Hedging Activities  an amendment of FASB Statement No. 133
 7




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VALEANT PHARMACEUTICALS INTERNATIONAL
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (Continued)
  Determination of the Useful Life
of Intangible Assets Goodwill and Other Intangible Assets
 Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)
  Recognition and
Presentation of Other-Than-Temporary Impairments
 Interim Disclosures
about Fair Value of Financial Instruments Disclosures about Fair Value of Financial Instruments
 Subsequent Events
 8




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VALEANT PHARMACEUTICALS INTERNATIONAL
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (Continued)
  New Accounting Standards Not Yet Adopted:
 Employers Disclosures
about Postretirement Benefit Plan Assets
 Amendments to FASB Interpretation No. 46(R) Consolidation of Variable Interest Entities
 The FASB Accounting Standards Codification TM and the Hierarchy of Generally Accepted Accounting Principles
 2. Restructuring
 Employers
Accounting for Postemployment Benefits Accounting for Costs Associated with Exit or Disposal
Activities Accounting for the Impairment or Disposal
of Long-lived Assets
 9




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VALEANT PHARMACEUTICALS INTERNATIONAL
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (Continued)
  2008 Restructuring
       Three Months
    
    
    Six MonthsEnded
    
    
    EndedJune 30,
    
    
    June 30,2009
    
    
    2009Severance costs (422 employees, cumulatively)
    
    $
    847
    
    
    $
    1,775Contract cancellation costs, legal and professional fees and other associated costs
    
    
    839
    
    
    
    1,094Subtotal: cash charges
    
    
    1,686
    
    
    
    2,869Non-cash charges
    
    
    8
    
    
    
    36Restructurings, asset impairments and dispositions
    
    $
    1,694
    
    
    $
    2,905
 10




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##### 



VALEANT PHARMACEUTICALS INTERNATIONAL
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (Continued)
    Three Months
    
    
    Six MonthsEnded
    
    
    EndedJune 30,
    
    
    June 30,2008
    
    
    2008Severance costs (144 employees, cumulatively)
    
    $
    5,854
    
    
    $
    12,069Legal and professional fees and other associated costs
    
    
    3,666
    
    
    
    8,552Subtotal: cash charges
    
    
    9,520
    
    
    
    20,621Stock compensation
    
    
    
    
    
    
    4,778Impairment of long-lived assets
    
    
    684
    
    
    
    8,537Loss on sale of long-lived assets
    
    
    2,736
    
    
    
    2,736Subtotal: restructuring expenses
    
    
    12,940
    
    
    
    36,672Gain on Invida transaction
    
    
    1,017
    
    
    
    (35,905
    )Restructurings, asset impairments and dispositions
    
    $
    13,957
    
    
    $
    767
 Classification of Inventory Markdowns
and Other Costs Associated with a Restructuring
 Reconciliation of Cash Restructuring Payments with Restructuring Accrual
  Reconciliation of Cash Payments and Accruals
 Restructuring accrual, March 31, 2009
    
    $
    8,404Charges to earnings
    
    
    1,686Cash paid
    
    
    (2,896
    )Restructuring accrual, June 30, 2009
    
    $
    7,194
 11




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##### 



VALEANT PHARMACEUTICALS INTERNATIONAL
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (Continued)
  3. Acquisitions and Collaboration Agreement
 Asset Purchase in Australia
  Emo-Farm Acquisition
   Current and long-term assets
    
    $
    14,364Identifiable intangible assets
    
    
    11,227Goodwill
    
    
    8,995Current and long-term liabilities
    
    
    (6,001
    )Net assets acquired
    
    $
    28,585
 Dow Acquisition
    12




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##### 



VALEANT PHARMACEUTICALS INTERNATIONAL
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (Continued)
    Value ofIntangible
    
    
    Weighted-AverageAssets
    
    
    AmortizationAcquired
    
    
    PeriodDeveloped formulations
    
    $
    104,500
    
    
    6.1 yearsOutlicensed technology
    
    
    70,000
    
    
    9.5 yearsCustomer relationships
    
    
    6,600
    
    
    7.0 yearsTotal identifiable intangible assets
    
    $
    181,100
 Collaboration Agreement with GSK
    13




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##### 



VALEANT PHARMACEUTICALS INTERNATIONAL
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (Continued)
  Three Months
    
    
    Six MonthsEnded
    
    
    EndedJune 30,
    
    
    June 30,2009
    
    
    2009Valeant research and development costs
    
    $
    5,477
    
    
    $
    13,424Valeant selling, general and administrative
    
    
    56
    
    
    
    2055,533
    
    
    
    13,629GSK expenses
    
    
    7,976
    
    
    
    13,279Total spending for Collaboration Agreement
    
    $
    13,509
    
    
    $
    26,908Equalization charge (credit)
    
    $
    1,222
    
    
    $
    (175
    )
  Six Months Ended June 30, 2009Selling,
    
    
    ResearchBalance
    
    
    Alliance
    
    
    General and
    
    
    andCollaboration Accounting Impact
    
    Sheet
    
    
    Revenue
    
    
    Administrative
    
    
    DevelopmentUpfront payment from GSK
    
    $
    125,000
    
    
    $
    
    
    
    $
    
    
    
    $
    Release from upfront payment in 2008
    
    
    (10,909
    )
    
    
    
    
    
    
    
    
    
    
    Incurred cost in 2009
    
    
    
    
    
    
    
    
    
    
    205
    
    
    
    13,424Incurred cost offset in 2009
    
    
    (13,454
    )
    
    
    
    
    
    
    (682
    )
    
    
    (12,772
    )Recognize alliance revenue
    
    
    (6,118
    )
    
    
    (6,118
    )
    
    
    
    
    
    
    Release from upfront payment
    
    
    (19,572
    )
    
    
    
    
    
    
    
    
    
    
    Remaining upfront payment from GSK
    
    $
    94,519
    
    
    
    
    
    
    
    
    
    
    
    Total equalization receivable from GSK
    
    $
    175
    
    
    
    
    
    
    
    477
    
    
    
    (652
    )Total expense and revenue
    
    
    
    
    
    $
    (6,118
    )
    
    $
    
    
    
    $
    Accrued liabilities
    
    $
    36,886Other liabilities
    
    
    36,886Deferred revenue short-term
    
    
    10,374Deferred revenue long-term
    
    
    10,373Remaining upfront payment from GSK
    
    $
    94,519
  4. Special Charges and Credits Including Acquired In-process Research and Development
 ® ®
  14




---



##### 



VALEANT PHARMACEUTICALS INTERNATIONAL
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (Continued)
 5. Discontinued Operations
   .
  15




---



##### 



VALEANT PHARMACEUTICALS INTERNATIONAL
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (Continued)
 Three
Months EndedJune 30,
    
    

Six Months Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008WEEMEA Business:Product sales
    
    $
    
    
    
    $
    53,208
    
    
    $
    
    
    
    $
    95,911Costs and expenses:Cost of goods sold (excluding amortization)
    
    
    
    
    
    
    21,605
    
    
    
    
    
    
    
    40,740Selling, general and administrative
    
    
    
    
    
    
    30,315
    
    
    
    
    
    
    
    50,772Research and development costs, net
    
    
    
    
    
    
    125
    
    
    
    
    
    
    
    223Restructuring, asset impairments and dispositions
    
    
    
    
    
    
    734
    
    
    
    
    
    
    
    1,260Amortization expense
    
    
    
    
    
    
    5,314
    
    
    
    
    
    
    
    10,050Total costs and expenses
    
    
    
    
    
    
    58,093
    
    
    
    
    
    
    
    103,045Other income (expense)
    
    
    
    
    
    
    249
    
    
    
    
    
    
    
    (1,239
    )Loss from discontinued operations before income taxes, WEEMEA
    
    
    
    
    
    
    (4,636
    )
    
    
    
    
    
    
    (8,373
    )Infergen:Product sales
    
    
    
    
    
    
    (50
    )
    
    
    
    
    
    
    1,000Costs and expenses:Cost of goods sold (excluding amortization)
    
    
    
    
    
    
    (69
    )
    
    
    
    
    
    
    2,007Selling, general and administrative
    
    
    
    
    
    
    (741
    )
    
    
    
    
    
    
    624Research and development costs, net
    
    
    
    
    
    
    68
    
    
    
    
    
    
    
    9,752Amortization expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total costs and expenses
    
    
    
    
    
    
    (742
    )
    
    
    
    
    
    
    12,383Income (loss) from discontinued operations, Infergen
    
    
    
    
    
    
    692
    
    
    
    
    
    
    
    (11,383
    )Other discontinued operations:Other income (expense)
    
    
    (240
    )
    
    
    792
    
    
    
    (360
    )
    
    
    792Consolidated discontinued operations:Loss from discontinued operations before income taxes
    
    
    (240
    )
    
    
    (3,152
    )
    
    
    (360
    )
    
    
    (18,964
    )Provision for income taxes
    
    
    
    
    
    
    17,873
    
    
    
    
    
    
    
    22,164Loss from discontinued operations
    
    
    (240
    )
    
    
    (21,025
    )
    
    
    (360
    )
    
    
    (41,128
    )Disposal of discontinued operations, net
    
    
    65
    
    
    
    (5,288
    )
    
    
    583
    
    
    
    18,108Income (loss) from discontinued operations, net
    
    $
    (175
    )
    
    $
    (26,313
    )
    
    $
    223
    
    
    $
    (23,020
    )
 6. Fair Value Measurements
     16




---



##### 



VALEANT PHARMACEUTICALS INTERNATIONAL
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (Continued)
  Assets (Liabilities)
    
    Assets (Liabilities)June 30, 2009
    
    December 31, 2008Level 1
    
    Level 2
    
    Level 3
    
    Level 1
    
    Level 2
    
    Level 3Available-for-sale securities
    
    $
    889
    
    
    $
    
    
    
    $
    
    
    
    $
    6,646
    
    
    $
    
    
    
    $
    Undesignated hedges
    
    
    
    
    
    
    (15
    )
    
    
    
    
    
    
    
    
    
    
    157
    
    
    
    Net investment derivative contracts
    
    
    
    
    
    
    (1,652
    )
    
    
    
    
    
    
    
    
    
    
    13
    
    
    
    Fair value hedges
    
    
    
    
    
    
    (1,076
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash flow derivative contracts
    
    
    
    
    
    
    56
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest rate swap
    
    
    
    
    
    
    (8
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 Accounting for Certain Investments in Debt
and Equity Securities
   7. Earnings Per Share
  17




---



##### 



VALEANT PHARMACEUTICALS INTERNATIONAL
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (Continued)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Income:Numerator for basic and diluted earnings per share attributable to Valeant:Income (loss) from continuing operations attributable to Valeant
    
    $
    33,035
    
    
    $
    (52,017
    )
    
    $
    63,832
    
    
    $
    (49,513
    )Income (loss) from discontinued operations
    
    
    (175
    )
    
    
    (26,313
    )
    
    
    223
    
    
    
    (23,020
    )Net income (loss) attributable to Valeant
    
    $
    32,860
    
    
    $
    (78,330
    )
    
    $
    64,055
    
    
    $
    (72,533
    )Shares:Denominator for basic earnings per share attributable to Valeant:Weighted shares outstanding
    
    
    82,225
    
    
    
    89,424
    
    
    
    82,165
    
    
    
    89,355Vested stock equivalents (not issued)
    
    
    569
    
    
    
    378
    
    
    
    568
    
    
    
    341Denominator for basic earnings per share attributable to Valeant
    
    
    82,794
    
    
    
    89,802
    
    
    
    82,733
    
    
    
    89,696Denominator for diluted earnings per share attributable to Valeant:Employee stock options
    
    
    622
    
    
    
    
    
    
    
    589
    
    
    
    Other dilutive securities
    
    
    257
    
    
    
    
    
    
    
    244
    
    
    
    Dilutive potential common shares
    
    
    879
    
    
    
    
    
    
    
    833
    
    
    
    Denominator for diluted earnings per share attributable to Valeant
    
    
    83,673
    
    
    
    89,802
    
    
    
    83,566
    
    
    
    89,696Basic income per share attributable to Valeant:Income (loss) from continuing operations attributable to Valeant
    
    $
    0.40
    
    
    $
    (0.58
    )
    
    $
    0.77
    
    
    $
    (0.55
    )Loss from discontinued operations
    
    
    
    
    
    
    (0.29
    )
    
    
    
    
    
    
    (0.26
    )Net income (loss) per share attributable to Valeant
    
    $
    0.40
    
    
    $
    (0.87
    )
    
    $
    0.77
    
    
    $
    (0.81
    )Diluted income per share attributable to Valeant:Income (loss) from continuing operations attributable to Valeant
    
    $
    0.39
    
    
    $
    (0.58
    )
    
    $
    0.76
    
    
    $
    (0.55
    )Income (loss) from discontinued operations
    
    
    
    
    
    
    (0.29
    )
    
    
    0.01
    
    
    
    (0.26
    )Net income (loss) per share attributable to Valeant
    
    $
    0.39
    
    
    $
    (0.87
    )
    
    $
    0.77
    
    
    $
    (0.81
    )
   8. Detail of Certain Accounts
  18




---



##### 



VALEANT PHARMACEUTICALS INTERNATIONAL
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (Continued)
 June 30,
    
    
    December 31,2009
    
    
    2008Accounts receivable, net:Trade accounts receivable
    
    $
    94,138
    
    
    $
    93,796Royalties receivable
    
    
    18,210
    
    
    
    21,774Other receivables
    
    
    36,969
    
    
    
    33,038149,317
    
    
    
    148,608Allowance for doubtful accounts
    
    
    (3,695
    )
    
    
    (4,099
    )$
    145,622
    
    
    $
    144,509Inventories, net:Raw materials and supplies
    
    $
    21,783
    
    
    $
    16,742Work-in-process
    
    
    11,235
    
    
    
    8,506Finished goods
    
    
    64,408
    
    
    
    61,64197,426
    
    
    
    86,889Allowance for inventory obsolescence
    
    
    (12,267
    )
    
    
    (13,917
    )$
    85,159
    
    
    $
    72,972Property, plant and equipment, net:Property, plant and equipment, at cost
    
    $
    186,836
    
    
    $
    178,156Accumulated depreciation and amortization
    
    
    (91,401
    )
    
    
    (87,928
    )$
    95,435
    
    
    $
    90,228
 Intangible assets:
 Weighted
    
    
    June 30, 2009
    
    
    December 31, 2008Average
    
    
    Gross
    
    
    Accumulated
    
    
    Net
    
    
    Gross
    
    
    Accumulated
    
    
    NetLives (years)
    
    
    Amount
    
    
    Amortization
    
    
    Amount
    
    
    Amount
    
    
    Amortization
    
    
    AmountProduct rightsNeurology
    
    
    12
    
    
    $
    277,612
    
    
    $
    (161,083
    )
    
    $
    116,529
    
    
    $
    276,229
    
    
    $
    (147,745
    )
    
    $
    128,484Dermatology
    
    
    13
    
    
    
    281,781
    
    
    
    (69,578
    )
    
    
    212,203
    
    
    
    275,032
    
    
    
    (54,906
    )
    
    
    220,126Other
    
    
    11
    
    
    
    86,845
    
    
    
    (44,910
    )
    
    
    41,935
    
    
    
    72,956
    
    
    
    (41,970
    )
    
    
    30,986Total product rights
    
    
    13
    
    
    
    646,238
    
    
    
    (275,571
    )
    
    
    370,667
    
    
    
    624,217
    
    
    
    (244,621
    )
    
    
    379,596Outlicensed technology
    
    
    10
    
    
    
    70,000
    
    
    
    (3,813
    )
    
    
    66,187
    
    
    
    74,000
    
    
    
    
    
    
    
    74,000Customer relationships
    
    
    8
    
    
    
    9,282
    
    
    
    (992
    )
    
    
    8,290
    
    
    
    8,242
    
    
    
    (30
    )
    
    
    8,212Trade names
    
    Indefinite
    
    
    6,871
    
    
    
    
    
    
    
    6,871
    
    
    
    5,987
    
    
    
    
    
    
    
    5,987License agreement
    
    
    5
    
    
    
    67,376
    
    
    
    (67,376
    )
    
    
    
    
    
    
    67,376
    
    
    
    (67,376
    )
    
    
    Total intangible assets
    
    
    
    
    
    $
    799,767
    
    
    $
    (347,752
    )
    
    $
    452,015
    
    
    $
    779,822
    
    
    $
    (312,027
    )
    
    $
    467,795
  Scheduled Future Amortization Expense2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    Thereafter
    
    
    TotalProduct rightsNeurology
    
    $
    12,480
    
    
    $
    24,534
    
    
    $
    18,970
    
    
    $
    17,876
    
    
    $
    16,825
    
    
    $
    25,844
    
    
    $
    116,529Dermatology
    
    
    14,566
    
    
    
    28,937
    
    
    
    28,937
    
    
    
    28,937
    
    
    
    27,315
    
    
    
    83,511
    
    
    
    212,203Other
    
    
    2,717
    
    
    
    5,578
    
    
    
    5,875
    
    
    
    5,916
    
    
    
    5,824
    
    
    
    16,026
    
    
    
    41,936Outlicensed technology
    
    
    3,813
    
    
    
    7,626
    
    
    
    8,234
    
    
    
    7,690
    
    
    
    7,689
    
    
    
    31,135
    
    
    
    66,187Customer relationships
    
    
    936
    
    
    
    1,651
    
    
    
    1,416
    
    
    
    1,180
    
    
    
    944
    
    
    
    2,162
    
    
    
    8,289Total
    
    $
    34,512
    
    
    $
    68,326
    
    
    $
    63,432
    
    
    $
    61,599
    
    
    $
    58,597
    
    
    $
    158,678
    
    
    $
    445,144
 19




---



##### 



VALEANT PHARMACEUTICALS INTERNATIONAL
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (Continued)
   Goodwill:
 9. Long-term Debt
 Senior Notes
    3.0% and 4.0% Convertible Subordinated Notes
  20




---



##### 



VALEANT PHARMACEUTICALS INTERNATIONAL
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (Continued)
    Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2009
    
    2008
    
    2009
    
    20083.0% Notes:Discount amortization
    
    $
    1,189
    
    
    $
    2,376
    
    
    $
    3,221
    
    
    $
    4,708Contractual coupon rate
    
    $
    922
    
    
    $
    1,800
    
    
    $
    2,341
    
    
    $
    3,6004.0% Notes:Discount amortization
    
    $
    1,558
    
    
    $
    1,462
    
    
    $
    3,105
    
    
    $
    2,896Contractual coupon rate
    
    $
    2,366
    
    
    $
    2,400
    
    
    $
    4,766
    
    
    $
    4,800
   June 30,
    
    
    December 31,2009
    
    
    20083.0% Notes
    
    $
    104,796
    
    
    $
    207,360Unamortized discount
    
    
    (4,740
    )
    
    
    (13,548
    )Net carrying value of 3.0% Notes
    
    $
    100,056
    
    
    $
    193,8124.0% Notes
    
    $
    224,960
    
    
    $
    240,000Unamortized discount
    
    
    (30,996
    )
    
    
    (36,179
    )Net carrying value of 4.0% Notes
    
    $
    193,964
    
    
    $
    203,821Equity component for 3.0% Notes
    
    $
    47,675
    
    
    $
    57,190Equity component for 4.0% Notes
    
    $
    58,352
    
    
    $
    62,167
  21




---



##### 



VALEANT PHARMACEUTICALS INTERNATIONAL
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (Continued)
  Accounting for Derivative Financial Instruments
Indexed to, and Potentially Settled in, a Companys Own Stock.
   10. Income Taxes
    Accounting for Uncertainty in Income Taxes- an interpretation of FASB Statement No. 109
 22




---



##### 



VALEANT PHARMACEUTICALS INTERNATIONAL
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (Continued)
   11. Stock and Stock Incentive Programs
 Stock and Securities Repurchase Programs
  Stock-based compensation
  23




---



##### 



VALEANT PHARMACEUTICALS INTERNATIONAL
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (Continued)
 Three Months
    
    
    Six MonthsEnded
    
    
    EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Employee stock options
    
    $
    1,144
    
    
    $
    (5,443
    )
    
    $
    2,638
    
    
    $
    (4,204
    )Restricted stock units
    
    
    1,408
    
    
    
    961
    
    
    
    3,354
    
    
    
    1,805Perfomance stock units
    
    
    829
    
    
    
    356
    
    
    
    1,711
    
    
    
    579Employee stock purchase plan
    
    
    
    
    
    
    67
    
    
    
    
    
    
    
    133Total stock-based compensation
    
    $
    3,381
    
    
    $
    (4,059
    )
    
    $
    7,703
    
    
    $
    (1,687
    )
   Remainder of 2009
    
    $
    6,3762010
    
    
    8,7982011
    
    
    3,1222012
    
    
    8052013
    
    
    102$
    19,203
 12. Derivative Financial Instruments
    24




---



##### 



VALEANT PHARMACEUTICALS INTERNATIONAL
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (Continued)
 As of June 30, 2009Asset Derivatives
    
    
    Liability DerivativesBalance
    
    
    
    
    
    
    BalanceNotional
    
    
    Sheet
    
    
    Fair
    
    
    Sheet
    
    
    FairDescription
    
    Amount
    
    
    Location
    
    
    Value
    
    
    Location
    
    
    ValueUndesignated hedges
    
    $
    4,024
    
    
    
    
    
    
    $
    
    
    
    Accrued liabilities
    
    $
    (15
    )Net investment derivative contracts
    
    
    20,379
    
    
    
    
    
    
    
    
    
    
    Accrued liabilities
    
    
    (1,652
    )Fair value hedges
    
    
    23,891
    
    
    
    
    
    
    
    
    
    
    Accrued liabilities
    
    
    (1,076
    )Interest rate swap
    
    
    2,264
    
    
    
    
    
    
    
    
    
    
    Accrued liabilities
    
    
    (8
    )Cash flow derivative contracts
    
    
    2,654
    
    
    Other assets
    
    
    56
    
    
    
    
    
    
    
    
 As of December 31, 2008Asset Derivatives
    
    
    Liability DerivativesBalance
    
    
    
    
    
    
    BalanceNotional
    
    
    Sheet
    
    
    Fair
    
    
    Sheet
    
    
    FairDescription
    
    Amount
    
    
    Location
    
    
    Value
    
    
    Location
    
    
    ValueUndesignated hedges
    
    $
    3,916
    
    
    Other assets
    
    $
    192
    
    
    Accrued liabilities
    
    $
    (35
    )Net investment derivative contracts
    
    
    18,779
    
    
    Other assets
    
    
    13
    
    
    
    
    
    
    
    
  
    
    Changes in the fair value of undesignated hedges are recorded in earnings in the
period of the change.
    
    Changes in the fair value of a derivative that is designated and qualifies as a
net investment hedge are recorded as translation adjustment in accumulated other
comprehensive income.
    
    Changes in the fair value of a derivative that is designated and qualifies as a
cash flow hedge are recorded in accumulated other comprehensive income and then
recognized in earnings when the hedged items affect earnings.
    
    Changes in the fair value of a derivative that is designated and qualifies as a
fair value hedge are recorded in exchange gains or loss in the period of the change.
    
    Changes in the fair value of the interest rate swap are recorded as interest
expense in the period of the change.
  25




---



##### 



VALEANT PHARMACEUTICALS INTERNATIONAL
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (Continued)
 Three Months Ended June 30, 2009Net
    
    CashInvestment
    
    Flow
    
    Fair
    
    InterestUndesignated
    
    Derivative
    
    Derivative
    
    Value
    
    RateDescription
    
    Hedges
    
    Contracts
    
    Contracts
    
    Hedges
    
    SwapLoss recognized in currency translation
adjustment in other comprehensive income
    
    $
    
    
    
    $
    (523
    )
    
    $
    
    
    
    $
    
    
    
    $
    Gain recognized in royalty income
    
    
    
    
    
    
    
    
    
    
    111
    
    
    
    
    
    
    
    Loss recognized in exchange gain / loss
    
    
    (84
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 Six Months Ended June 30, 2009Net
    
    CashInvestment
    
    Flow
    
    Fair
    
    InterestUndesignated
    
    Derivative
    
    Derivative
    
    Value
    
    RateDescription
    
    Hedges
    
    Contracts
    
    Contracts
    
    Hedges
    
    SwapGain recognized in currency translation
adjustment in other comprehensive income
    
    $
    
    
    
    $
    2,284
    
    
    $
    
    
    
    $
    
    
    
    $
    Gain recognized in royalty income
    
    
    
    
    
    
    
    
    
    
    111
    
    
    
    
    
    
    
    Gain recognized in exchange gain / loss
    
    
    86
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 Three Months Ended June 30, 2008Net
    
    CashInvestment
    
    Flow
    
    Fair
    
    InterestUndesignated
    
    Derivative
    
    Derivative
    
    Value
    
    RateDescription
    
    Hedges
    
    Contracts
    
    Contracts
    
    Hedges
    
    SwapLoss recognized in currency translation
adjustment in other comprehensive income
    
    $
    
    
    
    $
    (4,980
    )
    
    $
    
    
    
    $
    
    
    
    $
    Gain recognized in interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,140Loss recognized in royalty income
    
    
    
    
    
    
    
    
    
    
    (584
    )
    
    
    
    
    
    
    Loss recognized in exchange gain / loss
    
    
    (384
    )
    
    
    
    
    
    
    
    
    
    
    (977
    )
    
    
    
 Six Months Ended June 30, 2008Net
    
    CashInvestment
    
    Flow
    
    Fair
    
    InterestUndesignated
    
    Derivative
    
    Derivative
    
    Value
    
    RateDescription
    
    Hedges
    
    Contracts
    
    Contracts
    
    Hedges
    
    SwapLoss recognized in currency translation
adjustment in other comprehensive income
    
    $
    
    
    
    $
    (4,980
    )
    
    $
    
    
    
    $
    
    
    
    $
    Gain recognized in interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,459Loss recognized in royalty income
    
    
    
    
    
    
    
    
    
    
    (1,342
    )
    
    
    
    
    
    
    Loss recognized in exchange gain / loss
    
    
    (96
    )
    
    
    
    
    
    
    
    
    
    
    (321
    )
    
    
    
  13. Commitments and Contingencies
  SEC Investigation:
 Derivative Actions Related to Stock Options:
 26




---



##### 



VALEANT PHARMACEUTICALS INTERNATIONAL
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (Continued)
   Permax Product Liability Cases:
 Eli Lilly:
 27




---



##### 



VALEANT PHARMACEUTICALS INTERNATIONAL
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS   (Continued)
  Spear Pharmaceuticals, Inc
  Paddock Litigation: ®
 28




---



##### 



VALEANT PHARMACEUTICALS INTERNATIONAL
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (Continued)
  Tolmar Matter:
   Novel ANDA Patent Certification Notice
    14. Business Segments
    29




---



##### 



VALEANT PHARMACEUTICALS INTERNATIONAL
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (Continued)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008RevenuesSpecialty pharmaceuticals product sales
    
    $
    96,633
    
    
    $
    64,413
    
    
    $
    182,946
    
    
    $
    144,427Specialty pharmaceuticals services and alliance revenue (1)
    
    
    12,196
    
    
    
    
    
    
    
    24,101
    
    
    
    Branded
generics - Europe product sales
    
    
    34,032
    
    
    
    38,500
    
    
    
    69,370
    
    
    
    76,453Branded
generics - Latin America product sales
    
    
    36,200
    
    
    
    35,838
    
    
    
    67,382
    
    
    
    57,081Alliances (ribavirin royalties)
    
    
    12,637
    
    
    
    14,805
    
    
    
    25,822
    
    
    
    27,578Consolidated revenues
    
    $
    191,698
    
    
    $
    153,556
    
    
    $
    369,621
    
    
    $
    305,539Operating Income (Loss)Specialty pharmaceuticals
    
    $
    34,089
    
    
    $
    (12,017
    )
    
    $
    62,339
    
    
    $
    (15,705
    )Branded
generics - Europe
    
    
    6,791
    
    
    
    3,106
    
    
    
    15,655
    
    
    
    15,847Branded
generics - Latin America
    
    
    13,772
    
    
    
    5,244
    
    
    
    25,980
    
    
    
    2,86954,652
    
    
    
    (3,667
    )
    
    
    103,974
    
    
    
    3,011Alliances
    
    
    12,637
    
    
    
    14,805
    
    
    
    25,822
    
    
    
    27,578Corporate (2)
    
    
    (12,463
    )
    
    
    (11,594
    )
    
    
    (31,025
    )
    
    
    (26,879
    )Subtotal
    
    
    54,826
    
    
    
    (456
    )
    
    
    98,771
    
    
    
    3,710Special charges and credits including acquired in-process research
and development
    
    
    (1,974
    )
    
    
    
    
    
    
    (1,974
    )
    
    
    Restructuring, asset impairments and dispositions
    
    
    (1,694
    )
    
    
    (13,957
    )
    
    
    (2,905
    )
    
    
    (767
    )Consolidated segment operating income (loss)
    
    
    51,158
    
    
    
    (14,413
    )
    
    
    93,892
    
    
    
    2,943Interest income
    
    
    725
    
    
    
    5,236
    
    
    
    2,560
    
    
    
    9,960Interest expense
    
    
    (8,551
    )
    
    
    (13,325
    )
    
    
    (16,564
    )
    
    
    (26,709
    )Gain on early extinguishment of debt
    
    
    2,777
    
    
    
    
    
    
    
    7,376
    
    
    
    Other, net
    
    
    (646
    )
    
    
    (298
    )
    
    
    566
    
    
    
    (1,829
    )Income (loss) from continuing operations before income taxes
    
    $
    45,463
    
    
    $
    (22,800
    )
    
    $
    87,830
    
    
    $
    (15,635
    )
 
 (1)
    
    Specialty pharmaceuticals services and alliance revenue consists of: Three Months
    
    
    Six MonthsEnded
    
    
    EndedJune 30,
    
    
    June 30,2009
    
    
    2009Service revenue
    
    $
    5,606
    
    
    $
    12,344Dow dermatology royalties
    
    
    3,790
    
    
    
    5,639GSK Collaboration
    
    
    2,800
    
    
    
    6,118Total specialty pharmaceuticals services and alliance revenue
    
    $
    12,196
    
    
    $
    24,101
 
 (2)
    
    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.  30




---



##### 



VALEANT PHARMACEUTICALS INTERNATIONAL
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (Continued)
 June 30,
    
    
    December 31,2009
    
    
    2008Total AssetsSpecialty pharmaceuticals
    
    $
    599,925
    
    
    $
    692,734Branded generics - Europe
    
    
    159,096
    
    
    
    219,234Branded generics - Latin America
    
    
    119,154
    
    
    
    103,573Alliances
    
    
    13,877
    
    
    
    16,436Corporate
    
    
    503,227
    
    
    
    153,955Total
    
    $
    1,395,279
    
    
    $
    1,185,932
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2009
    
    2008
    
    2009
    
    2008Sales:McKesson
    
    $
    37,525
    
    
    $
    19,565
    
    
    $
    70,784
    
    
    $
    49,393Cardinal
    
    
    24,187
    
    
    
    13,943
    
    
    
    45,433
    
    
    
    32,085Percentage of total product sales:McKesson
    
    
    22
    %
    
    
    14
    %
    
    
    22
    %
    
    
    18
    %Cardinal
    
    
    14
    %
    
    
    10
    %
    
    
    14
    %
    
    
    12
    %
 15. Alliance Revenue
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Ribavirin royalty
    
    $
    12,637
    
    
    $
    14,805
    
    
    $
    25,822
    
    
    $
    27,578Dermatology royalties
    
    
    3,790
    
    
    
    
    
    
    
    5,639
    
    
    
    GSK Collaboration
    
    
    2,800
    
    
    
    
    
    
    
    6,118
    
    
    
    Total alliance revenue
    
    $
    19,227
    
    
    $
    14,805
    
    
    $
    37,579
    
    
    $
    27,578
 16. Related Parties
  31




---



##### 



VALEANT PHARMACEUTICALS INTERNATIONAL
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (Continued)
  17. Subsequent Events
  32




---



##### 



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
  Company Overview
 Introduction
    Business Strategy
     33




---



##### 



Pharmaceutical Products
   Alliance Revenue
   34




---



##### 



in vitro
 Research and Development
  Collaboration Agreement
    35




---



##### 



Three Months
    
    
    Six MonthsEnded
    
    
    EndedJune 30,
    
    
    June 30,2009
    
    
    2009(in thousands)Valeant research and development costs
    
    $
    5,477
    
    
    $
    13,424Valeant selling, general and administrative
    
    
    56
    
    
    
    2055,533
    
    
    
    13,629GSK expenses
    
    
    7,976
    
    
    
    13,279Total spending for Collaboration Agreement
    
    $
    13,509
    
    
    $
    26,908Equalization charge (credit)
    
    $
    1,222
    
    
    $
    (175
    )
  Six Months Ended June 30, 2009Selling,
    
    
    ResearchBalance
    
    
    Alliance
    
    
    General and
    
    
    andCollaboration Accounting Impact
    
    Sheet
    
    
    Revenue
    
    
    Administrative
    
    
    DevelopmentUpfront payment from GSK
    
    $
    125,000
    
    
    $
    
    
    
    $
    
    
    
    $
    Release from upfront payment in 2008
    
    
    (10,909
    )
    
    
    
    
    
    
    
    
    
    
    Incurred cost in 2009
    
    
    
    
    
    
    
    
    
    
    205
    
    
    
    13,424Incurred cost offset in 2009
    
    
    (13,454
    )
    
    
    
    
    
    
    (682
    )
    
    
    (12,772
    )Recognize alliance revenue
    
    
    (6,118
    )
    
    
    (6,118
    )
    
    
    
    
    
    
    Release from upfront payment
    
    
    (19,572
    )
    
    
    
    
    
    
    
    
    
    
    Remaining upfront payment from GSK
    
    $
    94,519
    
    
    
    
    
    
    
    
    
    
    
    Total equalization receivable from GSK
    
    $
    175
    
    
    
    
    
    
    
    477
    
    
    
    (652
    )Total expense and revenue
    
    
    
    
    
    $
    (6,118
    )
    
    $
    
    
    
    $
    Accrued liabilities
    
    $
    36,886Other liabilities
    
    
    36,886Deferred revenue short-term
    
    
    10,374Deferred revenue long-term
    
    
    10,373Remaining upfront payment from GSK
    
    $
    94,519
  Results of Operations
   36




---



##### 



Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(in thousands)RevenuesSpecialty pharmaceuticals product sales
    
    $
    96,633
    
    
    $
    64,413
    
    
    $
    182,946
    
    
    $
    144,427Specialty pharmaceuticals services and alliance revenue
    
    
    12,196
    
    
    
    
    
    
    
    24,101
    
    
    
    Branded generics - Europe
    
    
    34,032
    
    
    
    38,500
    
    
    
    69,370
    
    
    
    76,453Branded generics - Latin America
    
    
    36,200
    
    
    
    35,838
    
    
    
    67,382
    
    
    
    57,081Alliances (ribavirin royalties)
    
    
    12,637
    
    
    
    14,805
    
    
    
    25,822
    
    
    
    27,578Consolidated revenues
    
    
    191,698
    
    
    
    153,556
    
    
    
    369,621
    
    
    
    305,539Costs and expensesCost of goods sold (excluding amortization)
    
    
    42,750
    
    
    
    47,874
    
    
    
    82,447
    
    
    
    83,629Cost of services
    
    
    5,337
    
    
    
    
    
    
    
    9,663
    
    
    
    Selling, general and administrative
    
    
    62,535
    
    
    
    70,772
    
    
    
    126,751
    
    
    
    140,211Research and development costs, net
    
    
    9,145
    
    
    
    22,567
    
    
    
    17,880
    
    
    
    51,861Special charges and credits including acquired in-process research and
development
    
    
    1,974
    
    
    
    
    
    
    
    1,974
    
    
    
    Restructuring, asset impairments and dispositions
    
    
    1,694
    
    
    
    13,957
    
    
    
    2,905
    
    
    
    767Amortization expense
    
    
    17,105
    
    
    
    12,799
    
    
    
    34,109
    
    
    
    26,128Income (loss) from operations
    
    $
    51,158
    
    
    $
    (14,413
    )
    
    $
    93,892
    
    
    $
    2,943
  Product Sales Revenues:
   37




---



##### 



Alliance Revenue
   in vitro
   Three Months
    
    
    Six MonthsEnded
    
    
    EndedJune 30,
    
    
    June 30,2009
    
    
    2009Service revenue
    
    $
    5,606
    
    
    $
    12,344Dow dermatology royalties
    
    
    3,790
    
    
    
    5,639GSK Collaboration
    
    
    2,800
    
    
    
    6,118Total specialty pharmaceuticals services and alliance revenue
    
    $
    12,196
    
    
    $
    24,101
 Gross Profit Margin:
 38




---



##### 



Three Months EndedJune 30,
    
    
    Increase
    
    
    Percent2009
    
    
    2008
    
    
    (Decrease)
    
    
    Change(in thousands)Gross Profit (excluding product amortization)Specialty pharmaceuticals
    
    $
    78,453
    
    
    $
    48,245
    
    
    $
    30,208
    
    
    
    63
    %% of product sales
    
    
    81
    %
    
    
    75
    %Branded
generics - Europe
    
    
    19,048
    
    
    
    20,364
    
    
    
    (1,316
    )
    
    
    (6
    )%% of product sales
    
    
    56
    %
    
    
    53
    %Branded
generics - Latin America
    
    
    26,601
    
    
    
    21,321
    
    
    
    5,280
    
    
    
    25
    %% of product sales
    
    
    73
    %
    
    
    59
    %Corporate
    
    
    13
    
    
    
    947
    
    
    
    (934
    )
    
    
    % of product sales
    
    
    
    
    
    
    Consolidated gross profit
    
    $
    124,115
    
    
    $
    90,877
    
    
    $
    33,238
    
    
    
    37
    %% of product sales
    
    
    74
    %
    
    
    65
    %Product AmortizationSpecialty pharmaceuticals
    
    $
    13,443
    
    
    $
    9,101
    
    
    $
    4,342
    
    
    
    48
    %Branded
generics - Europe
    
    
    497
    
    
    
    313
    
    
    
    184
    
    
    
    59
    %Branded
generics - Latin America
    
    
    855
    
    
    
    1,021
    
    
    
    (166
    )
    
    
    (16
    )%Total product amortization
    
    $
    14,795
    
    
    $
    10,435
    
    
    $
    4,360
    
    
    
    42
    %Gross Profit (including product amortization)Specialty pharmaceuticals
    
    $
    65,010
    
    
    $
    39,144
    
    
    $
    25,866
    
    
    
    66
    %% of product sales
    
    
    67
    %
    
    
    61
    %Branded
generics - Europe
    
    
    18,551
    
    
    
    20,051
    
    
    
    (1,500
    )
    
    
    (7
    )%% of product sales
    
    
    55
    %
    
    
    52
    %Branded
generics - Latin America
    
    
    25,746
    
    
    
    20,300
    
    
    
    5,446
    
    
    
    27
    %% of product sales
    
    
    71
    %
    
    
    57
    %Corporate
    
    
    13
    
    
    
    947
    
    
    
    (934
    )
    
    
    % of product sales
    
    
    
    
    
    
    Consolidated gross profit
    
    $
    109,320
    
    
    $
    80,442
    
    
    $
    28,878
    
    
    
    36
    %% of product sales
    
    
    66
    %
    
    
    58
    %
 39




---



##### 



Six Months EndedJune 30,
    
    
    Increase
    
    
    Percent2009
    
    
    2008
    
    
    (Decrease)
    
    
    Change(in thousands)Gross Profit (excluding product amortization)Specialty pharmaceuticals
    
    $
    149,402
    
    
    $
    114,760
    
    
    $
    34,642
    
    
    
    30
    %% of product sales
    
    
    82
    %
    
    
    79
    %Branded
generics - Europe
    
    
    37,969
    
    
    
    45,155
    
    
    
    (7,186
    )
    
    
    (16
    )%% of product sales
    
    
    55
    %
    
    
    59
    %Branded
generics - Latin America
    
    
    49,886
    
    
    
    33,536
    
    
    
    16,350
    
    
    
    49
    %% of product sales
    
    
    74
    %
    
    
    59
    %Corporate
    
    
    (6
    )
    
    
    881
    
    
    
    (887
    )
    
    
    % of product sales
    
    
    
    
    
    
    Consolidated gross profit
    
    $
    237,251
    
    
    $
    194,332
    
    
    $
    42,919
    
    
    
    22
    %% of product sales
    
    
    74
    %
    
    
    70
    %Product AmortizationSpecialty pharmaceuticals
    
    $
    27,114
    
    
    $
    18,803
    
    
    $
    8,311
    
    
    
    44
    %Branded
generics - Europe
    
    
    731
    
    
    
    591
    
    
    
    140
    
    
    
    24
    %Branded
generics - Latin America
    
    
    1,634
    
    
    
    2,007
    
    
    
    (373
    )
    
    
    (19
    )%Total product amortization
    
    $
    29,479
    
    
    $
    21,401
    
    
    $
    8,078
    
    
    
    38
    %Gross Profit (including product amortization)Specialty pharmaceuticals
    
    $
    122,288
    
    
    $
    95,957
    
    
    $
    26,331
    
    
    
    27
    %% of product sales
    
    
    67
    %
    
    
    66
    %Branded
generics - Europe
    
    
    37,238
    
    
    
    44,564
    
    
    
    (7,326
    )
    
    
    (16
    )%% of product sales
    
    
    54
    %
    
    
    58
    %Branded
generics - Latin America
    
    
    48,252
    
    
    
    31,529
    
    
    
    16,723
    
    
    
    53
    %% of product sales
    
    
    72
    %
    
    
    55
    %Corporate
    
    
    (6
    )
    
    
    881
    
    
    
    (887
    )
    
    
    % of product sales
    
    
    
    
    
    
    Consolidated gross profit
    
    $
    207,772
    
    
    $
    172,931
    
    
    $
    34,841
    
    
    
    20
    %% of product sales
    
    
    65
    %
    
    
    62
    %
 Selling, General and Administrative Expenses:
 Research and Development Costs:
 40




---



##### 



Special Charges and Credits Including Acquired In-process Research and Development: ® ®
 Restructuring, Asset Impairments and Dispositions: Employers Accounting for Postemployment Benefits Accounting for
Costs Associated with Exit or Disposal Activities Accounting for the Impairment or Disposal of Long-lived Assets
 2008 Restructuring
   41




---



##### 



Three Months
    
    
    Six MonthsEnded
    
    
    EndedJune 30,
    
    
    June 30,2009
    
    
    2009Severance costs (422 employees, cumulatively)
    
    $
    847
    
    
    $
    1,775Contract cancellation costs, legal and professional fees and other associated costs
    
    
    839
    
    
    
    1,094Subtotal: cash charges
    
    
    1,686
    
    
    
    2,869Non-cash charges
    
    
    8
    
    
    
    36Restructurings, asset impairments and dispositions
    
    $
    1,694
    
    
    $
    2,905
    42




---



##### 



Three Months
    
    
    Six MonthsEnded
    
    
    EndedJune 30,
    
    
    June 30,2008
    
    
    2008Severance costs (144 employees, cumulatively)
    
    $
    5,854
    
    
    $
    12,069Legal and professional fees and other associated costs
    
    
    3,666
    
    
    
    8,552Subtotal: cash charges
    
    
    9,520
    
    
    
    20,621Stock compensation
    
    
    
    
    
    
    4,778Impairment of long-lived assets
    
    
    684
    
    
    
    8,537Loss on sale of long-lived assets
    
    
    2,736
    
    
    
    2,736Subtotal: restructuring expenses
    
    
    12,940
    
    
    
    36,672Gain on Invida transaction
    
    
    1,017
    
    
    
    (35,905
    )Restructurings, asset impairments and dispositions
    
    $
    13,957
    
    
    $
    767
 Classification of Inventory Markdowns
and Other Costs Associated with a Restructuring
 Reconciliation of Cash Restructuring Payments with Restructuring Accrual
  Reconciliation of Cash Payments and Accruals
 Restructuring accrual, March 31, 2009
    
    $
    8,404Charges to earnings
    
    
    1,686Cash paid
    
    
    (2,896
    )Restructuring accrual, June 30, 2009
    
    $
    7,194
  Amortization:
 Interest Expense and Income:
  43




---



##### 



Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion
(Including Partial Cash Settlement)
 Gain on Early Extinguishment of Debt:
 Other Income (Expense) Net, Including Translation and Exchange:
 Income Taxes:
  Accounting for
Income Taxes
 44




---



##### 



Income (loss) from Discontinued Operations, Net:
 Liquidity and Capital Resources
     45




---



##### 



Off-Balance Sheet Arrangements
  Products in Development
 Retigabine
    >
 46




---



##### 



>
     Taribavirin
    47




---



##### 



Dermatology Products
  IDP-107:
 IDP-108:
 48




---



##### 



IDP-113:
 IDP-115:
 Foreign Operations
  Critical Accounting Estimates
  Other Financial Information
  Forward-Looking Statements
  49




---



##### 



Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
  Notional/
    
    Assets (Liabilities)Contract
    
    Carrying
    
    FairDescription
    
    Amount
    
    Value
    
    ValueUndesignated hedges
    
    $
    4,024
    
    
    $
    (15
    )
    
    $
    (15
    )Net investment derivative contracts
    
    
    20,379
    
    
    
    (1,652
    )
    
    
    (1,652
    )Fair value hedges
    
    
    23,891
    
    
    
    (1,076
    )
    
    
    (1,076
    )Cash flow derivative contracts
    
    
    2,654
    
    
    
    56
    
    
    
    56Interest rate swap
    
    
    2,264
    
    
    
    (8
    )
    
    
    (8
    )
  
 Item 4.
    
    Controls and Procedures
 Disclosure Controls and Procedures
   50




---



##### 



Changes in Internal Control over Financial Reporting
  
 PART II  OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings
  
 Item 1A.
    
    Risk Factors
  If we, our partners or licensees cannot successfully develop or obtain future products and
commercialize those products, our growth would be delayed.
   51




---



##### 



Our business, financial condition and results of operations are subject to risks arising from the
international scope of our operations.
  
    
    difficulties and costs of staffing, severance and benefit payments and managing
international operations;
    
    exchange controls, currency restrictions and exchange rate fluctuations;
    
    unexpected changes in regulatory requirements;
    
    price controls restrictions on products sold in the relevant countries;
    
    the burden of complying with multiple and potentially conflicting laws;
    
    the geographic, time zone, language and cultural differences between personnel in
different areas of the world;
    
    market share and product sales in certain markets being dependent on actions by and
relationships with key distributors;
    
    greater difficulty in collecting accounts receivables in and moving cash out of certain
geographic regions;
    
    difficulties from repatriating earnings in our foreign subsidiaries to the Company in a
manner that is tax efficient, or at all; and
    
    the need for a significant amount of available cash from operations to fund our business
in a number of geographic and economically diverse locations; and political, social and
economic instability in emerging markets in which we currently operate.
 Legislative or regulatory reform of the healthcare system may affect our ability to sell our
products profitably.
   Many of our key processes, opportunities and expenses are a function of existing national and/or
local government regulation. Significant changes in regulations could have a material adverse
impact on our business.
  52




---



##### 



We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar
worldwide anti-bribery laws.
   
 Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
  53




---



##### 



Approximate DollarTotal Number of
    
    
    Value of Shares thatTotal Number of
    
    
    Average Price
    
    
    Shares Purchased
    
    
    May Yet BeShares
    
    
    Paid Per
    
    
    as Part of Publicly
    
    
    Purchased under thePeriod
    
    Repurchased
    
    
    Share
    
    
    Announced Plan
    
    
    Plan(In thousands)4/1/09 - 4/30/09
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    100,6805/1/09 - 5/31/09
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    366,3616/1/09 - 6/30/09
    
    
    1,108,970
    
    
    $
    23.17
    
    
    
    1,108,970
    
    
    $
    324,038Total
    
    
    1,108,970
    
    
    $
    23.17
    
    
    
    1,108,970
 
 Item 4.
    
    Submission of Matters to a Vote of Security Holders
    Votes Cast
    
    Votes Cast
    
    Votes
    
    VotesMatter
    
    For
    
    Against
    
    Withheld
    
    AbstainElection of Robert A. Ingram
    
    
    67,797,965
    
    
    
    
    
    
    
    2,582,912
    
    
    
    14,682Election of Lawrence N. Kugelman
    
    
    70,005,464
    
    
    
    
    
    
    
    370,346
    
    
    
    19,748Election of Theo Melas-Kyriazi
    
    
    69,865,666
    
    
    
    
    
    
    
    508,849
    
    
    
    1,894Ratification of appointment of PricewaterhouseCoopers LLP
    
    
    70,224,101
    
    
    
    158,296
    
    
    
    
    
    
    
    13,163
 54




---



##### 



Item 6. 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 (File No. 03995078), which
is incorporated herein by reference.3.2
    
    
    Certificate of Designation, Preferences and Rights of Series A
Participating Preferred Stock previously filed as Exhibit 3.1 to
the Registrants Current Report on Form 8-K, dated October 6,
2004, which is incorporated herein by reference.3.3
    
    
    Certificate of Correction to Restated Certificate of
Incorporation, dated April 3, 2006, previously filed as Exhibit
3.3 to the Registrants Form 10-Q for the quarter ended September
30, 2007, which is incorporated herein by reference.3.4
    
    
    Amended and Restated Bylaws of the Registrant previously filed as
Exhibit 3.1 to the Registrants Current Report on Form 8-K, dated
February 25, 2008, which is incorporated herein by reference.4.1
    
    
    Form of Rights Agreement, dated as of November 2, 1994, between
the Registrant and American Stock Transfer & Trust Company, as
trustee, previously filed as Exhibit 4.3 to the Registrants
Registration Statement on Form 8-A, dated November 10, 1994 (No.
94558814), which is incorporated herein by reference.4.2
    
    
    Amendment No. 1 to Rights Agreement, dated as of October 5, 2004,
by and between Valeant Pharmaceuticals International and American
Transfer & Trust Company as Rights Agent, previously filed as
Exhibit 4.1 to the Registrants Current Report on Form 8-K, dated
October 6, 2004, which is incorporated herein by reference.4.3
    
    
    Amendment No. 2 to Rights Agreement, dated as of June 5, 2008, by
and between Valeant Pharmaceuticals International and American
Transfer & Trust Company as Rights Agent, previously filed as
Exhibit 4.3 to the Registrants Amendment No. 4 to Form 8-A/A,
filed June 6, 2008, which is incorporated herein by reference.4.4
    
    
    Amendment No. 3 to Rights Agreement, dated as of May 15, 2009, by
and between Valeant Pharmaceuticals International and American
Transfer & Trust Company as Rights Agent, previously filed as
Exhibit 4.4 to the Registrants Amendment No. 5 to Form 8-A/A,
filed May 15, 2009, which is incorporated herein by reference.10.1
    
    
    Agreement and Plan of Merger, dated December 9, 2008, by and
among Valeant Pharmaceuticals International, Descartes
Acquisition Corp., Dow Pharmaceutical Sciences, Inc., and Harris
Goodman, as Stockholder Representative, previously filed as
Exhibit 2.1 to the Registrants Current Report on Form 8-K/A,
filed May 22, 2009, which is incorporated herein by reference.10.2
    
    
    Waiver, Release and Option Agreement for Taribavirin, effective
as of May 29, 2009, by and between Valeant Pharmaceuticals
International, Schering Corporation and Schering-Plough Ltd.10.3
    
    
    Exchange and Registration Rights Agreement, dated as of June 9,
2009, by and among the Company, Goldman, Sachs & Co. and UBS
Securities LLC as Representative of the several Initial
Purchasers named therein and the Guarantors (as defined therein),
relating to the 8.375% Senior Notes due 2016, previously filed as
Exhibit 99.1 to the Registrants Current Report on Form 8-K,
filed June 11, 2009, which is incorporated herein by reference.10.4
    
    
    Indenture, dated as of June 9, 2009, by and among the Company,
the Guarantors named therein and The Bank of New York Mellon
Trust Company, N.A., as Trustee, relating to the 8.375% Senior
Notes due 2016, previously filed as Exhibit 99.2 to the
Registrants Current Report on Form 8-K, filed June 11, 2009,
which is incorporated herein by reference.10.5
    
    
    Purchase Agreement, dated as of June 3, 2009, by and among the
Company, the Purchasers named in Schedule I thereto and the
Guarantors (as defined therein), relating to the 8.375% Senior
Notes due
 55




---



##### 



2016, previously filed as Exhibit 99.3 to the
Registrants Current Report on Form 8-K, filed June 11, 2009,
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.31.1
    
    
    Certification of Chief Executive Officer pursuant to Rule
13a-14(a) under the Exchange Act and Section 302 of the
Sarbanes-Oxley Act of 2002.31.2
    
    
    Certification of Chief Financial Officer pursuant to Rule
13a-14(a) under the Exchange Act and Section 302 of the
Sarbanes-Oxley Act of 2002.32.1
    
    
    Certification of Chief Executive Officer and Chief Financial
Officer of Periodic Financial Reports pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, 18 U.S.C. § 1350.
 
 
    
    Portions of this exhibit have been omitted pursuant to an Order Granting Confidential Treatment
issued by the SEC or a request for confidential treatment filed with the SEC. Such information has
been omitted and filed separately with the Securities and Exchange Commission. 56




---



##### 



SIGNATURES
  Valeant Pharmaceuticals International
Registrant/s/ J. Michael PearsonJ. Michael PearsonDate: August 4, 2009
    Chairman and Chief Executive Officer/s/ Peter J. BlottPeter J. BlottDate: August 4, 2009
    Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer) 57




---



##### 



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(No. 03995078), which is
incorporated herein by reference.3.2
    
    
    Certificate of Designation, Preferences and Rights of Series A
Participating Preferred Stock previously filed as Exhibit 3.1 to
the Registrants Current Report on Form 8-K, dated October 6,
2004, which is incorporated herein by reference.3.3
    
    
    Certificate of Correction to Restated Certificate of
Incorporation, dated April 3, 2006, previously filed as Exhibit
3.3 to the Registrants Form 10-Q for the quarter ended September
30, 2007, which is incorporated herein by reference.3.4
    
    
    Amended and Restated Bylaws of the Registrant previously filed as
Exhibit 3.1 to the Registrants Current Report on Form 8-K, dated
February 25, 2008, which is incorporated herein by reference.4.1
    
    
    Form of Rights Agreement, dated as of November 2, 1994, between
the Registrant and American Stock Transfer & Trust Company, as
trustee, previously filed as Exhibit 4.3 to the Registrants
Registration Statement on Form 8-A, dated November 10, 1994 (No.
94558814), which is incorporated herein by reference.4.2
    
    
    Amendment No. 1 to Rights Agreement, dated as of October 5, 2004,
by and between Valeant Pharmaceuticals International and American
Transfer & Trust Company as Rights Agent, previously filed as
Exhibit 4.1 to the Registrants Current Report on Form 8-K, dated
October 6, 2004, which is incorporated herein by reference.4.3
    
    
    Amendment No. 2 to Rights Agreement, dated as of June 5, 2008, by
and between Valeant Pharmaceuticals International and American
Transfer & Trust Company as Rights Agent, previously filed as
Exhibit 4.3 to the Registrants Amendment No. 4 to Form 8-A/A,
filed June 6, 2008, which is incorporated herein by reference.4.4
    
    
    Amendment No. 3 to Rights Agreement, dated as of May 15, 2009, by
and between Valeant Pharmaceuticals International and American
Transfer & Trust Company as Rights Agent, previously filed as
Exhibit 4.4 to the Registrants Amendment No. 5 to Form 8-A/A,
filed May 15, 2009, which is incorporated herein by reference.10.1
    
    
    Agreement and Plan of Merger, dated December 9, 2008, by and
among Valeant Pharmaceuticals International, Descartes
Acquisition Corp., Dow Pharmaceutical Sciences, Inc., and Harris
Goodman, as Stockholder Representative, previously filed as
Exhibit 2.1 to the Registrants Current Report on Form 8-K/A,
filed May 22, 2009, which is incorporated herein by reference.10.2
    
    
    Waiver, Release and Option Agreement for Taribavirin, effective
as of May 29, 2009, by and between Valeant Pharmaceuticals
International, Schering Corporation and Schering-Plough Ltd. 10.3
    
    
    Exchange and Registration Rights Agreement, dated as of June 9,
2009, by and among the Company, Goldman, Sachs & Co. and UBS
Securities LLC as Representative of the several Initial
Purchasers named therein and the Guarantors (as defined therein),
relating to the 8.375% Senior Notes due 2016, previously filed as
Exhibit 99.1 to the Registrants Current Report on Form 8-K,
filed June 11, 2009, which is incorporated herein by reference.10.4
    
    
    Indenture, dated as of June 9, 2009, by and among the Company,
the Guarantors named therein and The Bank of New York Mellon
Trust Company, N.A., as Trustee, relating to the 8.375% Senior
Notes due 2016, previously filed as Exhibit 99.2 to the
Registrants Current Report on Form 8-K, filed June 11, 2009,
which is incorporated herein by reference.10.5
    
    
    Purchase Agreement, dated as of June 3, 2009, by and among the
Company, the Purchasers named in




---



##### 



Schedule I thereto and the
Guarantors (as defined therein), relating to the 8.375% Senior
Notes due 2016, previously filed as Exhibit 99.3 to the
Registrants Current Report on Form 8-K, filed June 11, 2009,
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.31.1
    
    
    Certification of Chief Executive Officer pursuant to Rule
13a-14(a) under the Exchange Act and Section 302 of the
Sarbanes-Oxley Act of 2002.31.2
    
    
    Certification of Chief Financial Officer pursuant to Rule
13a-14(a) under the Exchange Act and Section 302 of the
Sarbanes-Oxley Act of 2002.32.1
    
    
    Certification of Chief Executive Officer and Chief Financial
Officer of Periodic Financial Reports pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, 18 U.S.C. § 1350.
 
 
    
    Portions of this exhibit have been omitted pursuant to an Order Granting Confidential
Treatment issued by the SEC or a request for confidential treatment filed with the SEC. Such
information has been omitted and filed separately with the Securities and Exchange Commission.