Valeant plans restructuring to reduce costs, improve earnings, focus on late-stage products

New York, April 3 - Valeant Pharmaceuticals International announced a restructuring plan intended to cut costs, accelerate earnings growth and focus research and development resources on select late-stage pipeline products.

The reductions are primarily focused on research and development operations and selling, general and administrative expenses across all divisions, the Costa Mesa, Calif., specialty pharmaceutical company said.

Valeant also announced it expects to report approximately break-even adjusted earnings per share in the first quarter of 2006, excluding the impact of any restructuring charges, as a result of slightly lower-than-anticipated revenues that are consistent with historical trends, and higher selling and research and development expenses.

The restructuring includes:

• Rationalize discovery and preclinical development operations;

• Out-license pradefovir, the company's compound in development for the treatment of hepatitis B, and VRX-840773, its HIV compound;

• Restructure the clinical and product development organization to focus on completing the development of Viramidine (taribavirin), retigabine and Infergen;

• Reduce selling expense to a range of 29% to 31% of product sales in 2006;

• Reduce general and administrative expenses to a range of 11% to 13% of product sales in 2006;

• Reduce commercial regions to three from four; and,

• Rationalize manufacturing facilities further to reach the goal of cost of goods sold of 20% to 25% by 2008.

"The steps we are taking are driven by our goal to deliver a significant increase in earnings over the next three years," said Timothy Tyson, president and chief executive officer, in a news release.

"We continue to expect our revenues to grow at an annual rate of 5% to 10%."

Excluding restructuring costs, Valeant said it expects to report adjusted earnings of more than $0.50 per diluted share in 2006. The company also expects to report adjusted earnings of more than $1.00 per diluted share in 2007. The company reiterates its 2008 goal of $1.90 in adjusted diluted earnings per share, excluding any impact from Viramidine.

As a result of these steps, Valeant expects to record a restructuring charge of about $80 million to $100 million, of which a portion will be recorded in the 2006 first quarter. About 25% to 35% of the restructuring charge will be in cash.

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