Valeant misses expectations, losing $89 million in Q4 and $116M for full year

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The corporate logo for Valeant Pharmaceuticals International, Inc. is shown. THE CANADIAN PRESS/HO, Valeant Pharmaceuticals

MONTREAL - Valeant Pharmaceuticals International expects that its $2.6 billion acquisition of U.S.-based dermatology company Medicis Pharmaceutical Corp. will generate larger cost savings than previously forecast.

"There is significantly more value for shareholders in this transaction than we originally modelled," CEO Michael Pearson said Thursday during a conference call about its fourth-quarter and 2012 results.

The Montreal-based company says the deal helps its plans to become a global leader in dermatology and complements its portfolio in the areas of acne medication and injectable dermal fillers in esthetic products.

Valeant spent $105 million in restructuring costs related to Medicis in the fourth quarter, including $78 million in severances. Pre-acquisition costs were $181.7 million, mostly from stock-based compensation.

Overall, the company is closing several facilities, including one on the outskirts of Montreal where it is consolidating operations in Laval. It's unclear how many employees will be affected, but a company spokeswoman said many will likely relocate to Laval.

Pearson said the company continues to eye more opportunities for growth even as it seeks to reduce its debt in the coming months.

"We continue to be in active conversations for both large and small deals but the timing of deals is unpredictable so we're not going to give any timing commitments," he told analysts.

Valeant missed expectations as it net loss grew in the fourth-quarter and full-year amid higher operating expenses and items related to restructuring and acquisitions.

The pharmaceutical company, which is Canada's largest publicly traded drug maker, said its net loss was $89.1 million or 29 cents per diluted share in the latest period.

For the full year, the loss was $116 million or 38 cents per share.

That compared with net earnings of $44.8 million or 18 cents in its fourth quarter a year ago and a full-year net profit of $159.6 million or 49 cents per share for 2011.

Adjusting for one-time items, it earned $1.22 per share, two cents below analyst forecasts, according to Thomson Reuters, but better than 87 cents per share a year ago. Excluding interest expense for Medicis, its earnings increased 43 per cent to $1.34 per share.

Valeant (TSX:VRX) completed the acquisition of Medicis Corp. on Dec. 11, but said its operations had no material impact on the results for the fourth quarter.

It earned $4.14 per share in adjusted full-year profits, compared to $4.52 per share expected by analysts, but above the $2.64 per share reported in 2011.

Revenue soared in both periods, up 43 per cent to $986.3 million in the quarter, rising to $3.55 billion for all of 2012 compared with $2.46 billion in 2011.

Valeant said $423 million in adjusted cash flow from operations during the quarter raised the total to $1.3 billion for the year, at the high end of its earlier guidance.

The company said all business units met or exceeded expectations as revenues excluding acquisitions grew about seven per cent in the quarter.

"Consistent with our track record over the last five years, we have overdelivered on every key metric — revenue growth, cash EPS and adjusted cash flows from operations," he added.

"We are particularly pleased to report a return to growth for our neurology and other business (segment) after six quarters of decline."

Douglas Miehm of RBC Capital Markets said the results were in line with his expectations and reflect the closure of the Medicis deal and typical one-time items.

"Valeant reported fourth-quarter results which were largely uneventful considering that the company provided guidance in early January when it gave 2013 guidance," he wrote in a report.

Valeant said its Canadian and Australian segment had negative organic product sales growth in the quarter as expected, due to the growth in a generic version of Casamet since last March. Excluding this drug, the segment's organic sales grew by five per cent.

The emerging markets segment's pro forma organic product sales grew by 15 per cent, driven by growth in all geographic areas.

Valeant Pharmaceuticals is a multinational specialty pharmaceutical company that develops, manufactures and markets a broad range of products primarily in the areas of neurology, dermatology and branded generics.

On the Toronto Stock Exchange, its shares gained $1.30 or nearly two per cent to $69.55 on Thursday.