Valeant 2012 Form 10-K
`
`https://www.sec.gov/Archives/edgar/data/885590/000088559013000014/...
`
`10-K 1 valeant2012form10-k.htm 10-K
`
`UNITED STATES
`SECURITIES AND EXCHANGE COMMISSION
`Washington, D.C. 20549
`_____________________________
`
`FORM 10-K
`ý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
`For the fiscal year ended December 31, 2012
`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 001-14956
`VALEANT PHARMACEUTICALS INTERNATIONAL, INC.
`(Exact Name of Registrant as Specified in its Charter)
`
`CANADA
`State or other jurisdiction of
`incorporation or organization
`
`98-0448205
`(I.R.S. Employer Identification No.)
`
`4787 Levy Street
`Montreal, Quebec
`CANADA, H4R 2P9
` (Address of principal executive offices)
`
`Registrant's telephone number, including area code (514) 744-6792
`
`Securities registered pursuant to Section 12(b) of the Act:
`
`Title of each class
`Common Shares, No Par Value
`Securities registered pursuant to section 12(g) of the Act:
`
`Name of each exchange on which registered
`New York Stock Exchange, Toronto Stock Exchange
`
`None
`(Title of class)
`Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý No o
`
`Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No ý
`
`Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or Section 15(d) of the Securities Exchange Act of 1934
`during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
`for the past 90 days. Yes ý No o
`
`Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be
`submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and
`post such files). Yes ý No o
`
`Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of
`registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
`
`Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the
`definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
`
`Large accelerated filer ý
`
`Non-accelerated filer o
`Accelerated filer o
`(Do not check if a smaller reporting company)
`
`Smaller reporting company o
`
`Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý
`
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`ACRUX DDS PTY LTD. et al.
`
`EXHIBIT 1604
`
`IPR Petition for
`
`U.S. Patent No. 7,214,506
`
`

`

`Valeant 2012 Form 10-K
`
`https://www.sec.gov/Archives/edgar/data/885590/000088559013000014/...
`
`10-K 1 valeant2012form10-k.htm 10-K
`
`UNITED STATES
`SECURITIES AND EXCHANGE COMMISSION
`Washington, D.C. 20549
`_____________________________
`
`FORM 10-K
`ý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
`For the fiscal year ended December 31, 2012
`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 001-14956
`VALEANT PHARMACEUTICALS INTERNATIONAL, INC.
`(Exact Name of Registrant as Specified in its Charter)
`
`CANADA
`State or other jurisdiction of
`incorporation or organization
`
`98-0448205
`(I.R.S. Employer Identification No.)
`
`4787 Levy Street
`Montreal, Quebec
`CANADA, H4R 2P9
` (Address of principal executive offices)
`
`Registrant's telephone number, including area code (514) 744-6792
`
`Securities registered pursuant to Section 12(b) of the Act:
`
`Title of each class
`Common Shares, No Par Value
`Securities registered pursuant to section 12(g) of the Act:
`
`Name of each exchange on which registered
`New York Stock Exchange, Toronto Stock Exchange
`
`None
`(Title of class)
`Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý No o
`
`Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No ý
`
`Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or Section 15(d) of the Securities Exchange Act of 1934
`during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
`for the past 90 days. Yes ý No o
`
`Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be
`submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and
`post such files). Yes ý No o
`
`Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of
`registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
`
`Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the
`definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
`
`Large accelerated filer ý
`
`Non-accelerated filer o
`Accelerated filer o
`(Do not check if a smaller reporting company)
`
`Smaller reporting company o
`
`Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý
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`Valeant 2012 Form 10-K
`
`https://www.sec.gov/Archives/edgar/data/885590/000088559013000014/...
`
`The aggregate market value of the common shares held by non-affiliates of the registrant as of the last business day of the registrant’s most recently completed second
`fiscal quarter was $10,315,067,000 based on the last reported sale price on the New York Stock Exchange on June 29, 2012.
`
`The number of outstanding shares of the registrant’s common stock, as of February 22, 2013 was 305,758,623.
`
`DOCUMENTS INCORPORATED BY REFERENCE
`
`Part III incorporates certain information by reference from the registrant’s proxy statement for the 2013 Annual Meeting of Shareholders. Such proxy
`statement will be filed no later than 120 days after the close of the registrant’s fiscal year ended December 31, 2012.
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`Valeant 2012 Form 10-K
`
`https://www.sec.gov/Archives/edgar/data/885590/000088559013000014/...
`
`TABLE OF CONTENTS
`
`GENERAL INFORMATION
`
`PART I
`
`Item 1.
`Item 1A.
`Item 1B.
`Item 2.
`Item 3.
`Item 4.
`
`Item 5.
`
`Item 6.
`Item 7.
`Item 7A.
`Item 8.
`Item 9.
`Item 9A.
`Item 9B.
`
`Item 10.
`Item 11.
`Item 12.
`Item 13.
`Item 14.
`
`Business
`Risk Factors
`Unresolved Staff Comments
`Properties
`Legal Proceedings
`Mine Safety Disclosures
`
`PART II
`Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
`Securities
`Selected Financial Data
`Management’s Discussion and Analysis of Financial Condition and Results of Operations
`Quantitative and Qualitative Disclosures About Market Risk
`Financial Statements and Supplementary Data
`Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
`Controls and Procedures
`Other Information
`
`PART III
`Directors, Executive Officers and Corporate Governance
`Executive Compensation
`Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
`Certain Relationships and Related Transactions, and Director Independence
`Principal Accounting Fees and Services
`
`Exhibits and Financial Statement Schedules
`Item 15.
`SIGNATURES
`
`PART IV
`
`i
`
`Page
`
`1
`12
`21
`22
`22
`22
`
`23
`27
`28
`74
`74
`74
`74
`74
`
`75
`75
`75
`75
`75
`
`76
`84
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`Valeant 2012 Form 10-K
`
`https://www.sec.gov/Archives/edgar/data/885590/000088559013000014/...
`
`Basis of Presentation
`
`General
`
`On September 28, 2010, Biovail Corporation (“Biovail”) completed the acquisition of Valeant Pharmaceuticals International
`(“Valeant”) through a wholly-owned subsidiary, pursuant to an Agreement and Plan of Merger, dated as of June 20, 2010, with
`Valeant surviving as a wholly-owned subsidiary of Biovail (the “Merger”). In connection with the Merger, Biovail was renamed
`“Valeant Pharmaceuticals International, Inc.” Biovail is both the legal and accounting acquirer in the Merger. Accordingly, the pre-
`acquisition consolidated financial statements of Biovail are the historical financial statements of the Company going forward such
`that the accompanying financial statements reflect Biovail’s stand-alone operations as they existed prior to the completion of the
`Merger. The results of Valeant’s business have been included in the financial statements only for periods subsequent to the
`completion of the Merger.
`
`Except where the context otherwise requires, all references in this Annual Report on Form 10-K (“Form 10-K”) to the
`“Company”, “we”, “us”, “our” or similar words or phrases are to Valeant Pharmaceuticals International, Inc. and its subsidiaries,
`taken together. In this Form 10-K, references to “$” and “US$” are to United States dollars, references to “C$” are to Canadian
`dollars, references to “€” are to Euros, references to “AUD$” are to Australian dollars, references to “R$” are to Brazilian real,
`references to “MXN$” are to Mexican peso and references to “PLN” are to Polish zloty. Unless otherwise indicated, the statistical
`and financial data contained in this Form 10-K are presented as of December 31, 2012.
`
`Trademarks
`
`The following words are trademarks of our Company and are the subject of either registration, or application for registration,
`in one or more of Canada, the United States of America (the “U.S.”) or certain other jurisdictions: ACANYA®, AFEXA®,
`ACNEFREE™, AMBI®, ANDOLEX®, ANTI-ANGIN ®, ANTIGRIPPIN™, APLENZIN®, ARESTIN®, ATRALIN®,
`BEDOYECTA®, BENZACLIN®, BIAFINE®, BIOVAIL®, BISOCARD™, CALADRYL®, CARAC®, CARDIOPIRIN™,
`CARDIZEM®, CERAVE®, CESAMET®, CLODERM®, COLD-FX®, COLDSORE-FX®, CORN HUSKERS ®, CORTAID®,
`DERMAGLOW®, DERMAVEEN®, DERMIK®, DIASTAT®, DIFFLAM®, DUROMINE®, DURO-TUSS®, EFUDEX®,
`EMERVEL®, ERTACZO®, EUCALYPTUS MA™, GLUMETZA®, LACRISERT®, LODALIS™, MACUGEN®, MELLERIL®,
`METERMINE®, M.V.I.®, NITOMAN®, NORGESIC®, OCEAN®, ORTHO DERMATOLOGICS®, PERLANE®, PERLANE-
`L®, PHOLTEX®, POTIGA™, PURPOSE® RENOVA®, RESTYLANE®, RESTYLANE-L®, RETIN-A MICRO®,
`RIKODEINE®, SAGE™, SCULPTRA®, SHOWER TO SHOWER ®, SOLODYN®, TAMBOCOR®, TANDENE®,
`TARGRETIN®, THROMBO AS™, TIAZAC®, TIMOPTIC®, TROBALT®, VALEANT®, VALEANT V & DESIGN®,
`VALEANT PHARMACEUTICALS & DESIGN®, VANOS®, XENAZINE®, XENAZINA®, ZIANA®, and ZYCLARA®.
`
`WELLBUTRIN®, WELLBUTRIN® XL, WELLBUTRIN XL® and ZOVIRAX® are trademarks of The GlaxoSmithKline
`Group of Companies and are used by us under license. ULTRAM® is a trademark of Ortho-McNeil, Inc. (now known as PriCara, a
`division of Ortho-McNeil-Janssen Pharmaceuticals, Inc.) and is used by us under license. MVE® is a registered trademark of
`Healthpoint, Ltd. and is used by us under license. ELIDEL® and XERESE® are registered trademarks of Meda Pharma SARL and
`are used by us under license. VISUDYNE® is a registered trademark of Novartis Pharma AG and is used by us under license.
`DYSPORT® is a registered trademark of Ipsen Biopharm Limited and is used by us under license. MONOPRIL®, CEFZIL®,
`DURACEF® and MEGACE® are registered trademarks of Bristol-Myers Squibb Company and are used by us under license.
`
`In addition, we have filed trademark applications for many of our other trademarks in the U.S., Canada and in other
`jurisdictions and have implemented, on an ongoing basis, a trademark protection program for new trademarks.
`
`Forward-Looking Statements
`
`Caution regarding forward-looking information and statements and “Safe-Harbor” statements under the U.S. Private Securities
`Litigation Reform Act of 1995:
`
`To the extent any statements made in this Annual Report on Form 10-K contain information that is not historical, these
`statements are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and
`Section 21E of the Securities Exchange Act of 1934, as amended, and may be forward-looking information within the meaning
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`
`defined under applicable Canadian securities legislation (collectively, “forward-looking statements”).
`
`These forward-looking statements relate to, among other things: the expected benefits of our acquisitions (including the
`Medicis acquisition) and other transactions, such as cost savings, operating synergies and growth potential of the Company;
`business plans and prospects, prospective products or product approvals, future performance or results of current and anticipated
`products; the impact of healthcare reform; exposure to foreign currency exchange rate changes and interest rate changes; the
`
`ii
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`Valeant 2012 Form 10-K
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`https://www.sec.gov/Archives/edgar/data/885590/000088559013000014/...
`
`outcome of contingencies, such as certain litigation and regulatory proceedings; general market conditions; and our expectations
`regarding our financial performance, including revenues, expenses, gross margins, liquidity and income taxes.
`
`Forward-looking statements can generally be identified by the use of words such as “believe”, “anticipate”, “expect”,
`“intend”, “estimate”, “plan”, “continue”, “will”, “may”, “could”, “would”, “target”, “potential” and other similar expressions.
`In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are
`forward-looking statements. These forward-looking statements may not be appropriate for other purposes. Although we have
`indicated above certain of these statements set out herein, all of the statements in this Form 10-K that contain forward-looking
`statements are qualified by these cautionary statements. Although we believe that the expectations reflected in such forward-looking
`statements are reasonable, such statements involve risks and uncertainties, and undue reliance should not be placed on such
`statements. Certain material factors or assumptions are applied in making forward-looking statements, including, but not limited to,
`factors and assumptions regarding the items outlined above. Actual results may differ materially from those expressed or implied in
`such statements. Important factors that could cause actual results to differ materially from these expectations include, among other
`things, the following:
`
`•
`
`•
`
`•
`
`•
`
`•
`
`•
`
`•
`
`•
`
`•
`
`•
`
`•
`
`•
`
`•
`
`our ability to compete against companies that are larger and have greater financial, technical and human resources than
`we do, as well as other competitive factors, such as technological advances achieved, patents obtained and new products
`introduced by our competitors;
`
`the introduction of generic competitors of our brand products;
`
`the introduction of products that compete against our products that do not have patent or data exclusivity rights, which
`products represent a significant portion of our revenues;
`
`the challenges and difficulties associated with managing the rapid growth of our Company and a large, complex business;
`
`our ability to identify, acquire, close and integrate acquisition targets successfully and on a timely basis;
`
`our ability to secure and maintain third-party research, development, manufacturing, marketing or distribution
`arrangements;
`
`factors relating to the integration of the companies, businesses and products acquired by the Company (including the
`integration relating to our recent acquisition of Medicis), such as the time and resources required to integrate such
`companies, businesses and products, the difficulties associated with such integrations, and the achievement of the
`anticipated benefits from such integrations;
`
`our eligibility for benefits under tax treaties and the continued availability of low effective tax rates for the business profits
`of certain of our subsidiaries;
`
`our substantial debt and debt service obligations and their impact on our financial condition and results of operations;
`
`our future cash flow, our ability to service and repay our existing debt and our ability to raise additional funds, if needed, in
`light of our current and projected levels of operations, acquisition activity and general economic conditions;
`
`interest rate risks associated with our floating debt borrowings;
`
`the risks associated with the international scope of our operations, including our presence in emerging markets and the
`challenges we face when entering new geographic markets;
`
`adverse global economic conditions and credit market and foreign currency exchange uncertainty in Central and Eastern
`European and other countries in which we do business;
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`Valeant 2012 Form 10-K
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`
`•
`
`•
`
`•
`
`•
`
`economic factors over which the Company has no control, including changes in inflation, interest rates, foreign currency
`rates, and the potential effect of such factors on revenues, expenses and resulting margins;
`
`the outcome of legal proceedings, investigations and regulatory proceedings;
`
`the risk that our products could cause, or be alleged to cause, personal injury, leading to potential lawsuits and/or
`withdrawals of products from the market;
`
`the difficulty in predicting the expense, timing and outcome within our legal and regulatory environment, including, but not
`limited to, the U.S. Food and Drug Administration, Health Canada and European, Asian, Brazilian and Australian
`regulatory approvals, legal and regulatory proceedings and settlements thereof, the protection afforded by our patents
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`and other intellectual and proprietary property, successful generic challenges to our products and infringement or alleged
`infringement of the intellectual property of others;
`
`the results of continuing safety and efficacy studies by industry and government agencies;
`
`the uncertainties associated with the acquisition and launch of new products, including, but not limited to, the acceptance
`and demand for new pharmaceutical products, and the impact of competitive products and pricing;
`
`the availability and extent to which our products are reimbursed by government authorities and other third party payors, as
`well as the impact of obtaining or maintaining such reimbursement on the price of our products;
`
`the inclusion of our products on formularies or our ability to achieve favorable formulary status, as well as the impact on
`the price of our products in connection therewith;
`
`the impact of price control restrictions on our products, including the risk of mandated price reductions;
`
`our ability to retain, motivate and recruit executives and other key employees;
`
`the success of preclinical and clinical trials for our drug development pipeline or delays in clinical trials that adversely
`impact the timely commercialization of our pipeline products, as well as factors impacting the commercial success of our
`currently marketed products, which could lead to material impairment charges;
`
`the results of management reviews of our research and development portfolio, conducted periodically and in connection
`with certain acquisitions, the decisions from which could result in terminations of specific projects which, in turn, could
`lead to material impairment charges;
`
`our ability to obtain components, raw materials or finished products supplied by third parties and other manufacturing and
`supply difficulties and delays;
`
`the disruption of delivery of our products and the routine flow of manufactured goods;
`
`declines in the pricing and sales volume of certain of our products that are distributed by third parties, over which we have
`no or limited control;
`
`the seasonality of sales of certain of our products;
`
`compliance with, or the failure to comply with, health care “fraud and abuse” laws and other extensive regulation of our
`marketing, promotional and pricing practices, worldwide anti-bribery laws (including the U.S. Foreign Corrupt Practices
`Act), worldwide environmental laws and regulation and privacy and security regulations;
`
`the impacts of the Patient Protection and Affordable Care Act and other legislative and regulatory healthcare reforms in the
`countries in which we operate; and
`
`other risks detailed from time to time in our filings with the U.S. Securities and Exchange Commission (the “SEC”) and the
`Canadian Securities Administrators (the “CSA”), as well as our ability to anticipate and manage the risks associated with
`the foregoing.
`
`•
`
`•
`
`•
`
`•
`
`•
`
`•
`
`•
`
`•
`
`•
`
`•
`
`•
`
`•
`
`•
`
`•
`
`•
`
`Additional information about these factors and about the material factors or assumptions underlying such forward-looking
`statements may be found elsewhere in this Form 10-K, under Item 1A. “Risk Factors”, and in the Company’s other filings with the
`SEC and CSA. We caution that the foregoing list of important factors that may affect future results is not exhaustive. When relying on
`our forward-looking statements to make decisions with respect to the Company, investors and others should carefully consider the
`foregoing factors and other uncertainties and potential events. These forward-looking statements speak only as of the date made. We
`undertake no obligation to update any of these forward-looking statements to reflect events or circumstances after the date of this
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`Form 10-K or to reflect actual outcomes.
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`Valeant 2012 Form 10-K
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`https://www.sec.gov/Archives/edgar/data/885590/000088559013000014/...
`
`Item 1. Business
`
`PART I
`
`Biovail Corporation (“Biovail”) was formed under the Business Corporations Act (Ontario) on February 18, 2000, as a result
`of the amalgamation of TXM Corporation and Biovail Corporation International. Biovail was continued under the Canada Business
`Corporations Act (the “CBCA”) effective June 29, 2005. On September 28, 2010 (the “Merger Date”), Biovail completed the
`acquisition of Valeant Pharmaceuticals International (“Valeant”) through a wholly-owned subsidiary pursuant to an Agreement and
`Plan of Merger, dated as of June 20, 2010, with Valeant surviving as a wholly-owned subsidiary of Biovail (the “Merger”). In
`connection with the Merger, Biovail was renamed “Valeant Pharmaceuticals International, Inc.” The accompanying financial
`statements reflect Biovail’s stand-alone operations as they existed prior to the completion of the Merger. The results of Valeant’s
`business have been included in the financial statements only for periods subsequent to the completion of the Merger.
`
`Unless the context indicates otherwise, when we refer to “we”, “us”, “our” or the “Company” in this Annual Report on
`Form 10-K (“Form 10-K”), we are referring to Valeant Pharmaceuticals International, Inc. and its subsidiaries on a consolidated
`basis.
`
`Introduction
`
`We are a multinational, specialty pharmaceutical company that develops, manufactures and markets a broad range of
`pharmaceutical products and medical devices. Our specialty pharmaceutical and over-the-counter (“OTC”) products are marketed
`under brand names and are sold in the United States (“U.S.”), Canada, Australia and New Zealand, where we focus most of our
`efforts on products in the dermatology and neurology therapeutic classes. We also have branded generic, branded, and OTC
`operations in Central and Eastern Europe, Latin America, Southeast Asia and South Africa.
`
`Business Strategy
`
`Our strategy is to focus the business on core geographies and therapeutic classes, manage pipeline assets either internally or
`through strategic partnerships with other pharmaceutical companies and deploy cash with an appropriate mix of selective
`acquisitions, debt repurchases and repayments, and share buybacks. We believe this strategy will allow us to improve both the
`growth rate and profitability of the Company and to enhance shareholder value.
`
`Our low risk research and development model is one key element to this business strategy. It will allow us to progress certain
`development programs to drive future commercial growth, while minimizing our research and development expense. This will be
`achieved in four ways:
`
`•
`
`•
`
`•
`
`•
`
`focusing our efforts on niche therapeutic areas such as dermatology, podiatry, ophthalmology and life-cycle management
`programs for currently marketed products;
`
`acquiring dossiers and registrations for branded generic products, which require limited manufacturing start-up and
`development activities;
`
`selling internal development capabilities to third parties, thereby allowing higher utilization and infrastructure cost
`absorption; and
`
`structuring partnerships and collaborations so that our partners share development costs.
`
`Focused Diversification across Geographies, Therapeutic Areas and Products with Limited Patent Exposure
`
`We are diverse not only in our sources of revenue from our broad drug portfolio, but also among the therapeutic classes and
`geographic segments we serve. We focus on those businesses that we view to have the potential for strong operating margins and
`solid growth, while providing natural balance across geographies.
`
`In addition, we have an established portfolio of specialty pharmaceutical, branded generic and OTC products with a focus in
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`Valeant 2012 Form 10-K
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`https://www.sec.gov/Archives/edgar/data/885590/000088559013000014/...
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`the dermatology therapeutic areas. We believe dermatology is particularly attractive given that many of the products are:
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`generally relatively small on an individual basis (with the exception of Solodyn® and Zovirax®), and therefore not the
`focus of larger pharmaceutical companies;
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`often topical treatments and, therefore, subject to less generic competition. Topical treatments generally require full clinical
`trials and not just bioequivalence tests before generics can enter the market; and
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`Valeant 2012 Form 10-K
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`https://www.sec.gov/Archives/edgar/data/885590/000088559013000014/...
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`• marked by a higher self-pay component than other therapeutic areas, so that they are not as dependent on increasing
`reimbursement pressures.
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`Acquisitions and Dispositions
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`We have completed several transactions to expand our product portfolio including, among others, the following acquisitions of
`businesses and product rights in 2012: Medicis Pharmaceutical Corporation (“Medicis”), OraPharma Topco Holdings, Inc.
`(“OraPharma”), certain assets from Johnson & Johnson Consumer Companies, Inc. (“J&J North America” and “J&J ROW”), certain
`assets from QLT Inc. and QLT Ophthalmics, Inc. (collectively “QLT”), certain assets from University Medical Pharmaceuticals
`Corp. (“University Medical”), certain assets from Atlantis Pharma (“Atlantis”), certain assets from Gerot Lannach, and Probiotica
`Laboratorios Ltda. (“Probiotica”). In addition, in February 2013, we acquired Natur Produkt International, JSC (“Natur Produkt”), as
`well as certain assets from Eisai Inc. (“Eisai”).
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`In connection with the acquisition of Dermik in December 2011, we were required by the Federal Trade Commission (“FTC”)
`to divest 1% clindamycin and 5% benzoyl peroxide gel, a generic version of BenzaClin®, and 5% fluorouracil cream, an authorized
`generic of Efudex®. We completed the divestiture of these products in February 2012.
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`For more information regarding our acquisitions and dispositions, see note 3, note 4 and note 27 of notes to consolidated
`financial statements in Item 15 of this Form 10-K.
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`Segment Information
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`As a result of the acquisition of iNova in December 2011, we began operating in five new territories: Malaysia, Philippines,
`Singapore, Hong Kong and South Africa, with a distribution business in Thailand, Taiwan and some sub-Saharan Africa markets.
`iNova also distributes through partners in China, Korea and Japan. Consequently, our Chief Executive Officer (“CEO”), who is our
`Chief Operating Decision Maker (“CODM”), began to manage the business differently, which necessitated a realignment of the
`segment structure, effective in the first quarter of 2012. Pursuant to this change, we now have four reportable segments:
`(i) U.S. Dermatology, (ii) U.S. Neurology and Other, (iii) Canada and Australia and (iv) Emerging Markets. Accordingly, the
`Company has restated prior period segment information to conform to the current period presentation. Comparative segment
`information for 2012, 2011 and 2010 is presented in note 26 of notes to consolidated financial statements in Item 15 of this Form 10-
`K.
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`Our current product portfolio comprises approximately 1,100 products, with approximately 7,300 stock keeping units
`(“SKUs”). In 2012, 2011 and 2010, global Wellbutrin XL® represented 7%, 9% and 21%, respectively, and Zovirax® represented
`7%, 8% and 14%, respectively, of our consolidated revenues. We anticipate a continuing decline in Wellbutrin XL® product sales
`due to generic erosion. However, the rate of decline is expected to decrease in the future, and this brand is expected to represent a
`declining percentage of total revenues primarily due to anticipated growth in other parts of our business and recent acquisitions. We
`anticipate that Zovirax® may also continue to decline as a percentage of consolidated revenues in the future as a result of revenue
`growth from acquisitions. In addition, in the U.S., Zovirax® does not currently have generic competition, but is not protected by
`patent or regulatory exclusivity.
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`U.S. Dermatology
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`The U.S. Dermatology segment generates revenues from pharmaceutical and OTC products, and alliance and contract service
`revenues, in the areas of dermatology and topical medication, aesthetics (including medical devices), dentistry, ophthalmology and
`podiatry. These pharmaceutical products are marketed and sold primarily through wholesalers and to a lesser extent through retail
`and direct-to-physician channels.
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`Dermatology Products — Our principal dermatology products are:
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`Zovirax® Ointment is a topical formulation of a synthetic nucleoside analogue which is active against herpes viruses. Each
`gram of Zovirax® Ointment contains 50 mg of acyclovir in a polyethylene glycol base. This product is indicated for the
`management of initial genital herpes and in limited non-life threatening mucocutaneous herpes simplex infections in
`immuno-compromised patients. Zovirax® Cream was approved by the FDA in December 2002 and launched by Biovail in
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`Valeant 2012 Form 10-K
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`https://www.sec.gov/Archives/edgar/data/885590/000088559013000014/...
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`July 2003. Zovirax® Cream is indicated for the treatment of recurrent herpes labialis (cold sores) in adults and adolescents
`(12 years of age and older). Pursuant to a distribution rights agreement, GSK provided us with Zovirax® products for the
`U.S. This distribution rights agreement terminated in February 2011 with our acquisition of the U.S. rights to non-
`ophthalmic topical formulations of Zovirax® from