valeant pharmaceuticals international, inc. form 6-k

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The gross margin on contract revenue was 20% in the 1996 first half as compared to 42% in the 1995 first half. The 1995 gross margin wasfavourably impacted due to the inclusion of $567,000 of non-refundable prepaid amounts related to the cancellation of a special study by aformer licensee; excluding this amount the gross margin for the 1995 first half was 27%.The gross margin on manufacturing revenue was 58% in the 1996 first half, as compared to 61% in the 1995 first half. The 1996 margin wasimpacted by the manufacture of both trade and sample supplies of Tiazac(R) compared to only trade supplies in 1995.Research and product development expenses increased to $4,015,000 in the 1996 first half from $1,458,000 in the 1995 first half, primarily dueto increased levels of product development activities and as a result of the establishment and staffing of the Toronto R & D facility.Selling, general and administrative expenses increased to $6,254,000 in the 1996 first half compared to $3,218,000 in the 1995 first half. Theperiod to period increases are primarily as a result of the commencement of the Canadian sales operation, increased activities associated withthe manufacturing facilities and increased corporate expenses due to the hiring of key management personnel.Operating income of $10,736,000 was achieved in the 1996 first half as compared to operating income of $968,000 in the 1995 comparableperiod. Canadian operations incurred losses of $5,611,000 in 1996 as compared to operating losses of $1,245,000 in 1995. Operating income of$2,129,000 and $1,307,000 in each of the 1996 and 1995 periods respectively was earned by the Company's subsidiary in Switzerland throughroyalties earned on the Company's products. Barbados contributed operating income of $14,218,000 in the 1996 first half compared to$906,000 in the 1995 comparable period. The increased operating contribution in Barbados is due to the sales of Tiazac(R).Net interest income was $321,000 in the 1996 first half as compared to interest expense of $224,000 in the 1995 first half. The interest incomein 1996 was earned as a result of surplus cash and a lower level of interest bearing debt.Income taxes in the 1996 first half increased to $620,000 from $23,000 in the 1995 first half period as a result of increased operating income.In the 1996 first half, the Company reported net income of $10,437,000, or $0.41 per share. This compares to net income of $1,851,000 or$0.07 per share in the 1995 first half, which included a gain on licensing settlement of $1,130,000 or $0.04 per share. Earnings per share havebeen calculated using the weighted average number of shares outstanding during each period and take into effect the 3 for 1 stock splitcompleted in January, 1996.
LIQUIDITY AND CAPITAL RESOURCESFor the six months ended June 30, 1996, the Company generated $2,080,000 in cash-flow from operating activities compared to $2,191,000 inthe 1995 comparable period. Cash generated was as a result of income from operations (after adding back non-cash charges) of $11,430,000and $2,439,000 in the 1996 first half and 1995 first half respectively, and a decrease in non-cash operating items of $9,350,000 and $248,000 inthe two respective periods.Net cash of $389,000 was used in financing activities in the 1996 first half, compared to a provision of net cash of $2,522,000 in the 1995 firsthalf. The 1996 cash utilization was as a result of long-term debt repayments of $737,000, offset in part by the issuance of common shares for$99,000 and increases in long-term debt of $249,000. In the same period of 1995, cash provided was due to the issuance of common shares for$84,000, increases in long-term debt of $2,831,000, offset in part by long-term debt repayments of $393,000.Investing activities related to additions to fixed assets of $3,351,000 in the 1996 first half compared to $541,000 in the 1995 first half.Exchange rate changes on foreign cash balances resulted in a U.S. dollar cash equivalent reduction of $727,000 in the 1996 first half, comparedto an increase of $428,000 in the 1995 first half.As a result of the foregoing, cash balances decreased to $21,936,000 as at June 30, 1996, from $24,323,000 as at December 31, 1995, butincreased from $7,419,000 as at June 30, 1995.The Company's total long-term debt was $9,694,000 as at June 30, 1996 as compared to $10,195,000 at December 31, 1995. Long-term debt atJune 30, 1996, is comprised of $6,068,000 related to the manufacturing facility located in Manitoba, Canada; $1,795,000 is a mortgage payableon its laboratory facility; and $1,831,000 is a bank term loan. With respect to the debt relating to the manufacturing facility, an aggregateamount of $3,034,000 is a non-interest bearing loan from a Canadian government agency and $3,034,000 is a construction loan from aCanadian chartered bank. The Company has available a line of credit of $1,500,000 for short-term financing.The Company believes it has adequate capital and sources of financing to support its ongoing operational requirements. Furthermore, theCompany believes it will be able to obtain long-term capital, if necessary, to support its growth objectives.INFLATIONInflation has not had a material impact on the Company's operations.The Company does not currently engage in hedging or other activities to reduce exchange rate risk but may do so in the future, if conditionswarrant.
Page 1 and 2: VALEANT PHARMACEUTICALSINTERNATIONA
Page 3 and 4: BIOVAIL CORPORATION INTERNATIONALQU
Page 6 and 7: BIOVAIL CORPORATION INTERNATIONALCO
Page 8 and 9: 3. CONTINGENCIESOn November 12, 199
Page 12 and 13: BIOVAIL CORPORATION INTERNATIONALPA
Page 14 and 15: [BIOVAIL LOGO]EXHIBIT "A"FOR:APPROV
Page 18 and 19: [BIOVAIL LOGO]EXHIBIT "B"FOR:APPROV
Page 22 and 23: [BIOVAIL LOGO]EXHIBIT "C"FOR:APPROV
Page 24 and 25: Eugene Melnyk, Chairman of the Boar
Page 28: [BIOVAIL LOGO]EXHIBIT "E"FOR:APPROV

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