Edgar Filing: VALEANT PHARMACEUTICALS INTERNATIONAL

e424b3

This filing is made pursuant to Rule 424(b)(3)
under the Securities Act of 1933
in connection with Registration No. 333-112904

$480,000,000

(VALEANT LOGO)

Valeant Pharmaceuticals International

$240,000,000 3.0% Convertible Subordinated Notes due 2010

$240,000,000 4.0% Convertible Subordinated Notes due 2013

and

the Common Stock Issuable upon Conversion of the Notes

This prospectus relates to the resale by various selling securityholders of $240,000,000 aggregate principal amount of our 3.0% convertible subordinated notes due 2010, $240,000,000 aggregate principal amount of our 4.0% convertible subordinated notes due 2013 and shares of our common stock into which the notes are convertible. The notes and shares may be offered and sold from time to time by the securityholders specified in this prospectus or their successors in interest. See “Selling Securityholders.” The notes and shares are being registered pursuant to an agreement with the initial purchasers of the notes. The selling securityholders will receive all of the proceeds from the sale of the securities under this prospectus. We will not receive any proceeds from the sale of securities under this prospectus by the selling securityholders.

We will bear the expenses in connection with the offering, including filing fees and our legal and accounting fees, estimated at $203,000.

Our common stock is quoted on the New York Stock Exchange under the symbol “VRX.” On July 21, 2004, the last reported sales price of the common stock on the New York Stock Exchange was $18.00.

The notes are not listed on any securities exchange or approved for quotation through any automated system.

Investing in our notes and common stock involves risks. See “Risk Factors” beginning on page 5.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus is August 6, 2004.

TABLE OF CONTENTS


	Page

SUMMARY		1
RISK FACTORS		5
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS		16
RATIO OF EARNINGS TO FIXED CHARGES		19
USE OF PROCEEDS		20
DESCRIPTION OF THE NOTES		20
DESCRIPTION OF CAPITAL STOCK		38
CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES		44
SELLING SECURITYHOLDERS		49
PLAN OF DISTRIBUTION		55
LEGAL MATTERS		58
EXPERTS		58
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM		58
WHERE YOU CAN FIND MORE INFORMATION		58

You should rely only on the information contained or incorporated or deemed to be incorporated by reference in this prospectus. We have not authorized anyone to provide you with different information. Neither the notes nor any shares of common stock issuable upon conversion of the notes are being offered in any jurisdiction where the offer or sale is not permitted. The information contained in this prospectus speaks only as of the date of this prospectus and the information in the documents incorporated or deemed to be incorporated by reference in this prospectus speaks only as of the respective dates those documents were filed with the Securities and Exchange Commission.

This prospectus contains summaries of certain provisions contained in some of the documents described herein, but reference is made to the actual documents for complete information. All of the summaries are qualified in their entirety by the actual documents. Copies of some of the documents referred to herein have been filed or incorporated by reference as exhibits to the registration statement of which this prospectus is a part and you may obtain copies of those documents as described below under “Where You Can Find More Information.”

SUMMARY

This summary highlights selected information from this prospectus. It does not contain all the information that is important to understanding this offering or the terms of the notes. You should read carefully the entire prospectus and the documents incorporated by reference, including our consolidated financial statements and their related notes. Unless the context otherwise requires in this summary, “we,” “our” or “us” refer to Valeant Pharmaceuticals International and its subsidiaries.

Valeant Pharmaceuticals International

We are a global, publicly-traded, research-based specialty pharmaceutical company that discovers, develops, manufactures and markets a broad range of pharmaceutical products. Our products are currently sold in 128 markets around the world, and encompass a broad range of therapeutic areas, with a primary focus upon our three targeted areas: infectious disease, neurology and dermatology. Our research and new product development initiatives focus on innovative treatments for infectious diseases and cancer. We believe that this research and development capability, in conjunction with our worldwide capacity to commercialize our products, positions us as a leading, fully integrated specialty pharmaceutical company.

We develop, manufacture and distribute a broad range of prescription and non-prescription pharmaceuticals. Our prescription pharmaceutical products treat, among other things, infectious diseases, diseases of the skin, neuromuscular disorders, cancer, cardiovascular disease, diabetes and psychiatric disorders. Our current product portfolio comprises more than 575 branded products, with over 2,500 stock-keeping units. We market our products globally through a sales force of over 1,250 representatives. Our products are sold globally, through four reportable pharmaceutical segments comprising: North America, Latin America, Europe and Asia, Africa and Australia.

During the third quarter of 2003, we approved restructuring plans to establish a global manufacturing and supply chain network of five manufacturing sites, which will result in the disposition of ten of our manufacturing sites. In the second quarter of 2004, we have made significant progress towards our plans of disposing certain of the manufacturing sites. In the second quarter of 2004, we recorded a pre-tax restructuring charge of approximately $20 million primarily for impairment of these sites.

In May 2004, we repurchased $89.4 million of our 6 1/2% Convertible Subordinated Notes due 2008. In connection with this repurchase we recorded a pre-tax loss on extinguishment of debt of $5.9 million in the second quarter of 2004. On July 21, 2004, we redeemed the remaining $236.6 million aggregate principal amount of our 6 1/2% Notes outstanding at a redemption price of 103.714% of the principal amount. As a result of this redemption, Ribapharm is no longer a co-obligor under our 7% Senior Notes due 2011, 3.0% Convertible Subordinated Notes due 2010 and 4.0% Convertible Subordinated Notes due 2013. In connection with this repurchase, we will record a pre-tax loss on early extinguishment of debt of approximately $14 million in the quarter ended September 30, 2004.

As of March 31, 2004, we had approximately 4,800 employees. Our principal executive offices are located at 3300 Hyland Avenue, Costa Mesa, California 92626. Our telephone number is (714) 545-0100. Our web site is www.Valeant.com. The information contained on our web site is not incorporated by reference in this prospectus.

We are incorporated under the laws of Delaware. Our name was changed from ICN Pharmaceuticals, Inc. to Valeant Pharmaceuticals International in 2003.

You can get more information regarding our business by reading our Annual Report on Form 10-K for the fiscal year ended December 31, 2003, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2004, and the other reports we file with the SEC. See “Where You Can Find More Information” on page 58.

The Offering


Securities Offered		$240,000,000 aggregate principal amount of 3.0% Convertible Subordinated Notes Due 2010 and $240,000,000 aggregate principal amount of 4.0% Convertible Subordinated Notes Due 2013.

Issuer		Valeant Pharmaceuticals International.

Maturity Date		3.0% notes due 2010: August 16, 2010.

		4.0% notes due 2013: November 15, 2013.

Interest		3.0% notes due 2010: 3.0% per annum, payable semi-annually on February 16 and August 16, beginning February 16, 2004.

		4.0% notes due 2013: 4.0% per annum, payable semi-annually on May 15 and November 15, beginning May 15, 2004.

Subordination		The notes are unsecured and subordinated obligations of Valeant. The notes rank junior in right of payment to all of Valeant’s existing and future senior indebtedness.

		At March 31, 2004, Valeant’s senior indebtedness totaled approximately $300.0 million.

		The notes will not be guaranteed by any subsidiaries and, accordingly, the notes are structurally subordinated to the indebtedness and other liabilities including trade payables of subsidiaries. As of March 31, 2004, the subsidiaries of Valeant had total indebtedness and trade payables of approximately $44.3 million. Valeant and its subsidiaries are not restricted under the indenture from incurring debt, including additional senior indebtedness. See “Description of the Notes — Subordination.”

Ribapharm Inc.		Our subsidiary, Ribapharm Inc., was a co-obligor on the notes when they were issued, but it remained so only for so long as it was a co-obligor on our 6 1/2% Convertible Subordinated Notes due 2008. Ribapharm Inc. ceased to be a co-obligor on the notes on July 21, 2004, when we redeemed all of the 6 1/2% Convertible Subordinated Notes due 2008 that remained outstanding.

Conversion Rights		The notes are convertible at any time prior to maturity or their prior redemption or repurchase, as applicable, into shares of Valeant common stock at a conversion rate of 31.6336 shares of Valeant common stock per each $1,000 principal amount of notes (a conversion price of approximately $31.61 per share), subject to adjustment in certain circumstances. Upon conversion, we will have the right to satisfy our conversion obligations by delivering, at our option, either shares of Valeant common stock, cash or a combination thereof. See “Description of the Notes — Conversion of Notes.”

Optional Redemption		3.0% notes due 2010: We may not redeem the 3.0% notes due 2010 prior to their maturity date. See “Description of the Notes — Optional Redemption of the Notes.”

		4.0% notes due 2013: At any time on or after May 20, 2011, we may redeem any or all of the 4.0% notes due 2013 that have not been previously converted, at a redemption price equal to 100% of


		the principal amount of the 4.0% notes due 2013, plus accrued and unpaid interest (including additional interest, if any) up to but not including the date of redemption.

Sinking Fund		None.

Purchase of Notes at Your Option Upon Change in Control		Upon a change in control, you may require Valeant to repurchase all or a portion of your notes at 100% of the principal amount of the notes, together with any accrued and unpaid interest, including interest on any unpaid interest, compounded semi-annually, and additional interest, if any, to, but excluding, the repurchase date. See “Description of the Notes — Purchase of Notes at Your Option upon a Change in Control.” We may elect to pay all or a portion of the purchase price in cash, shares of Valeant common stock, securities of the surviving corporation or a combination thereof, subject to certain conditions.

Use of Proceeds		The selling securityholders will receive all of the net proceeds from the sale of the notes or shares of common stock issued upon conversion of the notes. We will not receive any of the proceeds from the sale of any of these securities.

Registration Rights		Pursuant to a registration rights agreement that we entered into in connection with the private offering of the notes in November 2003, we have filed a shelf registration statement under the Securities Act of 1933 relating to the resale of the notes and the common stock issuable upon conversion of the notes. This prospectus constitutes a part of that registration statement. We filed the shelf registration statement solely to permit the resale of notes issued in the November 2003 private offering and shares of common stock issued upon conversion of those notes, and investors who purchase notes or shares of common stock from selling securityholders in this offering will not be entitled to any registration rights under the registration rights agreement. In addition, under the registration rights agreement, selling securityholders may be required to discontinue the sale or other disposition of notes and shares of common stock issued upon conversion of notes pursuant to the shelf registration statement and to discontinue the use of this prospectus under certain circumstances specified in the registration rights agreement.

Risk Factors		See “Risk Factors” and the other information in, and incorporated by reference into, this prospectus for a discussion of factors you should carefully consider before deciding to invest in the notes or the shares of common stock issuable upon conversion of the notes.

Trading		There is no public market for the notes and we do not intend to apply for listing of the notes on any securities exchange or for quotation of the notes through any automated quotation system. The notes currently trade in the PORTAL Market. However, once the notes are sold under this prospectus, those notes will no longer trade in the PORTAL Market. No assurance can be given that a trading market for the notes will exist or as to the liquidity of any trading market for the notes that may exist. Our common stock is listed on the New York Stock Exchange under the symbol “VRX.”


DTC Eligibility		The notes were issued in book-entry form and are represented by three permanent global certificates deposited with a custodian for, and registered in the name of a nominee of, The Depository Trust Company, or DTC, in New York, New York. Beneficial interests in such securities are shown on, and transfers are effected only through, records maintained by DTC and its direct and indirect participants. Any such interest may not be exchanged for certificated securities, except in limited circumstances. See “Description of the Notes — Global Notes, Book-Entry Form.”

RISK FACTORS

Investing in the notes and underlying shares of common stock involves a high degree of risk. You should carefully consider the following factors, in addition to the other information contained in, or incorporated by reference into, this prospectus, in determining whether or not to purchase notes or underlying shares of our common stock.

Risks Relating to Our Business


	If we cannot successfully develop or obtain future products, our growth may be delayed.

Our future growth will depend, in large part, upon our ability to develop or obtain and commercialize new products and new formulations of, or indications for, current products. We are engaged in an active research and development program involving compounds owned by us or licensed from others which we may commercially develop in the future. The process of successfully commercializing products is time consuming, expensive and unpredictable. There can be no assurance that we will be able to develop or acquire new products, obtain regulatory approvals to use these products for proposed or new clinical indications, manufacture our potential products in compliance with regulatory requirements or in commercial volumes, or gain market acceptance for such products. It may be necessary for us to enter into other licensing arrangements, similar to our arrangements with Schering-Plough and F. Hoffman-LaRoche Ltd., or Roche, with other pharmaceutical companies in order to market effectively any new products or new indications for existing products. There can be no assurance that we will be successful in entering into such licensing arrangements on terms favorable to us or at all.

On November 6, 2003, we announced that we were commencing Phase 3 clinical trials of Viramidine. There can be no assurance that our clinical trials for Viramidine will be successful, that we will be granted approval to market Viramidine for the indication we are seeking or that Viramidine will be a commercially successful product.


	The introduction of generic products has significantly impacted ribavirin royalties and may impact our ability to finance research and development activities.

Royalty revenues earned by us under our ribavirin license agreements with Schering-Plough and Roche represent an important source of revenues to us. Schering-Plough markets ribavirin for use in combination with its interferon product under the trade name “Rebetol” as a therapy for the treatment of hepatitis C and Roche markets ribavirin for use in combination with its interferon product under the name “Copegus.” Under the terms of their license agreements, Schering-Plough and Roche each have sole discretion to determine the pricing of ribavirin and the amount and timing of resources devoted to their respective marketing of ribavirin.

Competition from generic pharmaceutical companies has had a material negative impact on our royalty revenue and is expected to continue to have an impact. With respect to Schering-Plough, royalties have been affected by reduced sales by Schering-Plough as well as a reduction in the effective royalty rate per the license agreement. With respect to Roche, under the license agreement, introduction of generics in any market will eliminate the obligation of Roche to pay royalties for net sales in that market. Our research and development activities have historically been funded by the royalties received from Schering-Plough and Roche. Prospectively, substantially greater reliance on the profitability of the specialty pharmaceutical business will be required.

Although our financial planning has included an expectation of the erosion of royalty revenue due to generic competition for ribavirin in the United States, a greater-than-expected erosion of royalties from the United States, or a significant decrease in royalties from expected levels for markets other than the United States, could require us to reduce research and development expenditures and other activities.

Various parties are opposing our ribavirin patents in actions before the European Patent Office, and we are responding to these oppositions. While data exclusivity for the combination therapies marketed by Schering-Plough and Roche is scheduled to continue in the major markets of the European Union until 2009 for Schering-Plough and 2012 for Roche, regulatory approvals and schemes may change and/or studies

regarding ribavirin in combination with interferon may be replicated, allowing earlier introduction of generics into such markets.


	If our focus on the development of Viramidine does not result in an approved and commercially successful product, our business could be adversely affected.

We focus our research and development activities on areas in which we have particular strengths, particularly antivirals. The outcome of any development program is highly uncertain. Although Viramidine appears promising and has advanced to Phase 3 clinical trials, it may yet fail to yield a commercial product. Success in preclinical and early stage clinical trials may not necessarily translate into success in large-scale clinical trials. Further, to be successful in clinical trials, increased investment will be necessary, which will adversely affect short-term profitability.

In addition, we will need to obtain and maintain regulatory approval in order to market Viramidine. Even if Viramidine appears promising in large-scale Phase 3 clinical trials, regulatory approval may not be achieved. The results of clinical trials are susceptible to varying interpretations that may delay, limit or prevent approval or result in the need for post-marketing studies. In addition, changes in regulatory policy for product approval during the period of product development and FDA review of a new application may cause delays or rejection. Even if we receive regulatory approval, this approval may include limitations on the indications for which we can market the product. There is no guarantee that we will be able to satisfy the needed regulatory requirements, and we may suffer a significant variation from planned revenue as a result.


	As we develop and commercialize new products, we will have to incur a sizeable amount of research and development expenses to advance such products through the clinical trial and regulatory approval process. Such expenditures may have the effect of causing our earnings and cash flows to decline.

We currently are in clinical trials with three products, two of which, Viramidine and remofovir, are being funded by us. In December, 2003, we initiated Phase 3 trials of Viramidine. These clinical trials require significant research and development expenditures. In January, 2004, we announced that our total research and development expenses would be approximately $85 million to $95 million for 2004 as compared to $45 million in 2003, as we continue with the Phase 3 studies of Viramidine and progress continues with the clinical trials of remofovir. The increased amount of research and development expenses will negatively impact our earnings and cash flows.


	Third parties may be able to sell generic forms of our products or block our sales of our products if our intellectual property rights or data exclusivity rights do not sufficiently protect us; patent rights of third parties may also be asserted against us.

Our success depends in part on our ability to obtain and maintain meaningful exclusivity protection for our products and product candidates throughout the world via patent protection and/or data exclusivity protection. The patent positions of pharmaceutical, biopharmaceutical and biotechnology companies can be highly uncertain and involve complex legal and factual questions. We will be able to protect our products from generic substitution by third parties only to the extent that our technologies are covered by valid and enforceable patents, effectively maintained as trade secrets or are protected by data exclusivity. However, our currently pending or future patent applications may not issue as patents. Any patent issued may be challenged, invalidated, held unenforceable or circumvented. Furthermore, our patents may not be sufficiently broad to prevent third parties from producing generic substitutes for our products. Lastly, data exclusivity schemes vary from country to country and may be limited or eliminated as governments seek to reduce pharmaceutical costs by increasing the speed and ease of approval of generic products.

In order to protect or enforce patent and/or data exclusivity rights, we may initiate patent litigation against third parties, and we may be similarly sued by others. We may also become subject to interference proceedings conducted in the patent and trademark offices of various countries to determine the priority of inventions. The defense and prosecution, if necessary, of intellectual property and data exclusivity actions are costly and divert technical and management personnel from their normal responsibilities. We may not prevail

in any of these suits. An adverse determination of any litigation or defense proceedings, resulting in a finding of non-infringement or invalidity of our patents, or a lack of protection via data exclusivity, may allow entry of generic substitutes for our products.

Furthermore, because of the substantial amount of discovery required in connection with such litigation, there is a risk that some of our confidential information could be compromised by disclosure during such litigation. In addition, during the course of this kind of litigation, there could be public announcements of the results of hearings, motions or other interim proceedings or developments in the litigation. If securities analysts or investors perceive these results to be negative, it could have a substantial negative effect on the trading price of our securities.

We have limited patent rights in selected countries of the European Union, Switzerland and Japan relating to the antiviral use of ribavirin. These patents are currently scheduled to expire by 2005, although we are seeking to extend these patents until 2010. We may not be able to have these patents extended.

The existence of a patent will not necessarily protect us from competition. Competitors may successfully challenge our patents, produce similar drugs that do not infringe our patents or produce drugs in countries that do not respect our patents.

No patent can protect its holder from a claim of infringement of another patent. Therefore, our patent position cannot and does not provide an assurance that the manufacture, sale or use of products patented by us could not infringe a patent right of another.

While we know of no actual or threatened claim of infringement that would be material to us, there can be no assurance that such a claim will not be asserted. If such a claim is asserted, there can be no assurance that the resolution of the claim would permit us to continue producing the relevant product on commercially reasonable terms.


	Obtaining necessary government approvals is time consuming and not assured.

FDA approval must be obtained in the United States and approval must be obtained from comparable agencies in other countries prior to marketing or manufacturing new pharmaceutical products for use by humans. Obtaining FDA approval for new products and manufacturing processes can take a number of years and involves the expenditure of substantial resources. Numerous requirements must be satisfied, including preliminary testing programs on animals and subsequent clinical testing programs on humans, to establish product safety and efficacy. No assurance can be given that we will obtain approval in the United States, or any other country, of any application we may submit for the commercial sale of a new or existing drug or compound. Nor can any assurance be given that if such approval is secured, the approved labeling will not have significant labeling limitations that could affect profitability, or that those drugs or compounds will be commercially successful.

The FDA and other regulatory agencies in other countries also periodically inspect manufacturing facilities both in the United States and abroad. Failure to comply with applicable regulatory requirements can result in, among other things, warning letters, sanctions, fines, delays or suspensions of approvals, seizures or recalls of products, operating restrictions, manufacturing interruptions, costly corrective actions, injunctions, adverse publicity against us and our products, refusal to renew marketing applications, and criminal prosecutions. Furthermore, changes in existing regulations or adoption of new regulations could prevent or delay us from obtaining future regulatory approvals or jeopardize existing approvals.


	Difficulties with acquisitions could materially impact our future growth.

We intend to pursue a strategy of targeted expansion through the acquisition of compatible businesses and product lines and the formation of strategic alliances, joint ventures and other business combinations. There can be no assurance that we will successfully complete or finance any future acquisition or investment or that any acquisitions that we do complete will be completed at prices or on terms that prove to be advantageous to us. The success or failure in integrating the operations of companies that we have acquired or may acquire in the future may have a material impact on our future growth and success.


	If competitors develop vaccines or more effective or less costly drugs for our target indications, our business could be seriously harmed.

The biotechnology and pharmaceutical industries are intensely competitive and subject to rapid and significant technological change. Ribavirin and many of the drugs that we are attempting to discover will be competing with new and existing therapies. Many companies in the United States and abroad are pursuing the development of pharmaceuticals that target the same diseases and conditions that we are targeting. For example, in December 2002, Roche received approval to sell Copegus, its version of ribavirin. In addition, Human Genome Sciences, Inc. submitted an investigational new drug application with the FDA in October 2000 to initiate Phase 1 human clinical trials of Albuferon for treatment of hepatitis C. If Albuferon or other therapies that do not incorporate the use of our products prove to be a more effective treatment for hepatitis C than the combination therapy involving ribavirin, then our royalty revenues from ribavirin could significantly decrease. In addition, there are institutions engaged in research on the development of a vaccine to prevent hepatitis C. The availability of such a vaccine could have a material adverse effect on our revenues from sales of products treating hepatitis C.

Many of our competitors, particularly large pharmaceutical companies, have substantially greater financial, technical and human resources than we do. We believe that many of our competitors spend significantly more on research and development related activities than we do. Others may succeed in developing products that are more effective than those currently marketed or proposed for development by us. Progress by other researchers in areas similar to those being explored by us may result in further competitive challenges. In addition, academic institutions, government agencies, and other public and private organizations conducting research may seek patent protection with respect to potentially competitive products. They may also establish exclusive collaborative or licensing relationships with our competitors.

Competing therapies in development may include:


	•	Infergen being developed by Amgen, Inc. and Intermune;

	•	Omega interferon being developed by BioMedicines;

	•	Thymosin alfa being developed by SciClone Pharmaceuticals, Inc.;

	•	Albuferon being developed by Human Genome Sciences, Inc.; and

	•	Protease inhibitors being developed by Boehringer Ingelheim, Eli Lilly and Company, Vertex Pharmaceuticals Incorporated, Viropharma Incorporated, Wyeth and Gilead Sciences, Inc.

Other companies that engage in research activities similar to our research activities include Abbott Laboratories, Pfizer, Inc., GlaxoSmithKline plc, Merck & Co., Inc. and Novartis AG.


	If our products are alleged to be harmful, we may not be able to sell them and we may be subject to product liability claims not covered by insurance.

The nature of our business exposes us to potential liability risks inherent in the testing, manufacturing and marketing of pharmaceutical products. Using our drug candidates in clinical trials may expose us to product liability claims. These risks will expand with respect to drugs, if any, that receive regulatory approval for commercial sale. Even if a drug were approved for commercial use by an appropriate governmental agency, there can be no assurance that users will not claim that effects other than those intended may result from our products. While to date no material adverse claim for personal injury resulting from allegedly defective products, including ribavirin, has been successfully maintained against us, a substantial claim, if successful, could have a material negative impact on us.

In the event that anyone alleges that any of our products are harmful, we may experience reduced consumer demand for our products or our products may be recalled from the market. In addition, we may be forced to defend lawsuits and, if unsuccessful, to pay a substantial amount in damages. We currently do not have insurance against product liability risks for most of our commercially developed products. Insurance is

expensive and, if we seek such insurance in the future, it may not be available on acceptable terms. Even if obtained, insurance may not fully protect us against potential product liability claims.

Additionally, there is a potential for product liability claims from patients participating in our clinical trials in the event a participant is harmed by the product. We currently maintain clinical trial insurance in major markets in which we conduct clinical trials. There is no assurance, however, that such insurance will be sufficient to cover all claims.


	We are involved in various legal proceedings that could adversely affect us.

We are involved in several legal proceedings, including the following matters.


	Securities Class Actions

Since July 25, 2002, multiple class actions have been filed in the United States District Courts for the Eastern District of New York, the District of New Jersey and the Central District of California against us and certain of our former executive officers. The lawsuits have been consolidated; the consolidated complaint alleges that the defendants violated Sections 10(b) and 20(a) of the Exchange Act, and Rule 10b-5 promulgated thereunder, by issuing false and misleading financial results to the market during different class periods ranging from May 3, 2001 to July 10, 2002, thereby artificially inflating the price of our stock. The lawsuit generally claims that we issued false and misleading statements by improperly inflating our sales volume and revenues through excess shipment of products to our distributors, with respect to our Russian operations, in the marketing of Efudex and regarding the earnings and sales of our former Photonics division. The plaintiffs generally seek to recover compensatory damages, including interest. While we intend to defend this matter vigorously, an adverse result could have a material adverse effect on us.

On May 9, 2003, a bondholder filed a class action lawsuit against us and some of our current and former directors and former executive officers. The lawsuit alleges that the defendants violated Sections 11 and 15 of the Securities Act by making false and misleading statements in connection with the offering of 6 1/2% Convertible Subordinated Notes due 2008. The lawsuit generally claims that we issued false and misleading statements by improperly inflating our sales volume and revenues through excess shipment of products to our distributors, with respect to our Russian operations, and regarding the earnings and sales of our former Photonics division. The plaintiffs generally seek to recover compensatory damages, including interest. While we intend to defend this matter vigorously, an adverse result could have a material adverse effect on us.


	Settlement with the Securities and Exchange Commission

We are subject to the provisions of a settlement agreement with the Securities and Exchange Commission, which arose from a civil complaint brought against us by the Commission in 1999. We reached a settlement of the matter which was embodied in court orders entered in 2002. The material terms of the settlement with the Commission are as follows: we, without admitting or denying liability, consented to the entry of a consent judgment permanently enjoining us from violating Section 10(b) of the Exchange Act, and Rule 10b-5, promulgated thereunder. We paid a civil penalty in the amount of $1,000,000. We also consented to various corporate governance undertakings regarding FDA-related press releases. Because the settlement documents explicitly acknowledged that we incurred a “change of control” as of May 29, 2002, we are eligible to and intend to file in summer 2004 an application for termination of the undertakings (upon a showing of “good cause”). As a result of the settlement, we cannot take advantage of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and, therefore, may be hindered in the defense of any future allegations.


	Argentina Antitrust Matter

In July of 2004, we were advised that the Argentine Antitrust Agency had issued a notice unfavorable to us in a proceeding against our Argentine subsidiary. The proceeding involves allegations that our subsidiary in Argentina abused a dominant market position in 1999 by increasing its price on Mestinon in Argentina and not supplying the market for approximately two months. Our subsidiary filed documents with the agency offering

an explanation justifying its actions, but the agency has now rejected the explanation. We are considering our response. Argentinean law permits a fine to be levied of up to $5 million plus 20% of profits realized due to the alleged wrongful conduct. Counsel in the matter advises that the size of the transactions alleged to have violated the law will unlikely draw the maximum penalty.


	Our flexibility in maximizing commercialization opportunities for our compounds may be limited by our obligations to Schering-Plough.

In November 2000, we entered into an agreement that provides Schering-Plough with an option to acquire the rights to up to three of our products intended to treat hepatitis C that they designate prior to our entering into Phase 2 clinical trials and a right for first/last refusal to license various compounds we may develop and elect to license to others. Viramidine was not subject to the option of Schering-Plough, but it would be subject to their right of first/last refusal if we elected to license it to a third party. In addition, the agreement provides for certain other disclosures about our research and development activities. The interest of potential collaborators in obtaining rights to our compounds or the terms of any agreements we ultimately enter into for these rights may be impacted by our agreement with Schering-Plough. A commercialization partner other than Schering-Plough might have otherwise been preferable due to that potential partner’s strength in a given disease area or geographic region or for other reasons.


	We are subject to uncertainty related to health care reform measures and reimbursement policies.

The levels at which government authorities, private health insurers, HMOs and other organizations reimburse the costs of drugs and treatments related to those drugs will have an effect on the successful commercialization of our drug candidates. We cannot be sure that reimbursement in the United States or elsewhere will be available for any drugs we may develop or, if already available, will not be decreased in the future. Also, we cannot be sure that reimbursement amounts will not reduce the demand for, or the price of, our drugs. If reimbursement is not available or is available only to limited levels, we may not be able to obtain a satisfactory financial return on the manufacture and commercialization of any future drugs. In addition, as a result of the trend towards managed health care in the United States, as well as legislative proposals to reduce government insurance programs, third party payors are increasingly attempting to contain health care costs by limiting both coverage and the level of reimbursement of new drug products. Consequently, significant uncertainty exists as to the reimbursement status of newly approved health care products. Third party payors may not establish and maintain price levels sufficient for us to realize an appropriate return on our investment in product development.


	If our nucleoside analog library is destroyed because of an earthquake or other disaster, our research and development program may be seriously harmed.

The laboratory books and the compounds that comprise our nucleoside analog library are all located at our headquarters in Costa Mesa, California, near areas where earthquakes have occurred in the past.

There are no duplicate copies off-premises and there are no backup copies of the product candidates we are currently developing. No duplicate copies of our nucleoside analog library exist because making copies would be prohibitively expensive and the library has not been moved off-site because our scientific staff is currently in the process of screening it. Our ability to develop potential product candidates from our nucleoside analog library would be significantly impaired if these records were destroyed in an earthquake or other disaster. Any insurance we maintain may not be adequate to cover our losses.


	Dependence on key personnel leaves us vulnerable to a negative impact if they leave.

We believe that our continued success will depend to a significant extent upon the efforts and abilities of the key members of management. The loss of their services could have a negative impact on us.

In addition, our research and development effort depends upon the principal members of our scientific staff. Our success depends upon our ability to attract, train, motivate and retain qualified scientific personnel.

Qualified personnel are in great demand throughout the biotechnology and pharmaceutical industries. We may not be able to attract additional personnel or retain existing employees.


	Our third party manufacturers’ failure to comply with FDA regulations could cause interruption of the manufacture of our products.

Our manufacturers are required to adhere to regulations enforced by the FDA and similar regulatory agencies in other countries. Our dependence upon others to manufacture our products may adversely affect our profit margins and our ability to develop and commercialize products on a timely and competitive basis. Delays or difficulties with contract manufacturers in producing, packaging or distributing our products could adversely affect the sales of our current products or introduction of other products.

Schering-Plough manufactures and sells ribavirin under license from us. In February 2001, Schering-Plough announced that the FDA has been conducting inspections of Schering-Plough’s manufacturing facility in Las Piedras, Puerto Rico that manufactures ribavirin, and has issued reports citing deficiencies concerning compliance with current Good Manufacturing Practices, primarily relating to production processes, controls and procedures. In June 2001, Schering-Plough announced that FDA inspections at this and one other Schering-Plough facility in May and June 2001 cited continuing and additional deficiencies in manufacturing practices. In May 2002, Schering-Plough signed a consent decree of permanent injunction with the FDA, agreeing to measures to assure that the drug products manufactured at their Puerto Rico plant are made in compliance with FDA’s current good manufacturing practice regulations. While Schering-Plough has advised us that the deficiencies were not specifically applicable to the production of ribavirin, the Consent Decree covers the facility producing ribavirin. Schering-Plough’s ability to manufacture and ship ribavirin could be affected by temporary interruption of some production lines to install system upgrades and further enhance compliance, and other technical production and equipment qualification issues.

If the FDA is not satisfied with Schering-Plough’s compliance under the Consent Decree, the FDA could take further regulatory actions against Schering-Plough, including the seizure of products, an injunction against further manufacture, a product recall or other actions that could interrupt production of ribavirin. Interruption of ribavirin production for a sustained period of time could materially reduce our royalty receipts.


	Our business, financial condition and results of operations are subject to risks arising from the international scope of our operations.

We conduct a significant portion of our business outside the United States. Approximately 78% and 80% of our revenue was generated outside the United States during the year ended December 31, 2003, and the three months ended March 31, 2004, respectively. We sell our pharmaceutical products in 128 countries around the world and employ approximately 4,300 individuals in countries other than the United States. The international scope of our operations may lead to volatile financial results and difficulties in managing our operations because of, but not limited to, the following:


	•	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;

	•	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;

	•	greater difficulty in collecting accounts receivables in and moving cash out of certain geographic regions;

	•	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.


	Many of our key processes, opportunities and expenses are a function of national and/or local government regulation. Significant changes in regulations could have a material adverse impact on our business.

The process by which pharmaceutical products are approved is lengthy and highly regulated. We have developed expertise in managing this process in the many markets around the world. Our multi-year clinical trials programs are planned and executed to conform to these regulations, and once begun, can be difficult and expensive to change should the regulations regarding approval of pharmaceutical products significantly change.

In addition, we depend on patent law and data exclusivity to keep generic products from reaching the market before we have adequately recouped our investment in the discovery and development of our products. In assessing whether we will invest in any development program, or license a product from a third party, we assess the likelihood of patent and/or data exclusivity under the laws and regulations then in effect. If those schemes significantly change in a large market, or across many smaller markets, our ability to protect our investment may be adversely affected.

Appropriate tax planning requires that we consider the current and prevailing national and local tax laws and regulations, as well as international tax treaties and arrangements that we enter into with various government authorities. Changes in national/local tax regulations, or changes in political situations may limit or eliminate the effects of our tax planning. Our U.S. tax returns for the periods from 1997 to 2001 are currently being reviewed by the Internal Revenue Service. While we believe the tax returns have been prepared in accordance with the prevailing tax law at the time, interpretations of the law different from what was applied could result in permanent and timing differences that may adversely affect our reported effective tax rate and our after-tax cash flows.


	Due to the large portion of our business conducted outside the United States, we have significant foreign currency risk.

We sell products in many countries that are susceptible to significant foreign currency risk. In some of these markets we sell products for U.S. Dollars. While this eliminates our direct currency risk in such markets, it increases our credit risk because if a local currency is devalued significantly, it becomes more expensive for customers in that market to purchase our products in United States Dollars. In 2004, we entered into foreign currency hedge arrangements to hedge a portion of our exposure against variability in the Euro. We continue to evaluate the possibility of entering into arrangements which could result in additional expenditures.


	We are subject to price control restrictions on our pharmaceutical products in the majority of countries in which we operate.

There is a risk that other jurisdictions may enact price control restrictions, and that the restrictions that currently exist may be increased. Our future sales and gross profit could be materially affected if we are unable to obtain appropriate price increases.


	Our research and development activities involve the controlled use of potentially harmful biological materials as well as hazardous materials, chemicals and various radioactive compounds.

We cannot completely eliminate the risk of accidental contamination or injury from the use, storage, handling or disposal of these materials. In the event of contamination or injury, we could be held liable for damages that result. Any liability could exceed our resources. We are subject to federal, state and local laws and regulations governing the use, storage, handling and disposal of these materials and specified waste products. The cost of compliance with, or any potential violation of, these laws and regulations could be significant. Any insurance we maintain may not be adequate to cover our losses.


	Our stockholder rights plan and anti-takeover provisions of our charter documents could provide our board of directors with the ability to delay or prevent a change in control of us.

Our stockholder rights plan, provisions of our certificate of incorporation and provisions of the Delaware General Corporation Law could provide our board of directors with the ability to deter hostile takeovers or delay, deter or prevent a change in control of us, including transactions in which stockholders might otherwise receive a premium for their shares over then current market prices.

Risks Relating to the Notes and the Underlying Common Stock


	The notes will be subordinated to our senior indebtedness and will be structurally subordinated to liabilities of our subsidiaries.

The notes are and will be junior in right of payment to all our existing and future senior indebtedness, and are and will be structurally subordinated to all of the existing and future indebtedness and liabilities, including trade payables, of our subsidiaries. As of March 31, 2004, we had approximately $300.0 million of senior indebtedness outstanding, and our subsidiaries had approximately $44.3 million of indebtedness and other liabilities outstanding. The indenture governing the notes does not restrict the incurrence of senior indebtedness or other debt by us or our subsidiaries. By reason of such subordination, in the event of the insolvency, bankruptcy, liquidation, reorganization, dissolution or winding up of our business, our assets will be available to pay the amounts due on the notes only after all our senior indebtedness has been paid in full, and, therefore, there may not be sufficient assets remaining to pay amounts due on any or all of the notes then outstanding. See “Description of the Notes — Subordination.”

The indenture also provides that we may not make any payments on the notes or purchase or otherwise acquire the notes (i) if a default in the payment of any senior indebtedness occurs and is continuing beyond any grace period or (ii) if any other default occurs and is continuing with respect to designated senior indebtedness that permits holders or their representatives of designated senior indebtedness to accelerate its maturity, and the trustee with respect to the notes receives a payment blockage notice from us or another person permitted to give such notice under the indenture.


	Our subsidiaries’ creditors will get paid before you will get paid.

We operate our businesses in part through our subsidiaries. Accordingly, we are dependent upon the cash flows of, and receipt of dividends and advances from, or repayments of advances by, our subsidiaries in order to meet debt obligations, including the obligations under the notes. Our subsidiaries are separate and distinct legal entities and have no obligation, contingent or otherwise, to pay any amounts due pursuant to the notes or to make any funds available therefor, whether by dividends, loans or other payments, and do not guarantee the payment of interest, premium, if any, or principal on the notes. Any of our rights to receive any assets of any subsidiaries upon any liquidation, dissolution, winding up, receivership, reorganization, assignment for the benefit of creditors, marshaling of assets and liabilities or any bankruptcy, insolvency or similar proceedings of us (and the consequent right of the holders of the notes to participate in the distribution of, or to realize proceeds from, those assets) will be structurally subordinated to the claims of any such subsidiary’s creditors (including trade creditors and holders of debt issued by such subsidiary See “Description of the Notes — Subordination.”


	Our subsidiary, Ribapharm Inc., is no longer a co-obligor on the notes.

Ribapharm Inc. was a co-obligor on the notes when we were issued, but it remained so only for so long as it was a co-obligor on our 6 1/2% Convertible Standard Notes due 2008. Ribapharm Inc. ceased to be a co-obligor on the notes on July 21, 2004, when we redeemed all of the 6 1/2% Convertible Standard Notes due 2008 that remained outstanding. As a consequence, the notes are structurally subordinated to the liabilities of Ribapharm Inc. as well as those of our other subsidiaries.


	After giving effect to this offering, our level of leverage and debt service obligations could adversely affect our financial condition and prevent us from fulfilling our respective obligations to you under the notes.

As of March 31, 2004, our total indebtedness was approximately $1.1 billion. On a pro forma basis after giving effect to the redemption of our 6 1/2% Convertible Subordinated Notes due 2008, which occurred on July 21, 2004, our total indebtedness would have been $794.2 million as of March 31, 2004. Our level of indebtedness could restrict our operations and make it more difficult for us to satisfy our obligations under the notes. Among other things, our substantial indebtedness may:


	•	limit our ability to obtain additional financing for working capital, capital expenditures, acquisitions and general corporate purposes;

	•	require us to dedicate all or a substantial portion of our respective cash flows to service our respective debt, which will reduce funds available for other business purposes, such as capital expenditures or acquisitions;

	•	limit our flexibility in planning for or reacting to changes in the markets in which we compete;

	•	place us at a competitive disadvantage relative to our competitors with less indebtedness;

	•	render us more vulnerable to general adverse economic and industry conditions; and

	•	make it more difficult for us to satisfy our financial obligations, including those relating to the notes.

In addition, the 7.0% senior notes due 2011 indenture contains restrictive covenants that limits our ability to engage in activities that may be in our long-term best interests. Our failure to comply with those covenants could result in an event of default which, if not cured, could result in the acceleration of all of our debts.


	The notes are unsecured and, therefore, are effectively subordinated to any of our secured debt.

The notes are not secured by any of our assets or those of our subsidiaries. In addition, the notes are not guaranteed by our subsidiaries. As a result, the notes will be effectively subordinated to any secured debt that we may incur. In any liquidation, dissolution, bankruptcy or other similar proceeding, the holders of our secured debt may assert rights against the secured assets in order to receive full payment of their debt before the assets may be used to pay the holders of the notes.


	We may not be able to purchase the notes upon a change in control.

Upon the occurrence of certain specific kinds of change in control events, we will be required to offer to repurchase all outstanding notes at a price equal to 100% of their principal amount plus accrued and unpaid interest, including interest on any unpaid interest, compounded semi-annually, if any, to but not including the date of repurchase. See “Description of the Notes — Purchase of Notes at Your Option Upon a Change in Control.” It is possible that we will not have sufficient funds at the time of a change in control to make any required repurchase of notes. If we are required to make a change in control offer, there can be no assurance that we will be able to obtain all required consents from the holders of our senior debt to allow repurchase of the notes. If we fail to repurchase the notes when required following certain change in control events, we will be in default under the indenture. In addition, we have, and may in the future incur other indebtedness with similar change in control provisions permitting our other creditors to accelerate or to require us to purchase our indebtedness upon the occurrence of similar events or on some specific dates.


	There is no public market for the notes, and there is the potential for price volatility.

We issued the notes in November 2003 in a private offering made primarily to “qualified institutional buyers,” as defined in Rule 144A under the Securities Act. The offering was made through a group of investment banks, which we refer to as the “initial purchasers.” Prior to that offering there was no trading market for the notes. Although the initial purchasers advised us at the time of that offering that they intended to make a market in the notes, they are not obligated to do so and may discontinue such market making at any

time without notice. Accordingly, there can be no assurance that any market for the notes will develop or, if one does develop, that it will be maintained. If an active market for the notes fails to develop or be sustained, the value of the notes could be materially adversely affected. If such a market were to develop, the notes could trade at prices that may be higher or lower than their offering price depending upon many factors, including prevailing interest rates, our operating results and the markets for similar securities. In addition, the market price of the notes is expected to be significantly affected by the market price of our common stock. This may result in greater volatility in the trading value of the notes than would be expected for nonconvertible debt securities. There can be no assurance that the future market for the notes will not be subject to volatility. Accordingly, no assurance can be given as to the liquidity of the notes.

There is no public market for the notes and we do not intend to apply for listing of the notes on any securities exchange or for quotation of the notes through any automated quotation system. The notes issued to qualified institutional buyers in the November 2003 offering currently trade on the PORTAL Market. Once notes are sold under this prospectus, however, those notes will no longer trade on the PORTAL market.


	Hedging transactions and other transactions may affect the value of the notes.

Concurrently with the issuance of the notes in November 2003, we used a portion of the net proceeds to enter into convertible note hedge and written call option transactions relating to shares of our common stock with Goldman, Sachs Financial Markets, L.P., an affiliate of Goldman, Sachs & Co., and Banc of America Securities LLC. The convertible note hedge involved us purchasing a call option from each counterparty and the written call option involved us selling a call option to each counterparty with a higher strike price than the purchased call options. The convertible note hedge is expected to reduce the potential dilution from conversion of the notes and effectively increase the conversion price to us. These transactions may subject us to certain risks and may not achieve the desired effect.

Because we have sold a call option to each counterparty, the mitigating effect on dilution of the convertible note hedge will be capped, which means that the convertible note hedge may not completely mitigate dilution from conversion of the notes as intended. For example, if all notes were converted on the expiration date of the convertible note hedge, the exercise of the convertible note hedge would not mitigate dilution to the extent the market price per share of our common stock at the time of conversion exceeded the higher strike price of the written call option. Further, the extent to which the convertible note hedge mitigates dilution will also depend on the parties’ respective choice of settlement method.

In connection with hedging transactions related to ownership of the notes or the convertible note hedge, entities may have borrowed shares in the stock loan market in advance of and around the time of the issuance of the notes in November 2003 and may continue to borrow shares throughout the term of the notes and the convertible note hedge. These transactions may affect the liquidity and price to borrow shares in the stock loan market. We cannot assure you that such activity will not adversely affect the market price of our common stock. In addition, the existence of the notes may encourage short selling in our common stock by market participants, which could depress the price of our common stock.


	If you hold notes, you will not be entitled to any rights with respect to our common stock, but you will be subject to any changes made with respect to our common stock.

If you hold notes, you will not be entitled to any rights with respect to our common stock (including, without limitation, voting rights and rights to receive any dividends or other distributions on our common stock), but you will be subject to all changes affecting our common stock. You will only be entitled to rights on the common stock if and when we deliver shares of common stock to you in connection with conversion of your notes. For example, in the event that an amendment is proposed to our certificate of incorporation or bylaws requiring stockholder approval and the record date for determining the stockholders of record entitled to vote on the amendment occurs prior to delivery to you of the common stock, you will not be entitled to vote on the amendment, although you will nevertheless be subject to any changes in the powers, preferences or special rights of our common stock.


	We may issue additional equity securities and thereby materially and adversely affect the price of our common stock.

We are not restricted from issuing additional equity securities during the life of the notes. We are authorized to issue, without stockholder approval, 10 million shares of preferred stock, none of which were outstanding as of the date of this prospectus, in one or more series, which may give other stockholders dividend, conversion, voting, and liquidation rights, among other rights, which may be superior to the rights of holders of our common stock. Any such series of preferred stock could contain dividend rights, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences or other rights superior to the rights of holders of our common stock. Our board of directors has no present intention of issuing any such preferred stock, but reserves the right to do so in the future. In addition, we are authorized to issue up to 200 million shares of our common stock without stockholder approval. We are also authorized to issue, without stockholder approval, securities convertible into either shares of common stock or preferred stock. If we issue additional equity securities, the price of our common stock and, in turn, the price of the notes may be materially and adversely affected.


	A number of internal and external factors have caused and may continue to cause the market price of our stock to be volatile.

The market prices for securities of companies engaged in pharmaceutical development, including us, have been volatile. Many factors, including many over which we have no control, may have a significant impact on the market price of our common stock, including without limitation:


	•	our competitors’ announcement of technological innovations or new commercial products;

	•	changes in governmental regulation;

	•	our competitors’ receipt of regulatory approvals;

	•	our competitors’ developments relating to patents or proprietary rights;

	•	publicity regarding actual or potential medical results for products that we or our competitors have under development; and

	•	period-to-period changes in financial results.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements contained in this prospectus, including the documents incorporated herein by reference, are forward-looking statements, including but not limited to those specifically identified as such, that involve risks and uncertainties. The statements contained herein that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, including statements regarding our expectations, beliefs, intentions or strategies regarding the future. All forward-looking statements included in this prospectus are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements. Examples of forward-looking statements include statements regarding, among other matters, our strategic review, our acquisition strategy, our repositioning plans, our expectations regarding sales of products by the North America pharmaceutical segment, expectations regarding research and development costs and other factors affecting our financial condition or results of operations. In some cases, forward-looking statements may be identified by terminology such as “may,” “will,” “intends,” “should,” “would,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of those terms or comparable terminology. Similarly, statements that describe our plans, strategies, intentions, expectations, objectives, goals or prospects are forward-looking. The forward-looking statements in this and other reports generally assume a

stable economic climate in the United States and other countries in which we operate and assumes that losses will not result from any of the risks to which we are subject, including the following:


	•	The future growth of our business is based upon the development and approval of new products, including Viramidine and remofovir. The process of developing new drugs has an inherent risk of failure. Although certain of our research compounds show promise at their current stages of development, we may fail to commercialize them for various reasons. For example, they may turn out to be ineffective or unsafe in clinical or pre-clinical testing; their patent position may become compromised; other therapies may prove more safe or effective; or the prevalence of the disease for which they are being developed may decrease. Accordingly, our inability to successfully develop our products may negatively impact future revenues.

	•	We will be able to protect our products from generic substitution by third parties only to the extent that our technologies are covered by valid and enforceable patents, are effectively maintained as trade secrets or are protected by data exclusivity. However, our currently pending or future patent applications may not issue as patents. Any patent issued to us may be challenged, invalidated, held unenforceable or circumvented. Furthermore, our patents may not be sufficiently broad to prevent third parties’ competing products.

	•	The scope of protection afforded by a patent can be highly uncertain. A pending claim or a result unfavorable to us in a patent dispute may preclude development or commercialization of products or impact sales of existing products, and result in payment of monetary damages. In addition, third parties may assert infringement claims against us, prohibiting the further sale of a product or increasing costs by requiring that we pay for a license.

	•	Uncertainties and delays inherent in the drug approval process in the United States and other countries can preclude or delay development and commercialization of our products.

	•	Our current business plan includes expansion through acquisitions in addition to the development of new products. If we are unable to successfully execute on our expansion plans, to find attractive acquisition candidates at appropriate prices, or to integrate successfully any acquired companies or products, the growth of our business will be impeded.

	•	The pharmaceutical industry is subject to substantial government regulation, including the approval of new pharmaceutical products, labeling, advertising and, in some countries, pricing.

	•	We sell products in many countries that are susceptible to significant foreign currency risk. In some of these markets we sell products for U.S. Dollars. While this eliminates our direct currency risk in such markets, it increases our credit risk because if a local currency is devalued significantly it becomes more expensive for customers in that market to purchase our products in U.S. Dollars. In 2004, we entered into foreign currency hedge arrangements to hedge a portion of our exposure against variability in the Euro. We continue to evaluate the possibility of entering into arrangements which would result in additional expenditures.

	•	We and our competitors are always striving to develop products that are more effective, safer, more easily tolerated or less costly. If our competitors succeed in developing better alternatives to our current products before we do, we will lose sales and revenues to their alternative products.

	•	If we are unsuccessful in the defense of current securities litigation, we may be ordered to pay significant monetary damages, which may have a material negative impact on our current financial position.

	•	We have entered into an agreement granting Schering-Plough Ltd., or Schering-Plough, a limited right to commercialize our research compounds. The agreement could limit our own ability to commercially exploit some of our potential products. This could impede our plans for growth.

	•	A significant part of our revenue derives from products manufactured by third parties. We rely on their quality level, compliance with United States Food and Drug Administration, or the FDA, regulations


		and continuity of supply. Any failure by them in these areas could disrupt our product supply and negatively impact our revenue.

	•	To purchase our products many patients rely on reimbursement by third party payors such as insurance companies, HMOs and government agencies. These third party payors are increasingly attempting to contain costs by limiting both coverage and the level of reimbursement of new drug products. The reimbursement levels established by third party payors in the future may not be sufficient for us to realize an appropriate return on our investment in product development.

	•	Some of our development programs are based on the library of nucleoside compounds we have developed. Our nucleoside library is at risk for loss in earthquakes, fires and other natural disasters.

	•	We have announced plans to dispose of 10 manufacturing facilities and establish a new global manufacturing and supply network. If we are unsuccessful in our effort to execute on these plans we may not achieve anticipated cost savings. Additionally, there may be unforeseen costs and complications with this effort to rationalize our manufacturing operations.

	•	All drugs have potential harmful side effects and can expose drug manufacturers and distributors to liability. We generally do not maintain product liability insurance. As a result, in the event one or more of our products is found to have harmed an individual or individuals, we may be responsible for paying all or substantially all damages awarded. Any product liability exposure and our lack of any insurance coverage may have a material negative impact on our financial position and results of operations.

	•	Subject to the terms of our agreements with our existing lenders, we may incur additional indebtedness from time to time to finance working capital needs, acquisitions, capital expenditures or for other purposes. There can be no assurance that financing will continue to be available on terms acceptable to us or at all. The absence of such financing will reduce our ability to respond to changing business and economic conditions, to fund scheduled investments and capital expenditures, to make future acquisitions and to absorb negative operating results.

	•	We are also subject to those risks and uncertainties described from time to time in our filings with the Commission.

We are subject to a Consent Order with the Commission, which among other things requires us to preclear all FDA-related press releases with the FDA, and permanently enjoins us from violating securities laws and regulations. The Consent Order also precludes protection for forward-looking statements under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. The existence of the permanent injunction under the Consent Order, and the lack of protection under the Safe Harbor, may limit our ability to defend against future allegations.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither we nor the initial purchasers nor any other person assumes responsibility for the accuracy and completeness of such statements.

Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures we make in our Quarterly Reports on Form 10-Q, Annual Report on Form 10-K and Current Reports on Form 8-K filed with the Commission. See “Where You Can Find More Information.” We provide a cautionary discussion of selected risks and uncertainties regarding an investment in the notes under “Risk Factors” on page 5 of this prospectus. However, other factors besides those listed there could also adversely affect us.

RATIO OF EARNINGS TO FIXED CHARGES

The following table presents the ratio of earnings to fixed charges for Valeant and its consolidated subsidiaries for each of the periods indicated.

Years Ended December 31,

Three Months

Ended

2003

2002

2001

2000

1999

March 31, 2004

3.9

5.1

3.1

3.3

3.7

0.6

For the purpose of computing this ratio, “earnings” consist of income from continuing operations before income taxes plus non-cash and fixed charges. Fixed charges consist of interest expense. For the year ended December 31, 2003 and the three months ended March 31, 2004, non-cash charges of $117,609,000 and $11,386,000, respectively, related to acquired in-process research and development, were excluded from the calculation. A specific provision in the indenture of Valeant’s 7.0% Senior Notes due 2011 requires that we exclude acquired in-process research and development from consolidated net income for purposes of calculating the ratio of earnings to fixed charges.

USE OF PROCEEDS

We will not receive any of the proceeds from the sale of any of these securities. The selling securityholders will receive all of the net proceeds from the sale of the notes or shares of our common stock issued upon conversion of the notes. See “Selling Security holders.”

DESCRIPTION OF THE NOTES

We issued the notes under an indenture, dated as of November 19, 2003, among Valeant, as issuer, our subsidiary, Ribapharm Inc., as co-obligor, and The Bank of New York, as trustee. Under the terms of the indenture, Ribapharm remained a co-obligor on the notes only for so long as its was a co-obligor on our 6 1/2% Convertible Subordinated Notes due 2008. Ribapharm ceased being a co-obligor on our 6 1/2% notes when they were redeemed by us on July 21, 2004 and, therefore, is no longer a co-obligor on the notes covered by this prospectus. The notes and the shares of common stock issuable upon conversion of the notes are covered by a registration rights agreement. You may request a copy of the indenture, the form of certificates evidencing each series of the notes and the registration rights agreement from us at our address shown under the caption “Where You Can Find More Information.”

The following description is a summary of the material provisions of the notes, the indenture and the registration rights agreement. It does not purport to be complete. This summary is subject to and is qualified by reference to all the provisions of the notes, the indenture (including the definitions of certain terms used in the indenture) and the registration rights agreement. Where particular provisions or defined terms of the indenture or forms of notes are referred to in this section, these provisions or defined terms are incorporated in this offering circular by reference.

As used in this “Description of the Notes” section, unless the context indicates otherwise, “Valeant” “we,” “our” and “us” refer solely to Valeant Pharmaceuticals International and not to its subsidiaries; “3.0% notes due 2010” refers to the 3.0% Convertible Subordinated Notes due 2010; “4.0% notes due 2013” refers to the 4.0% Convertible Subordinated Notes due 2013; and “notes” refers to both the 3.0% notes due 2010 and the 4.0% notes due 2013.

General

The notes are our unsecured subordinated obligations. The notes rank junior in right of payment to all our existing and future senior indebtedness, and are structurally subordinated to all indebtedness and all liabilities of our subsidiaries, as described under “Subordination.” The notes are convertible into shares of our common stock as described under “Conversion of Notes.”

The 3.0% notes due 2010 were limited to $240,000,000 aggregate principal amount. The 4.0% notes due 2013 were limited to $240,000,000 aggregate principal amount. The notes were issued only in denominations of $1,000 and multiples of $1,000. The 3.0% notes due 2010 will mature on August 16, 2010 unless earlier converted or repurchased at your option upon a change in control. The 4.0% notes due 2013 will mature on November 15, 2013 unless earlier converted, redeemed by us at our option or repurchased at your option upon a change in control.

Neither we nor any of our subsidiaries are subject to any financial covenants under the indenture. In addition, neither we nor any of our subsidiaries are restricted under the indenture from paying dividends, incurring debt, including senior indebtedness, or issuing or repurchasing our securities.

You are not afforded protection under the indenture in the event of a highly leveraged transaction or a change in control of us except to the extent described below under “Purchase of Notes at Your Option Upon a Change in Control.” If we incur additional debt or liabilities, our ability to pay our obligations on the notes could be adversely affected.

We will pay interest at the rate of 3.0% per annum on the 3.0% notes due 2010 on February 16 and August 16 of each year, beginning February 16, 2004, to record holders at the close of business on the preceding February 1 and August 1 as the case may be, and we will pay interest at the rate of 4.0% per annum

on the 4.0% notes due 2013 on May 15 and November 15 of each year, beginning May 15, 2004, to record holders at the close of business on the preceding May 1 and November 1 as the case may be; provided, however, in case you convert any of your notes into Valeant’s common stock during the period after any record date but prior to the next interest payment date (except for any 4.0% notes due 2013 or portions of 4.0% notes due 2013 called for redemption on a redemption date occurring during the period from the close of business on a record date and ending on the opening of business on the first business day after the next interest payment date, or if this interest payment date is not a business day, the second business day after the interest payment date and, with respect to notes to be repurchased upon a change in control, except to the extent that we have specified a date for repurchase of such notes upon a change in control that is after a record date and on or prior to the date that is one business day after the next interest payment date), such note must also be accompanied by an amount equal to the interest due on the interest payment date on the converted principal amount, unless at the time of conversion there is a default in the payment of interest on the notes. See “Conversion of Notes.”

We maintain an office or agency in the Borough of Manhattan, The City of New York, for the payment of interest, which is currently an office or agency of the trustee. We may pay interest either:


	•	by check mailed to your address as it appears in the note register,

	•	or, if you are a holder with an aggregate principal amount in excess of $10 million, you shall be paid, at your written election, by wire transfer in immediately available funds to an account maintained by you in the United States.

However, payments to The Depository Trust Company, New York, New York, which we refer to as DTC, will be made by wire transfer of immediately available funds to the account of DTC or its nominee. Interest will be computed on the basis of a 360-day year composed of twelve 30-day months.

Conversion of Notes

You may convert your notes, at your option, in whole or in part, into shares of Valeant common stock prior to the close of business on the final maturity date of the notes, subject to prior repurchase of the 3.0% notes due 2010 at the option of the holders in connection with a change in control (as defined below) and subject to prior redemption at our option, or prior repurchase at the option of the holders in connection with a change in control, of the 4.0% notes due 2013. If you have submitted your notes for repurchase upon a change in control, you may convert your notes only if you withdraw your repurchase election in accordance with the indenture. You may convert your notes in part so long as this part is $1,000 principal amount or an integral multiple of $1,000. If any notes are converted after a record date for any interest payment date and prior to the next interest payment date (except for notes or portions of any 4.0% notes due 2013 called for redemption on a redemption date occurring during the period from the close of business on a record date and ending on the opening of business on the first business day after the next interest payment date, or if this interest payment date is not a business day, the second business day after the interest payment date and, with respect to notes to be repurchased upon a change in control, except to the extent that we have specified a date for repurchase of such notes upon a change in control that is after a record date and on or prior to the date that is one business day after the next interest payment date), the notes must be accompanied by an amount equal to the interest payable on the interest payment date on the converted principal amount, unless a default in the payment of interest exists at the time of conversion.

The initial conversion rate for the notes is 31.6336 shares of common stock per $1,000 principal amount of notes (equivalent to a conversion price of $31.61 per share), subject to adjustment as described below. We will not issue fractional shares of common stock upon conversion of notes. Instead, we will pay cash equal to such fraction multiplied by the closing price of Valeant’s common stock on the trading day prior to the conversion date. We may also choose to deliver cash in lieu of shares of Valeant common stock upon conversion, or a combination of shares of Valeant’s common stock and cash, as described below under “Payment Upon Conversion.”

If the notes are subject to repurchase following a change in control (as defined below), your conversion rights on the notes subject to repurchase will expire at the close of business on the last business day before the

repurchase date or such earlier date as you present the notes for repurchase, unless we default in the payment of the repurchase price, in which case your conversion rights will terminate at the close of business on the date the default is cured and we repurchase the notes. If you have submitted your notes for repurchase upon a change in control, you may only convert your notes if you withdraw your election in accordance with the indenture.

Your conversion rights on any 4.0% notes due 2013 called for redemption will expire at the close of business on the last business day before the redemption date, unless we default in the payment of the redemption price, in which case your conversion rights will terminate at the close of business on the date the default is cured and we redeem the 4.0% notes due 2013.

To convert interests in a global note, you must deliver to DTC the appropriate instruction form for conversion pursuant to DTC’s conversion program. To convert a definitive note into common stock, you must:


	•	complete and manually sign the conversion notice on the back of the note or facsimile of the conversion notice and deliver this notice to the conversion agent;

	•	surrender the note to the conversion agent;

	•	if required, furnish appropriate endorsements and transfer documents;

	•	if required, pay all transfer or similar taxes; and

	•	if required, pay funds equal to interest payable on the next interest payment date.

The date you comply with these requirements is the conversion date under the indenture. When we have delivered shares of Valeant’s common stock issued on conversion of your notes, or cash in lieu thereof, together with any cash payment in lieu of a fractional share and any required interest payment, we will have satisfied all of our obligations with respect to the converted notes in full.

Conversion Rate Adjustments

We will adjust the conversion rate if any of the following events occurs:


	(1) Valeant issues common stock as a dividend or distribution to all or substantially all holders of its common stock;

	(2) Valeant issues to all or substantially all holders of common stock certain rights or warrants to purchase our common stock, which rights or warrants are exercisable for not more than 60 days, at less than the sale price of Valeant’s common stock on the business day immediately preceding the time of announcement of such issuance; provided that the conversion rate will be readjusted to the extent that such rights or warrants are not exercised prior to their expiration;

	(3) Valeant subdivides or combines its common stock;

	(4) Valeant distributes to all holders of its common stock, shares of its capital stock, evidences of indebtedness or assets, including securities, but excluding:


	•	rights or warrants listed in clause (2) above;

	•	dividends or distributions listed in clause (1) above; and

	•	cash distributions listed in (5) below;

(an “Asset Distribution”), in which case, the conversion rate shall be adjusted so that the adjusted conversion rate shall equal the number determined by multiplying the conversion rate in effect on the record date with respect to the Asset Distribution by the fraction of “A/ B,” where “A” is equal to the last reported sale price of Valeant’s common stock on such record date, and “B” is equal to the last reported sale price of Valeant’s common stock on such record date minus the fair market value on such record date (as determined in good faith by our board


	of directors, whose determination shall be conclusive evidence of such fair market value) of the portion of the Asset Distribution applicable to one share of Valeant common stock;

(5) Valeant makes distributions to all or substantially all holders of shares of its common stock payable exclusively in cash, excluding any regular quarterly cash dividend on its common stock to the extent that such regular quarterly cash dividend does not exceed the dividend threshold amount described below; if the conversion rate is adjusted as described in this clause as a result of a distribution that is a regular quarterly dividend, the adjustment will be based on the amount by which the dividend exceeds the dividend threshold amount; if the conversion rate is adjusted as described in this clause as a result of a distribution that is not a regular quarterly dividend, the adjustment will be based on the full amount of the distribution;

the “dividend threshold amount” will initially be $0.0775 (Valeant’s current quarterly dividend rate); Valeant will adjust the dividend threshold amount for the same events that trigger an adjustment in the conversion rate, except that we will not adjust the dividend threshold amount for any regular quarterly cash dividend unless that regular quarterly cash dividend, when aggregated with other regular quarterly cash dividends paid within the prior 12 months that have not already been applied to adjust the dividend threshold amount, exceeds 7.5% of the average of the closing sale price of Valeant’s common stock during the ten trading days immediately prior to the declaration date of the dividend; or

(6) Valeant or one of its subsidiaries make a payment in respect of a tender or exchange offer for its common stock to the extent that the cash and fair market value of any other consideration included in such payment per share of its common stock exceed the first reported sale price per share of its common stock on the trading day next succeeding the last date on which tenders or exchanges may be made pursuant to such tender or exchange offer (such a tender or exchange offer, a “Tender Offer”); provided, however, that the fair market value of any such non-cash consideration paid in respect of a tender or exchange offer for common stock shall not be taken into consideration in the foregoing calculation unless such value (to the extent it would result in an adjustment if considered) when aggregated with the value of all other non-cash consideration paid within the preceding three months and not considered as a result of this clause (to the extent that it would have resulted in an adjustment if it had been considered) would exceed 1% of Valeant’s market capitalization, in which case the value shall be considered, but only to the extent that the aggregated value referred to above exceeds 1% of Valeant’s market capitalization. If an adjustment is required to be made as set forth above, such adjustment would be calculated based upon the amount by which the aggregate consideration paid for Valeant’s common stock acquired in the Tender Offer exceeds the value of such shares based on the first reported sale price of its common stock on the trading day next succeeding the last date on which tenders or exchanges may be made pursuant to such Tender Offer.

We will not make any adjustment if holders of notes participate in the transactions described above. We have agreed in the indenture to maintain, at all times, sufficient authorized but unissued capital stock underlying the notes, including any adjustments to the conversion rate pursuant to (1) through (6) above.

In addition, no adjustment in the conversion rate will be required unless the adjustment would require a change of at least 1% in the conversion rate then in effect; provided, however, that any adjustment that would otherwise be required to be made, even if the adjustment would require a change of less than 1% in the conversion rate then in effect, shall be carried forward and taken into account in any subsequent adjustment or in connection with any conversion of notes at redemption or maturity, as applicable.

Upon conversion of the notes into shares of Valeant’s common stock, you will receive, in addition to shares of Valeant’s common stock, the rights under Valeant’s Rights Agreement, dated as of November 2, 1994, or any future rights plan, whether or not the rights have separated from the common stock at the time of conversion, and no adjustments to the conversion rate will be made.

In the event of:


	•	any reclassification of Valeant’s common stock;

	•	a consolidation or merger to which we are a party; or

	•	a sale or conveyance to another person or entity of all or substantially all of our property and assets;

in which holders of Valeant’s common stock would be entitled to receive stock, other securities, other property, assets or cash for their common stock, upon conversion of your notes you will be entitled to receive the same type of consideration which you would have been entitled to receive if you had converted the notes into Valeant’s common stock immediately prior to any of these events.

You may in certain situations be deemed to have received a distribution subject to United States federal income tax as a dividend in the event of any taxable distribution to holders of common stock or in certain other situations requiring a conversion rate adjustment. See “Certain United States Federal Tax Consequences.”

We may, from time to time, increase the conversion rate for a period of at least 20 days if Valeant’s board of directors has made a determination that this increase would be in our best interests. Any such determination by Valeant’s board will be conclusive. We would give holders at least 15 days’ notice of any increase in the conversion rate. In addition, we may increase the conversion rate if Valeant’s board of directors deems it advisable to avoid or diminish any income tax to holders of common stock resulting from any dividend or distribution of stock or rights. See “Certain United States Federal Tax Consequences.”

Except as described above in this section, we will not adjust the conversion rate for any issuance of Valeant’s common stock or convertible or exchangeable securities or rights to purchase Valeant’s common stock or convertible or exchangeable securities.

Payment upon Conversion

Upon conversion, we may choose to deliver shares of Valeant’s common stock, cash in lieu of shares of Valeant’s common stock, or a combination thereof, as described below.

Conversion on or Prior to the Final Notice Date

In the event that we receive your notice of conversion on or prior to the date that is 20 days prior to maturity with respect to either series of notes or, if all or a portion of the 4.0% notes due 2013 have been called for redemption, the date that is 20 days prior to the redemption date (in either case, the “final notice date”), the following procedures will apply: If we choose to satisfy all or any portion of our obligation to convert the notes (the “conversion obligation”) in cash, we will notify you through the trustee of the dollar amount to be satisfied in cash (which must be expressed either as 100% of the conversion obligation or as a fixed dollar amount) at any time on or before the date that is two business days following the conversion date (the “cash settlement notice period”). If we timely elect to pay cash for any portion of the shares otherwise issuable to you upon conversion, you may retract your conversion notice at any time during the two business day period following the final day of the cash settlement notice period (the “conversion retraction period”). No such retraction can be made after the cash settlement notice period (and a conversion notice shall be irrevocable) if we do not elect to deliver cash in lieu of shares (other than cash in lieu of fractional shares). Upon the expiration of a conversion retraction period, a conversion notice shall be irrevocable. If we elect to satisfy all or any portion of the conversion obligation in cash, and the conversion notice has not been retracted, then settlement (in cash, shares or in cash and shares) will occur on the business day following the final day of the 20 trading day period beginning on the day after the final day of the conversion retraction period (the “cash settlement averaging period”).

Settlement amounts will be computed as follows:


	•	If we elect to satisfy the entire conversion obligation in shares, we will deliver to you a number of shares equal to (i) the aggregate principal amount of notes to be converted divided by $1,000, multiplied by (ii) the applicable conversion rate. In addition, we will pay cash for all fractional shares


		of common stock based on the last reported sale price of the common stock on the trading day immediately preceding the conversion date.

	•	If we elect to satisfy the entire conversion obligation in cash, we will deliver to you cash in an amount equal to the product of:


	•	a number equal to (i) the aggregate principal amount of notes to be converted divided by $1,000, multiplied by (ii) the applicable conversion rate, and

	•	the average last reported sale price of shares of Valeant’s common stock during the cash settlement averaging period.


	•	If we elect to satisfy a fixed portion (other than 100%) of the conversion obligation in cash, we will deliver to you such cash amount (the “cash amount”) and a number of shares of Valeant’s common stock equal to the greater of (i) zero and (ii) the excess, if any, of the number of shares calculated as if we elected to satisfy the entire conversion obligation in shares over the number of shares equal to the sum, for each day of the cash settlement averaging period, of (x) the cash amount divided by the number of days in the cash settlement averaging period, divided by (y) the last reported sale price of shares of Valeant’s common stock. In addition, we will pay cash for all fractional shares of common stock based on the average last reported sale price of the common stock during the cash settlement averaging period.

	•	Additionally, if we are obligated to deliver shares to holders, then if on the date you submit your notice of conversion (i) you hold notes that are neither registered under the Securities Act nor immediately freely saleable pursuant to Rule 144(k) under the Securities Act and (ii) there exists a registration default as defined under “Registration Rights of Noteholders,” we will deliver to holders an additional number of shares equal to 3% of the number of shares calculated above.

“Trading day” means a day during which trading in securities generally occurs on the New York Stock Exchange or, if Valeant’s common stock is not listed on the New York Stock Exchange, on the principal other national or regional securities exchange on which Valeant’s common stock is then listed or, if Valeant’s common stock is not listed on a national or regional securities exchange, on the National Association of Securities Dealers Automated Quotation System or, if Valeant’s common stock is not quoted on the National Association of Securities Dealers Automated Quotation System, on the principal other market on which Valeant’s common stock is then traded (provided that no day on which trading of Valeant’s common stock is suspended on such exchange or other trading market will count as a trading day).

Conversion After the Final Notice Date

With respect to conversion notices that we receive after the final notice date, we will not send individual notices of our election to satisfy all or any portion of the conversion obligation in cash. Instead, at any time on or before the fifth business day preceding the final notice date, if we choose to satisfy all or any portion of the conversion obligation with respect to conversions after the final notice date in cash, we will send a single notice to the trustee indicating the dollar amount to be satisfied in cash (which must be expressed either as 100% of the conversion obligation or as a fixed dollar amount).

In the event that we receive your notice of conversion after the final notice date, settlement amounts will be computed and settlement dates will be determined in the same manner as set forth above under “Conversion on or Prior to the Final Notice Date” except that the “cash settlement averaging period,” if applicable, shall be the 20 trading day period beginning on the trading day after the maturity date with respect to either series of notes or, in the case of conversion of 4.0% notes due 2013 after the final notice date with respect to the redemption date, the 20 trading day period beginning on the trading day after the redemption date. If your conversion notice is received after the final notice date for the applicable series, you will not be allowed to retract the conversion notice. Settlement (in cash, shares or in cash and shares) will occur on the business day following the final day of the applicable cash settlement averaging period.

Our Intention upon Conversions

Upon any conversion of notes by a holder (including a conversion after we have called the 4.0% notes due 2013 for redemption), it is our intention to elect to satisfy our conversion obligations (1) in cash, in an amount up to (and including) the principal amount of the notes converted by each holder and (2) in shares of Valeant’s common stock, to satisfy the remainder, if any, of our conversion obligation.

Optional Redemption of the Notes

We may not redeem the 3.0% notes due 2010 at our option at any time. We will have the right to redeem the 4.0% notes due 2013, in whole or in part, on or after May 20, 2011, upon not less than 30 nor more than 60 days’ prior notice for a cash price equal to 100% of the principal amount of the 4.0% notes due 2013 to be redeemed, plus accrued and unpaid interest and additional interest, if any, including interest on any unpaid overdue interest, compounded semi-annually, to, but not including, the redemption date.

If we decide to redeem fewer than all of the 4.0% notes due 2013, the trustee will select the notes to be redeemed by lot, or in its discretion, on a pro rata basis. If any 4.0% note due 2013 is to be redeemed in part only, a new note in principal amount equal to the unredeemed principal portion will be issued. If a portion of a holder’s 4.0% notes due 2013 are selected for partial redemption and a holder converts a portion of its 4.0% notes due 2013, the converted portion will be deemed to be part of the portion selected for redemption.

On or before the redemption date, we will deposit with a paying agent (or the trustee) money sufficient to pay the redemption price of the 4.0% notes due 2013 to be redeemed on that date. On and after the redemption date, unless we default in the deposit of the redemption price, interest will cease to accrue on the 4.0% notes due 2013 or any portion of the 4.0% notes due 2013 called for redemption, the conversion rights with respect to the 4.0% notes due 2013 or any portion of the 4.0% notes due 2013 called for redemption will lapse and all other rights of the holder will terminate other than the right to receive the redemption price, without interest from the redemption date, on surrender of the 4.0% notes due 2013.

No sinking fund is provided for the notes.

Purchase of Notes at Your Option upon a Change in Control

If a change in control (as defined below) occurs, you will have the right to require us to purchase all or any part of your notes 30 business days after the occurrence of such change in control at a purchase price equal to 100% of the principal amount of the notes together with any accrued and unpaid interest, including interest on any unpaid overdue interest, compounded semi-annually, and additional interest, if any, to, but excluding, the change in control purchase date. Notes submitted for purchase must be in integral multiples of $1,000 principal amount.

Instead of paying the change in control purchase price in cash, we may pay the change in control purchase price in shares of Valeant’s common stock or, in the case of a merger in which we are not the surviving corporation, common stock or American Depositary Receipts (or other securities representing common equity interests) of the surviving corporation or its direct or indirect parent corporation, or a combination of stock and cash, at our option. The number of shares of common stock or American Depositary Receipts (or other securities representing common equity interests) a holder will receive will equal the relevant amount of the change in control purchase price to be paid in common stock or American Depositary Receipts (or other securities representing common equity interests) divided by 97% of the average of the last reported sale prices of the common stock or American Depositary Receipts (or other securities representing common equity interests) for the 15 trading days immediately preceding and including the third trading day prior to the repurchase date. However, we may not pay the change in control purchase price in common stock or American Depositary Receipts (or other securities representing common equity interests) or a combination of common stock or American Depositary Receipts (or other securities representing common equity interests)

and cash, unless we satisfy certain conditions prior to the repurchase date as provided in the indenture, including:


	•	registration of the common stock or American Depositary Receipts (or other securities representing common equity interests) to be issued upon repurchase under the Securities Act and the Exchange Act, if required;

	•	qualification of the common stock or American Depositary Receipts (or other securities representing common equity interests) to be issued upon repurchase under applicable state securities laws, if necessary, or the availability of an exemption therefrom; and

	•	listing of the common stock or American Depositary Receipts (or other securities representing common equity interests) on a United States national securities exchange or quotation thereof in an inter-dealer quotation system of any registered United States national securities association.

We will mail to the trustee and to each holder a written notice of the change in control within 10 business days after the occurrence of such change in control. This notice will state certain specified information, including:


	•	information about, and the terms and conditions of, the change in control;

	•	information about the holders’ right to convert the notes;

	•	information about the holders’ right to require us to purchase the notes;

	•	the procedures required for exercise of the purchase option;

	•	the name and address of the paying and conversion agents; and

	•	whether the change in control purchase price will be paid in cash, common stock or American Depositary Receipts (or other securities representing common equity interests), or a combination thereof.

If you wish to exercise your purchase rights, you must deliver written notice of your exercise of this purchase right to the paying agent at any time prior to the close of business on the business day prior to the change in control purchase date. The written notice must specify the notes for which the purchase right is being exercised. If you wish to withdraw this election, you must provide a written notice of withdrawal to the paying agent at any time prior to the close of business on the business day prior to the change in control purchase date.

Because the average of the last reported sale prices of the common stock or American Depositary Receipts (or other securities representing common equity interests) will be determined prior to the applicable change in control purchase date, to the extent we pay any portion of the change in control purchase price in common stock or American Depositary Receipts (or other securities representing common equity interests), holders of notes bear the market risk that the stock will decline in value between the date the average of the last reported prices is calculated and the repurchase date.

A change in control will be deemed to have occurred if any of the following occurs:


	•	any “person” or “group” becomes the “beneficial owner” of shares of Valeant’s voting stock representing 50% or more of the total voting power of all Valeant’s outstanding voting stock, or acquires the power, directly or indirectly, to elect a majority of the members of Valeant’s board of directors;

	•	Valeant consolidates with, or merges with or into, another person or Valeant sells, assigns, conveys, transfers, leases or otherwise disposes of all or substantially all of Valeant’s assets, or any person consolidates with, or merges with or into, Valeant in any such event other than pursuant to a transaction in which the persons that “beneficially owned” the shares of Valeant’s voting stock immediately prior to such transaction “beneficially own” at least a majority of the total voting power of all outstanding voting stock of the surviving or transferee person, as applicable; or


	•	the holders of Valeant’s capital stock approve any plan or proposal for the liquidation or dissolution of Valeant (whether or not otherwise in compliance with the indenture).

However, a change in control will not be deemed to have occurred if either:


	•	the last reported sale price of Valeant’s common stock for any five trading days during the ten trading days immediately preceding the change in control is at least equal to 105% of the conversion price in effect on such day; or

	•	in the case of a merger or consolidation, at least 90% of the consideration by value in the merger or consolidation constituting the change in control consists of common stock or American Depositary Receipts (or other securities representing common equity interests) and any associated rights traded on a United States national securities exchange or quoted on The NASDAQ National Market (or which will be so traded or quoted when issued or exchanged in connection with such change in control) and as a result of such transaction or transactions at least 90% of the value of the consideration for which the notes become convertible consists of such common stock or American Depositary Receipts (or other securities representing common equity interests) and associated rights.

For purposes of this change in control definition:


	•	“person” and “group” have the meanings given to them for purposes of Sections 13(d) and 14(d) of the Exchange Act or any successor provisions, and the term “group” includes any group acting for the purpose of acquiring, holding or disposing of securities within the meaning of Rule 13d-5(b)(l) under the Exchange Act, or any successor provision;

	•	a “beneficial owner” will be determined in accordance with Rule 13d-3 under the Exchange Act, as in effect on the date of the indenture, except that the number of shares of Valeant’s voting stock will be deemed to include, in addition to all outstanding shares of Valeant’s voting stock and unissued shares deemed to be held by the “person” or “group” or other person with respect to which the change in control determination is being made, all unissued shares deemed to be held by all other persons;

	•	“beneficially own” and “beneficially owned” have meanings correlative to that of beneficial owner;

	•	“unissued shares” means shares of voting stock not outstanding that are subject to options, warrants, rights to acquire or conversion privileges exercisable within 60 days of the date of determination of a change in control; and

	•	“voting stock” means any class or classes of capital stock or other interests then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of Valeant’s board of directors.

There is no precise, established definition of the term “all or substantially all of our assets” under applicable law and accordingly, there may be uncertainty as to whether the foregoing provision would apply to a sale or lease of less than all of Valeant’s assets, as applicable.

In the event of a purchase offer required as a result of a change in control, we will:


	•	comply with the provisions of Rule 13e-4 and Rule 14e-l, if applicable, under the Exchange Act;

	•	file a Schedule TO or any successor or similar schedule if required under the Exchange Act; and

	•	otherwise comply with all applicable federal and state securities laws.

On or before the change in control purchase date, we will deposit with a paying agent (or the trustee) money or securities sufficient to pay the purchase price of the notes to be purchased on that date. On and after the change in control purchase date, unless we default in the deposit of the purchase price, interest will cease to accrue on the notes or any portion of the notes as to which a repurchase election has been validly made and not withdrawn, the conversion right with respect to the notes or any portion of the notes as to which the election has been made will lapse and all other rights of the holder will terminate other than the right to

receive the purchase price, without interest from the change in control purchase date, on surrender of the notes.

This change in control purchase feature may make more difficult or discourage a takeover of us and the removal of incumbent management. We are not, however, aware of any specific effort to accumulate shares of Valeant’s common stock or to obtain control of us by means of a merger, tender offer, solicitation or otherwise. In addition, the change in control purchase feature is not part of a plan by management to adopt a series of anti-takeover provisions. Instead, the change in control purchase feature is a result of negotiations between us and the initial purchasers that we believe represents a standard term in securities similar to the notes.

We may in the future enter into agreements, including agreements relating to senior indebtedness, the terms of which:


	•	require us to repurchase that indebtedness upon the occurrence of events similar to a change in control as defined above;

	•	provide that events similar to a change in control as defined above constitute an event of default permitting acceleration of that indebtedness; or

	•	prohibit our repurchase of the notes on a change in control in general or under specified circumstances.

The indenture governing our 7% Senior Notes due 2011 contains such provisions regarding the $300.0 million indebtedness represented by those notes.

If we are unable to pay the change in control purchase price for notes properly tendered by holders, that failure will constitute an event of default under the indenture, whether the failure occurs as the result of one of the foregoing reasons, because the subordination provisions of the indenture prohibit us from doing so at the time, because we have insufficient funds to do so at the time or for any other reason.

We could, in the future, enter into transactions, including recapitalizations, that would not constitute a change in control but would increase the amount of debt, including senior indebtedness, outstanding or otherwise adversely affect the holders of the notes. If we choose to repurchase the notes for stock, that issuance could be dilutive to Valeant’s stockholders and could adversely affect the value of the notes.

Subordination

The indebtedness evidenced by the notes is subordinated to the extent provided in the indenture to the prior payment in full in cash of all senior indebtedness.

Upon any distribution of our assets upon any dissolution, winding up, liquidation or reorganization, payments on the notes will be subordinated in right of payment to the prior payment in full in cash of all senior indebtedness.

In the event of any acceleration of the notes because of an event of default, holders of any senior indebtedness would be entitled to payment in full in cash of all senior indebtedness before the holders of subordinated debt securities, such as the notes, are entitled to receive any payment or distribution.

We are required to promptly notify holders of senior indebtedness if payment of the notes is accelerated because of an event of default.

We may not make payment on the notes or purchase or otherwise acquire the notes if:


	•	a default in the payment of any senior indebtedness occurs and is continuing beyond any grace period; or

	•	any other default occurs and is continuing with respect to designated senior indebtedness that permits holders or their representatives of designated senior indebtedness to accelerate its maturity, and the trustee receives a payment blockage notice from us or another person permitted to give the notice under the indenture.

We are required to resume payments on the notes:


	•	in case of a payment default, the date on which the default is cured or waived or ceases to exist; and

	•	in case of a nonpayment default, the date on which the default is cured or waived or ceases to exist or 179 days after the receipt of the payment blockage notice.

No new payment blockage period may start unless 365 days have elapsed from the effectiveness of the prior payment blockage notice.

No nonpayment default that existed or was continuing on the date of delivery of any payment blockage notice to the trustee shall be the basis for a subsequent payment blockage notice.

As a result of these subordination provisions, in the event of our bankruptcy, dissolution or reorganization, holders of senior indebtedness may receive more, ratably, and holders of the notes may receive less, ratably, than our other creditors.

The subordination provisions will not prevent the occurrence of any event of default under the indenture.

If the trustee, any paying agent or any holder receives any payment or distribution of assets in contravention of these subordination provisions before all senior indebtedness is paid in full in cash or other payment satisfactory to holders of senior indebtedness, then such payment or distribution will be held in trust for the holders of senior indebtedness to the extent necessary to make payment in full in cash of all unpaid senior indebtedness.

The notes are our obligations exclusively. Since a substantial portion of Valeant’s operations are conducted through subsidiaries, its cash flow and its ability to service debt, including the notes, are dependent in part upon the earnings of its subsidiaries and the distribution of those earnings to, or upon loans or other payments of funds by those subsidiaries to it. The payment of dividends and the making of loans and advances by Valeant’s subsidiaries may be subject to statutory or contractual restrictions, are dependent upon the earnings of those subsidiaries upon their liquidation or reorganization (and the consequent right of the holders of the notes to participate in those assets) and will be structurally subordinated to the claims of that subsidiary’s creditors (including trade creditors), except to the extent Valeant is itself recognized as a creditor of such subsidiary, in which case its claims would still be subordinate to any security interests in the assets of such subsidiary and any indebtedness of such subsidiary senior to that held by Valeant.

As of March 31, 2004, we had approximately $300.0 million of indebtedness outstanding that would have constituted senior indebtedness, and our subsidiaries had approximately $44.3 million of indebtedness and other liabilities outstanding to which the notes would have been structurally subordinated (including trade and other payables, but excluding intercompany liabilities).

The indenture does not limit the amount of additional indebtedness, including senior indebtedness, which we can create, incur, assume or guarantee, nor does the indenture limit the amount of indebtedness or other liabilities that any subsidiary can create, incur, assume or guarantee.

“Designated senior indebtedness” means any senior indebtedness in which the instrument creating or evidencing the indebtedness, or any related agreements or documents to which we are a party, expressly provides that such indebtedness is “designated senior indebtedness” for purposes of the indenture (provided that the instrument, agreement or other document may place limitations and conditions on the right of the senior indebtedness to exercise the rights of designated senior indebtedness).

“Indebtedness” means:

(1) all our indebtedness, obligations and other liabilities, contingent or otherwise, (A) for borrowed money, including overdrafts, foreign exchange contracts, currency exchange agreements, interest rate protection agreements, and any loans or advances from banks, whether or not evidenced by notes or similar instruments, or (B) evidenced by credit or loan agreements, bonds, debentures, notes or similar instruments, whether or not the recourse of the lender is to the whole of our assets or to only a portion


	thereof, other than any account payable or other accrued current liability or obligation incurred in the ordinary course of business in connection with the obtaining of materials or services;

	(2) all our reimbursement obligations and other liabilities, contingent or otherwise, with respect to letters of credit, bank guarantees or bankers’ acceptances;

	(3) all our obligations and liabilities, contingent or otherwise, in respect of leases required, in conformity with U.S. generally accepted accounting principles, to be accounted for as capitalized lease obligations on our balance sheet;

	(4) all our obligations and other liabilities, contingent or otherwise, under any lease or related document, including a purchase agreement, conditional sale or other title retention agreement, in connection with the lease of real property or improvements thereon (or any personal property included as part of any such lease) which provides that we are contractually obligated to purchase or cause a third party to purchase the leased property or pay an agreed upon residual value of the leased property, including our obligations under such lease or related document to purchase or cause a third party to purchase such leased property or pay an agreed upon residual value of the leased property to the lessor;

	(5) all our obligations, contingent or otherwise, with respect to an interest rate or other swap, cap, floor or collar agreement or hedge agreement, forward contract or other similar instrument or agreement or foreign currency hedge, exchange, purchase or similar instrument or agreement;

	(6) all our direct or indirect guaranties or similar agreements by us in respect of, and all of our obligations or liabilities to purchase or otherwise acquire or otherwise assure a creditor against loss in respect of, indebtedness, obligations or liabilities of another person of the kinds described in clauses (1) through (5); and

	(7) any and all deferrals, renewals, extensions, refinancings and refundings of, or amendments, modifications or supplements to, any indebtedness, obligation or liability of the kinds described in clauses (1) through (6).

“Senior indebtedness” means the principal of, premium, if any, interest, including any interest accruing after the commencement of any bankruptcy or similar proceeding, whether or not a claim for post-petition interest is allowed as a claim in the proceeding, and rent payable on or in connection with, and all fees, costs, expenses and other amounts accrued or due on or in connection with, our indebtedness whether secured or unsecured, absolute or contingent, due or to become due, outstanding on the date of the indenture or thereafter created, incurred, assumed, guaranteed or in effect guaranteed by us, including all deferrals, renewals, extensions or refundings of, or amendments, modifications or supplements to, the foregoing. However, senior indebtedness shall not include:


	•	indebtedness evidenced by the notes offered hereby;

	•	indebtedness to any of our subsidiaries, except it if is pledged as security for any senior indebtedness;

	•	our accounts payable to trade creditors arising in the ordinary course of business; and

	•	any indebtedness that expressly provides that it shall not be senior in right of payment to, or on the same basis with, or is subordinated to or junior to, the notes.

Merger and Sale of Our Assets

The indenture provides that Valeant may not consolidate with or merge with or into any other person or convey, transfer or lease their properties and assets substantially as an entirety to another person, unless:


	•	Valeant is the surviving person, or the resulting, surviving or transferee person, if other than Valeant, is organized and existing under the laws of the United States, any state thereof or the District of Columbia;

	•	the successor entity assumes all our obligations under the notes and the indenture;


	•	immediately after giving effect to the transaction, no default or event of default under the indenture has occurred and is continuing; and

	•	other conditions specified in the indenture are met.

When such a person assumes our obligations in such circumstances, subject to certain exceptions, we shall be discharged from all obligations under the notes and the indenture.

There is no precise, established definition of the term “substantially as an entirety” under applicable law and accordingly, there may be uncertainty as to whether the foregoing provision would apply to a conveyance, transfer or lease of less than all of our assets.

Events of Default; Notice and Waiver

The following are events of default under the indenture:


	•	we fail to pay principal or premium, if any, on the notes when due, whether or not prohibited by the subordination provisions of the indenture;

	•	we fail to pay any interest or additional interest, if any, on the notes, when due and such failure continues for a period of 30 days, whether or not prohibited by the subordination provisions of the indenture;

	•	we fail to perform or observe any of the other covenants in the indenture if such failure continues for 60 days after written notice is given in accordance with the indenture;

	•	we or any of our significant subsidiaries fail to pay any indebtedness for money borrowed by us or one of our significant subsidiaries in an outstanding principal amount in excess of $15.0 million at final maturity or upon acceleration and such indebtedness is not discharged, or such default in payment or acceleration is not cured or rescinded, within 30 days after written notice is given in accordance with the indenture; and

	•	certain events of bankruptcy, insolvency or reorganization of us or any of our significant subsidiaries.

Our obligations under the indenture are not intended to provide creditors’ rights in bankruptcy for any amounts in excess of par plus accrued and unpaid interest (including additional amounts, if any). The trustee may withhold notice to the holders of the notes of that series of any default, except defaults in payment of principal, premium, if any, interest or additional amounts, if any, on the notes. However, the trustee must consider it to be in the interest of the holders of the notes of that series to withhold this notice.

If an event of default occurs and continues, the trustee or the holders of at least 25% in principal amount of the outstanding notes of a series may declare the principal, premium, if any, and accrued interest and additional amounts, if any, on the outstanding notes of a series to be immediately due and payable. In case of certain events of bankruptcy or insolvency, the principal, premium, if any, and accrued interest and additional amounts, if any, on the notes will automatically become due and payable. However, if we cure all defaults, except the nonpayment of principal, premium, if any, interest or additional amounts, if any, that became due as a result of the acceleration, and meet certain other conditions, with certain exceptions, this declaration may be cancelled and the holders of a majority of the principal amount of outstanding notes may waive these past defaults.

Payments of principal, premium, if any, accrued interest and additional amounts, if any, that are not made will accrue interest at 1.0% per annum over the amount of interest otherwise payable from the required payment date.

The holders of a majority of outstanding notes of a series have the right to direct the time, method and place of any proceedings for any remedy available to the trustee, subject to limitations specified in the indenture.

No holder of the notes may pursue any remedy under the indenture, except in the case of a default in the payment of principal, premium, if any, or interest on the notes, unless:


	•	the holder has given the trustee written notice of an event of default;

	•	the holders of at least 25% in principal amount of outstanding notes of the applicable series make a written request, and offer reasonable indemnity, to the trustee to pursue the remedy;

	•	the trustee does not receive an inconsistent direction from the holders of a majority in principal amount of the notes of the applicable series; and

	•	the trustee fails to comply with the request within 60 days after receipt.

Modification and Waiver

We and the trustee may amend or supplement the indenture or the notes without notice to, or the consent of, the note holders to, among other things, cure any ambiguity, defect or inconsistency or make any other change that does not adversely affect the rights of any note holder. We retain the right to modify our right to settle our payment obligation upon conversion of notes in common stock, cash, or a combination of cash and common stock; we retain the right to fix the settlement of our conversion obligations (1) in cash, in an amount up to (and including) the principal amount of the notes converted by each holder and (2) in shares of common stock, to satisfy the remainder, if any, of our conversion obligation.

We and the trustee may amend or supplement the indenture or the notes with respect to any series with the consent of the holders of a majority in aggregate principal amount of the outstanding notes of such series. In addition, the holders of a majority in aggregate principal amount of the outstanding notes of a series may waive our compliance in any instance with any provision of the indenture with respect to such series without notice to the note holders. However, no amendment, supplement or waiver may be made without the consent of the holder of each outstanding note of the series affected thereby if such amendment, supplement or waiver would:


	•	extend the fixed maturity of any note;

	•	reduce the principal amount of or any premium or interest on any note;

	•	change the time for payment of interest or the redemption date, if applicable, on any note;

	•	modify the provisions with respect to the repurchase right of the holder upon a change in control in a manner adverse to the holder;

	•	impair the right of a holder to institute suit for payment on any note;

	•	change the currency in which any note is payable;

	•	modify the subordination provisions of any note in a manner that adversely affects the rights of the holder;

	•	impair the right of a holder to convert any note;

	•	reduce the quorum requirements under the indenture;

	•	reduce the percentage in principal amount of outstanding notes necessary for waiver of compliance with certain provisions of the indenture or for waiver of certain defaults;

	•	reduce the percentage of notes required for consent to any modification of the indenture;

	•	take any other action otherwise prohibited by the indenture to be taken without the consent of each holder affected by such action.

Any notes held by us or one of our subsidiaries will be disregarded for voting purposes in connection with any notice, waiver, consent or direction requiring the vote or concurrence of note holders.

Form, Denomination and Registration

The notes have been issued:


	•	in fully registered form;

	•	without interest coupons; and

	•	in denominations of $1,000 principal amount and integral multiples of $1,000.

Global Notes, Book-Entry Form

The notes are currently evidenced by global notes that we have deposited with DTC and registered in the name of Cede & Co. as DTC’s nominee. Except as set forth below, a global note may be transferred, in whole or in part, only to another nominee of DTC or to a successor of DTC or its nominee.

Persons owning or acquiring an interest in notes may hold their interests in a global note directly through DTC if such holder is a participant in DTC, or indirectly through organizations that are participants in DTC (called “participants”). Transfers between participants are effected in the ordinary way in accordance with DTC rules and are settled in clearing house funds. The laws of some states require that certain persons take physical delivery of securities in definitive form. As a result, the ability to transfer beneficial interests in a global note to such persons may be limited. Holders who are not participants may beneficially own interests in a global note held by DTC only through participants, or certain banks, brokers, dealers, trust companies and other parties that clear through or maintain a custodial relationship with a participant, either directly or indirectly (called “indirect participants”). So long as Cede & Co., as the nominee of DTC, is the registered owner of a global note, Cede & Co. for all purposes will be considered the sole holder of such global note. Except as provided below, owners of beneficial interests in a global note will:


	•	not be entitled to have certificates registered in their names;

	•	not receive physical delivery of certificates in definitive registered form; and

	•	not be considered holders of the global note.

We will pay interest on, the repurchase price of or the redemption price of, as applicable, a global note to Cede & Co. as the registered owner of the global note, by wire transfer of immediately available funds on each interest payment date, repurchase date or redemption date, as the case may be. Neither we, the trustee, registrar, paying agent or conversion agent are responsible or liable:


	•	for the records relating to, or payments made on account of, beneficial ownership interests in a global note; or

	•	for maintaining, supervising or reviewing any records relating to the beneficial ownership interests.

We have been informed that DTC’s practice is to credit participants’ accounts on that payment date with payments in amounts proportionate to their respective beneficial interests in the principal amount represented by a global note as shown in the records of DTC, unless DTC has reason to believe that it will not receive payment on that payment date. Payments by participants to owners of beneficial interests in the principal amount represented by a global note held through participants will be the responsibility of the participants, as is now the case with securities held for the accounts of customers registered in “street name.”

Because DTC can only act on behalf of participants, who in turn act on behalf of indirect participants, the ability of a person having a beneficial interest in the principal amount represented by a global note to pledge such interest to persons or entities that do not participate in the DTC system, or otherwise take actions in respect of such interest, may be affected by the lack of a physical certificate evidencing its interest.

Neither we, the trustee, registrar, paying agent nor conversion agent have any responsibility for the performance by DTC or its participants or indirect participants of their respective obligations under the rules and procedures governing their operations. DTC has advised us that it will take any action permitted to be taken by a holder of notes, including the presentation of notes for exchange, only at the direction of one or

more participants to whose account with DTC interests in a global note are credited, and only in respect of the principal amount of the notes represented by the global note as to which the participant or participants has or have given such direction.

DTC has advised us that it is:


	•	a limited purpose trust company organized under the laws of the State of New York, and a member of the Federal Reserve System;

	•	a “clearing corporation” within the meaning of the Uniform Commercial Code; and

	•	a “clearing agency” registered pursuant to the provisions of Section 17A of the Exchange Act.

DTC was created to hold securities for its participants and to facilitate the clearance and settlement of securities transactions between participants through electronic book-entry changes to the accounts of its participants. Participants include securities brokers, dealers, banks, trust companies and clearing corporations and other organizations. Some of the participants or their representatives, together with other entities, own DTC. Indirect access to the DTC system is available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly.

DTC has agreed to the foregoing procedures to facilitate transfers of interests in a global note among participants. However, DTC is under no obligation to perform or continue to perform these procedures, and may discontinue these procedures at any time. If DTC is at any time unwilling or unable to continue as depositary and a successor depositary is not appointed by us within 90 days, we will issue notes in certificated form in exchange for global notes.

Registration Rights of the Noteholders

On November 19, 2003, we entered into a registration rights agreement with the initial purchasers for the benefit of the holders of the notes.

Pursuant to the agreement, we agreed that we would, at our expense:


	•	file with the SEC not later than the date 90 days after November 19, 2003, the earliest date of original issuance of any of the notes, a registration statement on such form as we deem appropriate covering resales of the registrable securities;

	•	use our reasonable best efforts to cause such registration statement to become effective no later than 270 days after the earliest date of original issuance of any of the notes; and

	•	use our reasonable best efforts to keep the registration statement effective until the earliest of:


	(1) the date when all of the registrable securities shall have been sold under the registration statement;

	(2) the expiration of the holding period under Rule 144(k) with respect to all registrable securities held by persons that are not our affiliates; and

	(3) two years from the effective date of the registration statement.

When we use the term “registrable securities” in this section, we are referring to the notes and the common stock issuable upon conversion of the notes until the earliest of:


	(1) the effective registration under the Securities Act and the resale of the securities in accordance with the registration statement;

	(2) the transfer of the securities in compliance with Rule 144 under the Securities Act (or any successor provision thereof) or the securities are transferable pursuant to Rule 144(k) under the Securities Act (or any successor provision thereof); and

	(3) the exchange of the securities for new securities not subject to transfer restrictions.

This prospectus is part of the registration statement that we agreed to file. Pursuant to the registration rights agreement, we agreed that we would mail a notice and questionnaire to each holder to obtain certain information regarding the holder for inclusion in the prospectus. We agreed that not less than 30 calendar days prior to the time of effectiveness, we would mail the notice and questionnaire to each holder. No holder is entitled to be named as a selling securityholder, and no holder is entitled to use the prospectus forming a part of the registration statement for resales of registrable securities at any time, unless the holder returned a completed and signed notice and questionnaire to us by the deadline for response set forth in the notice and questionnaire; provided, however, that holders were required to have at least 28 calendar days from the date on which it is first mailed to return a completed and signed notice and questionnaire to us. However, upon request from a holder that did not return a notice and questionnaire on a timely basis, we have agreed that we will deliver a notice and questionnaire to such holder, and upon receipt of a properly completed notice and questionnaire from such a holder, we shall use our best efforts to add such holder to the registration statement as selling securityholder; provided, however, that nothing shall relieve the holder of the obligation to return a completed and signed notice and questionnaire to us.

In the registration rights agreement, we agreed that we would, with respect to any registration statement filed pursuant to the agreement:


	•	provide to each holder for whom the registration statement was filed copies of the prospectus that is a part of the registration statement;

	•	notify each such holder when the registration statement has become effective; and

	•	use our best efforts to take all other steps necessary to effect the registration, offering and sale of the registrable securities.

Each holder who sells securities pursuant to the registration statement generally will be:


	•	required to be named as a selling holder in the related prospectus;

	•	required to deliver a prospectus to the purchaser;

	•	subject to certain of the civil liability provisions under the Securities Act in connection with the holder’s sales; and

	•	bound by the provisions of the registration rights agreement which are applicable to the holder (including certain indemnification rights and obligations).

We have the right to suspend the use of this prospectus for up to 30 days in any 90-day period or an aggregate of 90 days in any 12-month period without being required to pay additional interest if Valeant’s board of directors has determined in good faith that because of valid business reasons (not including avoidance of Valeant’s obligations hereunder), including the acquisition or divestiture of assets, pending corporate developments and similar events, it is in Valeant’s best interests to suspend such use, and prior to suspending such use we provide the holders with written notice of such suspension, which notice need not specify the nature of the event giving rise to such suspension.

If,


	•	the registration statement has not been declared effective prior to or on the 270th day following the earliest date of original issuance of any of the notes (the “effectiveness target date”) other than as a result of a permitted suspension; then

additional interest will accrue on the notes that are registrable securities from and including the day following the registration default to but excluding the day on which the registration default has been cured. Additional interest will be paid semiannually in arrears, with the first semiannual payment due on each February 16 and August 16 with respect to the 3.0% notes due 2010 and on each May 15 and November 15 with respect to the 4.0% notes due 2013, and will accrue at a rate per year equal to:


	•	0.25% of the principal amount of a note to and including the 90th day following such registration default; and

	•	0.50% of the principal amount of a note from and after the 91st day following such registration default.

In addition, in the event that:


	•	the registration statement ceases to be effective;

	•	we suspend the use of the prospectus;

	•	we do not authorize the use of the prospectus in connection with the offer and sale of the registrable securities; or

	•	the holders are otherwise prevented or restricted by us from effecting sales pursuant to the registration statement (an “Effective Failure”);

for more than 30 days, whether or not consecutive, in any 90-day period, or for more than 90 days, whether or not consecutive, during any 12-month period; then we shall pay additional interest at a rate per annum equal to an additional 0.50% of the principal amount of the notes that are registrable securities from the 31st day of the applicable 90-day period or the 91st day of the applicable 12-month period, as the case may be, that any such Effective Failure has existed until the earlier of (1) the time the holders of are again able to make sales of notes under the registration statement or (2) the expiration of the effectiveness of the registration statement.

In no event will additional interest accrue on the notes at a rate per year exceeding 0.50%.

In no event will additional interest accrue on the notes solely as a result of a registration default with respect to the common stock.

If a holder converts some or all of its notes into common stock when there exists a registration default with respect to the common stock, the holder will not be entitled to receive additional interest on such common stock, but will receive additional shares upon conversion equal to 3% of the applicable conversion rate for each $1,000 original principal amount of notes (except to the extent we elect to deliver cash upon conversion). In addition, such holder will receive, on the settlement date for any notes submitted for conversion during a registration default, accrued and unpaid additional interest to the conversion date relating to such settlement date. If a registration default with respect to the common stock occurs after a holder has converted its notes into common stock, such holder will not be entitled to any compensation with respect to such common stock.

Information Concerning the Trustee

We have appointed The Bank of New York, the trustee under the indenture, as paying agent, conversion agent, note registrar and custodian for the notes. The trustee or its affiliates may provide banking and other services to us in the ordinary course of their business. The trustee is permitted to deal with us and any of our affiliates with the same rights as if it were not trustee. However, under the Trust Indenture Act, if the trustee acquires any conflicting interest and there exists a default with respect to the notes, the trustee must eliminate the conflict or resign.

DESCRIPTION OF CAPITAL STOCK

Valeant’s authorized capital stock consists of 200,000,000 shares of common stock, par value $0.01 per share, and 10,000,000 shares of preferred stock, par value $0.01 per share. The transfer agent and registrar for Valeant common stock is American Stock Transfer & Trust Company. On July 20, 2004, 84,001,220 shares of common stock and no shares of preferred stock were outstanding. The following summary of Valeant’s capital stock is qualified in its entirety by reference to its certificate of incorporation, bylaws and the Rights Agreement (as defined below) and Valeant encourages you to review its certificate of incorporation, bylaws and the Rights Agreement, which Valeant has filed with the Commission.

Common Stock

Holders of shares of Valeant common stock are entitled to one vote for each share of common stock held of record on all matters on which stockholders are generally entitled to vote. The vote of the holders of a majority of the stock represented at a meeting at which a quorum is present is generally required to take stockholder action, unless a greater vote is required by Valeant’s certificate of incorporation, bylaws or law. Directors are elected by a plurality of the votes cast at any election and there is no cumulative voting of shares.

Holders of shares of Valeant common stock have no preemptive rights. Subject to applicable law and the rights of the holders of preferred stock, holders of shares of common stock are entitled to such dividends as may be declared by Valeant’s board of directors. The common stock is not entitled to any sinking fund, redemption or conversion provisions. Upon Valeant’s dissolution, liquidation or winding up, the holders of shares of Valeant common stock are entitled to share ratably in Valeant’s net assets remaining after the payment of all creditors and liquidation preferences of preferred stock. The outstanding shares of common stock are duly authorized, validly issued, fully paid and nonassessable.

Preferred Stock

We are authorized to issue 10,000,000 shares of preferred stock of which 1,000,000 shares shall consist of Series A Participating preferred stock. 50,000 shares have been designated Series B Convertible preferred stock. 3,000 shares have been designated Series C Convertible preferred stock and 3,000 shares have been designated Series D Convertible preferred stock. Presently, we have no shares of preferred stock outstanding.

Subject to the provisions of its certificate of incorporation and limitations prescribed by law, Valeant’s board of directors, is authorized to provide for the issuance of shares of preferred stock in one or more series, to establish the number of shares to be included in each such series, and to fix the designations, voting powers, preferences and rights of the shares of each such series and any qualifications, limitations or restrictions thereof. The ability of the board of directors to issue preferred stock, while providing flexibility in connection with financing, acquisitions and other corporate purposes, could have the effect of discouraging, deferring or preventing a change in control or an unsolicited acquisition proposal, since the issuance of preferred stock could be used to dilute the share ownership of a person or entity seeking to obtain control of us. In addition, because the board of directors has the power to establish the preferences, powers and rights of the shares of any of these series of preferred stock, it may afford the holders of any preferred stock preferences, powers and rights (including voting rights) senior to the rights of the holders of common stock, which could adversely affect the rights of holders of common stock.

Stockholders Rights Agreement

Valeant’s board of directors declared and paid a dividend of one preferred stock purchase right (a “Right”) for each outstanding share of Valeant common stock to the stockholders of record on the record date. Each right entitles the registered holder to purchase from us one one-hundredth of a share of Valeant’s Series A Participating preferred stock, par value $0.01 per share, at a purchase price of $125.00 per one one-hundredth of a preferred share, subject to adjustment. The description and terms of the rights are set forth in a rights agreement between us and the American Stock Transfer & Trust Company (the “Rights Agreement”).

Until the earlier to occur of (i) the first date of a public announcement that a person has become an Acquiring Person (as defined in the Rights Agreement) which generally means that a person or group of affiliated or associated persons has acquired beneficial ownership of 15% or more of the outstanding shares of common stock or (ii) the close of business on the tenth day (or such later day as may be determined by action of Valeant’s board of directors) following the commencement of, or announcement of an intention to make, a tender offer or exchange offer the consummation of which would result in any person becoming an Acquiring Person (the earlier of such dates being called the Distribution Date), the Rights will be evidenced, by such common stock and the right to receive Rights certificates will be transferable only in connection with the transfer of the underlying shares of common stock.

Until the distribution date (or earlier redemption or expiration of the rights), the rights will be transferred with and only with the shares of common stock. The rights are not exercisable until the distribution date. The rights will expire on November 1, 2004, unless otherwise extended or the rights are earlier redeemed or exchanged by Valeant.

Unless otherwise provided in the Rights Agreement, the registered holder of any Right certificate may exercise the Rights evidenced thereby in whole or in part at any time after the Distribution Date upon, among other things, surrender of the Right certificate, together with payment of the aggregate Purchase Price (as defined in the Rights Agreement) for the total number of one one-hundredths of a share of preferred stock (or other securities, as the case may be) as to which such surrendered Rights are exercised, at or prior to the earlier of (i) the close of business on November 1, 2004 and (ii) the time at which the Rights are redeemed.

The purchase price payable, and the number of preferred shares or other securities or property issuable, upon exercise of the rights are subject to adjustment from time to time to prevent dilution. In the event that at any time prior to the Distribution Date, Valeant shall (i) declare or pay any dividend on its common stock payable in shares of common stock or (ii) effect a subdivision, combination or consolidation of its common stock (by reclassification or otherwise than by payment of dividends in shares of common stock) into a greater or lesser number of shares of common stock, then in any such case, each share of common stock outstanding following such subdivision, combination or consolidation shall continue to have a Right associated therewith and the Purchase Price following any such event shall be proportionately adjusted to equal the result obtained by multiplying the Purchase Price immediately prior to such event by a fraction the numerator of which shall be the total number of shares of common stock outstanding immediately prior to the occurrence of the event and the denominator of which shall be the total number of shares of common stock outstanding immediately following the occurrence of such event. This adjustment shall be made successively whenever such a dividend is declared or paid or such a subdivision, combination or consolidation is effected. In the event Valeant (i) declares a dividend on the shares of preferred stock payable in preferred stock, (ii) subdivides the outstanding shares of preferred stock, (iii) combines the outstanding shares of preferred stock into a smaller number of shares of preferred stock or (iv) issues any shares of its capital stock in a reclassification of the preferred stock (including any such reclassification in connection with a consolidation or merger in which Valeant is the continuing or surviving corporation), except as otherwise provided in the Rights Agreement, the Purchase Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification, and the number and kind of shares of capital stock issuable on such date, shall be proportionately adjusted so that the holder of any Right exercised after such time shall be entitled to receive the aggregate number and kind of shares of capital stock which, if such Right had been exercised immediately prior to such date and at a time when the preferred stock transfer books of Valeant were open, such holder would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination or reclassification; provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of Valeant issuable upon exercise of one Right.

In the event any Person, alone or together with its Affiliates and Associates (as each term is defined in the Rights Agreement), becomes an Acquiring Person then proper provision will be made so that each holder of a Right (except as provided in the Rights Agreement) will, for a period of 60 days after the later of the occurrence of any such event or the effective date of an appropriate registration statement under the Securities Act, have a right to receive, upon exercise of such Right at a price equal to the then current Purchase Price, in

accordance with the terms of the Rights Agreement, such number of shares of common stock (or, in the discretion of Valeant’s board of directors, one one-hundredth of a share of preferred stock) as shall equal the result obtained by (x) multiplying the then current Purchase Price by the then number of one one-hundredths of a share of preferred stock for which a Right was exercisable immediately prior to the first occurrence of a Section 11(a)(ii) Event (as defined in the Rights Agreement) and dividing that product by (y) 50% of the then current per share market price of Valeant’s common stock on the date of such first occurrence. There are also certain other circumstances that trigger adjustments to the Purchase Price and therefore the Rights Agreement should be read in its entirety.

With certain exceptions, no adjustment in the Purchase Price will be required until cumulative adjustments require an adjustment of at least 1% in such Purchase Price. No fractional preferred shares will be issued (other than fractions which are one one-hundredth or integral multiples of one one-hundredth of a preferred share, which may, at Valeant’s election, be evidenced by depositary receipts) and in lieu thereof, an adjustment in cash will be paid based on the market price of the preferred shares on the last trading day prior to the date of exercise.

In the event that, directly or indirectly, (x) Valeant consolidates with, or merges with and into, any Person, (y) Valeant consolidates with, or merges with, any Person, and Valeant is the continuing or surviving corporation of such consolidation or merger (other than, in a case of any transaction described in (x) or (y), a merger or consolidation which would result in all of the securities generally entitled to vote in the election of directors (“voting securities”) of Valeant outstanding immediately prior thereto, continuing to represent (either by remaining outstanding or by being converted into securities of the surviving entity) all of the voting securities of Valeant or such surviving entity outstanding immediately after such merger or consolidation and the holders of such securities not having changed as a result of such merger or consolidation) or (z) Valeant sells or otherwise transfers (or one or more of its subsidiaries sells or otherwise transfers), in one transaction or a series of related transactions, assets or earning power aggregating more than 50% of the assets or earning power of Valeant and its subsidiaries (taken as a whole) to any Person, (collectively, an “Event”) then, and in each such case (except as provided in the Rights Agreement), proper provision will be made so that (i) each holder of a Right, except as provided in the Rights Agreement, will thereafter have the right to receive, upon the exercise thereof at a price equal to the then current Purchase Price, in accordance with the terms of the Rights Agreement and in lieu of shares of preferred stock, such number of freely tradeable shares of common stock of the Principal Party (as defined in the Rights Agreement), not subject to any liens, encumbrances, rights of first refusal or other adverse claims, as shall equal the result obtained by (A) multiplying the then current Purchase Price by the number of one one-hundredths of a share of preferred stock for which a Right is then exercisable (without taking into account any adjustment previously made pursuant to a section of the Rights Agreement) and (B) dividing that product by 50% of the then current per share market price of the common stock of such Principal Party (determined pursuant to the Rights Agreement) on the date of consummation of such Event; and (ii) such Principal Party shall thereafter be liable for, and shall assume, by virtue of such Event, all the obligations and duties of Valeant pursuant to the Rights Agreement.

At any time prior to the time any Person becomes an Acquiring Person or the expiration date of the Rights, Valeant’s board of directors may, at its option, redeem all but not less than all the then outstanding Rights at a redemption price of $.01 per Right, as such amount may be appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date of the Rights Agreement (such redemption price being hereinafter referred to as the “Redemption Price”).

In addition, at any time following the time any Person becomes an Acquiring Person and the expiration of any period during which the holder of Rights may exercise the rights under certain provisions of the Rights Agreement, the board of directors of Valeant may, at its option, prior to any Event, redeem all but not less than all of the then outstanding Rights at the Redemption Price (x) in connection with any merger, consolidation or sale or other transfer (in one transaction or in a series of related transactions) of assets or earning power aggregating 50% or more of the earning power of Valeant and its subsidiaries (taken as a whole) in which all holders of shares of common stock are treated alike and not involving (other than as a holder of shares of common stock being treated like all other such holders) an Interested Stockholder (as defined in the Rights Agreement) or (y)(aa) if and for so long as the Acquiring Person is not thereafter the

beneficial owner of 15% of the shares of common stock and (bb) at the time of redemption no other Persons are Acquiring Persons. Immediately upon any redemption of the rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price.

Until a right is exercised, the holder thereof, as such, will have no rights as a Valeant stockholder, including, without limitation, the right to vote or to receive dividends.

The Rights have certain anti-takeover effects. The Rights will cause substantial dilution to a person or group that attempts to acquire Valeant on terms not approved by Valeant’s board of directors, except pursuant to an offer conditioned on a substantial number of Rights being acquired. The rights should not interfere with any merger or other business combination approved by the board of directors since the rights may be redeemed by Valeant at the Redemption Price prior to the time that a person or group has acquired beneficial ownership of 10% or more of the shares of common stock.

Anti-Takeover Considerations

Valeant’s certificate of incorporation and bylaws contain a number of provisions that may have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from acquiring, Valeant.


	*Classified Board of Directors*

Valeant’s certificate of incorporation and bylaws divide its board of directors into three classes, as nearly equal in size as possible, with staggered three year terms, and provide that:


	•	directors may be removed only for cause by the affirmative vote of the holders of at least 66 2/3% of the voting power of all then outstanding shares of capital stock entitled to vote generally in the election of directors, voting together as a single class; and

	•	any vacancy on Valeant’s board of directors may be filled by vote of a majority of the directors then in office.


	*Stockholder Action, Special Meeting of Stockholders*

Valeant’s certificate of incorporation and bylaws eliminate the ability of Valeant’s stockholders to act by written consent. Valeant’s certificate of incorporation and bylaws further provide that special meetings of its stockholders may be called only by its board of directors or its Chairman of the Board, unless otherwise prescribed by statute.


	*Advance Notice Requirements for Stockholder Proposals and Director Nominations*

Valeant’s certificate of incorporation provides that stockholders seeking to bring business before an annual meeting of stockholders, or to nominate candidates for election as directors at an annual meeting of stockholders, must provide timely notice in writing. To be timely, a stockholder’s notice must be delivered to or mailed and received at Valeant’s principal executive offices not less than 60 days nor more than 90 days prior to the scheduled date of the annual meeting, regardless of any postponement, deferral or adjournment of that meeting to a later date; provided, however, that if less than 70 days’ prior notice or public disclosure of the date of the annual meeting is given or made to stockholders, notice by the stockholder to be timely must be so delivered or received not later than the close of business on the tenth day following the earlier of the date on which such notice of the date of the annual meeting was mailed to stockholders or the day on which such public disclosure was made. Valeant’s certificate of incorporation also specifies requirements regarding the form and content of a stockholder’s notice. These provisions may preclude stockholders from bringing matters before an annual meeting of stockholders or from making nominations for directors at an annual meeting of stockholders.


	*Business Combinations and Limitations in Valeant’s Certificate of Incorporation*

In addition to any other vote required by Valeant’s certificate of incorporation or Delaware law, the affirmative vote of the holders of not less than 85% of the outstanding Voting Stock (as defined in Valeant’s certificate of incorporation) held by stockholders other than a Related Person (as defined below) by or with whom or on whose behalf, directly or indirectly, a Business Combination (as defined below) is proposed, voting as a single class, shall be required for the approval or authorization of such Business Combination; provided, however, that the 85% voting requirement shall not be applicable and such Business Combination may be approved by the vote required by law, if any, or by any other provision of the certificate of incorporation if either: the Business Combination is approved by the board of directors of Valeant by the affirmative vote of at least 66 2/3% of the Continuing Directors (as defined in Valeant’s certificate of incorporation), or certain conditions set forth in Valeant’s certificate of incorporation are satisfied.

Any amendment, addition, alteration, change or repeal of the provisions regarding Business Combinations, or any other amendment of the certificate of incorporation inconsistent with or modifying or permitting circumvention of these provisions, must first be proposed by the board of directors of Valeant, upon the affirmative vote of at least two-thirds of the directors then in office at a duly constituted meeting of the board of directors called for such purpose, and thereafter approved by the affirmative vote of the holders of not less than 85% of the then outstanding Voting Stock held by stockholders other than a Related Person by or with whom or on whose behalf, directly or indirectly, a Business Combination is proposed, voting as a single class; provided, however, that such requirement will not apply to, and such 85% vote will not be required for, any such amendment, addition, alteration, change or repeal recommended to stockholders of Valeant by the affirmative vote of not less than 66 2/3% of the Continuing Directors.

In Valeant’s certificate of incorporation a “Business Combination” is defined as (a) any merger or consolidation of Valeant or a subsidiary with a Related Person, (b) any sale, lease, exchange, mortgage, pledge, transfer or other disposition other than in the ordinary course of business to or with a Related Person of any assets of Valeant or a subsidiary having an aggregate fair market value of $25,000,000 or more, (c) the issuance or transfer by Valeant of any shares of Voting Stock or securities convertible into or exercisable for such shares (other than by way of pro rata distribution to all stockholders) to a Related Person, (d) any recapitalization, merger or consolidation that would have the effect of increasing the voting power of a Related Person, (e) the adoption of any plan or proposal for the liquidation or dissolution of Valeant or a subsidiary proposed, directly or indirectly, by or on behalf of a Related Person, (f) any merger or consolidation of the corporation with another Person (as defined in Valeant’s certificate of incorporation) proposed, directly or indirectly, by or on behalf of a Related Person unless the entity surviving or resulting from such merger or consolidation has a provision in its governing instrument which is substantially identical to the provisions regarding Business Combinations set forth in Valeant’s certificate of incorporation, or (g) any agreement, contract or other arrangement or understanding providing, directly or indirectly, for any of the transactions described above.

In Valeant’s certificate of incorporation, a “Related Person” is defined as any individual, partnership, corporation, trust or other Person which, together with its “affiliates” and “associates,” as defined in Rule 12b-2 under the Exchange Act as in effect on January 1, 1993, and together with any other individual, partnership, corporation, trust or other Person with which it or they have any agreement, contract or other arrangement or understanding with respect to acquiring, holding, voting or disposing of Voting Stock, “beneficially owns” (within the meaning of Rule 13d-3 under the Exchange Act on said date) an aggregate of 10% or more of the outstanding Voting Stock. A Related Person, its affiliates and associates and all such other individuals, partnerships, corporations and other Persons with whom it or they have any such agreement, contract or other arrangement or understanding, shall be deemed a single Related Person for purposes of the provisions regarding Business Combinations set forth in Valeant’s certificate of incorporation; provided, however, that the members of the board of directors of Valeant shall not be deemed to be associates or otherwise to constitute a Related Person solely by reason of their board membership. A person who is a Related Person as of (i) the time any definitive agreement relating to a Business Combination is entered into, (ii) the record date for the determination of stockholders entitled to notice of and to vote on a Business

Combination or (iii) immediately prior to the consummation of a Business Combination, shall be deemed a Related Person.


	*Amendments; Supermajority Vote Requirements*

Valeant’s certificate of incorporation requires the affirmative vote of not less than 75% of the voting power of all shares of Valeant entitled to vote generally in the election of directors, to amend certain provisions of Valeant’s certificate of incorporation, including those provisions relating to the classified board of directors, action by written consent and the ability of stockholders to call special meetings. Valeant’s certificate of incorporation expressly authorizes the board of directors to amend its bylaws; however, the certificate of incorporation requires that the bylaws shall not be amended by its stockholders without the affirmative vote of the holders of at least 75% of the voting power of all shares of the corporation entitled to vote generally in the election of directors voting together as a single class.


	*Delaware Anti-Takeover Law*

Section 203 of the Delaware General Corporation Law prohibits certain “business combination” transactions between a Delaware corporation and any “interested stockholder” owning 15% or more of the corporation’s outstanding voting stock for a period of three years after the date on which the stockholder became an interested stockholder, unless:


	•	prior to such time, the board of directors approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder;

	•	upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation, excluding those shares held by (i) directors who are also officers and (ii) certain employee stock plans; or

	•	on or subsequent to the date on which the stockholder became an interested stockholder, the business combination with the interested stockholder is approved by the board of directors and also authorized at a stockholder’s meeting, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding shares of the corporation’s voting stock which is not owned by the interested stockholder.

Under Delaware law, a “business combination” with an interested stockholder includes a merger, asset sale or other transaction resulting in a financial benefit to the interested stockholder.

Although a corporation may elect not to be governed by Section 203, Valeant has made no such election.

CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES

The following summary describes the material U.S. federal income tax consequences, as of the date hereof, of the ownership of notes and the shares of common stock into which the notes may be converted. Except where noted, it deals only with notes and shares of common stock held as capital assets and applies only to holders of notes who purchased the notes for cash at original issuance at their issue price. This summary does not deal with special situations, such as:


	•	tax consequences to holders who may be subject to special tax treatment, such as dealers in securities or currencies, banks, thrifts, regulated investment companies, or other financial institutions or financial service companies, regulated investment companies, real estate investment trusts, tax-exempt entities, insurance companies, or traders in securities that elect to use a mark-to-market method of accounting for their securities holdings;

	•	tax consequences to persons holding notes as a part of a hedging, integrated, conversion or constructive sale transaction or a straddle;

	•	tax consequences to U.S. holders (as defined below) of notes or shares of common stock whose functional currency is not the U.S. dollar;

	•	investors in pass-through entities;

	•	alternative minimum tax consequences, if any; and

	•	any state, local or foreign tax consequences.

The discussion below is based upon the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), and regulations, rulings and judicial decisions thereunder as of the date hereof, and such authorities may be repealed, revoked or modified so as to result, prospectively or retroactively, in U.S. federal income tax consequences different from those discussed below.

If a partnership holds notes or shares of common stock, the tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. If you are a partner in a foreign or domestic partnership that holds the notes or shares of common stock, you should consult your tax advisors.

If you are considering the purchase of notes, you should consult your tax advisors concerning the U.S. federal income tax consequences to you in light of your particular situation as well as any consequences arising under the laws of any state, local, foreign or other taxing jurisdiction.

As used herein, the term “U.S. holder” means a holder of notes or shares of common stock that is for U.S. federal income tax purposes:


	•	a citizen or resident of the U.S., including an alien individual who is a lawful permanent resident of the U.S. or who meets the substantial presence residency test under the U.S. federal income tax laws;

	•	a corporation (or other entity classified as a corporation for these purposes) created or organized in or under the laws of the U.S. or any state or the District of Columbia;

	•	an estate the income of which is subject to U.S. federal income taxation regardless of its source; or

	•	a trust if it (i) is subject to the primary supervision of a court within the U.S. and one or more U.S. persons have the authority to control all substantial decisions of the trust or (ii) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.

A “non-U.S. holder” is a beneficial owner of notes or shares of common stock that is not a U.S. holder or a foreign or domestic partnership. Special rules may apply to certain non-U.S. holders such as “controlled foreign corporations,” “passive foreign investment companies” and “foreign personal holding companies,” as defined under the Code. Each such entity should consult its tax advisors to determine the U.S. federal, state, local and other tax consequences that may be relevant to it.

Consequences to U.S. Holders


	*Payment*

The notes were not be issued with original issue discount. Accordingly, interest on a note will generally be taxable to you as ordinary income at the time it is paid or accrued in accordance with your usual method of accounting for tax purposes.


	*Constructive Dividend*

The conversion rate of the notes will be adjusted in certain circumstances. Under Section 305(c) of the Code, adjustments (or failures to make adjustments) that have the effect of increasing your proportionate interest in our assets or earnings may in some circumstances result in a deemed distribution to you. Adjustments to the conversion rate made pursuant to a bona fide reasonable adjustment formula that has the effect of preventing the dilution of the interest of the holders of the notes, however, will generally not result in a deemed distribution to you. Certain of the possible conversion rate adjustments provided in the notes (including, without limitation, adjustments in respect of taxable dividends to holders of our common stock) would not qualify as being pursuant to a bona fide reasonable adjustment formula. If such adjustments are made, the U.S. holders of notes will be deemed to have received a distribution even though they have not received any cash or property as a result of such adjustments. Any deemed distribution will be taxable as a dividend, return of capital, or capital gain in accordance with the earnings and profits rules under the Code. A deemed distribution may not qualify for the preferential U.S. federal income tax rates applicable to certain dividends under recently enacted legislation. (See “Dividends” below).


	*Sale, Exchange, Redemption, or Other Disposition of Notes*

Except as provided below under “Exchange of Notes into Common Stock, Cash or a Combination Thereof,” you will generally recognize gain or loss upon the sale, exchange, redemption or other disposition of a note equal to the difference between (i) the amount realized (that is, the amount of cash proceeds and the fair market value of any property received upon the sale, exchange, redemption or other disposition) — less accrued interest which will be taxable as such — and (ii) your adjusted tax basis in the note. Your tax basis in a note will generally be equal to the amount you paid for the note, less any principal payments received on the note, plus the aggregate amount of any deemed distributions you have previously included in income as dividends or capital gain in respect of the note (as described above under “Constructive Dividend”). Any gain or loss recognized on a taxable disposition of the note will be capital gain or loss. If you are an individual and have held the note for more than one year, such capital gain generally will be subject to reduced rates of taxation. Your ability to deduct capital losses may be limited.


	*Exchange of Notes into Common Stock, Cash or a Combination Thereof*

We intend to take the position that holders will recognize neither gain nor loss on the exchange of notes into shares of common stock upon conversion or repurchase, except to the extent of cash received, if any, including any cash received in lieu of a fractional share, and except to the extent of amounts received with respect to accrued interest, which will be taxable as such. If you receive solely cash in exchange for your notes upon conversion or repurchase, your gain or loss will be determined in the same manner as if you disposed of the notes in a taxable disposition (as described above under “Sale, Exchange, Redemption or other Disposition of Notes”). If a combination of cash and stock is received in exchange for your notes upon conversion or repurchase, we intend to take the position that gain, but not loss, will be recognized equal to the excess of the fair market value of the common stock and cash received (other than amounts attributable to accrued interest, which will be treated as such, and cash in lieu of a fractional share) over your adjusted tax basis in the note, but in no event should the gain recognized exceed the amount of cash received. The amount of gain or loss recognized on the receipt of cash in lieu of a fractional share will be equal to the difference between the amount of cash you receive in respect of the fractional share and the portion of your adjusted tax basis in the note that is allocable to the fractional share.

The tax basis of the shares of common stock received upon a conversion or repurchase (other than common stock attributable to accrued interest, the tax basis of which will equal its fair market value) will equal the adjusted tax basis of the note that was converted or repurchased (excluding the portion of the tax basis that is allocable to any fractional share), reduced by the amount of any cash received (other than cash received in lieu of a fractional share or cash attributable to accrued interest) and increased by the amount of gain, if any, recognized (other than with respect to a fractional share). Your holding period for shares of common stock generally will include the period during which you held the notes except that the holding period of any common stock received with respect to accrued interest will commence on the day after the date of receipt.

You should consult your tax advisors regarding the tax treatment of the receipt of cash and stock in exchange for notes upon conversion or repurchase and the ownership of our common stock.


	*Dividends*

If you exchange a note for common stock upon conversion or repurchase, and if we subsequently make a distribution in respect of that stock (other than a dividend in the form of additional shares of our common stock), the distribution will be treated as a dividend, taxable as ordinary income to the extent it is paid from our current or accumulated earnings and profits. If the distribution exceeds our current and accumulated profits, the excess will be treated first as a tax-free return of your investment, up to your basis in the common stock. Any remaining excess will be treated as capital gain. U.S. corporations generally would be entitled to claim a dividends received deduction equal to a portion of any dividends received, subject to certain holding period, taxable income and other limitations and conditions. Under recently enacted legislation, dividends received by non-corporate U.S. holders may be eligible for U.S. federal income tax at lower rates than other types of ordinary income if certain conditions are met. If you are a non-corporate U.S. holder, you should consult your tax advisors regarding the implications to you of this new legislation.


	*Information Reporting and Backup Withholding*

Information reporting requirements generally will apply to payments of interest on the notes and dividends on shares of common stock and to the proceeds of a sale of a note or share of common stock paid to you unless you are an exempt recipient such as a corporation. A backup withholding tax will apply to those payments if you fail to provide your taxpayer identification number, or certification of foreign or other exempt status or if you fail to report in full interest and dividend income.

Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against your U.S. federal income tax liability provided the required information is furnished to the Internal Revenue Service.

Consequences to Non-U.S. Holders


	*Payments of Interest*

The 30-percent U.S. federal withholding tax will not apply to any payment to you of interest on a note under the “portfolio interest rule” provided that:


	•	you do not actually or constructively own ten percent or more of the total combined voting power of all classes of our stock that are entitled to vote within the meaning of section 871(h)(3) of the Code;

	•	you are not a “controlled foreign corporation” within the meaning of section 957(a) of the Code with respect to which we are a “related person” within the meaning of section 864(d)(4) of the Code;

	•	you are not a bank whose receipt of interest on a note is described in section 881(c)(3)(A) of the Code;

	•	(a) you provide your name and address, and certify, under penalties of perjury, that you are not a U.S. person within the meaning of the Code (which certification may be made on an Internal Revenue Service Form W-8BEN (or successor form) ) or (b) you hold your notes through certain foreign


		intermediaries or certain foreign partnerships, and you satisfy the certification requirements of applicable Treasury regulations. Special “look-through” rules apply to non-U.S. holders that are pass-through entities.

If you cannot satisfy the requirements described above, payments of interest will be subject to the 30-percent U.S. federal withholding tax, unless you provide us with a properly executed (i) Internal Revenue Service Form W-8BEN (or successor form) claiming an exemption from or reduction in withholding under the benefit of a tax treaty or (ii) Internal Revenue Service Form W-8ECI (or successor form) stating that interest paid on the note is not subject to withholding tax because it is effectively connected with your conduct of a trade or business in the U.S.

If you are engaged in a trade or business in the U.S. and interest on the notes is effectively connected with the conduct of that trade or business, and, if an income tax treaty applies, you maintain a U.S. “permanent establishment” to which the interest is generally attributable, then, although exempt from the withholding tax discussed above (provided that you provide a properly executed applicable IRS form on or before any payment date to claim the exemption), you will be subject to U.S. federal income tax on that interest on a net income basis in generally the same manner as if you were a U.S. holder. In addition, if you are a foreign corporation, you may be subject to a branch profits tax equal to 30 percent (or lesser rate under an applicable income tax treaty) of your earnings and profits for the taxable year, subject to adjustments, that are effectively connected with your conduct of a trade or business in the U.S.


	*Payments of Dividends*

Any dividends paid to you with respect to the shares of common stock (and any deemed dividends resulting from certain adjustments, or failure to make adjustments, to the conversion rate, including, without limitation, adjustments in respect of taxable dividends to holders of our common stock, see “Constructive Dividend” above) will be subject to withholding tax at a 30-percent rate or such lower rate as may be specified by an applicable income tax treaty. However, dividends that are effectively connected with the conduct of a trade or business within the U.S. and, if a tax treaty applies, in the view of the Internal Revenue Service are attributable to a permanent establishment in the U.S., are not subject to the withholding tax but instead are subject to U.S. federal income tax on a net income basis at applicable graduated individual or corporate rates (see “Dividends” above). Certain certification requirements and disclosure requirements must be complied with in order for effectively connected income to be exempt from withholding. Any such effectively connected income received by a foreign corporation may, under certain circumstances, be subject to an additional branch profits tax at a 30-percent rate or such lower rate as may be specified by an applicable income tax treaty.

A non-U.S. holder of shares of common stock who wishes to claim the benefit of an applicable treaty rate must satisfy applicable certification and other requirements. If you are eligible for a reduced rate of U.S. withholding tax pursuant to an income tax treaty, you may obtain a refund of any excess amounts withheld by filing an appropriate claim for refund with the Internal Revenue Service.


	*Sale, Exchange, Redemption or Other Disposition of Notes or Shares of Common Stock*

Any gain realized upon the sale, exchange, redemption or other disposition of a note or share of common stock generally will not be subject to U.S. federal income tax unless:


	•	that gain is effectively connected with your conduct of a trade or business in the U.S., and, if an income tax treaty applies, is attributable to a permanent establishment in the U.S.;

	•	you are an individual who is present in the U.S. for 183 days or more in the taxable year of that disposition, and certain other conditions are met; or

	•	we are or have been a “United States real property holding corporation” for U.S. federal income tax purposes.

We believe that we are not and do not anticipate becoming a “United States real property holding corporation” for U.S. federal income tax purposes.


	*U.S. Federal Estate Tax*

Your estate will not be subject to U.S. federal estate tax on notes beneficially owned by you at the time of your death, provided that, at the time of your death, (i) you did not actually or constructively own ten percent or more of the total combined voting power of all classes of our stock that are entitled to vote within the meaning of section 871(h)(3) of the Code and (ii) payments with respect to the note would not have been effectively connected with the conduct by you of a trade or business in the U.S. However, shares of common stock held by you at the time of your death will be included in your gross estate for U.S. federal estate tax purposes unless an applicable estate tax treaty provides otherwise.


	*Information Reporting and Backup Withholding*

We must report annually to the Internal Revenue Service and to you the amount of interest and dividends paid to you and the amount of tax, if any, withheld with respect to those payments. Copies of the information returns reporting such interest, dividends and withholding may also be made available to the tax authorities in the country in which you reside under the provisions of an applicable income tax treaty.

In general, you will not be subject to backup withholding with respect to payments of interest or dividends that we make to you, provided the statement described above in the last bullet point under “Consequences to Non-U.S. Holders — Payments of Interest” has been received (and we do not have actual knowledge or reason to know that you are a U.S. person that is not an exempt recipient).

In addition, you will be subject to information reporting and, depending on the circumstances, backup withholding with respect to payments of the proceeds of the sale of a note or share of common stock within the U.S. or conducted through certain U.S.-related financial intermediaries, unless the statement described above has been received (and we do not have actual knowledge or reason to know that you are a U.S. person that is not an exempt recipient) or you otherwise establish an exemption.

THE PRECEDING DISCUSSION OF THE MATERIAL U.S. FEDERAL TAX CONSIDERATIONS IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS TAX ADVISOR AS TO THE PARTICULAR U.S. FEDERAL, STATE, AND LOCAL TAX CONSEQUENCES OF PURCHASING, HOLDING AND DISPOSING OF THE NOTES AND OUR COMMON STOCK. TAX ADVISORS SHOULD ALSO BE CONSULTED AS TO THE U.S. FEDERAL ESTATE AND GIFT TAX CONSEQUENCES AND THE FOREIGN TAX CONSEQUENCES OF PURCHASING, HOLDING AND DISPOSING OF THE NOTES AND OUR COMMON STOCK, AS WELL AS THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLE LAWS.

SELLING SECURITYHOLDERS

The notes offered hereby were originally issued by us in a private offering in November 2003. Pursuant to a purchase agreement that we and the initial purchasers entered into in connection with that offering, the initial purchasers agreed to offer and sell the notes only to persons they reasonably believed to be “qualified institutional buyers” within the meaning of Rule 144A under the Securities Act. The selling securityholders, which term includes their transferees, pledgees, donees and successors, may from time to time offer and sell pursuant to this prospectus any or all of the notes and common stock issued upon conversion of the notes.

The following table sets forth information regarding the respective principal amounts of notes and numbers of shares of common stock beneficially owned by the selling securityholders prior to this offering and the respective principal amounts of notes and numbers of shares of common stock offered by the selling securityholders pursuant to this prospectus. This information has been obtained from the selling securityholders and we have not independently verified this information. Unless otherwise indicated, none of the selling securityholders has, or within the past three years has had, any position, office or other material relationship with us or, insofar as we are aware, any of our predecessors or affiliates. Because the selling securityholders may offer all or some portion of the notes or the common stock issuable upon conversion of the notes pursuant to this prospectus, no estimate can be given as to the amount of the notes or common stock that will be held by the selling securityholders upon termination of this offering. In addition, the selling securityholders identified below may have sold, transferred or otherwise disposed of all or a portion of their notes or common stock since the date on which they provided the information to us for inclusion in the following table.


		Principal Amount of				Number of Shares
		Notes Beneficially		Principal Amount of		of Common Stock		Percentage of
		Owned Prior to		Notes Offered by		That May Be		Common Stock
Name of Selling Securityholder(1)		This Offering		This Prospectus		Sold(2)		Outstanding

3.0% convertible subordinated notes due 2010 (CUSIP No. 91911XAA2)
	Advisory Convertible Arbitrage Fund(I) L.P.		1,400,000		1,400,000		44,287		*
	AG Domestic Convertibles, L.P.		3,650,000		3,650,000		115,462		*
	AG Offshore Convertibles, Ltd.		6,850,000		6,850,000		216,690		*
	Alexandra Global Master Fund Ltd.		10,000,000		10,000,000		316,336		*
	Arbitex Master Fund L.P.		7,200,000		7,200,000		227,761		*
	Argent LowLev Convertible Arbitrage Fund LLC		877,000		877,000		27,742		*
	Argent LowLev Convertible Arbitrage Fund II, LLC		73,000		73,000		2,309		*
	Argent LowLev Convertible Arbitrage Fund Ltd.		5,510,000		5,510,000		174,301		*
	Arkansas PERS		1,175,000		1,175,000		37,169		*
	Astrazeneca Holdings Pension		265,000		265,000		8,382		*
	BNP Paribas Equity Strategies, SNC		2,196,000		2,196,000		69,467		*
	Boilermakers Blacksmith Pension Trust		760,000		760,000		24,041		*
	Canyon Capital Arbitrage Master Fund, Ltd.		2,250,000		2,250,000		71,175		*
	Canyon Value Realization Fund (Cayman), Ltd.		3,075,000		3,075,000		97,273		*
	Canyon Value Realization Fund, L.P.		1,125,000		1,125,000		35,587		*
	Canyon Value Realization MAC 18, Ltd. (RMF)		450,000		450,000		14,235		*
	Chrysler Corporation Master Retirement Trust		2,970,000		2,970,000		93,951		*


	Principal Amount of				Number of Shares
	Notes Beneficially		Principal Amount of		of Common Stock		Percentage of
	Owned Prior to		Notes Offered by		That May Be		Common Stock
Name of Selling Securityholder(1)	This Offering		This Prospectus		Sold(2)		Outstanding

Class C Trading Company, Ltd.		550,000		550,000		17,398		*
CNH CA Master Account, L.P.		500,000		500,000		15,816		*
CooperNeff Convertible Strategies (Cayman) Master Fund, LP		2,436,000		2,436,000		77,059		*
Credit Suisse First Boston LLC		500,000		500,000		15,816		*
CSS, LLC		2,000,000		2,000,000		63,267		*
Custom Investments PCC, Ltd.		160,000		160,000		5,061		*
Delaware PERS		500,000		500,000		15,816		*
Delta Airlines Master Trust		325,000		325,000		10,280		*
Delta Air Lines Master Trust — CV		1,195,000		1,195,000		37,802		*
Delta Pilots Disability & Survivorship Trust — CV		605,000		605,000		19,138		*
DKR Soundshore Opportunity Holding Fund Ltd.		3,100,000		3,100,000		98,064		*
Duke Endowment		140,000		140,000		4,428		*
First Franklin Convertible Securities Fund		2,000,000		2,000,000		63,267		*
Froley Revy Investment Convertible Security Fund		75,000		75,000		2,372		*
Guggenheim Portfolio Co. XV, LLC		790,000		790,000		24,990		*
HFR CA Global Select Master Trust Account		170,000		170,000		5,377		*
HFR CA Select Fund		1,000,000		1,000,000		31,633		*
ICI American Holdings Trust		195,000		195,000		6,168		*
Institutional Benchmarks Master Fund, Ltd.		2,000,000		2,000,000		63,267		*
J.P. Morgan Securities Inc.		5,000,000		5,000,000		158,168		*
KBC Financial Products USA Inc.		4,880,000		4,880,000		154,371		*
LDG Limited		93,000		93,000		2,941		*
Lehman Brothers Inc.		3,355,000		3,355,000		106,130		*
Lexington Vantage Fund c/o TQA Investors, LLC		21,000		21,000		664		*
Lyxor/ Convertible Arbitrage Fund Limited		408,000		408,000		12,906		*
Lyxor Master Fund Ref: Argent/ LowLev CB c/o Argent		550,000		550,000		17,398		*
Man Convertible Bond Master Fund, Ltd.		5,474,000		5,474,000		173,162		*
Microsoft Corporation		1,955,000		1,955,000		61,843		*
Motion Picture Industry Health Plan — Active Member Fund		135,000		135,000		4,270		*
Motion Picture Industry Health Plan — Retiree Member Fund		90,000		90,000		2,847		*
MSS Convertible Arbitrage 1 c/o TQA Investors, LLC		5,000		5,000		158		*
National Benefit Life Insurance Company		3,000		3,000		94		*
Nuveen Preferred & Convertible Fund JQC		4,350,000		4,350,000		137,606		*
Nuveen Preferred & Convertible Income Fund JPC		3,295,000		3,295,000		104,232		*


	Principal Amount of				Number of Shares
	Notes Beneficially		Principal Amount of		of Common Stock		Percentage of
	Owned Prior to		Notes Offered by		That May Be		Common Stock
Name of Selling Securityholder(1)	This Offering		This Prospectus		Sold(2)		Outstanding

OCLC Online Computer Library Center Inc.		25,000		25,000		790		*
OCM Convertible Trust		1,835,000		1,835,000		58,047		*
OCM Global Convertible Securities Fund		300,000		300,000		9,490		*
Partner Reinsurance Company Ltd.		1,025,000		1,025,000		32,424		*
Primerica Life Insurance Company		30,000		30,000		949		*
Prudential Insurance Co. of America		50,000		50,000		1,581		*
Qwest Occupational Health Trust		315,000		315,000		9,964		*
Ramius Capital Group		525,000		525,000		16,607		*
Ramius, LP		105,000		105,000		3,321		*
RCG Baldwin, LP		420,000		420,000		13,286		*
RCG Latitude Master Fund, Ltd.		6,080,000		6,080,000		192,332		*
S.A.C. Capital Associates, LLC		6,000,000		6,000,000		189,801		*
RCG Multi Strategy Master Fund, Ltd.		1,055,000		1,055,000		33,373		*
Sage Capital Management, LLC		100,000		100,000		3,163		*
San Diego County Employee Retirement Association		2,500,000		2,500,000		79,084		*
Silver Convertible Arbitrage Fund, LDC		390,000		390,000		12,337		*
Singlehedge US Convertible Arbitrage Fund		510,000		510,000		16,133		*
Southern Farm Bureau Life Insurance		405,000		405,000		12,811		*
Sphinx Fund c/o TQA Investors, LLC		108,000		108,000		3,416		*
St. Thomas Trading, Ltd.		6,526,000		6,526,000		206,440		*
Standard Fire Insurance Company		50,000		50,000		1,581		*
State Employees’ Retirement Fund of the State of Delaware		1,380,000		1,380,000		43,654		*
State of Oregon/ Equity		2,655,000		2,655,000		83,987		*
Sturgeon Limited		45,000		45,000		1,423		*
Syngenta AG		140,000		140,000		4,428		*
TQA Master Fund Ltd.		908,000		908,000		28,723		*
TQA Master Plus Fund Ltd.		1,362,000		1,362,000		43,084		*
Travelers Casualty Insurance Company of America		57,000		57,000		1,803		*
Travelers Indemnity Company — Commercial Lines		550,000		550,000		17,398		*
Travelers Indemnity Company — Personal Lines		360,000		360,000		11,388		*
Travelers Insurance Company — Life		214,000		214,000		6,769		*
Travelers Insurance Company Separate Account TLAC		6,000		6,000		189		*
Travelers Life & Annuity Company		15,000		15,000		474		*
Travelers Series Trust Convertible Bond Portfolio		75,000		75,000		2,372		*


		Principal Amount of				Number of Shares
		Notes Beneficially		Principal Amount of		of Common Stock			Percentage of
		Owned Prior to		Notes Offered by		That May Be			Common Stock
Name of Selling Securityholder(1)		This Offering		This Prospectus		Sold(2)			Outstanding

	Vanguard Convertible Securities Fund, Inc.		14,160,000		14,160,000		447,931			*
	Xavex Convertible Arbitrage 2 Fund		120,000		120,000		3,796			*
	Xavex Convertible Arbitrage 5 Fund		525,000		525,000		16,607			*
	Xavex Convertible Arbitrage 7 Fund c/o TQA Investors, LLC		340,000		340,000		10,755			*
	Zazove Convertible Arbitrage Fund, L.P.		6,500,000		6,500,000		205,618			*
	Zazove Hedged Convertible Fund, L.P.		4,100,000		4,100,000		129,697			*
	Zazove Income Fund, L.P.		1,500,000		1,500,000		47,450			*
	Zurich Institutional Benchmarks Master Fund Ltd. c/o TQA Investors, LLC		184,000		184,000		5,820			*
	All other holders of 3.0% convertible subordinated notes due 2010 or shares of common stock issued on conversion of such notes and future transferees, pledgees, donees, and successors thereof(3)	$	78,769,000	$	78,769,000		2,491,747			2.88	%

	Total 3.0% convertible subordinated notes due 2010	$	240,000,000	$	240,000,000		7,592,064	(4)		8.29	%

4.0% convertible subordinated notes due 2013 (CUSIP No. 91911XAC8)
	Alexandra Global Master Fund Ltd.		18,250,000		18,250,000		577,313			*
	American Investors Life Insurance Co.		700,000		700,000		22,143			*
	Arbitex Master Fund		2,500,000		2,500,000		79,084			*
	Argent Classic Convertible Arbitrage Fund L.P.		270,000		270,000		8,541			*
	Argent Classic Convertible Arbitrage Fund II, L.P.		70,000		70,000		2,214			*
	Argent Classic Convertible Arbitrage Fund (Bermuda) Ltd.		2,430,000		2,430,000		76,869			*
	Argent LowLev Convertible Arbitrage Fund LLC		390,000		390,000		12,337			*
	Argent LowLev Convertible Arbitrage Fund II, LLC		60,000		60,000		1,898			*
	Argent LowLev Convertible Arbitrage Fund Ltd.		3,510,000		3,510,000		111,033			*
	Arkansas PERS		850,000		850,000		26,888			*
	Astrazeneca Holdings Pension		145,000		145,000		4,586			*
	Bear, Stearns & Co., Inc.		2,050,000		2,050,000		64,848			*
	BNP Paribas Equity Strategies, SNC		3,870,000		3,870,000		122,422			*
	Boilermakers Blacksmith Pension Trust		440,000		440,000		13,918			*
	Canyon Capital Arbitrage Master Fund, Ltd.		2,100,000		2,100,000		66,430			*


	Principal Amount of				Number of Shares
	Notes Beneficially		Principal Amount of		of Common Stock		Percentage of
	Owned Prior to		Notes Offered by		That May Be		Common Stock
Name of Selling Securityholder(1)	This Offering		This Prospectus		Sold(2)		Outstanding

Canyon Value Realization Fund (Cayman), Ltd.		2,870,000		2,870,000		90,788		*
Canyon Value Realization Fund, L.P.		1,050,000		1,050,000		33,215		*
Canyon Value Realization MAC 18, Ltd. (RMF)		420,000		420,000		13,286		*
Chrysler Corporation Master Retirement Trust		2,695,000		2,695,000		85,252		*
Class C Trading Company, Ltd.		180,000		180,000		5,694		*
CNH CA Master Account, L.P.		1,500,000		1,500,000		47,450		*
CooperNeff Convertible Strategies (Cayman) Master Fund, LP		3,740,000		3,740,000		118,309		*
Credit Suisse First Boston LLC		2,900,000		2,900,000		91,737		*
Custom Investments PCC, Ltd.		40,000		40,000		1,265		*
Delaware PERS		300,000		300,000		9,490		*
Delta Airlines Master Trust		180,000		180,000		5,694		*
Delta Air Lines Master Trust — CV		775,000		775,000		24,516		*
Delta Pilots Disability & Survivorship Trust — CV		380,000		380,000		12,020		*
Duke Endowment		80,000		80,000		2,530		*
Froley Revy Investment Convertible Security Fund		40,000		40,000		1,265		*
Grace Brothers, Ltd.		1,500,000		1,500,000		47,450		*
Grace Convertible Arbitrage Fund, Ltd.		7,250,000		7,250,000		229,343		*
Guggenheim Portfolio Co. XV, LLC		790,000		790,000		24,990		*
HFR CA Global Select Master Trust Account		130,000		130,000		4,112		*
Huntrise Capital Leveraged Partners, LLC		22,000		22,000		695		*
ICI American Holdings Trust		115,000		115,000		3,637		*
Inflective Convertible Opportunity Fund 1, LP		800,000		800,000		25,306		*
Inflective Convertible Opportunity Fund 1, Ltd.		38,000		38,000		1,202		*
Institutional Benchmark Master Fund		2,600,000		2,600,000		82,247		*
International Truck & Engine Corporation Non-Contributory Retirement Plan Trust		735,000		735,000		23,250		*
International Truck & Engine Corporation Retirement Plan for Salaried Employees Trust		275,000		275,000		8,699		*
KBC Financial Products USA Inc.		1,050,000		1,050,000		33,215		*
Lyxor/ Convertible Arbitrage Fund Limited		720,000		720,000		22,776		*
Lyxor/ Inflective Convertible Fund Ltd.		357,000		357,000		11,293		*
Lyxor Master Fund Ref: Argent/ LowLev CB c/o Argent		350,000		350,000		11,071		*
Motion Picture Industry Health Plan — Active Member Fund		155,000		155,000		4,903		*


	Principal Amount of				Number of Shares
	Notes Beneficially		Principal Amount of		of Common Stock		Percentage of
	Owned Prior to		Notes Offered by		That May Be		Common Stock
Name of Selling Securityholder(1)	This Offering		This Prospectus		Sold(2)		Outstanding

Motion Picture Industry Health Plan — Retiree Member Fund		125,000		125,000		3,954		*
National Benefit Life Insurance Co.		3,000		3,000		94		*
Nuveen Preferred & Convertible Fund JQC		2,545,000		2,545,000		80,507		*
Nuveen Preferred & Convertible Income Fund JPC		1,940,000		1,940,000		61,369		*
OCLC Online Computer Library Center Inc.		15,000		15,000		474		*
OCM Convertible Trust		2,090,000		2,090,000		66,114		*
Partner Reinsurance Company Ltd.		695,000		695,000		21,985		*
Primerica Life Insurance Co.		30,000		30,000		949		*
Prudential Insurance Co. of America		35,000		35,000		1,107		*
Ramius Capital Group		525,000		525,000		16,607		*
Ramius, LP		105,000		105,000		3,321		*
RCG Baldwin, LP		420,000		420,000		13,286		*
RCG Latitude Master Fund, Ltd.		6,080,000		6,080,000		192,332		*
S.A.C. Capital Associates, LLC		13,000,000		13,000,000		411,236		*
RCG Multi Strategy Master Fund, Ltd.		1,055,000		1,055,000		33,373		*
Sage Capital Management, LLC		6,000,000		6,000,000		189,801		*
Silver Convertible Arbitrage Fund, LDC		180,000		180,000		5,694		*
Singlehedge US Convertible Arbitrage Fund		880,000		880,000		27,837		*
Southern Farm Bureau Life Insurance		95,000		95,000		3,005		*
Standard Fire Insurance Company		50,000		50,000		1,581		*
State Employees’ Retirement Fund of the State of Delaware		950,000		950,000		30,051		*
State of Oregon/ Equity		1,560,000		1,560,000		49,348		*
Sturgeon Limited		79,000		79,000		2,499		*
Syngenta AG		80,000		80,000		2,530		*
Travelers Casualty Insurance Company of America		57,000		57,000		1,803		*
Travelers Indemnity Company		50,000		50,000		1,581		*
Travelers Indemnity Company — Commercial Lines		25,000		25,000		790		*
Travelers Indemnity Company — Personal Lines		20,000		20,000		632		*
Travelers Insurance Co. — Life		214,000		214,000		6,769		*
Travelers Insurance Co. Sep. Acct. TLAC		6,000		6,000		189		*
Travelers Life & Annuity Company		15,000		15,000		474		*
Travelers Series Trust Convertible Bond Portfolio		75,000		75,000		2,372		*
Tribeca Investments, Ltd.		2,000,000		2,000,000		63,267		*
UBS AG London — F/ B/ O HFS		1,500,000		1,500,000		47,450		*
UBS Securities LLC		2,500,000		2,500,000		79,084		*


		Principal Amount of				Number of Shares
		Notes Beneficially		Principal Amount of		of Common Stock			Percentage of
		Owned Prior to		Notes Offered by		That May Be			Common Stock
Name of Selling Securityholder(1)		This Offering		This Prospectus		Sold(2)			Outstanding

	UnumProvident Corporation		695,000		695,000		21,985			*
	Vanguard Convertible Securities Fund, Inc.		9,435,000		9,435,000		298,463			*
	White River Securities LLC		2,050,000		2,050,000		64,848			*
	Xavex Convertible Arbitrage 2 Fund		110,000		110,000		3,479			*
	Xavex Convertible Arbitrage 5 Fund		525,000		525,000		16,607			*
	Xavex Convertible Arbitrage 9 Fund		1,250,000		1,250,000		39,542			*
	Xavex Convertible Arbitrage 10 Fund		230,000		230,000		7,275			*
	All other holders of 4.0% convertible subordinated notes due 2013 or shares of common stock issued on conversion of such notes and future transferees, pledgees, donees, and successors thereof(3)	$	109,034,000	$	109,034,000		3,449,137			3.94	%

	Total 4.0% convertible subordinated notes due 2013	$	240,000,000	$	240,000,000		7,592,064	(4)		8.29	%

Total all notes		$	480,000,000	$	480,000,000		15,184,128	(4)		15.31	%


	*	Less than 1%.


(1)	Information concerning the selling securityholders may change from time to time. Any such changed information will be set forth in amendments or supplements to this prospectus, if and when required.

(2)	Unless otherwise indicated, includes all shares of common stock issuable upon conversion of the notes and assumes a conversion rate of 31.6336 shares for each $1,000 principal amount of notes and a cash payment in lieu of any fractional share. However, this conversion rate will be subject to adjustment as described under “Description of the Notes — Conversion Rate Adjustments.” As a result, the number of shares of common stock offered hereby may increase or decrease in the future. Also assumes that the notes are convertible immediately. As described above under “Description of the Notes — Conversion of Notes,” the notes are convertible only in specified circumstances.

(3)	Information concerning other selling securityholders will be set forth in amendments or supplements to this prospectus, if required.

(4)	Assumes that any other holders of notes or shares of common stock issuable on conversion of notes and their respective transferees, pledgees, donees and successors do not beneficially own any common stock other than the common stock issued or issuable upon conversion of the notes.

PLAN OF DISTRIBUTION

The selling securityholders (including their transferees, pledgees, donees and successors) may sell the notes and the common stock issuable upon conversion of the notes from time to time directly to purchasers or through broker-dealers or agents who may receive compensation in the form of discounts, concessions or commissions from the selling securityholders or the purchasers. If the notes or the shares of common stock issuable upon conversion of notes are sold through broker-dealers or agents, the selling securityholders will be responsible for any discounts, concessions or commissions payable to those broker-dealers or agents.

The notes and the common stock issuable upon conversion of the notes may be sold in one or more transactions at:


	•	fixed prices;

	•	prevailing market prices at the time of sale;

	•	varying prices determined at the time of sale; or

	•	negotiated prices.

These sales may be effected in transactions, which may involve crosses or block transactions:


	•	on any national securities exchange or quotation service on which the notes or the common stock may be listed or quoted at the time of sale;

	•	in the over-the-counter market;

	•	otherwise than on such exchanges or services or in the over-the-counter market; or

	•	through the writing of options.

Crosses are transactions in which the same broker acts as an agent on both sides of the trade.

In connection with the sale of the notes and the common stock issuable upon conversion of the notes or otherwise, the selling securityholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the notes or common stock in the course of hedging their positions. The selling securityholders also may deliver the notes and shares of common stock issuable upon conversion of notes to close out short positions, or loan or pledge the notes or the common stock issuable upon conversion of such notes to broker-dealers or other financial institutions that in turn may sell those securities. The selling securityholders also may transfer, donate and pledge notes and shares of common stock issuable upon conversion of notes, in which case the transferees, donees, pledgees or other successors in interest will be deemed selling securityholders for purposes of this prospectus.

The aggregate proceeds to the selling securityholders from the sale of the notes or the common stock issuable upon the conversion of the notes offered by them will be the purchase price of such notes or common stock less discounts and commissions, if any, payable by them. Each of the selling securityholders reserves the right to accept and, together with their broker-dealers or agents from time to time, to reject, in whole or in part, any proposed purchase of the notes or the common stock issuable upon conversion of the notes to be made directly or through broker-dealers or agents. We will not receive any of the proceeds from the offering of the notes and the common stock issuable upon conversion of the notes.

There is no public market for the notes and we do not intend to apply for listing of the notes on any securities exchange or for quotation of the notes through any automated quotation system. The notes are currently designated for trading on the PORTAL Market. However, once notes are sold by means of this prospectus, those notes will no longer trade on the PORTAL Market. Our common stock is listed on the New York Stock Exchange under the symbol “VRX.”

In order to comply with the securities laws of some states, if applicable, the notes and the common stock issuable upon conversion of the notes may be sold in those jurisdictions only through registered or licensed brokers or dealers. In addition, in some states the notes and the common stock issuable upon conversion of the notes may not be sold unless they have been registered or qualified for sale or an exemption from registration or qualification requirements is available and is complied with.

The selling securityholders may choose not to sell any, or may sell less than all, of the notes and shares of common stock issuable upon conversion of the notes offered by them pursuant to this prospectus. In addition, any selling securityholder may, to the extent permitted by applicable law, sell, transfer, devise or gift the notes or shares of common stock issuable upon conversion of notes by means not described in this prospectus. In that regard, any notes or shares of common stock issuable upon conversion of notes that qualify for sale

pursuant to Rule 144A or Rule 144 under the Securities Act may be sold under that rule, if applicable, rather than pursuant to this prospectus.

The selling securityholders and any broker-dealers or agents that participate in the distribution of the notes and the common stock issuable upon conversion of the notes may be “underwriters” within the meaning of Section 2(11) of the Securities Act. As a result, any profits on the sale of the notes or the shares of common stock issued on conversion of notes received by selling securityholders and any discounts, commissions or concessions received by any such broker-dealers or agents might be deemed to be underwriting discounts and commissions under the Securities Act. If the selling securityholders were deemed to be underwriters, the selling securityholders could be subject to certain statutory liabilities under the federal securities laws, including under Sections 11, 12 and 17 of the Securities Act and Rule 10b-5 under the Securities Exchange Act of 1934.

Eight of the selling securityholders, Bear Stearns & Co. Inc., Credit Suisse First Boston LLC, CSS, LLC, J.P. Morgan Securities Inc., KBC Financial Products USA Inc., Lehman Brothers Inc., UBS Securities, LLC and White River Securities LLC, are registered broker-dealers that obtained their notes other than as compensation for services. As a result, they are deemed to be “underwriters” within the meaning of Section 2(11) of the Securities Act.

The following selling securityholders are affiliates of registered broker-dealers: AG Offshore Convertibles, Ltd., Arbitex Master Fund L.P., BNP Paribas Equity Strategies, SNC, Canyon Capital Arbitrage Master Fund, Ltd., Canyon Value Realization Fund (Cayman), Ltd., Canyon Value Realization Fund, L.P., Canyon Value Realization Fund MAC 18, Ltd., National Benefit Life Insurance Co., Primerica Life Insurance Co., Prudential Insurance Co. of America, Ramius Capital Group, Ramius, LP, RCG Baldwin, LP, RCG Latitude Master Fund, Ltd., RCG Multi Strategy Master Fund, Ltd., St. Thomas Trading, Ltd., Travelers Insurance Co. — Life Travelers Insurance Co. Sep. Acct. TLAC, Travelers Life & Annuity Co., and UBS AG London — F/B/O HFS. These selling securityholders have represented to us that they purchased their notes in the ordinary course of business and at the time of the purchase had no agreements or understandings to distribute the notes or the common stock into which the notes are convertible.

The selling securityholders and any other persons participating in the distribution of the notes and the shares of common stock issuable upon conversion of the notes will be subject to the Securities Exchange Act. The Securities Exchange Act rules include, without limitation, Regulation M, which may limit the timing of or prohibit the purchase and sale of notes and shares of common stock by the selling securityholders and any such other person. In addition, under Regulation M, any selling securityholder or other person engaged in the “distribution,” within the meaning of Regulation M, of the notes or the shares of common stock issuable upon conversion of the notes may not engage in market-making activities with respect to the notes or the common stock for certain periods prior to the commencement of that distribution, unless, in the case of persons other than selling securityholders, an applicable exemption is available under Regulation M. The foregoing may affect the marketability of the notes and the common stock issuable upon conversion of the notes and the ability of any person or entity to engage in market-making activities with respect to those securities.

In that regard, the selling securityholders are required to acknowledge that they understand their obligations to comply with the provisions of the Securities Exchange Act and the rules thereunder relating to stock manipulation, particularly Regulation M thereunder (or any successor rules or regulations), in connection with the offering made by this prospectus. Each selling securityholder is required to agree that neither it nor any person acting on its behalf will engage in any transaction in violation of such provisions.

To the extent required, the specific notes or common stock to be sold, the names of the selling securityholders, the respective purchase prices and public offering prices, the names of any agent or broker-dealer, and any applicable commissions or discounts with respect to a particular sale or other disposition of notes or shares of common stock issued on conversion of notes pursuant to this prospectus will be set forth in a supplement to this prospectus or, if appropriate, a post-effective amendment to the shelf registration statement of which this prospectus is a part.

Pursuant to the registration rights agreement described above under “Description of the Notes — Registration Rights of the Noteholders” we and the selling securityholders have agreed, subject to exceptions, to indemnify each other against specified liabilities, including liabilities under the Securities Act, and may be entitled to contribution from each other in respect of those liabilities.

We will pay substantially all of the expenses incident to the offering and sale of the notes and the common stock issuable upon conversion of the notes pursuant to this prospectus, other than commissions, fees and discounts payable to brokers-dealers or agents, fees and disbursements of any counsel or other advisors or experts retained by the selling securityholders and any documentary, stamp or similar issue or transfer tax.

Under the registration rights agreement, we may be required from time to time to require holders of notes and shares of common stock issued on conversion of notes to discontinue the sale or other disposition of those notes and shares of common stock under specified circumstances. See “Description of the Notes — Registration Rights of the Noteholders” above.

LEGAL MATTERS

Sheppard Mullin Richter & Hampton LLP, San Francisco, California has acted as counsel to Valeant Pharmaceuticals International in connection with this registration statement.

EXPERTS

The financial statements incorporated in this Registration Statement on Form S-3 by reference to the Annual Report on Form 10-K of Valeant Pharmaceuticals International for the year ended December 31, 2003 have been so incorporated in reliance on the reports of PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

With respect to the unaudited financial information of Valeant Pharmaceuticals International for the three month periods ended March 31, 2004 and 2003, incorporated by reference in this Registration Statement on Form S-3, PricewaterhouseCoopers LLP reported that they have applied limited procedures in accordance with professional standards for a review of such information. However, their separate report dated May 6, 2004, incorporated by reference herein state that they did not audit and they do not express an opinion on that unaudited financial information. Accordingly, the degree of reliance on their report on such information should be restricted in light of the limited nature of the review procedures applied. PricewaterhouseCoopers LLP is not subject to the liability provisions of Section 11 of the Securities Act of 1933 for their report on the unaudited financial information because that report is not a “report” or a “part” of the registration statement prepared or certified by PricewaterhouseCoopers LLP within the meaning of Sections 7 and 11 of the Act.

WHERE YOU CAN FIND MORE INFORMATION

Valeant is subject to the informational requirements of the Securities Exchange Act of 1934 and files reports, proxy statements and other information with the Securities and Exchange Commission, or the Commission. Such reports, proxy statements and other information filed by us may be inspected and copied at the Public Reference Section of the Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549-1004. Information on the operation of the Public Reference Room may be obtained by calling the Commission at 1-800-SEC-0330. Reports, proxy and information statements and other information filed electronically by us with the Commission are available at the Commission’s website at http://www.sec.gov.

The Commission allows us to “incorporate by reference” into this offering circular the information we file with the Commission. This means that we can disclose important information by referring you to those documents. The information incorporated by reference is considered to be a part of this offering circular. Information that we file later with the Commission will automatically update and supersede this information.

We incorporate by reference the documents listed below and all future documents filed with the Commission under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act until the termination of the offering to which this prospectus relates:


	•	Valeant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003;

	•	Valeant’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2004;

	•	Valeant’s Current Report on Form 8-K dated July 22, 2004;

	•	Valeant’s Current Report on Form 8-K dated August 5, 2004, but only to the extent such report is deemed to have been filed under the Exchange Act;

	•	Valeant Proxy Statement relating to our Annual Meeting of Stockholders held on May 25, 2004;

	•	The description of the common stock in Valeant’s Registration Statement on Form 8-A filed with the Commission on October 24, 1994, as amended by Form 8-A/A filed on October 25, 1994; and

	•	The description of Valeant’s Rights Agreement in Valeant’s Registration Statement on Form 8-A/A filed with the Commission on November 10, 1994.

This prospectus is part of a registration statement on Form S-3 that we have filed with the Commission. This prospectus does not contain all of the information contained in the registration statements. For a complete understanding of the offering of the notes, you should refer to the registration statements and their exhibits.

You may request a copy of these filings at no cost, by writing or telephoning us at:

Corporate Secretary

Valeant Pharmaceuticals International

3300 Hyland Avenue

Costa Mesa, CA 92626

(714) 545-0100