Canada-based drug maker Biovail Corp. (BVF,BVF.TO) on Wednesday reported a net loss for the second quarter compared to a profit in the year-ago quarter, hurt by higher restructuring and legal settlement costs. In addition, revenues for the latest quarter declined 8% on a drop in sales of the company's antidepressant drug Wellbutrin and its heart drug Cardizem.
Looking ahead, the company said that over the next several quarters, its ongoing and planned efficiency initiatives are expected to result in additional charges to earnings. Biovail said it expects year-over-year decreases in its product sales for the next several quarters, primarily due to the introduction of generic competition on the 150mg strength of Wellbutrin XL in the second quarter of 2008.
Second Quarter Results
Biovail reported a net loss for the second quarter of US$25.29 million, or US$0.16 per share, compared to net income of US$67.82 million, or US$0.42 per share, in the prior-year quarter.
The company noted that the restructuring costs and other specific items had an aggregate negative impact of US$84.9 million, or US$0.53 per share, in the most recent quarter. This compares to an aggregate positive impact of special items to net income, of US$3.5 million, or US$0.02 per share, in the year-ago quarter.
On average, nine analysts polled by First Call/Thomson Financial expected the company to report earnings for the quarter of US$0.34 per share.
In the latest quarter, Biovail incurred restructuring costs of US$51.76 million, or US$0.32 per share, related to the planned closure of its Puerto Rico manufacturing facilities and the research and development facility in Dublin. The company intends to shift its focus to the development of treatments for disorders of the central nervous system, including Parkinson's disease and multiple sclerosis.
Legal settlement costs for the quarter were US$24.65 million, or US$0.15 per share related to an agreement-in-principle with the U.S. Department of Justice on their investigation into the 2003 commercial launch of Cardizem.
The company also incurred costs of US$5.41 million, or US$0.03 per share in the recent quarter related to the recently resolved proxy contest regarding the election of the company's board of directors. Biovail won a bitter proxy battle against its estranged founder and former CEO Eugene Melnyk in a vote at a reconvened annual meeting last Friday. Melnyk had launched an unsuccessful campaign in June to replace Biovail's CEO William Wells and install new directors.
Biovail's revenues for the latest quarter declined 8.3% to US$186.10 million from US$203.03 million reported in the same quarter of last year. Wall Street analysts had a consensus revenue estimate of US$187.51 million for the quarter.
Research and development expenditures for the quarter declined 23% from the prior-year period to US$21.8 million on decreased spending for BVF-146, or the tramadol/NSAID combination, which was recently discontinued, and Aplenzin, which received FDA approval in April 2008.
Operating loss for the quarter was US$24.27 million compared to operating income of US$62.46 million in the same period last year.
The company reported a gain on disposal of investments of US$3.46 million, or US$0.02 per share, in the latest quarter, compared to gains of US$15.72 million, or US$0.10 per share, a year ago.
Segmental Revenues
Product revenues for the quarter declined 8% from the same period last year to US$175.67 million, primarily reflecting the introduction of generic competition for the 150 dosage strength of antidepressant Wellbutrin XL and lower revenues for Cardizem LA. These were partially offset by increases in revenues from the company's portfolio of generic products, Legacy products, Biovail Pharmaceuticals Canada, and Zovirax.
Meanwhile, research and development revenues dropped 23% from the prior-year period to US$5.70 million, due to a US$1.9 million payment from Kos in the second quarter of 2007 related to development activity for Vasocard prior to the project's termination. Royalty and other revenues for the quarter declined to US$4.73 million.
During the quarter, sales of Wellbutrin XL slumped 43% from a year ago to US$30.42 million on the introduction of generic competition. Sales of chronic pain drug Ultram ER sales declined 2% from the prior-year period to US$19.17 million, reflecting a reduction in inventory levels and the timing of sample shipments, partially offset by a price increase in the first quarter of 2008. However, sales of anti-herpes drug Zovirax increased 7% to US$37.53 million, reflecting the timing of wholesaler inventory purchases and a price increase in January 2008.
The total product revenue of Biovail Pharmaceuticals Canada, or BPC, for the quarter surged 31% from the year-ago quarter to US$18.41 million, helped by higher sales of Wellbutrin XL, Tiazac XC, Glumetza and Ralivia which was launched in November 2007.
The company's heart drug Cardizem LA reported a 54% drop in sales from a year ago to US$10.49 million, due to lower prescription volumes for the product, partially offset by price increases. Legacy products generated revenues of US$40.19 million, up 15% from the same period last year, reflecting the impact of price increases, partially offset by lower prescription volumes.
Product revenue for Biovail's portfolio of generic products, distributed by Teva Pharmaceutical Industries Ltd., rose 68% to US$18.9 million in the latest quarter, as the year-ago quarter was impacted by a higher-than-expected level of charge-backs processed by Teva.
Year-To-Date Results
Biovail's net income for the six months dropped to US$31.09 million, or US$0.19 per share, from US$161.64 million, or US$1.01 per share a year ago.
Revenue for the half year declined to US$394.59 million from US$450.03 million in the prior-year period.
Share Repurchase Program
Biovail said that under its ongoing share repurchase program, 2.3 million shares were purchased and cancelled from June 2, 2008 to June 23, 2008, at a cost of US$25.5 million. Biovail's board has approved the purchase of up to 14 million shares, subject to regulatory filings and approvals, under the program, which expires June 1, 2009.
Outlook
Biovail noted that over the next several quarters, its ongoing and planned efficiency initiatives are expected to result in additional charges to earnings. Cumulatively, these charges, including those recorded in the latest quarter, are expected to be in a range of US$80 million-US$100 million, of which the cash component is expected to be US$30 million-US$40 million Biovail anticipates total annual savings of US$30 million to US$40 million once all initiatives are completed.
The company said it expects year-over-year decreases in its product sales for the next several quarters, primarily due to the introduction of generic competition on the 150mg strength of Wellbutrin XL in the second quarter of 2008. The company does not anticipate meaningful revenue contribution from its development pipeline until the 2010-2011 timeframe.
The company also said it intends to invest over US$600 million in research and development through 2012, targeting unmet medical needs in specialty central nervous system, or CNS markets.
dividend
Separately, Biovail said that its board of directors declared a quarterly cash dividend of US$0.375 per share, payable on September 3, 2008, to shareholders of record at the close of business August 25, 2008. The ex-dividend date is August 21, 2008.
The company noted that upon payment of this dividend, it will have distributed US$4.125 per share to shareholders since implementing its dividend program in December 2005.
Stock Quotes
In Wednesday's regular trading session on the NYSE, BVF is trading at US$9.51, down US$0.42 or 4.23% on a volume of 0.23 million shares. The stock has been trading in a range of US$9.38-US$20.06 in the past 52 weeks.
On the Toronto Stock Exchange, BVF.TO is trading at C$10.13, down C$0.37 or 3.52% on a volume of 0.25 million shares. In the 52-week period, the stock has been trading in a range of C$9.64-C$19.47.
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