Biovail Reports Second-Quarter 2007 Financial Results
Company Records Total Revenues of $203 Million U.S. GAAP EPS of $0.42
Cash Balances of $469 Million Cash Flows from Operations of $98 Million
TORONTO, August 8 /CNW/ - Biovail Corporation (NYSE/TSX: BVF) today
announced financial results for the three-month and six-month periods ending
June 30, 2007. To the extent that this news release contains forward-looking
statements, investors are cautioned that these are based on the Company's
current views, and actual outcomes are not certain. For more information, see
the note on forward-looking information following the conference call details
in this news release.
Total revenues for the three months ended June 30, 2007 were $203.0
million, compared with $255.1 million for the second quarter of 2006. Total
revenues for the six months ended June 30, 2007 were $450.0 million, compared
with $477.8 million for the first six months of 2006. Second-quarter 2007 net
income, in accordance with United States Generally Accepted Accounting
Principles (GAAP), was $67.8 million, compared with $85.3 million for the
corresponding 2006 period. Net income for the first half of 2007 was $161.6
million, compared with $153.7 million in the same period a year earlier. GAAP
diluted earnings per share (EPS) for the second quarter of 2007 were $0.42,
compared with $0.53 for the second quarter of 2006. In the first half of 2007,
GAAP EPS were $1.01, compared with EPS of $0.96 for the first half of 2006.
"Biovail's solid financial performance in the quarter reflects the
positive impact of our restructuring efforts," said Biovail Chief Executive
Officer Dr. Douglas Squires. "Despite some challenges in our generics
business, we met our financial objectives for the quarter. We enter the
second-half of 2007 with a strong balance sheet, with $469 million in cash and
no debt. Given the strong ongoing cash flows from our business model, we
intend to continue to invest heavily in our product-development pipeline,
while maintaining an attractive dividend policy for shareholders."
Update on Bupropion Salt (BVF-033)
On July 20, 2007, Biovail announced the receipt of a Non-Approval letter
from the U.S. Food and Drug Administration (FDA) for its New Drug Application
(NDA) for BVF-033, a novel, once-daily salt formulation of bupropion. The
issue raised by the FDA in its letter related to the design of the
pharmacokinetic studies required to support the NDA. Biovail's NDA included a
single-dose, fed and fasted bioavailability study; a single-dose,
dose-proportionality study; and a multiple-dose, bioequivalence (BE) study
comparing BVF-033 to bupropion hydrochloride. The FDA contends that a
single-dose, comparative BE study should have been conducted instead of the
multiple-dose BE study in Biovail's NDA. Biovail believes the studies it
conducted were appropriate, and consistent with published FDA guidance and the
studies conducted to support approval of Wellbutrin XL(R). A meeting with the
FDA to discuss the matter - and the most expeditious path forward for BVF-033
- is scheduled for August 14, 2007.
Ultram(R) ER Patent Litigation
In May 2007, Biovail Laboratories International SRL, along with
Ortho-McNeil, Inc. (OMI), Purdue Pharma Products L.P., and Napp Pharmaceutical
Group Ltd., initiated patent-infringement litigation against Par
Pharmaceutical Companies, Inc. (Par) related to its abbreviated new drug
application (ANDA) for a generic formulation of the 200mg dosage strength of
Ultram(R) ER tablets. This action alleges that Par's generic formulation
infringes U.S. Patent No. 6,254,887, which is listed in the Orange Book for
Ultram(R) ER. In June 2007, Par's 100mg tablet was added to the infringement
action, further to Par's supplemental ANDA submission for that dosage
strength. Pursuant to the provisions of the Hatch-Waxman Act, the FDA will not
approve Par's product for a period of 30 months, or until the
patent-infringement litigation is resolved and such resolution is in favour of
Par, whichever occurs first.
Second-Quarter 2007 Financial Performance
Product revenues for the second quarter of 2007 were $190.8 million,
compared with $243.5 million in the second quarter of 2006, a 22% decrease
that reflects the introduction of generic competition for Wellbutrin XL(R) and
lower revenues for Biovail Pharmaceuticals Canada (BPC) and the Company's
portfolio of generic products. Partially offsetting these declines, were
increases in revenues from Ultram(R) ER, Zovirax(R) and Cardizem(R) LA.
Product revenues for the six months ended June 30, 2007 were $428.8 million
compared with $455.3 million for the six months ended June 30, 2006.
Product revenues for Wellbutrin XL(R) were $53.0 million in the second
quarter of 2007, and $114.5 million in the first half of 2007, compared with
$114.0 million and $179.0 million in corresponding periods in 2006,
respectively. These decreases reflect the December 2006 introduction of
generic competition for the 300mg dosage strength of the product. Under the
terms of a comprehensive settlement agreement entered into with a number of
generic pharmaceutical companies, with defined exceptions, a generic version
of the 150mg strength of Wellbutrin XL(R) may not be marketed until 2008.
Launched in February 2006 by marketing partner OMI, Biovail recorded
revenues of $19.6 million for Ultram(R) ER in the second quarter of 2007,
compared with $0.9 million in the corresponding period in 2006, which was
negatively impacted by a $7.8-million return provision related to the June
2006 recall of certain dosages of the product. In the first half of 2007,
Ultram(R) ER generated revenues of $49.6 million, compared to $16.0 million in
the corresponding period in 2007. Year-over-year performance was also impacted
by a price increase in January 2007, and an increase in Biovail's supply price
from 27.5% to 37.5% of OMI's net selling price. In the second quarter of 2007,
Ultram(R) ER captured 6.3% of total prescription volume of the tramadol market
(including generics).
Revenues for Biovail's Zovirax(R) franchise were $35.2 million in the
second quarter of 2007, and $72.5 million in the first half of 2007,
representing increases of 21% and 35%, respectively, when compared with $29.1
million and $53.6 million in the prior-year periods. The increases reflect the
timing of wholesaler inventory purchases and a January 2007 price increase. In
the second quarter of 2007, Zovirax(R) Ointment and Zovirax(R) Cream held a
combined 73.3% share of the topical herpes market.
Second-quarter 2007 revenues for BPC were $14.1 million, compared with
$19.5 million in the prior-year period. First-half 2007 revenues for BPC were
$27.9 million, compared with $39.3 million in the first half of 2006. The
declines reflect the availability of generic formulations of Tiazac(R) and
Wellbutrin(R) SR. Partially offsetting factors include the continued growth in
Tiazac(R) XC, and the April 2006 launch of Wellbutrin(R) XL. Total
prescription volume for Wellbutrin(R) SR decreased 53% in the second quarter
of 2007, versus the comparable period in 2006, due to generic competition.
However, Wellbutrin(R) XL continues to gain market share, capturing 31.3% of
total prescriptions written for the Wellbutrin(R) brand in the second quarter
of 2007. Total prescription volume for Tiazac(R) declined 81% in the second
quarter of 2007, compared with the corresponding period in 2006. However,
Tiazac(R) XC continues to gain market share, capturing 31.6% of total
prescriptions written for the Tiazac(R) brand in the second quarter of 2007.
In the second quarter of 2007, Cardizem(R) LA generated revenues of $22.7
million, compared with $11.5 million for the corresponding period in 2006. In
the first half of 2007, Cardizem(R) LA generated revenues of $46.6 million,
compared with $29.9 million in the first half of 2006. The increases in 2007
reflect the resolution of manufacturing issues, and the related first-quarter
2007 fulfillment of back orders for the 120mg and 180mg strengths of the
product. The amortization of deferred revenues associated with the May 2005
transaction with Kos Pharmaceuticals, Inc. (since acquired by Abbott
Laboratories) positively impacted Cardizem(R) LA revenues by $3.8 million and
$7.5 million in the second quarter and first six months, respectively, of both
2006 and 2007.
Legacy products generated revenues of $34.9 million in the second quarter
of 2007 and $70.6 million in the first half of 2007, compared with $36.7
million and $72.3 million in the corresponding periods in 2006, respectively.
This performance primarily reflects lower sales of Tiazac(R) (both brand and
generic) to Forest Laboratories, Inc. and the expected year-over-year declines
in total prescription volumes for these mature products, partially offset by a
price increase in January 2007.
Product revenue for Biovail's portfolio of generic products, distributed
by Teva Pharmaceutical Industries Ltd. (Teva), was $11.3 million in the second
quarter of 2007, compared with $32.8 million in the second quarter of 2006.
The decline in revenues in the second quarter of 2007 reflects $16.0 million
in price adjustments primarily related to a higher-than-expected level of
charge-backs Teva received from wholesalers. In the first half of 2007,
Biovail's generic products generated revenues of $47.1 million, compared with
$66.4 million in the first half of 2006.
The following table summarizes Biovail's product revenue performance in
the second quarter and first half of 2007:
($000s) Q2/07 Q2/06 Change H1/07 H1/06 Change
Revenues Revenues (%) Revenues Revenues (%)
----------------------------------------------------------------------
Wellbutrin XL(R) 53,048 113,950 (53) 114,453 178,954 (36)
Ultram(R) ER 19,562 880 N/M 49,581 15,991 210
Zovirax(R) 35,217 29,098 21 72,500 53,572 35
Biovail
Pharmaceuticals
Canada 14,071 19,527 (28) 27,897 39,307 (29)
Cardizem(R) LA 22,686 11,545 97 46,635 29,861 56
Legacy Products 34,917 36,729 (5) 70,557 72,258 (2)
Generics 11,265 32,784 (66) 47,145 66,381 (29)
Teveten - (1,058) N/A - (1,058) N/A
----------------------------------------------------------------------
Total Product
Revenues 190,766 243,455 (22) 428,768 455,266 (6)
----------------------------------------------------------------------
N/M = Not meaningful
Research-and-development revenue increased 87% in the second quarter of
2007 and 38% in first half of 2007, compared with the corresponding periods of
2006. This performance reflects increased activity levels at Biovail's
Contract Research Division, and a $1.9-million payment from Kos related to
development activity for Vasocard prior to the project's termination.
Royalty and other revenue was $4.9 million in the second quarter of 2007
and $9.0 million in the first half of 2007, compared with $7.7 million and
$13.6 million in the corresponding periods in 2006, respectively. The decrease
primarily reflects the elimination of co-promotion revenues associated with
Ultram(R) ER and Zoladex(R) 3.6mg.
Cost of goods sold for the second quarter of 2007 was $54.5 million,
compared with $58.6 million in the second quarter of 2006. Gross margins based
on product sales were 71.4% and 74.1% in the second quarter and first half of
2007, respectively, compared with 75.9% and 76.8% in the corresponding 2006
periods. Gross margins in the second quarter and first-half of 2007 were
negatively impacted by 2.2 and 1.0 percentage points, respectively, as a
result of the $16.0-million chargeback from Teva.
Selling, general and administrative (SG&A) expenses for the second
quarter of 2007 were $46.3 million, compared with $66.7 million in the second
quarter of 2006. SG&A expenses for the first half of 2007 were $95.9 million,
compared with $123.2 million in the corresponding period in 2006. These
decreases reflect Biovail's restructured approach to commercializing products
in the U.S., and an associated reduction in headcount in the Company's U.S.
commercial operations group; as well as higher spending in 2006 in support of
the Glumetza(TM) and Wellbutrin(R) XL launches in Canada.
Research-and-development expenditures were $28.4 million for the second
quarter of 2007 and $58.2 million for the first half of 2007, compared with
$18.4 million and $40.7 million for the corresponding periods in 2006,
respectively. The year-over-year changes reflect increased spending for
BVF-146 (tramadol/NSAID combination); which is currently nearing completion of
enrolment in a Phase III safety study; BVF-033 (bupropion salt); BVF-012
(enhanced absorption, alcohol-resistant venlafaxine); BVF-045 (combination of
BVF-033 with an undisclosed antidepressant); BVF-065 (undisclosed) and a
number of feasibility programs. With respect to BVF-033, Biovail will be
meeting with the FDA to discuss the recent Non-Approval Letter on August 14,
2007.
Amortization expense was $12.0 million in the second quarter of 2007 and
$24.0 million in the first half of 2007, compared with $14.8 million and $29.6
million in the second quarter and first half of 2006, respectively. The
decrease primarily reflects the third-quarter 2006 write-down of intangible
assets associated with Vasotec(R) and Glumetza(TM).
Non-Operating Items
In the second quarter of 2007, Biovail incurred a charge of $0.9 million
associated with the December 2006 restructuring of the Company's U.S.
commercial operations, and a loss of $12.5 million on the extinguishment of
the Company's Senior Subordinated Notes, which includes a $7.9-million premium
for the early redemption, and the write-off of $4.6 million in deferred
financing and other associated costs. Biovail also recorded a $0.5-million
equity loss in the second quarter of 2007 relating to the Company's investment
in Western life Sciences Venture Fund. Offsetting these items was a
$15.7-million gain associated with the April 2007 transfer of all of the
Company's interest in Ethypharm S.A., and a $1.6-million reversal in accrued
contract-cost provisions, primarily related to the Wellbutrin XL(R) agreement
as a result of additional sample purchases by GlaxoSmithKline plc (GSK) in the
second quarter of 2007. These items had an aggregate positive impact to net
income of $3.5 million, or $0.02 per common share.
In the second quarter of 2006, Biovail recorded a $4.5-million
contract-cost provision related to the sample-supply allowance with GSK, which
negatively impacted GAAP EPS by $0.03.
Balance Sheet & Cash Flow
At the end of the second quarter of 2007, Biovail had cash balances of
$469.4 million, and marketable securities of $4.6 million. Effective April 1,
2007, Biovail redeemed all of its outstanding Senior Subordinated Notes. In
addition, the Company has no outstanding borrowings against its $250-million
revolving-term credit facility.
Cash flows from operations were $98.3 million in the second quarter of
2007 and $218.1 million in the first half of 2007, compared with $110.8
million and $205.5 million, respectively, in the corresponding periods in
2006. Net capital expenditures were $7.4 million in the second quarter of 2007
and $13.1 million in the first half of 2007, which reflects the ongoing
expansion of the Company's corporate headquarters in Mississauga, Ontario.
SEC Update
As previously disclosed, in May 2007, Biovail received a Wells Notice
from staff of the U.S. Securities and Exchange Commission (SEC) alleging
violations of federal securities laws. Biovail continues to co-operate with
the SEC in this matter, and in July 2007, submitted a written response to the
Wells Notice.
Conference Call
Biovail management will host a conference call and Webcast on Wednesday,
August 8, 2007, at 8:30 a.m. EDT for Company executives to discuss 2007
second-quarter earnings. Following the discussion, Biovail executives will
address inquiries from research analysts.
A live Webcast of this call will be available through the Investor
Relations section of Biovail's Web site at www.biovail.com. To access the call
live, please dial 416-340-8010 (Toronto and International callers) and
1-866-540-8136 (U.S. and Canada). Listeners are encouraged to dial in 10
minutes before the call begins to avoid delays.
A replay of the conference call will be available until 7 p.m. EDT on
Wednesday, August 15, 2007, by dialing 416-695-5800 (Toronto and International
callers) and 1-800-408-3053 (U.S. and Canada), using access code, 3230521#.
Caution Regarding Forward-Looking Information and "Safe Harbor" Statement
Under the Private Securities Litigation Reform Act of 1995
To the extent any statements made in this release contain information
that is not historical, these statements are forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, and may be
forward-looking information within the meaning of the "safe harbor" provisions
of applicable Canadian provincial securities legislation (collectively,
"forward-looking statements"). These forward-looking statements relate to,
among other things, our objectives, goals, targets, strategies, intentions,
plans, beliefs, estimates and outlook, including, without limitation,
statements concerning the Company's intention to invest heavily in research
and development, expectations regarding ongoing cash flows from the Company's
business model, expectations regarding the payment of dividends, and beliefs
regarding BVF-033, and can generally be identified by the use of words such as
"believe," "anticipate," "expect," "intend," "plan," "will," "may" and other
similar expressions. In addition, any statements that refer to expectations,
projections or other characterizations of future events or circumstances are
forward-looking statements.
Although Biovail believes that the expectations reflected in such
forward-looking statements are reasonable, such statements involve risks and
uncertainties, and undue reliance should not be placed on such statements.
Certain material factors or assumptions are applied in making forward-looking
statements, and actual results may differ materially from those expressed or
implied in such statements. Important factors that could cause actual results
to differ materially from these expectations include, among other things: the
difficulty of predicting U.S. Food and Drug Administration and Canadian
Therapeutic Products Directorate approvals, acceptance and demand for new
pharmaceutical products, the impact of competitive products and pricing, new
product development and launch, reliance on key strategic alliances,
availability of raw materials and finished products, the regulatory
environment, tax rate assumptions, the outcome of legal proceedings,
fluctuations in operating results and other risks detailed from time to time
in the Company's filings with the Securities and Exchange Commission and the
Ontario Securities Commission, as well as the Company's ability to anticipate
and manage the risks associated with the foregoing. Additional information
about these factors and about the material factors or assumptions underlying
such forward-looking statements may be found in the body of this news release,
as well as under the heading "Risk Factors" contained in Item 3(D) of
Biovail's most recent Annual Report on Form 20-F/A.
The Company cautions that the foregoing list of important factors that
may affect future results is not exhaustive. When relying on Biovail's
forward-looking statements to make decisions with respect to the Company,
investors and others should carefully consider the foregoing factors and other
uncertainties and potential events. Biovail undertakes no obligation to update
or revise any forward-looking statement.
About Biovail Corporation
Biovail Corporation is a specialty pharmaceutical company, engaged in the
formulation, clinical testing, registration, manufacture and commercialization
of pharmaceutical products utilizing advanced drug-delivery technologies. For
more information about Biovail, visit the Company's Web site at
www.biovail.com.
For further information, please contact Nelson F. Isabel at 905-286-3000
or send inquiries to ir@biovail.com.
BIOVAIL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(All dollar amounts are expressed in thousands of U.S. dollars, except
per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
------------------- -------------------
2007 2006 2007 2006
--------- --------- --------- ---------
REVENUE
Product sales $190,766 $243,455 $428,768 $455,266
Research and development 7,378 3,951 12,219 8,860
Royalty and other 4,883 7,737 9,045 13,646
--------- --------- --------- ---------
203,027 255,143 450,032 477,772
--------- --------- --------- ---------
EXPENSES
Cost of goods sold 54,534 58,568 110,950 105,760
Research and development 28,447 18,402 58,169 40,730
Selling, general and
administrative 46,329 66,670 95,923 123,220
Amortization 11,982 14,825 23,963 29,649
Restructuring costs 887 - 1,532 -
Contract costs (recoveries) (1,612) 4,500 (1,612) 4,500
--------- --------- --------- ---------
140,567 162,965 288,925 303,859
--------- --------- --------- ---------
Operating income 62,460 92,178 161,107 173,913
Interest income 6,070 6,116 15,831 11,312
Interest expense (453) (8,485) (9,130) (17,509)
Gain on disposal of investment 15,716 - 15,716 -
Loss on early extinguishment of
debt (12,463) - (12,463) -
Foreign exchange gain (loss) 763 496 475 (387)
Equity income (loss) (469) 50 (893) (268)
--------- --------- --------- ---------
Income from continuing
operations before provision
for income taxes 71,624 90,355 170,643 167,061
Provision for income taxes 3,800 5,350 9,000 9,500
--------- --------- --------- ---------
Income from continuing
operations 67,824 85,005 161,643 157,561
Income (loss) from discontinued
operation - 272 - (3,848)
--------- --------- --------- ---------
Net income $67,824 $85,277 $161,643 $153,713
--------- --------- --------- ---------
Basic and diluted earnings
(loss) per share
Income from continuing
operations $0.42 $0.53 $1.01 $0.99
Income (loss) from discontinued
operation - - - (0.03)
--------- --------- --------- ---------
Net income $0.42 $0.53 $1.01 $0.96
--------- --------- --------- ---------
Weighted average number of
common shares outstanding
(000s)
Basic 160,847 160,071 160,654 159,868
--------- --------- --------- ---------
Diluted 160,988 160,071 160,724 159,905
--------- --------- --------- ---------
BIOVAIL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(All dollar amounts are expressed in thousands of U.S. dollars)
(Unaudited)
At At
June 30 December 31
2007 2006
---------- ------------
ASSETS
Cash and cash equivalents $469,458 $834,540
Other current assets 203,493 223,084
Long-term investments 38,063 56,442
Property, plant and equipment, net 223,114 211,979
Intangible assets, net 669,095 697,645
Goodwill 100,294 100,294
Other long-term assets, net 54,648 68,458
---------- ------------
$1,758,165 $2,192,442
---------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities $275,705 $410,287
Long-term obligations - 399,379
Other long-term liabilities 104,611 80,519
Shareholders' equity 1,377,849 1,302,257
---------- ------------
$1,758,165 $2,192,442
---------- ------------
BIOVAIL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(All dollar amounts are expressed in thousands of U.S. dollars)
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
------------------- -------------------
2007 2006 2007 2006
--------- --------- --------- ---------
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income $67,824 $85,277 $161,643 $153,713
Adjustments to reconcile net
income to cash provided by
continuing operating
activities
Depreciation and amortization 24,376 23,316 46,261 46,294
Amortization and write-down of
deferred financing costs 4,043 615 4,574 1,237
Amortization and write-down of
discounts on long-term
obligations 761 302 962 793
Stock-based compensation 2,811 2,889 7,037 9,762
Contract costs (recoveries) (1,612) 4,500 (1,612) 4,500
Gain on disposal of investment (15,716) - (15,716) -
Premium paid on early
extinguishment of debt 7,854 - 7,854 -
Equity loss (income) 469 (50) 893 268
Loss (income) from discontinued
operation - (272) - 3,848
Other 383 1,655 1,079 1,963
Changes in operating assets and
liabilities 7,084 (7,426) 5,130 (16,880)
--------- --------- --------- ---------
Net cash provided by continuing
operating activities 98,277 110,806 218,105 205,498
Net cash provided by (used in)
continuing investing
activities 30,402 (12,690) 24,672 (30,902)
Net cash used in continuing
financing activities (529,837) (39,517) (608,331) (47,874)
Net cash provided by (used in)
discontinued operation - 22 - (558)
Effect of exchange rate changes
on cash and cash equivalents 441 (114) 472 (127)
--------- --------- --------- ---------
Net increase (decrease) in cash
and cash equivalents (400,717) 58,507 (365,082) 126,037
Cash and cash equivalents,
beginning of period 870,175 512,819 834,540 445,289
--------- --------- --------- ---------
Cash and cash equivalents, end
of period $469,458 $571,326 $469,458 $571,326
--------- --------- --------- ---------
For further information: Biovail Corporation Nelson F. Isabel,
905-286-3000 Vice-President, Investor Relations & Corporate Communications
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