Biovail Beats in Q2 – Analyst Blog

Biovail Corporation’s (BVF) reported earnings of 34 cents per share (excluding special items) for its second quarter 2010 earnings, comfortably surpassed the Zacks Consensus Estimate of 26 cents per share. The company also earned 34 cents in the year-ago quarter.

 

On a reported basis (including special items) Biovail earned 21 cents per share in the reported quarter, against 15 cents a year ago. The increase in earnings was attributed to higher revenues driven by the impressive showing of its antidepressant drug Wellbutrin and its portfolio of generic products.

 

Adjusted cash earnings (cash flow from operating activities excluding changes in operating assets and liabilities) climbed 17% year over year to 60 cents per share in the quarter.

 

Total revenues in the quarter climbed 23% to $238.8 million, well above the Zacks Consensus Estimate of $213 million. Product sales jumped approximately 23.2% to $231.3 million. The impressive performance was driven by a 45% increase in Wellbutrin XL sales, which came in at $54 million. Sales of Xenazine, Biovail’s product for treating Huntington’s chorea, a neurodegenerative genetic disorder, grew 83% to $20.2 million. However, pain reliever Ultram performed disappointingly with sales dropping 59% to approximately $6.9 million. The sharp decline was attributed to the introduction of generic competition late last year for the 100mg and 200mg dosage strengths of the product. The 300mg dosage strength was also impacted by the presence of generics.

 

Revenues from the legacy products at Biovail climbed 14.5% to $46.5 million in the reported quarter. Performance was driven by the increase in prices of the products, which more than offset lower prescription volumes.

 

Revenues from Biovail’s portfolio of generic products climbed 51.7% to $26.1 million in the reported quarter. Performance was driven by strong sales of generic Cardizem CD. The increase in sales was primarily due to manufacturing problems faced by competitors, which more than offset lower prescription volumes for generic formulations of Cardizem CD and pricing for other generic products at Biovail.

 

Research & development (R&D) expenses for the quarter fell 16.6% to $37.3 million. However, R&D expenses, excluding special items, rose 121% to $23.6 million. The increase was attributed to Biovail’s efforts to develop its pipeline. Selling, general and administrative (SG&A) expenses (including special items) declined approximately 8.9% to $45.1 million.

 

 

In June 2010, Biovail Corp. and Valeant Pharma (VRX) agreed upon a merger, in which the latter will merge with a wholly-owned subsidiary of Biovail, with the combined company being called Valeant Pharmaceuticals International Inc. The merger, which is expected to be completed by the end of the year, is subject to shareholder and regulatory approvals. In July, the Federal Trade Commission issued an early termination of the waiting period under the Hart-Scott-Rodino Act. Both the participants in the merger have scheduled their respective special meetings of shareholders on September 27, 2010.

 

The transaction, which will create a giant specialty pharmaceuticals company, is valued at approximately $3.3 billion. The deal entitles the shareholders of Valeant to a one-time special cash dividend of $16.77 per share immediately prior to the closing of the merger, in addition to 1.7809 shares of Biovail upon closing of the merger in exchange for each share of Valeant. The Biovail and Valeant stockholders would own approximately 50.5% and 49.5% of the shares of the merged entity, respectively.

 

Furthermore, the new company will have limited patent exposure and should enjoy strong and stable cash flows from existing products, which will support growth and thereby ensure a strong balance sheet. Management of the merged entity, which will be based in Mississauga, Ontario, will be divided between the leadership of the two companies.