Biovail Corporation (NYSE/TSX: BVF) today announced financial results for the three-month and nine-month periods ended September 30, 2009. To the extent that this news release contains forward-looking statements, investors are cautioned that these statements 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 at the end of this news release.
“Biovail produced strong cash flows from operations in the third quarter, which allowed us to reduce long-term debt by $75 million. We also completed our fifth business development transaction since launching our new strategy only 18 months ago,” said Biovail Chief Executive Officer Bill Wells. “Cash flow was assisted by strong prescription volume for Wellbutrin XL®, which continues to track above most generic analogs, and by a growing contribution from our recently acquired tetrabenazine franchise.
“We remain active on the business development front and are currently evaluating a number of opportunities within our target therapeutic area of specialty central nervous system disorders. With over $500 million in available liquidity at the end of the third quarter, we’re well positioned to execute on one or more of these to further build a long-term growth engine for the Company.”
Financial Results
Total revenues for the three months ended September 30, 2009 were $212.5 million, compared with $181.1 million for the third quarter of 2008. Total revenues for the nine months ended September 30, 2009 were $579.4 million, compared with $575.7 million for the first nine months of 2008. In accordance with United States Generally Accepted Accounting Principles (GAAP), Biovail reported net income of $40.4 million in the third quarter of 2009, compared with net income of $48.4 million for the corresponding 2008 period. For the nine months ended September 30, 2009, net income was $103.5 million, compared with $79.5 million for the same period a year earlier. For the third quarter of 2009, Biovail reported GAAP diluted earnings per share (EPS) of $0.25, compared with GAAP EPS of $0.31 for the third quarter of 2008. In the first nine months of 2009, GAAP EPS were $0.65, compared with GAAP EPS of $0.50 for the first nine months of 2008.
Specific Items Affecting Operations
The following table displays specific items that affected results in the third quarter and first nine months of 2009 and 2008, respectively, and the impact of each individual item on diluted EPS.
GAAP net income and EPS figures for the third quarter of 2009 were negatively impacted by $8.1 million in acquired in-process research and development (R&D) related to the acquisition of U.S. and Canadian rights to JP-1730/fipamezole from Santhera Pharmaceuticals (Switzerland) Ltd.; $2.4 million in restructuring charges related to the ongoing closure of Biovail’s manufacturing facilities in Puerto Rico and the consolidation of its R&D facilities; $0.4 million in proxy contest costs; a $0.4 million impairment loss related to auction rate securities; partially offset by a gain of $0.5 million on the sale of the Company’s equity interest in Hemispherx Biopharma, Inc., and a $0.2 million reversal of independent consultant costs. These items had an aggregate negative impact to net income and EPS of $10.7 million and $0.07, respectively.
GAAP net income and EPS figures for the third quarter of 2008 were negatively impacted by $7.6 million in restructuring charges, which included $5.1 million related to the closures of the Company’s two Puerto Rico manufacturing facilities and Dublin, Ireland research facility, and $2.5 million related to Biovail’s Bridgewater, New Jersey facility as a result of lower estimated future sublease rentals; and a provision of $2.0 million related to potential legal settlements. In addition, Biovail incurred costs of $0.7 million related to the 2008 proxy contest; and recorded a $1.2-million loss primarily related to the impairment of the Company’s auction rate securities. Partially offsetting these items was a $4.2-million gain on the disposal of a portion of an equity investment. These items had an aggregate negative impact to net income and EPS of $7.4 million and $0.05, respectively, in the third quarter of 2008.
2009 Financial Performance
Product revenues for the third quarter of 2009 were $204.3 million, compared with $170.5 million in the third quarter of 2008, a 20% increase that primarily reflects higher revenues from Wellbutrin XL® and the inclusion of revenues from tetrabenazine products and Aplenzin™. Partially offsetting factors include lower revenues from Ultram® ER, Zovirax® and Biovail’s portfolio of generic products. Product revenues for the nine months ended September 30, 2009 were $557.4 million, compared with $543.1 million for the nine months ended September 30, 2008.
Product revenues for Wellbutrin XL® were $58.6 million in the third quarter of 2009 and $115.9 million for the first nine months of 2009, compared with $16.6 million and $105.9 million, respectively, in the prior-year periods. The increases in 2009 reflect the acquisition of the U.S. commercialization rights to the product in May, which were partially offset by the impact of the May 2008 introduction of generic competition for the 150mg dosage strength of the product.
Biovail’s global tetrabenazine franchise generated third-quarter 2009 revenues of $15.1 million. Launched in the U.S. in November 2008 by Biovail’s marketing partner Lundbeck Inc., Xenazine® generated revenues of $11.5 million in the third quarter of 2009. Following the acquisition of the worldwide development and commercialization rights to tetrabenazine in June 2009, Biovail recorded $2.2 million in revenues in the third quarter of 2009 from sales of the product in Europe and around the world. In Canada, Nitoman® generated third-quarter 2009 revenues of $1.4 million, which is included in Biovail Pharmaceutical Canada’s revenues. In the first nine months of 2009, Biovail’s tetrabenazine franchise generated revenues of $34.9 million.
Aplenzin™, which was launched in April 2009 by Biovail’s marketing partner sanofi-aventis US, generated third-quarter 2009 revenues of $2.7 million, which reflects the launch of the 174mg strength of the product in the U.S. in July 2009.
Revenues for Biovail’s Zovirax® franchise were $30.8 million in the third quarter of 2009, and $100.0 million in the first nine months of 2009, representing decreases of 6% and 7%, respectively, compared with $32.8 million and $107.4 million in the prior-year periods. These declines reflect a 3% year-over-year decrease in prescription volume and a reduction in wholesaler and trade inventory levels, partially offset by price increases implemented over the last 12 months.
In the third quarter of 2009, Biovail recorded revenues of $12.1 million for Ultram® ER, compared with $20.8 million in the third quarter of 2008. In the first nine months of 2009, Ultram® ER generated revenues of $49.3 million, compared with $64.1 million in the corresponding period in 2008. Year-over-year performance reflects lower prescription volumes, partly as a result of the second-quarter 2009 introduction of a competing once-daily tramadol product in the U.S. market; a reduction in Biovail’s supply price from 37.5% of net sales in 2008 to 35% of net sales in 2009, and lower inventory levels in the distribution channel in 2009 in anticipation of potential generic competition. In August 2009, the U.S. District Court for the District of Delaware ruled in favour of a generic manufacturer in patent-infringement litigation related to Ultram® ER. While the decision has been appealed, a generic formulation of Ultram® ER could be launched in the U.S. market at any time.
Third-quarter 2009 revenues for Biovail Pharmaceuticals Canada (BPC) were $20.7 million, compared with $18.2 million in the prior-year period. BPC revenues for the first nine months of 2009 were $54.2 million, compared with $52.9 million in the first nine months of 2008. The year-over-year increases reflect continued growth of Wellbutrin® XL and Tiazac® XC, for which prescription volumes increased 30% and 16%, respectively, in the first nine months of 2009, compared with the prior-year period, and the inclusion of $1.4 million and $3.5 million of Nitoman® product sales in the third quarter and first nine months of 2009, respectively. Partially offsetting factors include the weakening Canadian dollar relative to the U.S. dollar. At constant exchange rates, BPC revenues increased approximately 21% and 18% in the third quarter and first nine months of 2009, respectively, compared with the corresponding periods of 2008.
In the third quarter of 2009, Cardizem® LA generated revenues of $13.7 million, compared with $13.2 million for the corresponding period in 2008. In the first nine months of 2009, Cardizem® LA generated revenues of $30.8 million, compared with $33.9 million in the first nine months of 2008, which reflects lower prescription volumes in 2009 and a reduction in inventory levels in the distribution channels in the first nine months of 2009 in anticipation of the introduction of a generic version of the product. The amortization of deferred revenues associated with the May 2005 transaction with Kos Pharmaceuticals, Inc. positively impacted Cardizem® LA revenues by $3.8 million and $11.3 million in each of the third quarters and first nine months, respectively, of 2009 and 2008. Pursuant to an agreement with Watson Pharmaceuticals, Inc. a generic formulation of Cardizem® LA can be launched upon Watson’s receipt of FDA approval. Biovail will receive a royalty based on sales of Watson’s generic version of Cardizem® LA.
Biovail’s Legacy products generated revenues of $41.8 million for the third quarter of 2009, compared with $42.1 million in the third quarter of 2008, a decrease of 1%. In the first nine months of 2009, Legacy products generated revenues of $122.9 million, compared with $115.5 million in the first nine months of 2008, an increase of 6% that reflects a 137% increase in prescription volume for generic Tiazac® (distributed by a subsidiary of Forest Laboratories, Inc.) as a result of the supply chain interruptions of two manufacturers. In addition, declining prescription volumes for other Legacy products were largely offset by price increases implemented over the last 12 months.
Product revenue for Biovail’s portfolio of generic products (distributed by a subsidiary of Teva Pharmaceutical Industries Ltd.) was $9.8 million in the third quarter of 2009, compared with $25.7 million in the third quarter of 2008, which reflects lower pricing and prescription volumes across the majority of products, and a delay in the sale of $4.4 million of product due to customs clearance issues. This product is expected to be shipped in – and to positively impact – the fourth quarter of 2009. In the first nine months of 2009, revenues were $43.8 million, compared with $61.8 million in the corresponding 2008 period. Also contributing to the year-over-year declines was the recognition in the third quarter of 2008 of a $4.5 million adjustment made by Teva in Biovail's favour related to prior-year chargebacks.
Performance Summary
The following table summarizes Biovail’s product revenue performance in the third quarter and first nine months (YTD) of 2009:
R&D revenue decreased 38% to $3.4 million in the third quarter of 2009, and decreased 44% to $10.4 million in the first nine months of 2009, compared with the corresponding periods in 2008 as a result of lower activity at Biovail’s contract research division and the negative impact of the weakening of the Canadian dollar relative to the U.S. dollar.
Royalty and other revenue was $4.8 million in the third quarter of 2009 and $11.6 million in the first nine months of 2009, compared with $5.1 million and $14.1 million in the corresponding periods in 2008, respectively. The declines reflect lower revenue based on sales of fenofibrate in the U.S.
Cost of goods sold excluding amortization of intangible assets for the third quarter of 2009 was $50.7 million, compared with $47.5 million in the third quarter of 2008. In the first nine months of 2009, cost of goods sold was $145.6 million, compared with $145.1 million in the prior-year period. These figures reflect product mix (including the addition of Xenazine® and Aplenzin™ in the 2009 periods), the higher cost basis related to the Wellbutrin XL® inventory reacquired from GlaxoSmithKline plc (GSK) and subsequently sold to wholesalers, the impact of lower labour and overhead costs at the Company’s Puerto Rico manufacturing facilities and the positive impact on labour and overhead costs in its Steinbach, Manitoba facility as a result of the weakening of the Canadian dollar relative to the U.S. dollar.