Biovail cuts costs as drug company battles generics
Last Updated: Thursday, November 6, 2008 | 4:57 PM ET
CBC News
Biovail Corp. will take as much as $100 million in new restructuring charges over the "next several quarters" as the pharmaceutical producer tries to fight off increased competition from generic drug makers.
Biovail, which released its third-quarter earnings Thursday, said the previously announced closure of three facilities plus other efficiency enhancements would drag down profits in the short-term, but would yield cost savings of between $30 million and $40 million annually starting in 2010.
Biovail's cost-paring process has already begun with the imminent shutting of Biovail's research and development operation in Dublin and the pending closure of two plants in Puerto Rico.
"We made solid progress on the implementation of our new strategic focus and in restructuring our business in the third quarter," said Bill Wells, the company's chief executive officer.
A new fight
Biovail faces slumping revenue as no-name competitors took away sales from Wellbutrin, the company's prominent antidepressant.
In the third quarter of 2008, Biovail only generated $16.6 million in sales for this drug versus $53.5 million for the same three months one year earlier.
Biovail's third-quarter product revenue slipped by four per cent, reaching $170.5 million compared with $178.3 million during the July-to-September period one year earlier.
Sales of the painkiller Ultram offset the Wellbutrin slide and rose more than 50 per cent, comparing the most recent quarter with the same three months in 2007.
Bad metrics
Biovail's overall revenue also slid four per cent, at 181.1 million.
But the company still posted positive earnings, with a gain of $48.4 million, or 33 cents a share, in the quarter. That picture, however, was not as bright as the third quarter one year earlier when Biovail made $65.9 million.
Biovail said that increased generic competition, combined with the slowing global economy, will crimp the Toronto company's revenue forecast.
"Biovail expects to record period-over-period declines in product sales for the next several quarters, mainly as a result of the introduction of generic competition to the 150 mg Wellbutrin XL(R) product on May 30, 2008," the company said in its earnings release.
Biovail has had a tough 2008, with a nasty corporate proxy fight with company founder Eugene Melnyk, who tried and failed to throw out the existing board of directors.
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