BIOVAIL CORP INTERNATIONAL - 6-K - 20040813 - EXHIBIT_99
Exhibit 99.1
Second
Quarter
Report 2004
Biovail
Corporation
Q2
1 BIOVAIL 2004 SECOND QUARTER REPORT
Letter to
Shareholders
[PHOTO]
Dear
Fellow Shareholders,
In
the second quarter of 2004, Biovail Corporation continued to move toward its long-term goal of becoming a leading, fully integrated specialty pharmaceutical company with high growth and
profit potential.
Biovail
has reached the point in its evolution where focusing on improving operational efficiencies, management information and financial systems is paramount.
To
this end, Biovail recently made several key changes to the composition of its executive group. The Company has hired Charles Rowland as Senior Vice-President and Chief Financial
Officer, succeeding Brian Crombie, who remains with Biovail as Senior Vice-President, Strategic Development. Rick Keefer, who has played a key role in helping to build our
U.S. operation, succeeds Kristine Peterson as Senior Vice-President, Commercial Operations. The company has also hired John Sebben to become Vice-President, Global
Manufacturing.
FINANCIAL PERFORMANCE
Biovail's
financial results for the second quarter of 2004 demonstrate that the Company's commercial operations are executing well against plan.
Total
product sales for second quarter 2004 were up 25% year over year to a record $197.2 million. Product sales for the first half of 2004 were 31% higher for the corresponding
six-month period in 2003. As a percentage of total
corporate revenue, products sales were 96% and 95% in the second quarter and first half of 2004 respectively, compared to 73% and 70% in the second quarter and first of half of 2003 respectively.
These increases can be attributed to the ongoing strength of Wellbutrin XL and Cardizem LA.
Net
income for the second quarter of 2004 was $44.2 million, compared with a net loss of $4.9 million for the corresponding period in 2003. For the first half of 2004, net income was
$65.3 million, compared with $52.7 million for the corresponding 2003 period.
Second
quarter 2004 U.S. GAAP diluted earnings per share of 28 cents were at the high end of Biovail's guidance. This compares to a loss of $0.03 in the second quarter of 2003 and diluted EPS
of 13 cents for the first quarter of this year.
BIOVAIL 2004 SECOND QUARTER REPORT 2
PRODUCTS
Since
the Wellbutrin XL launch in September 2003 through our marketing partner, GlaxoSmithKline (GSK), bupropion's share of the anti-depressant market has expanded by 18.5%. At the
end of June 2004, Wellbutrin XL had captured 49.6% of new prescriptions written for the Wellbutrin brand (including generics). In the second quarter of 2004, GSK's net sales of Wellbutrin XL
exceeded the first-tier threshold for the first time, thereby increasing Biovail's supply price to the second tier of the manufacturing and supply agreement.
The
collective performance of our promoted brands in the U.S. shows a clear focus and steady demand throughout the final phases of field sales optimization, realignment and staffing
initiatives.
Cardizem
LA continues to achieve weekly prescription volumes and market share records throughout the second quarter of the year. Total prescriptions were up 8% in the second quarter of 2004 relative
to the first quarter of 2004. As such, Cardizem LA held a 7.4% share of the once-daily diltiazem market in the second quarter of 2004, compared with 6.8% for the first quarter of 2004.
Again, it's important to note that recent weekly trends are reflecting the early impact of Biovail's sales and marketing strategies. We expect the efforts of our specialty sales forces to continue to
drive growth for Cardizem LA in the second half of 2004.
In
Canada, performance was driven by the strong performance of Wellbutrin SR and Tiazac. Wellbutrin SR's prescription volume in the second quarter of 2004 was 18.8% higher than for the corresponding
period in 2003. Total prescriptions for Tiazac in the second quarter of 2004 were up 25.5% over the corresponding period in 2003, making Tiazac the fastest-growing calcium channel blocker in Canada.
REGULATORY HIGHLIGHTS
Biovail
continued to build on the momentum it generated during the first quarter of the year with respect to product development. During the second quarter of 2004, we filed two New Drug
Applications with the U.S. Food and Drug Administration — one for Glumetza with our partner, Depomed and one for a novel formulation of citalopram for the
treatment of depression.
To
date in 2004, Biovail has filed four new drug applications for novel therapeutics with the U.S. Food and Drug Administration, and completed one New Drug Submission with the
Therapeutic Products Directorate (TPD). We anticipate at least one additional regulatory submission before the end of the year.
Biovail
expects to receive approval from the TPD for Tiazac XC for the treatment of hypertension in the second half of 2004. Building on the success of Tiazac, Canada's leading once-daily
diltiazem formulation, Tiazac XC features a new extended-release delivery system designed for bedtime administration, resulting in improved blood-pressure control during the early morning hours.
3 BIOVAIL 2004 SECOND QUARTER REPORT
OPERATIONS
During
the past 18 months, Biovail has focused on making strategic investments to consolidate our operations in the U.S. The consolidation of our U.S. commercial operations and
select R&D functions at our Bridgewater, N.J. facility is complete. Our U.S. sales force now has more than 600 sales professionals. It includes 475 primary-care representatives and
two 63-member sales forces — one for cardiology and one for dermatology and OB-GYNs. Biovail intends to leverage this important asset to
increase our market share in the second half of 2004.
Activities
at Biovail's flagship manufacturing facility in Steinbach, Manitoba, are running at their highest levels ever. Our transition to 24/7 production and 12-hour shifts is now
complete. In Steinbach we now have 570 employees — up from 350 a year ago. We are now capable of producing in excess of 1.7 billion dosage units per year;
more than twice our capacity of 670 million units just a year ago. Our facilities in Dorado and Carolina, Puerto Rico continue to optimize their manufacturing operations and continue to provide
Biovail's diltiazem requirements.
LOOKING AHEAD
To
date, in 2004, management and employees at Biovail have worked diligently to provide tangible, measurable signs of progress.
Biovail's
development pipeline is currently the deepest in the Company's history. Beyond the recent regulatory filings in 2004, our formulation operations in Chantilly, Virginia and Dublin, Ireland
continue their development efforts for novel formulations of several products, including venlafaxine, bupropion, eprosartan, enalapril, metoprolol, zolpidem and combination products involving
simvastatin.
Our
strategy for the second half of the year remains unchanged — to build on the solid, measurable success realized in the first six months of the year.
Eugene N. Melnyk
Chairman of the Board
Chief Executive Officer
BIOVAIL 2004 SECOND QUARTER REPORT 4
Consolidated Balance Sheets
In accordance with U.S. generally accepted accounting principles
(All dollar amounts are expressed in thousands of U.S. dollars)
(Unaudited)
June 30
December 31
2004
2003
ASSETS
Current
Cash and cash equivalents
$
51,659
$
133,261
Accounts receivable
153,643
179,374
Inventories
94,859
84,058
Deposits and prepaid expenses
11,492
15,759
311,653
412,452
Long-term investments
105,055
113,546
Property, plant and equipment, net
174,835
173,804
Goodwill, net
100,814
100,814
Intangible assets, net
1,016,100
1,049,475
Other assets, net
60,730
72,683
$
1,769,187
$
1,922,774
LIABILITIES
Current
Accounts payable
$
51,669
$
67,932
Accrued liabilities
94,259
105,201
Minority interest
—
679
Income taxes payable
22,132
24,175
Deferred revenue
5,234
5,765
Current portion of long-term obligations
74,861
58,816
248,155
262,568
Deferred revenue
12,800
14,500
Long-term obligations
569,079
764,111
830,034
1,041,179
SHAREHOLDERS' EQUITY
Common shares
1,452,031
1,448,353
Stock options outstanding
2,150
2,290
Deficit
(542,364
)
(607,678
)
Accumulated other comprehensive income
27,336
38,630
939,153
881,595
$
1,769,187
$
1,922,774
5 BIOVAIL 2004 SECOND QUARTER REPORT
Consolidated Statements of Income (Loss)
In accordance with U.S. generally accepted accounting principles
(All dollar amounts are expressed in thousands of U.S. dollars, except per share data)
(Unaudited)
Three Months Ended June 30
Six Months Ended June 30
2004
2003
2004
2003
(Restated
[1]
)
(Restated
[1]
)
REVENUE
Product sales
$
197,213
$
157,730
$
372,310
$
284,644
Research and development
2,673
3,673
6,889
6,273
Co-promotion, royalty and licensing
6,427
55,880
13,740
117,756
206,313
217,283
392,939
408,673
EXPENSES
Cost of goods sold
59,052
11,332
111,193
48,744
Research and development
15,830
21,813
33,821
39,819
Selling, general and administrative
55,991
55,593
115,449
102,301
Amortization
15,734
45,886
32,839
86,407
Acquired research and development
—
84,200
8,640
84,200
Settlements
—
(9,300
)
—
(34,055
)
146,607
209,524
301,942
327,416
Operating income
59,706
7,759
90,997
81,257
Interest income
167
1,635
571
4,702
Interest expense
(8,970
)
(9,507
)
(20,364
)
(19,489
)
Foreign exchange loss
(1,318
)
(5,284
)
(356
)
(10,125
)
Other income (expense)
(3,577
)
6,157
(2,434
)
6,664
Income before provision for income taxes
46,008
760
68,414
63,009
Provision for income taxes
1,800
5,700
3,100
10,350
Net income (loss)
$
44,208
$
(4,940
)
$
65,314
$
52,659
Earnings (loss) per share
Basic
$
0.28
$
(0.03
)
$
0.41
$
0.33
Diluted
$
0.28
$
(0.03
)
$
0.41
$
0.33
Weighted average number of common shares
outstanding (000s)
Basic
159,084
158,386
159,043
158,291
Diluted
159,201
158,386
159,241
159,960
BIOVAIL 2004 SECOND QUARTER REPORT 4
Consolidated Statements of Cash Flows
In accordance with U.S. generally accepted accounting principles
(All dollar amounts are expressed in thousands of U.S. dollars)
(Unaudited)
Six Months Ended June 30
2004
2003
(Restated
[1]
)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
$
65,314
$
52,659
Add (deduct) items not involving cash
Depreciation and amortization
44,009
94,355
Amortization of deferred financing costs
2,699
1,369
Amortization of discounts on long-term obligations
1,526
3,978
Acquired research and development
8,640
84,200
Other
(401
)
2,477
121,787
239,038
Net change in non-cash operating items
(14,127
)
(64,847
)
Cash provided by operating activities
107,660
174,191
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment
(14,155
)
(16,572
)
Acquisition of business, net of cash acquired
(9,319
)
—
Acquisitions of long-term investments
(245
)
(4,536
)
Acquisitions of intangible assets
—
(196,052
)
Increase in loan receivable
—
(5,000
)
Proceeds on disposal of intangible asset
—
10,000
Cash used in investing activities
(23,719
)
(212,160
)
CASH FLOWS FROM FINANCING ACTIVITIES
Advances (repayments) under revolving term credit facility,
including financing costs
(122,550
)
144,000
Repayments of other long-term obligations
(52,796
)
(70,386
)
Proceeds on termination of interest rate swaps
6,300
—
Issuance of common shares, net of issue costs
3,678
10,332
Cash provided by (used in) financing activities
(165,368
)
83,946
Effect of exchange rate changes on cash and cash equivalents
(175
)
535
Net increase (decrease) in cash and cash equivalents
(81,602
)
46,512
Cash and cash equivalents, beginning of period
133,261
56,080
Cash and cash equivalents, end of period
$
51,659
$
102,592
[1] As disclosed in Biovail Corporation's amended Form 6-K for the quarterly period ended June 30, 2003,
financial results for the three months and six months ended June 30, 2003 have been restated for non-cash foreign exchange translation adjustments of $3,928,000 and $9,320,000,
respectively, which resulted in an increase in the net loss for the three months ended June 30, 2003 from $1,012,000 (basic and diluted loss per share of $0.01) as previously reported to
$4,940,000 (basic and diluted loss per share of $0.03) as restated, and a decrease in net income for the six months ended June 30, 2003 from $61,979,000 (basic and diluted earnings per share of
$0.39) as previously reported to $52,659,000 (basic and diluted earnings per share of $0.33) as restated. Current and prior years' figures reflect the reclassification of foreign exchange gains and
losses from selling, general and administrative expenses.
For
additional copies of this report, the annual report on Form 20-F as filed with the United States Securities and Exchange Commission, for quarterly reports or for further
information, please contact Investor Relations.
Corporate Information
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The
following words are trademarks of the Company and may be registered in Canada, the United States and certain other jurisdictions: Ativan®, Attenade(tm), Biovail®,
Cardizem®, CEFORM(tm), Fastab(tm), FlashDose®, Glumetza(tm), Isordil®, Ralivia(tm), Shearform(tm), Smartcoat(tm), Tiazac®, Teveten®,
Vasotec® and Vaseretic®. Wellbutrin®, Wellbutrin SR®, Wellbutrin XL(tm), Zovirax®, and Zyban® are trademarks of "The
GlaxoSmithKline Group of Companies" and are used by the Company under license.
All
other trademarks mentioned in this report, which are not the property of the Company, are owned by their respective holders and may be licensed to the Company for use in certain markets.
To
the extent any statements made in this report contain information that is not historical, these statements are essentially forward-looking. As such, they are subject to risks and uncertainties,
including the difficulty in predicting FDA and TPD 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, the regulatory environment, legislative amendments and / or changes, fluctuations in operating results and other risks detailed from
time to time in the Company's filings with the U.S. Securities and Exchange Commission and Canadian securities authorities.
Financial
Statements prepared in accordance with Canadian Generally Accepted Accounting Principles are made available to all shareholders.
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