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Biovail Corporation (BVF)
Biovail Corporation's First Quarter Profit Down 31%
Biovail Corporation (BVF: Charts, News, Offers) reported today that its first quarter profit fell 31%. The Canadian pharmaceutical company saw its profit tumble to $39 million from $56.4 million a year ago. Despite being positioned in the often considered "recession resistant" medical industry, Biovail is still experiencing significant reductions in profit. However, the pharmaceutical producer seems to have identified the cause of its recent drop in performance. What factors are responsible for such a drastic decline in profit? What is Biovail's plan of action for performance improvement?
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The primary cause for Biovail's recent troubles has been a decrease in sales. The pharmaceutical giant has seen its market share significantly decrease with the popularity of low-cost generic drugs. For example, sales of its antidepressant Wellbutrin XL fell by over 50% after generic versions of the drug were introduced to the market in May of 2008. Biovail was also forced to recall some production lots of its extended-release pain drug, Ultram ER, due to inconsistent pill dissolve times. In addition, the Canadian-based company reported that the recent foreign exchange rates have hurt the company's revenues. Declining drug sales, unexpected recall costs, and an unfavorable foreign exchange rates have all led to Biovail's recent fall in profit. However, the medical drug producer seems to have developed a strategy to combat its declining performance.
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The first quarter was not all bad for Biovail. It did see promising revenue growth from its own generic drug sales, a 22% increase. Specifically, Biovail Corporation received strong performance from its chorea drug Xenazine and depression treatment Aplenzin, each earning $6.7 million and $3.8 million in revenue respectfully. The pharmaceutical company hopes that continued development and expansion of its recent generic drug success will help improve future profit margins. In addition, Biovail is making a concentrated effort to change its U.S. portfolio. Biovail Corporation seems focused on investing earlier on product launches and development as well as increasing its involvement with top selling drug products. Biovail Corporation has put its plan into motion with the purchase of the U.S. commercial rights to the antidepressant Wellbutrin XL from GlaxoSmithKline PLC for $510 million. The pharmaceutical developer has also organized a deal with Acadia Pharmaceuticals (ACAD: Charts, News, Offers) to commercialize pimavanserin, which is used to treat schizophrenia and Parkinson's disease.
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Although Biovail has experienced some recent problems with its revenue stream, it is actively working to improve performance. The introduction of low-cost generic versions of its brand name drugs has really hurt sales. However, at the same time, the pharmaceutical giant has seen tremendous growth in performance with its own generic drugs. Biovail Corporation's growing generic drug success and refocused U.S. agenda may be just what the doctor ordered for a performance turnaround. However, only time will tell if the prescription is strong enough to save this ailing patient.
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