<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER PURSUANT TO RULE 13A - 16 AND 15D - 16 OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED JUNE 30, 1999 COMMISSION FILE NUMBER 001-11145
BIOVAIL CORPORATION INTERNATIONAL
(TRANSLATION OF REGISTRANT'S NAME INTO ENGLISH)
2488 DUNWIN DRIVE, MISSISSAUGA, ONTARIO L5L 1J9, CANADA
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (416) 285-6000
INDICATE BY CHECK MARK WHETHER THE REGISTRANT FILES OR WILL FILE
ANNUAL REPORTS UNDER COVER OF FORM 20-F OR FORM 40-F
FORM 20-F _X_ FORM 40-F __
INDICATE BY CHECK MARK WHETHER FOR REGISTRANT BY FURNISHING THE INFORMATION
CONTAINED IN THIS FORM IS ALSO THEREBY FURNISHING THE INFORMATION TO THE
COMMISSION PURSUANT TO RULE 12G 3-2 (B) UNDER THE SECURITIES EXCHANGE ACT OF
1934.
YES __ NO _X_
<PAGE> 2
BIOVAIL CORPORATION INTERNATIONAL
QUARTERLY REPORT
INDEX
<TABLE>
<S> <C>
PART 1. FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS, JUNE 30, 1999 AND
DECEMBER 31, 1998 ............................................... 1
CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS AND THE THREE MONTHS ENDED
JUNE 30, 1999 AND 1998 .......................................... 2
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998.................. 3
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS .......................... 4
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS .......................................10
PART II. OTHER INFORMATION ..........................................16
</TABLE>
(ALL DOLLAR AMOUNTS IN THIS DOCUMENT ARE EXPRESSED
IN U.S. DOLLARS UNLESS OTHERWISE STATED.)
<PAGE> 3
BIOVAIL CORPORATION INTERNATIONAL
CONSOLIDATED BALANCE SHEETS
(ALL DOLLAR AMOUNTS ARE EXPRESSED IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
----------- ------------
(UNAUDITED) (AUDITED)
<S> <C> <C>
ASSETS
CURRENT
Cash and short-term deposits $ 86,358 $ 78,279
Accounts receivable 36,521 42,768
Inventories 15,199 10,542
Executive stock purchase plan loans (Note 2) 3,025 2,924
Deposits and prepaid expenses 3,264 3,357
------------- -------------
144,367 137,870
LONG-TERM INVESTMENTS (Note 3) 10,055 10,055
CAPITAL ASSETS, net 25,464 23,677
OTHER ASSETS, net 29,072 28,317
------------- -------------
$ 208,958 $ 199,919
============= =============
LIABILITIES
CURRENT
Accounts payable $ 7,300 $ 12,244
Accrued liabilities 5,561 4,129
Income taxes payable 1,293 1,004
Customer prepayments 16,126 4,516
Current portion of long-term debt 751 653
------------- -------------
31,031 22,546
LONG-TERM DEBT 125,856 126,182
------------- -------------
156,887 148,728
------------- -------------
SHAREHOLDERS' EQUITY
Share capital (Note 4) 21,019 19,428
Warrants 8,244 8,244
Retained earnings 22,059 24,748
Cumulative translation adjustment 749 (1,229)
------------- -------------
52,071 51,191
------------- -------------
$ 208,958 $ 199,919
============= =============
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements
1
<PAGE> 4
BIOVAIL CORPORATION INTERNATIONAL
CONSOLIDATED STATEMENTS OF INCOME
(ALL DOLLAR AMOUNTS EXCEPT PER SHARE DATA ARE
EXPRESSED IN THOUSANDS OF U.S. DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUE
Product sales $ 24,979 $ 17,296 $ 37,541 $ 28,763
Research and development 8,635 4,109 15,352 11,953
Royalty and licensing 2,550 3,850 11,502 6,428
----------- ----------- ----------- -----------
36,164 25,255 64,395 47,144
----------- ----------- ----------- -----------
EXPENSES
Cost of goods sold 7,848 6,867 12,887 12,009
Research and development 6,459 4,103 11,783 8,132
Selling, general and administrative 6,359 4,143 12,604 8,454
----------- ----------- ----------- -----------
20,666 15,113 37,274 28,595
----------- ----------- ----------- -----------
OPERATING INCOME 15,498 10,142 27,121 18,549
INTEREST EXPENSE, net (2,657) (89) (5,449) (157)
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES 12,841 10,053 21,672 18,392
PROVISION FOR INCOME TAXES 775 510 1,308 1,001
----------- ----------- ----------- -----------
NET INCOME $ 12,066 $ 9,543 $ 20,364 $ 17,391
=========== =========== =========== ===========
EARNINGS PER SHARE (Note 5) $ 0.49 $ 0.36 $ 0.83 $ 0.65
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 24,534,000 26,849,900 24,534,000 26,849,900
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements
2
<PAGE> 5
BIOVAIL CORPORATION INTERNATIONAL
CONSOLIDATED STATEMENTS OF CASH FLOW
(ALL DOLLAR AMOUNTS ARE EXPRESSED IN THOUSANDS OF U.S. DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
1999 1998
------------- ------------
<S> <C> <C>
NET INFLOW (OUTFLOW) OF CASH RELATED
TO THE FOLLOWING ACTIVITIES
OPERATING
Net income for the period $ 20,364 $ 17,391
Depreciation and amortization 3,154 2,346
------------ ------------
23,518 19,737
Change in non-cash operating items 10,771 6,966
------------ ------------
34,289 26,703
------------ ------------
INVESTING
Additions to capital assets, net (2,785) (2,235)
Executive stock purchase plan loans (Note 2) 31 116
Acquisition of product rights (1,811) -
Acquisition of royalty interest - (15,000)
Increase in other assets - (170)
Long-term investments - (7,500)
------------ ------------
(4,565) (24,789)
------------ ------------
FINANCING
Acquisition of share capital (Note 4) (23,550) -
Issuance of share capital 2,088 3,858
Reduction in other long-term debt (300) (7,840)
Increase in other long-term debt - 14,706
------------ ------------
(21,762) 10,724
------------ ------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 117 (31)
------------ ------------
INCREASE IN CASH 8,079 12,607
------------ ------------
CASH AND SHORT-TERM DEPOSITS,
BEGINNING OF PERIOD 78,279 8,275
------------ ------------
CASH AND SHORT-TERM DEPOSITS,
END OF PERIOD $ 86,358 $ 20,882
============ ============
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements
3
<PAGE> 6
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR AMOUNTS EXCEPT PER SHARE DATA ARE
EXPRESSED IN THOUSANDS OF U.S. DOLLARS)
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
Biovail Corporation International (the "Company"), was amalgamated
effective March 29, 1994, under the laws of the province of Ontario. The
Company's accounting and reporting policies conform to generally accepted
accounting principles in Canada. There were no material differences between
generally accepted accounting principles in Canada and generally accepted
accounting principles in the United States in the reporting periods except
for those described in Note 8.
1998 Figures
Certain of the 1998 figures have been reclassified to conform to the 1999
presentation.
For a full description of the other accounting policies of the Company,
reference is made to the Annual Report on Form 20-F for the year ended
December 31, 1998.
In the opinion of management, all adjustments necessary for a fair
presentation of the financial position, results of operations and cash
flows for the period presented have been made and all such adjustments are
of a normal recurring nature.
2. EXECUTIVE STOCK PURCHASE PLAN LOANS
Executive Stock Purchase Plan ("ESPP") loans, of $3,024,532 at June 30,
1999, were made to finance the acquisition of shares of the Company on the
open market by executive officers. The loans which are due on December 1,
1999, are secured by shares of the Company owned by the executive officers
and bear interest at 1/4% over the bank prime rate, which is equal to the
Company's rate for borrowing.
3. LONG-TERM INVESTMENTS
In March, 1998, the Company made a $7,543,127 investment in a marketable
securities fund. The investment is carried at cost, less provision to
recognize any decline in value that is other than temporary. The fair value
of the investment at June 30, 1999 was $5,022,902.
In July, 1998, in connection with the acquisition from Celgene Corporation
("Celgene") of Canadian marketing and distribution rights in respect to
immediate release and pulse release formulations of products containing
d-methylphenidate hydrochloride, the Company made a $2,500,000 investment
in common shares of Celgene, the supplier of the product. The fair value of
the investment at June 30, 1999 was $3,507,021.
4
<PAGE> 7
4. SHARE CAPITAL
From January 1, 1999 to June 30, 1999, in accordance with the Company's
stock repurchase program, the Company has repurchased an additional 598,700
common shares at a cost of $23,550,257. The excess of the cost of the
common shares acquired over the stated capital thereof, totaling
$23,053,011 has been charged to retained earnings.
5. EARNINGS PER SHARE
Earnings per share, for all interim periods presented have been calculated
using the weighted number of shares outstanding during the year. The
earnings per share on a fully diluted basis giving effect to the exercise
of all options and warrants granted would have been $0.44 and $0.33 for the
three months ended June 30, 1999 and 1998 respectively and $0.76 and $0.61
for the six months ended June 30, 1999 and 1998 respectively.
6. LITIGATION
From time to time, the Company becomes involved in various legal
proceedings which it considers to be in the ordinary course of business.
The vast majority of these proceedings involve intellectual property issues
that often result in patent infringement suits brought by patent holders
upon the Company's filing of its ANDA applications. The timing of these
actions is mandated by statute and may result in a delay of FDA's approval
for such filed ANDAs until the final resolution of such actions or the
expiry of 30 months, whichever occurs earlier. The Company is currently
litigating a number of such actions and the Company is vigorously defending
these suits by denying infringement of the patents and has or will be
asserting counterclaims seeking damages for violation of the anti-trust
laws of the U.S. and for tortious interference with the Company's
prospective business advantage. While the Company is not currently able to
determine the potential liability, if any, related to such matters, the
Company believes none of the matters, individually or in aggregate, will
have a material adverse effect on its financial position, results of
operations or cash flows.
7. SEGMENTED INFORMATION AND MAJOR CUSTOMERS
The Company's operations consist of three segments - Product Sales,
Research and Development, and Royalty and Licensing. The segments are
determined based on several factors including customer base, the nature of
the product or service provided, delivery channels and other factors.
The PRODUCT SALES segment covers sales of production from the Company's
Puerto Rico and Steinbach, Manitoba, facilities and sales by the Crystaal
Division.
5
<PAGE> 8
The RESEARCH AND DEVELOPMENT segment covers all revenues generated by the
Company's integrated research and development facilities, and comprises
research and development services provided to third parties, including
Intelligent Polymers Limited, and product development milestone fees.
The ROYALTY AND LICENSING segment covers royalty revenues received from
licensees in respect of products for which the Company has manufacturing,
marketing and/or intellectual property rights and product or technology
licensing fees.
The following table sets forth information regarding segment operating
income:
<TABLE>
<CAPTION>
RESEARCH ROYALTY
SIX MONTHS ENDED PRODUCT AND AND
JUNE 30, 1999 SALES DEVELOPMENT LICENSING TOTAL
------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues from external
customers $ 37,541 $ 15,352 $ 11,502 $ 64,395
--------- ---------- ---------- ----------
Segment operating
income 15,834 2,575 11,277 29,686
Unallocated amounts
Selling, general and
administrative expenses (2,565)
Interest expense, net (5,449)
----------
Income before income taxes $ 21,672
==========
</TABLE>
<TABLE>
<CAPTION>
RESEARCH ROYALTY
SIX MONTHS ENDED PRODUCT AND AND
JUNE 30, 1998 SALES DEVELOPMENT LICENSING TOTAL
------------- ---------- ----------- --------- ----------
<S> <C> <C> <C> <C>
Revenues from external
customers $ 28,763 $ 11,953 $ 6,428 $ 47,144
---------- ---------- --------- ----------
Segment operating
income 10,837 2,957 6,294 20,088
Unallocated amounts
Selling, general and
administrative expenses (1,539)
Interest expense, net (157)
----------
Income before income taxes $ 18,392
==========
</TABLE>
6
<PAGE> 9
8. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
The financial statements of the Company have been prepared in accordance
with generally accepted accounting principles in Canada ("Cdn. GAAP") which
differ in certain respects from those applicable in the United States
("U.S. GAAP"). The material differences as they apply to the Company's
financial statements are as follows:
a) Reconciliation of net income under Cdn. and U.S. GAAP
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30
------------------------------
1999 1998
----------- -----------
<S> <C> <C>
Net income under Cdn. GAAP........................... $ 20,364 $ 17,391
U.S GAAP adjustments:
Reversal of previously expensed product
launch advertising costs (i)............... 238 -
Collection of warrant subscription
receivable (ii)............................ (1,397) (537)
Compensation cost for employee stock
options (iii).............................. (900) (1,888)
----------- -----------
Net income according to U.S. GAAP $ 18,305 $ 14,966
=========== ===========
Earnings per share under U.S. GAAP
Basic........................................... $ 0.75 $ 0.56
Fully diluted................................... $ 0.69 $ 0.55
Weighted average number of common shares
outstanding under U.S. GAAP (000's)
Basic........................................... 24,534 26,850
Fully diluted................................... 26,340 27,189
</TABLE>
(i) For the purposes of reporting under U.S. GAAP, companies are required to
write off certain product launch and advertising costs incurred during
the year. This adjustment represents the portion of product launch and
advertising costs currently expensed under Cdn. GAAP which have been
previously written off under U.S. GAAP.
(ii) See Note 8 (c)
(iii) For the purposes of reporting under U.S. GAAP, the Company accounts for
compensation expense for certain employee stock option plans under the
provisions of Accounting Principles Board Opinion 25. No such expense is
required to be determined under Cdn. GAAP.
7
<PAGE> 10
b) Comprehensive income
Under U.S. GAAP, the following additional disclosure would be provided
pursuant to the requirements of SFAS No. 130 "Reporting Comprehensive
Income" which establishes standards for the reporting of comprehensive
income and its components:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
----------------------------
Statement of comprehensive income 1999 1998
--------- ---------
<S> <C> <C>
Net income according to U.S. GAAP............................. $ 18,305 $ 14,966
--------- ---------
Other comprehensive income (loss), net of tax
Foreign currency translation adjustment................... 1,978 173
Unrealized holding (loss) gain on long-term
investments............................................ (636) 43
--------- ---------
Other comprehensive loss...................................... 1,342 216
--------- ---------
Comprehensive income under U.S. GAAP.......................... $ 19,647 $ 15,182
========= =========
</TABLE>
<TABLE>
<CAPTION>
Accumulated other
Comprehensive
income (loss)
balances JUNE 30, 1999 JUNE 30, 1998
------------------------------------------ ------------------------------------------
FOREIGN UNREALIZED FOREIGN UNREALIZED
CURRENCY LOSSES ON CURRENCY LOSSES ON
TRANSLATION INVESTMENTS TOTAL TRANSLATION INVESTMENTS TOTAL
----------- ----------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, beginning
of year $ (1,229) $ (877) $ (2,106) $ (960) $ - $ (960)
Current year change 1,978 (636) 1,342 173 $ 43 216
--------- --------- --------- --------- ------- ---------
Balance, end of year $ 749 $ (1,513) $ (764) $ (787) $ 43 $ (744)
========= ========= ========= ========= ======= =========
</TABLE>
c) The components of shareholders' equity under U.S. GAAP are as follows:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
---------- ------------
<S> <C> <C>
Share capital........................................ $ 21,019 $ 19,428
Warrants............................................. 8,244 8,244
Warrants subscription receivable..................... (4,918) (6,315)
Retained earnings.................................... 21,363 26,111
Other comprehensive loss ............................ (764) (2,106)
---------- ----------
$ 44,944 $ 45,362
========== ==========
</TABLE>
Under U.S. GAAP, the Company would record in paid-up capital an amount
equal to the proceeds attributable to Warrants as determined at the time of
their issuance along with an offsetting contra equity account, "Warrant
subscription receivable". Under Cdn. GAAP, the offsetting amount has been
recorded as a reduction in retained earnings.
8
<PAGE> 11
9. SUBSEQUENT EVENT
The Company entered into a definitive Merger Agreement (the "Merger
Agreement") dated as of July 25, 1999 with Fuisz Technologies Ltd.
("Fuisz"). Pursuant to the terms of the Merger Agreement, the Company and
Fuisz have agreed to enter into a two-stage transaction consisting of cash
of approximately $75.6 million and stock of approximately $78.6 million
that values Fuisz's shares at $7.00 per share, or approximately $154.2
million, based on the closing sale price of the shares of Biovail on July
23, 1999.
The Board of Directors of the Company and Fuisz have approved the
transaction. The consummation of the merger is subject to certain customary
conditions, including approval by the shareholders of Fuisz, compliance
with the Hart-Scott Rodino Antitrust Improvements Act, and certain other
regulatory filings and approvals. The transaction is expected to close in
the fourth quarter of 1999 and will be accounted for by the Company using
the purchase method of accounting in accordance with the Canadian and U.S.
GAAP.
9
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(ALL DOLLAR AMOUNTS ARE EXPRESSED IN U.S. DOLLARS)
OVERVIEW
Biovail Corporation International ("Biovail" or the "Company") derives its
revenues from (i) developing and licensing oral controlled release products
using its proprietary drug delivery technologies; (ii) manufacturing such
products for sale to licensees and wholesalers; and (iii) providing
pharmaceutical contract research services to third parties.
RESULTS OF OPERATIONS
Comparison of six months ended June 30, 1999 and June 30, 1998
Revenue for the first six months of 1999 was $64.4 million compared to $47.1
million in the comparable period in 1998. The increase was primarily due to an
increase in product sales and royalty and licensing revenues. Net income
increased 17.1% to $20.4 million or $0.83 per share in the first six months of
1999 from $17.4 million or $0.65 per share in the comparable period in 1998.
Earnings per share have been calculated using the weighted average number of
common shares outstanding during the period.
REVENUE
Product sales were $37.5 million for the first six months of 1999 as compared to
$28.8 million in the comparable period in 1998. In 1999 revenues were generated
primarily on sales of Tiazac(R) to Forest Laboratories ("Forest") for the U.S.
market, Canadian market sales of Tiazac(R) by the Company's Crystaal Division
("Crystaal") and the product launch shipments of the Company's generic version
of Verelan and Crystaal's launch of Brexidol, Retavase and Celexa.
Research and development revenue was $15.4 million in the first six months of
1999, as compared to $12.0 million in the comparable period in 1998. The
increase was primarily due to a record level of contract development activity
for third parties at the Company's Contract Research Division and research and
development work relating to the development of branded products on behalf of
Intelligent Polymers Limited ("IPL").
Net royalty and licensing revenue was $11.5 million in the first six months of
1999, as compared to $6.4 million in the comparable period in 1998. The increase
is primarily a result of increased royalty revenues from sales of Tiazac(R) in
the U.S. market and product licensing fees received in the first quarter of 1999
related to the Company's agreement with Mylan with respect to Verelan.
10
<PAGE> 13
COST OF GOODS SOLD AND GROSS MARGINS
The cost of goods sold as a percentage of product sales decreased to 34% in the
first six months of 1999 as compared to 42% in the comparable period in 1998.
Gross margins in 1999 on product sales for the first six months were 66% as
compared to 58% for the first six months of 1998. The Company's gross margins
are impacted by product sales price, product mix, manufacturing volumes and
manufacturing costs. The increase in gross margins was due to the impact of
higher margins on new products and a higher level of Tiazac(R) trade product
shipments.
RESEARCH AND DEVELOPMENT
Research and development expenses were $11.8 million for the first six months of
1999 as compared to $8.1 million in the comparable period in 1998. The increased
spending reflected the increased level of research and development activity on
branded generic products being developed on behalf of IPL, work related to the
development of ANDA products and other activities for third party customers.
SELLING, GENERAL AND ADMINISTRATIVE
Selling general and administrative expenses were $12.6 million in the first six
months of 1999 compared to $8.5 million in the comparable period in 1998. The
increase was primarily a result of increased sales and marketing expenses
related to the launch of Brexidol, Retavase and Celexa by Crystaal in Canada and
a higher level of corporate activities.
OPERATING INCOME
Operating income increased to $27.1 million for the first six months of 1999
compared to $18.5 million for the comparable period in 1998. Segment operating
income for the first six months of 1999, before unallocated selling, general and
administrative expenses, was $29.7 million compared to $20.1 million in 1998. Of
the 1999 total, product sales accounted for $15.8 million compared to $10.8
million in the previous year. This income relates primarily to the increased
Tiazac(R) sales and the impact of new product launches for the Canadian market.
The research and development segment accounted for $2.6 million in 1999 compared
to $3.0 million in 1998, which included contribution to margins in respect of
milestones attained under the Teva development agreement. Royalty and licensing
activities generated segment operating income of $11.3 million in 1999, compared
with $6.3 million in 1998. This increase primarily relates to higher Tiazac(R)
Royalties and the licensing agreement with Mylan with respect to Verelan.
INTEREST
Net interest expense was $5.4 million in the first six months of 1999 compared
to $157,000 in 1998. The increase was primarily due to the interest expense
associated with the $125 million U.S. Dollar Senior Notes bearing interest at 10
7/8%, which the Company issued in November, 1998.
11
<PAGE> 14
INCOME TAXES
Income taxes in the first six months of 1999 were $1.3 million compared to $1.0
million in 1998. The Company's tax provision is reflective of the geographic
sources of income at the appropriate rates within each tax jurisdiction. The
benefit of tax losses in the Canadian entity has not been recognized for
accounting purposes.
NET INCOME
Net income increased by 17.1% to $20.4 million for the first six months of 1999
as compared to $17.4 million in the comparable period in 1998.
EBITDA
For the reasons set forth above EBITDA, which is defined as earnings before
interest, taxes, depreciation and amortization, increased by $9.4 million or 45%
to $30.3 million for the first six months of 1999 from $20.9 million in the
comparable period in 1998. The ratio of total debt at June 30, 1999 to EBITDA
for the six months ended as of June 30, 1999 was 5.2:1 compared to 7.1:1 in
1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and short-term deposits of $86.4 million at June 30, 1999,
as compared to $78.3 million at December 31, 1998. At June 30, 1999, working
capital was $113.3 million compared to $115.3 million at December 31, 1998,
which represented a working capital ratio of 4.7: 1 as compared to 6.1: 1,
respectively.
Cash flow from operating activities (after adding back non-cash charges) was
$34.3 million for the first six months of 1999 as compared to $26.7 million in
the comparable period in 1998. Cash requirements for non-cash operating items
decreased for the first six months of 1999 and were primarily attributable to a
decrease in accounts receivable and an increase in customer prepayments.
Investing activities in the first six months of 1999 totaled $4.6 million and
related primarily to capital asset additions of $2.8 million and the acquisition
of product rights, primarily by Crystaal, totaling $1.8 million. In the
comparable period in 1998, investing activities totaled $24.8 million of which
the majority related to the acquisition of the royalty interest from Galephar of
$15 million, long-term investments of $7.5 million and additions to capital
assets of $2.2 million.
Net cash used in financing activities was $21.8 million for the first six months
of 1999 as compared to net cash generated of $10.7 million in the comparable
period in 1998. The cash utilization for the first six months of 1999 reflects
the repurchase of common shares in the amount of $23.6 million the repayment of
long-term debt of $300,000, offset in part by the issuance of share capital
primarily on the exercise of stock options of $2.1 million. In the comparable
period in 1998, cash generated was a result of a net increase of $6.9 million in
long-term debt and $3.9 million from the issuance of shares on the exercise of
stock options.
12
<PAGE> 15
Exchange rate changes in foreign cash balances resulted in an increase in cash
of $117,000 in the first six months of 1999 as compared to a reduction of cash
of $31,000 in the comparable period in 1998.
As a result of the foregoing, we had positive cash flow of $8.1 million for the
six months of 1999 compared to $12.6 million in 1998.
Total long-term debt (including current portions thereof) was $126.6 million as
at June 30, 1999 compared to $126.8 million at December 31, 1998 resulting in a
debt to equity ratio of 3.0:1 and 2.9:1, respectively. Long-term debt is
comprised of $125 million U.S. Senior Notes and the balance of a non-interest
bearing government loan.
We believe we have adequate capital and sources of financing to support our
existing ongoing operational requirements. As discussed below, the Company has
entered into a merger agreement with Fuisz Technologies Ltd. ("Fuisz") which if
completed, could increase our cash requirements. We intend to finance these cash
requirements through a combination of cash provided by existing operations, new
banking facilities, or by means of capital financing. Furthermore, we believe we
will be able to obtain long-term capital, if necessary, to support our continued
growth objectives. There can be no assurance, however, that these financial
resources will be available on acceptable terms and will be sufficient to
sustain our longer-term growth objectives.
We and our subsidiaries generate revenue and expenses primarily in U.S. and
Canadian dollars. In the first six months of 1999, revenue was generated in the
following proportions: 89% in U.S. dollars, 11% in Canadian dollars. In
addition, expenses were incurred in the following proportions: 68% in U.S.
dollars, and 32% in Canadian dollars. We do not believe that our exposure to
foreign currency exchange risk is significant because of the relatively minor,
and diminishing, proportion of Canadian dollar to U.S. dollar denominated
transactions. We have not historically utilized foreign currency hedging
instruments.
Inflation has not had a material impact on the Company's operations.
ACQUISITION
We have entered into a definitive Merger Agreement (the "Merger Agreement")
dated as of July 25, 1999 with Fuisz. Pursuant to the terms of the Merger
Agreement, the Company and Fuisz have agreed to enter into a two-stage cash and
stock transaction that values Fuisz's shares at approximately $154 million,
based on the closing sale price of the shares of Biovail on July 23, 1999. The
details of the purchase are described below:
On July 25, 1999, Biovail, Fuisz and ABCI Acquisition Sub. Corporation (the
"Purchaser"), a Delaware corporation and an indirect wholly-owned subsidiary of
Biovail, entered into the Merger Agreement pursuant to which Biovail agreed to
cause the Purchaser to promptly commence an offer (the "Offer") to purchase up
to 6,585,225 of the outstanding shares of common stock of Fuisz at a purchase
price of U.S. $7.00 per share, net to the seller in cash. According to
information provided by Fuisz to the Purchaser, there were 22,030,723 shares of
13
<PAGE> 16
common stock of Fuisz outstanding as of July 25, 1999. The Purchaser and its
affiliates beneficially own 4,209,829 of such shares. Accordingly, if the
Purchaser purchases 6,585,225 shares of Fuisz pursuant to the Offer, Biovail and
its affiliates will own, beneficially, approximately 49% of the outstanding
shares of Fuisz.
The Merger Agreement further provides, among other things, that, after the
purchase of the shares of Fuisz pursuant to the Offer and subject to the
satisfaction or waiver of certain conditions as set forth in the Merger
Agreement, including the receipt of Fuisz shareholder approval, the Purchaser
will be merged with and into Fuisz (the "Merger"), with Fuisz surviving the
Merger as a wholly-owned subsidiary of Biovail.
Pursuant to the terms of the Merger, each issued and outstanding share of Fuisz
immediately prior to the effective time of the Merger (other than shares held by
Biovail, the Purchaser or any direct or indirect wholly-owned subsidiary of
Biovail) will be converted into the right to receive a fraction of a common
share of Biovail based on an exchange ratio determined as follows:
(i) if the Average Trading Price (as hereinafter defined) of a common
share of Biovail is less than $45.00, the exchange ratio shall be
0.1556;
(ii) if the Average Trading Price of a share of Biovail is greater than or
equal to $45.00, but less than or equal to $58.625, the exchange ratio
shall equal a fraction (rounded to the nearest ten thousandth)
determined by dividing $7 by the Average Trading Price of a share of
Biovail;
(iii) if the Average Trading Price of a share of Biovail is greater than
$58.625 but less than or equal to $62.810, the exchange ratio shall
equal 0.1194; and
(iv) if the Average Trading Price is greater than $62.810, the exchange
ratio shall equal a fraction (rounded to the nearest ten-thousandth)
determined by dividing $7.50 by the Average Trading Price of a share
of Biovail.
For purposes of the Merger Agreement, Average Trading Price is defined as a
number equal to the average of the daily closing prices per common share of
Biovail on the New York Stock Exchange (the "NYSE") Composite Transactions
Reporting System, as reported in The Wall Street Journal for the fifteen trading
days ending on the date immediately prior to the second full NYSE trading day
immediately preceding the closing day.
Upon the successful completion of the acquisition, we may need additional funds
to finance the operating activities of Fuisz and to pay certain liabilities of
Fuisz consisting of the $75 million Convertible Subordinated Debentures, which
may become payable.
The acquisition will be accounted for by the Company using the purchase method
of accounting in accordance with Canadian and U.S. GAAP.
14
<PAGE> 17
YEAR 2000 COMPLIANCE
We continue to work actively on our Year 2000 program. At the end of July, 1999
most of our key systems and technologies were Year 2000 ready with the remainder
scheduled to be ready in all material respects by the end of the third quarter
of 1999, which is prior to any anticipated impact on our operating systems. The
total cost of the Year 2000 project is estimated at $500,000 which is being
funded through operating cash flow. To date, we have incurred approximately
$450,000, related to the assessment of and preliminary efforts on our Year 2000
project and the development of a contingency plan. Approximately 50% of all cost
associated with the Year 2000 project have been capitalized and will be
amortized in accordance with company policy. The balance will be expensed as
incurred.
We utilize enterprise resource planning systems in the operation of our core
business functions. In conjunction with third party consultants, substantial
efforts have been made to test all components of the enterprise resource
planning system for Year 2000 compliance. The evaluation of test results and any
required remediation will be completed by the end of the third quarter of 1999.
We have identified and contacted key suppliers, partners and collaborators to
determine their stage of readiness for the Year 2000. Despite our best efforts,
risks of third party compliance are not directly within the Company's control
and are difficult to assess.
To avoid manufacturing operations disruptions and product quality issues through
failures of equipment or environmental systems, we have an inventory of all the
equipment and software applications that we use in our operations that could be
impacted in a material way by the Year 2000 issue. Any equipment identified as
being susceptible to the Year 2000 problem will be retired from operations.
The scope of our contingency plan in the event of Year 2000 difficulties
includes environmental systems, computer systems, manufacturing equipment and
the supply of goods and services. The contingency plan for each location within
the Company will be completed by the end of the third quarter of 1999.
We believe that we are taking the necessary steps to resolve the Year 2000
issues and are pleased with our programs and progress to date. Due to the
general uncertainty inherent in the Year 2000 conversion, particularly related
to the readiness of other parties, it is not possible to determine with
certainty at this time whether the Year 2000 calendar change will have a
material impact on the Company.
FORWARD - LOOKING STATEMENTS
To the extent any statements made in this report contains information that is
not historical, these statements are essentially forward - looking. As such,
they are subject to risks and uncertainties, including the difficulty of
predicting FDA and TPP 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, 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.
15
<PAGE> 18
BIOVAIL CORPORATION INTERNATIONAL
PART II - OTHER INFORMATION
1. OPERATIONAL INFORMATION
The press releases issued by the Company subsequent to the filing of SEC
form 6-K on May 27, 1999 are attached as the following exhibits:
a) On June 30, 1999, the Company announced it had received tentative
approval for its generic versions of Adalat CC.
b) On July 2, 1999, the Company announced it had acquired from
Spectral Diagnostics Inc. the exclusive rights to market
Spectral's Cardiac STATus(TM) in Canada.
c) On July 26, 1999, the Company and Fuisz Technologies Ltd.
announced that they had entered into a definitive merger
agreement for Biovail to acquire Fuisz in a cash and stock
transaction.
d) On July 28, 1999, the Company announced record 1999 second
quarter and year-to-date financial results.
2. LEGAL PROCEEDINGS
For detailed information concerning legal proceedings, reference is made to
Note 16 in the financial statement contained as part hereof and to the
Annual Report on Form-20F for the year ended December 31, 1998.
3. The material issued by the Company to shareholders are attached as the
following exhibits:
e) The 1999 First Quarter Report to shareholders.
f) The 1999 Second Quarter Report to shareholders.
4. Reporting issued to Canadian Security Administrators and Stock Exchanges
are attached as the following exhibits:
g) Form 27 - Material Change Report.
16
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Biovail Corporation International
August 27, 1999 By /s/John R. Miszuk
-----------------
John R. Miszuk
Vice President, Controller
17
<PAGE> 1
LOGO
CONTACT: Eugene Melnyk
Chairman of the Board
Bob Podruzny
President
(416) 285-6000
FOR IMMEDIATE RELEASE:
* BIOVAIL RECEIVES GENERIC ADALAT CC TENTATIVE APPROVAL *
Toronto, Canada, June 30th, 1999 - Biovail Corporation International (NYSE, TSE:
BVF) today announced that it has received tentative approval for its 30mg and
60mg generic versions of Adalat CC (nifedipine) from the United States Food and
Drug Administration ("FDA"). Adalat CC is indicated for the treatment of
hypertension and is marketed by Bayer Corporation. Sales of approximately $357
million were achieved in 1998 for Adalat CC, of which the 60mg strength
accounted for approximately 45% and the 30mg strength accounted for 35% of
sales, respectively.
Biovail was the first company to file an abbreviated new drug application
("ANDA") with the FDA for the 60mg strength of Adalat CC and will be entitled to
180 days of marketing exclusivity. A competitor was the first to file for the
30mg strength and that product has received tentative FDA approval. Accordingly,
Biovail will be able to launch its 30mg strength of Adalat CC upon expiry of
the competitors exclusivity.
Market introduction of Biovail's 60mg and 30mg strengths, as well as the
competitors 30mg strength will depend upon the settlement of legal and patent
issues with Bayer. Upon introduction, Biovail's generic version of Adalat CC
will be marketed in the US by Teva Pharmaceuticals USA Inc., one of the premier
marketers of generic products in the country.
- more -
BIOVAIL CORPORATION INTERNATIONAL
2488 DUNWIN DRIVE, MISSISSAUGA, ONTARIO, CANADA L5L 1J9
TEL (416) 285-6000 FAX (416) 285-6499
<PAGE> 2
Eugene Melnyk, Chairman of the Board, commented that, "the approval of
Adalat CC is an exciting milestone achievement for Biovail and is an added
demonstration of the scientific and developmental capability of the company. In
addition to Adalat CC, we also have our generic versions of Cardizem CD,
Procardia XL, Voltaren SR and Dilacor XR awaiting FDA approval and expect to
receive these approvals in due coarse."
Biovail Corporation International is an international full-service
pharmaceutical company, engaged in the formulation, clinical testing,
registration and manufacture of drug products utilizing advanced drug delivery
technologies.
"Safe Harbor" statement under the Private Securities Litigation Reform Act of
1995.
To the extent any statements made in this release contain information that
is not historical, these statements are essentially forward looking and are
subject to risks and uncertainties, including the difficulty of 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, fluctuations in operating results and other risks
detailed from time to time in the Company's filings with the Securities and
Exchange Commission.
<PAGE> 1
LOGO
CONTACT: Eugene Melnyk
Chairman of the Board
Bob Podruzny
President
(416) 285-6000
FOR IMMEDIATE RELEASE:
*BIOVAIL ACQUIRES EXCLUSIVE RIGHTS TO MARKET SPECTRAL'S CARDIAC
STATus(TM) IN CANADA*
TORONTO, Canada, July 2nd, 1999 - Biovail Corporation International (NYSE, TSE:
BVF) today announced that it has acquired from Spectral Diagnostics Inc.
(NASDAQ: DIAGF, TSE: SDI) the exclusive rights to market Spectral's Cardiac
STATus(TM) in Canada. Cardiac STATus(TM), a rapid, point of care diagnostic
test, assists in the early identification of patients with heart attacks or
other Acute Coronary Syndromes.
Each year, approximately 750,000 Canadians go to hospital emergency
departments complaining of chest pain. In a resource challenged environment such
as the emergency department, early detection of Acute Myocardial Infarction
(AMI) is pivotal in determining treatment options, the timely commencement of
which can save lives. Cardiac STATus(TM) will be marketed by Biovail's Canadian
marketing division, Crystaal, complemented with selling and implementation
support by Spectral.
In 1998 Crystal entered into an exclusive distributorship of Retavase(TM)
(reteplase -rPA) in Canada with Centocor Inc. Retavase is a fibrinolytic agent
used to treat patients who suffer from heart attacks. Rolf Reininghaus,
President of Crystaal, commented "The addition of Spectral's Cardiac STATus(TM)
product line provides a strong synergy with Retavase and a strategic advantage
in the Acute Coronary Syndromes market. We are now poised to become the market
leader in this rapidly growing 50 million dollar market segment."
- more -
BIOVAIL CORPORATION INTERNATIONAL
2488 DUNWIN DRIVE, MISSISSAUGA, ONTARIO, CANADA L5J 1J9
TEL (416) 285-6000 FAX (416) 285-6499
<PAGE> 2
Crystaal will begin selling Cardiac STATus(TM) in July 1999. Crystaal's
hospital and specialist group is currently marketing Tiazac(R), Biovail's once
daily diltiazem formulation indicated for angina and high blood pressure,
Retavase(TM), for the treatment of heart attack, and has secured the exclusive
marketing rights to Corlopam(TM), an antihypertension agent for in-hospital use.
Other products marketed by Crystaal consist of Brexidol(TM), a once daily
analgesic product, and Celexa(TM) which is co-promoted with H. Lundbeck A/S of
Copenhagen, Denmark for the treatment of depression. Crystaal also has the
Canadian marketing rights for d-methylphenidate, a chiral preparation for the
treatment of Attention Deficit Hyperactivity Disorder.
Biovail Corporation International is an international full-service
pharmaceutical company, engaged in the formulation, clinical testing,
registration and manufacture of drug products utilizing advanced drug delivery
technologies.
"Safe Harbor" statement under the Private Securities Litigation Reform Act of
1995.
To the extent any statements made in this release contain information that is
not historical, these statements are essentially forward looking and are subject
to risks and uncertainties, including the difficulty of 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, fluctuations in operating results and other risks detailed from
time to time in the company's filing with the Securities and Exchange
Commission.
<PAGE> 1
LOGO
CONTACT: Eugene Melnyk
Chairman of the Board
Robert Podruzny
President
(416) 285-6000
Web Page: www.biovail.com
Investor Relations e-mail:
[email protected]
FOR IMMEDIATE RELEASE:
*BIOVAIL TO ACQUIRE FUISZ TECHNOLOGIES*
Acquisition to Expand Biovail's Pipeline of Products and Delivery Platforms.
TORONTO, CANADA/CHANTILLY, VIRGINIA, July 26, 1999--Biovail Corporation
International (NYSE, TSE: BVF) ("Biovail") and Fuisz Technologies Ltd. (Nasdaq:
FUSE) ("Fuisz") today announced that they have entered into a definitive Merger
Agreement for Biovail to acquire Fuisz in a two-stage cash and stock transaction
that values Fuisz at $7.00 per share, or approximately $154 million, based on
Biovail's closing share price of $58.625 on July 23, 1999. Fuisz has outstanding
debt of approximately $91 million, for a total transaction value of
approximately $245 million.
Under the terms of the agreement, which has been approved by the Boards of
Directors of both companies, Biovail will promptly commence a cash tender offer
for a number of the outstanding common shares of Fuisz, which will result in
Biovail owning 49% of the outstanding common shares of Fuisz. Upon completion of
the cash tender, the remaining outstanding common shares of Fuisz will be
exchanged for Biovail common shares in the ratio of 1 common share of Fuisz for
0.1194 common share of Biovail (the "Exchange Ratio"), subject to adjustment as
provided in the Merger Agreement. The merger is subject to approval by the
shareholders of Fuisz, expiration of the required waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 and other customary
conditions.
- more -
BIOVAIL CORPORATION INTERNATIONAL
2488 DUNWIN DRIVE, MISSISSAUGA, ONTARIO, CANADA L5L 1J9
TEL (416) 285-6000 FAX (416) 285-6499
<PAGE> 2
Biovail currently beneficially owns approximately 19.2% of the outstanding
common shares of Fuisz.
The acquisition will be accounted for by Biovail using the purchase method
of accounting and will reflect a one-time charge for the acquisition of
in-process research and development as determined through independent assessment
and valuation. Fuisz has advised Biovail that it expects its results for the
fiscal quarter ended June 30, 1999 to be significantly below market
expectations. The transaction is expected to be neutral to Biovail's earnings in
1999 and accretive in 2000. It is expected that the transaction will close in
the fourth quarter of 1999.
Eugene Melnyk, Chairman of the Board of Biovail, commented, "The
acquisition of Fuisz allows Biovail to significantly expand its pipeline of
products and drug delivery platforms. The microsphere technology and rapid
dissolving formulations developed by Fuisz provide exciting potential for
application on a wide array of drugs that will benefit from Fuisz's improved
controlled release and taste masking technologies. We are confident that the
technology platforms developed by Fuisz, in combination with those of Biovail,
provide us with the foundation and leverage for a very broad portfolio of
exciting applications."
Dr. Richard Fuisz, Chairman of the Board of Fuisz Technologies commented,
"The combination with Biovail should ultimately allow the shareholders of Fuisz
to attain the level of success that befits the development of this extremely
strong technological base. I have confidence that Eugene Melnyk will lead the
way to substantive added value to our shareholders."
Donaldson, Lufkin & Jenrette acted as financial advisor to Biovail and
Warburg Dillon Reed LLC acted as financial advisor to Fuisz.
Fuisz Technologies Ltd. is engaged in the development, manufacture and
commercialization of a wide variety of pharmaceutical and healthcare products
which utilize its proprietary CEFORM(TM), SHEARFORM(TM), and other drug delivery
technologies.
- more -
<PAGE> 3
Biovail Corporation International is an international full-service
pharmaceutical company engaged in the formulation, clinical testing,
registration and manufacture of drug products utilizing advanced drug delivery
technologies.
The statements in this press release may contain forward-looking statements
that involve a number of risks and uncertainties. In addition to the matters
described in this press release, the success of integration of operations, the
degree of dilution, the success of product approvals and marketing opportunities
for each company's products, and the success in discovery research as well as
other risks and uncertainties detailed from time to time in Securities and
Exchange Commission reports filed by Biovail and Fuisz may affect the actual
results achieved by Biovail and Fuisz. Biovail and Fuisz disclaim any intent or
obligation to update these forward-looking statements.
"Safe Harbor" statement under the Private Securities Litigation Reform Act of
1995.
To the extent any statements made in this release contain information that
is not historical, these statements are essentially forward looking and are
subject to risks and uncertainties, including the difficulty of predicting FDA
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, fluctuations in operating results and other risks detailed from
time to time in the company's filings with the Securities and Exchange
Commission.
<PAGE> 1
LOGO
CONTACT: Eugene Melnyk
Chairman of the Board
Robert Podruzny
President
John Miszuk
Vice President, Controller
(416) 285-6000
Web Page: www.biovail.com
Investor Relations e-mail:
[email protected]
FOR IMMEDIATE RELEASE:
*BIOVAIL REPORTS RECORD 1999 SECOND QUARTER AND YEAR TO DATE
FINANCIAL RESULTS*
TORONTO, Canada, July 28, 1999 - Biovail Corporation International (NYSE,
TSE:BVF) today reported record second quarter and six month financial results
for the period ended June 30, 1999.
Revenue for the second quarter and first half of 1999 increased by 43% and
37% respectively to $36.2 million and $64.4 million, compared to second quarter
1998 revenue of $25.3 million and first half 1998 revenue of $47.1 million.
Operating income for the quarter was $15.5 million and for the first half
of 1999 was $27.1 million, representing increases of 53% and 46% respectively
over the comparable periods of 1998.
Net income of $12.1 million or $0.49 per share was achieved in the quarter,
a 26% increase over the net income of $9.5 million or $0.36 per share earned in
1998. For the first half of 1999, net income of $20.4 million or $0.83 per share
was achieved, a 17% increase over $17.4 million or $0.65 per share in the
comparable period of 1998.
- More -
BIOVAIL CORPORATION INTERNATIONAL
2488 DUNWIN DRIVE, MISSISSAUGA, ONTARIO, CANADA L5L 1J9
TEL (416) 285-6000 FAX (416) 285-6499
<PAGE> 2
Revenue and income improvements in both the second quarter and first half
of 1999 are primarily attributable to increasing market penetration of
Tiazac(R), Biovail's prescription drug used in the treatment of angina and
hypertension, in the United States and Canada. In addition, the launch of a
generic version of the angina/hypertension drug Verelan in the United States and
the Canadian launches of Retavase, a fibrinolytic clot dissolving product,
Brexidol, used for the relief of pain and Celexa, an anti-depressant have all
contributed to the company's increasing revenue and income performance.
Eugene Melnyk, Chairman of the Board commented, "We are very pleased to
report that the strategic initiatives undertaken at Biovail historically are
today generating continually improving financial results. Our pipeline of
products is very strong and is expected to contribute significantly in the near
future. In addition, completion of the recently announced merger agreement with
Fuisz Technologies Ltd. will provide the combined operations with leading edge
drug delivery technology platforms that can be applied to a wide array of
important drugs. This acquisition provides Biovail greater leverage to take
advantage of the many exciting opportunities available to the company."
Biovail Corporation International is an international full-service
pharmaceutical company, engaged in the formulation, clinical testing,
registration and manufacture of drug products utilizing advanced drug delivery
technologies.
"Safe Harbor" statement under the Private Securities Litigation Reform Act of
1995.
To the extent any statements made in this release contain information that
is not historical, these statements are essentially forward looking and are
subject to risks and uncertainties, including the difficulty of predicting FDA
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, fluctuations in operating results and other risks detailed from
time to time in the company's filings with the Securities and Exchange
Commission.
<PAGE> 3
BIOVAIL CORPORATION INTERNATIONAL
CONSOLIDATED BALANCE SHEETS
(ALL DOLLAR AMOUNTS ARE EXPRESSED IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
----------- ------------
(UNAUDITED) (AUDITED)
<S> <C> <C>
ASSETS
Current
Cash and short-term deposits $ 86,358 $ 78,279
Accounts receivable 36,521 42,768
Inventories 15,199 10,542
Executive stock purchase plan loans 3,025 2,924
Deposits and prepaid expenses 3,264 3,357
----------- ----------
144,367 137,870
LONG-TERM INVESTMENTS 10,055 10,055
CAPITAL ASSETS, net 25,464 23,677
OTHER ASSETS, net 29,072 28,317
----------- ----------
$ 208,958 $ 199,919
=========== ==========
LIABILITIES
Current
Accounts payable $ 7,300 $ 12,244
Accrued liabilities 5,561 4,129
Income taxes payable 1,293 1,004
Customer prepayments 16,126 4,516
Current portion of long-term debt 751 653
----------- ----------
31,031 22,546
LONG-TERM DEBT 125,856 126,182
----------- ----------
156,887 148,728
----------- ----------
SHAREHOLDERS' EQUITY
Share capital 21,019 19,428
Warrants 8,244 8,244
Retained earnings 22,059 24,748
Cumulative translation adjustment 749 (1,229)
----------- ----------
52,071 51,191
----------- ----------
$ 208,958 $ 199,919
=========== ==========
</TABLE>
<PAGE> 4
BIOVAIL CORPORATION INTERNATIONAL
CONSOLIDATED STATEMENTS OF INCOME
(ALL DOLLAR AMOUNTS EXCEPT PER SHARE DATA ARE
EXPRESSED IN THOUSANDS OF U.S. DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUE
Product Sales $ 24,979 $ 17,296 $ 37,541 $ 28,763
Research and development 8,635 4,109 15,352 11,953
Royalty and licensing 2,550 3,850 11,502 6,428
----------- ----------- ----------- -----------
36,164 25,255 64,395 47,144
----------- ----------- ----------- -----------
EXPENSES
Cost of goods sold 7,848 6,867 12,887 12,009
Research and development 6,459 4,103 11,783 8,132
Selling, general and administrative 6,359 4,143 12,604 8,454
----------- ----------- ----------- -----------
20,666 15,113 37,274 28,595
----------- ----------- ----------- -----------
OPERATING INCOME 15,498 10,142 27,121 18,549
INTEREST EXPENSE (2,657) (89) (5,449) (157)
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES 12,841 10,053 21,672 18,392
PROVISION FOR INCOME TAXES 775 510 1,308 1,001
----------- ----------- ----------- -----------
NET INCOME $ 12,066 $ 9,543 $ 20,364 $ 17,391
=========== =========== =========== ===========
EARNINGS PER SHARE $ 0.49 $ 0.36 $ 0.83 $ 0.65
----------- ----------- ----------- -----------
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING 24,533,987 26,849,900 24,533,987 26,849,900
----------- ----------- ----------- -----------
</TABLE>
<PAGE> 5
BIOVAIL CORPORATION INTERNATIONAL
CONSOLIDATED STATEMENTS OF CASH FLOW
(ALL DOLLAR AMOUNTS ARE EXPRESSED IN THOUSANDS OF U.S. DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
1999 1998
---------- ----------
<S> <C> <C>
NET INFLOW (OUTFLOW) OF CASH RELATED
TO THE FOLLOWING ACTIVITIES
OPERATING
Net income for the period $ 20,364 $ 17,391
Depreciation and amortization 3,154 2,346
---------- ----------
23,518 19,737
Change in non-cash operating items 10,771 6,966
---------- ----------
34,289 26,703
---------- ----------
INVESTING
Additions to capital assets, net (2,785) (2,235)
Executive stock purchase plan loans 31 116
Acquisition of product rights (1,811) -
Acquisition of royalty interest - (15,000)
Increase in other assets - (170)
Long-term investments - (7,500)
---------- ----------
(4,565) (24,789)
---------- ----------
FINANCING
Acquisition of share capital (23,550) -
Issuance of share capital 2,088 3,858
Reduction in other long-term debt (300) (7,840)
Increase in other long-term debt - 14,706
---------- ----------
(21,762) 10,724
---------- ----------
Effect of exchange rate changes on cash 117 (31)
---------- ----------
INCREASE IN CASH 8,079 12,607
---------- ----------
CASH AND SHORT-TERM
DEPOSITS, BEGINNING OF PERIOD 78,279 8,275
---------- ----------
CASH AND SHORT-TERM
DEPOSITS, END OF PERIOD $ 86,358 $ 20,882
========== ==========
</TABLE>
<PAGE> 1
BIOVAIL
CORPORATION INTERNATIONAL
LOGO
INTERIM REPORT 1999
FIRST QUARTER
<PAGE> 2
DEAR FELLOW SHAREHOLDER
I am pleased to report that the first quarter of 1999 has been an excellent one
for Biovail. The company has begun the year once again posting record quarterly
financial results. Many factors contributed to these results, which continue to
build on our achievements of last year. In addition to steady progress in our
core business operations and increasing sales across our portfolio, the first
quarter was marked by a significant international licensing agreement and
several exciting milestones in our Canadian marketing endeavours.
TIAZAC(R) EXPANSION
In 1998, Biovail achieved record production and shipment levels of Tiazac(R),
the Company's once-daily diltiazem medication. This was driven by steady market
growth in the US for the hypertension indication, as well FDA approval for the
treatment of angina and the introduction of a 420mg dosage - making Tiazac(R)
the only 420mg once daily diltiazem product available in the large US market.
In the first quarter of this year, Tiazac(R)'s potential in Canada was
bolstered tremendously by its inclusion in the Ontario Drug Benefit Formulary
(ODBF). Crystaal, Biovail's Canadian marketing division, had restricted access
to Ontario, which represents 42% of the Cdn. $123 million diltiazem market in
Canada. With the ODBF listing, market share is expected to grow significantly.
CITALOPRAM JOINT DEVELOPMENT AND CO-PROMOTION
In January, Biovail announced an exciting agreement to develop a novel
controlled release formulation of the leading anti-depressant Citalopram. As
part of a multi-faceted deal concluded with Citalopram's innovator, H. Lundbeck
A/S of Denmark, Biovail will develop, manufacture and supply a controlled
release version of Citalopram for commercialization by Lundbeck and its
licensees. The deal also calls for Crystaal to co-promote with Lundbeck the
current version of Citalopram in Canada.
<PAGE> 3
Clinical depression affects countless people around the world, including
one in ten Americans, and is associated with greater levels of physical and
social impairment than other chronic conditions, including heart disease.
Citalopram, a selective serotonin reuptake inhibitor, is marketed in more
than 60 countries under the brand names Celexa, Cipramil and Seropram. The
worldwide annual market for this class of anti-depressants is estimated to be in
excess of $7 billion, with an annual growth rate of 17%.
Citalopram has been shown to have an improved side effect profile and lower
incidence of drug interactions compared to many other serotonin reuptake
inhibitors. It is currently the best selling anti-depressant in 13 countries,
including eight in Europe, where its sales are growing at the rate of 28%
annually.
CRYSTAAL PORTFOLIO EXPANSION
The first quarter of 1999 has been an extremely busy one for Crystaal, the
Company's Canadian marketing operation. In February, Health Canada's Therapeutic
Products Programme approved the marketing of Celexa (Citalopram) for the
symptomatic relief of depression. Under the terms of the recently completed
agreement, Crystaal will co-promote Celexa in collaboration with Lundbeck
Canada. Crystaal will concentrate its efforts on primary care physicians, where
their strong sales network is already well established. The Canadian
anti-depressant market is valued at approximately US$300 million annually. In
addition, it is estimated that only a third of the 20-25% of Canadians who
suffer from depression presently receive appropriate treatment.
Also in the first quarter, Crystaal received marketing approval in Canada
for Brexidol, a unique product for the treatment of mild to severe pain,
including sports injuries, post-operative pain, primary dysmenorrhea, dental
pain and headache. Brexidol, utilizes the Nobel Prize winning Host-Guest
chemistry system, in-licensed from Chiesi Farmaceutici S.p.a.
<PAGE> 4
Brexidol will compete in the Canadian pain and anti-inflammatory product
market, valued at approximately US$150 million annually. The product has been
marketed in Europe for nearly 10 years and has established an excellent safety
and efficacy record in over 20 million patients.
The addition of Celexa and Brexidol further enhances Crystaal's already
impressive portfolio of exciting products, which also includes: Tiazac(R),
Retavase, d-methylphenidate and Corlopam.
RECORD FINANCIAL RESULTS
Biovail marked the start of 1999 with record first quarter financial results.
Revenues for the first quarter of 1999 were $28.2 million, a 29% increase over
1998 first quarter revenues of $21.9 million. Operating income for the first
quarter was $11.6 million, a 38% improvement over 1998 first quarter figures of
$8.4 million. Net income for the first quarter of 1999 was $8.3 million, or
$0.34 per share, compared to net income of $7.8 million, or $0.29 share,
realized in the first quarter of 1998.
With this extremely positive start to 1999, and the continued progress in
our sales and product development activities, the Company is well positioned for
another excellent year.
On behalf of the Board, I would like to thank all of our employees for
their dedication and hard work, and our shareholders for their continued support
of our Company.
(signed) Eugene Melnyk
EUGENE MELNYK
Chairman of the Board
<PAGE> 5
consolidated balance sheets
(All dollar amounts are expressed in thousands of U.S. dollars)
<TABLE>
<CAPTION>
MARCH 31, December 31,
1999 1998
(Unaudited) (Audited)
----------- ---------
<S> <C> <C>
ASSETS
Current
Cash and short-term deposits $ 79,256 $ 78,279
Accounts receivable 41,383 42,768
Inventories 13,760 10,542
Executive loans 2,975 2,924
Deposits and prepaids 3,254 3,357
---------- ----------
140,628 137,870
LONG-TERM INVESTMENTS 10,055 10,055
CAPITAL 24,818 23,677
OTHER, net 27,769 28,317
---------- ----------
$ 203,270 $ 199,919
========== ==========
LIABILITIES
Current
Accounts payable $ 7,319 $ 12,244
Accrued liabilities 8,147 4,129
Income taxes payable 594 1,004
Customer prepayments 13,956 4,516
Current portion of long-term debt 733 653
---------- ----------
30,749 22,546
LONG-TERM DEBT 125,836 126,182
---------- ----------
156,585 148,728
---------- ----------
SHAREHOLDERS' EQUITY
Share capital 20,939 19,428
Warrants 8,244 8,244
Retained earnings 18,345 24,748
Cumulative translation adjustment (843) (1,229)
---------- ----------
46,685 51,191
---------- ----------
$ 203,270 $ 199,919
========== ==========
</TABLE>
<PAGE> 6
consolidated statements of income
(all dollar amounts except per share data
are expressed in thousands of U.S. dollars)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
(Unaudited) 1999 1998
- - - ----------- ---- ----
<S> <C> <C>
REVENUE
Product Sales $ 12,562 $ 11,467
Research and development 6,717 7,844
Royalty and licensing 8,952 2,578
------------ ------------
28,231 21,889
------------ ------------
EXPENSES
Cost of goods sold 5,039 5,142
Research and development 5,324 4,029
Selling, general and administrative 6,245 4,311
------------ ------------
16,608 13,482
------------ ------------
OPERATING INCOME 11,623 8,407
INTEREST INCOME (EXPENSE), net (2,792) (68)
------------ ------------
INCOME BEFORE INCOME TAXES 8,831 8,339
PROVISION FOR INCOME TAXES 533 491
------------ ------------
NET INCOME $ 8,298 $ 7,848
============ ============
EARNINGS PER SHARE $ 0.34 $ 0.29
============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 24,603,400 26,736,000
============ ============
</TABLE>
<PAGE> 7
consolidated statements of cash flows
(all dollar amounts data are expressed in thousands of U.S. dollars)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
(Unaudited) 1999 1998
- - - ----------- ---- ----
<S> <C> <C>
NET INFLOW (OUTFLOW) OF CASH RELATED
TO THE FOLLOWING ACTIVITIES
OPERATING
Net income for the period $ 8,298 $ 7,848
Depreciation and amortization 1,489 1,164
----------- -----------
9,787 9,012
----------- -----------
Changes in non-cash operating items:
(Increase) decrease accounts
receivable 1,466 (3,191)
(Increase) decrease inventory (3,030) (2,332)
(Increase) decrease deposits
& prepaid expenses 103 (78)
Increase (decrease) accounts
payable & accrued liabilities (383) 339
Increase (decrease) income
taxes payable (386) 135
Increase (decrease) customer
prepayments 9,440 4,511
----------- -----------
7,210 (616)
----------- -----------
16,997 8,396
----------- -----------
INVESTING
Additions to fixed assets, net (1,611) (1,207)
Executive stock purchase plan loans (52) 213
Acquisition of royalty interest - (15,000)
Long-term investments - (7,500)
----------- -----------
(1,663) (23,494)
----------- -----------
FINANCING
Acquisition of share capital (14,933) -
Issuance of share capital 1,424 3,660
Reduction in other long-term debt (300) (597)
Repayment of other long-term debt - 15,000
----------- -----------
(13,809) 18,063
----------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (548) 8
----------- -----------
INCREASE (DECREASE) IN CASH 977 2,973
----------- -----------
CASH, AND SHORT TERM DEPOSITS,
BEGINNING OF PERIOD 78,279 8,275
----------- -----------
CASH, AND SHORT TERM DEPOSITS,
END OF PERIOD $ 79,256 $ 11,248
=========== ===========
</TABLE>
<PAGE> 8
corporate information
BOARD OF DIRECTORS
Eugene Melnyk
Chairman of the Board
Biovail Corporation International
Bruce Brydon
Chief Executive Officer
Biovail Corporation International
Robert Podruzny
President and Chief Operating Officer
Biovail Corporation International
Kenneth Cancellara, Q.C.
Senior Vice President
General Counsel and Secretary
Biovail Corporation International
Rolf Reininghaus
Senior Vice President
Biovail Corporation International
President
Crystaal Division of Biovail Corporation International
Wilfred Bristow
Senior Vice President
Nesbitt Burns Inc.
Roger Rowan
President and Chief Operating Officer
Watt Charmichael Inc.
Robert Vujea
President
R&D Chemical Corporation
AUDITORS REGISTRARS AND TRANSFER AGENTS
Deloitte & Touche, CIBC Mellon Trust Company
Chartered Accountants Toronto, Ontario
Toronto, Canada
ChaseMellon
STOCKLISTING Shareholder Services
New York Stock Exchange New York, USA
Toronto Stock Exchange
Symbol: BVF
<PAGE> 9
shareholder information
Head office
Biovail Corporation International
2488 Dunwin
Drive
Mississauga, Ontario
Canada L5L 1J9
The Annual Meeting of Shareholders The annual meeting of shareholders will be
held at 10:00 a.m.Thursday, July 22, 1999 at the Royal York Hotel, Territories
Room, 100 Front Street, Toronto, Ontario.
How to Reach Us for More Information 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.
By mail:
Biovail Corporation International
2488 Dunwin Drive
Mississauga, Ontario
Canada L5L 1J9
By phone:
(416) 285-6000
By fax:
(416) 285-6499
By e-mail:
[email protected]
<PAGE> 10
BIOVAIL
CORPORATION INTERNATIONAL
2488 Dunwin Drive, Mississauga, Ontario, Canada L5L 1J9
<PAGE> 1
BIOVAIL
CORPORATION INTERNATIONAL
LOGO
INTERIM REPORT 1999
SECOND QUARTER
<PAGE> 2
DEAR FELLOW SHAREHOLDER
I am pleased to report that 1999 continues to be an excellent year for Biovail
Corporation, as we once again achieved record second quarter and year-to-date
financial results. These results are accompanied by significant progress in all
aspects of our operations. This sets the stage for continued significant growth
throughout the remainder of 1999 and well into the future.
TIAZAC(R)
The steady penetration of Tiazac(R), Biovail's once-daily diltiazem product,
continued in the U.S. market, bolstered by the first quarter introduction of a
420mg dosage strength. By the second quarter of this year, Tiazac(R) had
achieved a 16% share of the U.S. diltiazem market.
GENERIC VERELAN AND ADALATCC
Towards the end of the second quarter, Biovail announced the launch by our U.S.
marketing partner, Teva Pharma-ceuticals, of a generic version of Verelan, a
calcium channel blocker used in the treatment of hypertension.
Also, towards the end of the quarter, the Company received tentative
approval from the U.S. FDA for the 30mg and 60mg formulations of its generic
version of AdalatCC. Upon launch, Biovail will be entitled to 180 days of
marketing exclusivity for the 60mg dosage as the first generic formulation
filed. The launch of the 30mg dosage will follow the expiration of a similar
period of exclusivity held by another company. Total branded sales in the U.S.
of AdalatCC in 1998 were estimated at $357 million, with the 30mg dosage
accounting for 30% and the 60mg dosage accounting for 45%. Upon launch,
Biovail's generic version of AdalatCC will be marketed by Teva Pharmaceuticals.
CRYSTAAL EXPANSION
Crystaal, Biovail's Canadian sales and marketing division, continued its
impressive growth in the second quarter. Sales of Tiazac(R) continued to grow,
with the impact of the product's first quarter inclusion in the Ontario Drug
Benefit Formulary.
Along with Tiazac(R), Crystaal's portfolio includes the clot dissolving
agent Retavase; Brexidol, a unique pain control product with a variety of
indications including sports injuries, post-operative pain and dysmenorrhea; and
the recently-launched antidepressant Celexa, currently being co-promoted with
Lundbeck Canada. Sales activities continue to be extremely encouraging.
<PAGE> 3
In the second quarter, Crystaal's portfolio was strengthened by the
addition of Cardiac STATus(TM), a rapid point-of-care diagnostic test developed
to assist in the early identification of patients with acute myocardial
infarction (heart attacks). Each year, approximately 750,000 Canadians visit
emergency rooms complaining of chest pains. In the busy, often over-stressed ER
environment, early detection of heart attack is pivotal in determining treatment
and ultimately increasing survival. Under the terms of the agreement with
Spectral Diagnostics Inc., Crystaal will be the exclusive distributor of Cardiac
STATus(TM) in Canada. This product is a natural complement to Crystaal's
Retavase marketing effort and positions the Company to take a leading role in
the expanding $50 million a year Canadian Acute Coronary Syndromes market.
In addition, Crystaal has two products in final development phase for
Canadian regulatory submissions. These are Corlopam, in-licensed from Elan
Corporation and used for the in-hospital treatment of hypertension; and
d-methylphenidate, a chiral version of Ritalin, an attention deficit disorder
treatment licensed from Celgene Corporation.
PRODUCT PIPELINES
Product development continues on schedule on the Company's ANDA pipeline. Six
products are currently awaiting FDA approval in the U.S., including generic
versions of Cardizem CD, Procardia XL, Dilacor and Voltaren. Four products are
awaiting approval in Canada, including generic versions of Cardizem CD, Trental
and Verelan.
Excellent progress is also continuing in the NDA pipeline with the products
being developed by Intelligent Polymers, as well as the development of a
controlled release version of the best-selling antidepressant Celexa.
CONTRACT RESEARCH AND MANUFACTURING
Other areas of the Company also continue to grow significantly. Biovail's
Contract Research Division reported a 200% increase in second quarter
revenue, and a 100% revenue increase in the first six months compared to last
year. The clinic has recently been expanded to accommodate the increased
activity from its third party clients as well as contract work from Biovail and
Intelligent Polymers.
Manufacturing capacity is also being expanded in both Puerto Rico and
Manitoba in preparation for expected product approvals.
<PAGE> 4
RECORD FINANCIALS
Biovail reported record second quarter and first half financial results for
1999. Revenue for the second quarter and first half increased by 43% and 37%
respectively to $36.2 million and $64.4 million, compared to second quarter 1998
revenue of $25.3 million and first half 1998 revenue of $47.1 million. Operating
income for the second quarter was $15.5 million and for the first half of 1999
was $27.1 million, representing increases of 53% and 46% respectively over the
same periods in 1998. Net income for the second quarter was $12.1 million, or
$0.49 per share, compared to net income of $9.5 million, or $0.36 per share,
earned in the second quarter of 1998. For the first half of 1999, net income was
$20.4 million, or $0.83 per share, compared to $17.4 million, or $0.65 per
share, in the first half of 1998.
These excellent second quarter results, in combination with ongoing
exciting developments, keep Biovail solidly on track for another record setting
year.
On behalf of the Board, I would like to thank our shareholders for their
support, and everyone who has contributed to Biovail's continuing success.
(signed) Eugene Melnyk
EUGENE MELNYK
Chairman of the Board
<PAGE> 5
consolidated balance sheets
(All dollar amounts are expressed in thousands of U.S.dollars)
<TABLE>
<CAPTION>
JUNE 30, December 31,
1999 1998
(Unaudited) (Audited)
----------- ---------
<S> <C> <C>
ASSETS
CURRENT
Cash and short-term deposits $ 86,358 $ 78,279
Accounts receivable 36,521 42,768
Inventories 15,199 10,542
Executive stock purchase plan loans 3,025 2,924
Deposits and prepaid expenses 3,264 3,357
------------ -------------
144,367 137,870
LONG-TERM INVESTMENTS 10,055 10,055
CAPITAL ASSETS, net 25,464 23,677
OTHER ASSETS, net 29,072 28,317
------------ -------------
$ 208,958 $ 199,919
============ =============
LIABILITIES
CURRENT
Accounts payable $ 7,300 $ 12,244
Accrued liabilities 5,561 4,129
Income taxes payable 1,293 1,004
Customer prepayments 16,126 4,516
Current portion of long-term debt 751 653
------------ -------------
31,031 22,546
LONG-TERM DEBT 125,856 126,182
------------ -------------
156,887 148,728
============ =============
SHAREHOLDERS' EQUITY
Share capital 21,019 19,428
Warrants 8,244 8,244
Retained earnings 22,059 24,748
Cumulative translation adjustment 749 (1,229)
------------ -------------
52,071 51,191
------------ -------------
$ 208,958 $ 199,919
============ =============
</TABLE>
<PAGE> 6
consolidated statements of income
(All dollar amounts except per share data are
expressed in thousands of U.S.dollars)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
(Unaudited) 1999 1998
- - - ----------- ------------ -------------
<S> <C> <C>
REVENUE 36,164 25,255
EXPENSES
Cost of goods sold 7,848 6,867
Research and development 6,459 4,103
Selling,general and
administrative 6,359 4,143
------------ ------------
20,666 15,113
------------ ------------
OPERATING INCOME 15,498 10,142
INTEREST EXPENSE, net (2,657) (89)
------------ ------------
INCOME BEFORE INCOME TAXES 12,841 10,053
PROVISION FOR INCOME TAXES 775 510
------------ ------------
NET INCOME $ 12,066 $ 9,543
============ ============
EARNINGS PER SHARE $ 0.49 $ 0.36
============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 24,534,000 26,849,900
============ ============
SEGMENTED INFORMATION
REVENUE FROM EXTERNAL CUSTOMERS
Product sales $ 24,979 $ 17,296
Research and development 8,635 4,109
Royalty and licensing 2,550 3,850
------------ ------------
$ 36,164 $ 25,255
============ ============
SEGMENT OPERATING INCOME (LOSS)
Product sales $ 12,687 $ 7,219
Research and development 1,633 (410)
Royalty and licensing 2,524 3,871
Unallocated (1,346) (538)
------------ ------------
$ 15,498 $ 10,142
============ ============
</TABLE>
<PAGE> 7
consolidated statements of income
(All dollar amounts except per share data are
expressed in thousands of U.S.dollars)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
(Unaudited) 1999 1998
- - - ----------- ------------ ------------
<S> <C> <C>
REVENUE 64,395 47,144
EXPENSES
Cost of goods sold 12,887 12,009
Research and development 11,783 8,132
Selling,general and
administrative 12,604 8,454
------------ ------------
37,274 28,595
------------ ------------
OPERATING INCOME 27,121 18,549
INTEREST EXPENSE, net (5,449) (157)
------------ ------------
INCOME BEFORE INCOME TAXES 21,672 18,392
PROVISION FOR INCOME TAXES 1,308 1,001
------------ ------------
NET INCOME $ 20,364 $ 17,391
============ ============
EARNINGS PER SHARE $ 0.83 $ 0.65
============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 24,534,000 26,849,900
============ ============
SEGMENTED INFORMATION
REVENUE FROM EXTERNAL CUSTOMERS
Product sales $ 37,541 $ 28,763
Research and development 15,352 11,953
Royalty and licensing 11,502 6,428
------------ ------------
$ 64,395 $ 47,144
============ ============
SEGMENT OPERATING INCOME (LOSS)
Product sales $ 15,834 $ 10,837
Research and development 2,575 2,957
Royalty and licensing 11,277 6,294
Unallocated (2,565) (1,539)
------------ ------------
$ 27,121 $ 18,549
============ ============
</TABLE>
<PAGE> 8
consolidated statements of cash flows
(All dollar amounts are expressed in thousands of U.S. dollars)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
(Unaudited) 1999 1998
- - - ----------- ------------ ------------
<S> <C> <C>
NET INFLOW (OUTFLOW) OF CASH
RELATED TO THE FOLLOWING ACTIVITIES
OPERATING
Net income for the period $ 20,364 $ 17,391
Depreciation and amortization 3,154 2,346
------------ ------------
23,518 19,737
------------ ------------
Changes in non-cash operating items:
Decrease in accounts receivable 6,497 4,311
Increase in inventories (4,471) (1,893)
Decrease (increase) in deposits
and prepaid expenses 93 (249)
Decrease in accounts payable
and accrued liabilities (3,259) (880)
Increase in income taxes payable 301 437
Increase in customer prepayments 11,610 5,240
------------ ------------
10,771 6,966
------------ ------------
34,289 26,703
------------ ------------
INVESTING
Additions to capital assets,net (2,785) (2,235)
Executive stock purchase plan loans 31 116
Acquisition of product rights (1,811) -
Acquisition of royalty interest - (15,000)
Increase in other assets - (170)
Acquisition of long-term investments - (7,500)
------------ ------------
(4,565) (24,789)
------------ ------------
FINANCING
Acquisition of share capital (23,550) -
Issuance of share capital 2,088 3,858
Reduction in other long-term debt (300) (7,840)
Increase in other long-term debt - 14,706
------------ ------------
(21,762) 10,724
------------ ------------
EFFECT OF EXCHANGE RATE CHANGES
ON CASH 117 (31)
------------ ------------
INCREASE IN CASH 8,079 12,607
------------ ------------
CASH AND SHORT-TERM DEPOSITS,
BEGINNING OF PERIOD 78,279 8,275
------------ ------------
CASH AND SHORT-TERM DEPOSITS,
END OF PERIOD $ 86,358 $ 20,882
============ ============
</TABLE>
<PAGE> 9
shareholder information
Head office
Biovail Corporation International
2488 Dunwin Drive
Mississauga,Ontario
Canada L5L 1J9
How to Reach Us for More Information
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 or visit our web
site.
By mail:
Biovail Corporation International
2488 Dunwin Drive
Mississauga,Ontario
Canada L5L 1J9
By phone:
(416) 285-6000
By fax:
(416) 285-6499
By e-mail:
[email protected]
Website:
www.biovail.com
corporate information
STOCK LISTING REGISTRARS AND TRANSFER AGENTS
New York Stock Exchange CIBC Mellon Trust Company
Toronto Stock Exchange Toronto, Ontario
Symbol: BVF
ChaseMellon
Shareholder Services
New York, USA
To the extent any statements made in this report contains information that is
not historical, these statements are essentially forward-looking. As such, they
are subject to risks and uncertainties, including the difficulty of predicting
FDA and TPP 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, 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.
<PAGE> 10
BIOVAIL
CORPORATION INTERNATIONAL
2488 Dunwin Drive, Mississauga, Ontario, Canada L5L 1J9
Tel 416-285-6000 Fax 416-285-6499
<PAGE> 1
MATERIAL CHANGE REPORT
Form 27 - Securities Act (Ontario)
Form 27 - Securities Act (British Columbia)
1. Reporting Issuer
Biovail Corporation International
2488 Dunwin Drive
Mississauga, Ontario
L5L 1J9
2. Date of Material Change
July 25, 1999
3. Press Release
The press release prescribed by section 75(1) of the Securities Act
(Ontario) was filed through SEDAR on July 26, 1999.
4. Summary of Material Change
Biovail Corporation International ("Biovail") announced that they have
entered into a definitive merger agreement (the "Merger Agreement") dated
as of July 25, 1999 among Biovail, ABCI Acquisition Sub. Corporation (the
"Purchaser") and Fuisz Technologies Inc. ("Fuisz"). Pursuant to the terms
of the Merger Agreement, Biovail and Fuisz have agreed to enter into a
two-stage cash and stock transaction that values Fuisz's shares at
approximately US$154 million, based on the closing sale price of the shares
of Biovail on July 23, 1999.
Full Description of Material Change
On July 25, 1999, Biovail, Fuisz and ABCI Acquisition Sub. Corporation (the
"Purchaser"), a Delaware corporation and an indirect wholly-owned
subsidiary of Biovail, entered into a merger agreement (the "Merger
Agreement") pursuant to which Biovail agreed to cause the Purchaser to
promptly commence an offer (the "Offer") to purchase up to 6,585,225 of the
outstanding shares of common stock of Fuisz at a purchase price of US$7.00
per share, net to the seller in cash. According to information provided by
Fuisz to the Purchaser, there were 22,030,723 common shares of Fuisz
outstanding as of July 25, 1999. The Purchaser and its affiliates
beneficially own 4,209,829 of such shares. Accordingly, if the Purchaser
purchases 6,585,225 shares of Fuisz pursuant to the Offer, Biovail and its
affiliates will own, beneficially, approximately 49% of the outstanding
shares of Fuisz.
The Merger Agreement further provides, among other things, that, after the
purchase of the shares of Fuisz pursuant to the Offer and subject to the
satisfaction
<PAGE> 2
or waiver of certain conditions as set forth in the Merger Agreement, the
Purchaser will be merged with and into Fuisz (the "Merger"), with Fuisz
surviving the Merger as a wholly-owned subsidiary of Biovail.
Pursuant to the terms of the Merger, each issued and outstanding share of
Fuisz immediately prior to the effective time of the Merger (other than
shares held by Biovail, the Purchaser or any direct or indirect
wholly-owned subsidiary of Biovail) will be converted into the right to
receive a fraction of a common share of Biovail based on an exchange ratio
determined as follows:
(i) if the Average Trading Price (as hereinafter defined) of a
common share of Biovail is less than $45, the exchange ratio shall be
0.1556;
(ii) if the Average Trading Price of a share of Biovail is greater
than or equal to $45, but less than or equal to $58,625, the exchange
ratio shall equal a fraction (rounded to the nearest ten thousandth)
determined by dividing $7 by the Average Trading Price of a share of
Biovail;
(iii) if the Average Trading Price of a share of Biovail is greater
than $58.625 but less than or equal to $62.810, the exchange ratio
shall equal 0.1194; and
(iv) if the Average Trading Price is greater than $62.810, the
exchange ratio shall equal a fraction (rounded to the nearest
ten-thousandth) determined by dividing $7.50 by the Average Trading
Price of a share of Biovail.
For purposes of the Merger Agreement, Average Trading Price is defined as a
number equal to the average of the daily closing prices per common share of
Biovail on the New York Stock Exchange (the "NYSE") Composite Transactions
Reporting System, as reported in The Wall Street Journal for the fifteen
trading days ending on the date immediately prior to the second fully NYSE
trading day.
5. Reliance on Section 75(3) of the Act
Not applicable.
6. Omitted Information
Not applicable.
2
<PAGE> 3
7. Senior Officers
The senior officer of Biovail who is knowledgeable about this material
change is:
John Miszuk
Vice-President and Controller
(416) 285-6000
8. Statement of Senior Officer
The foregoing accurately discloses the material change referred to herein.
Dated this 10th day of August, 1999.
__________________________________
John Miszuk
Vice-President and Controller
3
