<PAGE>
INTERIM REPORT 2000
THIRD QUARTER REPORT
<PAGE>
DEAR FELLOW SHAREHOLDERS
I am pleased to report that the third quarter of 2000 has been an excellent, and
particularly exciting, one for Biovail. The Company once again reported record
financial results, both for the quarter and the first nine months of the year.
In addition, Biovail continued to achieve excellent growth in sales and moved
forward with new product launches and its clinical trial program. The most
exciting news, however, came on the business front. During the quarter, Biovail
implemented a key element of its long-term strategy with the purchase of DJ
Pharma, Inc. - a move that provides the Company with complete vertical
integration of its operations in North America.
DJ PHARMA
The purchase of DJ Pharma, Inc., a pharmaceutical marketing company based in San
Diego, California and Raleigh-Durham, North Carolina represents a significant
milestone for Biovail. This transaction provides the Company with critical
direct access to the huge United States pharmaceutical marketplace, and provides
an infrastructure and sales force for the marketing of Biovail branded products.
DJ Pharma currently employs approximately 300 sales representatives and a
professional management team, and generates significant sales revenues. It
currently markets branded respiratory, allergy and skin/soft tissue infection
products to high prescribing primary care physicians and pediatricians
throughout the U.S. Since its inception in 1998, DJ Pharma has realized
excellent growth.
The acquisition of this dynamic company builds on Biovail's stated strategy
of developing a high calibre U.S. sales operation to complement our Canadian
operation - Crystaal. It represents a major step towards maximizing the
profitability of Biovail's NDA branded product pipeline, as well as products
sourced through the newly formed Biovail Ventures Group.
PRODUCT SALES GROWTH
Sales continued to grow at record levels during the quarter.
Tiazac-Registered Trademark- continues to perform well, and has achieved a
22% share of the U.S. diltiazem market. The Company's generic versions of
Cardizem CD, Trental and Voltaren XR are also steadily gaining market share.
Especially encouraging are the sales of the generic versions of the
nonsteroidal anti-inflammatory Voltaren XR and the anti-hypertensive Adalat
CC 30mg, both launched this year in the U.S. by our marketing partner,
<PAGE>
Teva Pharmaceuticals. Published data already show a share of 53% and 24%
respectively within the total markets for these products.
The performance of Crystaal, our Canadian marketing division, continues to
improve quarter by quarter. With six products currently being marketed and four
more in the approval or late stage development process, Crystaal is well
positioned for steady growth.
In the United Kingdom, sales of Boots Healthcare International's Nurofen
Meltlets (the first commercial product using Biovail's Flash Dose-Registered
Trademark- technology) continue to grow, and the product has also been
launched in Australia. This success bodes well for the future launch of other
high volume Flash Dose-Registered Trademark- products.
NEW PRODUCTS
Late in the third quarter, Biovail received FDA approval for its generic version
of Procardia XL, a once-daily treatment for hypertension and angina with annual
U.S. sales of $461 million. The Biovail version is already in production, and
Teva Pharmaceuticals has successfully launched this product. Biovail's generic
version of Adalat CC 60mg, which was previously approved, will also be launched
immediately in the U.S. following the expiration of the 30 month Waxmann-Hatch
provision.
PRODUCT DEVELOPMENT
Towards the end of the quarter, the Company initiated Phase III clinical trials
of a controlled-release once daily version of Tramadol, a leading product for
the treatment of moderate to moderately-severe chronic pain. Tramadol is
currently marketed in the U.S. by a division of Johnson & Johnson and is only
available in an immediate-release multiple daily dose formulation. Annual U.S.
sales of immediate release Tramadol are currently in excess of $475 million.
Phase III trials of Biovail's once daily controlled-release version of
Buspirone are expected to be completed by the end of this year or early next
year, and Phase III trials of the Company's once-daily version of the
antidepressant Celexa continue to progress well, under the direction of our
development partner H. Lundbeck. Biovail is also in late stage development of
novel once-daily formulations of medications for the treatment of anxiety
disorders. Progress is also being made in formulation, manufacturing scale up
and the initiation of bioavailability studies on a number of promising
products in our ANDA and Flash Dose-Registered Trademark- technology pipeline.
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MANUFACTURING AND CRD
Biovail's manufacturing facilities in Manitoba, Virginia and Puerto Rico are
operating at high levels of production and work is progressing towards the
Company taking possession of its new manufacturing facility in Dorado, Puerto
Rico.
The Contract Research Division continues to operate at record levels, performing
studies for both Biovail and third parties. Volume has increased by 50% in both
the quarter, and year-to-date.
STOCK SPLIT
Finally, the Board of Directors of Biovail approved a stock split on the basis
of two common shares for each one common share held on September 30, 2000. This
was the second two common shares for each one common share stock split since
December 1999.
FINANCIAL RESULTS
The Company once again reported record financial results for the third quarter
and nine months ended September 30, 2000. Total revenues for the third quarter
increased by 99% to $88.7 million from $44.6 million in third quarter 1999. Net
income for the third quarter increased by 140% to $38.9 million (excluding
charges) from $16.2 million in 1999. Diluted earnings per share (excluding
charges) increased by 69% to $0.27 per share on a post split basis (or $0.53 per
share on a pre-split basis). Year-to-date revenues increased 82% to $196 million
from $107.6 million in 1999, and net income and diluted earnings per share
(excluding charges) increased by 116% and 53% respectively.
Note: As of January 1, 2000, Biovail started reporting its
financial results in accordance with U.S. GAAP.
On behalf of the Board, I would like to thank the Company's employees for their
contribution, and our shareholders for their ongoing support of our efforts.
/s/ Eugene Melnyk
Eugene Melnyk
Chairman of the Board
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CONSOLIDATED BALANCE SHEETS
IN ACCORDANCE WITH U.S. GAAP
(ALL DOLLAR AMOUNTS ARE EXPRESSED IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
SEPTEMBER 30, December 31,
(UNAUDITED) 2000 1999
---------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT
Cash and cash equivalents $ 348,702 $ 178,086
Short-term investments 49,169 65,893
Accounts receivable 86,224 60,571
Inventories 23,533 12,701
Assets held for disposal - 20,000
Deposits and prepaid expenses 4,955 3,172
-------------------------
512,583 340,423
LONG-TERM INVESTMENTS 2,071 12
PROPERTY, PLANT AND EQUIPMENT, net 48,834 45,300
OTHER ASSETS, net 92,418 86,478
-------------------------
$ 655,906 $ 472,213
=========================
LIABILITIES
CURRENT
Accounts payable $ 20,278 $ 22,685
Accrued liabilities 27,090 31,107
Income taxes payable 8,364 3,585
Customer prepayments 10,467 4,962
Deferred tax liability 336 336
Current portion of long-term debt 512 12,016
-------------------------
67,047 74,691
DEFERRED TAX LIABILITY 4,447 4,698
CONVERTIBLE SUBORDINATED
PREFERRED EQUIVALENT DEBENTURES 300,000 -
LONG-TERM DEBT - 125,488
-------------------------
371,494 204,877
-------------------------
SHAREHOLDERS' EQUITY
Common shares, no par value,
unlimited shares authorized,
129,831,000 and 124,392,000
issued and outstanding at
September 30, 2000 and
December 31, 1999, respectively 478,055 373,962
Warrants 8,244 8,244
Warrant subscription receivable - (2,287)
Deficit (201,047) (113,843)
Accumulated other
comprehensive income (loss) (840) 1,260
-------------------------
284,412 267,336
-------------------------
$ 655,906 $ 472,213
=========================
</TABLE>
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CONSOLIDATED STATEMENTS OF LOSS
IN ACCORDANCE WITH U.S. GAAP
(ALL DOLLAR AMOUNTS EXCEPT PER SHARE DATA ARE EXPRESSED IN THOUSANDS
OF U.S. DOLLARS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
(UNAUDITED) 2000 1999
----------------------------------------------------------------------
<S> <C> <C>
REVENUE
Product sales $ 50,296 $ 28,730
Research and development 33,284 11,254
Royalty and licensing 5,113 4,637
------------------------------
88,693 44,621
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EXPENSES
Cost of goods sold 16,798 8,946
Research and development 22,713 7,699
Selling, general and administrative 10,954 8,038
Acquired research and development 141,500 -
------------------------------
191,965 24,683
------------------------------
OPERATING INCOME (LOSS) (103,272) 19,938
EQUITY LOSS - (57,142)
INTEREST INCOME (EXPENSE), net 3,102 (2,722)
------------------------------
LOSS BEFORE INCOME TAXES (100,170) (39,926)
PROVISION FOR INCOME TAXES 2,478 1,062
------------------------------
LOSS BEFORE EXTRAORDINARY ITEM (102,648) (40,988)
EXTRAORDINARY ITEM - Premium paid
on early extinguishment of
U.S. Dollar Senior Notes - -
------------------------------
NET LOSS $ (102,648) $ (40,988)
==============================
BASIC LOSS PER SHARE
Loss before extraordinary item $ (0.79) $ (0.42)
Extraordinary item - -
------------------------------
Net loss $ (0.79) $ (0.42)
==============================
DILUTED LOSS PER SHARE
Loss before extraordinary item $ (0.79) $ (0.42)
Extraordinary item - -
------------------------------
Net loss $ (0.79) $ (0.42)
==============================
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
Basic 129,739,000 97,804,000
==============================
Diluted 146,377,000 101,668,000
==============================
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF LOSS
IN ACCORDANCE WITH U.S. GAAP
(ALL DOLLAR AMOUNTS EXCEPT PER SHARE DATA ARE EXPRESSED IN THOUSANDS
OF U.S. DOLLARS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
(UNAUDITED) 2000 1999
----------------------------------------------------------------------
<S> <C> <C>
REVENUE
Product sales $ 126,289 $ 66,271
Research and development 59,280 25,209
Royalty and licensing 10,426 16,139
------------------------------
195,995 107,619
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EXPENSES
Cost of goods sold 41,371 21,833
Research and development 48,421 19,482
Selling, general and administrative 32,352 21,304
Acquired research and development 141,500 -
------------------------------
263,644 62,619
------------------------------
OPERATING INCOME (LOSS) (67,649) 45,000
EQUITY LOSS - (57,142)
INTEREST INCOME (EXPENSE), net 5,219 (8,171)
------------------------------
LOSS BEFORE INCOME TAXES (62,430) (20,313)
PROVISION FOR INCOME TAXES 4,735 2,370
------------------------------
LOSS BEFORE EXTRAORDINARY ITEM (67,165) (22,683)
EXTRAORDINARY ITEM - Premium paid
on early extinguishment of
U.S. Dollar Senior Notes (20,039) -
------------------------------
NET LOSS $ (87,204) $ (22,683)
==============================
BASIC LOSS PER SHARE
Loss before extraordinary item $ (0.52) $ (0.23)
Extraordinary item (0.16) -
------------------------------
Net loss $ (0.68) $ (0.23)
==============================
DILUTED LOSS PER SHARE
Loss before extraordinary item $ (0.52) $ (0.23)
Extraordinary item (0.16) -
------------------------------
Net loss $ (0.68) $ (0.23)
==============================
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
Basic 128,285,000 97,804,000
==============================
Diluted 143,402,000 101,668,000
==============================
</TABLE>
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CONSOLIDATED STATEMENTS OF CASH FLOWS
IN ACCORDANCE WITH U.S. GAAP
(ALL DOLLAR AMOUNTS ARE EXPRESSED IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
(UNAUDITED) 2000 1999
-------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (87,204) $ (22,683)
Depreciation and amortization 14,926 4,960
Deferred income tax recovery (252) -
Acquired research and development 141,500 -
Extraordinary item 20,039 -
Equity loss - 57,142
Compensation cost for employee stock options - 1,350
------------------------
89,009 40,769
Change in non-cash operating items:
Increase in accounts receivable (26,361) (5,174)
Increase in inventories (10,975) (3,432)
Increase in deposits and prepaid expenses (1,783) (396)
Increase (decrease) in accounts
payable and accrued liabilities (12,714) 8,999
Increase in income taxes payable 3,526 1,026
Increase in customer prepayments 5,505 12,927
------------------------
(42,802) 13,950
------------------------
46,207 54,719
------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment, net (11,074) (5,281)
Investment in IPL Acquireco 2000 Ltd. (141,500) -
Maturity of short-term investments, net 16,725 -
Acquisition of long-term investments, net (2,273) -
Proceeds from assets held for disposal 20,000 -
Decrease in other assets 333 -
Investment in Fuisz Technologies Ltd. - (77,479)
Acquisition of product rights - (2,203)
Repayment of executive stock purchase plan loans - 719
------------------------
(117,789) (84,244)
------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common shares 104,093 2,985
Repurchase of common shares - (30,593)
Issuance of Convertible Subordinated Preferred
Equivalent Debentures, net of financing costs 288,500 -
Repurchase of U.S. Dollar Senior Notes (141,017) -
Reduction in other long-term debt (11,432) (667)
Collection of warrant subscription receivable 2,287 2,383
------------------------
242,431 (25,892)
------------------------
EFFECT OF EXCHANGE RATE CHANGES
ON CASH AND CASH EQUIVALENTS (233) 76
------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 170,616 (55,341)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 178,086 78,279
------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 348,702 $ 22,938
========================
</TABLE>
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SHAREHOLDER INFORMATION
HEAD OFFICE
Biovail Corporation
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.
BY MAIL:
Biovail Corporation
2488 Dunwin Drive
Mississauga, Ontario
Canada L5L 1J9
BY PHONE: BY FAX:
(416) 285-6000 (416) 285-6499
BY E-MAIL: BY WEB:
[email protected] www.biovail.com
CORPORATE INFORMATION
TRADING SYMBOLS REGISTRARS AND
Common Shares: BVF TRANSFER AGENTS
Common Share CIBC Mellon Trust Company
Warrants: BVF_w Toronto, Canada
Convertible ChaseMellon Shareholder
Subordinated Services
Preferred New York, New York
Equivalent
Debentures: BVF_p
THE FOLLOWING WORDS AND LOGOS ARE TRADEMARKS FOR THE COMPANY AND MAY BE
REGISTERED IN CANADA, THE UNITED STATES AND CERTAIN OTHER JURISDICTIONS:
BIOVAIL, TIAZAC-REGISTERED TRADEMARK-, VIAZEM, CEFORM-REGISTERED TRADEMARK-,
FLASH DOSE-REGISTERED TRADEMARK-, SHEARFORM-REGISTERED TRADEMARK- AND
CRYSTAAL.
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.
