<PAGE>
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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, 2000
COMMISSION FILE NUMBER 001-11145
------------------------
BIOVAIL CORPORATION
(Translation of registrant's name into English)
2488 DUNWIN DRIVE, MISSISSAUGA, ONTARIO L5L 1J9, CANADA
(address of principal executive offices and zip code)
(416) 285-6000
Registrant's telephone number, including area code
------------------------
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 the 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/
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<PAGE>
BIOVAIL CORPORATION
QUARTERLY REPORT
THIS REPORT OF FOREIGN ISSUER ON FORM 6-K IS INCORPORATED BY REFERENCES INTO
THE REGISTRATION STATEMENT ON FORM S-8 OF BIOVAIL CORPORATION (REGISTRATION
NO. 333-92229).
INDEX
PART I -- FINANCIAL INFORMATION
<TABLE>
<S> <C>
Consolidated Balance Sheets, June 30, 2000 and December 31,
1999...................................................... 2
Consolidated Statements of Income for the six months and
three months ended June 30, 2000 and 1999................. 3
Consolidated Statements of Cash Flows for the six months
ended June 30, 2000 and 1999.............................. 4
Condensed Notes to the Consolidated Financial Statements.... 5
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 12
</TABLE>
PART II -- OTHER INFORMATION
<TABLE>
<S> <C>
Operational Information..................................... 17
Legal Proceedings........................................... 17
Material Issued to Shareholders............................. 17
Additional Developments..................................... 17
</TABLE>
(All dollar amounts in this Report are expressed in U.S. dollars unless
otherwise stated.)
1
<PAGE>
BIOVAIL CORPORATION
CONSOLIDATED BALANCE SHEETS
IN ACCORDANCE WITH U.S. GAAP
(ALL DOLLAR AMOUNTS ARE EXPRESSED IN THOUSANDS OF U.S. DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
--------- -------------
<S> <C> <C>
ASSETS
CURRENT
Cash and cash equivalents................................. $447,453 $178,086
Short-term investments.................................... 61,675 65,893
Accounts receivable....................................... 81,986 60,571
Inventories (Note 2)...................................... 23,891 12,701
Assets held for disposal (Note 3)......................... -- 20,000
Deposits and prepaid expenses............................. 3,075 3,172
-------- --------
618,080 340,423
LONG-TERM INVESTMENTS (Note 4).............................. 1,654 12
PROPERTY, PLANT AND EQUIPMENT, net.......................... 46,407 45,300
OTHER ASSETS, net (Note 5).................................. 87,543 86,478
-------- --------
$753,684 $472,213
======== ========
LIABILITIES
CURRENT
Accounts payable.......................................... $ 22,813 $ 22,685
Accrued liabilities....................................... 24,543 31,107
Income taxes payable...................................... 4,945 3,585
Customer prepayments...................................... 9,922 4,962
Deferred tax liability.................................... 336 336
Current portion of long-term debt (Note 6)................ 1,298 12,016
-------- --------
63,857 74,691
DEFERRED TAX LIABILITY...................................... 4,531 4,698
CONVERTIBLE SUBORDINATED PREFERRED EQUIVALENT DEBENTURES
(Note 7).................................................. 300,000 --
LONG-TERM DEBT (Note 6)..................................... -- 125,488
-------- --------
368,388 204,877
-------- --------
SHAREHOLDERS' EQUITY
Common shares, no par value, unlimited shares authorized,
64,797,000 and 62,196,000 issued and outstanding at
June 30, 2000 and December 31, 1999, respectively
(Note 8)................................................ 476,363 373,962
Warrants.................................................. 8,244 8,244
Warrant subscription receivable........................... -- (2,287)
Deficit................................................... (98,399) (113,843)
Accumulated other comprehensive income (loss)............. (912) 1,260
-------- --------
385,296 267,336
-------- --------
$753,684 $472,213
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
2
<PAGE>
BIOVAIL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
IN ACCORDANCE WITH U.S. GAAP
(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,
------------------------- -------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUE
Product sales................................ $ 42,362 $ 24,979 $ 75,993 $ 37,541
Research and development..................... 15,495 7,878 25,996 13,955
Royalty and licensing........................ 2,585 2,550 5,313 11,502
----------- ----------- ----------- -----------
60,442 35,407 107,302 62,998
----------- ----------- ----------- -----------
EXPENSES
Cost of goods sold........................... 13,538 7,848 24,573 12,887
Research and development..................... 13,942 6,459 25,708 11,783
Selling, general and administrative.......... 11,559 6,798 21,398 13,266
----------- ----------- ----------- -----------
39,039 21,105 71,679 37,936
----------- ----------- ----------- -----------
OPERATING INCOME............................... 21,403 14,302 35,623 25,062
INTEREST INCOME (EXPENSE), net................. 2,383 (2,657) 2,117 (5,449)
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES..................... 23,786 11,645 37,740 19,613
PROVISION FOR INCOME TAXES..................... 1,444 775 2,257 1,308
----------- ----------- ----------- -----------
INCOME BEFORE EXTRAORDINARY ITEM............... 22,342 10,870 35,483 18,305
EXTRAORDINARY ITEM -- Premium paid on early
extinguishment of U.S. Dollar Senior Notes
(Note 6)..................................... -- -- (20,039) --
----------- ----------- ----------- -----------
NET INCOME..................................... $ 22,342 $ 10,870 $ 15,444 $ 18,305
=========== =========== =========== ===========
BASIC EARNINGS (LOSS) PER SHARE (Note 9)
Income before extraordinary item............. $ 0.34 $ 0.22 $ 0.56 $ 0.37
Extraordinary item........................... -- -- (0.31) --
----------- ----------- ----------- -----------
Net income................................... $ 0.34 $ 0.22 $ 0.24 $ 0.37
=========== =========== =========== ===========
DILUTED EARNINGS (LOSS) PER SHARE (Note 9)
Income before extraordinary item............. $ 0.31 $ 0.21 $ 0.50 $ 0.35
Extraordinary item........................... -- -- (0.28) --
----------- ----------- ----------- -----------
Net income................................... $ 0.31 $ 0.21 $ 0.22 $ 0.35
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING (Note 9).........................
Basic........................................ 64,765,000 49,068,000 63,775,000 49,068,000
=========== =========== =========== ===========
Diluted...................................... 71,559,000 52,680,000 70,925,000 52,680,000
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE>
BIOVAIL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
IN ACCORDANCE WITH U.S. GAAP
(ALL DOLLAR AMOUNTS ARE EXPRESSED IN THOUSANDS OF U.S. DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------
2000 1999
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income................................................ $ 15,444 $ 18,305
Depreciation and amortization............................. 10,018 3,154
Deferred income tax recovery.............................. (167) --
Extraordinary item -- Premium paid on early extinguishment
of U.S. Dollar Senior Notes (Note 6).................... 20,039 --
Compensation cost for employee stock options.............. -- 900
-------- --------
45,334 22,359
Change in non-cash operating items (Note 11).............. (35,142) 10,533
-------- --------
10,192 32,892
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment, net........... (5,791) (2,785)
Maturity of short-term investments, net................... 4,218 --
Acquisition of long-term investments...................... (2,285) --
Proceeds from assets held for disposal (Note 3)........... 20,000 --
Decrease in other assets.................................. 261 --
Acquisition of product rights............................. -- (1,811)
Repayment of executive stock purchase plan loans.......... -- 31
-------- --------
16,403 (4,565)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common shares (Note 8)........................ 102,822 2,088
Repurchase of common shares............................... -- (23,550)
Issuance of Convertible Subordinated Preferred Equivalent
Debentures, net of financing costs (Note 7)............. 289,410 --
Repurchase of U.S. Dollar Senior Notes (Note 6)........... (141,017) --
Reduction in other long-term debt......................... (10,657) (300)
Collection of warrant subscription receivable............. 2,287 1,397
-------- --------
242,845 (20,365)
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS............................................... (73) 117
-------- --------
INCREASE IN CASH AND CASH EQUIVALENTS....................... 269,367 8,079
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.............. 178,086 78,279
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD.................... $447,453 $ 86,358
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE>
BIOVAIL CORPORATION
CONDENSED 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
CHANGE IN ACCOUNTING REPORTING CONVENTION
Prior to the current fiscal year, Biovail Corporation ("Biovail" or the
"Company") reported its consolidated results in accordance with Canadian
generally accepted accounting principles ("GAAP"). As of January 1, 2000,
the Company began to report its financial results in accordance with
U.S. GAAP. Historical consolidated results have been restated to reflect
this change.
The decision to provide U.S. GAAP financial results was driven by the
Company's desire to make it easier for the majority of its shareholders to
assess the Company's financial performance by using accounting rules that
are more familiar to these shareholders. This presentation is also more
consistent with the presentation of financial results of most of the
Company's industry customers and competitors.
Consolidated financial statements in U.S. dollars and prepared in accordance
with Canadian GAAP are attached as an Exhibit to this Report.
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared by the Company in U.S. dollars and in accordance with U.S. GAAP,
applied on a consistent basis. These unaudited condensed notes to the
consolidated financial statements should be read in conjunction with the
audited consolidated financial statements and notes on Form 20-F for the
year ended December 31, 1999.
In preparing the Company's consolidated financial statements, management is
required to make estimates and assumptions that affect the reported amounts
of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts
of revenue and expenses during the reporting period. Actual results could
differ from these estimates and the operating results for the interim
periods presented are not necessarily indicative of the results expected for
the full year.
NEW ACCOUNTING STANDARDS
In July 1999, the Financial Accounting Standards Board ("FASB") announced
the delay of the effective date of Statement No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS No. 133"), for one
year to the first quarter of 2001. SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It
requires companies to recognize all derivatives as either assets or
liabilities on the balance sheet and measure those instruments at fair
value. Gains or losses resulting from changes in the values of those
derivatives would be accounted for depending on the use of the derivative
and whether it qualifies for hedge accounting under SFAS No. 133. The
Company is determining the impact of the adoption of SFAS No. 133.
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements" ("SAB 101"). In March 2000, the SEC delayed the implementation
date of SAB 101 to the second quarter of 2000. In July 2000, the SEC further
delayed the implementation date to the fourth quarter of 2000. SAB 101
summarizes the SEC's views in applying GAAP to revenue recognition in
financial statements. The Company is continuing to evaluate SAB 101's
potential future impact on Biovail's financial position and results of
operations with respect to upfront fees and milestone payments earned by the
Company under certain research and development agreements and under certain
licensing and supply agreements. It is possible that under SAB 101, certain
of these fees would be required to be deferred and recognized as revenue
over future periods rather than immediately on a one-time basis.
2. INVENTORIES
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
--------- -------------
<S> <C> <C>
Raw materials............................................... $ 9,923 $ 5,149
Work in process............................................. 10,748 4,258
Finished goods.............................................. 3,220 3,294
------- -------
$23,891 $12,701
======= =======
</TABLE>
5
<PAGE>
BIOVAIL CORPORATION
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR AMOUNTS EXCEPT PER SHARE DATA ARE EXPRESSED IN THOUSANDS OF
U.S. DOLLARS)
(UNAUDITED)
3. ASSETS HELD FOR DISPOSAL
The Company determined, as part of its evaluation of the purchase of Fuisz
Technologies Ltd. ("Fuisz") on November 12, 1999, that certain operations of
Fuisz were not strategic to the Company's business plans and accordingly
should be sold.
Effective January 4, 2000, the Company entered into an agreement to sell all
of the issued share capital of Clonmel Healthcare Limited ("Clonmel"), a
pharmaceutical and antibiotic manufacturer and distributor located in
Ireland, for proceeds of $20,000,000. No gain or loss was recognized by the
Company on this transaction as Clonmel was included at fair value in the
purchase price allocation at November 12, 1999.
In addition, under the terms of the sale of Clonmel, the Company repaid an
IRL8,452,000 term bank loan connected with the 1997 acquisition of Clonmel
by Fuisz. As a result, the cash balance of $11,258,000 that was pledged as
collateral against the term bank loan at December 31, 1999 and included in
short-term investments, has become unrestricted.
4. LONG-TERM INVESTMENTS
In February 2000, in connection with the acquisition from Hemispherx
Biopharma, Inc. ("Hemispherx") of the exclusive Canadian marketing rights to
Ampligen, the Company made a $2,250,000 investment in common shares of
Hemispherx, the supplier of the product. The investment represents
approximately 1% of the outstanding common shares of Hemispherx and has been
classified as being available-for-sale. The fair value of the investment at
June 30, 2000 was $1,607,000.
5. OTHER ASSETS
The following table summarizes other assets net of accumulated amortization.
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
--------- -------------
<S> <C> <C>
Goodwill.................................................... $30,766 $31,771
Core technology and workforce............................... 17,487 18,195
Product rights and royalty interests........................ 27,759 31,945
Deferred financing costs.................................... 11,382 4,219
Other intangibles........................................... 149 348
------- -------
$87,543 $86,478
======= =======
</TABLE>
Amortization amounted to $6,005,000 and $1,374,000 for the six months ended
June 30, 2000 and 1999, respectively and $2,231,000 and $863,000 for the
three months ended June 30, 2000 and 1999, respectively.
Deferred financing costs at June 30, 2000 relate to the Convertible
Subordinated Preferred Equivalent Debentures issued on March 22, 2000. These
costs are being amortized over the 25 year term of the debentures.
Deferred financing costs at December 31, 1999 related to the 10 7/8% U.S.
Dollar Senior Notes that the Company repurchased on March 22, 2000. The
remaining costs at March 22, 2000, amounting to $4,022,000, were included in
the determination of the premium paid to retire the notes and recorded in
the extraordinary item in the first quarter of 2000.
6. LONG-TERM DEBT
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
Non-interest bearing government loan........................ $ 848 $ 1,250
U.S. Dollar Senior Notes.................................... -- 125,000
Term bank loan.............................................. -- 10,799
Other debt.................................................. 450 455
------ --------
1,298 137,504
Less current portion........................................ 1,298 12,016
------ --------
$-- $125,488
====== ========
</TABLE>
6
<PAGE>
BIOVAIL CORPORATION
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR AMOUNTS EXCEPT PER SHARE DATA ARE EXPRESSED IN THOUSANDS OF
U.S. DOLLARS)
(UNAUDITED)
6. LONG-TERM DEBT (CONTINUED)
On March 22, 2000, the Company repurchased all of its outstanding 10 7/8%
U.S. Dollar Senior Notes at a redemption price of 112.820% of the principal
amount. The premium paid by the Company of $16,017,000 together with the
unamortized financing costs of $4,022,000 were recorded as an extraordinary
item in the first quarter of 2000.
Under the terms of the sale of Clonmel, the Company repaid the IRL8,452,000
term bank loan outstanding at December 31, 1999.
The Company has a $75,000,000 credit facility available with a Canadian
chartered bank. Advances under the credit facility can be drawn in either
U.S. or Canadian funds and are secured by accounts receivable and
inventories. Interest rates available to the Company in respect of advances
are U.S. base rate plus 0.25%, LIBOR plus 1.25% and the bank's prime lending
rate plus 0.25%. A standby fee of 0.0625% applies to the unused portion of
the credit facility. At June 30, 2000, the Company had not utilized any
portion of the credit facility.
7. CONVERTIBLE SUBORDINATED PREFERRED EQUIVALENT DEBENTURES
On March 22, 2000, the Company issued $300 million of 6.75% Convertible
Subordinated Preferred Equivalent Debentures, due March 31, 2025 (the
"Convertible Preferred Securities"). The Convertible Preferred Securities
are unsecured and subordinated to all Senior Indebtedness, as defined, of
the Company.
The Convertible Preferred Securities are convertible at any time into common
shares at $60.675 per common share and may be redeemed at the option of the
Company beginning on March 31, 2003 at a redemption price of 104.725%
declining each year as prescribed in the indenture agreement to 100% by
March 31, 2010. The Company has a special right to redeem the Convertible
Preferred Securities prior to March 31, 2003 at 106.75% if the trading price
of the Company's stock equals or exceeds $91.01 per share on the NYSE for a
specified period, subject to certain conditions. Interest is payable
quarterly in arrears commencing June 30, 2000. Subject to certain
conditions, the Company has the right to defer payment of interest on the
Convertible Preferred Securities for up to 20 consecutive quarterly periods.
Interest and principal are payable in cash or, at the option of the Company,
from the proceeds on the sale of equity securities of the Company delivered
to the trustee of the Convertible Preferred Securities.
8. COMMON SHARES
On March 22, 2000, concurrent with the Convertible Preferred Securities
offering, the Company issued 2,000,000 common shares for gross proceeds of
$101,125,000 less offering costs of $5,800,000. At June 30, 2000, a portion
of these costs have not been paid and are included in accounts payable.
During the six months ended June 30, 2000, 601,193 stock options were
exercised for proceeds of $7,076,000
The number of common shares outstanding at June 30, 2000 and December 31,
1999 were 64,796,977 and 62,195,784, respectively.
7
<PAGE>
BIOVAIL CORPORATION
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR AMOUNTS EXCEPT PER SHARE DATA ARE EXPRESSED IN THOUSANDS OF
U.S. DOLLARS)
(UNAUDITED)
9. EARNINGS PER SHARE
The reconciliation of the numerator and denominator for the calculation of
basic and diluted earnings per share is as follows (number of shares in
thousands):
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
BASIC EARNINGS PER SHARE
Net income................................................ $22,342 $10,870 $15,444 $18,305
======= ======= ======= =======
Weighted average number of common shares outstanding...... 64,765 49,068 63,775 49,068
======= ======= ======= =======
Basic earnings per share.................................. $ 0.34 $ 0.22 $ 0.24 $ 0.37
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
DILUTED EARNINGS PER SHARE
Net income................................................ $22,342 $10,870 $15,444 $18,305
======= ======= ======= =======
Weighted average number of common shares outstanding...... 64,765 49,068 63,775 49,068
Dilutive effect of warrants............................... 4,348 1,619 4,542 1,619
Dilutive effect of stock options.......................... 2,446 1,993 2,608 1,993
------- ------- ------- -------
Adjusted weighted average number of common shares
outstanding............................................. 71,559 52,680 70,925 52,680
======= ======= ======= =======
Diluted earnings per share................................ $ 0.31 $ 0.21 $ 0.22 $ 0.35
======= ======= ======= =======
</TABLE>
10. COMPREHENSIVE INCOME
Pursuant to the requirements of SFAS No. 130 "Reporting Comprehensive
Income", which established standards for the reporting of comprehensive
income and its components, the following disclosure is provided:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income.................................................. $22,342 $10,870 $15,444 $18,305
------- ------- ------- -------
Other comprehensive income (loss)
Foreign currency translation adjustment................... (1,090) 1,592 (1,529) 1,978
Unrealized holding gain (loss) on long-term investments... (1,536) 182 (643) (636)
------- ------- ------- -------
Other comprehensive income (loss)........................... (2,626) 1,774 (2,172) 1,342
------- ------- ------- -------
Comprehensive income........................................ $19,716 $12,644 $13,272 $19,647
======= ======= ======= =======
</TABLE>
8
<PAGE>
BIOVAIL CORPORATION
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR AMOUNTS EXCEPT PER SHARE DATA ARE EXPRESSED IN THOUSANDS OF
U.S. DOLLARS)
(UNAUDITED)
11. CHANGE IN NON-CASH OPERATING ITEMS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------
2000 1999
-------- --------
<S> <C> <C>
Accounts receivable......................................... $(22,041) $ 6,497
Inventories................................................. (11,517) (4,471)
Deposits and prepaid expenses............................... 97 (145)
Accounts payable and accrued liabilities.................... (7,961) (3,259)
Income taxes payable........................................ 1,320 301
Customer prepayments........................................ 4,960 11,610
-------- -------
$(35,142) $10,533
======== =======
</TABLE>
12. LEGAL PROCEEDINGS
In March 1998, Biovail commenced an action in the district court of New
Jersey against Hoechst Aktiengesellschaft and related parties to recover
monetary damages and gain injunctive relief for what Biovail believes to be
violations of U.S. anti-trust law. In addition, Biovail's complaint alleges
that the various defendant parties engaged in breach of contract, deceptive
trade practices, restraint of trade, unfair competition and other violations
of the law. The action is proceeding to documentary and witness discovery.
Biovail anticipates a trial by early 2001.
From time to time, Biovail 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
filing of ANDA applications. The timing of these actions is mandated by
statute and may result in a delay of FDA approval for such filed ANDAs until
the final resolution of such actions or the expiry of 30 months, whichever
occurs earlier.
In this regard, Biovail and its wholly owned subsidiary, Biovail
Laboratories, Inc. ("Biovail Laboratories"), have been sued in separate
lawsuits by Bayer AG and Bayer Corporation, as well as by Pfizer Inc.
("Pfizer"), upon the filing by Biovail Laboratories of separate ANDAs for
generic versions of Procardia XL and Adalat CC. These actions make the
usual, technical claims of infringement. Biovail is vigorously defending
these suits and is aggressively pursuing motions for summary judgment.
Biovail has denied the allegations and has pleaded affirmative defenses that
the patents are invalid, have not been infringed and are unenforceable.
On April 23, 1998, Biovail filed a four-count complaint against Bayer AG,
Bayer Corporation and Pfizer seeking a declaratory judgment that their
patent is invalid, unenforceable, and not infringed by our filing of the
ANDAs. Biovail has also asserted that Bayer corporation and Pfizer have
violated anti-trust laws and have interfered with Biovail's prospective
economic advantage. Biovail's action has been stayed until the conclusion of
the patent infringement suits.
On August 25, 1998, Andrx Pharmaceutical, Inc. ("Andrx") submitted to
Biovail a Notice of Certification under the FDC Act certifying that the ANDA
filed by Andrx for a generic version of Tiazac-Registered Trademark- did not
infringe on Biovail's patent. In October 1998, Biovail commenced a patent
infringement suit against Andrx. A non-jury trial in this action was
completed in February 2000. On March 8, 2000, the district court ruled in
favor of Andrx stating that there was no infringement of Biovail's patent.
Biovail has appealed this ruling. Andrx' ANDA for its generic version of
Tiazac has not yet been tentatively approved by the FDA. Under current FDA
regulations, the FDA will not approve Andrx' ANDA for a period of 30 months
from the date Biovail first received the Notice of Patent Certification or
the date when Andrx successfully defends Biovail's appeal, whichever occurs
first.
In November 1999, Biovail acquired Fuisz Technologies Ltd. ("Fuisz"). Fuisz
is now a wholly-owned subsidiary of Biovail and has been renamed Biovail
Technologies Ltd. ("Biovail Technologies").
In February 2000 Biovail Technologies filed a complaint in Circuit Court of
Fairfax County, Va. against Richard C. Fuisz, former chairman of Fuisz
Technologies Ltd., and several other former Fuisz executives, directors and
employees and related parties (the "Complaint"). The Complaint charges
breaches of fiduciary duties, breaches of contract, fraud, conversion,
business conspiracy and unjust enrichment arising out of a pattern of
misconduct in which the defendants pursued their personal advancement at the
expense of Fuisz. Biovail Technologies seeks $25 million in damages, treble
damages of $75 million, interest, punitive damages and attorneys fees.
Biovail believes that the allegations against the defendants are meritorious
and is in the process of vigorously litigating the suit.
9
<PAGE>
BIOVAIL CORPORATION
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR AMOUNTS EXCEPT PER SHARE DATA ARE EXPRESSED IN THOUSANDS OF
U.S. DOLLARS)
(UNAUDITED)
12. LEGAL PROCEEDINGS (CONTINUED)
In connection with the Fuisz acquisition Biovail entered into a Consulting
Agreement (the "Consulting Agreement") and an Option Agreement (the "Option
Agreement") (together, the "Agreements") with Richard Fuisz. Pursuant to the
Agreements Biovail acquired Richard Fuisz' shares in Fuisz
Technologies Ltd. In March 2000, Richard Fuisz commenced an action in the
district court of Delaware against Biovail (the "Delaware Action").
The Delaware Action alleges that Biovail fraudulently induced the Agreements
and that Biovail is in breach of the Agreements. The Delaware Action seeks
rescission of the Agreements plus damages or, in the alternative,
entitlement to a sum of $8 million plus interest pursuant to the Consulting
Agreement. Though it is currently premature to predict the outcome of this
action, Biovail believes that the Delaware Action is without merit and
intends to vigorously defend the lawsuit.
While Biovail is not currently able to determine the potential liability, if
any, related to such matters, Biovail believes that none of the matters,
individually or in aggregate, will have a material adverse effect on
Biovail's financial position, results of operations or cash flows.
13. SEGMENTED INFORMATION
Biovail is an international full service pharmaceutical company. The Company
operates in a single industry and is engaged in formulation, clinical
testing, registration and manufacture of drug products utilizing advanced
drug delivery technologies.
Organizationally, 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 Canadian facilities and sales by Crystaal, the Canadian
marketing division of the Company.
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.
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<PAGE>
BIOVAIL CORPORATION
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR AMOUNTS EXCEPT PER SHARE DATA ARE EXPRESSED IN THOUSANDS OF
U.S. DOLLARS)
(UNAUDITED)
13. SEGMENTED INFORMATION (CONTINUED)
The following table sets forth information regarding segment operating
income:
<TABLE>
<CAPTION>
PRODUCT RESEARCH AND ROYALTY AND
THREE MONTHS ENDED JUNE 30, 2000 SALES DEVELOPMENT LICENSING TOTAL
-------------------------------- -------- ------------ ----------- --------
<S> <C> <C> <C> <C>
Revenue from external customers............................. $42,362 $15,495 $ 2,585 $ 60,442
------- ------- ------- --------
Segment operating income (loss)............................. 21,854 (1,213) 2,572 23,213
Unallocated amounts
Selling, general and administrative expenses.............. (1,810)
Interest income, net...................................... 2,383
--------
Income before income taxes.................................. $ 23,786
========
</TABLE>
<TABLE>
<CAPTION>
PRODUCT RESEARCH AND ROYALTY AND
THREE MONTHS ENDED JUNE 30, 1999 SALES DEVELOPMENT LICENSING TOTAL
-------------------------------- -------- ------------ ----------- --------
<S> <C> <C> <C> <C>
Revenue from external customers............................. $24,979 $ 7,878 $ 2,550 $ 35,407
------- ------- ------- --------
Segment operating income.................................... 12,867 876 2,524 16,267
Unallocated amounts
Selling, general and administrative expenses.............. (1,965)
--------
Interest expense, net..................................... (2,657)
--------
Income before income taxes.................................. $ 11,645
========
</TABLE>
<TABLE>
<CAPTION>
PRODUCT RESEARCH AND ROYALTY AND
SIX MONTHS ENDED JUNE 30, 2000 SALES DEVELOPMENT LICENSING TOTAL
------------------------------ -------- ------------ ----------- --------
<S> <C> <C> <C> <C>
Revenue from external customers............................. $75,993 $25,996 $ 5,313 $107,302
------- ------- ------- --------
Segment operating income (loss)............................. 38,317 (4,007) 5,260 39,570
Unallocated amounts
Selling, general and administrative expenses.............. (3,947)
Interest income, net...................................... 2,117
--------
Income before income taxes.................................. $ 37,740
========
</TABLE>
<TABLE>
<CAPTION>
PRODUCT RESEARCH AND ROYALTY AND
SIX MONTHS ENDED JUNE 30, 1999 SALES DEVELOPMENT LICENSING TOTAL
------------------------------ -------- ------------ ----------- --------
<S> <C> <C> <C> <C>
Revenue from external customers............................. $37,541 $13,955 $11,502 $ 62,998
------- ------- ------- --------
Segment operating income.................................... 16,072 1,178 11,277 28,527
Unallocated amounts
Selling, general and administrative expenses.............. (3,465)
Interest expense, net..................................... (5,449)
--------
Income before income taxes.................................. $ 19,613
========
</TABLE>
11
<PAGE>
BIOVAIL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(ALL DOLLAR AMOUNTS ARE EXPRESSED IN U.S. DOLLARS)
OVERVIEW
We derive our revenues from: (i) developing and licensing oral
controlled-release products utilizing our proprietary drug delivery
technologies; (ii) manufacturing such products for sale to licensees and
wholesalers and from direct marketing of proprietary and in-licensed products in
Canada; and (iii) providing pharmaceutical contract research services to third
parties.
CHANGE IN ACCOUNTING REPORTING CONVENTION
As of January 1, 2000, we began to report our consolidated results in
accordance with U.S. GAAP. Historical consolidated results have been restated to
reflect this change.
The decision to provide U.S. GAAP financial results was driven by our desire
to make it easier for the majority of our shareholders to assess our financial
performance by using accounting rules that are more familiar to these
shareholders. This presentation is also more consistent with the presentation of
financial results of most of our industry customers and competitors.
RESULTS OF OPERATIONS
Revenue for the quarter ended June 30, 2000 was $60.4 million and for the
six months ended June 30, 2000 was $107.3 million, increases of $25.0 million or
71% and $44.3 million or 70%, respectively over the comparable periods in 1999.
The increases were primarily due to higher product sales and third party
research and development revenue. Operating income for the quarter ended
June 30, 2000 was $21.4 million, a 50% increase over the comparable period of
1999 and for the six months ended June 30, 2000 operating income was
$35.6 million, a 42% increase over the comparable period in 1999. Net income of
$22.3 million, or $0.31 per share on a diluted basis, was earned in the quarter
ending June 30, 2000, a 106% increase over net income of $10.9 million, or $0.21
per share on a diluted basis, in the comparable period of 1999. During the first
quarter of 2000, we repurchased all of our outstanding 10 7/8% U.S. Dollar
Senior Notes (the "Senior Notes") at a premium resulting in an extraordinary
charge of $20.0 million. Income before this extraordinary item for the six
months ended June 30, 2000, was $35.5 million, or $0.50 per share on a diluted
basis, an increase of 94% over income before extraordinary item of
$18.3 million, or $0.35 per share on a diluted basis, in the same period of
1999. Net income for the six months ended June 30, 2000 was $15.4 million, or
$0.22 per share on a diluted basis, compared to net income of $18.3 million, or
$0.35 per share on a diluted basis, in the comparable period of 1999.
Product sales for the quarter ended June 30, 2000 were $42.4 million and for
the six months ended June 30, 2000 were $76.0 million, increases of
$17.4 million or 70% and $38.5 million or 102%, respectively over the comparable
periods in 1999. The growth in product sales was attributable to sales of
generic Adalat CC and Voltaren XR in the U.S. and increased sales of
Tiazac-Registered Trademark- and Celexa in Canada.
Research and development revenue for the quarter ended June 30, 2000 was
$15.5 million and for the six months ended June 30, 2000 was $26.0 million,
increases of $7.6 million or 97% and $12.0 million or 86%, respectively over the
comparable periods in 1999. The increase was primarily due to a higher level of
activity relating to the development of branded products on behalf of
Intelligent Polymers Limited ("IPL").
Net royalty and licensing revenue for the quarter ended June 30, 2000 was
$2.6 million and for the six months ended June 30, 2000 was $5.3 million,
compared to $2.6 million and $11.5 million in the same periods of 1999. The
decline in royalty and licensing revenue for the six months ended June 30, 2000,
compared to the same period in 1999, was due to a fee received in the first
quarter of 1999 from Mylan Pharmaceuticals Inc. ("Mylan") related to a
co-marketing agreement with respect to a generic version of Verelan.
12
<PAGE>
COST OF GOODS SOLD AND GROSS MARGINS
The cost of goods sold as a percentage of product sales was 32% for the
quarter and six months ended June 30, 2000, compared to 31% for the quarter
ended June 30, 1999 and 34% for the six months ended June 30, 1999.
Gross margins on product sales for the quarter and six months ended
June 30, 2000 were 68%, compared to 69% for the quarter ended June 30, 1999 and
66% for the six months ended June 30, 1999. The Company's gross margins are
impacted by product sales price, product mix, manufacturing volumes and
manufacturing costs. The improvement in gross margins for the six months ended
June 30, 2000 compared to the same period in 1999 was due to the higher margin
contributions from new products.
RESEARCH AND DEVELOPMENT
Research and development expenses for the quarter ended June 30, 2000 were
$13.9 million and for the six months ended June 30, 2000 were $25.7 million,
increases of $7.5 million or 116% and $13.9 million or 118%, respectively over
the comparable periods in 1999. The increased spending related to increased
activity on the development of NDA products for IPL and the development of rapid
dissolve products utilizing our Flash Dose-Registered Trademark- technology.
The Company has continued its development of acquired in-process research
and development projects relating to the Fuisz acquisition. In April 2000, the
first commercialization of a Flash Dose product Nurofen Meltlets, a new form of
ibuprofen, was approved and launch in the United Kingdom.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses for the quarter ended June 30,
2000 were $11.6 million and for the six months ended June 30, 2000 were
$21.4 million, increases of $4.8 million or 70% and $8.1 million or 61%,
respectively over the comparable periods in 1999. The increases were due to
increased legal activity, the addition of Biovail Technologies Ltd. including
the amortization of goodwill and executive additions to our management team.
OPERATING INCOME
Operating income increased to $21.4 million for the quarter ended June 30,
2000, from $14.3 million for the same period of 1999. For the six months ended
June 30, 2000, operating income increased to $35.6 million from $25.1 million in
the comparable period of 1999.
Segment operating income for the quarter ended June 30, 2000, before
unallocated selling, general and administrative expenses, was $23.2 million,
compared to $16.3 million for the same period of 1999. Of the 2000 total,
product sales accounted for $21.9 million, compared to $12.9 million in 1999.
This increase relates primarily to sales of generic Adalat CC and Voltaren XR in
the U.S. and increased sales of Tiazac-Registered Trademark- and Celexa in
Canada. The research and development segment had an operating loss of
$1.2 million in 2000, compared to operating income of $876,000 in 1999. The loss
in 2000 is attributable to work being performed at Biovail Technologies Ltd. to
develop rapid dissolve products that will utilize our Flash
Dose-Registered Trademark- technology. Royalty and licensing activities
generated operating income of $2.6 million in 2000, compared to $2.5 million in
1999.
Segment operating income for the six months ended June 30, 2000, before
unallocated selling, general and administrative expenses, was $39.6 million,
compared to $28.5 million for the same period of 1999. Of the 2000 total,
product sales accounted for $38.3 million, compared to $16.1 million in the
prior year. The research and development segment had an operating loss of
$4.0 million in 2000, compared to operating income of $1.2 million in 1999. The
changes in the product sales and research and development segments, as between
2000 and 1999, are attributable to the same factors as set forth above for the
second quarter. Royalty and licensing activities generated operating income of
$5.3 million in 2000, compared to $11.3 million in 1999, which included the fee
received related to the co-marketing agreement with Mylan with respect to
Verelan in the first quarter of 1999.
13
<PAGE>
INTEREST
Net interest income was $2.4 million for the quarter ended June 30, 2000
compared to net interest expense of $2.7 million in the same period of 1999. For
the six months ended June 30, 2000, net interest income was $2.1 million
compared to net interest expense of $5.4 million in the same period of 1999. For
the quarter and six months ended June 30, 2000, interest income was earned
primarily on the proceeds from the concurrent offering on March 22, 2000 of
6.75% Convertible Subordinated Preferred Equivalent Debentures, due March 31,
2025 (the "Convertible Preferred Securities") and two million common shares,
that have been invested in high-grade commercial paper. Partially offsetting the
interest earned on these proceeds, was interest expense on the Convertible
Preferred Securities after March 22, 2000 and on the Senior Notes prior to this
date. In 1999, net interest expense was primarily related to interest on the
Senior Notes.
INCOME TAXES
Income taxes for the quarter ended June 30, 2000 were $1.4 million compared
to $775,000 in the same period of 1999. For the six months ended June 30, 2000,
income taxes were $2.3 million compared to $1.3 million in the same period of
1999. The Company's tax provision is related to our foreign subsidiaries, in
which lower statutory tax rates apply than those in Canada. The benefit of tax
losses historically incurred by the Canadian operations and by the U.S.
operations of Biovail Technologies Ltd. has not been recognized for accounting
purposes to-date.
INCOME BEFORE EXTRAORDINARY ITEM
Income before extraordinary item for the six months ended June 30, 2000 was
$35.5 million, or $0.50 per share on a diluted basis, and $18.3 million, or
$0.35 per share on a diluted basis, for the comparable period of 1999.
EXTRAORDINARY ITEM
In March 2000, we successfully tendered for and retired our Senior Notes. We
recorded a $20.0 million extraordinary charge related to the premium paid on
early extinguishment and the write-off of the deferred financing costs
associated with the notes.
NET INCOME
Net income for the quarter ended June 30, 2000 was $22.3 million, or $0.31
per share on a diluted basis, compared to $10.9 million, or $0.21 per share on a
diluted basis, in the same period of 1999. After deducting the extraordinary
item, net income for the six months ended June 30, 2000 was $15.4 million, or
$0.22 per share on a diluted basis, compared to $18.3 million, or $0.35 per
share on a diluted basis, for the same period of 1999.
EBITDA
For the reasons set forth above, EBITDA, which is defined as earnings before
interest, taxes, depreciation and amortization, increased by $9.9 million or 62%
to $25.9 million for the quarter ended June 30, 2000 from $16.0 million in the
comparable period of 1999. For the six months ended June 30, 2000, EBITDA
increased by $17.4 million or 62% to $45.6 million from $28.2 million in the
comparable period of 1999. The ratio of total debt at June 30, 2000 to EBITDA
for the six months ended June 30, 2000 was 6.6:1 compared to 4.5:1 for the same
periods of 1999.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2000, our cash position was $447.5 million, our cash plus
short-term investments was $509.1 million and our working capital was
$554.2 million, representing a working capital ratio of 9.7:1. At December 31,
1999, our cash position was $178.1 million, our cash plus short-term investments
was $244.0 million and our working capital was $265.7 million, representing a
working capital ratio of 4.6:1.
Cash flows from operating activities (after changes in non-cash operating
items) was $10.2 million for the six months ended June 30, 2000 compared to
$32.9 million in the same period of 1999. The decline from the
14
<PAGE>
prior year was primarily due to increases in accounts receivable and
inventories, reflecting higher levels of product shipments and manufacturing
activity.
Cash flows from investing activities, for the six months ended June 30,
2000, totaled $16.4 million and related mainly to the proceeds from the sale of
Clonmel Healthcare Limited ("Clonmel") of $20.0 million and the net activity in
short-term investments of $4.2 million. Additions to property, plant and
equipment totaled $5.8 million in the six months ended June 30, 2000 compared to
$2.8 million in same period of 1999. Acquisitions of long-term investments
totaled $2.3 million in the six months ended June 30, 2000 and no investments
were made in the same period of 1999. For the six months ended June 30, 1999, we
had acquired product rights for $1.8 million.
Cash flows from financing activities, for the six months ended June 30,
2000, include the concurrent offering on March 22, 2000 of Convertible Preferred
Securities and common shares. The Convertible Preferred Securities were issued
for gross proceeds of $300 million ($289.4 million, net of financing costs) and
the common shares were issued for gross proceeds of $101.1 million
($95.7 million, net of issuance costs). On the same date, $141.0 million of the
proceeds were used to repurchase the $125 million principal of our outstanding
Senior Notes, and pay a premium of $16.0 million. We reduced other long-term
debt, principally through the repayment of the term bank loan in connection with
the sale of Clonmel, by $10.7 million. Common shares issued on the exercise of
stock options generated $7.1 million during the six months ended June 30, 2000.
In the same period of 1999, cash used in financing activities reflected the
repurchase of common shares in the amount of $23.6 million and the repayment of
long-term debt of $300,000, offset in part by the issuance of common shares on
the exercise of stock options for $2.1 million. Cash received from IPL pursuant
to the development and licensing agreement is prorated between research and
development revenue and the warrant subscription receivable. For the six months
ended June 30, 2000, the amount allocated to the warrant subscription receivable
was $2.3 million compared to $1.4 million in the same period of 1999.
Exchange rate changes on foreign currency denominated cash balances resulted
in a decrease in cash of $73,000 in the six months ended June 30, 2000 as
compared to a increase in cash of $117,000 in the same period of 1999.
As a result of the foregoing, we had positive cash flow of $269.4 million
for the six months ended June 30, 2000 compared to $8.1 million in the same
period of 1999.
After completing our Convertible Preferred Securities offering, the
repurchase of our Senior Notes and the repayment of a portion of our other
long-term debt, we had total long-term debt (including current portions thereof)
of $301.3 million at June 30, 2000, compared to $137.5 million at December 31,
1999. The debt-to-equity ratio at June 30, 2000 was 0.8:1 compared to 0.5:1 at
December 31, 1999. Long-term debt at June 30, 2000 was comprised of
$300 million of Convertible Preferred Securities and $1.3 million of other debt.
In addition, we have a $75 million banking facility available. At June 30, 2000,
we had not utilized any portion of this facility.
We believe we have adequate capital and sources of financing to support our
ongoing operational and interest requirements and investment objectives. We
believe that we would be able to raise capital, if necessary, to support our
objectives.
It is possible that our results of operations for the current fiscal year
will be impacted by potential costs relating to the rationalization of certain
of our research and development facilities. We are currently evaluating our
business plans and, accordingly, we are not able to determine the costs of this
process at the present time.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
We do not believe that we have material exposure to financial market risks,
including changes in foreign currency exchange rates and interest rates on debt
instruments and short-term investments.
We and our subsidiaries generate revenue and incur expenses primarily in
U.S. dollars. We do not believe that we have significant exposure to exchange
risk because of the relative stability of the Canadian dollar in relation to the
U.S. dollar.
15
<PAGE>
On March 22, 2000, we issued $300 million of Convertible Preferred
Securities. The interest rate on these securities is fixed and therefore is not
subject to interest rate risk. The proceeds were used, in part, to repurchase
our $125 million of Senior Notes, due November 15, 2005 for consideration of
$141.0 million. Such consideration included a consent payment of $2.5 million
and a premium of approximately $13.5 million calculated by reference to the bid
price and yield on March 6, 2000 for the 5 3/4% U.S. Treasury Note due
November 20, 2002.
From time to time we have surplus funds available for investment. Our policy
is to invest such funds in high-grade commercial paper and U.S. government
treasury bills with varying maturities, typically of less than 90 days. In light
of the high quality and short-term duration of these investments, the Company
believes that there is no significant risk to the principal value of these
investments.
Inflation has not had a material impact on our operations.
RECENT ACCOUNTING DEVELOPMENTS
The Financial Accounting Standards Board has issued Statement No. 133
"Accounting for Derivative Instruments and Hedging Activities", as amended by
Statement No. 137, which is required to be adopted in the first quarter of 2001.
We are determining the impact of the adoption of the new statement.
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements"
("SAB 101"). In March 2000, the SEC delayed the implementation date of SAB 101
to the second quarter of 2000. In July 2000, the SEC further delayed the
implementation date to the fourth quarter of 2000. SAB 101 summarizes the SEC's
views in applying GAAP to revenue recognition in financial statements. We are
continuing to evaluate SAB 101's potential future impact on our financial
position and results of operations with respect to upfront fees and milestone
payments earned by us under certain research and development agreements and
under certain licensing and supply agreements. It is possible that under SAB
101, certain of these fees would be required to be deferred and recognized as
revenue over future periods rather than immediately on a one-time basis.
FORWARD -- LOOKING STATEMENTS
To the extent any statements made in this report contain information that is
not historical, these statements are essentially forward-looking. As such, they
are subject to risks and uncertainties, including the difficulty 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.
16
<PAGE>
BIOVAIL CORPORATION
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 30, 2000 are as follows:
a) On May 30, 2000, the Company announced Senior Executive appointments.
b) On June 29, 2000, the Company announced the successful completion of the
development of a novel controlled release formulation of
Celexa-Registered Trademark- citalopram.
c) On July 25, 2000, the Company announced that it had received tentative
approval from the FDA for its generic version of Procardia XL.
d) On July 27, 2000, the Company announced record second quarter 2000
financial results.
2. LEGAL PROCEEDINGS
For detailed information concerning legal proceedings, reference is made to
Note 11 in the financial statement contained as part hereof and to the Annual
Report on Form-20F for the year ended December 31, 1999.
3. MATERIAL ISSUED TO SHAREHOLDERS
The material issued by the Company to shareholders are attached as the
following exhibits:
Exhibit 99.1 Consolidated financial statements in U.S. dollars and in
accordance with Canadian GAAP
Exhibit 99.2 Interim Report 2000 -- Second Quarter Report to Shareholders
4. ADDITIONAL DEVELOPMENTS
SENIOR EXECUTIVE APPOINTMENTS
In May 2000, Brian H. Crombie was appointed Senior Vice President and Chief
Financial Officer of the Company and Michel P. Chouinard was appointed Vice
President and General Manager of Crystaal.
PROCARDIA XL
In July 2000, the Company received tentative approval from the U.S. Food and
Drug Administration for its generic once daily controlled release version of
Procardia XL. Procardia XL is a nifedipine product indicated for the treatment
of hypertension and angina.
NUROFEN MELTLETS
In April 2000, the first commercial introduction of a Flash
Dose-Registered Trademark- product took place. Nurofen Meltlets, a new form of
ibuprofen, were launched in the United Kingdom by Crookes Healthcare Ltd., a
division of Boots Healthcare International. Nurofen Meltlets are manufactured
for Boots by the Company's subsidiary, Biovail Technologies Ltd., using its
patented Flash Dose-Registered Trademark- technology.
ADALAT CC
In March 2000, the Company received final approval from the U.S. Food and
Drug Administration for its in-licensed 30mg dosage strength of Adalat CC. The
Company in-licensed the 30mg dosage strength from Elan Corporation plc in
October 1999. This arrangement allowed the Company to market the 30mg dosage
strength, through its marketing partner Teva Pharmaceuticals Industries Ltd.,
six months earlier than originally scheduled.
VOLTAREN XR
In February 2000, the Company received final approval from the U.S. Food and
Drug Administration for its generic version of Voltaren XR. The Company
immediately began to market its generic Voltaren XR through its marketing
partner, Teva Pharmaceuticals Industries Ltd.
17
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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.
<TABLE>
<S> <C> <C>
BIOVAIL CORPORATION
By: /s/ JOHN R. MISZUK
----------------------------------------------
John R. Miszuk
VICE PRESIDENT, CONTROLLER
</TABLE>
August 25, 2000
18
