Updated from 3:38 p.m. EDT
Shares of Toronto-based drugmaker
continued to get flogged Monday as more investors digested -- and gagged on -- the company's warning last week that third-quarter earnings and revenue would be much lower than had been expected.
The stock fell 7.7%, or $2.40, to $28.70 in afternoon trading. The stock was hammered Friday -- falling 17.7% as three investment banking firms cut their ratings -- following Biovail's announcement of the profit and revenue shortfall.
Biovail said revenue for the quarter ended Sept. 30 would fall to a range of $215 million to $235 million compared with the previous guidance of $260 million to $300 million. The earnings per share guidance was dropped to a range of 35 cents to 40 cents compared with the previous estimate of 58 cents to 68 cents.
The bad news has three components:
A company truck filled with a newly approved antidepressant, Wellbutrin XL, was involved in a serious traffic accident near Chicago on Oct. 1. Because the truck left a Biovail plant in the province of Manitoba on Sept. 30, the drugs were considered as sold during the third quarter. The truck was carrying $10 million to $20 million worth of the product; and the company said the material will be returned to the plant so it can determine how much, if any, of the shipment can be salvaged.
Sales of the company's heart disease drug Cardizem CD have been hampered by production problems and ordering backlogs with its supplier, the French pharmaceutical giant Aventis.
Royalties from the company's generic version of the ulcer drug Prilosec were lower than expected because a distributor of the product enacted what Biovail called "significant price reductions on a retroactive basis" to drug wholesalers.
Until Thursday's announcement, analysts' opinions -- at least the consensus views tracked by Thomson First Call -- had been extraordinarily favorable. Even now, the buy ratings (13) outnumber the hold ratings (five) and sell ratings (one).
And by Monday, some analysts who liked Biovail before said they still liked the company as its stock sinks into what they consider bargain-buy territory.
"The bad news is mostly priced in," said Andrew Forman, of the Arlington, Va.-based investment banking firm of Friedman Billings Ramsey. He told clients in a research report that he maintained his outperform rating, reducing his price target to $42 from $50 and saying "the downside is limited to $30."
Forman said he is keeping his rating primarily because Wellbutrin XL has a strong future. The original Wellbutrin was developed by GlaxoSmithKline, which is serving as a partner in marketing the revised version which is taken once a day -- instead of twice a day -- and which has fewer side effects (less weight loss, fewer sexual problems) than did the original. He is bearish on the prospects for revenue from the heart and ulcer drugs. Forman doesn't own shares; his firm doesn't have an investment banking relationship with Biovail.
Another analyst who remained stirred but not shaken in his view of Biovail is Douglas Miehm, of RBC Capital Markets, who told clients Monday he was maintaining his outperform rating. Miehm said he was confident that Wellbutrin XL would propel the company's stock because the drug "represents one of the most important launches" among the specialty drug sector -- companies that sell generics as well as improved versions of brand name drugs -- in the next two years.
"We would recommend purchase of the shares during this period of weakness," said Miehm's Monday research report. The analyst cut his price target to $43 from $54. He doesn't own shares; his Toronto-based firm is a market maker in Biovail's stock.
Another Biovail supporter keeping his buy rating is Steven Valiquette, of UBS, who told clients in a Monday research report that last week's bad news could be this week's buying opportunity. Valiquette cut his earnings and revenue estimates and dropped his stock target price to $43 from $55. He doesn't own shares, but his firm has had an investment banking relationship with Biovail.