Tough LegacyLife is full of surprises when you're Biovail ( BVF). Uncertainty around the Ontario pharmaceutical firm has created a feeding ground for hedge funds that see the stock as a pure "event" play. Biovail got a boost earlier this month when it announced a marketing partnership with Johnson & Johnson ( JNJ) for the sale of Tramadol ER, a pain reliever. "The partnering is fantastic news. They found the best partner," says David Maris, a Banc of America Securities analyst who is neutral on the stock. New York-based Deerfield Management, a specialized life science hedge fund, is long the stock and held 3.77 million shares, according to its most recent 13H filing. On the downside, Biovail, which manufactures Wellbutrin XL, is facing generic competition. OrbiMed Advisors, a hedge fund specializing in life science products, sold its 2.1 million-share position based on the generic risk, according to a source familiar with the sale. York Capital Management also sold almost a million shares, according to regulatory filings. Both trades looked prescient Thursday when Biovail tanked 13% to $22.30 after Anchen Pharmaceuticals obtained tentative approval for its generic version of Wellbutrin XL.
Rough PatchEverybody agrees that October was an ugly month for hedge funds, but the devil is in the details. Among various categories, so-called special situation strategies were hit hard by the bankruptcies of Refco ( RFXCQ) and Delphi ( DPHIQ). The problem wasn't necessarily investments in those specific situations (indeed, the Refco scandal was