Just a week after taking the hot seat at the top of struggling pharmaceutical maker Biovail Corp., Bill Wells launched the company yesterday on a new trajectory that he, and investors, hope will lead it back to health.
The former Loblaw executive, who became chief executive officer on May 1, announced a shift that will see Biovail focus on niche drugs that treat disorders of the central nervous system (CNS) - afflictions such as multiple sclerosis, Alzheimer's, and epilepsy.
Biovail has lately been suffering from intense generic competition, and that was reflected in first-quarter results released yesterday that showed a 16-per-cent decrease in sales and a 40-per-cent profit decline.
Mr. Wells said the company needs to move away from its focus on creating convenient formulas - such as once-a-day doses - of existing drugs, and from its tendency to try to develop products with vast markets.
"I think we've had a tendency at Biovail in the past to look for blockbusters," Mr. Wells said in an interview. "The problem is it's much harder to find those blockbusters these days, and the risk is much higher. I'd far rather have a portfolio of drugs in the $100-million to $300-million [sales] range than one drug in the $1-billion range."
With several of its existing drugs already designed to deal with CNS problems such as pain or depression, the company already has lots of expertise in this area, Mr. Wells said. But research and development will now centre on drugs in this sector where there are high-growth, and less competitive, niche markets.
The company will not do basic research, however. It will license or acquire new drugs already in the works and then do the R&D to ready them for market. To help guide it, Biovail will hire a new chief scientific adviser, set up an advisory board, and eventually hire a small specialized sales force.
To pay for this, the company is cutting costs by closing down a couple of plants in Puerto Rico, and trimming its legal expenses. But with more than $400-million in cash and no debt, the company can afford the transition while keeping up its dividend and even funding a round of share buybacks, Mr. Wells said. "We are in a very strong position to do this, and the main reason is that we have the cash."
Still, the change in direction at Biovail will bring close scrutiny, not least from its founder and biggest shareholder, Eugene Melnyk, who is in a proxy battle with the company.
Yesterday, a source close to Mr. Melnyk declared the former CEO "pretty unimpressed" with the planned changes.
In a letter to the U.S. Securities and Exchange Commission, filed yesterday before the restructuring was announced, Mr. Melnyk expressed concern over Mr. Wells' capabilities.
The letter, addressed to the Biovail board, said Mr. Melnyk was "astonished" that Mr. Wells' employment contract will give him a multimillion-dollar payout if he is displaced as CEO, something Mr. Melnyk expects to happen if a slate of new directors he is proposing is elected at the annual meeting.
The letter also says Mr. Wells appears to have been appointed without "a proper search," and that he has "no experience" in the industry.
Mr. Wells, who was chief financial officer at Loblaw before joining Biovail, wouldn't comment specifically on Mr. Melnyk's complaints, saying only that "it's predictable in these circumstances."
Mr. Wells said he brings "a fresh pair of eyes" to Biovail's business, and he has broad experience in corporate restructuring. At the same time, there is tremendous pharmaceutical experience still in the senior ranks of the company, Mr. Wells said.
Analyst Claude Camiré of Paradigm Capital Inc., said he was impressed that Mr. Wells acted so fast. "I like his execution speed."
BIOVAIL (BVF)
Close: $12.50, up 68¢
Biovail Corp.
| Q1 | 2008 | 2007 |
| Profit | $56.4-million | $93.8-million |
| EPS | 35¢ | 58¢ |
| Revenue | $208.5-million | $247-million |
U.S. dollars
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