(Adds company comments; in U.S. dollars)
By Scott Anderson
TORONTO, May 8 (Reuters) - Biovail Corp BVF.TO BVF.N said on Thursday that it will close operations in Puerto Rico, resulting in charges of $80 million to $100 million in the next few quarters, as it shifts focus to a new line of drugs.
Canada’s biggest publicly traded drugmaker, which has faced growing criticism for its dependence on a narrow stable of treatments, also said it plans to spend $600 million in research and development of new treatments for central nervous system (CNS) disorders through to 2012.
“Our previous model was just not working any more,” Bill Wells, Biovail’s recently appointed chief executive, told Reuters.
Wells said the focus on CNS treatments, which represent a $70 billion global market, will allow Biovail to get away from direct competition with the big transnational drug firms and concentrate on niche markets such as Parkinson’s disease and multiple sclerosis.
But he said the company would still maintain a focus on its key Wellbutrin and Cardizem drugs, noting that these products provide the cash flow to invest in “the next generation of products.”
“We are simply refocusing the business. We have a lot of cash flow and a lot of firepower and we are redirecting that firepower to where the opportunities are best.”
Shifting to the CNS niche markets will also shield Biovail for a longer period of time from generic versions of its new treatments. It has seen its revenue hit by copycat versions as early as three years after its products first hit the market.
Biovail also said it hoped to raise $100 million from the sale of other non-core assets. It plans to shift some of its operations to a facility in Manitoba.
It said the two Puerto Rico closures, expected over the next 18 to 24 months, should not result in any supply disruptions. About 250 employees are affected.
The company reported a first-quarter profit of $56.4 million, or 35 cents a share, down from $93.8 million, or 58 cents a share last year. That reflected lower sales of key products, investment losses and charges involved in terminating a safety study.
Analysts had, on average, expected earnings before exceptions of 38 cents a share on revenue of $199.8 million.
Biovail said revenue fell to $208.5 million, from $247 million, largely due to lower sales for its key Cardizem and Ultram products.
The company said it plans to buy back up to 14 million of its shares over the next year to help prop up a stock price that is down 59 percent in the past year. The shares were up 91 Canadian cents at C$12.75 on the Toronto Stock Exchange.
The new measures come just months after Biovail first said it planned to look at all areas of its operations.
Since then it has settled a number of regulatory and shareholder lawsuits and named Wells as chief executive.
But it still continues an embarrassing squabble with Eugene Melnyk, its founder and former chairman, who is proposing an alternative slate of directors at the June annual meeting.
Melnyk took another swat at the firm on Thursday for the April 22 hiring of Wells, a Biovail board member and former executive at grocer Loblaw Cos (L.TO), and his payment of $3.4 million for work between May 1 and June 25.
He also criticized the company for its lump sum payment agreements with Doug Squires, who moved from chief executive to chairman of the board.
“I am very concerned about the circumstances surrounding the entering into the employment agreements with senior management and the change in control provisions in those agreement,” Melnyk said in a letter to Biovail
“I intend to hold the directors and management fully accountable and personally responsible for any inappropriate action going forward and for the blatantly improper actions they have already taken.” ($1=$1.01 Canadian) (Reporting by Scott Anderson; editing by Rob Wilson)