-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MOOW+T2VooP44vkjdoUh7rlXV2aSZ0YW6iPZerFHSjkkAehBYLwkAR+JtQ7rY59H OmZkmg6P4OY1fXgdMfPsJw== 0000950135-99-004261.txt : 19991027 0000950135-99-004261.hdr.sgml : 19991027 ACCESSION NUMBER: 0000950135-99-004261 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990830 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BIOVAIL CORPORATION INTERNATIONAL CENTRAL INDEX KEY: 0000885590 STANDARD INDUSTRIAL CLASSIFICATION: 2834 IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 6-K SEC ACT: SEC FILE NUMBER: 001-14956 FILM NUMBER: 99702597 BUSINESS ADDRESS: STREET 1: 2488 DUNWIN DR STREET 2: MISSISSIAUGA CITY: ONTARIO STATE: A6 BUSINESS PHONE: 4162856000 MAIL ADDRESS: STREET 1: 2488 DUNWIN DR STREET 2: MISSISSAUGA CITY: ONTARIO STATE: A6 6-K 1 BIOVAIL CORPORATION INTERNATIONAL 1 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, 1999 COMMISSION FILE NUMBER 001-11145 BIOVAIL CORPORATION INTERNATIONAL (TRANSLATION OF REGISTRANT'S NAME INTO ENGLISH) 2488 DUNWIN DRIVE, MISSISSAUGA, ONTARIO L5L 1J9, CANADA (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (416) 285-6000 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 FOR 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_ 2 BIOVAIL CORPORATION INTERNATIONAL QUARTERLY REPORT INDEX PART 1. FINANCIAL INFORMATION CONSOLIDATED BALANCE SHEETS, JUNE 30, 1999 AND DECEMBER 31, 1998 ............................................... 1 CONSOLIDATED STATEMENTS OF INCOME FOR THE SIX MONTHS AND THE THREE MONTHS ENDED JUNE 30, 1999 AND 1998 .......................................... 2 CONSOLIDATED STATEMENTS OF CASH FLOW FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998.................. 3 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS .......................... 4 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS .......................................10 PART II. OTHER INFORMATION ..........................................16
(ALL DOLLAR AMOUNTS IN THIS DOCUMENT ARE EXPRESSED IN U.S. DOLLARS UNLESS OTHERWISE STATED.) 3 BIOVAIL CORPORATION INTERNATIONAL CONSOLIDATED BALANCE SHEETS (ALL DOLLAR AMOUNTS ARE EXPRESSED IN THOUSANDS OF U.S. DOLLARS)
JUNE 30, DECEMBER 31, 1999 1998 ----------- ------------ (UNAUDITED) (AUDITED) ASSETS CURRENT Cash and short-term deposits $ 86,358 $ 78,279 Accounts receivable 36,521 42,768 Inventories 15,199 10,542 Executive stock purchase plan loans (Note 2) 3,025 2,924 Deposits and prepaid expenses 3,264 3,357 ------------- ------------- 144,367 137,870 LONG-TERM INVESTMENTS (Note 3) 10,055 10,055 CAPITAL ASSETS, net 25,464 23,677 OTHER ASSETS, net 29,072 28,317 ------------- ------------- $ 208,958 $ 199,919 ============= ============= LIABILITIES CURRENT Accounts payable $ 7,300 $ 12,244 Accrued liabilities 5,561 4,129 Income taxes payable 1,293 1,004 Customer prepayments 16,126 4,516 Current portion of long-term debt 751 653 ------------- ------------- 31,031 22,546 LONG-TERM DEBT 125,856 126,182 ------------- ------------- 156,887 148,728 ------------- ------------- SHAREHOLDERS' EQUITY Share capital (Note 4) 21,019 19,428 Warrants 8,244 8,244 Retained earnings 22,059 24,748 Cumulative translation adjustment 749 (1,229) ------------- ------------- 52,071 51,191 ------------- ------------- $ 208,958 $ 199,919 ============= =============
The accompanying notes are an integral part of the consolidated financial statements 1 4 BIOVAIL CORPORATION INTERNATIONAL CONSOLIDATED STATEMENTS OF INCOME (ALL DOLLAR AMOUNTS EXCEPT PER SHARE DATA ARE EXPRESSED IN THOUSANDS OF U.S. DOLLARS) (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, 1999 1998 1999 1998 ---- ---- ---- ---- REVENUE Product sales $ 24,979 $ 17,296 $ 37,541 $ 28,763 Research and development 8,635 4,109 15,352 11,953 Royalty and licensing 2,550 3,850 11,502 6,428 ----------- ----------- ----------- ----------- 36,164 25,255 64,395 47,144 ----------- ----------- ----------- ----------- EXPENSES Cost of goods sold 7,848 6,867 12,887 12,009 Research and development 6,459 4,103 11,783 8,132 Selling, general and administrative 6,359 4,143 12,604 8,454 ----------- ----------- ----------- ----------- 20,666 15,113 37,274 28,595 ----------- ----------- ----------- ----------- OPERATING INCOME 15,498 10,142 27,121 18,549 INTEREST EXPENSE, net (2,657) (89) (5,449) (157) ----------- ----------- ----------- ----------- INCOME BEFORE INCOME TAXES 12,841 10,053 21,672 18,392 PROVISION FOR INCOME TAXES 775 510 1,308 1,001 ----------- ----------- ----------- ----------- NET INCOME $ 12,066 $ 9,543 $ 20,364 $ 17,391 =========== =========== =========== =========== EARNINGS PER SHARE (Note 5) $ 0.49 $ 0.36 $ 0.83 $ 0.65 =========== =========== =========== =========== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 24,534,000 26,849,900 24,534,000 26,849,900 =========== =========== =========== ===========
The accompanying notes are an integral part of the consolidated financial statements 2 5 BIOVAIL CORPORATION INTERNATIONAL CONSOLIDATED STATEMENTS OF CASH FLOW (ALL DOLLAR AMOUNTS ARE EXPRESSED IN THOUSANDS OF U.S. DOLLARS) (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 1999 1998 ------------- ------------ NET INFLOW (OUTFLOW) OF CASH RELATED TO THE FOLLOWING ACTIVITIES OPERATING Net income for the period $ 20,364 $ 17,391 Depreciation and amortization 3,154 2,346 ------------ ------------ 23,518 19,737 Change in non-cash operating items 10,771 6,966 ------------ ------------ 34,289 26,703 ------------ ------------ INVESTING Additions to capital assets, net (2,785) (2,235) Executive stock purchase plan loans (Note 2) 31 116 Acquisition of product rights (1,811) - Acquisition of royalty interest - (15,000) Increase in other assets - (170) Long-term investments - (7,500) ------------ ------------ (4,565) (24,789) ------------ ------------ FINANCING Acquisition of share capital (Note 4) (23,550) - Issuance of share capital 2,088 3,858 Reduction in other long-term debt (300) (7,840) Increase in other long-term debt - 14,706 ------------ ------------ (21,762) 10,724 ------------ ------------ EFFECT OF EXCHANGE RATE CHANGES ON CASH 117 (31) ------------ ------------ INCREASE IN CASH 8,079 12,607 ------------ ------------ CASH AND SHORT-TERM DEPOSITS, BEGINNING OF PERIOD 78,279 8,275 ------------ ------------ CASH AND SHORT-TERM DEPOSITS, END OF PERIOD $ 86,358 $ 20,882 ============ ============
The accompanying notes are an integral part of the consolidated financial statements 3 6 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 Biovail Corporation International (the "Company"), was amalgamated effective March 29, 1994, under the laws of the province of Ontario. The Company's accounting and reporting policies conform to generally accepted accounting principles in Canada. There were no material differences between generally accepted accounting principles in Canada and generally accepted accounting principles in the United States in the reporting periods except for those described in Note 8. 1998 Figures Certain of the 1998 figures have been reclassified to conform to the 1999 presentation. For a full description of the other accounting policies of the Company, reference is made to the Annual Report on Form 20-F for the year ended December 31, 1998. In the opinion of management, all adjustments necessary for a fair presentation of the financial position, results of operations and cash flows for the period presented have been made and all such adjustments are of a normal recurring nature. 2. EXECUTIVE STOCK PURCHASE PLAN LOANS Executive Stock Purchase Plan ("ESPP") loans, of $3,024,532 at June 30, 1999, were made to finance the acquisition of shares of the Company on the open market by executive officers. The loans which are due on December 1, 1999, are secured by shares of the Company owned by the executive officers and bear interest at 1/4% over the bank prime rate, which is equal to the Company's rate for borrowing. 3. LONG-TERM INVESTMENTS In March, 1998, the Company made a $7,543,127 investment in a marketable securities fund. The investment is carried at cost, less provision to recognize any decline in value that is other than temporary. The fair value of the investment at June 30, 1999 was $5,022,902. In July, 1998, in connection with the acquisition from Celgene Corporation ("Celgene") of Canadian marketing and distribution rights in respect to immediate release and pulse release formulations of products containing d-methylphenidate hydrochloride, the Company made a $2,500,000 investment in common shares of Celgene, the supplier of the product. The fair value of the investment at June 30, 1999 was $3,507,021. 4 7 4. SHARE CAPITAL From January 1, 1999 to June 30, 1999, in accordance with the Company's stock repurchase program, the Company has repurchased an additional 598,700 common shares at a cost of $23,550,257. The excess of the cost of the common shares acquired over the stated capital thereof, totaling $23,053,011 has been charged to retained earnings. 5. EARNINGS PER SHARE Earnings per share, for all interim periods presented have been calculated using the weighted number of shares outstanding during the year. The earnings per share on a fully diluted basis giving effect to the exercise of all options and warrants granted would have been $0.44 and $0.33 for the three months ended June 30, 1999 and 1998 respectively and $0.76 and $0.61 for the six months ended June 30, 1999 and 1998 respectively. 6. LITIGATION From time to time, the Company 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 Company's filing of its ANDA applications. The timing of these actions is mandated by statute and may result in a delay of FDA's approval for such filed ANDAs until the final resolution of such actions or the expiry of 30 months, whichever occurs earlier. The Company is currently litigating a number of such actions and the Company is vigorously defending these suits by denying infringement of the patents and has or will be asserting counterclaims seeking damages for violation of the anti-trust laws of the U.S. and for tortious interference with the Company's prospective business advantage. While the Company is not currently able to determine the potential liability, if any, related to such matters, the Company believes none of the matters, individually or in aggregate, will have a material adverse effect on its financial position, results of operations or cash flows. 7. SEGMENTED INFORMATION AND MAJOR CUSTOMERS 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 Steinbach, Manitoba, facilities and sales by the Crystaal Division. 5 8 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 and product or technology licensing fees. The following table sets forth information regarding segment operating income:
RESEARCH ROYALTY SIX MONTHS ENDED PRODUCT AND AND JUNE 30, 1999 SALES DEVELOPMENT LICENSING TOTAL ------------- --------- ---------- ---------- ---------- Revenues from external customers $ 37,541 $ 15,352 $ 11,502 $ 64,395 --------- ---------- ---------- ---------- Segment operating income 15,834 2,575 11,277 29,686 Unallocated amounts Selling, general and administrative expenses (2,565) Interest expense, net (5,449) ---------- Income before income taxes $ 21,672 ==========
RESEARCH ROYALTY SIX MONTHS ENDED PRODUCT AND AND JUNE 30, 1998 SALES DEVELOPMENT LICENSING TOTAL ------------- ---------- ----------- --------- ---------- Revenues from external customers $ 28,763 $ 11,953 $ 6,428 $ 47,144 ---------- ---------- --------- ---------- Segment operating income 10,837 2,957 6,294 20,088 Unallocated amounts Selling, general and administrative expenses (1,539) Interest expense, net (157) ---------- Income before income taxes $ 18,392 ==========
6 9 8. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in Canada ("Cdn. GAAP") which differ in certain respects from those applicable in the United States ("U.S. GAAP"). The material differences as they apply to the Company's financial statements are as follows: a) Reconciliation of net income under Cdn. and U.S. GAAP
SIX MONTHS ENDED JUNE 30 ------------------------------ 1999 1998 ----------- ----------- Net income under Cdn. GAAP........................... $ 20,364 $ 17,391 U.S GAAP adjustments: Reversal of previously expensed product launch advertising costs (i)............... 238 - Collection of warrant subscription receivable (ii)............................ (1,397) (537) Compensation cost for employee stock options (iii).............................. (900) (1,888) ----------- ----------- Net income according to U.S. GAAP $ 18,305 $ 14,966 =========== =========== Earnings per share under U.S. GAAP Basic........................................... $ 0.75 $ 0.56 Fully diluted................................... $ 0.69 $ 0.55 Weighted average number of common shares outstanding under U.S. GAAP (000's) Basic........................................... 24,534 26,850 Fully diluted................................... 26,340 27,189
(i) For the purposes of reporting under U.S. GAAP, companies are required to write off certain product launch and advertising costs incurred during the year. This adjustment represents the portion of product launch and advertising costs currently expensed under Cdn. GAAP which have been previously written off under U.S. GAAP. (ii) See Note 8 (c) (iii) For the purposes of reporting under U.S. GAAP, the Company accounts for compensation expense for certain employee stock option plans under the provisions of Accounting Principles Board Opinion 25. No such expense is required to be determined under Cdn. GAAP. 7 10 b) Comprehensive income Under U.S. GAAP, the following additional disclosure would be provided pursuant to the requirements of SFAS No. 130 "Reporting Comprehensive Income" which establishes standards for the reporting of comprehensive income and its components:
SIX MONTHS ENDED JUNE 30 ---------------------------- Statement of comprehensive income 1999 1998 --------- --------- Net income according to U.S. GAAP............................. $ 18,305 $ 14,966 --------- --------- Other comprehensive income (loss), net of tax Foreign currency translation adjustment................... 1,978 173 Unrealized holding (loss) gain on long-term investments............................................ (636) 43 --------- --------- Other comprehensive loss...................................... 1,342 216 --------- --------- Comprehensive income under U.S. GAAP.......................... $ 19,647 $ 15,182 ========= =========
Accumulated other Comprehensive income (loss) balances JUNE 30, 1999 JUNE 30, 1998 ------------------------------------------ ------------------------------------------ FOREIGN UNREALIZED FOREIGN UNREALIZED CURRENCY LOSSES ON CURRENCY LOSSES ON TRANSLATION INVESTMENTS TOTAL TRANSLATION INVESTMENTS TOTAL ----------- ----------- ---------- ----------- ----------- ---------- Balance, beginning of year $ (1,229) $ (877) $ (2,106) $ (960) $ - $ (960) Current year change 1,978 (636) 1,342 173 $ 43 216 --------- --------- --------- --------- ------- --------- Balance, end of year $ 749 $ (1,513) $ (764) $ (787) $ 43 $ (744) ========= ========= ========= ========= ======= =========
c) The components of shareholders' equity under U.S. GAAP are as follows:
JUNE 30, DECEMBER 31, 1999 1998 ---------- ------------ Share capital........................................ $ 21,019 $ 19,428 Warrants............................................. 8,244 8,244 Warrants subscription receivable..................... (4,918) (6,315) Retained earnings.................................... 21,363 26,111 Other comprehensive loss ............................ (764) (2,106) ---------- ---------- $ 44,944 $ 45,362 ========== ==========
Under U.S. GAAP, the Company would record in paid-up capital an amount equal to the proceeds attributable to Warrants as determined at the time of their issuance along with an offsetting contra equity account, "Warrant subscription receivable". Under Cdn. GAAP, the offsetting amount has been recorded as a reduction in retained earnings. 8 11 9. SUBSEQUENT EVENT The Company entered into a definitive Merger Agreement (the "Merger Agreement") dated as of July 25, 1999 with Fuisz Technologies Ltd. ("Fuisz"). Pursuant to the terms of the Merger Agreement, the Company and Fuisz have agreed to enter into a two-stage transaction consisting of cash of approximately $75.6 million and stock of approximately $78.6 million that values Fuisz's shares at $7.00 per share, or approximately $154.2 million, based on the closing sale price of the shares of Biovail on July 23, 1999. The Board of Directors of the Company and Fuisz have approved the transaction. The consummation of the merger is subject to certain customary conditions, including approval by the shareholders of Fuisz, compliance with the Hart-Scott Rodino Antitrust Improvements Act, and certain other regulatory filings and approvals. The transaction is expected to close in the fourth quarter of 1999 and will be accounted for by the Company using the purchase method of accounting in accordance with the Canadian and U.S. GAAP. 9 12 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (ALL DOLLAR AMOUNTS ARE EXPRESSED IN U.S. DOLLARS) OVERVIEW Biovail Corporation International ("Biovail" or the "Company") derives its revenues from (i) developing and licensing oral controlled release products using its proprietary drug delivery technologies; (ii) manufacturing such products for sale to licensees and wholesalers; and (iii) providing pharmaceutical contract research services to third parties. RESULTS OF OPERATIONS Comparison of six months ended June 30, 1999 and June 30, 1998 Revenue for the first six months of 1999 was $64.4 million compared to $47.1 million in the comparable period in 1998. The increase was primarily due to an increase in product sales and royalty and licensing revenues. Net income increased 17.1% to $20.4 million or $0.83 per share in the first six months of 1999 from $17.4 million or $0.65 per share in the comparable period in 1998. Earnings per share have been calculated using the weighted average number of common shares outstanding during the period. REVENUE Product sales were $37.5 million for the first six months of 1999 as compared to $28.8 million in the comparable period in 1998. In 1999 revenues were generated primarily on sales of Tiazac(R) to Forest Laboratories ("Forest") for the U.S. market, Canadian market sales of Tiazac(R) by the Company's Crystaal Division ("Crystaal") and the product launch shipments of the Company's generic version of Verelan and Crystaal's launch of Brexidol, Retavase and Celexa. Research and development revenue was $15.4 million in the first six months of 1999, as compared to $12.0 million in the comparable period in 1998. The increase was primarily due to a record level of contract development activity for third parties at the Company's Contract Research Division and research and development work relating to the development of branded products on behalf of Intelligent Polymers Limited ("IPL"). Net royalty and licensing revenue was $11.5 million in the first six months of 1999, as compared to $6.4 million in the comparable period in 1998. The increase is primarily a result of increased royalty revenues from sales of Tiazac(R) in the U.S. market and product licensing fees received in the first quarter of 1999 related to the Company's agreement with Mylan with respect to Verelan. 10 13 COST OF GOODS SOLD AND GROSS MARGINS The cost of goods sold as a percentage of product sales decreased to 34% in the first six months of 1999 as compared to 42% in the comparable period in 1998. Gross margins in 1999 on product sales for the first six months were 66% as compared to 58% for the first six months of 1998. The Company's gross margins are impacted by product sales price, product mix, manufacturing volumes and manufacturing costs. The increase in gross margins was due to the impact of higher margins on new products and a higher level of Tiazac(R) trade product shipments. RESEARCH AND DEVELOPMENT Research and development expenses were $11.8 million for the first six months of 1999 as compared to $8.1 million in the comparable period in 1998. The increased spending reflected the increased level of research and development activity on branded generic products being developed on behalf of IPL, work related to the development of ANDA products and other activities for third party customers. SELLING, GENERAL AND ADMINISTRATIVE Selling general and administrative expenses were $12.6 million in the first six months of 1999 compared to $8.5 million in the comparable period in 1998. The increase was primarily a result of increased sales and marketing expenses related to the launch of Brexidol, Retavase and Celexa by Crystaal in Canada and a higher level of corporate activities. OPERATING INCOME Operating income increased to $27.1 million for the first six months of 1999 compared to $18.5 million for the comparable period in 1998. Segment operating income for the first six months of 1999, before unallocated selling, general and administrative expenses, was $29.7 million compared to $20.1 million in 1998. Of the 1999 total, product sales accounted for $15.8 million compared to $10.8 million in the previous year. This income relates primarily to the increased Tiazac(R) sales and the impact of new product launches for the Canadian market. The research and development segment accounted for $2.6 million in 1999 compared to $3.0 million in 1998, which included contribution to margins in respect of milestones attained under the Teva development agreement. Royalty and licensing activities generated segment operating income of $11.3 million in 1999, compared with $6.3 million in 1998. This increase primarily relates to higher Tiazac(R) Royalties and the licensing agreement with Mylan with respect to Verelan. INTEREST Net interest expense was $5.4 million in the first six months of 1999 compared to $157,000 in 1998. The increase was primarily due to the interest expense associated with the $125 million U.S. Dollar Senior Notes bearing interest at 10 7/8%, which the Company issued in November, 1998. 11 14 INCOME TAXES Income taxes in the first six months of 1999 were $1.3 million compared to $1.0 million in 1998. The Company's tax provision is reflective of the geographic sources of income at the appropriate rates within each tax jurisdiction. The benefit of tax losses in the Canadian entity has not been recognized for accounting purposes. NET INCOME Net income increased by 17.1% to $20.4 million for the first six months of 1999 as compared to $17.4 million in the comparable period in 1998. EBITDA For the reasons set forth above EBITDA, which is defined as earnings before interest, taxes, depreciation and amortization, increased by $9.4 million or 45% to $30.3 million for the first six months of 1999 from $20.9 million in the comparable period in 1998. The ratio of total debt at June 30, 1999 to EBITDA for the six months ended as of June 30, 1999 was 5.2:1 compared to 7.1:1 in 1998. LIQUIDITY AND CAPITAL RESOURCES The Company had cash and short-term deposits of $86.4 million at June 30, 1999, as compared to $78.3 million at December 31, 1998. At June 30, 1999, working capital was $113.3 million compared to $115.3 million at December 31, 1998, which represented a working capital ratio of 4.7: 1 as compared to 6.1: 1, respectively. Cash flow from operating activities (after adding back non-cash charges) was $34.3 million for the first six months of 1999 as compared to $26.7 million in the comparable period in 1998. Cash requirements for non-cash operating items decreased for the first six months of 1999 and were primarily attributable to a decrease in accounts receivable and an increase in customer prepayments. Investing activities in the first six months of 1999 totaled $4.6 million and related primarily to capital asset additions of $2.8 million and the acquisition of product rights, primarily by Crystaal, totaling $1.8 million. In the comparable period in 1998, investing activities totaled $24.8 million of which the majority related to the acquisition of the royalty interest from Galephar of $15 million, long-term investments of $7.5 million and additions to capital assets of $2.2 million. Net cash used in financing activities was $21.8 million for the first six months of 1999 as compared to net cash generated of $10.7 million in the comparable period in 1998. The cash utilization for the first six months of 1999 reflects the repurchase of common shares in the amount of $23.6 million the repayment of long-term debt of $300,000, offset in part by the issuance of share capital primarily on the exercise of stock options of $2.1 million. In the comparable period in 1998, cash generated was a result of a net increase of $6.9 million in long-term debt and $3.9 million from the issuance of shares on the exercise of stock options. 12 15 Exchange rate changes in foreign cash balances resulted in an increase in cash of $117,000 in the first six months of 1999 as compared to a reduction of cash of $31,000 in the comparable period in 1998. As a result of the foregoing, we had positive cash flow of $8.1 million for the six months of 1999 compared to $12.6 million in 1998. Total long-term debt (including current portions thereof) was $126.6 million as at June 30, 1999 compared to $126.8 million at December 31, 1998 resulting in a debt to equity ratio of 3.0:1 and 2.9:1, respectively. Long-term debt is comprised of $125 million U.S. Senior Notes and the balance of a non-interest bearing government loan. We believe we have adequate capital and sources of financing to support our existing ongoing operational requirements. As discussed below, the Company has entered into a merger agreement with Fuisz Technologies Ltd. ("Fuisz") which if completed, could increase our cash requirements. We intend to finance these cash requirements through a combination of cash provided by existing operations, new banking facilities, or by means of capital financing. Furthermore, we believe we will be able to obtain long-term capital, if necessary, to support our continued growth objectives. There can be no assurance, however, that these financial resources will be available on acceptable terms and will be sufficient to sustain our longer-term growth objectives. We and our subsidiaries generate revenue and expenses primarily in U.S. and Canadian dollars. In the first six months of 1999, revenue was generated in the following proportions: 89% in U.S. dollars, 11% in Canadian dollars. In addition, expenses were incurred in the following proportions: 68% in U.S. dollars, and 32% in Canadian dollars. We do not believe that our exposure to foreign currency exchange risk is significant because of the relatively minor, and diminishing, proportion of Canadian dollar to U.S. dollar denominated transactions. We have not historically utilized foreign currency hedging instruments. Inflation has not had a material impact on the Company's operations. ACQUISITION We have entered into a definitive Merger Agreement (the "Merger Agreement") dated as of July 25, 1999 with Fuisz. Pursuant to the terms of the Merger Agreement, the Company and Fuisz have agreed to enter into a two-stage cash and stock transaction that values Fuisz's shares at approximately $154 million, based on the closing sale price of the shares of Biovail on July 23, 1999. The details of the purchase are described below: On July 25, 1999, Biovail, Fuisz and ABCI Acquisition Sub. Corporation (the "Purchaser"), a Delaware corporation and an indirect wholly-owned subsidiary of Biovail, entered into the Merger Agreement pursuant to which Biovail agreed to cause the Purchaser to promptly commence an offer (the "Offer") to purchase up to 6,585,225 of the outstanding shares of common stock of Fuisz at a purchase price of U.S. $7.00 per share, net to the seller in cash. According to information provided by Fuisz to the Purchaser, there were 22,030,723 shares of 13 16 common stock of Fuisz outstanding as of July 25, 1999. The Purchaser and its affiliates beneficially own 4,209,829 of such shares. Accordingly, if the Purchaser purchases 6,585,225 shares of Fuisz pursuant to the Offer, Biovail and its affiliates will own, beneficially, approximately 49% of the outstanding shares of Fuisz. The Merger Agreement further provides, among other things, that, after the purchase of the shares of Fuisz pursuant to the Offer and subject to the satisfaction or waiver of certain conditions as set forth in the Merger Agreement, including the receipt of Fuisz shareholder approval, the Purchaser will be merged with and into Fuisz (the "Merger"), with Fuisz surviving the Merger as a wholly-owned subsidiary of Biovail. Pursuant to the terms of the Merger, each issued and outstanding share of Fuisz immediately prior to the effective time of the Merger (other than shares held by Biovail, the Purchaser or any direct or indirect wholly-owned subsidiary of Biovail) will be converted into the right to receive a fraction of a common share of Biovail based on an exchange ratio determined as follows: (i) if the Average Trading Price (as hereinafter defined) of a common share of Biovail is less than $45.00, the exchange ratio shall be 0.1556; (ii) if the Average Trading Price of a share of Biovail is greater than or equal to $45.00, but less than or equal to $58.625, the exchange ratio shall equal a fraction (rounded to the nearest ten thousandth) determined by dividing $7 by the Average Trading Price of a share of Biovail; (iii) if the Average Trading Price of a share of Biovail is greater than $58.625 but less than or equal to $62.810, the exchange ratio shall equal 0.1194; and (iv) if the Average Trading Price is greater than $62.810, the exchange ratio shall equal a fraction (rounded to the nearest ten-thousandth) determined by dividing $7.50 by the Average Trading Price of a share of Biovail. For purposes of the Merger Agreement, Average Trading Price is defined as a number equal to the average of the daily closing prices per common share of Biovail on the New York Stock Exchange (the "NYSE") Composite Transactions Reporting System, as reported in The Wall Street Journal for the fifteen trading days ending on the date immediately prior to the second full NYSE trading day immediately preceding the closing day. Upon the successful completion of the acquisition, we may need additional funds to finance the operating activities of Fuisz and to pay certain liabilities of Fuisz consisting of the $75 million Convertible Subordinated Debentures, which may become payable. The acquisition will be accounted for by the Company using the purchase method of accounting in accordance with Canadian and U.S. GAAP. 14 17 YEAR 2000 COMPLIANCE We continue to work actively on our Year 2000 program. At the end of July, 1999 most of our key systems and technologies were Year 2000 ready with the remainder scheduled to be ready in all material respects by the end of the third quarter of 1999, which is prior to any anticipated impact on our operating systems. The total cost of the Year 2000 project is estimated at $500,000 which is being funded through operating cash flow. To date, we have incurred approximately $450,000, related to the assessment of and preliminary efforts on our Year 2000 project and the development of a contingency plan. Approximately 50% of all cost associated with the Year 2000 project have been capitalized and will be amortized in accordance with company policy. The balance will be expensed as incurred. We utilize enterprise resource planning systems in the operation of our core business functions. In conjunction with third party consultants, substantial efforts have been made to test all components of the enterprise resource planning system for Year 2000 compliance. The evaluation of test results and any required remediation will be completed by the end of the third quarter of 1999. We have identified and contacted key suppliers, partners and collaborators to determine their stage of readiness for the Year 2000. Despite our best efforts, risks of third party compliance are not directly within the Company's control and are difficult to assess. To avoid manufacturing operations disruptions and product quality issues through failures of equipment or environmental systems, we have an inventory of all the equipment and software applications that we use in our operations that could be impacted in a material way by the Year 2000 issue. Any equipment identified as being susceptible to the Year 2000 problem will be retired from operations. The scope of our contingency plan in the event of Year 2000 difficulties includes environmental systems, computer systems, manufacturing equipment and the supply of goods and services. The contingency plan for each location within the Company will be completed by the end of the third quarter of 1999. We believe that we are taking the necessary steps to resolve the Year 2000 issues and are pleased with our programs and progress to date. Due to the general uncertainty inherent in the Year 2000 conversion, particularly related to the readiness of other parties, it is not possible to determine with certainty at this time whether the Year 2000 calendar change will have a material impact on the Company. FORWARD - LOOKING STATEMENTS To the extent any statements made in this report contains 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. 15 18 BIOVAIL CORPORATION INTERNATIONAL 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 27, 1999 are attached as the following exhibits: a) On June 30, 1999, the Company announced it had received tentative approval for its generic versions of Adalat CC. b) On July 2, 1999, the Company announced it had acquired from Spectral Diagnostics Inc. the exclusive rights to market Spectral's Cardiac STATus(TM) in Canada. c) On July 26, 1999, the Company and Fuisz Technologies Ltd. announced that they had entered into a definitive merger agreement for Biovail to acquire Fuisz in a cash and stock transaction. d) On July 28, 1999, the Company announced record 1999 second quarter and year-to-date financial results. 2. LEGAL PROCEEDINGS For detailed information concerning legal proceedings, reference is made to Note 16 in the financial statement contained as part hereof and to the Annual Report on Form-20F for the year ended December 31, 1998. 3. The material issued by the Company to shareholders are attached as the following exhibits: e) The 1999 First Quarter Report to shareholders. f) The 1999 Second Quarter Report to shareholders. 4. Reporting issued to Canadian Security Administrators and Stock Exchanges are attached as the following exhibits: g) Form 27 - Material Change Report. 16 19 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. Biovail Corporation International August 27, 1999 By /s/John R. Miszuk ----------------- John R. Miszuk Vice President, Controller 17 EX-99.A 2 PRESS RELEASE DATED JUNE 30, 1999 1 LOGO CONTACT: Eugene Melnyk Chairman of the Board Bob Podruzny President (416) 285-6000 FOR IMMEDIATE RELEASE: * BIOVAIL RECEIVES GENERIC ADALAT CC TENTATIVE APPROVAL * Toronto, Canada, June 30th, 1999 - Biovail Corporation International (NYSE, TSE: BVF) today announced that it has received tentative approval for its 30mg and 60mg generic versions of Adalat CC (nifedipine) from the United States Food and Drug Administration ("FDA"). Adalat CC is indicated for the treatment of hypertension and is marketed by Bayer Corporation. Sales of approximately $357 million were achieved in 1998 for Adalat CC, of which the 60mg strength accounted for approximately 45% and the 30mg strength accounted for 35% of sales, respectively. Biovail was the first company to file an abbreviated new drug application ("ANDA") with the FDA for the 60mg strength of Adalat CC and will be entitled to 180 days of marketing exclusivity. A competitor was the first to file for the 30mg strength and that product has received tentative FDA approval. Accordingly, Biovail will be able to launch its 30mg strength of Adalat CC upon expiry of the competitors exclusivity. Market introduction of Biovail's 60mg and 30mg strengths, as well as the competitors 30mg strength will depend upon the settlement of legal and patent issues with Bayer. Upon introduction, Biovail's generic version of Adalat CC will be marketed in the US by Teva Pharmaceuticals USA Inc., one of the premier marketers of generic products in the country. - more - BIOVAIL CORPORATION INTERNATIONAL 2488 DUNWIN DRIVE, MISSISSAUGA, ONTARIO, CANADA L5L 1J9 TEL (416) 285-6000 FAX (416) 285-6499 2 Eugene Melnyk, Chairman of the Board, commented that, "the approval of Adalat CC is an exciting milestone achievement for Biovail and is an added demonstration of the scientific and developmental capability of the company. In addition to Adalat CC, we also have our generic versions of Cardizem CD, Procardia XL, Voltaren SR and Dilacor XR awaiting FDA approval and expect to receive these approvals in due coarse." Biovail Corporation International is an international full-service pharmaceutical company, engaged in the formulation, clinical testing, registration and manufacture of drug products utilizing advanced drug delivery technologies. "Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995. To the extent any statements made in this release contain information that is not historical, these statements are essentially forward looking and are subject to risks and uncertainties, including the difficulty of predicting FDA and TPD 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 Securities and Exchange Commission. EX-99.B 3 PRESS RELEASE DATED JULY 2, 1999 1 LOGO CONTACT: Eugene Melnyk Chairman of the Board Bob Podruzny President (416) 285-6000 FOR IMMEDIATE RELEASE: *BIOVAIL ACQUIRES EXCLUSIVE RIGHTS TO MARKET SPECTRAL'S CARDIAC STATus(TM) IN CANADA* TORONTO, Canada, July 2nd, 1999 - Biovail Corporation International (NYSE, TSE: BVF) today announced that it has acquired from Spectral Diagnostics Inc. (NASDAQ: DIAGF, TSE: SDI) the exclusive rights to market Spectral's Cardiac STATus(TM) in Canada. Cardiac STATus(TM), a rapid, point of care diagnostic test, assists in the early identification of patients with heart attacks or other Acute Coronary Syndromes. Each year, approximately 750,000 Canadians go to hospital emergency departments complaining of chest pain. In a resource challenged environment such as the emergency department, early detection of Acute Myocardial Infarction (AMI) is pivotal in determining treatment options, the timely commencement of which can save lives. Cardiac STATus(TM) will be marketed by Biovail's Canadian marketing division, Crystaal, complemented with selling and implementation support by Spectral. In 1998 Crystal entered into an exclusive distributorship of Retavase(TM) (reteplase -rPA) in Canada with Centocor Inc. Retavase is a fibrinolytic agent used to treat patients who suffer from heart attacks. Rolf Reininghaus, President of Crystaal, commented "The addition of Spectral's Cardiac STATus(TM) product line provides a strong synergy with Retavase and a strategic advantage in the Acute Coronary Syndromes market. We are now poised to become the market leader in this rapidly growing 50 million dollar market segment." - more - BIOVAIL CORPORATION INTERNATIONAL 2488 DUNWIN DRIVE, MISSISSAUGA, ONTARIO, CANADA L5J 1J9 TEL (416) 285-6000 FAX (416) 285-6499 2 Crystaal will begin selling Cardiac STATus(TM) in July 1999. Crystaal's hospital and specialist group is currently marketing Tiazac(R), Biovail's once daily diltiazem formulation indicated for angina and high blood pressure, Retavase(TM), for the treatment of heart attack, and has secured the exclusive marketing rights to Corlopam(TM), an antihypertension agent for in-hospital use. Other products marketed by Crystaal consist of Brexidol(TM), a once daily analgesic product, and Celexa(TM) which is co-promoted with H. Lundbeck A/S of Copenhagen, Denmark for the treatment of depression. Crystaal also has the Canadian marketing rights for d-methylphenidate, a chiral preparation for the treatment of Attention Deficit Hyperactivity Disorder. Biovail Corporation International is an international full-service pharmaceutical company, engaged in the formulation, clinical testing, registration and manufacture of drug products utilizing advanced drug delivery technologies. "Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995. To the extent any statements made in this release contain information that is not historical, these statements are essentially forward looking and are subject to risks and uncertainties, including the difficulty of predicting FDA and TPD 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 filing with the Securities and Exchange Commission. EX-99.C 4 PRESS RELEASE DATED JULY 26, 1999 1 LOGO CONTACT: Eugene Melnyk Chairman of the Board Robert Podruzny President (416) 285-6000 Web Page: www.biovail.com Investor Relations e-mail: ir@biovail.com FOR IMMEDIATE RELEASE: *BIOVAIL TO ACQUIRE FUISZ TECHNOLOGIES* Acquisition to Expand Biovail's Pipeline of Products and Delivery Platforms. TORONTO, CANADA/CHANTILLY, VIRGINIA, July 26, 1999--Biovail Corporation International (NYSE, TSE: BVF) ("Biovail") and Fuisz Technologies Ltd. (Nasdaq: FUSE) ("Fuisz") today announced that they have entered into a definitive Merger Agreement for Biovail to acquire Fuisz in a two-stage cash and stock transaction that values Fuisz at $7.00 per share, or approximately $154 million, based on Biovail's closing share price of $58.625 on July 23, 1999. Fuisz has outstanding debt of approximately $91 million, for a total transaction value of approximately $245 million. Under the terms of the agreement, which has been approved by the Boards of Directors of both companies, Biovail will promptly commence a cash tender offer for a number of the outstanding common shares of Fuisz, which will result in Biovail owning 49% of the outstanding common shares of Fuisz. Upon completion of the cash tender, the remaining outstanding common shares of Fuisz will be exchanged for Biovail common shares in the ratio of 1 common share of Fuisz for 0.1194 common share of Biovail (the "Exchange Ratio"), subject to adjustment as provided in the Merger Agreement. The merger is subject to approval by the shareholders of Fuisz, expiration of the required waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and other customary conditions. - more - BIOVAIL CORPORATION INTERNATIONAL 2488 DUNWIN DRIVE, MISSISSAUGA, ONTARIO, CANADA L5L 1J9 TEL (416) 285-6000 FAX (416) 285-6499 2 Biovail currently beneficially owns approximately 19.2% of the outstanding common shares of Fuisz. The acquisition will be accounted for by Biovail using the purchase method of accounting and will reflect a one-time charge for the acquisition of in-process research and development as determined through independent assessment and valuation. Fuisz has advised Biovail that it expects its results for the fiscal quarter ended June 30, 1999 to be significantly below market expectations. The transaction is expected to be neutral to Biovail's earnings in 1999 and accretive in 2000. It is expected that the transaction will close in the fourth quarter of 1999. Eugene Melnyk, Chairman of the Board of Biovail, commented, "The acquisition of Fuisz allows Biovail to significantly expand its pipeline of products and drug delivery platforms. The microsphere technology and rapid dissolving formulations developed by Fuisz provide exciting potential for application on a wide array of drugs that will benefit from Fuisz's improved controlled release and taste masking technologies. We are confident that the technology platforms developed by Fuisz, in combination with those of Biovail, provide us with the foundation and leverage for a very broad portfolio of exciting applications." Dr. Richard Fuisz, Chairman of the Board of Fuisz Technologies commented, "The combination with Biovail should ultimately allow the shareholders of Fuisz to attain the level of success that befits the development of this extremely strong technological base. I have confidence that Eugene Melnyk will lead the way to substantive added value to our shareholders." Donaldson, Lufkin & Jenrette acted as financial advisor to Biovail and Warburg Dillon Reed LLC acted as financial advisor to Fuisz. Fuisz Technologies Ltd. is engaged in the development, manufacture and commercialization of a wide variety of pharmaceutical and healthcare products which utilize its proprietary CEFORM(TM), SHEARFORM(TM), and other drug delivery technologies. - more - 3 Biovail Corporation International is an international full-service pharmaceutical company engaged in the formulation, clinical testing, registration and manufacture of drug products utilizing advanced drug delivery technologies. The statements in this press release may contain forward-looking statements that involve a number of risks and uncertainties. In addition to the matters described in this press release, the success of integration of operations, the degree of dilution, the success of product approvals and marketing opportunities for each company's products, and the success in discovery research as well as other risks and uncertainties detailed from time to time in Securities and Exchange Commission reports filed by Biovail and Fuisz may affect the actual results achieved by Biovail and Fuisz. Biovail and Fuisz disclaim any intent or obligation to update these forward-looking statements. "Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995. To the extent any statements made in this release contain information that is not historical, these statements are essentially forward looking and are subject to risks and uncertainties, including the difficulty of predicting FDA 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 Securities and Exchange Commission. EX-99.D 5 PRESS RELEASE DATED JULY 28, 1999 1 LOGO CONTACT: Eugene Melnyk Chairman of the Board Robert Podruzny President John Miszuk Vice President, Controller (416) 285-6000 Web Page: www.biovail.com Investor Relations e-mail: ir@biovail.com FOR IMMEDIATE RELEASE: *BIOVAIL REPORTS RECORD 1999 SECOND QUARTER AND YEAR TO DATE FINANCIAL RESULTS* TORONTO, Canada, July 28, 1999 - Biovail Corporation International (NYSE, TSE:BVF) today reported record second quarter and six month financial results for the period ended June 30, 1999. Revenue for the second quarter and first half of 1999 increased by 43% and 37% respectively to $36.2 million and $64.4 million, compared to second quarter 1998 revenue of $25.3 million and first half 1998 revenue of $47.1 million. Operating income for the quarter was $15.5 million and for the first half of 1999 was $27.1 million, representing increases of 53% and 46% respectively over the comparable periods of 1998. Net income of $12.1 million or $0.49 per share was achieved in the quarter, a 26% increase over the net income of $9.5 million or $0.36 per share earned in 1998. For the first half of 1999, net income of $20.4 million or $0.83 per share was achieved, a 17% increase over $17.4 million or $0.65 per share in the comparable period of 1998. - More - BIOVAIL CORPORATION INTERNATIONAL 2488 DUNWIN DRIVE, MISSISSAUGA, ONTARIO, CANADA L5L 1J9 TEL (416) 285-6000 FAX (416) 285-6499 2 Revenue and income improvements in both the second quarter and first half of 1999 are primarily attributable to increasing market penetration of Tiazac(R), Biovail's prescription drug used in the treatment of angina and hypertension, in the United States and Canada. In addition, the launch of a generic version of the angina/hypertension drug Verelan in the United States and the Canadian launches of Retavase, a fibrinolytic clot dissolving product, Brexidol, used for the relief of pain and Celexa, an anti-depressant have all contributed to the company's increasing revenue and income performance. Eugene Melnyk, Chairman of the Board commented, "We are very pleased to report that the strategic initiatives undertaken at Biovail historically are today generating continually improving financial results. Our pipeline of products is very strong and is expected to contribute significantly in the near future. In addition, completion of the recently announced merger agreement with Fuisz Technologies Ltd. will provide the combined operations with leading edge drug delivery technology platforms that can be applied to a wide array of important drugs. This acquisition provides Biovail greater leverage to take advantage of the many exciting opportunities available to the company." Biovail Corporation International is an international full-service pharmaceutical company, engaged in the formulation, clinical testing, registration and manufacture of drug products utilizing advanced drug delivery technologies. "Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995. To the extent any statements made in this release contain information that is not historical, these statements are essentially forward looking and are subject to risks and uncertainties, including the difficulty of predicting FDA 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 Securities and Exchange Commission. 3 BIOVAIL CORPORATION INTERNATIONAL CONSOLIDATED BALANCE SHEETS (ALL DOLLAR AMOUNTS ARE EXPRESSED IN THOUSANDS OF U.S. DOLLARS)
JUNE 30, DECEMBER 31, 1999 1998 ----------- ------------ (UNAUDITED) (AUDITED) ASSETS Current Cash and short-term deposits $ 86,358 $ 78,279 Accounts receivable 36,521 42,768 Inventories 15,199 10,542 Executive stock purchase plan loans 3,025 2,924 Deposits and prepaid expenses 3,264 3,357 ----------- ---------- 144,367 137,870 LONG-TERM INVESTMENTS 10,055 10,055 CAPITAL ASSETS, net 25,464 23,677 OTHER ASSETS, net 29,072 28,317 ----------- ---------- $ 208,958 $ 199,919 =========== ========== LIABILITIES Current Accounts payable $ 7,300 $ 12,244 Accrued liabilities 5,561 4,129 Income taxes payable 1,293 1,004 Customer prepayments 16,126 4,516 Current portion of long-term debt 751 653 ----------- ---------- 31,031 22,546 LONG-TERM DEBT 125,856 126,182 ----------- ---------- 156,887 148,728 ----------- ---------- SHAREHOLDERS' EQUITY Share capital 21,019 19,428 Warrants 8,244 8,244 Retained earnings 22,059 24,748 Cumulative translation adjustment 749 (1,229) ----------- ---------- 52,071 51,191 ----------- ---------- $ 208,958 $ 199,919 =========== ==========
4 BIOVAIL CORPORATION INTERNATIONAL CONSOLIDATED STATEMENTS OF INCOME (ALL DOLLAR AMOUNTS EXCEPT PER SHARE DATA ARE EXPRESSED IN THOUSANDS OF U.S. DOLLARS) (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, 1999 1998 1999 1998 ----------- ----------- ----------- ----------- REVENUE Product Sales $ 24,979 $ 17,296 $ 37,541 $ 28,763 Research and development 8,635 4,109 15,352 11,953 Royalty and licensing 2,550 3,850 11,502 6,428 ----------- ----------- ----------- ----------- 36,164 25,255 64,395 47,144 ----------- ----------- ----------- ----------- EXPENSES Cost of goods sold 7,848 6,867 12,887 12,009 Research and development 6,459 4,103 11,783 8,132 Selling, general and administrative 6,359 4,143 12,604 8,454 ----------- ----------- ----------- ----------- 20,666 15,113 37,274 28,595 ----------- ----------- ----------- ----------- OPERATING INCOME 15,498 10,142 27,121 18,549 INTEREST EXPENSE (2,657) (89) (5,449) (157) ----------- ----------- ----------- ----------- INCOME BEFORE INCOME TAXES 12,841 10,053 21,672 18,392 PROVISION FOR INCOME TAXES 775 510 1,308 1,001 ----------- ----------- ----------- ----------- NET INCOME $ 12,066 $ 9,543 $ 20,364 $ 17,391 =========== =========== =========== =========== EARNINGS PER SHARE $ 0.49 $ 0.36 $ 0.83 $ 0.65 ----------- ----------- ----------- ----------- WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 24,533,987 26,849,900 24,533,987 26,849,900 ----------- ----------- ----------- -----------
5 BIOVAIL CORPORATION INTERNATIONAL CONSOLIDATED STATEMENTS OF CASH FLOW (ALL DOLLAR AMOUNTS ARE EXPRESSED IN THOUSANDS OF U.S. DOLLARS) (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 1999 1998 ---------- ---------- NET INFLOW (OUTFLOW) OF CASH RELATED TO THE FOLLOWING ACTIVITIES OPERATING Net income for the period $ 20,364 $ 17,391 Depreciation and amortization 3,154 2,346 ---------- ---------- 23,518 19,737 Change in non-cash operating items 10,771 6,966 ---------- ---------- 34,289 26,703 ---------- ---------- INVESTING Additions to capital assets, net (2,785) (2,235) Executive stock purchase plan loans 31 116 Acquisition of product rights (1,811) - Acquisition of royalty interest - (15,000) Increase in other assets - (170) Long-term investments - (7,500) ---------- ---------- (4,565) (24,789) ---------- ---------- FINANCING Acquisition of share capital (23,550) - Issuance of share capital 2,088 3,858 Reduction in other long-term debt (300) (7,840) Increase in other long-term debt - 14,706 ---------- ---------- (21,762) 10,724 ---------- ---------- Effect of exchange rate changes on cash 117 (31) ---------- ---------- INCREASE IN CASH 8,079 12,607 ---------- ---------- CASH AND SHORT-TERM DEPOSITS, BEGINNING OF PERIOD 78,279 8,275 ---------- ---------- CASH AND SHORT-TERM DEPOSITS, END OF PERIOD $ 86,358 $ 20,882 ========== ==========
EX-99.E 6 1999 INTERIM REPORT FOR FIRST QUARTER 1 BIOVAIL CORPORATION INTERNATIONAL LOGO INTERIM REPORT 1999 FIRST QUARTER 2 DEAR FELLOW SHAREHOLDER I am pleased to report that the first quarter of 1999 has been an excellent one for Biovail. The company has begun the year once again posting record quarterly financial results. Many factors contributed to these results, which continue to build on our achievements of last year. In addition to steady progress in our core business operations and increasing sales across our portfolio, the first quarter was marked by a significant international licensing agreement and several exciting milestones in our Canadian marketing endeavours. TIAZAC(R) EXPANSION In 1998, Biovail achieved record production and shipment levels of Tiazac(R), the Company's once-daily diltiazem medication. This was driven by steady market growth in the US for the hypertension indication, as well FDA approval for the treatment of angina and the introduction of a 420mg dosage - making Tiazac(R) the only 420mg once daily diltiazem product available in the large US market. In the first quarter of this year, Tiazac(R)'s potential in Canada was bolstered tremendously by its inclusion in the Ontario Drug Benefit Formulary (ODBF). Crystaal, Biovail's Canadian marketing division, had restricted access to Ontario, which represents 42% of the Cdn. $123 million diltiazem market in Canada. With the ODBF listing, market share is expected to grow significantly. CITALOPRAM JOINT DEVELOPMENT AND CO-PROMOTION In January, Biovail announced an exciting agreement to develop a novel controlled release formulation of the leading anti-depressant Citalopram. As part of a multi-faceted deal concluded with Citalopram's innovator, H. Lundbeck A/S of Denmark, Biovail will develop, manufacture and supply a controlled release version of Citalopram for commercialization by Lundbeck and its licensees. The deal also calls for Crystaal to co-promote with Lundbeck the current version of Citalopram in Canada. 3 Clinical depression affects countless people around the world, including one in ten Americans, and is associated with greater levels of physical and social impairment than other chronic conditions, including heart disease. Citalopram, a selective serotonin reuptake inhibitor, is marketed in more than 60 countries under the brand names Celexa, Cipramil and Seropram. The worldwide annual market for this class of anti-depressants is estimated to be in excess of $7 billion, with an annual growth rate of 17%. Citalopram has been shown to have an improved side effect profile and lower incidence of drug interactions compared to many other serotonin reuptake inhibitors. It is currently the best selling anti-depressant in 13 countries, including eight in Europe, where its sales are growing at the rate of 28% annually. CRYSTAAL PORTFOLIO EXPANSION The first quarter of 1999 has been an extremely busy one for Crystaal, the Company's Canadian marketing operation. In February, Health Canada's Therapeutic Products Programme approved the marketing of Celexa (Citalopram) for the symptomatic relief of depression. Under the terms of the recently completed agreement, Crystaal will co-promote Celexa in collaboration with Lundbeck Canada. Crystaal will concentrate its efforts on primary care physicians, where their strong sales network is already well established. The Canadian anti-depressant market is valued at approximately US$300 million annually. In addition, it is estimated that only a third of the 20-25% of Canadians who suffer from depression presently receive appropriate treatment. Also in the first quarter, Crystaal received marketing approval in Canada for Brexidol, a unique product for the treatment of mild to severe pain, including sports injuries, post-operative pain, primary dysmenorrhea, dental pain and headache. Brexidol, utilizes the Nobel Prize winning Host-Guest chemistry system, in-licensed from Chiesi Farmaceutici S.p.a. 4 Brexidol will compete in the Canadian pain and anti-inflammatory product market, valued at approximately US$150 million annually. The product has been marketed in Europe for nearly 10 years and has established an excellent safety and efficacy record in over 20 million patients. The addition of Celexa and Brexidol further enhances Crystaal's already impressive portfolio of exciting products, which also includes: Tiazac(R), Retavase, d-methylphenidate and Corlopam. RECORD FINANCIAL RESULTS Biovail marked the start of 1999 with record first quarter financial results. Revenues for the first quarter of 1999 were $28.2 million, a 29% increase over 1998 first quarter revenues of $21.9 million. Operating income for the first quarter was $11.6 million, a 38% improvement over 1998 first quarter figures of $8.4 million. Net income for the first quarter of 1999 was $8.3 million, or $0.34 per share, compared to net income of $7.8 million, or $0.29 share, realized in the first quarter of 1998. With this extremely positive start to 1999, and the continued progress in our sales and product development activities, the Company is well positioned for another excellent year. On behalf of the Board, I would like to thank all of our employees for their dedication and hard work, and our shareholders for their continued support of our Company. (signed) Eugene Melnyk EUGENE MELNYK Chairman of the Board 5 consolidated balance sheets (All dollar amounts are expressed in thousands of U.S. dollars)
MARCH 31, December 31, 1999 1998 (Unaudited) (Audited) ----------- --------- ASSETS Current Cash and short-term deposits $ 79,256 $ 78,279 Accounts receivable 41,383 42,768 Inventories 13,760 10,542 Executive loans 2,975 2,924 Deposits and prepaids 3,254 3,357 ---------- ---------- 140,628 137,870 LONG-TERM INVESTMENTS 10,055 10,055 CAPITAL 24,818 23,677 OTHER, net 27,769 28,317 ---------- ---------- $ 203,270 $ 199,919 ========== ========== LIABILITIES Current Accounts payable $ 7,319 $ 12,244 Accrued liabilities 8,147 4,129 Income taxes payable 594 1,004 Customer prepayments 13,956 4,516 Current portion of long-term debt 733 653 ---------- ---------- 30,749 22,546 LONG-TERM DEBT 125,836 126,182 ---------- ---------- 156,585 148,728 ---------- ---------- SHAREHOLDERS' EQUITY Share capital 20,939 19,428 Warrants 8,244 8,244 Retained earnings 18,345 24,748 Cumulative translation adjustment (843) (1,229) ---------- ---------- 46,685 51,191 ---------- ---------- $ 203,270 $ 199,919 ========== ==========
6 consolidated statements of income (all dollar amounts except per share data are expressed in thousands of U.S. dollars)
Three Months Ended March 31, (Unaudited) 1999 1998 - - - ----------- ---- ---- REVENUE Product Sales $ 12,562 $ 11,467 Research and development 6,717 7,844 Royalty and licensing 8,952 2,578 ------------ ------------ 28,231 21,889 ------------ ------------ EXPENSES Cost of goods sold 5,039 5,142 Research and development 5,324 4,029 Selling, general and administrative 6,245 4,311 ------------ ------------ 16,608 13,482 ------------ ------------ OPERATING INCOME 11,623 8,407 INTEREST INCOME (EXPENSE), net (2,792) (68) ------------ ------------ INCOME BEFORE INCOME TAXES 8,831 8,339 PROVISION FOR INCOME TAXES 533 491 ------------ ------------ NET INCOME $ 8,298 $ 7,848 ============ ============ EARNINGS PER SHARE $ 0.34 $ 0.29 ============ ============ WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 24,603,400 26,736,000 ============ ============
7 consolidated statements of cash flows (all dollar amounts data are expressed in thousands of U.S. dollars)
Three Months Ended March 31, (Unaudited) 1999 1998 - - - ----------- ---- ---- NET INFLOW (OUTFLOW) OF CASH RELATED TO THE FOLLOWING ACTIVITIES OPERATING Net income for the period $ 8,298 $ 7,848 Depreciation and amortization 1,489 1,164 ----------- ----------- 9,787 9,012 ----------- ----------- Changes in non-cash operating items: (Increase) decrease accounts receivable 1,466 (3,191) (Increase) decrease inventory (3,030) (2,332) (Increase) decrease deposits & prepaid expenses 103 (78) Increase (decrease) accounts payable & accrued liabilities (383) 339 Increase (decrease) income taxes payable (386) 135 Increase (decrease) customer prepayments 9,440 4,511 ----------- ----------- 7,210 (616) ----------- ----------- 16,997 8,396 ----------- ----------- INVESTING Additions to fixed assets, net (1,611) (1,207) Executive stock purchase plan loans (52) 213 Acquisition of royalty interest - (15,000) Long-term investments - (7,500) ----------- ----------- (1,663) (23,494) ----------- ----------- FINANCING Acquisition of share capital (14,933) - Issuance of share capital 1,424 3,660 Reduction in other long-term debt (300) (597) Repayment of other long-term debt - 15,000 ----------- ----------- (13,809) 18,063 ----------- ----------- EFFECT OF EXCHANGE RATE CHANGES ON CASH (548) 8 ----------- ----------- INCREASE (DECREASE) IN CASH 977 2,973 ----------- ----------- CASH, AND SHORT TERM DEPOSITS, BEGINNING OF PERIOD 78,279 8,275 ----------- ----------- CASH, AND SHORT TERM DEPOSITS, END OF PERIOD $ 79,256 $ 11,248 =========== ===========
8 corporate information BOARD OF DIRECTORS Eugene Melnyk Chairman of the Board Biovail Corporation International Bruce Brydon Chief Executive Officer Biovail Corporation International Robert Podruzny President and Chief Operating Officer Biovail Corporation International Kenneth Cancellara, Q.C. Senior Vice President General Counsel and Secretary Biovail Corporation International Rolf Reininghaus Senior Vice President Biovail Corporation International President Crystaal Division of Biovail Corporation International Wilfred Bristow Senior Vice President Nesbitt Burns Inc. Roger Rowan President and Chief Operating Officer Watt Charmichael Inc. Robert Vujea President R&D Chemical Corporation AUDITORS REGISTRARS AND TRANSFER AGENTS Deloitte & Touche, CIBC Mellon Trust Company Chartered Accountants Toronto, Ontario Toronto, Canada ChaseMellon STOCKLISTING Shareholder Services New York Stock Exchange New York, USA Toronto Stock Exchange Symbol: BVF 9 shareholder information Head office Biovail Corporation International 2488 Dunwin Drive Mississauga, Ontario Canada L5L 1J9 The Annual Meeting of Shareholders The annual meeting of shareholders will be held at 10:00 a.m.Thursday, July 22, 1999 at the Royal York Hotel, Territories Room, 100 Front Street, Toronto, Ontario. How to Reach Us for More Information For additional copies of this report, the annual report on form 20-F as filed with the United States Securities and Exchange Commission, for quarterly reports or for further information, please contact Investor Relations. By mail: Biovail Corporation International 2488 Dunwin Drive Mississauga, Ontario Canada L5L 1J9 By phone: (416) 285-6000 By fax: (416) 285-6499 By e-mail: ir@biovail.com 10 BIOVAIL CORPORATION INTERNATIONAL 2488 Dunwin Drive, Mississauga, Ontario, Canada L5L 1J9 EX-99.F 7 1999 INTERIM REPORT FOR SECOND QUARTER 1 BIOVAIL CORPORATION INTERNATIONAL LOGO INTERIM REPORT 1999 SECOND QUARTER 2 DEAR FELLOW SHAREHOLDER I am pleased to report that 1999 continues to be an excellent year for Biovail Corporation, as we once again achieved record second quarter and year-to-date financial results. These results are accompanied by significant progress in all aspects of our operations. This sets the stage for continued significant growth throughout the remainder of 1999 and well into the future. TIAZAC(R) The steady penetration of Tiazac(R), Biovail's once-daily diltiazem product, continued in the U.S. market, bolstered by the first quarter introduction of a 420mg dosage strength. By the second quarter of this year, Tiazac(R) had achieved a 16% share of the U.S. diltiazem market. GENERIC VERELAN AND ADALATCC Towards the end of the second quarter, Biovail announced the launch by our U.S. marketing partner, Teva Pharma-ceuticals, of a generic version of Verelan, a calcium channel blocker used in the treatment of hypertension. Also, towards the end of the quarter, the Company received tentative approval from the U.S. FDA for the 30mg and 60mg formulations of its generic version of AdalatCC. Upon launch, Biovail will be entitled to 180 days of marketing exclusivity for the 60mg dosage as the first generic formulation filed. The launch of the 30mg dosage will follow the expiration of a similar period of exclusivity held by another company. Total branded sales in the U.S. of AdalatCC in 1998 were estimated at $357 million, with the 30mg dosage accounting for 30% and the 60mg dosage accounting for 45%. Upon launch, Biovail's generic version of AdalatCC will be marketed by Teva Pharmaceuticals. CRYSTAAL EXPANSION Crystaal, Biovail's Canadian sales and marketing division, continued its impressive growth in the second quarter. Sales of Tiazac(R) continued to grow, with the impact of the product's first quarter inclusion in the Ontario Drug Benefit Formulary. Along with Tiazac(R), Crystaal's portfolio includes the clot dissolving agent Retavase; Brexidol, a unique pain control product with a variety of indications including sports injuries, post-operative pain and dysmenorrhea; and the recently-launched antidepressant Celexa, currently being co-promoted with Lundbeck Canada. Sales activities continue to be extremely encouraging. 3 In the second quarter, Crystaal's portfolio was strengthened by the addition of Cardiac STATus(TM), a rapid point-of-care diagnostic test developed to assist in the early identification of patients with acute myocardial infarction (heart attacks). Each year, approximately 750,000 Canadians visit emergency rooms complaining of chest pains. In the busy, often over-stressed ER environment, early detection of heart attack is pivotal in determining treatment and ultimately increasing survival. Under the terms of the agreement with Spectral Diagnostics Inc., Crystaal will be the exclusive distributor of Cardiac STATus(TM) in Canada. This product is a natural complement to Crystaal's Retavase marketing effort and positions the Company to take a leading role in the expanding $50 million a year Canadian Acute Coronary Syndromes market. In addition, Crystaal has two products in final development phase for Canadian regulatory submissions. These are Corlopam, in-licensed from Elan Corporation and used for the in-hospital treatment of hypertension; and d-methylphenidate, a chiral version of Ritalin, an attention deficit disorder treatment licensed from Celgene Corporation. PRODUCT PIPELINES Product development continues on schedule on the Company's ANDA pipeline. Six products are currently awaiting FDA approval in the U.S., including generic versions of Cardizem CD, Procardia XL, Dilacor and Voltaren. Four products are awaiting approval in Canada, including generic versions of Cardizem CD, Trental and Verelan. Excellent progress is also continuing in the NDA pipeline with the products being developed by Intelligent Polymers, as well as the development of a controlled release version of the best-selling antidepressant Celexa. CONTRACT RESEARCH AND MANUFACTURING Other areas of the Company also continue to grow significantly. Biovail's Contract Research Division reported a 200% increase in second quarter revenue, and a 100% revenue increase in the first six months compared to last year. The clinic has recently been expanded to accommodate the increased activity from its third party clients as well as contract work from Biovail and Intelligent Polymers. Manufacturing capacity is also being expanded in both Puerto Rico and Manitoba in preparation for expected product approvals. 4 RECORD FINANCIALS Biovail reported record second quarter and first half financial results for 1999. Revenue for the second quarter and first half increased by 43% and 37% respectively to $36.2 million and $64.4 million, compared to second quarter 1998 revenue of $25.3 million and first half 1998 revenue of $47.1 million. Operating income for the second quarter was $15.5 million and for the first half of 1999 was $27.1 million, representing increases of 53% and 46% respectively over the same periods in 1998. Net income for the second quarter was $12.1 million, or $0.49 per share, compared to net income of $9.5 million, or $0.36 per share, earned in the second quarter of 1998. For the first half of 1999, net income was $20.4 million, or $0.83 per share, compared to $17.4 million, or $0.65 per share, in the first half of 1998. These excellent second quarter results, in combination with ongoing exciting developments, keep Biovail solidly on track for another record setting year. On behalf of the Board, I would like to thank our shareholders for their support, and everyone who has contributed to Biovail's continuing success. (signed) Eugene Melnyk EUGENE MELNYK Chairman of the Board 5 consolidated balance sheets (All dollar amounts are expressed in thousands of U.S.dollars)
JUNE 30, December 31, 1999 1998 (Unaudited) (Audited) ----------- --------- ASSETS CURRENT Cash and short-term deposits $ 86,358 $ 78,279 Accounts receivable 36,521 42,768 Inventories 15,199 10,542 Executive stock purchase plan loans 3,025 2,924 Deposits and prepaid expenses 3,264 3,357 ------------ ------------- 144,367 137,870 LONG-TERM INVESTMENTS 10,055 10,055 CAPITAL ASSETS, net 25,464 23,677 OTHER ASSETS, net 29,072 28,317 ------------ ------------- $ 208,958 $ 199,919 ============ ============= LIABILITIES CURRENT Accounts payable $ 7,300 $ 12,244 Accrued liabilities 5,561 4,129 Income taxes payable 1,293 1,004 Customer prepayments 16,126 4,516 Current portion of long-term debt 751 653 ------------ ------------- 31,031 22,546 LONG-TERM DEBT 125,856 126,182 ------------ ------------- 156,887 148,728 ============ ============= SHAREHOLDERS' EQUITY Share capital 21,019 19,428 Warrants 8,244 8,244 Retained earnings 22,059 24,748 Cumulative translation adjustment 749 (1,229) ------------ ------------- 52,071 51,191 ------------ ------------- $ 208,958 $ 199,919 ============ =============
6 consolidated statements of income (All dollar amounts except per share data are expressed in thousands of U.S.dollars)
Three Months Ended June 30, (Unaudited) 1999 1998 - - - ----------- ------------ ------------- REVENUE 36,164 25,255 EXPENSES Cost of goods sold 7,848 6,867 Research and development 6,459 4,103 Selling,general and administrative 6,359 4,143 ------------ ------------ 20,666 15,113 ------------ ------------ OPERATING INCOME 15,498 10,142 INTEREST EXPENSE, net (2,657) (89) ------------ ------------ INCOME BEFORE INCOME TAXES 12,841 10,053 PROVISION FOR INCOME TAXES 775 510 ------------ ------------ NET INCOME $ 12,066 $ 9,543 ============ ============ EARNINGS PER SHARE $ 0.49 $ 0.36 ============ ============ WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 24,534,000 26,849,900 ============ ============ SEGMENTED INFORMATION REVENUE FROM EXTERNAL CUSTOMERS Product sales $ 24,979 $ 17,296 Research and development 8,635 4,109 Royalty and licensing 2,550 3,850 ------------ ------------ $ 36,164 $ 25,255 ============ ============ SEGMENT OPERATING INCOME (LOSS) Product sales $ 12,687 $ 7,219 Research and development 1,633 (410) Royalty and licensing 2,524 3,871 Unallocated (1,346) (538) ------------ ------------ $ 15,498 $ 10,142 ============ ============
7 consolidated statements of income (All dollar amounts except per share data are expressed in thousands of U.S.dollars)
Six Months Ended June 30, (Unaudited) 1999 1998 - - - ----------- ------------ ------------ REVENUE 64,395 47,144 EXPENSES Cost of goods sold 12,887 12,009 Research and development 11,783 8,132 Selling,general and administrative 12,604 8,454 ------------ ------------ 37,274 28,595 ------------ ------------ OPERATING INCOME 27,121 18,549 INTEREST EXPENSE, net (5,449) (157) ------------ ------------ INCOME BEFORE INCOME TAXES 21,672 18,392 PROVISION FOR INCOME TAXES 1,308 1,001 ------------ ------------ NET INCOME $ 20,364 $ 17,391 ============ ============ EARNINGS PER SHARE $ 0.83 $ 0.65 ============ ============ WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 24,534,000 26,849,900 ============ ============ SEGMENTED INFORMATION REVENUE FROM EXTERNAL CUSTOMERS Product sales $ 37,541 $ 28,763 Research and development 15,352 11,953 Royalty and licensing 11,502 6,428 ------------ ------------ $ 64,395 $ 47,144 ============ ============ SEGMENT OPERATING INCOME (LOSS) Product sales $ 15,834 $ 10,837 Research and development 2,575 2,957 Royalty and licensing 11,277 6,294 Unallocated (2,565) (1,539) ------------ ------------ $ 27,121 $ 18,549 ============ ============
8 consolidated statements of cash flows (All dollar amounts are expressed in thousands of U.S. dollars)
Six Months Ended June 30, (Unaudited) 1999 1998 - - - ----------- ------------ ------------ NET INFLOW (OUTFLOW) OF CASH RELATED TO THE FOLLOWING ACTIVITIES OPERATING Net income for the period $ 20,364 $ 17,391 Depreciation and amortization 3,154 2,346 ------------ ------------ 23,518 19,737 ------------ ------------ Changes in non-cash operating items: Decrease in accounts receivable 6,497 4,311 Increase in inventories (4,471) (1,893) Decrease (increase) in deposits and prepaid expenses 93 (249) Decrease in accounts payable and accrued liabilities (3,259) (880) Increase in income taxes payable 301 437 Increase in customer prepayments 11,610 5,240 ------------ ------------ 10,771 6,966 ------------ ------------ 34,289 26,703 ------------ ------------ INVESTING Additions to capital assets,net (2,785) (2,235) Executive stock purchase plan loans 31 116 Acquisition of product rights (1,811) - Acquisition of royalty interest - (15,000) Increase in other assets - (170) Acquisition of long-term investments - (7,500) ------------ ------------ (4,565) (24,789) ------------ ------------ FINANCING Acquisition of share capital (23,550) - Issuance of share capital 2,088 3,858 Reduction in other long-term debt (300) (7,840) Increase in other long-term debt - 14,706 ------------ ------------ (21,762) 10,724 ------------ ------------ EFFECT OF EXCHANGE RATE CHANGES ON CASH 117 (31) ------------ ------------ INCREASE IN CASH 8,079 12,607 ------------ ------------ CASH AND SHORT-TERM DEPOSITS, BEGINNING OF PERIOD 78,279 8,275 ------------ ------------ CASH AND SHORT-TERM DEPOSITS, END OF PERIOD $ 86,358 $ 20,882 ============ ============
9 shareholder information Head office Biovail Corporation International 2488 Dunwin Drive Mississauga,Ontario Canada L5L 1J9 How to Reach Us for More Information For additional copies of this report, the annual report on form 20-F as filed with the United States Securities and Exchange Commission, for quarterly reports or for further information, please contact Investor Relations or visit our web site. By mail: Biovail Corporation International 2488 Dunwin Drive Mississauga,Ontario Canada L5L 1J9 By phone: (416) 285-6000 By fax: (416) 285-6499 By e-mail: ir@biovail.com Website: www.biovail.com corporate information STOCK LISTING REGISTRARS AND TRANSFER AGENTS New York Stock Exchange CIBC Mellon Trust Company Toronto Stock Exchange Toronto, Ontario Symbol: BVF ChaseMellon Shareholder Services New York, USA To the extent any statements made in this report contains 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. 10 BIOVAIL CORPORATION INTERNATIONAL 2488 Dunwin Drive, Mississauga, Ontario, Canada L5L 1J9 Tel 416-285-6000 Fax 416-285-6499 EX-99.H 8 MATERIAL CHANGE REPORT 1 MATERIAL CHANGE REPORT Form 27 - Securities Act (Ontario) Form 27 - Securities Act (British Columbia) 1. Reporting Issuer Biovail Corporation International 2488 Dunwin Drive Mississauga, Ontario L5L 1J9 2. Date of Material Change July 25, 1999 3. Press Release The press release prescribed by section 75(1) of the Securities Act (Ontario) was filed through SEDAR on July 26, 1999. 4. Summary of Material Change Biovail Corporation International ("Biovail") announced that they have entered into a definitive merger agreement (the "Merger Agreement") dated as of July 25, 1999 among Biovail, ABCI Acquisition Sub. Corporation (the "Purchaser") and Fuisz Technologies Inc. ("Fuisz"). Pursuant to the terms of the Merger Agreement, Biovail and Fuisz have agreed to enter into a two-stage cash and stock transaction that values Fuisz's shares at approximately US$154 million, based on the closing sale price of the shares of Biovail on July 23, 1999. Full Description of Material Change On July 25, 1999, Biovail, Fuisz and ABCI Acquisition Sub. Corporation (the "Purchaser"), a Delaware corporation and an indirect wholly-owned subsidiary of Biovail, entered into a merger agreement (the "Merger Agreement") pursuant to which Biovail agreed to cause the Purchaser to promptly commence an offer (the "Offer") to purchase up to 6,585,225 of the outstanding shares of common stock of Fuisz at a purchase price of US$7.00 per share, net to the seller in cash. According to information provided by Fuisz to the Purchaser, there were 22,030,723 common shares of Fuisz outstanding as of July 25, 1999. The Purchaser and its affiliates beneficially own 4,209,829 of such shares. Accordingly, if the Purchaser purchases 6,585,225 shares of Fuisz pursuant to the Offer, Biovail and its affiliates will own, beneficially, approximately 49% of the outstanding shares of Fuisz. The Merger Agreement further provides, among other things, that, after the purchase of the shares of Fuisz pursuant to the Offer and subject to the satisfaction 2 or waiver of certain conditions as set forth in the Merger Agreement, the Purchaser will be merged with and into Fuisz (the "Merger"), with Fuisz surviving the Merger as a wholly-owned subsidiary of Biovail. Pursuant to the terms of the Merger, each issued and outstanding share of Fuisz immediately prior to the effective time of the Merger (other than shares held by Biovail, the Purchaser or any direct or indirect wholly-owned subsidiary of Biovail) will be converted into the right to receive a fraction of a common share of Biovail based on an exchange ratio determined as follows: (i) if the Average Trading Price (as hereinafter defined) of a common share of Biovail is less than $45, the exchange ratio shall be 0.1556; (ii) if the Average Trading Price of a share of Biovail is greater than or equal to $45, but less than or equal to $58,625, the exchange ratio shall equal a fraction (rounded to the nearest ten thousandth) determined by dividing $7 by the Average Trading Price of a share of Biovail; (iii) if the Average Trading Price of a share of Biovail is greater than $58.625 but less than or equal to $62.810, the exchange ratio shall equal 0.1194; and (iv) if the Average Trading Price is greater than $62.810, the exchange ratio shall equal a fraction (rounded to the nearest ten-thousandth) determined by dividing $7.50 by the Average Trading Price of a share of Biovail. For purposes of the Merger Agreement, Average Trading Price is defined as a number equal to the average of the daily closing prices per common share of Biovail on the New York Stock Exchange (the "NYSE") Composite Transactions Reporting System, as reported in The Wall Street Journal for the fifteen trading days ending on the date immediately prior to the second fully NYSE trading day. 5. Reliance on Section 75(3) of the Act Not applicable. 6. Omitted Information Not applicable. 2 3 7. Senior Officers The senior officer of Biovail who is knowledgeable about this material change is: John Miszuk Vice-President and Controller (416) 285-6000 8. Statement of Senior Officer The foregoing accurately discloses the material change referred to herein. Dated this 10th day of August, 1999. __________________________________ John Miszuk Vice-President and Controller 3 -----END PRIVACY-ENHANCED MESSAGE-----