8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): September 7, 2010

-

BIOVAIL CORPORATION

(Exact name of registrant as specified in its charter)

Canada	001-14956	Not Applicable
(State or other jurisdiction	(Commission File Number)	(IRS Employer
of incorporation)		Identification Number)

7150 Mississauga Road Mississauga, Ontario Canada	L5N 8M5
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (905) 286-3000

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 7.01                      REGULATION FD DISCLOSURE.

On September 7, 2010, J. Michael Pearson, Chairman and Chief Executive Officer of Valeant Pharmaceuticals International (“Valeant”), sent an email communication to employees of Valeant and Biovail Corporation (“Biovail”).  A copy of the email communication is attached as Exhibit 99.1.

The information contained in this Current Report on Form 8-K under Item 7.01 and Exhibit 99.1 has been “furnished” and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under that section. The information in this Current Report under Item 7.01 and Exhibit 99.1 shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.  By filing this Current Report on Form 8-K and furnishing this information, Biovail makes no admission as to the materiality of any information in this report that is required to be disclosed solely by reason of Regulation FD.

ITEM 9.01                      FINANCIAL STATEMENTS AND EXHIBITS.

(d)  Exhibits:

Exhibit No.	Description
99.1	Email Communication sent to employees of Valeant and Biovail dated September 7, 2010, and furnished pursuant to Item 7.01, “Regulation FD Disclosure.”

Caution Regarding Forward-Looking Information and “Safe Harbor” Statement

To the extent any statements made in this document contain information that is not historical, these statements are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and may be forward-looking information as defined under applicable Canadian securities legislation (collectively, “forward-looking statements”).

These forward-looking statements relate to, among other things, the expected benefits of the proposed merger such as efficiencies, cost savings, tax benefits, enhanced revenues and cash flow, growth potential, market profile and financial strength; the competitive ability and position of the combined company; the expected timing of the completion of the transaction; and the expected payment of a one-time cash dividend.  Forward-looking statements can generally be identified by the use of words such as “believe”, “anticipate”, “expect”, “estimate”, “intend”, “continue”, “plan”, “project”, “will”, “may”, “should”, “could”, “would”, “target”, “potential” and other similar expressions.  In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements.  Although certain of these statements set out herein are indicated above, all of the statements in this filing that contain forward-looking statements are qualified by these cautionary statements. Although Valeant and Biovail believe that the expectations reflected in such forward-looking statements are reasonable, such statements involve risks and uncertainties, and undue reliance should not be placed on such statements.  Certain material factors or assumptions are applied in making forward-looking statements, including, but not limited to, factors and assumptions regarding the items outlined above.  Actual results may differ materially from those expressed or implied in such statements.  Important factors that could cause actual results to differ materially from these expectations include, among other things, the following: the failure to receive, on a timely basis or otherwise, the required approvals by Valeant and Biovail shareholders and government or regulatory agencies (including the terms of such approvals); the risk that a condition to closing of the merger may not be satisfied; the possibility that the anticipated benefits and synergies from the proposed merger cannot be fully realized or may take longer to realize than expected; the possibility that costs or difficulties related to the integration of Valeant and Biovail operations will be greater than expected; the ability of the combined company to retain and hire key personnel and maintain relationships with customers, suppliers or other business partners; the impact of legislative, regulatory, competitive and technological changes; the risk that the credit ratings of the combined company may be different from what the companies expect; and other risk factors relating to the pharmaceutical industry, as detaile d from time to time in each of Valeant’s and Biovail’s reports filed with the Securities and Exchange Commission (“SEC”) and, in Biovail’s case, the Canadian Securities Administrators (“CSA”).  There can be no assurance that the proposed merger will in fact be consummated.

Additional information about these factors and about the material factors or assumptions underlying such forward-looking statements may be found in the body of this filing, as well as under Item 1.A. in each of Valeant’s and Biovail’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009, and Item 1.A in each of Valeant’s and Biovail’s most recent Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2010.  Valeant and Biovail caution that the foregoing list of important factors that may affect future results is not exhaustive. When relying on forward-looking statements to make decisions with respect to Valeant and Biovail, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Neither Biovail nor Valeant undertak es any obligation to update or revise any forward-looking statement, except as may be required by law.

Additional Information

In connection with the proposed merger, Biovail has filed with the SEC a Registration Statement on Form S-4 that includes a definitive joint proxy statement of Valeant and Biovail that also constitutes a prospectus of Biovail, and each of Valeant and Biovail may file with the SEC other documents regarding the proposed merger.  The definitive joint proxy statement/prospectus was first mailed to shareholders of Valeant and Biovail on or about August 20, 2010. INVESTORS ARE URGED TO READ THE DEFINITIVE JOINT PROXY STATEMENT/PROSPECTUS AND OTHER DOCUMENTS FILED WITH THE SEC IN CONNECTION WITH THE PROPOSED MERGER CAREFULLY IN THEIR ENTIRETY BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION.  Investors may obtain the joint proxy statement/prospectus, as well as other filings containing information abo ut Valeant and Biovail, free of charge, at the website maintained by the SEC at www.sec.gov and, in Biovail’s case, on SEDAR at www.sedar.com.  Investors may also obtain these documents, free of charge, from Valeant’s website (www.valeant.com) under the tab “Investor Relations” and then under the heading “SEC Filings,” or by directing a request to Valeant, One Enterprise, Aliso Viejo, California, 92656, Attention: Corporate Secretary.  Investors may also obtain these documents, free of charge, from Biovail’s website (www.biovail.com) under the tab “Investor Relations” and then under the heading “Regulatory Filings” and then under the item “Current SEC Filings,” or by directing a request to Biovail, 7150 Mississauga Road, Mississauga, Ontario, Canada, L5N 8M5, Attention: Corporate Secretary.

The respective directors and executive officers of Valeant and Biovail and other persons may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction.  Information regarding Valeant’s directors and executive officers is available in its Annual Report on Form 10-K for the fiscal year ended December 31, 2009, which was filed with the SEC on February 24, 2010, and in its definitive proxy statement filed with the SEC by Valeant on March 25, 2010.  Information regarding Biovail’s directors and executive officers is available in its Annual Report on Form 10-K for the fiscal year ended December 31, 2009, which was filed with the SEC on February 26, 2010, and in its definitive proxy statement filed with the SEC and CSA by Biovail on April 21, 2010.  Other informat ion regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, is contained in the definitive joint proxy statement/prospectus and other relevant materials filed with the SEC.  These documents can be obtained free of charge from the sources indicated above. This communication shall not constitute an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.  No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.

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 hereunto duly authorized.

BIOVAIL CORPORATION,
by:
	/s/ Jennifer Tindale
	Name:	Jennifer Tindale
	Title:	Vice President, Associate General Counsel and Corporate Secretary

Date: September 7, 2010

EXHIBIT INDEX

Exhibit No.	Description
99.1	Email Communication sent to employees of Valeant and Biovail dated September 7, 2010, and furnished pursuant to Item 7.01, “Regulation FD Disclosure.”

EX-99.1

Exhibit 99.1

Dear Colleagues:

As the summer winds down and the official beginning of our new company approaches, I write to update everyone on the progress we have made on integration plans.

First I thank all of you who have and continue to work tirelessly and professionally to bring our two companies together –on integration planning, raising the financing, meeting the legal requirements, and on the many, many other tasks that have been added to your normal workload.

Second, I thank all of you who have continued to focus on running our two businesses.  As I continue to monitor weekly sales and other key metrics for the Valeant businesses, I see continued strong performance.  Peggy and Gilbert have indicated to me that they are seeing similar strong performance at Biovail.  And hats off to Sue Hall and the Potiga (retigabine/ezogobine) team for shepherding this potentially very important medicine through the regulatory process.  Unlike most other integrations I have observed, I am pleased to report that the new Valeant is not losing momentum.  And on behalf of both of our Boards and shareholders, I salute all of you for these accomplishments.

In terms of integration planning, we are largely finished.  The new strategy is agreed, the organizational design is largely done, and the synergy targets, both in terms of dollars and timing, have been significantly exceeded.  Over $300 million of cost synergies have been identified and we expect to realize well north of $200 million in 2011.  The rest will be captured in 2012.   As suggested in my earlier communication, we are planning to reduce headcount by approximately 25% across the U.S. and Canadian business of the combined company.  In addition, our combined cash tax rate by the end of 2012 is expected to be approximately 15%.

The primary purpose of this memo is to communicate the new strategy, discuss our organizational model, and outline decisions that have been reached.  This includes the timing of specific communications of individual roles in the new company and programs we have put in place for colleagues who will not be continuing with us on the next phase of our journey.  It is a bittersweet moment in the history of both our companies, but I am confident that all of you will take pride in the way the new Valeant will be treating all of our employees during this transition period.

So let me first touch on: (1) New Valeant strategy and operating philosophy, (2) organizational design and philosophy and finally (3) decisions made and timing.

1.   New Valeant Strategy and Operating Philosophy

Our vision for new Valeant is to become the leading specialty pharmaceutical company in the world.  We will measure our success through our returns to our shareholders and our overall market capitalization.  We will have a balanced and diversified portfolio of businesses: in terms of types of products – branded pharmaceuticals, over the counter medications, branded generics, and unbranded generics; therapeutic areas - dermatology, neurology, and ophthalmology; and geographies - U.S., Canada, Central Europe, Latin America, Australia and New Zealand.  We will measure ourselves in terms of overall growth, organic growth, cash earnings, and cash flow from operations.  Our portfolio will evolve over time.  All of our assets are for s ale if they are worth more to others than they are to our shareholders. However, if our operating units continue to meet their financial objectives, our bias will be to keep them.  Over time, I would expect us to both enter and exit geographies, therapeutic areas, and potentially even product forms.  We will continue to seek out high growth, high profit markets where we can bring a unique competitive advantage, and exit markets where growth and profitability is no longer attractive.  Again, we will measure our success through shareholder returns and market capitalization, not revenues, assets, or other measures.

In terms of innovation, we will continue to invest in a leveraged R&D portfolio (leveraged means we will seek partners for any of our high spend development efforts), but our spend in R&D will be substantially less than our peers.  Internal R&D has not proven to be a good return for most pharmaceutical companies over the last decade, and I don’t think we are smarter, better or luckier than others in the industry.  To the extent that we have a unique capability such as our Dow formulation expertise, we will continue in-house development.  Our primary source of innovation will come through acquisitions of smaller in-line products that we can grow dramatically though our infrastructure and commercial processes as well as smart and focused life cycle management projects.  Past examples of acquiring innovation include: CeraVe, Atralin, Wellbutrin XL, Lacrisert and Acanya, in the U.S., Dr. Renaud and Vital Science in Canada, DermaTech and Dr. Lewinns in Australia, EMO-FARM in Central Europe, Delta and Bunker in Brazil, and Tecnofarma in Mexico.

Given our new corporate structure and Barbados subsidiary, our returns on these types of investments will only be enhanced.

We will operate a low cost operating model in all we do.  In essence, we will continue to apply a low margin operating mindset to a high margin business.  We will take pride in our frugality, our ability to make quick decisions based on internal resources, our willingness to all wear different hats at different times.  And in return, we will pay above average compensation for superior performance and beyond average shareholder returns.

I recognize that many of you did not sign up for either this strategy or operating philosophy.  And many of you may choose not to continue to work for the new Valeant.  I understand and respect that decision. For those of you who do continue with the new Valeant, I suspect that most of you will grow more as a professional over the next few years than you have at any previous time in your careers.

2.   Organizational Design and Philosophy

To support our strategy, the new Valeant will employ a decentralized organizational model.  We will create ten operating units – U.S. Dermatology - Rx, U.S. Dermatology – OTC, U.S. Neurology / Other, U.S. Ophthalmology, Barbados, Canada, Mexico, Brazil, Europe, and Australia/New Zealand.  Each will be led by a President / General Manager and he/she will in most cases have direct line responsibility for all critical functions: sales, marketing, business development, manufacturing, R&D, human resources, IT, legal, etc.  Only finance, compliance, regulatory and pharmacovigilence will report centrally to ensure proper controls on the business.  However, the CFO’s of each of these units will also be expected to be business part ners of the operating units. Each of these operating units will be managed and held accountable for four key metrics:

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1.   Constant currency growth

2.   Organic growth

3.   EBIT

4.   Cash flow from operations

Our corporate targets for each, and what I expect from each of our units, are:

1.   Constant currency growth >20%

2.   Organic growth >10%

3.   EBIT margin >35%

4.   Cash flow from operations – Annual target

While not all units will exceed each metric every year, we expect the portfolio of businesses to deliver in aggregate.

Each of our Presidents / General Managers will also be expected to create a highly ethical environment for their employees.  In the end, our primary mission as an organization is to serve the patients and consumers who use our products, the physicians who prescribe / recommend them and the customers who provide retail outlets for these products.  Healthcare companies are held by society to the highest possible ethical standard – and they should be.  Adhering to this extremely high ethical bar supersedes any financial or other objective.

To succeed, each of our units will need to do two things well: (1) Execute flawlessly in terms of developing, producing, marketing and selling their products and (2) Identify, negotiate and close value creating business development deals (working as appropriate with our new Barbados subsidiary) on behalf of the company. Again, our focus in our business development activities will be on in-line, or soon to be marketed products.

Consistent with the decentralized operating philosophy, our corporate center will be small, lean and focused on three things:

1.   Ensuring adequate controls to protect our shareholders and to ensure we are in compliance with all regulatory requirements

2.   Ensuring overall corporate financial objectives are met

3.   Actively managing all capital allocation decisions (e.g.: what business development deals we will or will not do)

In total, our corporate staff functions will number less than 80 people.

3.   Decisions Made and Timing

Over the past several months, we have been working diligently to design and staff the new Valeant organization and to identify and begin to eliminate unnecessary non-FTE costs consistent with our new strategy and organizational approach.

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3.1      New Executive Management Team

The new Executive Management Team or EMT will initially consist of:

Rajiv De Silva – President of Valeant and COO of Specialty Pharmaceuticals, Peggy Mulligan – Chief Financial Officer, and Mark Durham SVP of HR.  In addition, I will be naming a new General Legal Counsel in the next couple of weeks who, along with me, will complete the five person EMT. Peter Blott, Bhaskar Chaudhuri, Gilbert Godin, Greg Gubitz, Elisa Karlson, and Steve Min will not continue with the combined company.

Rajiv will have responsibility for all Specialty Pharmaceutical Operations, including: Canada, Australia, Aton, Dow Services, U.S. Neuro, Coria, Kinerase and Specialty R&D (Dow, Neuro and Aton) and North America manufacturing including Steinbach.

Tom Schlader will assume responsibilities for new Valeant Canadian Operations including Biovail’s commercial operations in Canada.  He will also be responsible for our Canadian Manufacturing function with the exception of Steinbach.  Our Canadian commercial operations will be headquartered in Montreal.

Rob Tessarolo, current head of Biovail’s Canadian business is considering other opportunities within the new Valeant.  I thank Rob for his successful leadership of Biovail’s Canadian operation over the past 3 years.

Our branded generics businesses in Europe and Latin America will report directly to me.

Peggy Mulligan, who was previously announced, will have responsibilities for Finance, IT, Procurement and Facilities.

Our new General Counsel will assume responsibilities for all of the corporate legal teams.

Mark Durham will be responsible for corporate Human Resources including talent management, benefits, compensation and internal communication.

Barbados will continue to report to Bill Wells until I establish my residency in Barbados, at which time it will transfer to me.

3.2      New Organization

As part of the integration process, we have developed new organization charts for U.S. Operations, our Canadian business and all corporate functions.  Over the next few weeks the new Executive Management Team will be working with me to populate these organization charts with employees from Biovail, Valeant, and when appropriate from outside the company.  We expect to notify all employees of Biovail and Valeant of their individual employee status by October 15th.

I would like to thank all of our departing executives for their leadership and dedication and wish them well in the next phase of their professional lives.  To the new executive team, I again offer my congratulations and best wishes.

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3.3      Pipeline Decisions

Over the past couple of months, we have conducted an extensive R&D pipeline review across both companies. We have a number of recommendations that once finalized by the appropriate Boards, will be communicated to our partners.  In the coming weeks, I will communicate these decisions both internally and to the investor community.  For projects we plan to stop funding, we will look to maximize the value of these assets through partnerships and/or outright sales.

3.4      Severance Plans

Both the Canadian and U.S. Severance Plans have been finalized.  The objective of these severance plans is to provide individuals with support during transition to alternative employment.  This support consists of financial payments, benefits extension and career transition services.  Our intention is to treat all departing employees with the support and respect they deserve.

Information about these plans will be forwarded to Canadian and U.S. employees via email over the next few days.  Our intent is to inform all employees of their job status on or before October 15th.

3.5      Site Town Halls

During the week of September 6th, we will be hosting town halls at all Biovail and Valeant locations in North America (with the exception of Steinbach where I held a town hall last week).  We will provide an overview of the information shared today and use this time to address your questions and concerns.

Details regarding the specific times and locations of town halls will be sent shortly to each site under a separate email.

***

I appreciate that, as exciting as this new venture may be, change is difficult and some of this information may be unsettling – particularly with regard to appointments and terminations. It is not easy when friends and colleagues leave the business or when there is uncertainty regarding your individual roles.  My objective with this announcement is to share with you, openly and honestly, what has transpired over the past couple of months and plans for the weeks ahead.  I hope that this message has provided some clarity and guidance for each of you.

If you have questions please attend your site town hall.  You can also speak with your local HR representative.  Thank you for your continued support throughout this process.

Best regards,

Mike

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