EX-99.2 4 a2117852zex-99_2.htm EXHIBIT 99.2
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EXHIBIT 99.2

Second Quarter Report 2003

Biovail Corporation

[PHOTO]

Letter to
Shareholders

Dear Fellow Shareholders,

During the second quarter of 2003, Biovail overcame a number of challenges and achieved numerous successes, which are contributing to the establishment of Biovail as a pre-eminent specialty pharmaceutical company.

Most significant for us in the second quarter was the receipt of an "Approvable Letter" from the U.S. Food and Drug Administration ("FDA") for our once-daily depression medication, Wellbutrin XL. The FDA has assigned "Class I" status to their review and indicated that September 3, 2003 is its target action date for the approval of this product. This is excellent news for Biovail and our marketing partner, GlaxoSmithKline. We are continuing to manufacture Wellbutrin XL supplies in support of this upcoming product launch.

Also, throughout the second quarter, we focused on the U.S. launch of Cardizem® LA, Biovail's once-daily graded release medication for the treatment of hypertension. In the sixteen weeks following its launch, Cardizem LA market penetration exceeded our expectations and generated over 165,000 prescriptions.

Late in the second quarter, we acquired the U.S. rights to the oral product lines for the anxiety drug, Ativan®, and a cardiovascular drug, Isordil®, from Wyeth. We believe there are significant market opportunities to expand the well-known and respected Ativan brand in the U.S. Isordil, a nitrate used for the prevention of angina, will complement our growing in-market portfolio of cardiovascular medications.

CARDIZEM LA

To better evaluate the performance of Cardizem LA in a clinical setting, we initiated a Clinical Experience Program called "PLACE" — Proving LA through Clinical Experience. The program was designed to provide important information regarding certain variables that physicians consider when prescribing antihypertensive medications, and to provide useful information on the performance of Cardizem LA in a clinical setting. The program has been well received by the medical community and approximately 17,000 doctors have enrolled. We will use this information to design future Phase IV clinical trials and will publish the data to provide physicians with a better understanding of how Cardizem LA may be used to meet their patient needs.

Through our Managed Care program, we have gained access to 120 million of the total 170 million managed care (insured) lives. Currently, Cardizem LA is covered unrestricted in 41 of 50 states through Medicaid Agencies.

PRODUCT SALES

In addition to growing our Cardizem franchise from 7% to 11% in the sixteen weeks following the launch of Cardizem LA, we experienced a number of other product successes during the second quarter. These included the launch of a bioequivalent (generic) version of Tiazac® and an increase in Teveten® prescriptions of more than 22% over the first quarter of 2003 and more than 145% over the second quarter of 2002.

In Canada, Tiazac's new prescription share for May 2003 was 42% of the long acting diltiazem CD market compared to 35% in May 2002. New prescription share for Monocor® reached 6.9% of the beta-blocker market, up from 3.7% in May 2002.

PRODUCT PIPELINE

New additions

In addition to the products from Wyeth mentioned above, we acquired North American rights from Flamel Technologies to their oral solid controlled-release formulation of acyclovir (Genvir) for the treatment of episodic and recurrent genital herpes infections. We anticipate initiating Phase III clinical trials for these indications in the first half of 2004. As well, we acquired four new cardiovascular products under development from Athpharma and we anticipate initiating Phase III clinical trials for two of these products in the first half of 2004.

On-going programs

During the second quarter, we submitted a supplemental New Drug Application ("NDA") to the FDA for an angina indication for Cardizem LA. We also presented the results of two Cardizem LA clinical studies at the American Society of Hypertension.

We have completed enrollment in two 1,000-patient trials investigating the safety and efficacy of our once-daily pain management medication, tramadol XL, in patients with osteoarthritis. The open label safety study to generate the requisite long-term ICH safety data has been completed and we anticipate top-line results from these studies before the end of 2003. We continue to target late 2003 for an NDA submission for tramadol XL.

In conjunction with our partner, DepoMed, Inc., we anticipate having top-line results from three pivotal Phase III trials in the second half of 2003 evaluating the safety and efficacy of treating Type II diabetic patients using our once-daily formulation of metformin GR. We anticipate filing an NDA in the first half of 2004.

FINANCIAL RESULTS

Total revenues for the second quarter of 2003 were $217 million, reflecting an increase of 17% over the second quarter of 2002. Net income for the second quarter was $83 million excluding the impact of acquired research and development programs from Athpharma and Wyeth, reflecting an increase of 33% over the same quarter of last year.

On a final note, Biovail has entered into a lease for 110,000 square feet of office space in New Jersey, where Biovail will be establishing its U.S. head office over the coming months. A New Jersey office will bring us closer to many of our key partners and will provide further access to experienced pharmaceutical executive resources.

On behalf of the Board of Directors, I would like to thank Biovail employees for their valuable contribution to the successes of this quarter, and Biovail's shareholders for your continued support.

/s/ EUGENE N. MELNYK
Eugene N. Melnyk
Chairman of the Board
Chief Executive Officer

Consolidated Balance Sheets
In accordance with U.S. generally accepted accounting principles
(All dollar amounts are expressed in thousands of U.S. dollars)

	June 30 2003			December 31 2002
	(Unaudited)			(Audited)
ASSETS
Current
Cash and cash equivalents	$	102,592		$	56,080
Accounts receivable		216,438			190,980
Inventories		77,436			53,047
Deposits and prepaid expenses		15,666			21,524

		412,132			321,631
Long-term investments		95,754			79,324
Property, plant and equipment, net		157,409			136,784
Goodwill, net		102,450			102,212
Intangible assets, net		1,144,439			1,080,503
Other assets, net		118,259			113,350

	$	2,030,443		$	1,833,804

LIABILITIES
Current
Accounts payable	$	74,568		$	71,641
Accrued liabilities		100,836			95,289
Income taxes payable		42,096			35,691
Deferred revenue		11,321			19,947
Current portion of long-term obligations		92,285			122,590

		321,106			345,158
Deferred revenue		16,200			18,200
Long-term obligations		749,328			624,760

		1,086,634			988,118

SHAREHOLDERS' EQUITY
Common shares		1,443,956			1,433,624
Stock options outstanding		4,678			4,856
Executive Stock Purchase Plan loans		(9,988	)		(9,988	)
Deficit		(518,434	)		(580,413	)
Accumulated other comprehensive income (loss)		23,597			(2,393	)

		943,809			845,686

	$	2,030,443		$	1,833,804

Consolidated Statements of Income (Loss)
In accordance with U.S. generally accepted accounting principles
(All dollar amounts are expressed in thousands of U.S. dollars, except per share data) (Unaudited)

	Three Months Ended June 30						Six Months Ended June 30
	2003			2002			2003			2002
REVENUE
Product sales	$	157,730		$	157,788		$	284,644		$	287,642
Research and development		3,673			5,802			6,273			11,515
Co-promotion, royalty and licensing		55,880			21,541			117,756			41,227

		217,283			185,131			408,673			340,384

EXPENSES
Cost of goods sold		11,332			41,291			48,744			77,007
Research and development		21,813			14,453			39,819			24,921
Selling, general and administrative		56,949			38,981			103,106			78,318
Amortization		45,886			14,019			86,407			26,528
Acquired research and development		84,200			—			84,200			—
Settlements		(9,300	)		—			(34,055	)		—

		210,880			108,744			328,221			206,774

Operating income		6,403			76,387			80,452			133,610
Interest income		1,635			1,047			4,702			2,561
Interest expense		(9,507	)		(10,104	)		(19,489	)		(11,797	)
Other income		6,157			(66	)		6,664			(66	)

Income before provision for income taxes		4,688			67,264			72,329			124,308
Provision for income taxes		5,700			4,707			10,350			8,700

Net income (loss)	$	(1,012	)	$	62,557		$	61,979		$	115,608

Earnings (loss) per share
Basic	$	(0.01	)	$	0.42		$	0.39		$	0.76

Diluted	$	(0.01	)	$	0.39		$	0.39		$	0.70

Weighted average number of common shares outstanding (000s)
Basic		158,386			149,948			158,291			152,735

Diluted		160,428			161,423			159,960			164,885

Consolidated Statements of Cash Flows
In accordance with U.S. generally accepted accounting principles
(All dollar amounts are expressed in thousands of U.S. dollars) (Unaudited)

	Six Months Ended June 30
	2003			2002
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	61,979		$	115,608
Add (deduct) items not involving cash
Depreciation and amortization		94,355			32,025
Amortization of deferred financing costs		1,369			1,160
Amortization of discounts on long-term obligations		3,978			2,074
Compensation cost for employee stock options		999			999
Acquired research and development		84,200			—
Other		(7,842	)		—

		239,038			151,866
Net change in non-cash operating items		(64,847	)		(25,388	)

Cash provided by operating activities		174,191			126,478

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of intangible assets		(196,052	)		(383,302	)
Additions to property, plant and equipment		(16,572	)		(20,436	)
Increase in loan receivable		(5,000	)		—
Acquisition of long-term investments		(4,536	)		(70,694	)
Proceeds on disposal of intangible asset		10,000			—

Cash used in investing activities		(212,160	)		(474,432	)

CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common shares, net of issue costs		10,332			5,232
Repurchase of common shares		—			(452,001	)
Proceeds from the exercise of warrants		—			794
Advances under revolving term credit facility		144,000			34,954
Repayments of other long-term obligations		(70,386	)		(24,740	)
Issuance of Senior Subordinated Notes, net of financing costs		—			384,280

Cash provided by (used in) financing activities		83,946			(51,481	)

Effect of exchange rate changes on cash and cash equivalents		535			49

Increase (decrease) in cash and cash equivalents		46,512			(399,386	)
Cash and cash equivalents, beginning of period		56,080			434,891

Cash and cash equivalents, end of period	$	102,592		$	35,505

Shareholder Information		Corporate Information
BIOVAIL CORPORATION		TRADING SYMBOL — BVF
7150 Mississauga Road Mississauga, Ontario Canada L5N 8M5 T: (905) 286-3000 F: (905) 286-3050 E: ir@biovail.com W: www.biovail.com 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.		New York Stock Exchange Toronto Stock Exchange REGISTRARS AND TRANSFER AGENTS CIBC Mellon Trust Company Toronto, Ontario, Canada Mellon Investor Services, LLC New York, New York, USA The following words and logos are trademarks for the company and may be registered in Canada, the United States and certain other jurisdictions: Biovail, Cardizem®, Tiazac®, Ativan®, Isordil®, Teveten®, Vasotec®, Vaseretic®, CEFORM™, Shearform™, FlashDose®, Instatab™, SportSafe™, DrinkUp™ and Cardisense®. To the extent any statements made in this report contain information that is not historical, these statements are essentially forward-looking. As such, they are subject to risks and uncertainties, including the difficulty in 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 U.S. Securities and Exchange Commission and Canadian securities authorities. Financial Statements prepared in accordance with Canadian Generally Accepted Accounting Principles are made available to all shareholders.

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EXHIBIT 99.2

Second Quarter Report 2003
Biovail Corporation
Q2