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At a crucial stage in the development of every truly successful company, there comes a point when management realizes that it is time to take a bold step forward, time to move on to the next phase that will ensure not only the continued success of the company, but also open up exciting new possibilities for unprecedented growth and expansion. For Biovail, that time is now. The timely sales and marketing expansion into the lucrative U.S. pharmaceutical marketplace represents the logical next step in Biovail's corporate strategy.
Biovail Corporation is a pharmaceutical company that uses its patented controlled-release technology to improve upon drugs already approved by the U.S. Food and Drug Administration. Biovail is involved in the formulation, clinical testing, registration, manufacturing, and marketing of these products throughout North America. Among the company's most important products is Tiazac, a drug used to treat hypertension. Biovail is run by Barbados-based Eugene Melnyk and operates facilities in Canada, the United States, Ireland, and Puerto Rico.
Biovail began operating in the 1970s, nearly two decades before the company rose from obscurity and dazzled investors and analysts alike. For years, Biovail operated as a small, research and development firm based in the suburban Toronto city of Mississauga, Ontario. As a generic drug maker, the company existed outside the periphery of recognition. Its annual revenue volume was insignificant when compared with the pharmaceutical concerns competing against the company, and its contributions to the pharmaceutical market were unremarkable. Biovail eked out an existence during the first chapter of its history, not reaching $10 million in revenues--a pittance in the multibillion-dollar pharmaceutical industry--until the 1990s began. The company's second era of existence began when it attracted the attention of a young Canadian publisher. Although it would be several years before Biovail began to exude the luster that titillated Wall Street, the relationship between Biovail and Eugene Melnyk, begun in 1989, marked the beginning of the small, Mississauga firm's rise to fame.
The paths of Melnyk and Biovail were connected by Trimel Corp. Melnyk started Trimel Corp. in 1983, when the entrepreneur (later to be one of the richest individuals in Canada) was 24 years old. Trimel Corp. operated as a publisher of medical journals, which introduced Melnyk to an enticing technology in the medical field. During his perusal of medical publications, Melnyk learned of oral controlled-release technology, which regulated a drug's dosage throughout the day, enabling patients to take only one pill a day, rather than several pills. Melnyk was excited about the potential of time-release technology in the pharmaceutical market, prompting him to sell Trimel Corp.'s publishing operations in 1988. A year later, he paid $6.5 million for the little-known Biovail, which was developing drugs using controlled-release technology at the time. Roughly five years later, it appeared as if Melnyk had made a grave error. Before Biovail achieved much applauded success, Melnyk's 1989 purchase teetered on the brink of bankruptcy.
Operating as a generic drug maker, Biovail found itself embattled. The small company was positioned in a highly competitive market fraught with litigious battles. Biovail shared in the fate of nearly all generic drug makers: The company endured frequent lawsuits filed by brand-name pharmaceutical concerns who accused Melnyk's firm of patent infringement, which led to costly legal fights that the small company was ill-equipped to sustain. By 1993, Biovail was nearly destitute, particularly after a failed attempt to secure public financing early in the year blackened hopes for the immediate future. The company could not meet payroll, unable to muster the $100,000 needed to pay its employees. One employee, a future senior vice-president, mortgaged his house to give the company the funds to pay its workers. Stumbling, Biovail managed to keep its balance until Melnyk merged the drug company with Trimel, whose shares traded on the Toronto Stock Exchange, in late 1993. The situation was bleak, but Biovail's salvation was on the horizon.
Tiazac: A Mid-1990s Saviour
In late 1994, Biovail's future quickly brightened. News spread that the company was likely to get approval for Tiazac, its controlled-release formulation of diltiazen, a leading calcium channel blocker that represented a class of drugs widely used in the treatment of hypertension, a condition that accounted for 15 percent of all prescriptions written in the United States. The news caused a measurable and substantial stir among analysts and investors. Expecting Biovail's profits to increase exponentially, the investment community flocked to the unknown Biovail, which generated $16.5 million in revenue in 1994. Shares in the company, trading at $2.75 per share in November 1994, experienced dizzying growth, increasing to $80 per share, after a sustained buying frenzy, in December 1995. Melnyk, through the investor frenzy surrounding Tiazac, was making Biovail a known name in the vast pharmaceutical industry.
In September 1995, the Food and Drug Administration (FDA) officially approved Biovail's request to market Tiazac. That same month, Melnyk supplied perhaps his greatest contribution to the finances of Biovail. Melnyk brokered a 16-year marketing and distribution deal with Forest Laboratories Inc. Under the terms of the agreement, Biovail licensed its angina-fighting drug Tiazac in exchange for 35 percent of the drug's sales and $20 million in cash. The agreement led to the February 1996 launch of Biovail's new product, giving Melnyk's company its first taste of robust financial growth. During the first six months of 1996, Biovail's sales soared to $34.6 million, more than 400 percent higher than the total registered during the same period in 1995. The company's net income during the first half of 1996 rose to $10.4 million, far eclipsing the $1.8 million posted during the first six months of 1995. By the end of 1996, Biovail was a more than $66 million-in-sales company, one year after being unable to generate $20 million in sales. Wall Street watched, and became intrigued.
Not long before Melnyk engineered the pivotal agreement with Forest Laboratories, he handed his responsibilities as Biovail's chief executive officer to Bruce Brydon. Melnyk, who had moved to Barbados in 1990, continued serving as chairman, taking responsibility for legal and financial matters, long-term planning, and part of research and development. Brydon's responsibility, Melnyk explained in a December 31, 2001 interview with Canadian Business, was "to make sure everything's going according to plan." Toward this end, Brydon distinguished himself, orchestrating Biovail's transformation into an influential drug maker.
The Late 1990s Rise of Biovail
The combination of Brydon in Mississauga and Melnyk in Barbados worked well, particularly from 1997 forward, after the pair refined Biovail's agenda. Instead of subjecting themselves to a never-ending barrage of patent infringement lawsuits, Melnyk and Brydon decided to focus on drugs that had already gained regulatory approval. Biovail then would add its patented controlled-release technology and market the products. The strategic alteration gave the company a new, lucrative direction to pursue. "The genius of Biovail," an analyst remarked in a December 31, 2001 Canadian Business article, "is that they figured out you don't need to spend $500 million and take ten years to develop a new product. You can take something that's out there on the market, tweak it a little bit, repackage it as a new brand and make just as much money."
As Melnyk charted a new course for Biovail, he gave Brydon a lofty goal to pursue. At Biovail's annual shareholder meeting in 1997, Melnyk promised shareholders that the company would achieve growth of 30 percent each year into the future. To Brydon fell the responsibility of ensuring that the goal was met, a task he accomplished, helping Biovail to record prolific growth as it exited the 1990s and entered the 21st century.
In 1998, Biovail had 13 products on the market. Of the total, 11 products were developed under research sponsored by other pharmaceutical companies. Biovail sold these products under license in 55 countries, with the sales generating royalties that were paid to Biovail. By this point, however, the company was pursuing its declared goal of becoming a leading producer of branded drugs before 2005. Accordingly, the future of the company was represented by Tiazac and a new product, launched in the fall of 1998, Trental, which was used to treat peripheral vascular disease. Tiazac and Trental, in contrast with the company's other 11 products on the market during the year, represented the first two medications that Biovail selected, developed, and navigated through the legal and approval process to bring to market. In the years ahead, the ranks of such branded products within Biovail's portfolio swelled, enabling Melnyk and Brydon to realize their vision.
In 1999, a year in which the company's sales leaped from $112.8 million to $176.5 million, further progress was made in the company's development of branded pharmaceuticals. Much of the revenue growth recorded by Biovail was attributable to the increasing sales of Tiazac, which increased its share of the diltiazen market in the United States to approximately 16 percent. New product introductions also fueled growth, helping Biovail to exceed Melnyk's ambitious growth projections. During the year, Biovail launched a generic version of the calcium channel blocker Vevelan in the United States, which was marketed by the company's U.S. generic product marketing partner, Teva Pharmaceutical Industries Ltd. Also in 1999, Biovail received approval from the FDA for the introduction of generic versions of Cardizem CD and Adalat CC, two leading treat-
In 2000, Biovail exceeded the accomplishments of 1999. Revenue increased 79 percent during the year, reaching an impressive $309 million. Sales of Tiazac continued to lead the way, as its share of the U.S. diltiazen market increased to 22 percent. During the year, the company acquired the exclusive Canadian marketing and distribution rights for Monocor, a cardioselective beta blocker, and Ampligen, used to treat Chronic Fatigue Immune Deficiency Syndrome. The rights to Monocor and Ampligen were acquired in February, the same month Biovail received U.S. marketing approval for its generic version of Voltaren XR, used to treat arthritis, and acquired a 120,000-square-foot manufacturing plant in Dorado, Puerto Rico. The acquisition of this facility promised to increase the company's total manufacturing operations by more than 100 percent. Perhaps the most significant event of 2000 occurred in October, when Biovail acquired San Diego, California-based DJ Pharma, Inc., a leading pharmaceutical sales and marketing concern. The addition of DJ Pharma, which formed Biovail Pharmaceuticals, gave Biovail 300 pharmaceutical sales professionals in the United States and established the company as a full-scale competitor in the U.S. controlled-release drug market, estimated to generate more than $8 billion in revenue annually.
By 2001, Melnyk, residing in a hilltop mansion in Barbados, also sat atop a vast fortune. His net worth was estimated to be $1.8 billion. Biovail's stock, of which Melnyk owned 25 percent, was trading at $90 per share after splitting 12 times during the previous six years. Although he continued to live in Barbados, Melnyk took over the responsibilities of Biovail's chief executive office in early 2002. Brydon, his achievements a record of success, became executive director of Biovail Ventures, the company's venture capital division. Looking to the future, Melnyk plotted a concerted attack on the U.S. pharmaceutical market, the largest market in the world. He planned to increase Biovail's sales staff in the United States from 300 to 800 by June 2002. As he shaped Biovail into a genuine North American powerhouse, Melnyk could rely on the introduction of a handful of new pharmaceutical products in the United States. Biovail's parade of drugs for the immediate future included Cardizem XL, a bronchitis medication named Cedax, a decongestant marketed as Rondec, and a coldsore ointment called Zovirax. Melnyk could also look forward to revenues gleaned from Biovail's new patented technology called FlashDose, which tripled a medication's absorption rate by "melting" in a patient's mouth. The full-scale launch of products using the FlashDose technology was expected to occur by 2003.
Principal Subsidiaries: Biovail Ventures; Biovail Pharmaceuticals; Biovail Technologies; Crystaal.
Principal Competitors: Alkernes, Inc.; Andrx Corporation; ALZA Corporation.