Bausch Health Companies Inc (BHC) 2006 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the first quarter 2006 earnings conference call for Biovail Corporation. At this time, all participants are in a listen-only mode.

This conference call is being webcast on the Worldwide Web at www.biovail.com. If anyone should require assistance during the conference call, please press the star key followed by zero.

As a reminder, a replay of this conference call will be available until 7:00 p.m. Eastern Daylight time on Thursday, May 18th. Callers from Toronto and countries other than the United States should dial 416-695-5800. Callers from the rest of Canada and United States should dial 1-800-408-3053. The access code for the replay is 3185952 followed by the pound sign.

On behalf of the speakers who follow, investors the cautioned that the presentations and responses to questions may contain forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and which comprise forward-looking information within the meaning of the Safe Harbor provisions of Canadian Provencial Security laws. Forward-looking 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 and actual results may differ materially from those expressed or implied in such statements. Forward-looking statements include, but are not limited to our goals, targets, strategies, intentions, plans, beliefs, estimates, expectations, outlook, and other statements which contains language such as belief, anticipate, expect, intend, plan, will, may, and other similar expressions.

For additional information about the material factors or assumptions underlying such statements and about the material factors or assumptions underlying such statements and about the material factors that may cause actual results to vary from those expressed or implied in such statements, please consult the Company's earnings release is dated May 11, 2006, that is available on the Company Web site as well as its filings with the Securities and Exchange Commission and the Interior Securities Commission, including the risk factors and details in its most recent Annual Report on Form 20F, Item 3D. The Company does not undertake to update any forward-looking statements.

At this point, I would like to turn the call over to Ken Howling, Vice President of Finance and Corporate Affairs for Biovail Corporation. Mr. Howling will moderate today's call.

Thank you, Operator. Good morning, everyone. On behalf of Biovail, I would like to thank you for taking the time to join us this morning for our conference call.

On today's call, we will recap and provide additional insight into the Company's financial results for the first quarter of 2006. Joining me this morning are Dr. Douglas Squires, Chief Executive Officer of Biovail Corporation, and Charles Rowland, Senior Vice President and Chief Financial Officer.

Also on the call is Ken Cancellara, Senior Counsel, and Rick Kiefer, Senior Vice President Commercial Operations. They will be available along with myself to participate during the question-and-answer session.

After members of our management team have completed their review, we will conduct a question-and-answer session for research analysts on this morning's call who cover Biovail. As always, we will try to get to as many questions as possible while limiting the call to approximately one hour.

After the conference call, we encourage other participants to follow-up with the Company by calling 905-286-3000 and asking for Investor Relations.

Doug, would you like to begin?

Thank you, Ken. Good morning, everyone. Thank you again for joining us.

I'm pleased to be with you today to provide you with an in depth review of Biovail's financial and operational performance in the first quarter of 2006. One of the Company's main goals and commitments to our shareholders is to execute against our stated financial objectives, and I'm pleased to say that once again we have met this commitment.

For the three months ending March 31, 2006, Biovail generated record first quarter revenues, robust cash flow from operations, and strong earnings per share. There were also successes on the product commercialization front on both sides of the border.

In Canada, we received earlier than expected regulatory approval in January for Wellbutrin XL, which in turn was formerly launched in April by Biovail Pharmaceuticals Canada, our Canadian sales and marketing arm. And in the United States, in late February, in collaboration with our marketing partner Ortho-McNeil, Ultram ER, the first, once daily extended release formulation of tramadol in the United States was launched.

Through this partnership, our U.S. specialty sales force is co-promoting Ultram ER to women's healthcare practitioners.

Biovail has worked diligently over the past couple of years to prepare our road map that we believe will enable us to realize our vision of becoming the world's premier specialty pharmaceutical company. Many of you will recall that just a little more than a year ago on May 3rd, to be exact, we announced major changes to our commercialization strategy.

This change, which enabled us to immediately establish a profitable commercial business in the U.S. market, was based on the development of our strategic plan, which over the past 12 months has given us the flexibility to capitalize on opportunities as they are created through our own product development pipeline in addition to those presented to us through the dynamic pharmaceutical market.

In the past year, we have reaffirmed our commitment to apply advanced drug delivery technologies to enhance the clinical effectiveness of medicines. This has enabled us to enter into strategic partnerships with companies that have a strong primary care capability in key therapeutic areas, companies such as Kos Pharmaceuticals and Ortho-McNeil.

Partnerships with Ortho-McNeil, and more recently, AstraZeneca have enabled us to leverage our realigned specialty commercial organization in the U.S. and to strengthen our position with women's healthcare practitioners through our promotion of Ultram ER and Zoladex. On May 2nd, Biovail and AstraZeneca announced that our U.S. specialty sales force would promote Zoladex to obstetricians and gynecologists with the endometriosis indication in the United States and Puerto Rico.

Zoladex is an injectable depot and is an excellent drug for the treatment of endometriosis and advanced prostate cancer. It is currently the second largest selling luteinising hormone-releasing hormone analogue in the world and is currently available in more than 100 markets.

AstraZeneca's promotional efforts for Zoladex are currently focused on the treatment of advanced prostate cancer. We believe there is significant potential to grow market share for this drug in the women's healthcare market.

Given that one of the focal points of our specialty sales organization is one [inaudible], the opportunity to promote Zoladex for endometriosis is particularly well suited to us.

No money has changed hands upon the closing of this agreement. Biovail will be compensated for its efforts based on prescriptions written in this market.

We are very excited about this opportunity to promote Zoladex because we believe we can drive prescription growth and because we feel it is an excellent complementary product to Ultram ER in the women's healthcare market.

All of us at Biovail believe being dynamic and possessing the ability to move quickly and decisively is to critical to our ability to embrace and capitalize on new opportunities. As a result and consistent with our entrepreneurial culture, we announced the realignment of our plans to manage our business in three inter-related business units.

Each of these business unit, Biovail drug delivery, which comprises Biovail's drug delivery technologies, its delivery capabilities and its strategic partnerships, BPI, our U.S. commercial organization, which focuses on the promotion of products to specialists in niche therapeutic markets, and Biovail Pharmaceuticals Canada, or BPC, our Canadian sales and marketing division is supported by a corporate and shared services organization that ensures maximum operating efficiencies.

Biovail has again been able to attract top talent to facilitate the ongoing implementation of this structure and to meet the current and emerging needs of the Company's business. In the past two weeks, we have made two significant additions to our executive management team.

On April 27th, we announced that Gilbert Godin joined the Company as Senior Vice President Technical Operations Drug Delivery. Gilbert is focusing on the Company's product development capability as well as manufacturing and contract development services.

Gilbert provides Biovail with a unique combination of commercial and scientific expertise. He comes us from MDS Pharma Services where during the past seven years he held a series of progressively responsible positions in Canada and the United States which culminated in October, 2004 with his assumption of the Presidency of MDS Pharma Services.

And this past Tuesday, we announced that Dr. Peter Silverstone has joined us as Senior Vice President Medical and Scientific Affairs. He will focus on the rapid clinical development and effective registration of Biovail's pipelines products.

Peter joins Biovail from Global IQ, a clinical research organization in Calgary that he co-founded in 1999. His extensive clinical trial experience will be immensely valuable as the Company accelerates important products through its development pipeline.

From an operational perspective, the first quarter of 2006 was strong. Total revenues for the three months ending March 31, 2006 were 220.5 million, a 27% increase over the corresponding period a year earlier.

First quarter 2006 net income in accordance with U.S. Generally Accepted Accounting Principals were 64.5 million, reflecting a 479% increase over the first quarter of 2005. This increase is primarily due to strong revenues for Wellbutrin XL and the restructuring of our business, which we implemented in May of last year.

This strong performance allowed us to announce today that Biovail will pay a dividend of $0.125 per share on May 31, 2006 to shareholders of record as of May 23, 2006.

In a few moments, Charlie Rowland, Biovail's Chief Financial Officer, will provide you with a more comprehensive summary of the Company's financial performance during the first quarter of 2006.

From an operational perspective, initial shipments of Wellbutrin XL were delivered to Canadian wholesalers during the first quarter of 2006. Immediately following the quarter in April, Biovail Pharmaceuticals Canada formally launched Wellbutrin XL, our once daily version of bupropion to Canadian physicians and healthcare professionals.

Wellbutrin XL is recommended by Canadian depression guidelines for first-line use. Early indications are Wellbutrin XL has been well received by patients and healthcare practitioners throughout the country and we look forward to watching this product strengthen its position in the Canadian market.

Sales of Wellbutrin SR in Canada continue to be negatively affected by the introduction of generic competition. However, on our last conference call at the end of March, we reported this generic competitor was requested to conduct a recall at the wholesaler level of all its bupropion 150-milligram tablets.

In early April, the generic competitor returned the product to the shelves with availability limited to 30-count bottles and dating limited to three or four months. The shortage of branded Wellbutrin SR was caused in part by the removal of the generic competitor's product. We expect the shortage to be resolved within the week.

Biovail continues to believe that the commercial availability of Wellbutrin XL and its related benefits may provide healthcare practitioners with a compelling reason to convert their patients to this new once daily formulation.

Despite the reduced market share for Tiazac in Canada as a result of generic competition, we are particularly encouraged by the continuing rapidly market acceptance of Tiazac XC, which continues to gain market share capturing just under 24% of total prescriptions written for the Tiazac brand in the first quarter of 2006.

Glumetza, the first and only once daily metformin in Canada was introduced to the Canadian marketplace in November 2005 at the annual meeting of the Canadian Diabetes Association. Although the initial prescription uptake from launch has been lower than we expected, we are implementing and working with key opinion leaders to continue to drive market penetration of this product in 2006 and beyond, and establish the brand as the first-line treatment of choice for patients with diabetes who have requisite private insurance coverage.

With respect to international markets, our marketing partner GlaxoSmithKline continues to proactively move forward with plans to build new markets for Wellbutrin XL in Europe. To date, GSK had made regulatory findings fro Wellbutrin XL in several European markets including German, Italy, and Spain.

Additionally, Ortho-McNeil is finalizing their list of target international markets for Ultram ER.

In late February, further to our marketing partnership announced last November, Ortho-McNeil launched Ultram ER, the first extended release tramadol product approved in the U.S. for the relief of moderately to moderately severe chronic pain in adults. Available in once daily dosage strengths of 100, 200, and 300-milligram tablets, Ultram ER is also being promoted to women's healthcare practioners by Biovail's [ELAS] specialty sales force.

Biovail is pleased with the initial performance of this product. Market research indicates that the majority of Ultram ER prescriptions are being written for patients new to tramadol.

We believe that this is important for two reasons. First, we believe that the greatest potential for the drug will be realized if it is viewed as physicians as a new drug for the treatment of chronic pain.

Second, we believe the use of Ultram ER in new patients will provide the opportunity for doctors to become confident with the drug's effectiveness, which in turn will help drive conversion to the once daily formulation. As part of our partnership agreement, Ortho-McNeil has certain advertising and promotional requirements, we anticipate the initiation of this campaign in the near future, which in turn will enhance awareness of this product and its benefits.

Let me now take a moment to provide you with an update on our product development activities. Biovail currently has development efforts ongoing in over 25 pipeline products, including once daily formulations of Carvedilol, [inaudible] formulations of Venlafaxine and separate combination products involving each of bupropion and tramadol.

We further anticipate initiating Phase III clinical trials for three of these programs in the next twelve months. Strengthening of our clinical development and regulatory organization just announced is very important as we accelerate later-stage projects towards filing and as feasibility projects move into full product development.

Our strong cash balance has left us well positioned to consider a number of options to grow Biovail's business through acquisition in 2006. We continue to actively explore a number of complementary product and technology opportunities and we are encouraged by the progress of many of these ongoing discussions and will provide updates as appropriate.

For closing, I would like to comment on the status of the ongoing patent infringement actions related to Wellbutrin XL.

With respect to the ongoing litigation between Biovail and the four companies that have filed ANDAs for generic formulations of Wellbutrin XL, let me be very clear. We feel strongly that the various products infringe our intellectual property and as such, we are vigorously defending our intellectual property rights in court.

In the Amgen litigation, there is a court mandated settlement conference tomorrow in California. The hearing with respect to Amgen's motion for summary judgment, which was originally scheduled for May 22nd has been delayed indefinitely.

On June 2nd, however, the parties will be in court to address other issues. The trial for this case is still scheduled for September 12, 2006.

In the [ABRICA] case, we are currently in the process of conducting dissolution testing on the intermediates in [ABRICA's] manufacturing process as we strongly believe that these are subject to our infringement plans. We expect the submission of these dissolution results of the Florida court in the coming weeks.

The court's decision on [ABRICA's] summary judgment motion should come thereafter. We have not yet received the order set in the court's claim construction of the [ABRICA] case, nor has a date for a trial been scheduled.

In the IMPAX case, the Markman hearing was held on April 17th in Pennsylvania. The court has not yet issued its order with respect to claim construction, nor has it scheduled a trial date.

The Watson litigation remains in the early stages.

In December 2005, Biovail submitted a Citizen's Petition to the FDA to require rigorous bioequivalance testing for generic products that reference Wellbutrin XL before they can be approved. Biovail took this step to protect patients against such potentially serious risks of seizures, which are currently disclosed in the approved Wellbutrin XL labeling, and to assure that generic versions of Wellbutrin XL are as safe and as effective as the innovator product. The FDA has not yet responded to Biovail's Citizen's Petition.

So with that, that concludes my remarks. Ken, I'll turn it back to you.

Thanks very much, Doug.

I would like to introduce Charles Rowland, Biovail's Senior Vice President and Chief Financial Officer. Charlie will now provide you with more in depth information pertaining to the Company's financial performance for the first quarter of 2006. Charlie?

Thanks, Ken. Good morning, everyone.

Biovail reports its financial results in U.S. dollars and under U.S. Generally Accepted Accounting Principals, or U.S. GAAP, guidelines. All earnings per share information discussed in the conference call today will be presented on a diluted basis.

For the three months ended March 31, 2006 Biovail generated record first quarter revenues, robust cash flows from operations, and strong earnings per share. On a consolidated basis, total revenues for the first quarter of 2006 were 220.5 million compared with 173.7 million for the first quarter of 2005, an increase of 46.8 million, or 27%.

Net income from continuing operations, which excludes an asset write-down and an operating loss at Nutravail in the amount of 4.1 million, was 68.6 million in the first quarter of 2006 compared with 12.1 million in the first quarter of 2005. Net income for the first quarter of 2006 was 64.5 million compared with 11.1 million for the corresponding period in 2005, an increase of 53.4 million.

Fully diluted earnings per share for the first quarter of 2006 were $0.40 compared with $0.07 for the same period in 2005. Excluding the 4.1 million loss related to Nutravail, earnings per share were $0.43 in the first quarter of 2006 compared with $0.08 in the first quarter of 2005.

Total product sales for the first quarter of 2005 were 209.7 million, a 31% increase relative to the 160.5 million for the corresponding period in 2005. This increase reflects a significant first quarter rise in revenues for Wellbutrin XL, notable gains in revenues for Cardizem LA, and Biovail's portfolio of generic and legacy products, an initial revenue following the late February launch of Ultram ER by our marketing partner Ortho-McNeil.

Partially offsetting these gains were declines in revenues for Zovirax for BPC, the Company's Canadian business unit, as well as the May 2005 transaction with Kos Pharmaceuticals which included the divestiture of Teveten.

Product revenues for Wellbutrin XL were 65 million in the first quarter of 2006 compared with 36.8 million for the same period a year ago, an increase of 77%.

Wellbutrin XL revenues in the first quarter of 2005 were impacted by a planned reduction in safety stock levels at our marketing partner, GlaxoSmithKline, following an increase in the fourth quarter of 2004. As per the tiered pricing agreement with GSK, it should be noted that Biovail's supply price resets to the lowest tier at the beginning of each year.

The growing market acceptance of Wellbutrin XL is further evidenced by the fact that for the month of March Wellbutrin XL captured 58.3% of the new prescriptions for the total bupropion market.

Turning now to Biovail's Zovirax franchise, revenues for the first quarter of 2006 were 24.5 million compared with 27.1 million for the prior year period. The decline in revenue can be attributed to fluctuations in wholesaler buying patterns, however Zovirax continues to gain market share, capturing 70% of the topical antiviral market for herpes, up 3.5 percentage points for the corresponding period in 2005.

CPC generated revenues of 19.8 million for the first quarter of 2006 compared with 25 million in the first quarter of 2005. The decrease can be attributed largely to the availability of generic formulations for both Wellbutrin SR and Tiazac.

Cardizem LA generated revenues of 16.2 million in the first quarter of 2006 compared with 11.4 million for the same period in 2005. This increase of 42% was mainly attributable to the higher returns and an additional returns provision in 2005.

Biovail now manufacturers and supplies Cardizem LA to Kos for more than 30% of Kos' net selling price. Also in 2006, amortization of deferred revenue associated with the Kos transaction positively impacted revenues by 3.8 million.

Launched in late February 2006, Ultram ER generates revenues of 15.1 million in the first quarter of 2006. The product's early performance is in line with our forecast of 75 to 85 million for 2006.

Legacy products generated first quarter 2006 revenues of 35.5 million, up 19% from the 29.8 million in the first quarter of 2005. Revenue was favorably impacted by higher sales of Cardizem CD, the Tiazac brand, and Vasotec products.

The key drivers of this increase are reduction in wholesale inventories in Q1 2005 and price growth year-over-year.

Total revenues for Biovail's generic portfolio were 33.6 million compared with 25 million in the first quarter of 2005, an increase of 35%. This increase can be attributed to 10% growth in prescriptions filled with generic products and strong performance of our partners Teva and NovaPharm in gaining market share.

With regard to specific items effecting operations, in the first quarter of 2006 Biovail amended its purchase and sale agreement with Futuristic Brands related to Nutravail. As such, Biovail incurred a $2.8 million write-down to the carrying value of Nutravail assets.

This write-down is included in the 4.1 million first quarter 2006 loss from discontinued operations, which negatively impacted GAAP EPS by $0.03. There were no specific items affecting operations in the first quarter of 2005.

At the end of the first quarter, Biovail's cash balances were 512.8 million. In the first quarter of 2006, Biovail reduced its long-term obligations by 10.8 million.

The Company's long-term debt to equity ratio stood at .3 at the end of the first quarter of 2006 compared with .4 at December 31, 2005.

Cash flows from continuing operations were 94.7 million in the first quarter of 2006 compared with 67.8 million in the corresponding period of 2005. This represents an increase of 40%.

Net capital expenditures amounted to 17.9 million in the first quarter of 2006 compared with 5.1 million for the three months ended March 31, 2005. This increase largely reflects the ongoing expansion of Biovail's manufacturing facility in Steinbach, which we expect to be completed in the coming months.

As Doug mentioned earlier, Biovail will pay a dividend of $0.125 payable on May 31st for shareholders of record May 23rd.

In the first three months of 2006, Biovail continued to execute against stated financial objectives for, among other things, a stronger balance sheet.

More specifically, gross margins on product revenues were 76% for the three months ended March 31, 2006 compared with 74% for the first quarter of 2005, driven largely by higher Wellbutrin XL revenues and a reduction in returns. These product margins put us ahead of our peer group average.

SG&A decreased 24% in the first quarter of 2006 to 56.6 million compared with 74.7 million for the same period in 2005. This decline reflects Biovail's restructured approach to commercializing products in the U.S. and an associated reduction in head count in the Company's U.S. commercial operating group.

Partially offsetting these savings were increased costs related to Sarbanes-Oxley compliance, information technology upgrades, the launches of Glumetza and Wellbutrin XL in Canada, and increased legal expenses. In addition, in accordance with the Financial Accounting Standards Boards Statement 123R, Biovail incurred stock-based compensation costs of 6.9 million in the first quarter of 2006, the majority of which is recorded in SG&A expenses.

Operating margins improved to 35%, which keeps Biovail in the top quartile of its peer group. EBITDA as a percentage of revenue increased to 47% which ranks us among the top quartile of our peer group.

Operating cash flow as a percentage of revenue improved to 42.9% which moves us into the top quartile of our peer group.

Biovail's research and development expenses were up 12% in the first quarter of 2006 to 22.3 million. The 12% increase can be attributed to the ongoing progress of Biovail's product pipeline.

For more comprehensive information pertaining to Biovail's financial and operational performance for the first quarter, please refer to the news release distributed earlier this morning. At this time, I would also like to reconfirm the revenue and earnings guidance for 2006 provided on March 23rd when the Company reported its financial results for the fourth quarter and full-year 2005.

This concludes my review of Biovail's financial performance for the first quarter of 2006 and I'd like to turn this now back over to Ken.

Thank you, Charlie.

As a reminder, we request that analysts limit their questions to one question with perhaps one follow-up question. This allows every analyst the opportunity to ask questions. Time permitting, we will have the opportunity to get to additional questions later in the call.

I would now like to ask Doug Squires to make his concluding remarks.

Thank you, Ken.

In the first quarter of 2006, Biovail again executed against its stated financial and operational objectives. Our performance to date has provided us with considerable opportunity to apply our strategies more broadly and more deeply to enhance growth and achieve even higher levels of operating efficiency. And our strong balance sheets gives us the ability to make value-added investments and acquisitions and to fully exploit our market opportunities.

We have been able to build a solid infrastructure to support Biovail and its future business. In the past couple of months, we have put the finishing touches on a business unit model based on accountability and opportunity and we have recently added certain senior executives to support this initiative.

We believe that this model will better enable us to create clear goals and objectives and support our sustained growth.

In closing, we look forward to seeing you next month at Biovail's annual and special meeting of shareholders. The event is scheduled for June 27th in Toronto at the Dominion Club. We hope many of you can attend either in person or via our webcast.

Ladies and gentlemen, this concludes my comments. I will now turn the call over the Operator for questions.

Thank you. [OPERATOR INSTRUCTIONS] The first question is from David Lickrish from HSBC. Please go ahead.

Good morning, everybody.

I guess if I'm limited to one question, I'd like to get a little bit more detail on the Phase III programs that you're working on. Doug, are those three trials that you referred to, are those for three different -- three separate registrations, and will those one Phase III trials be enough to submit an application to the FDA, or do you have to do multiple Phase III trials in support of those?

And how should we think about SG&A, then, going forward? It looks like 2007 could be, or sorry, R&D is going to be a little bit more robust than what we're seeing this year.

Good morning, David.

My comments with respect to Phase III trials represent Phase III programs for three separate and individual compounds. The nature of the trials and the size of the trials are dependent on both the nature of the compound indications that [have been gone for] and then FDA guidance as it relates to what's required to register the product.

So there are three separate Phase III programs for three separate compounds.

In terms of your thinking forward to 2007, 2008, as it relates to R&D expenditures, I think, because of that accelerated movement, an accelerated movement into Phase III, I think you'll see that rise.

Okay.

But does that mean -- when should we start thinking about the filings then happening at the FDA?

The filings at the FDA would be in that -- they're very different programs, so perhaps 2008, 2009 type timing for those filings.

Okay.

And you mentioned, just briefly, your cash position and talked about mergers. Are you looking at something actively, should we be looking -- is it possible you think you could execute on something before year-end, or are you just saying in general, you're looking at acquiring new technologies opportunistically.

I don't think I used the word merger, but I think we have a variety of opportunities ahead of us. As I mentioned before, we're very much focused on the utilization of that cash to invest in the business and the areas of both products that support our commercialization strength and link technologies that broaden the depth and capability and extending exclusivity opportunities that such new technologies provide.

And yes, I think there's a reasonable likelihood that we will do one or more of these types of ventures before the end of the year.

Okay. I'll jump back in the queue. Thanks.

Thank you. The next question is from Doug Miehm from RBC Capital Markets. Please go ahead.

My question just has to do with the launch of Ultram ER and where scrips are tracking now. Relative to what we're looking for, perhaps things are a little weak, but it seems to be being made up in the pill prescrip being above 30 or so, although the trajectory is probably not where I thought it would be.

And perhaps you can discuss that with respect to certain campaigns that are going to be implicated by J&J like DTC, et cetera, et cetera and when we might start to see an increase in that trajectory?

Sure. I'll just make a couple of general comments first. I think it's important for everyone to realize that we look at this as being in the early stages of the launch, and that's very important.

Number two, we pay a lot of attention to the feedback from the physicians that both OMI are detailing, but also that we are detailing ourselves, which gives us sort of a unique insight into how they're receiving the product and the response has been is very favorable. It's quite interesting and quite gratifying to note as well that more than half of the patients are new to tramadol, which is what we wanted.

We wanted this product treated as a new drug to treat new patients with chronic pain as opposed to just a conversion strategy. We believe by doing that, you really maximize the opportunity.

Script size, as you point out Doug, is around 32, which is a little higher than we thought, which is also positive.

The comment you made, I think, is important as well, is that the full impact of Ortho-McNeil's non-salesman promotion, their advertising and promotion has yet to start, and that will start shortly. The reason for that is that OMI and we agree with this, is very prudent in how they approach their non-salesman promotion to ensure that the regulatory authorities are fully onboard with what we're saying and how we're saying it and as a consequence, are awaiting their final approval.

As a general comment, most companies are finding this process quite slow these days for a variety of reasons. It's compound independent, it's just a slow process. However, when it's done, that will be initiated and we expect that to have a significant impact on awareness and utilization and so on.

As a follow-up, then, just with respect to the docs saying they really like this product, that may be true, but is there any push back in terms of the pricing of the product? And if so, and if we look at the 2007, 2008 for this product and if it were a little bit lower than you thought, how important does settlement discussions become on Wellbutrin XL? I'll leave it there.

As a push back on pricing, I think pricing is rarely raised in this issue. I think what's going on out there is doctors are more than willing to try the drug, it fills a void that they have.

I think they want to get experience with the drug before they start switching somebody's who's on four to five times a day and is happy, you know, their pain's been treated and they want to be certain that using a product once a day in that circumstance works. And then I think you'll see some significant conversion.

I've made no comment at this point, Doug, as you know, on whether we're in settlement discussions or not, so I really can't answer the second part of your question.

Thank you.

Thank you. The next question is from Dimi Ntantoulis from UBS. Please go ahead.

Good morning, thanks for taking the question.

Just a question about Wellbutrin XL in Canada, and how much loading was there in the quarter to satisfy wholesale inventories, et cetera? And then maybe just, where do you book that revenue, do you book it under the Wellbutrin line or do you book it under the Canada line?

Dimi, we book that revenue under the Canadian line, not in the Wellbutrin XL line.

Okay.

And we've not previously disclosed how much individual products do within BPC.

Okay.

So of the 65 million reported, sorry, I apologize, of the 19.5 reported in Biovail Canada, it therefore looks like the Wellbutrin SR numbers were even more affected by generics or perhaps it was Tiazac. Can you sort of put some color around those Biovail Canada numbers are a lot weaker than what we were looking for, even with the genericization of those two products.

It is a combination as you point out. The genericization of SR, the genericization of Tiazac, the early stages of the launch of both Wellbutrin XL and as well as Tiazac and Glumetza. And you're seeing a ramp-up of recently launched products and a more rapid erosion or decline due to the genericization.

So it's just a timing issue, Ken, in your mind?

Yeah, yeah, no, I think Wellbutrin XL, the salesman promotional activity was just initiated in April, so -- and Tiazac XE has been promoted for a while now, but again, it's still early days for that and Glumetza as well.

Okay. Thanks.

Thank you. The next question is from Elliott Wilbur from CIBC World Markets. Please go ahead.

Good morning.

I wanted to ask a question or a line of questioning around the legacy products. Maybe if you could just provide us with an update on what your latest thinking is there with respect to some sort of disposition structure for Crystaal timing and maybe have a range of potential options.

And then, if I think about this from a financial perspective, and I think those products had trailing twelve months sales within a little over 130 million, you've got associated amortization of roughly 40 million. So I guess you have 75, 80 million in terms of a pre-tax contribution.

Should we be thinking about any sort of transaction that take place as essentially, kind of, you're not being able to offset that financial impact, meaning that it's dilutive to your numbers, but you don't think that, obviously, it allows you to really kind of drill down and focus on the core growth products and be able to show us a higher growth rate so that you don't incur some near-term financial market penalty.

Good morning, Elliot. I may take a crack at the first part of your question then ask Ken to comment on the second.

As we have stated before, our intent is to conclude this transaction during 2006, so obviously, probably the latter part of 2006, and that timing remains unchanged. As you will have noted, we have brought onboard Greg Gubitz to help us prepare for that, and that involves a multitude of relatively complexion things, logistical issues, supply issues, and then some recruitment of some of the staff necessary to affect the management of the subsequent entity.

With respect to the cash flow and the cash flow implications and I'll let Ken maybe answer that.

Sure. Good morning, Elliot.

I think it's important to note, Elliot, that what is envisioned is that the spend would in essence, represent a spinout of 100% ownership, if you will, 100% interest in those assets. So if you were a shareholder of Biovail, or are a shareholder of Biovail today and you have one piece of equity, the next day following the spin, you would have two pieces of equity and you'd have no dissimilar interest in those two sets of assets.

Yes, we would expect that the growth rates for Biovail post the spin would be improved considering that the prescription rates, the decline rates for these products is fairly predictable, continues to trend on a fairly consistent basis.

But I guess the other comment I'd make is that we believe that fundamentally, there is a very viable business model with that legacy portfolio. It's no secret that the number of legacy products within the whole pharmaceutical industry is growing.

Therefore there are, we believe, opportunities to acquire legacy assets that are no longer of either strategic value or importance to big pharma, and that fundamentally that legacy business, if it executes on its business model can actually grow and enhance, and will in itself create shareholder value. And we believe as well with Biovail staying focused on its core competencies and capability we can grow and create value for its shareholders through what we do best.

Thank you. The next question is from Christine Charette from BMO Nesbitt Burns. Please go ahead.

My question is about Wellbutrin XL generics. Can you give us some sense of what is happening with Amgen, why there was a delay in the summary judgment day? With the hearing on June 2nd, are we likely to get another summary judgment day, or is it going to go to a full court date?

And can you address, I know you can't address specifically about what you're doing with a potential deal, but more generally, we all know that there's an increasing amount of deals between patent holders and generic companies, it would be very beneficial for Biovail to sign one, but the FTC position on, given the FTC position on these deals that they may be difficult to close. What's your sense of what the industry believes is a structure that the FTC would agree with and is this something that is possible?

Good morning, Christine. I'm going to pass the question over to Ken Cancellara, particularly the first part of the question dealing with the status of some of the court dates and so on. Ken?

Good morning, Christine.

The motion for summary judgment has originally been scheduled for May 22nd. That motion has now been postponed indefinitely because there is a contest with respect to the filing of additional expert's reports.

Without getting into a lot of detail, because it's very technical and very complex, in support of the summary judgment motion by both sides, expert's reports were filed and rebuttal reports were also filed. Additional reports are being sought to be filed by Biovail in rebuttal of the expert's reports that were filed by Amgen.

It is that issue that's now in contest and the judge has obviously determined that the importance of that issue and the resolution of that issue warranted a postponement of the summary judgment motion.

And therefore, the date of -- a date has been set for the arguing of this admissibility of additional reports, which is set for early June. And depending on the outcome of that issue, a new date will be fixed for the actual hearing of the motion itself.

And Christine, maybe just a brief comment on the latter part of your question, Biovail believes that if it indeed did enter at any point in time in any sort of agreement that it would never -- would only enter an agreement that would not be considered anticompetitive. We firmly believe that the creation of certainty versus uncertainty is an appropriate arrangement in a general context. So we'll see what we'll see.

Ken may want to add an additional comment to that as well.

We are, of course, analyzing the scope of the various settlements that's been put in play by a number of pharmaceutical companies, including court cases, but particularly one court case that is on its way to the highest court in the United States. So in addition to our being prudent from a business standpoint, we will, of course, seek to ensure that there's still compliance with the current FTC regulations, and of course, those regulations as impacted by the recent court decisions.

Regarding a new date for a summary judgment hearing, is that a possibility before September 12th, or is timing becoming too tight?

Christine, that's an excellent question, of course. We're now in the middle of May. Summary judgment motions are usually, if they're going to have any advantage for the applicant, are usually heard long before a trial is scheduled.

As we all know, there's a trial scheduled for the middle of September, approximately. So it's difficult to know and to understand, frankly, when this new date will be scheduled.

We know it's not going to be in early June, we know that for sure. And we're running very close, of course, to the proposed beginning of the trial date itself.

So it's a good and important question. And nobody knows the answer to that, of course.

Thank you.

Thank you. The next question is from Hari Sambasivam from Merrill Lynch. Please go ahead.

Just a quick question on Ultram, ER. In terms of reimbursement, could you give us a sense of where the product is getting reimbursed at this point in time and generally, could you talk about it in terms of general coverage across the United States as to how many major states or how many major agencies have covered or have not covered this?

And the second follow-up to that would be, if you could maybe talk a little bit about your plans to get this product registered in Europe, what have you thought about it? How do you think you may be proceeding on this over the next several months?

Sure, good morning, Hari.

In terms of the first question, more than 90% of managed care lives are covered at the tier three level in the U.S. Which we're pleased with, actually. We're very pleased with.

And as it relates to the second question, as you know, in general part of our agreement with Ortho-McNeil is their opportunity to consider a variety of international markets to enter and they're evaluating that and then as that target, which we encourage of course, as that target list is finalized, we're look at markets they are not interested in for one reason or another and then make a decision as to whether we should enter those as well, or not, depending on the economic value of that.

What is the timing on the European filings, if any?

I think it's going to be quite soon. I believe there's active work going on now in terms of preparing a submission for review.

That's great. Thank you.

Thank you.

Thank you. We will now take the follow-up question from David Lickrish, HSBC. Please go ahead.

Hi, guys. Just a follow-up question.

I guess, when you're, Hari was sort of touching on the questions that I wanted to follow-up on which was really focusing on the tramadol opportunity in Europe. And you think that the data that you currently have is going to be enough in order to support a filing, like no additional clinical work in Europe would be required?

Yes, we believe that to be the case, David.

Okay. I just wanted to clarify. Thanks.

Thank you.

Thank you. The next question is from Christine Charette from BMO Nesbitt Burns. Please go ahead.

I just want to explore the Tramadol ER in the states. If we look at the -- I heard what you said, but if you look at the conversion rate, it's basically in the bottom quartile of what we've seen in terms of conversion rates for other once-a-day products that are out there. Now every once-a-day product has the same problems that physicians want to be comfortable switching patients, making sure that the drug is as good as the multiple times a day.

And if you think pricing is not an issue, what is different about this drug versus all the other sustained release products that makes it a bottom quartile conversion rate, and do you think it's going to stay at a bottom quartile conversion rate or is going to improve from there, and why would it improve?

Christine, a couple of answers to that. First, I think it's premature to make the judgment, secondly, analogs are just analogs. Every situation has to be looked at very specifically.

Two things to remember here is that some companies that introduce alternative dosage forms and so on focus solely on the conversion rate as a strategy. And as a consequence, you might see a more rapid conversion, but you don't get the utilization of new patients.

So our view of that is that the conversion rate will occur, because this is a big difference between four times a day to once a day. It's a generic marketplace, we want to make sure that we just don't focus on conversion rate, where we could maybe have a faster penetration but a lower high end result as opposed to that.

We're treating this as a new drug. We want the new patient that goes in with moderately severe chronic pain to get a prescription for Ultram ER. That's the focus. We have the metrics that show that that's happening.

And secondly, as I mentioned before, sort of the full weight of the promotional plan that OMI has in preparation has yet to be felt within the marketplace and I think that's very important in terms of reminder, in terms of reminder of the name, in terms of reminder of the name when you're writing a script and so on. So we think that's very significant.

So we look at this as sort of the early stages of the launch with those with that understanding. So we have high confidence in the guidance that we do.

And maybe I'll ask one other comment. I may ask Rick to comment on this, because Rick has a sales organization that is actually directly involved with physicians in this and gets direct feedback. So maybe Rick, do you want to add a comment to Christine's question?

Thanks, Doug.

Just to reiterate, we see no red flags. We've done a lot of market research on this product with our marketing partner and we don't see any red flags.

I actually had the chance to spend a couple days in the field and talk to doctors directly, they're very excited about the compound and we are strongly in belief that we're on forecast and we're going to make our numbers and we are excited about the opportunity to continue to grow Ultram.

Okay.

And you mentioned that 90% were tier three and you were pleased with that. Is that that you're pleased that is covered? My understanding is tier three has a large co-pay.

Sure. I think, it would be wonderful if it was all tier one but we recognize the realities of the marketplace and this is the, there's a lot of generic Ultram's out there and there are price concerns and so on. But I think it's very important for the products to be covered. Because I think although there may be a higher co-pay, the fact that it is covered is not going to be a significant hurdle to conversion or to use of the first time.

That's what I'm saying, I feel good about 90% coverage in tier three, it's in recognition to the realities of the market and I think this is a very good position to be.

Okay, great. Thanks.

Thank you. The last question is from Elliot Wilbur from CIBC World Markets. Please go ahead.

I wanted to ask a question specifically about one of your development programs, Metoprolol, haven't heard anything from you guys recently on that product. Obviously it loses patent protection in the U.S. in '07.

Wondering if you still think there's an opportunity to monetize or commercialize your product in advance of that, and then obviously, you recently did a deal with AstraZeneca involving your specialty sales organization in the U.S. and was just curious if you could share with us whether or not you had any discussions around your Metoprolol formulation with AstraZeneca? Thanks.

We haven't said too much about our development program for Metoprolol other than the fact that we have a development program with Metoprolol and also Metoprolol in combination with some other non-disclosed products. And I don't think we're going to get too much more granular, Elliot, than we have in the past and really wouldn't comment at this point of discussions either with AstraZeneca or anyone else. Thank you.

Thank you. This concludes our question-and-answer session. I would like to turn the meeting back over to Mr. Howling.

I thought I'd just ask Doug to say a closing remark.

Yeah, thank you, Ken.

I just want to thank you, again, all for attending this conference call, and I would like to also express my personal appreciation to all the dedicated Biovail employees whose truly diligent efforts are behind the success of the Company as we've outlined today. So thank you, and thank you all for attending and have a good afternoon. Thank you.

Thank you. The conference has now ended. Please disconnect your lines at this time. We thank you for all your participation and have a great day