Bausch Health Companies Inc (BHC) 2007 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the first quarter 2007 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. (OPERATOR INSTRUCTIONS) As a reminder a replay of this conference call will be available until 7:00 p.m. Eastern Daylight Time on Thursday, May 17, 2007. Callers from Toronto and countries other than the United States should dial 416-695-5800. Callers from the rest of Canada and the United States should dial 1-800-408-3053. The access code for this replay is 3221188 followed by the pound sign.

On behalf of the speakers who follow, investors are 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 Provincial Securities 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 our goals, targets, strategies, intentions, plans, beliefs, estimates, expectations, outlook, guidance, and other statements which contain language such as guidance, believe, 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 that may cause actual results to vary from those expressed or implied in such statements, please consult the Company's earnings press release dated May 10, 2007. That is available on the Company website as well as its filings with the U.S. Securities and Exchange Commission and the Canadian Securities Administrators including the risk factors, details in its most recent annual report on Form 20-F 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 Nelson Isabel, Vice President, Investor Relations and Corporate Communications for Biovail Corporation.

Thank you, Operator. Good morning, everyone. Thanks, Operator and good morning. On behalf of Biovail thank you for joining us today. On this mornings call we will provide additional insight into the financial results and operating highlights for the first quarter of 2007. Joining me on today's conference call are Dr. Douglas Squires, Chief Executive Officer of Biovail Corporation; Ken Howling, Senior Vice President and Chief Financial Officer; and Kathleen Brown, Vice President, Associate General Counsel and Chief Compliance Officer. They will all be available to participate during the question and answer session with research analysts immediately following our opening remarks.

We will try to get to as many questions as possible while limiting the call to approximately one hour. Other participants are encouraged to follow-up with the Company after this mornings call by calling 905-286-3000 and asking for Investor Relations. Doug, please go ahead.

Well, thank you, Nelson. Good morning, everyone. Thank you again for joining us. Before I begin my remarks pertaining to Biovail's financial and operational performance for the first quarter of 2007, I'd like to comment on Biovail's intention to file an amended and restated Form 20-F for 2006. As a result of the understatement of the Company's reported net income for fiscal 2005 and 2006.

The error that caused the need for a restatement was discovered very recently. Biovail's Management acted quickly and decisively to remediate this material error which relates to a non-cash amortization schedule and update the public record. As a result of the restatement, the Company is required to correct other known errors in prior year periods that were previously deemed to be immaterial. The errors that were identified and are in the process, that we identified and that we are in the process of remediateing are relatively minor in nature. Let me also emphasize that the errors resulting in an under statement of net income were modest. Ken Howling, Biovail's Chief Financial Officer, will provide further comments with regard to the restatement later in this mornings call.

I'm pleased to report that in the first quarter of 2007, Biovail again executed strongly against its financial and operational objectives building on the momentum and successes of 2006. Despite the loss of market exclusivity for the 300 milligram strength of Wellbutrin XL, the Company's business model remains strong and continues to generate robust cash flow. $120 million in the first quarter of 2007. This, in conjunction with a strong balance sheet, provides Biovail with the flexibility to invest heavily in our R&D pipeline, the life blood of the Company.

It also allows us to pursue a number of other strategic initiatives to grow the business, including the targeted acquisition of complementary technologies or products while offering our shareholders one of the industry's highest dividend yield. Of particular interest is the acquisition of new products for the Canadian market to further leverage the outstanding capabilities of the BPC Sales and Marketing Organization. After the quarter closed, we redeemed all of our outstanding senior subordinated notes, which has left Biovail debt free and our strong cash position has again enabled our Board of Directors to approve the payment of a quarterly dividend of $0.375 per share payable on May 29, 2007 to shareholders of record on May 22, 2007.

In the first quarter of 2007, Biovail announced that it had reached comprehensive settlements with Anchen Pharmaceuticals, Impax Labs, Watson Pharmaceuticals, and Teva which resolved, among other things, Biovail's patent infringement actions against each of Impax and Watson related to Wellbutrin XL. Importantly, with the find exceptions, none of Teva, Anchen, Impax, on Watson may market a generic version of the 150 milligram strength of Wellbutrin XL until some time in 2008. Let me emphasize that these settlements eliminated the uncertainty associated with ongoing litigation and immediately reduced our legal expenses. They also provided financial upside to our forecast for our Wellbutrin XL business for 2007 and 2008, and perhaps most importantly, the settlement provides a significant buffer for us to launch BVF 033, our Bupropion formulation into a still branded market. I'll talk about the salt in more detail in a moment.

Our Wellbutrin revenues in 2007 will also benefit from a commercial launch of Wellbutrin XR in Europe, our marketing partner, GlaxoSmithKline has launched Wellbutrin XR in Germany and anticipates launching the product in other European countries through 2007. Further to the agreement signed in 2001 between Biovail and Glaxo, Biovail will manufacture and supply the product to GSK at a fixed contractually determined price. In anticipation of the European launch, Biovail shipped product in late February.

On the regulatory front in the first quarter of 2007, Biovail submitted a supplemental new drug submission to the Therapeutic Products Director in Canada for Wellbutrin XL for the prevention of seasonal effective disorder. The file has an action date of February 12, 2008. Also in Canada, the TPD has given us an action date of September 2, 2007, for our new drug submission for BvF 127 , a once daily Tramadol formulation for the management of moderate to moderately severe chronic pain in adults. And on April 25, Biovail received final approval from the U.S. Food and Drug Administration for zolpidem ODT which is indicated for the short-term treatment of insomnia. Biovail is currently evaluating a number of options for the marketing and distribution of this product in the U.S.

Turning now to the pipeline, we continue to believe that we will make at least one regulatory filing later this year. Let me now quickly review the status of some of our disclosed programs. The FDA action date for our new drug application for our bupropion salt is July 28, 2007. We are in late stage negotiations with potential commercial partners for this product. Development work continues on BVF 146, a combination product that incorporates Biovail's once daily Tramadol formulation with an undisclosed non-steroidal anti-inflammatory drug. Phase III studies were initiated in October 2006.

Development work is also progressing for BVF 012 an enhanced absorption alcohol resistant formulation of venlafaxine and for BVF 045 a combination product incorporating our bupropion salt with another undisclosed anti-depressant. We are currently in partnership discussions with a number of potential partners for the commercialization rights for these products.

Additionally, further to our agreement with EpiPharm development work continues on four products. BVF 087 and BVF 065 which target large markets in CNS disorders, BVF 239, a cardiovascular product and BVF 300 a product that targets the gastrointestinal disease market. In early April, Biovail transferred all of its interest in EpiPharm to a French private equity fund in return for proceeds of $39 million in cash and a small interest in shares on convertible debt of the purchase. I'd like to emphasize that this development has no impact on the status of the aforementioned programs under our agreement.

Turning now to Ultram ER. We are encouraged by the products prescription trends over the past eight weeks. While it is too early to be definitive it appears as though marketing partner Ortho-McNeil's recent growth initiatives are taking effect and being reflected in total prescription figures as reported by IMS. Over the last five weeks of reported data the product as hit all-time highs in total prescription volume every week. Let me reiterate that Biovail and OMI remain confident in Ultram ER's commercial potential.

With respect to potential competition for Ultram ER, we recently received a Paragraph IV certification from Par Pharmaceuticals related to their abbreviated new drug application for ageneric formulation of the 200 milligram strength of once daily Tramadol. As the owner of a patent currently listed in the orange book for Ultram ER, yesterday, Purdue Pharma Products along with Biovil Laboratories International, and OMI initiated patent infringement litigation against Par. As a result, pursuant to the Hatch-Waxman provisions, the FDA cannot issue approval to Par's 200 milligram product prior to the resolution of the litigation in Par's Favor or the expiry of 30 months whichever occurs first.

I'd like to remind everyone that Ultram ER is protected by a significant intellectual property portfolio which includes two of our own patents which are currently being prosecuted by the U.S. Patent and Trademark Office as well as patents owned by Purdue.

On Tuesday, it was reported that a proposed settlement between the Ontario Securities Commission and Biovail Chairman, Eugene Melnyk was not approved. Biovail will not be commenting on this matter at this time. The Company continues to cooperate fully with the OSC and its ongoing investigation relating to Biovail. The Company cannot predict the outcome, timing of when this matter may be resolved.

In closing, let me reiterate that Biovail's business remains strong. Our strong cash position has put us in excellent position to evaluate a number of opportunities to grow Biovail's business and while 2007 will likely be a transition year for the Company, we remain confident in our business model and our prospects for growth. Buoyed by recent strong prescription trends for Ultram ER and the near term PDUFA date pending for our bupropion salt and a maturing development pipeline, Biovail is entering a new product cycle that we believe may fuel mid to long term growth for the Company. Back to you,

Thanks, Doug. I'd now like to call on Ken Howling, Senior Vice President and Chief Financial Officer to provide more in depth information on the Company's financial performance for the first quarter of 2007. Ken, please go ahead.

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

As Doug mentioned earlier at the beginning of his remarks. Biovail will file an amended and restated Form 20 F for the fiscal year ended December 31, 2006, and other such documents as may be required. As described in today's press release, we recently discovered a computational error related to amortization, a non-cash item of the Zovirax asset that resulted in our requirement to restate prior period financial statements affected by the error, namely fiscal 2005 and 2006. As a result of the restatement, we are required to correct other known misstatements that were previously deemed immaterial. The Company identified two such instances. One related to foreign exchange, also a non-cash item and the other previously disclosed related to Cardizem LA, the aggregate impact of these items was the understatement of net income in 2005 and 2006 in the amount of $10.2 million and $7.7 million respectively. I'd like to emphasize that Biovail remains confident in its accounting systems and processes. We have initiated a remediation plan to promptly correct the material weaknesses identified as a result of that error and we expect that these remediation measures will be implemented during the second quarter of 2007.

In the first quarter of 2007, Biovail generated strong revenues, robust cash flows from operations and strong earnings per share. On a consolidated basis, total revenues for the first quarter of 2007 were $247 million compared with $222.6 million for the first quarter of 2006 reflecting an increase of 11%. Biovail's U.S. GAAP net income for the first quarter of 2007 was $93.8 million compared with $68.4 million for the corresponding period in 2006. Fully diluted GAAP earnings per share for the first quarter of 2007 were $0.58 compared with $0.43 per share for the period in 2006. GAAP net income and EPS figures for the three months ended March 31, 2007, were negatively impacted by an incremental $600,000 charge related to the December 2006 restructuring of the Company's U.S. commercial operations.

Total product sales for the first quarter of 2007 were $238 million reflecting a 12% increase compared with $211.8 million for the corresponding three-month period a year earlier. The gain reflects higher revenues from several product lines including Ultram ER, Zovirax, Cardizem LA, and Biovail's portfolio of generic products, partially offsetting these factors included lower revenues from Wellbutrin XL and BPC, our Canadian sales and marketing organization. Product revenues for Wellbutrin XL declined approximately 6% to $61.4 million in the first quarter of 2007 compared with $65 million in 2006. Wellbutrin XL revenues in the first quarter of 2007 were impacted by the loss of market exclusivity and the December 2006 launch of generic competition for the 300 milligram dosage strengthen the United States. In the first quarter of 2007, generic competitors captured 74% of total prescriptions written for the 300 milligram strength. Partly offsetting these declines were revenues realized from initial shipments to marketing partner GSK to support the European launch of Wellbutrin XR.

In the first quarter of 2007, Ultram ER generated $30 million in revenues compared with $15.1 million in the first quarter of 2006. The sales performance of this product in the first three months of 2007 can be partly attributed to a recent price increase, an increase in Biovail supply price from 27.5% to 37.5% of OMI's net selling price, higher sample revenues and higher inventory levels.

Turning to Biovail's Zovirax franchise, revenues for the first quarter of 2007 were $37.3 million compared with $24.5 million for the prior year period. The 52% increase can be attributed to price increases as well as a two week increase in the amount of inventory at the wholesaler level. In the first quarter of 2007, the Zovirax line held a 73.9% share of the topical antiviral market up 3.2 percentage points from the corresponding period in 2006.

For the three months ended March 31, 2007, BPC generated revenues of $13.8 million for the first quarter of 2007 compared with $19.8 million in the first quarter of 2006. The decline can be directly attributed to the impact of generic competition for Tiazac and Wellbutrin SR, which were partly offset by steadily increasing sales for Tiazac XC and Wellbutrin XL. Cardizem LA generated revenues of $23.9 million in the first three months of 2007 compared with $18.3 million for the period in 2006. This 31% increase was mainly attributable to the fulfillment of back orders for the 120 milligram and 180 milligram strengths of the product. The amortization of deferred revenues associated with the May 2005 Kos transaction positively impacted revenues for Cardizem LA for 3.8 million in the first quarters of both 2006 and 2007.

Our legacy portfolio generated first quarter 2007 revenues of $35.6 million compared with $35.5 million in the first quarter of 2006. Revenue was favorably impacted by price increases implemented in 2006 in the first quarter of 2007 and was partly offset by expected year-over-year declines in overall prescription volumes for these mature products. Total revenue for Biovail's portfolio of generics in the first quarter of 2007 was up 7% to $35.9 million compared with $33.6 million in the first quarter of 2006. The increase can be attributed to higher prescription volumes for Biovail's generic formulation of Procardia XL. Revenues were partly offset by declines in prescription volumes for generic formulation of Cardizem CR and Voltarin X R.

At the end of the first quarter Biovail's cash balances were $870 million. On April 2, 2007, the Company redeemed all its outstanding 7 7/8 senior subordinated notes due April 1, 2010 for a total cash outlay of $422.5 million which included early redemption premium of 7.9 million accrued interest to April 1. The redemption is expected to be neutral from a cash earnings per share perspective in 2007 and accretive thereafter. Biovail is now debt free.

Cash flows from operations were $119.8 million in the first quarter of 2007 compared with $94.7 million in the corresponding period for 2006. This represents an increase of 27%. Net capital expenditures amounted to $5.7 million in the first quarter of 2007 compared with $17.9 million for the three months ended March 31, 2006. Capital expenditures in 2006 reflected the expansion of the Company's manufacturing facility in Steinbach, Manitoba which is now complete. As Doug mentioned earlier, Biovail's Board of Directors has approved the payment of a dividend of $0.375 per share payable on May 29, 2007, for shareholders of record on May 22, 2007.

For more comprehensive detail pertaining to Biovail's financial and operational performance for the three months ended March 31, 2007, please refer to the earnings news release distributed by the Company earlier this morning. With respect to guidance, Biovail is reaffirming its 2007 guidance for total revenues of 800 million to $850 million. The Company's also reiterating its guidance for diluted EPS of $1.70-$1.80 excluding specific items and for cash flows from operations of 320 million to 340 million.

Please note that certain items that positively impacted first quarter results are not expected to impact performance for the rest of the year. More specifically, these items include shipments of quantities of Wellbutrin XR to GSK for the European marketplace, higher than expected revenues of Wellbutrin XL as a result of a recent settlement, increased sample revenues and inventory levels for Ultram ER, the fulfillment of back orders for 120 milligram and 180 milligram dosage strengths of Cardizem LA and an increase in Zovirax wholesaler inventories of approximately two weeks. As before, Biovail's revenue guidance is based on a number of variables including current prescription trends and business trends and the success of our strategic marketing and distribution partners. Biovail's 2007 financial guidance assumes that a generic formulation of the 150 milligram strength of Wellbutrin XL is not launched in 2007.

In addition, 2007 guidance does not include the impact of any potential acquisitions or dispositions, the introductions of new generic formulations to the Company's other key products, any new supply and distribution agreements, restructuring, settlements, or other specific charges. That concludes my review of Biovail's financial performance for the first quarter of 2007 and I will now turn the call back to Doug Squires for his closing remarks.

Well, thank you, Ken. The individual and collective capabilities and efforts of the people of Biovail have led again to a successful quarter. In the first quarter, this performance has provided us with the ability to explore multiple opportunities to apply our strategies to grow our business and to further enhance our operating efficiencies. Our performance has also provided us with more clarity on some of the hurdles we face. We have worked diligently to build a solid infrastructure to support Biovail in its future business. In particular, our ability to develop and sustain a robust, high value pipeline. We remain confident that our business model will further enable us to create clear goals, and objectives, achieve them in a controlled and disciplined manner as well as to respond quickly and decisively to obstacles.

Our course for the rest of 2007 has been chartered with specific strategies and marked by what we believe to be attainable goals. We look forward to seeing you next week at Biovail's annual and special meeting of shareholders. The event is scheduled for 10:00 a.m. next Wednesday, May 16, 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 and remarks. I will now return the call to the conference call Operator for questions. Thank you.

Thank you, sir. (OPERATOR INSTRUCTIONS) Our first question is from Doug Miehm from RBC Capital Markets. Please go ahead.

Thank you. I'm just going to lay out three questions. First one, with respect to the outperformance this quarter looking at Wellbutrin and European Union, Ultram ER, et cetera, et cetera. Things were stronger than anticipated and that won't be continued through the remainder of the year but maybe you could comment on whether or not you expect numbers to be under reported in Q2 and Q3 as a result of the shipments? Secondly, perhaps you could talk about the recent Supreme Court decision, KSR versus Telflex and how that may impact how you are looking at your pipeline and patenting and IP and protection and finally just with respect to the Wellbutrin salt deal, maybe you could provide an update on that? Thank you. Thank you.

Okay, good morning, Doug. I'll answer a couple of these and maybe toss one back to Ken maybe to start with your last one, I think as I mentioned in my comments the Wellbutrin salt has a PDUFA date of end of July, July 28, I believe. As you know, we are in active discussions with partners and we hope to be able to announce something in the relevant near term on that, but that's about the most I can say at this point in time. The issue of the Supreme Court ruling which was on the issue of obviousness, it's important to us. We pay attention to it from multiple directions. This is all, it's not a new issue in terms of our evaluation of our pipeline and what types of projects we work on, what type of combinations we do. The unexpected results that are necessary to support a case against obviousness and so on, so it just heightens our attention to ensuring that the IP position that we put together for some of our pipeline is solid and supports the uniqueness of our position.

The other side of the coin is of course, we also have activities in the R&D side that relate to difficult to manufacture generics and those kind of often involve a variety of litigations associated with us, so we can take the view that that may actually assist us in some of those, so it's a two edged sword and we pay a lot of attention to it. Your first question related to the good performance in the first quarter and some of the events that supplemented that performance that will not continue into the year and maybe the impact in subsequent quarters. Maybe I'll let Ken just take a crack at that.

Sure, Doug, there were a couple of things as we noted that impacted Q1 of '07 that we would not anticipate impacting Q2 or subsequent quarters. Things like certain initial quantities to support a launch in the number of European countries for Wellbutrin XR. Certainly, the settlement caused a rebalancing, if you will, of inventories, given the fact that at the end of December, the settlement had not been concluded nor reached and certainly inventory levels were being worked down, obviously in Q1 there was a rebalancing there.

In addition at the end of December, certain inventory provisions were taken at least to be conservative or prudent that some of these, some of the product that was out in the distribution channel could come back if a settlement had not been reached. Obviously there was a rebalancing of those inventory provisions when we looked at the continued strength of Wellbutrin 150 milligram as well as the 300 actually outperforming, if you will, other analogs. So without being too directional in terms of the future, but it's clear to us that there were certain favorable impacts in Q1 that would not continue in future quarters.

Okay, thank you.

Thank you. The next question is from Randall Stanicky from Goldman Sachs. Please go ahead.

Great. Thanks, guys and good morning. I just wanted to follow-up on the last question. I guess two questions. One, Ken, Doug, as you think about, I know you don't give specific product guidance but as you think about your internal targets for your individual products, anything changed here from when you initially gave guidance to where we are now? And then the second aspect of that, could you talk more to the quarterly distribution of (Inaudible) for the rest of the year or perhaps to the how you're expecting to accrue the benefits from your December restructuring announcement from a cost perspective?

Good morning, Randall. As it relates to let's say products and any product changes since the time that we gave guidance, original guidance, there are a number of things that always change. At the time we gave guidance, the situation with Wellbutrin XL was obviously uncertain, and at that time, when we were planning our guidance, we were pretty conservative. We based it on the genericization for the full year, while things did not quite turn out that way, so obviously, with the settlement that we announced, that's modified on Wellbutrin. Ultram is sort of an open question for us. We had probably higher expectations in '06 than turned out to be warranted at least in the ramp up, but in recent weeks, 6 to 8 weeks things are starting to look pretty good with a change in some of the products that OMI launched, sample sizes and so on that we have talked about before. So there has been a few that have gone up and down and there's still some uncertainties on those. These things are still in play. We're still waiting to see the degree of this traction, this ramp up of Ultram ER and we're confident but we want to see it and again, what will happen with Wellbutrin throughout the year remains to be seen as well, although we're confident there and we're confident in our PDUFA date for the salt. Ken, do you want to make any?

The only point I'd add or touch on is with respect to the restructuring, we do believe that all of the expenses associated with that restructuring, certainly all the materials, significant ones, had been occurred. All of the changes have been affected. The employee base, et cetera, those changes have been made.

And near fully loaded in the quarter?

Yes. So the current infrastructure costs are fully loaded in the quarter and the amount I think it was $600,000 related to the restructuring was also booked and charged in the quarter. So that's essentially done.

So as we think about the quarterly distribution can you give us any color? I know there's some flexibility probably on the cost structure, but is it a more evenly weighted earnings trajectory for the rest of the year or is there a conservatism to your numbers as we think about the back half and some of the moving parts?

Well, the only additional color I may offer is that again, there are clearly certain items that benefited Q1 as outlined in the previous question I guess that we would not anticipate going forward, but again, we just don't break out that quarterly so I won't try and get into a distribution.

Okay, great. Thanks a lot.

Thank you. The next question is from Marc Goodman from Credit Suisse. Please go ahead.

Yes, Doug, can you give us a flavor for how much you're going to spend on R&D this year? And can you just comment on this material weakness comment that showed up in the press release and what you think the cause of it is and what you've done to correct it, and whether this really has any implications for anything that we need to be very concerned about? Thanks.

Let's talk about maybe the last question first. This is a recently discovered computational area related to non-cash amortization expense for Zovirax that came to light in the first quarter, impacts only 2005 and 2006 and it's an understatement of net income. It's roughly $17 million and I think we have to keep a perspective on this, but this is roughly 4% of net income in those years so it's a fairly modest change, but nonetheless, we took what I believe is the appropriate route which is to be very conservative, to take the most open, transparent route in dealing with this type of issue which will occasionally come up in any company because there is no infallability formula here for any company to follow. This is something that was embedded in a spreadsheet that was difficult to see until it was in fact seen. So, I think we did the right thing. I think companies will occasionally have this. Nobody likes to have a restatement but that will occasionally occur and I think companies have to be judged on what they do about it and how quickly they do it and how transparently and openly they address that issue. Ken, do you want to make any additional comment to that?

Yes, I do. Certainly the computational error that was found was found in one spreadsheet, if you will. We did a number of things to ensure that other spreadsheets were not affected. We did tests throughout the organization to ensure that other computational errors at least to the extent possible did not exist. We looked at all of the key calculations and spreadsheets. We're initiating not only controls around the validating and testing of those other important spreadsheets but as well, we're also implementing a number of things with respect to training of the team with respect to developing these spreadsheets, and to the extent possible, we're identifying ways where we can move away from relying on these computational Excel spreadsheets if you will and embedding it right into our enterprise programs, so identified the causes Doug expressed. It was an isolated issue but we didn't want to just rely on that. We actually looked throughout the organization and tested all the key spreadsheets to make sure it didn't exist elsewhere and we feel quite confident that it was an isolated incident but nonetheless we are remediating it throughout the organization.

Excellent and then just the other question was what the planned R&D spend was for the year?

R&D spend.

Sorry, Marc. We haven't given that level of granularity with respect to R&D spend by year. We have talked about we will spend up to $500 million through 2010 and that's as detailed as we've gotten, Marc.

Is it fair to say that the first quarter which is obviously up from the prior couple of quarters, there's no reason to think that that spreads going down in the next couple of quarters, right?

I think, Marc, it's all dependent upon timing. There's a number of anticipated rather large significant studies. If things rollout according to one schedule we'll have a pretty robust R&D spend this year if there's any, I won't say slippage but the start of the enrollment for some of these moves by 30 or 60 days, that has an impact for 2007 clearly.

And Doug, you mentioned you were in conversations with multiple parties on different things, so are we to understand that the salt formulation of bupropion, are you in discussions with multiple parties on that specific product?

I'm not going to get that specific either, Marc. All I can say is that we are in discussions with multiple parties with multiple potential partnerships including the salt.

Okay. Thanks.

Thanks.

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

Hi, thanks. Just trying to get some idea of how much of the strength in Q1 is not -- will not reoccur. Can you give us some sense of the magnitude of your shipment to Wellbutrin XL to Europe and Ultram ER consistently comes in much stronger than anticipated or much stronger than what could be supported by the prescription trends. Should we start questioning the prescription trends or is it truly just inventory build?

I think with respect to Wellbutrin XR, I'm not going to be specific as to how much of it was related to (inaudible) demand if you will versus some of the other items. The European amount, fairly modest if you will, but certainly in conjunction with some of the other elements with respect to strategies around our distribution partner having adequate trade product if you will. I think if you look at as I say some of the analog, if you look at the performance of Wellbutrin XL 300 milligram versus some of the historical erosion rates, it's tracking quite nicely and that of course would also have an impact on anticipated levels et cetera.

With respect to Ultram ER, again, you can calculate what demand prescription demand is. You can, if you want to look at the delta, get a sense as to potentially how much was provided to support this significant sampling program which you're aware of going to the 30 count and of course those samples are obviously much more expenses than a 7-pack obviously and there's also an adjustment, by moving into the higher tier if you will. There's an adjustment going from the lower tier, 27.5% to the 37.5%, pick up that that we benefited from in Q1 as well with respect to inventory levels that OMI would have had on hand at December 31.

Okay, thank you.

Thank you. The next question is from John Maletic from Scotia Capital. Please go ahead.

Hi. I apologize if you have mentioned this already. I just want to get a sense of the internal forecast for Ultram ER. Has the recent uptick caused you to revisit your anticipation for the rest of the year or is it too early to tell?

We've got a lot of potential to this and very close attention to it but I think we want to see a continuation of this trend. We're optimistic before we -- but nonetheless, we want to make sure that this traction is sustainable and continuous before we revisit our forecast.

Okay. And I want to get a bit more color on some of the pipeline activities for the remainder of the year. The NDA filing, could you give us a sense of when that might take place? I assume it's for the combo Tramadol/(Inaudible) product?

We haven't identified what the filing is for I think the most we said is towards the end of the year.

Okay, and could we expect to see any new clinical activity on perhaps the combo antidepressant product? Or others starting the back half of the year?

Quite possibly. But I'm not going to be specific about it. This is interrelated both with the development program which is ongoing. The regulatory program and the partner discussions.

Okay.

And all those impact those start dates.

Okay. Thanks.

Thank you, John.

Thank you. The next question is from Joe Walewicz from CIBC World Markets.

Hi, yes, good morning. Most of my questions have been answered but I just wanted to ask a little bit about you had in the past discussed, Doug, some potential of looking at the generic market a little more than you have in recent years. Just wondering if you can comment about the R&D pipeline, if anything is going on there or if you have moved on that or that's still in the early stages, and just for Ken, just on the CapEx for the quarter, a bit low versus guidance for the year. Just wondering what the plans are for the rest of the year and if that's a new run rate or are we going to see things tick up later in the year? Thanks.

Okay, Joe. Good morning. In terms of the generic initiatives that we've talked about, the hard to manufactured generics we have a number of active development programs. This is not in the planning stage. This is in the development stage in a number of specific areas.

Now, sorry to interrupt. Are any of those the numbered programs or are these new programs in addition to those?

Well, they are both. A couple of them are in the numbered programs but we have been specific as to which are which.

Okay, great.

Ken, do you want to--?

Joe, with respect to CapEx, I think Q1 was lighter than I would expect. I certainly wouldn't annualize that. On recent Board meetings, we just approved additional capital expenditures associated with equipment for our Puerto Rican facility so I would still anticipate that at least for the year, we would spend somewhere in that 40 to $50 million range.

All right, great. Thank you, guys.

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

Yes, thank you. Doug, just a couple of quick questions. One, on the Wellbutrin salt, just I'm just wondering, in the event that you get an approval on July 28, and you launch the product relatively quickly, could you give us a sense of how you sort of avoid canniblaizing Wellbutrin XL with this particular salt at this point in time and I'm just wondering , GSK may take it on, GSK may not take it on and I'm just wondering in the event that someone else takes it on, are there sort of positioning issues that we need to think about as to how you position this versus Wellbutrin XL or is this a straight cannibalization attempt? And the second question is that you've got $100 million R&D run rate for the year or give or take thereabouts. Could you give us a sense as to how you areprioritizing that $100 million, Doug? What's at the top of the pile, maybe the top two or three programs, just there seems to be a little bit of a moving goal post as to what comes forward and not so if you could clarify as to what are sort of the two or three programs tat we should really focus on and where you're spending your cash

Yes. Good morning, hard it. I'm just writing this down here so I don't forget all your questions here. So, on the salt, I'd love to answer your questions on that in detail but I think I'll be in a position to do that in a couple of months. I don't really want to get into the strategies that the partner might be using with respect to how it's positioned in the marketplace or what the targets are, the relationship to the currently marketed once a day Wellbutrin and so on. We're just not in a position to do that and we think that it's sort of commercially very proprietary, but as we approach and get past the PDUFA date and we know that this product will be launched by our partner in let's say Q4 just for a date, then we'll be able to talk about that in more detail.

Now, as it relates to the R&D questions, there's sort of two ways to I guess think about that. All the programs that we spend money on, we regard as strategically significant to us; however, there are some, as you know, that have very high levels of expense largely because they are moving into the later clinical stages of development and so and those types of programs are the Tramadol non-steroidal and the combinations because by definition, those require certain types of clinical trials to gain approval that are quite substantive and quite expensive. There are others that are let's say more classical trials that are maybe smaller and smaller class that we haven't been too disclosing on but that are also very important in that amount that we spend in R&D, so from a materiality point of view those combination products are quite contributory to that.

Is it fair to say the Ultram and say the antidepressant combination studies account for the two largest components of the R&D expenditure, Doug?

They would probably be the two largest components, Hari.

Thank you.

Sure.

Thank you. (OPERATOR INSTRUCTIONS) There are no further questions registered at this time. I'd like to turn the meeting back over to Mr. Squires.

Well again, thank you very much for attending this morning. I'd like to take this opportunity once again to express my personal appreciation to the many employees of Biovail that work so hard and diligently and creatively to insure the success of the Company and it's sort of manifested in another very nice quarter, so thank you very much.

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