The recovery in Biovail continues (BVF)
There was a fair bit of news coverage recently regarding the recent sale of a large block of Biovail shares. Biovail’s largest shareholder, founder and previous CEO Eugene Melnyk took his stake in the company down by 9.6 million shares to only 232,000 shares worth close to 4 million C$. At the peak, Mr. Melnyk held 25% of the company whose market capitalization is approximately 2.7 Billion USD at current prices (Yahoo finance). It is not difficult to understand why Mr. Melnyk was interested in selling the shares. The investment was not only financial but also emotional. Mr. Melnyk had a long history with this company having brought it to where it is. Biovail, in return, helped make him one of the richest Canadians. Having sold the shares now, he can move on and focus on other ventures.
All that said, the timing of the sale was less than ideal. In fact, any time a seller can find willing buyers for large blocks of stock means it is likely that higher prices lie ahead . For the rest of the note, we will take a brief look at Biovail and outline a favorable case for investing in this company.
From a fundamental standpoint, a number of Canadian managers have offered positive views of the company. For example, back in October 2009, John Zechner described his investment thesis on the company as one of his top picks. Since then, the stock is up from under 15 dollars to almost 17 dollars.
The price action, furthermore, has been favorable as the following charts show. The shares both on New York and Toronto have been making highs not seen since 2007:
chart courtesy of stockcharts.com
chart courtesy of stockcharts.com
In addition to making recent new highs, since the start of 2009 and until now (5 quarters or 15 months), BVF has outperformed the iShares Dow Jones pharma ETF as well as the iShares MSCI Canada (EWC) ETF as the chart below shows. This relative strength is a good indicator for the robust demand for the shares among investors.
chart courtesy of stockcharts.com
As the current move in the market since March 9th, 2009 continues, Biovail continues to do well. The shares are arguably somewhat extended. Hence, one may want to examine the shares on a pullback. Canadian investors have been fortunate that the only pharmaceuteucal entry in the XIU continues to outperform in this strong market.
Disclaimer: Please note that it is important to do further research and consult a licenced investment professional prior to investing in any security. Disclosure:The author of this article, maplenotes.com or staff do own a position in Biovail at the time this note was first published.
The April 9th, 2010 edition of the Investor’s Digest of Canada offers an abridged version of a Deutsche Bank research report on Biovail. The analyst (David Steinberg) goes into detail about Biovail’s products and growth initiatives.