Thursday, September 20, 2007

Biovail (NYSE:BVF): Actionable call alert!

- Goldman Sachs is out positive on Biovail (NYSE:BVF) saying that while recent share performance has been tepid with little recent news flow, they see the stock as well positioned for potential near-term upside given:

1) anticipated BVF-033 update the firm believes may serve as a near-term catalyst;

2) dividend yield of 8.6% which could help support an upward move;

3) depressed valuation at 10.5X 2008 EPS. While GSCO still sees challenges at Biovail, including the need for a sustainable growth story (no change to Neutral rating, $23 tgt), they do see risk/reward skewed to the upside here as investor expectations surrounding BVF-033 appear modest. With shares off 33% (versus S&P down 2%) since the July 20 non-approvable letter (removal of $1.3 billion in equity cap), they believe an earlier-than-expected approval could provide a boost to the stock with still decent downside protection on current dividend yield.

Street expectations for BVF-033 appear modest, with visibility into a path for earlier-than-expected approval a potential catalyst. It has been five weeks since management's August 14 meeting with FDA (following July 20 non-approvable) with ongoing active dialogue. GSCO now believes an update to be

Notablecalls: BVF stock has been crushed since the BVF-033 (new version of Wellbutrin XL) approvable letter. The analyst community and investors in general had considered the approval a sure thing. The next leg down came when Q2 results conf call yielded little new information on the pipeline (plus lousy generics side performance).

Yet, looking at the BVF-033 situation, a short bioequivalence trial (with a 6-month review) looks increasingly as the worst case scenario. Other scenarios include the acceptance of the existing application or the completion of the single-dose study with a ver short review time.

My guts tells me here that anything poisitive from BVF should propel the stock several points higher from current levels. Most analyst tgts stand around the $25 level.

Commenting on the pipeline the management noted on the Q2 conference call that it has 10 core programs underway and expects to be in a position to launch 2 products in 2009 and 3 products in 2010 assuming successful clinical trials. I think there will be more news from this direction as well in the future.

The dividend yield is just huge here, too. Even if they decide to it pare back, it's still big enough to limit downside.

Last but not least, technically the stock looks like it wants to go higher from here. I'm going to call this GSCO call Actionable here. Tight leash around the $17 area.

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