Biovail Settles with Stock Analyst |
Date: Wednesday, September 12, 2007
Author: Christopher Faille, Senior Financial Correspondent, Hedgeworld.com
Biovail Corp. has settled a lawsuit against one of the defendants in a lawsuit against research analysts and hedge funds that Biovail claims acted in concert to drive down the company's stock price, which helped short sellers to profit. The particulars of the settlement with the Band of America analyst David Maris remain secret, but Biovail, a pharmaceutical concern with a market capitalization of $2.5 billion, put out a statement Tuesday [Sept. 11] acknowledging that it is dropping its lawsuit against him. Biovail had claimed that Mr. Maris was one of several research analysts who issued damaging research about Biovail that caused the stock price to fall, benefiting those who sold Biovail stock short. The settlement with Mr. Maris marks the latest development in a high-profile lawsuit that was featured on the CBS News program "60 Minutes" in March 2006. Biovail's acknowledgement of the settlement was a rather reluctant one, coming in response to an article on the subject that appeared in Monday's New York Post. In that article, Post reporter Roddy Boyd cited an unnamed "person familiar with the proceedings," and construed the settlement with Mr. Maris as one sign that Biovail's broader lawsuit against research analysts and short-selling hedge funds is collapsing. In its response, Biovail said that Mr. Boyd's story was misleading and inaccurate. It said that not only is it continuing to pursue the short-selling matter in state court in New Jersey, but that Mr. Maris "is expected to be extremely helpful on Biovail's pursuit of its lawsuit" against his former co-defendants. The company said that the settlement includes a provision that Mr. Maris will "provide substantial sworn testimony, voluntary production of material documents from [Banc of America Securities] and … the right to demand additional discovery," including emails, correspondence, etc. Other defendants in the lawsuit include hedge funds like SAC Capital Advisors LLC, its related entities and its founder Steven A. Cohen; analysts and research firms such as Gradient Analytics Inc.; and investment and brokerage firms including the Gerson Lehman Group, the Gerson Lehman Group Brokerage Services and others. Separate from Biovail's lawsuit in New Jersey, there is litigation ongoing against Biovail in a Manhattan federal court. This suit arose from the consolidation of several Biovail investor lawsuits, including one brought by the Ontario Teachers' Pension Plan Board Previous HedgeWorld Story. The pension plan and other plaintiffs maintain that Biovail management fraudulently misled shareholders by making materially false statements that inflated the value of the company's stock. Biovail's defense in that litigation overlaps with its complaint in New Jersey. In each context it is claiming that its stock price was depressed as a result of an illegal scheme by short sellers and their allies. In its statement, Biovail's said that its settlement with Mr. Maris arose out of the recent lengthy sanctions hearings in the context of the federal lawsuit. A spokeswoman for Gradient Analytics, which has played a leading role in the public-relations side of the New Jersey litigation for the defendants there, declined comment Tuesday. The day of the "60 Minutes" broadcast, Biovail's stock (NYSE: BVF) closed at $23.43 per share. A year and a half later, the stock is now in a trading range between $17.10 per share and $17.50 per share. One may take this as a sign that the fundamental dog wags the speculative tail on Wall Street, theories to the contrary notwithstanding. The substantial downward move in Biovail's stock price began in July, when Biovail received a non-approval letter from the U.S. Food and Drug Administration for BVF-033, a novel once-daily salt formulation of the anti-depressant bupropion.
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