Biovail Case

775 WordsFeb 1, 20154 Pages
Analysis of Maximum Potential Impact to Revenue from Trucking Accident I have conducted an analysis of Biovail’s estimate that their 3rd quarter revenue would be impacted by $10 to $20 million due to the recent trucking accident. My conclusion is that Management has made serious mistakes in this estimate and it is not clear if this is due to incompetence or an intention to deceive investors. While my high level estimates show that a truck could hold upwards of $53.46 million worth of Wellbutrin® XL if completely full (and therefore the truck would only need to be ~19% full to contain $10 million worth) the bill of lading obtained by the state trooper clearly showed that the total weight of the freight on board was only 11,690 pounds.…show more content…
Even J.P.Morgan who maintains a bullish stance on the name cited poor earnings quality and CIBC ceased coverage after citing production delays and operational uncertainties. As outlined above Biovail’s management has materially misstated revenue guidance in my opinion either due to incompetence, or of even greater concern possibly engaged in deceptive disclosures. It is also possible that they were attempting to engage in channel stuffing to inflate revenue figures. The fact that management applied pressure to retract a negative report published by a former Banc of America analyst and then made negative public statements regarding his coverage is a huge red flag in my mind. This is a highly unusual tactic and raises ethical concerns. Despite these aggressive tactics analysts should not shy away from covering this stock as it is their role in the capital markets to provide an independent view for investors, be that positive or negative and this is never more important than when something improper may be in play or when fundamental performance is at a tipping
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