Biovail is a Canadian pharmaceutical company. It is recognized as one of the largest companies dealing with pharmaceutical products within Canada. It commercializes its products in Canada directly and through Strategic partners internationally. Its reputation as a recognized company in pharmaceutical products is due to its excellence in innovations and the .
The focus of this study is based on financial matters relating to the company. Biovail is a company with a strong base and with policies that have enabled it to be a leader on the pharmaceutical manufacturing front. Some of those strengths include:
- Including production of enhanced formulations of existing drugs
/> - Manufacture of high-end generic products
- Incorporating more than one therapeutic class of existing drugs to produce a single efficient product.
This study necessitated by an event that occurred on the 1st of October 2003. On that particular day an accident occurred near Chicago Illinois involving a truck belonging to Biovail Corporation. The truck was transporting a shipment of Wellbutrin® XL to North Carolina. The financial damage projected by the company shortly after the accident seem exaggerated compared to approximations made by analysts like J.P Morgan Securities Inc and Banc of America Securities.
Why could there be such a big difference between independent organization analysis and the company projections? Could the company authorities be talking advantage of the accident situation to cover up some truth? These uncertainties lead to a conclusion that there are forces within the company or its outside partners with hidden agendas that could ruin the company.
There are clear weaknesses within Biovail that have caused all the discussed disarray the company finds itself in. They are outlined below:
- The public relations department due to the naïve approach in which they report to the outside world about emerging reports about the company.
- There are no sufficient mechanisms to handle commercialization processes within the company.
Despite this, Biovail company can effectively implement the SEC’s Staff Accounting Bulletin concerning revenue allocation which proposes a four point approach to ensure recoverability from the commercialization mess the company find itself in. it is an opportunity gap that Biovail cannot fail to utilize. This four point criteria states that:
- Detailed evidences of any and all agreements are maintained.
- Service has been rendered or delivery has been made.
- Existence of a determinable or fixed price between buyer and seller.
- Assurance for collectability.
Using this four point criteria, Biovail would explore the opportunity to meet the US GAAP (Generally Accepted Accounting Principles) requirement that revenue must be realizable in order for it to be termed as recognizable.
There are further allegations by the Securities and Exchange Commission (SEC) suggesting that Biovail Corporation could be engaging in Channel stuffing. This is the act of sending retailers more products than they are able to sell with a purpose of registering high revenues.
The allegations presented led to the ultimate placement on leave for Jerry Treppel (Managing Director, Corporate Finance, Banc of America Securities) and his subsequent resignation. The failure by executives at Biovail to convince the Banc of America Securities to withdraw a report on Biovail (April 2012) was attributed to him.
Treppel had indicated in his report that he had doubts about Biovail’s ability to handle
David Maris took over the accounts from Treppel and conducted some investigations that found grave allegations citing to Biovail conducting underground deals with the Distributor. Through this deal, the Distributor conducts activities as a pharmaceutical manufacturer of which it is Biovail disguising itself as the Distributor.
Biovail company is a large company that cannot escape scrutiny and critic when faced with a disarray no matter the magnitude of that disarray. It is therefore important that the company sets out policies that ensure:
- Proper communication channels between all departments or sections of the company.
- Excellent public relation techniques
- Organized staff
- Excellent legal support services.
It is also important that the company engages well with its essential partners and particularly government agencies to avoid collisions which could ruin the company. It is important that the company studies and implements requirements set out by government policy on functioning of companies and commercialization process.
Jones, R. C., Venuti, E. K., & Tax Management Inc (2009). Revenue recognition--international accounting standards. Arlington, VA: Tax Management.
Starczewski, L. M., Beil, F. J., Mallek, J. R., & Tax Management Inc (2006). Revenue recognition--product sales and services. Arlington, VA: Tax Management.