Nearly four years after raising a big stink - and filing a group of $4.6 billion lawsuits - over allegations that research analysts and hedge funds conspired to drive down its stock price, Biovail (BVF) has finally given up. The white flag was raised, however, only after a recent merger with Valeant Pharmaceuticals (VRX) that ushered in new management and a new way of viewing a dispute that generated significant publicity and aggravation, but not much else.
And so Valeant has agreed to pay $10 million to SAC Capital Advisors to reimburse the hedge fund for the cost of defending two earlier actions filed by Biovail and its shareholders. Both suits against SAC, which is run by billionaire investor Steven Cohen, were dismissed. Moreover, the drugmaker has issued an apology, a rather rare omission, given the voluminous amount of litigation involving the pharmaceutical industry.
“The initiation of litigation against SAC and others in 2006 by Biovail’s management at the time was regrettable. We would like to put this incident behind us,” J. Michael Pearson, Valeant’s CEO, say in a brief statement. “With the merger between Valeant and Biovail now complete and a new management team in place, we have the opportunity to settle this matter and, instead, focus all of our efforts on growing Valeant’s core businesses and enhancing value for our shareholders.”
This isn’t the first time that Biovail has had to backpedal from its allegations. Three years ago, the drugmaker dropped a claim against former securities analyst Dave Maris, who works at CLSA, and his former employer, and agreed to pay the firm $2 million in legal fees. SAC was a hedge fund client. This came after Biovail founder Eugene Melnyk charged Maris inaccurately quoted forensic accounting experts in a report, but his claimed proved to be incorrect.
In its own brief statement, the hedge fund says: “SAC continues to believe that Biovail’s lawsuit and the media campaign that accompanied it were designed to distract critics from the company’s own conduct.”
Melnyk, who owns the Ottawa Senators hockey team, ran the drugmaker until 2007 and, more recently, sold most of his Biovail stock. But his tenure was marked by turmoil and controversy. He and the board were charged with securities violations (see this) and, two years ago, paid $25 million to settle charges that docs were paid kickbacks to induce them to prescribe the Cardizem heart drug (look here). He also fought unsuccessfully to regain control of the drugmaker in 2008 (back story).