RBC Likes Biovail's Strategy Shift

RBC Capital Markets analyst Doug Miehm offered qualified support for drug maker Biovail Corp.'s (BVF) much talked about strategic shift into central nervous system drugs, praising management in a note this morning for doing "a good job" of explaining the new focus.

However, in a note to clients Mr. Miehm went on to say he believes the company faces significant risk in implementation.

Developing new treatments for central nervous system conditions is a highly competitive area, and many observers believe the risks are particularly great for a company like Biovail that is struggling with declining revenues.

Biovail this week posted second quarter earnings of 37¢ a share,slightly ahead of Mr. Miehm's estimate of 34¢.

He called the results "solid," praising the company for better -than-expected cost savings from recent streamlining of its research operations.

The shares are currently trading at C$10.15. Mr. Miehm has a target of C$13 on the shares, to which he gives an "Outperform" rating.

He also questioned the logic behind a possible Biovail plan to create a sales force, a move that was unsuccessfully attempted by the company several years ago. Biovail expects to make the decision within the next few months.

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