Biovail to No Avail

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Canadian drug maker Biovail (NYSE: BVF) plummeted 21% today after the company received a letter from the Securities & Exchange Commission announcing an informal inquiry into its accounting for 2002 and year-to-date 2003. That's $4.79 off yesterday's $23.22 close.

On the back of several quarters of ripping double-digit year-over-year revenue hikes, the red-hot stock hit a 52-week high of $51.30 in June before taking a breather. But when the company warned in October for Q3, shares plunged 24% in two days.

Why? Some odd news about a truck accident affecting end-of-quarter delivery of $10 to $20 million of its Wellbutrin XL, the once-daily version of the bestselling antidepressant it makes for partner GlaxoSmithKline (NYSE: GSK). (Alyce Lomax reported that story.) Is it just us, or does this conjure up images of "C'mon, stuff that crap in there and let's get moving -- the quarter's about to end!"

And Q3 results, announced on Oct. 30, not only delivered a modest 3% sales gain vs. the prior year, but a lower-than-warned 83% drop in EPS. According to billionaire chairman and CEO Eugene Melnyk, "the results reflect a series of decisions we made to remain consistent with our conservative accounting approach." Parse that. At best, it implies that they wavered but returned to the fold. Never good.

The SEC inquiry joins a Health & Human Services Department inquiry into company sales practices, and we have to ask the same old question of many a high-growth story: Is it the real thing or manufactured? Investors should be wary.

Bump in the road for a growing company, or smoke signifying fire? Be heard on our Biovail discussion board and learn why our boards are voted the best on the Web!