New Sheriff arrives at Biovail

Jul 7th, 2010 – Comment

Looking at the value of the stock since the announcement of the merger with Valeant Pharmaceuticals International (VRX TSX) I think the short term good news is already baked into this pie and its about execution of their plan as we go forward.


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biovail

 

I have been holding BVF for quite some time at a cost of $22.76. With the merger with Valeant how do I figure out what the price will be towards the end of the year if it does happen.

Would appreciate your expert opinion.

Thank you
Barbara

 

Hi Barbara,

Thanks for the assignment. Its been quite a long time since I have even thought of Biovail Corp. ( BVF TSX) as anything other than a short. BVF has been selling off since 2001 when it traded above $80.00 a share. I guess you jumped in at $22.76 anticipating a bottom and then found new lows with your money. Been there, done that, ate losses myself! Looking at the value of the stock since the announcement of the merger with Valeant Pharmaceuticals International (VRX TSX) I think the short term good news is already baked into this pie and its about execution of their plan as we go forward.

 

BVF

The three year chart paints the picture of a stock that finally found a bottom in late 2008 and then built support at $14.00 in 2009 and developed a nice base over the last 12 months till it popped on the deal announcement on June 21, 2010.

 

 

 

 

BVF2

The six month chart illustrates the frenzy that transpired on the deal with VRX. The RSI is signalling that the stock is currently over bought and the MACD looks to be bending to the downside. What I do like in this chart is the big flag pole that has been built and what seems to be a pennant forming. This sort of pattern is a continuation pattern that in most cases indicates that there is more to come on this advance. We still have to be patient in that the pattern isn’t complete yet but please understand that there are no guarantees that it will.

 

 

vrx

What I do like about the future of the combined company is that J. Michael Pearson, Chairman and CEO of VRX will be the CEO of the combined company. The stock chart for VRX indicates that under new management the combined company has a sustained uptrend and lots of support along the trend line. Pearson is talking tough about cutting spending and staff and as a shareholder you have to like that.

 

At this point I would say that you have a good chance of seeing this investment get back into the black for you by year end.

 

Happy Capitalism!

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