Taking the buy out of Biovail

24 February 2006 By Alex Fak

Following in the footsteps of Overstock.com, Biovail has accused shortsellers and a research firm of conspiring to tank its stock. However, both companies have themselves to blame for their lousy market performance.

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On Wednesday, Biovail, a Canadian speciality pharmaceuticals company, filed a lawsuit in New Jersey against several hedge fund managers, a research firm and an analyst, alleging that the parties conspired to manipulate the market and drive down the company's stock price.

The lawsuit alleges that several hedge funds engaged in shortselling Biovail's stock had "ghost written" the negative research reports put out by Gradient Analytics, an Arizonabased independent stock research firm. The company also alleges that Gradient held back publishing the research for long enough to allow the hedge funds to accumulate short positions.

In part, the complaint names SAC Capital, its founder Steven Cohen, Gradient and its founders as defendants.

Gradient and SAC Capital deny Biovail's charges.

The suit also alleges that hedge funds Perry Capital and Rocker Partners as part of the "associationinfact" conspiring to execute "illegal stock manipulation scheme," although neither is named among the defendants.

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