Giving HF A Taste Of Its Own Medicine

Biovail Corp. apparently had it up to here with hedge funds allegedly attacking the company in an effort to drive down its share price, and the Canadian pharmaceutical is about to give SAC Management a taste of its own medicine. In a lawsuit filed in New Jersey Superior Court, The Wall Street Journal reports, Biovail is suing Steve Cohen's $7 billion hedge fund for $4.6 billion in damages, claiming that the HF had engaged in a conspiracy to sack the drug company's share price by "ghost writing" analyst reports that were "negative and false" for independent researchers that wreaked havoc on share prices and let the likes of SAC and other short-sellers to cash in.

According to the Journal, Biovail is no stranger to dishing out doses of legal trouble to hedge funds. Ten years ago, it sued Parker Quillen of the hedge fund Quilcap, over allegedly false rumors that it claims dented its share price. The suit settled before trial – with one term of the agreement, the paper says, that Biovail would invest in Quilcap.

As for the current action, SAC issued a statement saying that the allegations against it are "outrageous and defamatory," adding that "Biovail's true issue is the valuation that the public market placed on their common stock. That disagreement should be resolved in the public markets, not in litigation, especially not in litigation dressed up with false allegations."

Quillen told the Journal that he was "a little surprised" by the latest Biovail action. "I would have thought [Biovail founder] Eugene [Melnyk] would have learned a lesson." Biovail itself, the paper says, is dealing with another legal issue; the Ontario Securities Commission is investigating it for insider trading.