What drug are Biovail investors on?

(Disclosure: I own Biovail shares)

You know what company completely blows my mind? Biovail.

We've had a long, tortured relationship, Biovail and I. I took my initial position in the company in 2003. At the time, it was a nebulous growth play for me, and my thinking was along the lines of "boomers are getting old and old people need a lot of drugs, so drug companies are a good long-term investment. I should buy Canada's largest drug company."

I bought just after Biovail's stock had tanked from about $70 down to about $30 after some fishy accounting and a famous truck crash. As it turns out, I was trying to catch a falling knife and the stock still had a ways to fall. After bottoming out around $16, it's hovered in the high 20s for the last little while before this recent stock panic has it back at $20.

I've come close to selling numerous times, but Biovail has morphed itself from a growth play into a legitimate income-generating security that value investors tend to love. With an annual dividend of $1.74, Biovail is currently yielding close to 9%. That's insane to me. We're talking income-trust territory here, people.

Biovail's been in freefall since the middle of July when the FDA rejected one of their applications, but to me the fundamentals of the stock don't justify the beating it's taking. I can only assume it's due to fears that the company will now slash their dividend, but as the company suggested in a press release recently, I don't see that happening: their outlooks weren't counting on revenue from that drug any time soon, and the company is sitting on more than $450-million in cash and no long-term debt as it stands now. What's the worry?

My back of the napkin calculations based on the company's most recent quarter show that the company is sitting on about $5.30 in cash or cash equivalents for every share. By way of comparison, every share pays out $1.74 per year in dividends.

Am I missing something here? To me, this is a company that's yielding close to 9% at the moment, sitting on enough cash to cover its dividend for the next two years and then some. And we haven't even considered any additional revenue to be made from the company's underlying drug business. Even if the stock flatlines, that's a decent return. Never mind any capital gains to be had.

What can I say -- I'm tempted. I'm in the process of moving some money aronud at the moment, and when it's all ready in my investment account, I'm seriously considering upping my Biovail stake. I'll have to do some more research, but haven't seen anything thus far that woudldjustify the hammering the stock has taken for the last two weeks. If there's a contrarian view, I'd love to hear it in the comments.

As always, do your own research before buying anything.