Allegedly, Biovail consistently reported "record" growth throughout this time period, and the defendants issued positive earnings and income growth forecasts of 30% throughout this period. Unbeknownst to investors, however, Biovail allegedly used hundreds of millions of dollars in proceeds from previously issued stock to make acquisitions and thereby create the illusion of increasing revenue and demand for Biovail products. Allegedly, this scheme also allowed certain individual defendants to obtain more than $40 million in performance-based stock grants and options.

The action alleges that the defendants failed to disclose that during this time period the defendants could not maintain Biovail's historical profit margins and revenue growth at or above 30% amidst growing competition; that earnings forecasts were not based on reasonable assumptions, especially given the fact that the defendants knew that the company was experiencing an overall slow-down in internal growth and that the company could not control the production and sales costs of its expensive products; and that such growth could not possibly keep pace with the company's historical performance, much less exceed it.

On October 30, 2003, Biovail shocked the market by announcing revised guidance for 2004 and its financial results for the third quarter of 2003, which were substantially below prior guidance--net income down 83% for the quarter and revenue growth of 10% versus prior guidance of more than 30%. The defendants issued a series of releases revealing rising expenses that far outpaced any prior guidance and lower revenues that far underperformed plan. Immediately following this disclosure, the price of Biovail's common shares plummeted 20%, or $5.38 per share, from the prior day's high in a single day's trading session to a new 52-week trading low.