UPDATE 3-Biovail settles U.S. shareholder suit

(Adds analyst, plaintiff comments)

By Wojtek Dabrowski

TORONTO Dec 11 (Reuters) - Biovail Corp BVF.TO BVF.N continued to lighten its legal load on Tuesday, announcing it had reached a deal to settle a U.S. shareholder class action lawsuit that stretched back more than four years.

Canada's biggest publicly traded drugmaker said the total settlement was $138 million, but estimated it would pay about $85 million after the resolution of insurance claims.

The company said the proposed settlement covers all persons or entities that bought Biovail's common shares between Feb. 7, 2003 and March 2, 2004.

The case centered on claims Biovail made regarding its two key products, Cardizem LA and Wellbutrin XL.

Still, the company said the pact "contains no admission of wrongdoing by Biovail or any of the named individual defendants."

Standard & Poor's Ratings Services said that since Biovail has cash balances of $412 million and no borrowing outstanding under its $250 million revolving credit facility as of the end of September, the settlement shouldn't materially alter the company's liquidity or its ability to make acquisitions or licensing deals.

However, the debt-rating agency noted "various other ongoing regulatory inquiries and litigation remain pending and continue to constrain the ratings."

"It's, in our view, a tremendous settlement," said Max Berger, an attorney for one of the lead plaintiffs in the case, the Ontario Teachers' Pension Plan Board.

One analyst who spoke on the condition of anonymity said the monetary amount of the settlement "was not that great" and that it was difficult to say whether this was an isolated decision by Biovail or part of a greater litigation clean-up effort the company is undertaking.

When "we start seeing two or three of these, then I'll start to look at this as a trend," the analyst said, adding the company faces a number of other class action suits.

This is the latest lawsuit Biovail has settled in recent months. In September, it settled with a former Banc of America Securities analyst, saying it would drop him from a racketeering case filed in New Jersey state court last year.

It also settled with Banc of America Securities itself regarding related legal matters.

Still, it vowed to pursue in court others it has accused of conspiring to drive down its share price. Those include hedge funds, analysts and investment and brokerage firms, it said at the time.

Earlier this month, Biovail struck a deal with Watson Pharmaceuticals Inc (WPI.N) that will delay a generic version of Biovail's Cardizem LA heart drug from hitting the market until April 2009. The deal also ended patent litigation in U.S. courts.

Biovail still faces an inquiry from the U.S. Securities and Exchange Commission related to its accounting.

"The SEC investigation is still pending and this could also require payment of a fine," BMO Capital Markets analyst Christine Charette wrote in a note to clients Tuesday. "Resolution of all legal issues and securities investigations would remove an overhang and would have a meaningful effect on (selling, general and administrative) expenses."

The shareholder settlement announced on Tuesday is subject to approval by the U.S. District Court for the Southern District of New York.

"This proposed settlement would eliminate the uncertainty and considerable expense associated with this matter and enable us to use, in much more productive ways, resources we otherwise would have devoted to this litigation," Biovail Chief Executive Douglas Squires said in a statement.

Biovail shares rose 4 Canadian cents to C$14.99 on the Toronto Stock Exchange. They have lost almost half their value since hitting a year high of C$28.78 in May.

($1=$1.01 Canadian) (Additional reporting by Scott Anderson and Martha Graybow; Editing by Rob Wilson)