UPDATE 3-Biovail cuts dividend, buys Wellbutrin rights

* Cuts quarterly dividend by 76 pct

* To buy U.S. rights to Wellbutrin XL from Glaxo

* EPS $0.25 vs $0.35

* Shares drop 15 pct

(In U.S. dollars. Adds company and analyst comments)

By Scott Anderson

TORONTO, May 6 (Reuters) - Biovail Corp (BVF.TO) slashed its dividend by 76 percent on Wednesday and said it plans to spend $510 million to buy the U.S. rights to antidepressant Wellbutrin XL, sending its shares down about 15 percent.

The country's biggest publicly traded drugmaker said it plans to pay shareholders a quarterly dividend of 9 cents a share beginning in July, just a fraction of the dividend of 37.5 cents it last paid shareholders earlier this year.

Biovail said it needed to redirect the money to boost its acquisition warchest to fund the development of its new strategy to focus on treatments for central nervous system disorders.

The company estimates the change in dividend policy as well as the Wellbutrin deal with development partner GlaxoSmithKline (GSK.L) will give it an additional $480 million to pursue the growth strategy.

Wellbutrin XL was originally developed by Biovail and has been distributed by Glaxo in the United States since 2003.

"This is all about making sure that we have enough resources to accelerate our strategy. We are seeing so many opportunities out there that we want to have the incremental cash to go after those," Bill Wells, Biovail chief executive told Reuters.

"The large number of opportunities that we are seeing means that a better use of those funds is to invest in those opportunities and get higher returns for shareholders."

Shareholders disagreed, however, sending the shares down 12.7 percent to C$11.70. Earlier in the session, the shares touched a low of C$10.90.

RBC Capital Markets analyst Doug Miehm said the stock action was a "knee-jerk reaction" to the dividend cut as well as disappointment over the size of the Wellbutrin deal.

"While likely to generate significant free cash flow and strong returns, the market was likely expecting a different CNS acquisition of this size," Miehm said in a note to clients.