Bristol-Myers chief executive resigns

Bristol-Myers chief executive resigns
By Christopher Bowe and Dan Pimlott in New York
Copyright The Financial Times Limited 2006
Published: September 11 2006 22:31 | Last updated: September 12 2006 15:05



Peter Dolan, chief executive of Bristol-Myers Squibb has resigned in the face of pressure on the US drugmaker over its attempts to delay generic competition for Plavix, its most important drug.

James Cornelius, a director of the company and former chairman of Guidant Corporation, will take over immediately as interim chief executive, but Mr Dolan will remain as an advisor to assist in the transition to new leadership, the company said. Richard Willard, senior vice president and general counsel, has also left the company.

The changes followed a board meeting on Monday in which a government monitor recommended that Mr Dolan and Mr Willard be sacked.

“Judge Lacey’s recommendation followed an inquiry by the Monitor and the U.S. Attorney into issues related to corporate governance in connection with the negotiation of a settlement agreement of the pending Plavix patent litigation with Apotex Inc. and Apotex Corp,” the company said.

The board was also due to meet on Tuesday in the first face-to-face assembly of all its directors since a generic version of Plavix launched last month and quickly eroded profits.

The launch came after negotiations failed between Bristol and French partner Sanofi-Aventis, and Apotex, the Canadian generic drugmaker.

Part of the fall-out will see the board on Tuesday consider whether to cut Bristol’s dividend. A strong dividend yield has been a key support to the share price while the drugmaker struggled over the past few years to regain sales and profit growth.

Mr Dolan job had been called into question on a number of occasions, particularly externally after negotiations for Plavix allowed a loophole for Apotex to launch a generic and prompted a criminal investigation into Bristol.

Some analysts remain puzzled over the drugmakers’ negotiating tactics on Plavix.

Timothy Anderson, analyst at Prudential Equity Group, said in a recent report: “It appears that Bristol and Sanofi made significant concessions as part of that original agreement – like forfeiting the ability to sue for treble damages – the question we have is ‘Why?’”

Plavix, a blood thinner, is the world’s second best-selling medicine with about $4bn in US sales.

Rather than fight at a pending trial, Bristol and Sanofi in March reached a settlement with Apotex that would delay generic Plavix until mid-2011, months before its alleged maximum patent life would expire.

The settlement provided Apotex with at least $40m – a provision that US regulators at the Federal Trade Commission questioned.

Requiring FTC approval, the deal was amended but also included provisions – among them one that allowed Apotex to launch a generic Plavix on August 8 with a window of five days before Bristol could file to stop it in court. This amounted to several weeks of sales flooding the market.

The generic Plavix immediately took about 80 per cent of new prescriptions, forcing Bristol to slash its profit forecast this year by as much as 25 per cent. A federal judge has stopped sales but declined to order a recall.

This raised questions about the dividend. Its 5 per cent yield in recent years helped appease shareholders until Bristol’s promised return to profit growth next year.