BMS attempts to distance itself from fraud allegations
pharmafile | October 31, 2003 | News story | |Â Â Â
Bristol-Myers Squibb is attempting to draw a line under allegations of fraud and financial misconduct by downgrading earnings as far back as 1999.
The company has been under investigation by the US Securities and Exchange Commission (SEC) since last April, but has only now admitted it used sales incentives to artificially raise wholesale inventory levels, which in turn increased short-term earnings figures.
The company's restated financial figures mean net sales for 2001, 2000 and 1999 are reduced by $1.4 billion, $678 million and $376 million respectively, while net earnings decreased by $376 million, $206 million and $331 million for the same period.
But the re-calculation means that net sales and net earnings for the first half of 2002 have now increased, by $653 million and $261 million respectively.
BMS has also settled antitrust proceedings with the Federal Trade Commission and various states in the US relating to charges that it blocked generic competition to cancer treatments Taxol and Platinol, and anti-anxiety drug BuSpar.
The FTC said that a "decade-long" plan of alleged anticompetitive acts saved the company almost $2 billion in lost sales. BMS said the outcome would not "adversely impact the company's financial position."
While BMS hopes the restatement will help clear the air and aid future review forecasts, a series of further problems make the company's short-term future look uncertain. Analysts believe the companys depressed share price, down by over a half compared with 12 months ago, has left it vulnerable to acquisition by a rival.
The SEC's investigation into BMS's wholesale inventory build-up may be joined by possible legal action by shareholders who feel they were misled by the company's senior management as to the financial health of the company.
Several senior figures have already left the company but Chief Executive Peter Dolan is under pressure as patent expiries are having a serious impact on sales. These are compounded by a lack of products to plug the gaps, such as the high profile failure of cancer drug Erbitux – which led to an ongoing insider trading investigation at co-developers ImClone – and hypertension drug Vanlev.
Analysts Lehman Brothers have BMS at the bottom of the list of major US pharma companies with strategies to minimise generic threat and estimate almost a quarter of the company's sales could be threatened over the next four years.
The restatement overshadowed the company's 2002 results, which saw sales of $14.7 billion, a 2% drop. US sales declined by 7% as net sales of off-patent Glucophage (diabetes), Taxol (cancer) and BuSpar (anxiety) dropped 85%. But a strong performance of the statin Pravachol/Lipostat, BMS's top seller, in Europe and Taxol in Japan led to a 9% rise in international sales.
Other promising indicators are a 61% rise in anti-platelet therapy Plavix to $1.9 billion and a 20% rise in hypertension drug Avapro to $586 million. Both are co-promoted with Sanofi-Synthelabo.
