1. Bristol-Myers Squibb PATENTS, PROFITS, AND PUBLIC SCRUTINY

2. Agenda Overview of case issues
Bristol-Myers brief history and general information
Financials
Forecast
Peter Dolan bio
Plavix information
Apotex
Pharmaceutical industry
Generic competition

3. Agenda Bristol-Myers accounting scandal
Failed patent protection agreement
Patent protection court battle
Challenges facing the board
Discussion questions

4. Overview of Issues
In the Bristol-Myers Squibb corporate Pledge, the company declares:
We pledge Bristol-Myers Squibb to the highest standard of moral and ethical behavior and to policies and practices that fully embody the responsibility, integrity and decency required of free enterprise if it is to merit and maintain the confidence of our society.
accounting scandal at Bristol-Myers Squibb
Patent protection of Plavix
Plavix is the company’s top-grossing drug: responsible for approximately 30% of BMS revenues. (Second is Pravachol, a widely-applicable anti-cholesterol medication, responsible for 12% of BMS revenues.)
Nascent patent protection agreement with Apotex
Failure of negotiations in August 2006
Department of Justice investigation
Accounting scandal:
Most damaging to Dolan's reputation may have been the restatements of sales and earnings from previously issued financial statements from 1999 through During that time period, the company later admitted, Bristol had lied, inflating sales by as much as $3.35 billion and earnings by at least $900 million. The restatements were thought to have been the result of a commonly used—albeit morally questionable—tactic known as "stuffing the sales channel." Bristol conceded that in its quest to meet unrealistic growth expectations, the company had used sales incentives to entice distributors to buy more products than their pharmacy customers reasonably needed. As a result, Bristol seemed to be selling large quantities of its drugs, when in fact the products were sitting untouched on distributors' shelves. The restatements spiraled into a widespread investigation of the company's business practices. The Sarbanes-Oxley Act, passed in 2002 as part of an aggressive federal attempt to rein in corporate abuse, required that top company officials swear to the truth of their companies' financial data and provided stiff penalties for those who knowingly engaged in deception. In August 2002 Dolan swore to the accuracy of the company's statements—and proceeded to deny any responsibility for them only a few months later.
After laying low through one of the darkest periods in the company's 147-year history and dealing with a deluge of criticism, Dolan emerged from the shadows. As reported by the New York Times, in a conference call on April 29, 2003, he struck an optimistic note, saying he hoped the company would soon move into the "business-as-usual period" (May 18, 2003).

5. History of Bristol-Myers Squibb
“Starting with a dream, a handful of people and a few thousand dollars in capital,” William McLaren Bristol and John Ripley Myers founded the Bristol, Myers company in The original mission of Bristol-Myers was “to sell quality medicines directly to doctors.”
In the latter half of the 19th century, Dr. Edward Robinson Squibb also launched a pharmaceutical business that carried his name.
Bristol-Myers and Squibb merged in 1989, one of the largest mergers in corporate history. At the time, they formed the world’s second-largest pharmaceutical company.
Core products include: Videx (1991), Monopril (1991) and Pravachol (1991, expanded usage granted in 1995 by the FDA), TAXOL Injection (1991), Glucophage (1993), Avapro (1997), Plavix (1997), Excedrin (1998), Sustiva capsules (2001), Coumadin Crystalline (2001), Abilify (2002), Reyataz (2004), Orencia (2005), EMSAM transdermal (2006), SPRYCEL (2006), and ATRIPLA (2006).
Bristol-Myers Squibb is the number one provider world-wide of anti-cancer therapies, as well as a leader in the discovery and development of innovative treatments to fight heart disease, stroke, infectious diseases including HIV/AIDS and mental illness.
Its areas of disease interest include most of the spectrum -- everything from oncology to cardiovascular disease to infectious diseases to HIV/AIDS and mental illness. In the early 1960s Bristol-Myers provided its first anti-cancer medicine, which is still used today. In the 1980s Squibb marketed the first of an important new class of medications called ACE inhibitors, for the treatment of hypertension. In 1989 these two companies joined forces, bringing about one of the largest mergers in corporate history. During the 1990s Bristol-Myers Squibb brought to market the first medicine specifically for the treatment of HIV/AIDS, as well as a breakthrough therapy hailed as the most important cancer medication in 20 years.
BMS Official Site: Company History. Last updated: August Website:
BRISTOL-MYERS In 1887 William McLaren Bristol and John Ripley Myers decided to sink $5,000 into a failing drug manufacturing firm called the Clinton Pharmaceutical Company, located in Clinton, New York. The company was officially incorporated on December 13, 1887, with William Bristol as president and John Myers as vice president. The partners worked hard to expand the business, but at first it was an uphill struggle. From the start, however, they had two rules: insist on high quality and maintain the firm’s good financial standing at all costs. In May 1898 came a new name: Bristol, Myers Company (a hyphen would replace the comma after Myers’s death in 1899, when the company became a corporation). Not until 1900 did Bristol-Myers break through into the black -- where it has remained ever since. The company’s first nationally recognized product was termed a poor man’s spa by chief chemist J. Leroy Webber: a laxative mineral salt that, when dissolved in water, reproduced the taste and effects of the natural mineral waters of Bohemia. Christened Sal Hepatica, the new product sold modestly for eight years. Then, from 1903 to 1905, sales suddenly mushroomed tenfold. Another runaway success of this era was Ipana toothpaste, the first toothpaste to include a disinfectant in its formula and thus protect against the effects of bleeding gums. The demand for Sal Hepatica and Ipana transformed Bristol-Myers from a regional into a national company and then an international one. In 1924, gross profits topped $1 million for the first time in Bristol-Myers’ history. The company’s products were now sold in 26 countries. At this point, the shares held by John Myers’s heirs became available for sale, triggering a series of moves that in 1929 turned Bristol-Myers into a publicly held company, listed on the New York Stock Exchange.
The postwar depression prompted Bristol-Myers to jettison its pharmaceutical business and devote itself entirely to its specialties: Sal Hepatica and Ipana, its two big winners, and a dozen or so assorted toiletries, antiseptics and cough syrups. Company headquarters were established in Manhattan. And having shifted squarely into the consumer products arena, Bristol-Myers began advertising its products directly to the public. With the acquisition in 1943 of Cheplin Laboratories -- a Syracuse, New York manufacturer of acidophilus milk -- Bristol-Myers again became a producer of pharmaceutical products. Cheplin, which had expertise in fermentation techniques, became a key supplier to the U.S. War Production Board’s crash program to mass-produce penicillin for the Allied armed forces.
By the end of the war, it was clear that penicillin and other antibiotics represented an immense opportunity for Bristol-Myers. Cheplin was renamed Bristol Laboratories, and Frederic N. Schwartz was put in charge of it. In 1957 Schwartz was appointed president and chief executive officer of Bristol-Myers when Henry Bristol, approaching 70, chose to shed some of his former responsibilities and become chairman of the board. Reviewing the company’s situation and prospects, Schwartz and then-treasurer Gavin K. MacBain -- later Schwartz’s successor as CEO -- decided that Bristol-Myers should embark on a program of acquiring well-managed smaller companies. The two executives’ first major move in that direction was to acquire Clairol, a company founded by the husband-and-wife team of Lawrence M. Gelb and Joan Clair, which had turned haircoloring from a difficult-to-use specialty item into a highly successful mainstream consumer product. With Clairol also came the executive who in 1972 was to succeed MacBain as CEO of Bristol-Myers Company: Richard L. Gelb, elder son of Clairol’s founders. In 1976 Richard Gelb was elected chairman of the board. Within a dozen or so years after Clairol joined the company, a number of other acquisitions followed, including those of Drackett, Mead Johnson, Zimmer and Westwood. In 1986 the company opened a state-of-the-art research complex in Wallingford, Connecticut, designed to house more than 800 scientists and support staff. (In 1995, this facility would be renamed the Richard L. Gelb Center for Pharmaceutical Research and Development.) SQUIBB In 1858 Edward Robinson Squibb founded a pharmaceutical company in Brooklyn, New York, dedicated to the production of consistently pure medicines. In 1895 Squibb passed most of the responsibility for managing the firm to his sons, Charles and Edward. The company became known as E.R. Squibb & Sons. In 1905 the Squibb sons sold the company to Lowell M. Palmer and Theodore Weicker, and the company became incorporated. That same year, land was purchased at New Brunswick, New Jersey, for establishment of an ether production plant. In 1906, six years after Edward Squibb’s death, Congress passed the Pure Food and Drugs Act. The law still stands as the triumph of his lifelong crusade for safe, reliable pharmaceutical products.
Around the same time, the prototype of the Squibb logo was designed. The logo represented product uniformity, purity, efficacy and reliability based on research. In 1921 the company coined its slogan: "The priceless ingredient in every product is the honor and integrity of its maker." In 1938 the Squibb Institute for Medical Research was established. In 1944 Squibb opened the largest penicillin production plant in the world; in New Brunswick, New Jersey. In 1946 Squibb International was incorporated and the company expanded into South America and Europe while building manufacturing facilities in Mexico, Italy and Argentina. In 1971 Squibb Corporation established worldwide headquarters and expanded facilities for the Squibb Institute in Princeton, New Jersey. In 1975 Squibb researchers Miguel A. Ondetti, Bernard Rubin and David W. Cushman created Capoten® (captopril) -- the first in a new class of antihypertensive agents called ACE inhibitors. Capoten was an important new medical discovery for the treatment of patients with high blood pressure. In 1999, Cushman and Ondetti would be honored further with the prestigious Lasker Award. BRISTOL-MYERS SQUIBB In 1989 Bristol-Myers merged with Squibb, creating a global leader in the health care industry. The merger created what was then the world’s second-largest pharmaceutical enterprise.
In 1990 the Bristol-Myers Squibb Pharmaceutical Research Institute was established with headquarters in Princeton, New Jersey, and research facilities in Wallingford, Connecticut, and other sites around the world.
In 1991, the company received U.S. Food and Drug Administration (FDA) approval in the U.S. for Videx® (didanosine) also known as ddI, making it the second medicine available for treating HIV infection (the other being AZT). Other approvals that year included an antibiotic, Cefzil® (cefprozil); two cardiovascular agents, Pravachol® (pravastatin sodium) Tablets and Monopril® (fosinopril sodium) Tablets; and a central nervous system drug, Stadol NS® (butorphanol tartrate) C-IV.
In that same year, the company signed a Cooperative Research and Development Agreement with the National Cancer Institute to research and develop a new compound for treating certain types of cancer. This compound, TAXOL® (paclitaxel) Injection, immediately was established as the company’s top research priority. Bristol-Myers Squibb invested hundreds of millions of dollars to supply TAXOL in sufficient quantities for clinical trials, to prepare data for regulatory submission and to develop alternative sources of TAXOL (which originally was derived from the bark of an endangered tree, the Pacific Yew). TAXOL launched in 1993 and quickly became one of the world’s most widely used cancer treatments.
In 1994, Charles A. Heimbold, Jr. was elected chief executive officer. Also in 1994, the company completed its acquisition of UPSA, a leading maker of pharmaceutical and consumer medicines, based in France. It acquired Glucophage® (metformin hydrochloride tablets), a new oral medication for type 2 diabetes, from Lipha. And it received FDA approval of Zerit® (stavudine), an HIV medication.
In May 1995 the board of directors conferred the title of chairman emeritus on Richard L. Gelb for his long and distinguished career. Mr. Heimbold became chairman as well as CEO. By the end of that year, the company had over 60 product lines with $50 million or more in annual sales worldwide.
Beginning in 1995, Pravachol® (pravastatin sodium) was granted expanded usage from the FDA for reducing risk of heart attack or death in patients with elevated cholesterol or chronic heart disease. And Bristol-Myers Squibb acquired full ownership of Oncology Therapeutics Network, a distributor of cancer medicines, products and services to office-based oncologists.
In 1997, the company intensified its investment in pharmaceutical research and development, opening a new, 433-acre research campus in Hopewell, New Jersey. And two important new medicines co-developed with Sanofi-Sythelabo received approvals: Avapro® (irbesartan), an anti-hypertensive, and Plavix® (clopidogrel bisulfate), an anti-platelet agent.
At the beginning of 1998, the FDA granted clearance to market Excedrin® Migraine for the relief of migraine headache pain and associated symptoms. Excedrin Migraine became the first migraine headache medication available to consumers without a prescription.
In December of that same year, Bristol-Myers Squibb received the National Medal of Technology -- America’s highest honor for technological innovation -- "for extending and enhancing human life through innovative pharmaceutical research and development, and for redefining the science of clinical study through groundbreaking and hugely complex clinical trials that are recognized models in the industry."
In 1999, Bristol-Myers Squibb announced SECURE THE FUTURE™, a $100 million commitment to advance HIV/AIDS research and community outreach programs in five southern African countries: South Africa, Botswana, Namibia, Lesotho and Swaziland. SECURE THE FUTURE grants are funding a laboratory for local HIV monitoring and research; an HIV nursing curriculum; physicians’ exchange programs between Africa and the U.S.; large-scale studies of the feasibility and effectiveness of antiretroviral therapy in Africa for both prevention and treatment; a children’s clinical center of excellence in Botswana; and many community-driven initiatives such as orphan care, home care, counseling and other services.
And in 2000, Bristol-Myers Squibb, together with four other pharmaceutical companies and international agencies, joined the UNAIDS Drug ACCESS Initiative. The ACCESS program aims to make antiretroviral medicines and therapies to treat opportunistic infections more widely available in African countries that have developed a coherent national AIDS strategy. As part of the program, the company offered to lower the prices of HIV/AIDS medicines in those countries by 90 percent.
More recently, Bristol-Myers Squibb took its access efforts a step further, offering HIV/AIDS drugs below cost in Africa and committing an additional $15 million for extending SECURE THE FUTURE to four Western African countries -- Burkina Faso, Côte d’Ivoire, Mali and Senegal. The company is also ensuring that its patents do not prevent inexpensive HIV/AIDS therapy in Africa. The patent for Zerit, rights to which are owned by Yale University and Bristol-Myers Squibb, is now available at no cost to treat AIDS in southern Africa.
In September 2000, Bristol-Myers Squibb announced a new strategy that includes a sharpened focus on medicines and an aggressive external development program. As part of this new strategy, the company announced its intention to divest its Clairol and Zimmer businesses.
In February 2001, Bristol-Myers Squibb was chosen "America’s Most Admired Pharmaceutical Company" by FORTUNE Magazine.
In May 2001, Peter R. Dolan, a 13-year veteran of the company, succeeded Charles A. Heimbold, Jr., as chief executive officer. At around this same time, President George W. Bush announced his intention to nominate Mr. Heimbold to become the next United States ambassador to Sweden. Mr. Heimbold assumed his duties as ambassador on September 12, At that time, Peter Dolan became chairman of the Board of Directors; he retains his title of CEO.
Under Mr. Dolan’s leadership, the company announced in June 2001 that it had entered into a definitive agreement to acquire the DuPont Pharmaceuticals Company for $7.8 billion, an acquisition intended to further strengthen Bristol-Myers Squibb’s medicines business. In August 2001, the company completed the spin-off of the Zimmer orthopaedics business, and the DuPont transaction officially closed as of October 1, 2001.
In 2003, the company teamed up with cancer survivor and Tour de France champion Lance Armstrong to sponsor the Bristol-Myers Squibb TOUR OF HOPE™, an unprecedented week-long coast-to-coast cycling event. En route, the 26-member team of cancer survivors, caregivers, physicians, nurses and researchers raised awareness of cancer research and the importance of clinical trials in developing new treatments. Building on the success of the 2003 event, Armstrong and Bristol-Myers Squibb teamed up once again to sponsor the 2004 Tour of Hope coast-to-coast cycling event.

6. Financial situation
2005 revenues were approximately $19 billion with profits of $3 billion, a -7.6% decrease and 25.6% increase, respectively. (Source: CNN Money.com, Fortune rankings)
R&D expenditures in 2005 were $2.7 billion, up 10% from 2004; this included $2.5 billion in payments for in-licensing and development programs. For 1Q2006, $750 million was spent on R&D, up 22% from the previous year.
Bristol-Myers Squibb is determined to be a leader in drug development. Strategies include:
in-house development and collaboration
acquisition of smaller dynamic pharmaceutical companies
divestiture of non-core assets (May 2005 sale of Oncology Therapeutics Network distribution business, and US and Canadian Consumer Medicines business to Novartis).

7. Forecast I Forecast for the future is cautiously optimistic:
New BMS blockbuster drugs may spearhead a turnaround. In the first half of 2003 two major drugs were approved: Abilify, an antipsychotic, and Reyataz, the first once-daily protease inhibitor for the treatment of HIV/AIDS. In addition limited clearance was given to Erbitux, the sidelined cancer drug licensed from Imclone. Analysts at SunTrust Robinson Humphrey estimated that Erbitux sales could peak at more than $700 million. The promising drugs signaled a potential new beginning for the company. Morningstar projects an average revenue growth rate of 3 percent through 2007.
However, more generic challengers are entering the market
There is the threat of increased competition from the large drug developers in BMS’s core territories. (Merck, Norvartis, and Pfizer are core competition)

8. Forecast II
If 1Q 2006 is an indication of a trend, 2006 will be more profitable for BMS: the company reported a 34% increase in first-quarter profit to $714 million, helped by higher sales of heart and blood-pressure drugs and, a $200 million gain from selling off assets.
Revenues were up only 3% to $4.7 billion, (U.S. pharma revenues rose 17% to $2.1 billion).
However, Erbitux sales were $413 million for the year up 58%. Plavix, Abilify, and Reyataz sales were up 15%, 54% and 68% respectively – definitely a bright spot for the company.
Source:

9. Corporate Communications at BMS
Robert T. Zito, SVP Corporate and
Business Communications and Chief
Communications Officer
Former EVP of Communications for the
NYSE
Functions under Zito include brand
management, advertising, media,
employee communications, policy
communications, executive communications, creative services and community affairs

10. A Brief History of Peter Dolan
Born: January 6, 1956, in Salem, Massachusetts.
Education: BA from Tufts University (1978), and MBA from Dartmouth College (1980).
Worked at General Foods from In 1988, began working at Bristol-Myers as Vice-President of Marketing.
: As president of the Mead Johnson Nutritional Group, the company opened manufacturing facilities in four countries and international sales climbed to 40 percent of the corporation's revenue by 1996.
Was famous for setting “Big Hairy Audacious Goals” – like his 2001 promise to double BMS revenues within five years. He would come to regret that statement, as 2002 sales totalled $18.1 billion, down 1% from 2000.
Named CEO in February 2001 and chairman in 2002.
With 2003 sales of $20.8 billion Bristol-Myers Squibb Company at the start of the 21st century was one of the top pharmaceutical firms in the United States. The company specialized in anticancer, cardiovascular, and anti-infective pharmaceuticals; it was also active in the area of AIDS research and treatment, particularly through protease inhibitors, and was increasing its efforts to find genetic remedies for diseases—particularly infections—often in collaboration with other researchers. Although most of Bristol's sales came from perscription pharmaceuticals, the company also marketed Excedrin and Bufferin over the counter and, through its Mead Johnson subsidiary, sold infant formula. The company focused on creating product franchises by manufacturing several leading products within each of its core markets; for example, as the manufacturer of TAXOL, Paraplatin, Platinol, and VePesid, Bristol was a leading producer of anticancer drugs. The chairman, CEO, and president Peter R. Dolan had a personal interest in cancer, as several members of his family suffered from the disease.
Dolan was the seventh CEO in the corporation's 114-year history. A 15-year veteran of the company, his ascent to the top was particularly quick—some said too quick—as at 45 Dolan became one of the youngest chief executives of any of the largest drug makers. As of 2004 Dolan's standing with the company was tenuous due to a series of poor management decisions and an accounting scandal that made him the target of a federal investigation.
Dolan's instincts were almost on target. He got his start marketing Jell-O and other desserts for General Foods; but after Philip Morris acquired the company, Dolan quit, telling the New York Times, "I decided I wanted to work at a healthcare company, rather than a tobacco company" (February 8, 2001).
Not long after Dolan began working at Bristol-Myers Squibb Company, and by 1993 he was in charge of Bristol-Myers Products, the firm's over-the-counter drug business. He played an important role in the company's push to invest more heavily in Excedrin, which in 1998 became the first over-the counter drug approved to treat migraines. Sales increased by 17 percent under Dolan's leadership.
As president of Bristol's Nutritionals and Medical Devices Group, Dolan had responsibility for the Mead Johnson Nutritional Group, which produced infant formula. Under Dolan, Mead Johnson made international business a top priority. The company opened manufacturing facilities in four countries and international sales climbed to 40 percent of the corporation's revenue by 1996.
Dolan spearheaded a number of initiatives emphasizing new-product development and international marketing, establishing the 70-employee Global New Business Development Team. He set up what were affectionately referred to as the "Big Hairy Audacious Goals," which included making Mead Johnson number one in the world in infant formula; operating company-wide on a global level; launching a new product with sales of $100 million; garnering 30 percent of business from new products; and cutting operating costs by $100 million. While Dolan's unit did not meet all of those goals by the 1997 target date, Mead Johnson did become the world's largest infant-formula manufacturer; by 1986 the subsidiary controlled 23.6 percent of the world market. Also during Dolan's tenure Mead relaunched Sustacal, positioning it toward active seniors as opposed to the institutional market.
In November 1998 Bristol reorganized its senior management, signaling the start of a race for the company's top jobs for when the executive vice president Kenneth Weg and the chairman Charles Heimbold would retire in 2000 and 2001, respectively. Weg and Heimbold formed the office of the chairman, which would groom their successors. Dolan was mentioned as a second-tier candidate for the CEO job and was promoted to senior vice president for strategy and organizational effectiveness, heading a council to consider strategic alternatives for the company.
Somewhat surprisingly Dolan proved to be on the fast track; he was named CEO in February 2001 and chairman in Heeding calls from Wall Street, he quickly jettisoned auxiliary businesses—selling Clairol, the number-one hair-color brand and a longtime anchor product, for example—and focused on pharmaceuticals. He set audacious goals for the company, vowing to double the company's sales and earnings within five years—a promise he would later come to regret. In 2002, his first full year at the top, sales totaled $18.1 billion, down 1 percent from 2000.
Sagging sales, however, would be the least of Dolan's problems. In 2001, amid much scrutiny, he negotiated a $2 billion deal with Imclone Systems, the company notorious for its involvement in the Martha Stewart insider-trading scandal. The guiding principle had been to join forces to develop and promote the long-anticipated cancer drug Erbitux. But in 2002 Imclone received a "refusal-to-file" letter from the U.S. Food and Drug Administration, signaling a shortfall of convincing data with regard to the drug's efficacy. Investor outrage over the fact that Dolan had invested in the partnership without solid reassurance resulted in a write-down of $367 million—most of Bristol's investment in Imclone.
Analysts speculated as to whether Dolan was truly the right executive for the top job at Bristol-Myers. They didn't like the fact that he had climbed the corporate ladder so quickly and said that he lacked the character-building experiences that would have taught him how to deal with adversity. Dolan said in the New York Times that he took such criticism seriously but added, "I may be at my best when I'm underestimated" (May 12, 2002). Dolan evidenced his determination through athletic feats. In his 20s his inability to swim was not enough to thwart his plans to compete in a triathlon—he simply taught himself the crawl. At age 40 he ran two marathons in three weeks, in one beating the personal marathon record he had set 15 years earlier. Dolan and his wife were also competitive cyclists.
Most damaging to Dolan's reputation may have been the restatements of sales and earnings from previously issued financial statements from 1999 through During that time period, the company later admitted, Bristol had lied, inflating sales by as much as $3.35 billion and earnings by at least $900 million. The restatements were thought to have been the result of a commonly used—albeit morally questionable—tactic known as "stuffing the sales channel." Bristol conceded that in its quest to meet unrealistic growth expectations, the company had used sales incentives to entice distributors to buy more products than their pharmacy customers reasonably needed. As a result, Bristol seemed to be selling large quantities of its drugs, when in fact the products were sitting untouched on distributors' shelves.
The restatements spiraled into a widespread investigation of the company's business practices. The Sarbanes-Oxley Act, passed in 2002 as part of an aggressive federal attempt to rein in corporate abuse, required that top company officials swear to the truth of their companies' financial data and provided stiff penalties for those who knowingly engaged in deception. In August 2002 Dolan swore to the accuracy of the company's statements—and proceeded to deny any responsibility for them only a few months later.
After laying low through one of the darkest periods in the company's 147-year history and dealing with a deluge of criticism, Dolan emerged from the shadows. As reported by the New York Times, in a conference call on April 29, 2003, he struck an optimistic note, saying he hoped the company would soon move into the "business-as-usual period" (May 18, 2003).
Analysts were skeptical—especially since federal prosecutors were still in the midst of their investigation. Barbara A. Ryan, the analyst at Deutsche Bank Securities who was among those interviewed by prosecutors, noted in the New York Times, "You're listening to him on the one hand and thinking on the other that he's the subject of a major criminal investigation. That certainly doesn't help rebuild credibility" (May 18, 2003).
In 2003 Bristol's board of directors approved the five-year plan Dolan had put forth to save the company. In addition to implementing management controls that would prevent corporate abuses from resurfacing, Dolan vowed to bolster the company's research and development efforts and strengthen its product pipeline.
With many of the company's drugs nearing the end of patent protection, the pressure to roll out new blockbusters was immense—losses from patent expirations were estimated at about $1 billion in annual net sales. Instead of relying on partnerships and alliances, Dolan shifted focus to developing more products internally; he aimed to produce two-thirds of new drugs in the company's own laboratories.
In the first half of 2003 two major drugs were approved: Abilify, an antipsychotic, and Reyataz, the first once-daily protease inhibitor for the treatment of HIV/AIDS. In addition limited clearance was given to Erbitux, the sidelined cancer drug licensed from Imclone. Analysts at SunTrust Robinson Humphrey estimated that Erbitux sales could peak at more than $700 million.
The promising drugs signaled a potential new beginning for the company. Morning star projected an average revenue growth rate of 3 percent through The Morningstar analyst Todd Lebor observed in Med Ad News, "Bristol isn't the cash machine of the past, but we think its future cash flows justify a $27 stock price. We think Bristol will pull out of its death spiral and reward patient investors" (September 1, 2003).
While Bristol had the chance to pull itself out of its slump, the competitive Dolan found himself in one race he would possibly prove unable to finish. Bristol's board temporarily left him in control, but with the investigation into the company's accounting practices looming in the background, their continued loyalty was by no means assured. Although Dolan had only been named CEO in 2001, he had been an executive since 1998, making it impossible to indemnify him for any penalties resulting from accounting improprieties. Lebor noted in Med Ad News, "He's hanging on to his job by a very thin thread, and we think the accounting shenanigans, misguided focus, and poor investments under his watch will catch up to him soon" (September 1, 2003).

11. A Brief History of Peter Dolan (cont.)
2001: Heeding calls from Wall Street, quickly jettisons auxiliary businesses —selling Clairol, the number-one hair-color brand and a longtime anchor product, for example — and re-focuses on pharmaceuticals. Negotiates and invests heavily in a $2-billion R&D and marketing deal with ImClone Systems regarding the cancer drug Erbitux, which was subsequently issued a “refusal to file” letter from the FDA . Investor outrage over the fact that Dolan had invested in the partnership without solid reassurance resulted in a write-down of $367 million — most of Bristol's investment in ImClone.
Concern over BMS flagging analyst ratings and crumbling stock price
Board of Directors and analysts express concern as to whether Dolan’s meteoric rise up the corporate ladder had exposed him to enough of the “character-building” experiences that season a CEO and teach him to deal with adversity.

12. What is Plavix?
Anti-platelet medication approved by the U.S. Food and Drug Administration to reduce the risk:
Heart attack
Stroke
Vascular death in patients with established peripheral arterial disease
When taken daily can help reduce risk of having a future heart attack or stroke
Used by 48 million Americans
Marketed through a partnership with Bristol-Myers and Sanofi-Aventis

13. Sanofi Aventis Headquartered in Paris
World’s third largest Pharmaceutical (#1 in Europe)
35,000 member sales force
Sales = 27 billion euros
R&D = 4 billion euros
Has operations in more than 100 countries

14. Plavix and BMS Revenues
Bristol-Myers Squibb 2005 revenue was $19.2b. Plavix sales represent about 30% of total revenues
U.S. sales of $3.8b in 2005, up 15% from 2004
Global sales of $5.9 billion
Second best selling drug in the world

15. Apotex Founded in 1974 Largest Canadian-owned pharmaceutical company
Main business is making and selling generic pharmaceuticals
2005 sales of $740 million (Canadian)
Over 500 products
Wants to sell generic Plavix
Received FDA approval for generic Plavix in early 2006

16. Pharmaceutical Industry
Market Size
Global pharmaceutical market in 2005 was $565 billion and is growing at an estimated 7% per year
Competition
Generic competition is the biggest threat to branded drug makers
Between 2006 and 2010, at least 70 innovative brand-name drugs are expected to go off patent in the United States
19 of those are blockbusters (defined as a drug with annual sales of more than $1 billion)
Accounts for $45 billion (or roughly 8%) of the global market

17. Patent expiration
The following blockbuster drugs will go generic in the near future

18. BMS Accounting scandal
3/10/2003 – company announces earning overstated by $2.5 billion
Bristol-Myers admitted using “channel surfing” to inflate sales
Wholesales acquired almost $2 billion in excess inventories
Former CFO Frederick S. Schiff and former executive vice president Richard J. Lane were indicted

19. Accounting Scandal
Net sales reduced by $1.4 billion for 2001, $678 million for 2000, and $376 million for 1999
A total of $839 million was paid to shareholders harmed by Bristol-Myers fraudulent conduct
Charges against the company are dropped pending two year probationary period

20. Patent Protection Agreement
BMS negotiates with Apotex to keep generic Plavix out of the market until June 1, 2011
Regulators (FTC and state attorneys general) refuse to sign-off on agreement
July 2006 – investigation into the failed agreement
FBI searches Dolan’s New York office

21. Patent Protection Agreement Investigation
BMS allegedly agrees to pay (i.e. bribe) Apotex $40 million to keep generic Plavix out of the market until 2011
Investigation also alleges BMS made unusual and anti-competitive concessions to Apotex and concealed the concessions from federal regulators
Anti-competitive concession in agreement – Bristol-Myers agrees not to sell its own generic version of Plavix for 6 months after Apotex releases their generic

22. Generic Plavix
Because the agreement failed, Apotex introduces generic Plavix in August 2006 and quickly gains 75% share of new prescriptions
Generic priced 10 – 20% lower than brand-name Plavix
Court orders injunction to halt sales of generic Plavix until patent protection case is heard in court
Court does not order a recall – supply of generic Plavix will stretch well into 2007

23. Plavix Patent Trial Trial to start January 2007
$400 million bond provided by BMS and Plavix partner Sanofi-Aventis as security to Apotex if court rules against BMS

24. BMS Financial Impact Earnings forecast lowered by 25%
EPS < dividend
Moody’s Investor Services downgraded Bristol-Myers debt to “A2” from “A1”
Analysts expect dividend cut
Stock loses 60% of value during Dolan’s five year tenure

25. BMS Board Reacts
Dolan and BMS General Counsel Richard K. Willard fired on 9/12/2006
James M. Cornelius, a Bristol-Myers director and former executive at Guidant Corp., named interim CEO
Internal and external search for permanent CEO
Wall Street speculates that BMS may be acquired or taken over

26. Questions for discussion
What are the critical issues facing Bristol-Myers Squibb in this case?
Who are the key stakeholders in this case? How would a patent case verdict for or against Bristol-Myers Squibb affect the stakeholders?
What messages does Zito need to communicate to the stakeholder groups? How should he deliver his message to them?
Does Bristol-Myers Squibb need to retain an external firm to help it craft an effective public response to Dolan’s firing or the patent dispute?

27. Questions for discussion
What other actions (if any) should the board take in response to the accounting and patent protection scandals?
What mistakes did Dolan make while negotiating with Apotex? What else could he have done to protect the Plavix patent?
Can corporate communication play a role in helping Bristol-Myers Squibb win the upcoming patent protection trial? What can Zito and his team do?