Bristol Myers and drug pricing article

December 22, 2006

Strong Medicine for Bristol-Myers Fri Dec 22, 8:08 AM ET

Bristol-Myers Squibb (NYSE:BMY - News) said Dec. 21 that it reached

a preliminary agreement to pay $499 million to settle several years

of regulatory investigations into its drug pricing, sales and

marketing activities.

Perhaps expressing relief at resolution of the issue, investors bid

up the stock 0.5% to $25.91 per share in early trading Dec. 21 on

the New York Stock Exchange.

Pharmaceutical companies like Bristol-Myers, generic drug makers,

and regulators, are struggling with the question of how long drug

patents should last. Now the New York company has a settlement with

the Office of the United States Attorney in Massachusetts and the

U.S. Department of Justice.

There are no criminal charges, but Bristol-Myers must enter into a

corporate integrity agreement, subject to approvals, with the Office

of Inspector General of the U.S. Department of Health and

Human Services. The company did not provide any detail about the

activities under investigation in a press release Dec. 21.

Bristol-Myers increased its reserves for losses with respect to such

matters by $353 million and expects to record the move in its fourth

quarter 2006 results. After taking a $220 million pre-tax charge

related to a debt restructuring completed in the fourth quarter, the

company lowered its forecast for the full year of 2006 to between 72

cents and 77 cents per share. Guidance given at the end of the third

quarter 2006 had been for 97 cents to $1.02 per share during 2006.

The New York drug maker's CEO R. Dolan got ousted on Sept. 12

after he botched a patent fight with Canadian generic drugmaker

Apotex Inc. over BMS's blockbuster anti-clotting drug, Plavix. He

tried to pay Apotex to prevent it from selling generic copies of

Plavix, but failed in the effort. And then it turned out that the

Plavix patent wasn't as vulnerable as Dolan had feared, according to

an Aug. 31 ruling in the U.S. District Court (see BusinessWeek,

9/25/06, " Why Dolan Got The Boot " ).

Standard & Poor's equity analyst Herman Saftlas, while encouraged by

continuing strong growth in Bristol-Myers' key drugs and its robust

pipeline, thinks the shares will tread water at least until a court

decision is rendered in Plavix patent litigation. He believes the

main rationale for holding the stock is the dividend, yielding 4.3%.

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