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Dolan leaves BMS hot seat

US reports suggest board members were under pressure to fire CEO

Bristol-Myers Squibb (BMS) has announced that chief executive, Peter Dolan, has left the company with immediate effect.

Dolan becomes the third CEO of a large US pharma firm to be ousted within the last 18 months, highlighting the increasing pressures the industry is facing.

Last year, Merck CEO Raymond Gilmartin went into early retirement as the firm struggled with the after-effects of the withdrawal of the COX-2, Vioxx in 2004. Earlier this year, Hank McKinnell was replaced by Jeffrey Kindler as CEO of the world's largest pharma firm, Pfizer.

The future of Dolan had been cast into doubt after reports in the US suggested that board members of the US drugmaker were under heavy pressure to fire him. Board member James Cornelius has been appointed interim chief executive of the New York-based drugmaker.

Investors reacted positively to the news of Dolan's departure, with shares in BMS rising 48 cents, or 2 per cent, to $23.87 in morning trading on the New York stock exchange. Since Dolan took over as CEO in 2001, BMS stock has lost 56 per cent of its value.

A report in the Wall Street Journal said that a federal monitor appointed to oversee the firm, former federal Judge Frederick Lacey, had recommended to a special meeting of the BMS board late on September 11 that it terminate the contracts of both Dolan and BMS' general counsel, Richard Willard.

Willard has also left the company; Sandra Leung, vice president and corporate secretary, has been appointed as acting general counsel.

It is understood that the board, which had already been expected to discuss Dolan's fate at the scheduled meeting on September 12, was given little choice but to agree to the monitor's recommendation lest the company face charges in connection with a $2.5bn `channel stuffing' scandal.

BMS is operating under the terms of a deferred-prosecution agreement reached with the US Attorney in New Jersey last year following a three-year investigation into the affair. Dolan was already in charge of the company when the scheme to inflate company revenue and reach quarterly sales targets by overloading wholesalers with inventory first came to light in 2002.

The recommendation also came hot on the heels of a criminal probe opened by the US Justice Department's antitrust unit into a settlement that Bristol-Myers and marketing partner, sanofi-aventis, made with Apotex to keep the Canadian generics firm's version of the blockbuster blood thinner, Plavix, off the market.

When the settlement failed to gain antitrust clearance, Apotex triggered a renewal of patent litigation by not only launching its version, but also taking advantage of concessions it had managed to prise out of BMS during negotiations, which put a cap on any damages the Canadian firm may have to pay out in the future.

Earlier this month (September), a US federal judge granted a preliminary injunction halting sales of Apotex's generic version. However, the firm managed to ship substantial amounts of its product, with some third-party payment providers believed to have stocked as much as a year's supply of the cheaper drug.

Analysts have criticised the BMS management for allowing Apotex to come out of negotiations with the concessions. In a recent report, Timothy Anderson, analyst at Prudential Equity Group, said: ìIt 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'?î

Generic firms that release a generic version of a drug and are later found to have breached its patent can be liable for three times the branded drugmaker's lost profits.

30th September 2008


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