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Bristol-Myers Ousts Its CEO Amid Inquiry

A federal overseer had urged Peter Dolan's firing in the wake of a failed deal to forestall competition for the drug maker's No. 1 product.

September 13, 2006|From Reuters

Bristol-Myers Squibb Co. on Tuesday said it had fired Chief Executive Peter Dolan under pressure from a federal overseer, who called for Dolan's ouster after looking into a failed deal to delay competition to the drug maker's top product.

Dolan's departure ends a rocky five-year tenure marred by an accounting scandal, questionable business deals and a nearly 60% drop in the value of the company's stock. Wall Street expects the company's profit to plunge 31% in 2006 because of a rival's unexpected launch of a generic form of Bristol-Myers' top-selling Plavix blood thinner.

"Dolan has been extremely unpopular outside of the company, and why the board has been so supportive of him is a mystery to me," said David Dreman, chief investment officer at Dreman Value Management, which holds about $180 million in Bristol-Myers shares.

"I don't think any drug company has had the kind of problems that Bristol-Myers has had under Peter Dolan, and the problems all seem to stem from his management," Dreman said.

The New York-based company said Dolan was being replaced on an interim basis by board member James Cornelius, a former chairman of medical device maker Guidant Corp., who helped engineer Guidant's sale to Boston Scientific Corp.

Bristol-Myers shares rose 4% on Tuesday, helped by an announcement later in the day that the board planned to maintain the company's hefty dividend through 2007. Analysts had speculated the dividend might be at risk because of the Plavix competition.

Bristol-Myers is the third major U.S. drug maker in the last 19 months, following Pfizer Inc. and Merck & Co., to change top management ahead of schedule.

The company said Chairman James Robinson would lead a search committee to review internal and external candidates to succeed Dolan, who agreed to stay as an advisor to help find a replacement.

The interim appointment of Cornelius raised speculation among analysts that Bristol-Myers could be a takeover target.

Cornelius "took [Guidant] to the position where it could be sold," said Fred Burke, a fund manager with Johnson Lemon Asset Management. "The shareholders were extremely pleased when Guidant was sold."

Bristol-Myers said the management shake-up followed a Monday board meeting at which a special government monitor, former federal Judge Frederick Lacey, recommended that the company dismiss Dolan and General Counsel Richard Willard. Willard is also leaving, effective immediately.

The company is operating under a deferred-prosecution agreement with the U.S. attorney made last year after an investigation into an alleged $2.5-billion scandal involving the overloading of wholesalers with inventory to meet quarterly sales targets.

Bristol-Myers said Lacey's recommendation followed an inquiry by him and New Jersey U.S. Atty. Christopher Christie into issues related to corporate governance involving a settlement with Canadian drug maker Apotex Corp.

The deal, which would have delayed Apotex's sale of generic versions of Plavix, fell through and is under a federal criminal investigation for possible antitrust violations.

Bristol-Myers shares closed up 93 cents at $24.32.

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