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[DewDiligence]

FBI Raids Offices at Bristol-Myers over Plavix Deal

[From Friday’s WSJ]

http://online.wsj.com/article/SB115400761960519041.html

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By JOHN CARREYROU, BARBARA MARTINEZ and JOHN R. WILKE
July 28, 2006

FBI agents raided the office of Bristol-Myers Squibb Co. Chief Executive Peter Dolan as part of a criminal investigation into an agreement the pharmaceutical company struck to delay the launch of a generic version of its best-selling drug.

Bristol-Myers yesterday disclosed the criminal probe, which also is focused on Paris-based Sanofi-Aventis SA. The investigation concerns a deal struck by Bristol-Myers and Sanofi with Apotex Inc. of Canada in March. Under the agreement, the two companies proposed to pay Apotex a minimum of $40 million to hold off launching a generic version of the blood thinner Plavix until 2011, the year the main patent protecting Plavix expires.

Sanofi developed Plavix and sells the drug outside the U.S., while Bristol-Myers holds the rights to the American market. Plavix is the world's No. 2 drug, after Pfizer Inc.'s Lipitor, with $5.9 billion in global sales last year, according to IMS Health. Bristol-Myers's share of those sales was nearly $3.8 billion.

The settlement is critical for Bristol-Myers as the New York company emerges from a difficult period that included a federal probe into its accounting. It would enable Bristol-Myers and Sanofi to protect at least $30 billion in revenue, assuming that Plavix sales merely hold steady in the next five years. However, analysts expect the drug's sales to continue to grow. Federal regulators have expressed concern that such deals hurt consumers by keeping drug costs high.

Bristol-Myers shares fell 7.5% to $24.04 in 4 p.m. composite trading on the New York Stock Exchange.

Federal Bureau of Investigation agents, working on behalf of the antitrust division of the Justice Department, showed up at Bristol-Myers's Manhattan headquarters on Wednesday and left with batches of documents, a person familiar with the matter said. The investigators searched the office of Mr. Dolan, among others.

It isn't clear what conduct the government is investigating. The criminal probe arose from a referral to the Justice Department by the Federal Trade Commission. The FTC and state attorneys general have been conducting a civil review of Bristol-Myers's and Sanofi's settlement with Apotex. Under a consent agreement, Bristol-Myers and Sanofi need approval from the FTC and the states to consummate the settlement.

The companies could face prosecution if they misled the government in any way when the FTC and the states reviewed the deal. And if the companies shared information on pricing or other confidential competitive information during the negotiation of the proposed settlement, that could be seen as criminal collusion between rivals.

The FTC and Justice Department declined to comment. Bristol-Myers and Sanofi both said they were informed of the criminal investigation Wednesday, but declined to comment on its specifics.

Bristol-Myers and Sanofi submitted a reworked version of their March settlement to the state attorneys general and the FTC two months ago, after the states rejected the original proposal. The state attorneys general are expected to inform Bristol-Myers of their decision on whether they approve the revised agreement today.

On a previously scheduled conference call to present Bristol-Myers's second-quarter earnings, Mr. Dolan said the company intended to fully cooperate with the investigation. A company spokesman, Tony Plohoros, said Bristol "believes that all of its conduct relating to the proposed Plavix settlement has been entirely appropriate and coordinated throughout with senior outside counsel."

Bristol-Myers and Sanofi said they intend to resume litigation against Apotex to prevent it from launching a generic version of Plavix if the state attorneys general and the FTC reject the settlement.
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