Biotech Values

[DewDiligence]

States Reject Bristol-Myers Plavix Deal

[Because of a prior consent decree, without approval from the state attorneys general, there is no deal.]

http://yahoo.reuters.com/news/articlehybrid.aspx?storyID=urn:newsml:reuters.com:20060728:MTFH79053_2...

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Fri Jul 28, 2006 5:32 PM ET
By Ransdell Pierson

NEW YORK, July 28 (Reuters) - Bristol-Myers Squibb Co. <BMY> was dealt a setback in its bid to block a generic form of its biggest product, the anti-clotting drug Plavix, when a group of state attorneys general on Friday rejected a proposed settlement with a generic drugmaker.

Bristol-Myers shares fell almost 2 percent in after-hours trade on uncertainty over the continued exclusivity of Plavix. The drug generates more than $4 billion in annual sales for Bristol-Myers, or 30 percent of company profit.

Bristol-Myers and its partner Sanofi-Aventis <SNY> had been locked in a high-stakes U.S. patent battle with generic drugmaker Apotex, which hopes to soon launch a cheaper generic form of Plavix, the world's second-biggest selling drug.

A Bristol-Myers spokesman declined to comment on the rejection.

"This could be a show stopper for Sanofi and Bristol's agreement with Apotex," said Morningstar analyst Tom D'Amore.

Under the proposed settlement, Apotex, based in Canada, had agreed not to begin selling its copycat drug until June 2011, in return for undisclosed compensation from Bristol-Myers.

The deal, which had eased investor concerns about Bristol's financial future, has been under review by the U.S. Federal Trade Commission (FTC).

Bristol disclosed on Thursday that the anti-trust division of the Department of Justice had begun a criminal investigation of the settlement. FBI agents seized documents on Wednesday from the office of Bristol-Myers Chief Executive Officer Peter Dolan as part of that probe.

In a letter addressed to Bristol-Myers lawyers, Meredyth Smith Andrus, an assistant attorney general for the state of Maryland, on Friday said the various states ruling on the matter "object to and will not approve" the settlement.

"Regardless of what the Federal Trade Commission says, if the states as a group think it violates antitrust, then it's problematic for the agreement," said analyst D'Amore.

However, he said it was uncertain how soon generics of Plavix would reach the market because the next steps in the legal process are unclear, as is how long it will take for Apotex to get up to speed in producing the drug.

In 2003, Bristol reached an agreement with the U.S. Federal Trade Commission requiring the drugmaker under a 10-year consent decree to stop misusing patent laws to block generics. It requires Bristol to get approval from the states when entering into settlement agreements with generic drugmakers. The states, through the attorneys general, have now formally rejected the proposed settlement.

Settlements by drugmakers to delay the sale of generic forms of their medicines are coming under increased scrutiny from U.S. regulators and lawmakers, who fear that consumers are being denied access to less-expensive medicines.

Industry analysts have said that a rejection by the states of the Plavix deal could force Bristol, Sanofi and Apotex to amend their agreement in a more acceptable way to states -- and therefore to consumers.

"Because of previous transgressions, these companies are under the government's thumb for a few more years, so any deal they reach will get tougher scrutiny," said Ira Loss, analyst at Washington Analysis.

He said the consent decree gives federal authorities the leverage to work out a deal that is more to their liking.

Under another possible scenario, without a settlement, Bristol and Sanofi could now resume their court patent battle to keep the Apotex generic off the market, alleging it would infringe their patents.
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