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Dolan Dismissed

Shake-up at Bristol-Myers Squibb adds to talk of a takeover

by Lisa M. Jarvis
September 18, 2006 | APPEARED IN VOLUME 84, ISSUE 38

In more fallout from its attempt to delay competition to its best-selling drug, Plavix, Bristol-Myers Squibb has fired CEO Peter R. Dolan and General Counsel Richard K. Willard. The moves add grist to the rumor mill, which in recent weeks has churned over speculation that BMS is vulnerable to a takeover.

James M. Cornelius, a BMS director and chairman emeritus of the medical device company Guidant, will act as interim CEO. Willard, who was terminated for signing off on a pact with Apotex to delay a generic version of Plavix, a blood thinner, will be temporarily replaced by Sandra Leung, vice president and corporate secretary.

The ousters follow weeks of questions about the future of both Dolan and the company after Apotex' unexpected launch of generic Plavix in early August (C&EN, Aug. 21, page 12). Though the BMS board initially stood behind Dolan, support rapidly eroded as details of the Plavix debacle emerged.

The top executive was already under the microscope because of a series of missteps over the past several years: Investors thought BMS overpaid for a stake in the biotech firm ImClone Systems, several late-stage products were withdrawn from development, and the company was fined for inflating product sales by "overstuffing" distribution channels.

Dolan's fate was sealed when a former federal judge, after investigating BMS management's handling of the agreement with Apotex, recommended that its board terminate both Dolan and Willard.

Dolan is yet another big drug company CEO who has succumbed to outside pressure for fresh leadership. Henry A. McKinnell Jr. was replaced as Pfizer's CEO in July following a six-year decline in the company's stock price, and Raymond V. Gilmartin was replaced at Merck last year in the wake of the Vioxx recall.

The management shake-up at BMS adds to speculation that the company is a takeover target. If the firm is successful in defending its Plavix patent, stock analysts say, its robust pipeline, notably in oncology, and relatively low stock price could make it attractive to drug industry rivals with aging portfolios.

"In our view, the CEO ouster increases the possibility of a takeover," Friedman Billings Ramsey stock analyst David S. Moskowitz said in a note to investors, particularly because early legal proceedings indicate the firm's Plavix patent is strong. He points out that Cornelius, the interim CEO, shepherded Guidant through its takeover by Boston Scientific and could do the same for BMS.

Moskowitz believes a suitor would offer in the range of $35 per share for BMS, valuing it at roughly $69 billion. The firm's stock price closed at $24.81 last Wednesday. Deutsche Bank analyst Barbara Ryan says the BMS board needs to consider "any reasonable offer" for the company.

A BMS spokesman says the company's board "will always consider what's in the best interest of shareholders," a stance that would include considering takeover offers if the company is approached.



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