U.S. investigating generic-drug deal

By Theresa Agovino and Wallace Witkowski

posted on Jul. 28, 2006

Associated Press

NEW YORK - Bristol-Myers Squibb Co. said yesterday that it was the subject of a criminal antitrust probe over a pending deal with generic-drug-maker Sanofi-Aventis involving its best-selling product, Plavix, and it reported a 33 percent drop in second-quarter profit.

Separately, AstraZeneca P.L.C. said its profit grew 31 percent in the quarter on sales of drugs such as cholesterol-cutter Crestor. It has U.S. headquarters near Wilmington, Del.

Bristol-Myers' shares dropped after it announced that the U.S. Department of Justice had launched an investigation into a settlement awaiting regulatory approval that it reached with Apotex Inc. to keep a generic version of blood-thinner Plavix off the market until at least 2011.

Analysts said the Justice Department inquiry cast further doubt over the future of Bristol-Myers' best-selling drug just when the market was already awaiting the outcome, as early as today, of an investigation by states' attorneys general into the same deal.

The states' attorneys general and Federal Trade Commission can reject deals that Bristol-Myers reaches with generic companies over patents as a result of an agreement reached with the company regarding earlier settlements.

Last March, Bristol-Myers and marketing partner Sanofi agreed to pay Apotex at least $40 million in a deal under which the generic-drug company ended its Plavix patent challenge. The agreement sparked numerous lawsuits alleging that consumers were being denied access to cheap generic drugs.

Last month, Bristol-Myers and Sanofi amended the deal to allow Apotex to market its product three months earlier than previously announced. Now analysts speculate that the arrangement may collapse.

Credit Suisse analyst Catherine Arnold said she thought the attorneys general would reject the deal, especially because of the Justice Department probe.

Bristol-Myers chief executive officer Peter Dolan said in a conference call that he did not know the focus of the federal probe or whether it would affect the inquiry by the attorneys general. He said the company was cooperating with the investigation, and he reiterated that he believed the Plavix patent was valid.

Bristol-Myers' shares plunged $1.95, or 7.5 percent, to $24.04 on the New York Stock Exchange, while U.S. shares of Sanofi-Aventis dropped $2.84, or 5.7 percent, to $47.16 on the NYSE.

Bristol-Myers also said net income declined to $667 million, or 34 cents a share, from $1 billion, or 50 cents a share, in the second quarter a year earlier, when results were boosted by onetime tax benefits.

Excluding discontinued operations, the company reported earnings of $991 million, or 50 cents a share, in the year-earlier quarter. On that basis, analysts surveyed by Thomson Financial had estimated earnings of 32 cents a share in the latest quarter.

Revenue slipped less than 1 percent, to $4.87 billion from $4.89 billion a year earlier. Analysts had expected revenue of $4.76 billion.

AstraZeneca said yesterday that earnings rose to $1.6 billion from 1.22 billion in the year-earlier quarter. Operating profit rose 24 percent to $2.13 billion, beating analysts' expectations of $2.06 billion.

Revenue rose to $6.63 billion from $6.13 billion a year earlier, with sales of the company's five key growth products up 25 percent to $3.3 billion.

However, analysts' hopes that AstraZeneca would raise its full-year outlook for a second straight quarter were dashed. The drugmaker said it now expected earnings to be at the high end of its previously flagged range of $3.60 to $3.90 a share.

U.S. shares in the Anglo-Swedish company fell 2.27, or 3.7 percent, to $59.73.

source:http://www.philly.com/mld/inquirer/business/15140225.htm