Could this finally be the end for Bristol-Myers Squibb Chief Executive Peter Dolan?
A board meeting Tuesday, Sept. 12 could determine Dolan's fate. He is under fire because of a failed attempt to hold off cut-rate generics for Plavix, the blood-thinner that is Bristol's top seller. Ontario, Canada-based generic firm Apotex was able to launch its generic Plavix because during negotiations Bristol-Myers inexplicably gave away its rights to triple damages should its patent prevail at trial. The move has analysts scratching their heads in bewilderment.
The company faces a federal criminal antitrust investigation over the failed deal, and Bristol had to sharply lower earnings forecasts after generic firm Apotex flooded the market with its Plavix knockoffs in August. Bristol snagged a court injunction barring further sales, but the damage was done.
Bristol's board is under "huge pressure" to do something, says Kevin Schulman, who heads the health care management program at Duke University's Fuqua business school. "Pharmaceutical stocks are supposed to be relatively safe investments in grandma's portfolio. There are not supposed to be mistakes of this magnitude at the top." Patent law "is the basis of the pharmaceutical industry, and here they made grievous errors in the area of intellectual property," he adds.
Bristol says comments on future CEO candidates are "pure speculation, and we never comment on speculation." It says that it and partner Sanofi-Aventis "made concessions as part of the negotiating process, having concluded it was in the best interests of the companies to pursue an overall settlement process" with Apotex.
Controversy has dogged Dolan his entire tenure. He has been criticized for paying too much for rights to ImClone System's colon cancer drug Erbitux, and also survived an accounting scandal that led to indictments of two former executives and a deferred prosecution agreement for the company. The deal cost Bristol $300
But the latest goof has market watchers speculating that Dolan may not survive, especially after the board did not specifically say it stood by him in an Aug. 17 public statement. The statement said that an investigation by an outside counsel found no wrongdoing, but wrote that it "welcomes a full and broad inquiry" into whether Bristol's employees might have engaged in unlawful conduct.
In a note to investors on Monday, Timothy Anderson at Prudential Equity Group upgraded Bristol to an "overweight" from an "underweight," arguing that the Plavix litigation is actually looking less risky--and that there is hope that succession plans will finally be announced. Anderson argues that Bristol and partner Sanofi-Aventis are likely to win a patent battle with Apotex--which also means there was never a need for Bristol to settle.
Other pharmaceutical firms that have recently eased out incumbent chief executives include Pfizer (Hank McKinnell) and Merck (Raymond Gilmartin). But in those two cases, the executives were nearing their scheduled retirement dates. But Dolan is just 50 years old, and no obvious internal successor has been groomed. That could complicate any decision to oust him quickly to appease angry investors.
Exactly what the board will do, if anything, is a mystery. But if they decide to oust Dolan, the number of other veteran executives who could take his place is surprisingly limited. The ideal candidate would be fairly young, like Dolan, but with a great deal of experience in the drug business. Forbes.com talked to analysts and industry-watchers and compiled a list of potential candidates.
