A federal investigation into Bristol-Myers Squibb Co.'s (BMY) proposed settlement of a patent dispute has been expanded to determine whether the deal violated securities laws, the drug maker disclosed Thursday.
Earlier this year, Bristol-Myers and Sanofi-Aventis (SNY), which co-market the heart drug Plavix, reached a proposed settlement with Apotex Inc. of Canada to stave off the introduction of a generic version of Plavix until 2011. The deal fell apart after state regulators objected, and Apotex sold generic Plavix for about three weeks in August before a judge's order halted sales.
Bristol-Myers previously disclosed that the U.S. Attorney's office in New Jersey began an investigation into corporate governance issues related to the company's negotiations of the proposed settlement. Also, the Department of Justice's antitrust unit launched a criminal investigation into the proposed settlement, Bristol disclosed in July.
On Thursday, Bristol-Myers said the U.S. Attorney's office investigation has been expanded to include a review of whether there was any violation of federal securities laws in connection with the proposed settlement. Bristol-Myers said this was in connection with the terms of a consent order entered into with the Securities and Exchange Commission in August 2004.
Bristol disclosed the development in a press release for its third-quarter financial results.
The 2004 SEC agreement settled charges that Bristol-Myers engaged in a fraudulent earnings management scheme that was unrelated to the current Plavix matter. The settlement required Bristol-Myers to pay $150 million and included a permanent injunction against future violations of certain accounting provisions of federal securities laws.
In a related development in June 2005, Bristol-Myers agreed to pay an additional $300 million as part of a deferred-prosecution agreement with the U.S. Attorney's office in Newark, N.J. Under that pact, federal prosecutors agreed to defer prosecution on a charge of conspiring to commit securities fraud for two years. If at the end of two years, Bristol-Myers has fully complied with the terms, the criminal complaint will be dismissed.
The terms included Bristol-Myers' agreement to submit to an independent monitor, former federal judge Frederick Lacey. It was Lacey's oversight, in connection with the U.S. Attorney's office probe into corporate governance issues surrounding the proposed Plavix settlement, that led to the firing of Peter Dolan as CEO last month.
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