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Bristol-Myers Revises Profits Down $900M

March 11, 2003

NEW YORK (AP) _ Bristol-Myers Squibb Co. wiped away $900 million in profits and $2.5 billion in revenues reported from 1999 through 2001 to correct for an artificial boost from aggressive sales incentives that created a massive inventory glut.

Bristol-Myers also reported 2002 earnings Monday that were down sharply from the previous year and reaffirmed its earnings guidance for this year.

``Completing this restatement is another important step in focusing the company on delivering our 2003 results,″ chief financial officer Andrew Bonfield said during a conference call to discuss the restatement of results from 1999 and continuing through this year.

Analysts said Bristol-Myers’ future prospects aren’t as clear they had hoped they would be after the restatement, which they have awaited since the fall. They say Bristol-Myers failed to give them adequate information on earnings, product sales or how the inventory glut will affect the first few quarters of this year.

Without such information, analysts said it was difficult to determine how Bristol-Myers would meet its projected 2003 earnings.

``Even with the restatement we seem to have more questions than answers,″ said David Moskowitz, an analyst with Friedman, Billings, Ramsey, who added Monday morning’s conference call to discuss the restatement seemed ``rushed and disorganized.″

Bristol-Myers shares fell 29 cents to close at $22.51 on the New York Stock Exchange.

The revision reduced profit from continuing operations by $900 million and sales by $2.5 billion for the years 1999, 2000 and 2001. But it raised profit by $200 million and sales by $653 million for the first six months of 2002.

For all of 2002, Bristol-Myers earned $1.9 billion, or 98 cents a share, from $4.9 billion, or $2.51 a share, in 2001. Sales edged up to $18.1 billion from $17.99 billion in 2001.

Bristol-Myers wouldn’t specify what earnings would have been before one-time items and revenue lost as wholesalers worked down inventory.

The company said it still expected 2003 earnings of $1.60 to $1.65 a share.

``I think it is a positive that Bristol-Myers released the numbers, but the prospects for its future are still muddy,″ said Standard & Poor’s analyst Arthur Wong.

Patent issues led to the restatement and will continue to be a problem for the company.

Wong said that over the next two years, Bristol-Myers is slated to lose patents on several important drugs that account for $1.5 billion in sales.

Bristol-Myers does have some promising new drugs, including the anti-psychotic Abilify which it launched in late 2002 and an AIDs medicine it hopes to introduce later this year.

But, Wong said, ``Abilify will take a few years to establish,″ Wong said. ``Patent expiration fallout is practically immediate.″

Bristol-Myers moved aggressively to pump up sales because it knew in 2000 and 2001 it was losing market exclusivity for three of its best-selling products: cancer drug Taxol, diabetes treatment Glucophage and anti-anxiety medication BuSpar.

The inventory glut was created when Bristol-Myers used low prices to induce wholesalers to buy more drugs than they immediately could use because the drugmaker wanted to meet sales projections and increase sales ahead of the patent expirations.

Bristol-Myers disclosed the glut last April and initially resisted restating sales and earnings. Last October, Bristol-Myers said it would revise its financial reports on the advice of its accountant.

The Securities and Exchange Commission and the U.S. Attorney’s Office in New Jersey are investigating.

Bristol-Myers also filed new patents and lawsuits to stall generic competition for those drugs.

The maneuvers resulted in a rash of lawsuits claiming antitrust violations. Late last year, it announced a $670 million preliminary agreement to settle the cases. And on Friday, the company announced an agreement with the Federal Trade Commission and state attorneys general to settle antitrust charges stemming from attempts it made to stall generic competition.

Bristol-Myers took a financial hit last year when it had to write down more than $1 billion of its big investment in ImClone Systems Inc. when the biotech firm’s stock imploded. ImClone, and Bristol, were betting on its highly touted cancer drug Erbitux, which was turned back by the Food and Drug Administration.

Bristol-Myers and ImClone are conducting new studies on Erbitux, and some believe a European study due out in May could provide enough information to refile with the FDA.

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