SEC Elevates Bristol-Myers Sales Probe

Bristol-Myers Squibb Co. said Thursday that a Securities and Exchange Commission inquiry into how the firm persuaded wholesalers last year to buy surplus amounts of its drugs has been elevated into a formal investigation.

The SEC move is the latest setback for the New York-based drug giant, whose earnings are reeling from the inventory problems, patent expirations on key drugs and its controversial $2-billion cancer drug partnership with ImClone Systems Inc.

This month, Bristol-Myers said in a SEC regulatory filing that it was cooperating with the SEC inquiry that began in April.

Industry analysts have expressed concern that the company may have artificially inflated its earnings last year by coaxing wholesalers to buy huge surpluses of diabetes treatment Glucophage and a half-dozen other medicines. It spurred the sales by announcing that their prices were soon to be increased.

The surplus buying has hurt demand for the same drugs this year, contributing to an expected 50% decline in company earnings in 2002. It also has harmed the credibility of Chief Executive Peter Dolan, who took the helm in mid-2001.

In its Aug. 14 SEC filing, Bristol-Myers also cautioned that it might have to restate its earnings results for last year if the SEC inventory inquiry is unfavorable.

Bristol-Myers reaffirmed Thursday that it believes its accounting treatment for the wholesaler buildup was appropriate and that it continues to cooperate with the SEC review.

Shares of Bristol-Myers closed down 77 cents at $24.29 on the New York Stock Exchange.