Dupont Pharmaceuticals
After the two companies merged in 1989, they continued selling major medications such as Taxol for cancer, Pravachol and Monopril for cardiovascular disorders, antibiotics such as Cefzil, antidiabetics such as Glucophage, and the anti-clotting medication, Plavix. To continue to focus on pharmaceuticals, in the early years of 2000-2002, the company divested many of their non-pharmaceutical divisions, such as Clairol and the Mead-Johnson Nutritional division, and purchased DuPont Pharmaceuticals as well as an almost 20% share of ImClone Systems, which was getting ready to release a new anti-cancer drug, Erbitux (SEC eyes Bristol-Myers, 2002).
In April of 2002, the trouble for BMS began with an SEC investigation into their sales practices for …show more content…
SEC complaint against Schiff and Lane, as early as 1991-1992, “BMS sold large quantities of its pharmaceutical products to its wholesalers in advance of a January 1992 price increase, which contributed to a significant buildup in wholesaler inventory” (SEC -v- Schiff & Lane, 2005). As a result, their earnings the following year were “significant lower” than projected and they admitted that the “results were being significantly depressed by wholesale destocking” (SEC -v- Schiff & Lane, 2005). The result of this activity was shareholder lawsuits and significant negative press. In addition, BMS was forced to modify internal controls to “closely monitor and restrict wholesaler purchases to prevent another buildup in excess wholesaler inventory and resulting reduction in BMS’ earning from wholesaler destocking” (SEC -v- Schiff & Lane, 2005). So, going into the turn of the century, there were supposedly controls in place to prevent the same kind of channel-stuffing action that caused them problems in the early 90s, and yet they continued to do it. Schiff was even the controller at the time of the 1992 incident, so he should have known better. However, the complaint goes on to share how, starting in about 1994, BMS “publicly announced a plan to double the sales, earnings, and earning per share” during the time from 1993 to 2000. They further stated in 2000 that they were improving upon the earlier plans and implementing the “Mega-Double,” redoubling the sales and earnings from 2000 to 2005, amounting to “average compound annual growth of nearly 15%” (SEC -v- Schiff & Lane, 2005). Schiff, Lane and others pushed these goals and created a “corporate culture in which meeting or exceeding the …targets…was considered mandatory. … Employees who suggested that [these]… targets were too aggressive or expressed doubts … were subsequently transferred or demoted” (SEC -v- Schiff & Lane, 2005). By 1997, BMS started to realize significant gaps between targets and
In April of 2002, the trouble for BMS began with an SEC investigation into their sales practices for …show more content…
SEC complaint against Schiff and Lane, as early as 1991-1992, “BMS sold large quantities of its pharmaceutical products to its wholesalers in advance of a January 1992 price increase, which contributed to a significant buildup in wholesaler inventory” (SEC -v- Schiff & Lane, 2005). As a result, their earnings the following year were “significant lower” than projected and they admitted that the “results were being significantly depressed by wholesale destocking” (SEC -v- Schiff & Lane, 2005). The result of this activity was shareholder lawsuits and significant negative press. In addition, BMS was forced to modify internal controls to “closely monitor and restrict wholesaler purchases to prevent another buildup in excess wholesaler inventory and resulting reduction in BMS’ earning from wholesaler destocking” (SEC -v- Schiff & Lane, 2005). So, going into the turn of the century, there were supposedly controls in place to prevent the same kind of channel-stuffing action that caused them problems in the early 90s, and yet they continued to do it. Schiff was even the controller at the time of the 1992 incident, so he should have known better. However, the complaint goes on to share how, starting in about 1994, BMS “publicly announced a plan to double the sales, earnings, and earning per share” during the time from 1993 to 2000. They further stated in 2000 that they were improving upon the earlier plans and implementing the “Mega-Double,” redoubling the sales and earnings from 2000 to 2005, amounting to “average compound annual growth of nearly 15%” (SEC -v- Schiff & Lane, 2005). Schiff, Lane and others pushed these goals and created a “corporate culture in which meeting or exceeding the …targets…was considered mandatory. … Employees who suggested that [these]… targets were too aggressive or expressed doubts … were subsequently transferred or demoted” (SEC -v- Schiff & Lane, 2005). By 1997, BMS started to realize significant gaps between targets and