This year, I introduced a weekly series called "CEO Gaffe of the Week." Having come across more than a handful of questionable executive decisions last year when compiling my list of the worst CEOs of 2011, I thought it could be a learning experience for all of us if I pointed out apparent gaffes as they occur. Trusting your investments begins with trusting the leadership at the top -- and with leaders like these on your side, sometimes you don't need enemies!
This week I want to highlight, once again, Bristol-Myers Squibb
The dunce cap
Who would have thought that paying $2.5 billion for an experimental hepatitis-C drug that was barely out of phase 1 clinical trials would be a bad idea? Oh yeah, that's right: I did -- in January, March, April, and May.
I was shaking my head in dismay in January when Bristol ponied up $2.5 billion for Inhibitex -- a move preempted by Gilead Sciences'
Bristol's drug, on the other hand…not so great. BMS-986094 (the hepatitis-C drug it acquired when Bristol purchased Inhibitex) was suspended earlier this month after a patient suffered a cardiac event that eventually led to death. Since that time, Bristol has completely discontinued the drug, outlined plans to take a $1.8 billion writedown on its investment, and noted that nine additional patients were in need of hospitalization due to complications from BMS-986094.
It's not bad enough that Andreotti steered his ship into a clearly visible iceberg, but his drugs' failure has aimed his sinking ship at his peers as well. Since BMS-986094 worked as a nucleotide inhibitor, other nucleotide-based treatments are now under severe scrutiny. Idenix Pharmaceuticals
To the corner, Mr. Andreotti
So Lamberto Andreotti made an awful buy. It couldn't get worse than that, could it?
Oh, yes, it could!
In addition to shelving its premiere hepatitis-C drug, Bristol-Myers has also dealt with a drug recall and an executive insider-trading scandal just this month. Just yesterday Bristol disclosed a 31,000-unit recall of carmustine, a drug used to treat various types of cancers, after it discovered an overfilled vial which could lead to potential overdoses of the drug. In Bristol's defense, no adverse patient reactions have been reported thus far.
What's both sad and comical is the insider trading allegations brought against Bristol insider Robert D. Ramnarine, who profited more than $300,000 from front-running stock and call purchases in companies he was advising Bristol-Myers to buy. Not only was he caught, but the Securities and Exchange Commission noted that he used Bristol's own computers to research whether or not he'd be caught and viewed articles on how to avoid getting caught for insider trading. What I wouldn't give for a thumbs-up icon right now!
So while this is going on at Bristol, Lamberto Andreotti is getting a 27% raise! In March, Andreotti had his compensation packaged boosted to $14.8 million for delivering strong results and working toward its "string of pearls" strategy of acquiring new drugs. I'm curious how well that'll go over next year with a $1.8 billion boo-boo on the books and that pearl strand now in knots. What's more, Andreotti's pay raise came almost immediately after a one-year freeze on all workers' compensation had been lifted.
Seriously, I couldn't make this up if I tried. Andreotti joins a short list of CEOs who have appeared in this column twice, and I can't say for certain -- even now -- whether this will be his last visit to the futility column.
Do you have a CEO you'd like to nominate for this dubious honor? Shoot me an email and a one- or two-sentence description of why your choice deserves next week's nomination, and you just may see your suggestion in the spotlight.
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