During the period 2001 through 2003, Bristol-Myers Squibb, a large New York-based pharmaceutical company, lost about 11 percent of its sales and saw its stock value decrease by about 50 percent due to business and significant risks. Major events triggering Bristol's problems included the following:

1 Sales loss for 2002 of about $2 billion (11 percent) to generic manufacturers resulting from expiration of patents on three key drugs - cancer medicine Taxol, diabetes drug Glucophage, and anti-anxiety medicine BuSpar. (Revell,2003).

2 Investment loss of about two-thirds of its stake in biotech company ImClone Systems acquired in late 2001 for $1.2 billion, due to delays in FDA approval of ImClone's intended blockbuster cancer drug Erbitux, and compounded by well-publicized insider trading scandals (Anand 2002) centering around ImClone's founder Samuel Waksal who was sentenced to 87 months in prison for his role in the scandal.

3 Between 1999 and 2001, the company acknowledged it had overstated revenue by $2.5 billion by improperly recording sales to wholesales, generally towards the end of the quarter, in order to meet quarterly sales projections established by senior management.

(Landers 2003) This practice (called "channel stuffing") involved the company persuading its wholesale customers to buy about $2 billion more of drugs than they actually needed so that Bristol could meet its earnings targets for that year. The SEC and the Justice Department launched an investigation into inventory and accounting practices.

I.Discuss of the events given - which were significant risks and which were business risks.

II.How could Bristol Myers have avoided these risks?