-what is the estimated decline in revenue in year 3?
-what is the estimated decline in net income in year 3?
- is the impact on revenue and net income material?
0.20 Legal Proceedings: Patent Infringement. Bristol-Myers Squibb Company (BMY) engages in the discovery, development, license, manufacture, marketing, distribution, and sale of pharmaceutical and other health care products. Selected financial information for the company is as follows: BMY's Year 2 annual report disclosed the following information in its footnote: Legal Proceedings and Contingencies Various lawsuits, claims, proceedings, and investigations are pending against the Company and certain of its subsidiaries. In accordance with SFAS No. 5, Accounting for Contingencies, the Company records accruals for such contingencies when it is probable that a liability will be incurred and the amount of loss can be reasonably estimated. These matters involve antitrust, securities, patent intringements, the Employee Retirement Income Security Act of 1974, as amended (ERISA), pricing, sales and marketing practices, environmental, health and safety matters, product liability and insurance coverage. The most significant of these matters are described on the next page. Plavix Litigation The Company's U.S. territory partnership under its alliance with Sanofi is a plaintiff in three pending patent intringement lawsuits instituted in the U.S. District Court for the Southern District of New York. Plaintiffs' infringement position is based on defendants' filing of their Abbreviated New Drug Application (ANDA) with the FDA, seeking approval to sell generic clopidogrel bisulfate prior to the expiration of the composition of matter patent in Year 9. Plavix is currently the Company's largest product ranked by net sales. Net sales of Plavix were approximately $3.3 billion and $2.5 billion for the years ended December 31 , Year 2 and Year 1, respectively. Loss of market exclusivity of Plavix and the subsequent development of generic competition would be material to the Company's sales of Plavix and results of operations and cash flows and could be material to its financial condition and liquidity. Legal Proceedings: Patent Infringement. Bristol-Myers Squibb Company (BMY) engages in the TA 1 discovery, development, license, manufacture, marketing, distribution, and sale of pharmaccutical and other health care products. Selected financial infomation for the company is as follows: BMY's Year 2 annual report disclosed the following information in its footnote: Legal Proceedings and Contingencies Various lawsuits, claims, proceedings, and investigations are pending against the Company and certain of its subsidiaries. In accordance with SFAS No. 5. Accounting for Contingencies, the Company records accruais for such contingencies when it is probable that a liability will be incurred and the amount of loss can be reasonably estimated. These matters involve antitrust, secunties, patent infringements, the Employee Retirement Income Security Act of 1974, as amended (ERISA), pricing, sales and marketing practices, environmental, health and safely matters, product lability and insurance coverage. The most significant of these matters are described on the next page. Plavix Litigation The Company's U.S. territory partnership under its alliance with Sanofi is a plaintiff in three pending patent infringement lawsults instituted in the U.S. District Court for the Southem District of New York. Plaintiffs' infringement postion is based on defendants' filing of their Abbreviated New Drug Application (ANDA) with the FDA, seeking approval to sell generic clopidogrel bisulfate prior to the expiration of the composition of matter patent in Year 9 . Plavix is currently the Company's largest product ranked by net sales. Net sales of Plavix were approximately $3.3 billion and $2.5 billion for the years ended December 31, Year 2 and Year 1, respectively. Loss of market exclusivity of Plavix and the subsequent development of genoric competition would be material to the Company's sales of Plavix and results of operations and cash flows and could be material to its financial condition and lquidity. Required 1. Historically, the loss of patent protection on a brand name pharmaceutical product bas resulted in a 70 percent decline in product sales. Assuming that (a) BMY's patent protection on Plavix is lost as of the beginning of Year 3. (b) revenue and earmings for Year 3 would, in the absence of the loss of patent Year 3 . (b) revenue and eamings for Year 3 would in the absence of the loss of patent MY's reven, have equaled those of Year 2. und (c) the after-tax masgin on Pavix is 60 hese financial effects? BMY's revenue and eamings for Year 3. How material are these financial effects? . . . 2. BMY's Plavix patent is carried on its balance as an intangible asset valued at S120 million. of patent protection loss, how should the company reflect this in its financial statements? had been filed against BMX and (b) the oogle LLC is a US-based mulinationa corporiasolueted multiple
