Probe Stings Bristol-Myers

Updated from 9:33 a.m. EDT

Bristol-Myers Squibb(BMY Quote) reported a better-than-expected second quarter and reaffirmed its full-year earnings projections, but the drugmaker's stock was hit by word that the federal government is conducting a criminal investigation.

The Justice Department is looking into a proposed settlement Bristol-Myers has reached for the anticoagulant Plavix, the company's biggest drug. By early afternoon, the stock was down $1.89, or 7.3%, to $24.10 on trading volume of 19.3 million shares, roughly three times the daily average.

CEO Peter Dolan told analysts and investors Thursday that his company learned about the investigation the previous day. He said the company is cooperating, but he added that he doesn't have any specific information about the reason for the probe, which is being conducted by the Justice Department's antitrust division.

The settlement under scrutiny was hammered out in March, when Bristol-Myers and its partner Sanofi-Aventis(SNY Quote) made a deal with Canadian generic-drug company Apotex to settle a patent fight concerning Plavix. Last year, Plavix accounted for $3.82 billion, or 20%, of Bristol-Myers' revenue. The drug produced $2.45 billion in sales for Sanofi-Aventis in 2005.

The Food and Drug Administration said in January that Apotex could begin selling generic versions of Plavix, but the generic firm decided against marketing the drug until a court acted or a settlement was made.

A pending trial was suspended when the sides reached the agreement. The original settlement said Sanofi-Aventis, which holds the Plavix patents, would grant Apotex a license to make and sell generic Plavix starting in September 2011. The date was recently amended to June 1, 2011. Apotex could put a product on the market earlier if another company persuades a court to declare the Plavix patent invalid.

Key Driver

Bristol-Myers' reliance on Plavix was again demonstrated in the second quarter as the drug's sales rose 18% from a year earlier to $1.15 billion.

For the quarter, the company earned 35 cents a share, excluding one-time items, beating the Wall Street consensus estimate by 3 cents. Revenue from continuing operations for the three months ended June 30 was $4.87 billion, slightly better than the $4.76 billion forecast of analysts polled by Thomson First Call.