So much for safe havens.

Bristol-Myers Squibb

(BMY) - Get Report

, maker of blockbusters like lipid-lowering Pravachol and cancer-killer Taxol, has for years rewarded shareholders with consistently strong earnings growth and dividends comparable with those of rivals like

Merck

(MRK) - Get Report

,

Pfizer

(PFE) - Get Report

and

Eli Lilly

(LLY) - Get Report

. And as tech highfliers have tumbled earthward in recent weeks, investors have been returning to the drug-stock fold en masse.

But one of the quintessential safe-haven stocks doesn't seem quite so safe anymore in the aftermath of a series of drug-development problems that have hammered its stock. The prospect of slowing earnings growth at the nation's third-biggest drugmaker is also worrying some investors, who are now wondering whether the company needs to make a big strategic change -- by shuffling management or setting a merger -- to reignite the stock. Bristol-Myers says it has no such plans.

"It's going to be difficult to make money in this stock this year," says Bob Rhodes, a fund manager at

SunTrust Banks

, an Atlanta fund that held about 5.8 million Bristol shares as of December. "We've been lightening up on it."

The Vanlev Shock

The most brutal shock came late last month when Vanlev -- a new kind of hypertension drug seen as a potential multibillion-dollar seller -- was yanked for more clinical testing just before the

Food and Drug Administration

was slated to formally review it.

Feeling the Pain
Recent slide puts Bristol-Myers near recent lows

Source: BigCharts

Bristol-Myers stock plunged 22% April 19, wiping nearly $30 billion off the company's market value -- now about $102.5 billion. The stock has recovered little since the selloff, even though it is cheaper than many rivals based on its price-to-earnings ratio, and analysts are divided as to whether the drug is dead or merely facing a delay. The company is conducting new clinical trials to find out.

The share crash over Vanlev could illustrate investor "nervousness," a recent

Lehman Brothers

report said. "Bristol has demonstrated an inability to seamlessly pull off a major, category leading drug launch," according to the brokerage firm, which hasn't done underwriting for Bristol-Myers in the past three years.

To Market, to Market

Adding to Bristol-Myers' pain, the Vanlev debacle marked its third such pitfall in as many months.

In April, the company suffered a legal defeat to Miami-based

Ivax

(IVX)

, a generic drugmaker, which allows Ivax to market Taxol -- a decision that Bristol-Myers is appealing. Bristol-Myers admits it may not succeed in blocking generic competition to the cancer drug, which generated revenue of $1.48 billion in 1999, making it the company's second-biggest seller.

That came a month after the company yanked its application for approval of Orzel, a new colorectal cancer treatment -- likely delaying approval for a drug that Lehman Brothers forecasts will generate $500 million a year in sales.

"These are all big setbacks," says Leonard Cohen, analyst with

AmeriCal Securities

, a brokerage with no formal rating on the stock and that does no underwriting for the company. "Vanlev in particular was going to be the blockbuster of the entire drug industry."

Big Expectations

It's not like other companies haven't had setbacks in the high-risk world of drug development. Rezulin, the

Warner-Lambert

(WLA)

diabetes drug that was pulled from pharmacy shelves in March, and Propulsid, a heartburn remedy from

Johnson & Johnson

(JNJ) - Get Report

that suffered the same fate, come to mind.

American Home Products

(AHP)

has probably the most unfortunate recent record of drug setbacks, including the withdrawal of diet drugs Pondimin and Redux, as well as the Rotashield vaccine and the painkiller, Duract.

But expectations for Bristol-Myers were higher, particularly for Vanlev. Without it, the company is lacking in potential blockbusters, although it is widely viewed as having a strong earlier-stage pipeline of development projects.

As a result, the Vanlev setback raised inevitable questions about whether Bristol-Myers will now seek a merger, a well-trod industry route to boost earnings through cost cutting, or force Charles Heimbold Jr., 65, chairman and chief executive, to resign. A company spokesman says Heimbold has no such plans.

"The setbacks put a lot of pressure on the company to move aggressively on the strategic front to boost earnings growth," says Barbara Ryan, an analyst with

Deutsche Bank

, which raised its rating on the company to strong buy from buy after the Vanlev setback and does no underwriting for the company. "Is it going to have to come from restructuring, asset sales or aggressive share purchases?"

Open to Opportunities

Richard J. Lane, president of Bristol-Myers worldwide medicines, says the company has no plans for any strategic or management changes, although he says the company is always "open to opportunities" to build its pipeline, such as increasing alliances with biotechnology companies. He says he is "not aware of any talks" over mergers it may be having now.

Lane says the company's health will be assured from three product launches it plans this year alone, including Glucophage XR and Glucovance, two modified versions of Glucophage, and Vaniqa, a product for excessive female facial hair co-developed with

Gillette

(G) - Get Report

. It also has a plethora of drugs in development to treat cancer and cardiovascular disease.

"We remain bullish on our prospects." says Lane.

Still, no bet in this sector is absolutely safe.