Drug giant Bristol-Myers Squibb Co. said Friday it will pay $300 million to settle a class-action lawsuit that accused the company of lying about accounting and its investment in ImClone Systems Inc.
The suit stemmed from a 2001 announcement in which Bristol-Myers said it would invest $2 billion in ImClone to gain marketing rights for the ImClone cancer drug Erbitux.
But shareholders who sued Bristol-Myers said the company made overly optimistic statements about the drug’s chances for approval by the Food and Drug Administration.
Bristol-Myers did not admit wrongdoing as part of the settlement, which still must be approved by a federal judge in Manhattan.
The FDA declined to review ImClone’s application for approval for Erbitux in December 2001. Martha Stewart’s sale of ImClone stock one day before that announcement led to her eventual conviction for lying to investigators.
The FDA eventually approved the drug earlier this year.
A federal judge in Manhattan dismissed the shareholder suit in March, but shareholders were appealing the dismissal to the 2nd U.S. Circuit Court of Appeals.
Bristol-Myers said in a statement it would pay the settlement out of legal reserves that it boosted earlier this year from $150 million to about $470 million.
The suit’s allegations of shady accounting relate to an announcement by Bristol-Myers in 2002 that it had overstated revenue between 1999 and 2001 by $2.5 billion by offering incentives to wholesalers.
The SEC and federal prosecutors in New Jersey are still investigating the company’s accounting.
Shares of Bristol-Myers rose 33 cents to close at $22.90 Friday on the New York Stock Exchange. ImClone rose 60 cents to close at $58.78 on the Nasdaq Stock Market.
On Thursday, Bristol-Myers reported its second-quarter earnings fell 42 percent because of the increased legal reserves and company writeoffs of research and development costs.