Our Fourth Nominee for Worst CEO of the Year: Lamberto Andreotti
Oct 11th 2012 8:53PM
Updated Oct 11th 2012 9:06PM
My praise and contempt for CEO actions are pretty well known around these parts. I've been running a weekly series looking at CEO gaffes for nearly ten months now (with seemingly endless material, may I add), and recently I've begun highlighting incredible CEOs who deserve a pat on the back. Last year, I even listed my top 10 CEOs of the year and my 10 worst CEOs of the year.
However, this year, we're changing things up a bit, and putting the ball in your court! This year, The Motley Fool community is going to decide who the best CEO of the year is, and which CEO should be banished to a distant island.
Each week over the next five weeks, I'm going to highlight one CEO who's worthy of being called the best CEO of 2012, as well as a CEO who could easily be called the worst of 2012. In total, you and your community members will have eight great CEOs and eight terrible ones to choose from when voting commences in November. For reference, here is last week's worst CEO nominee.
In the meantime, I encourage you to get the discussion started on the CEO of the Week board. Although I do have all the nominees handpicked already, these selections are by no means set in stone. If you can offer me your top picks for best and worst CEO, as well as your reasoning, you may just find your nomination in the spotlight.
Without further ado, I give you the fourth nominee for worst CEO of the year: Lamberto Andreotti, CEO of Bristol-Myers Squibb (NYS: BMY) .
Why Lamberto Andreotti?
- "String of pearls" has failed: Going into 2012 and understanding that it was about to lose its patent exclusivity on blockbuster atherosclerosis drug Plavix, Bristol-Myers' plan, as laid out by Lamberto Andreotti, was to develop a string of pearls, and essentially acquire new drugs to fuel its pipeline. One of the first purchases on that string was Inhibitex, in January, for $2.5 billion, as it tried to gain a piece of the rapidly growing hepatitis-C revenue pie. I expressed my concerns about the purchase back in January, especially given that Inhibitex's lead drug had only made it through phase 1 clinical trials. Those concerns proved warranted in early August, when Bristol-Myers made known that one patient had suffered a fatal cardiac event due to BMS-986094, the hep-C drug acquired when it purchased Inhibitex. The company subsequently discontinued development of the drug altogether two weeks later, with a whopping writedown of $1.8 billion -- yikes!
- Torpedoed other nucleotide inhibitor programs: It would have been great if BMS-986094 just sort of died quietly into the night, but that wasn't the case. Instead, Bristol-Myers went rogue, and torpedoed the entire nucleotide-based hepatitis-C drug pipeline. Idenix Pharmaceuticals (NAS: IDIX) has had two of its hep-C hopefuls, IDX184 in mid-stage trials, and IDX19368, which is just out of preclinical studies, put on FDA clinical hold in some form due to safety concerns. Gilead Sciences (NAS: GILD) has escaped an FDA hold as of now, but a closer safety profile cannot be written out of the cards. On the bright side, Achillion Pharmaceuticals (NAS: ACHN) has been doing the happy dance since its leading hepatitis-C candidates aren't nucleotide-based.
- A drug recall: To add insult to injury, in August, Bristol-Myers dealt with the recall of carmustine, a drug that treats various different types of cancer. The recall was prompted after a vial was discovered that had far more than the recommended dosage, which could potentially lead to serious complications. The company caught the problem in time; however, it did ultimately recall more than 31,000 vials of the drug.
- Executive insider trading allegations: Around the same time as the aforementioned recall, allegations were brought against Bristol-Myers corporate executive Robert D. Ramnarine, who allegedly purchased stock and options in companies that he had been advising Bristol-Myers to buy. As always, Mr. Ramnarine is innocent until proven guilty, but it's somewhat comical (and sad) that he was using Bristol-Myers' own computers to research various ways he could avoid being caught for insider trading.
- An unwarranted pay raise: The ship may have run aground, but Mr. Andreotti found some buried treasure in the sand that he's more than willing to keep for himself. Shortly after removing a pay freeze for the entire company, Andreotti was graced with a 27% pay raise, to $14.8 million, after delivering strong results and building upon its "string of pearls" strategy. Given the loss of patent exclusivity on Plavix, the failure of BMS-986094, a drug recall, and other corporate shenanigans, I'd love to see what he would have earned had the company actually performed well
- Underperformed its peers: I may harp on most big pharmaceutical companies on a regular basis for their lack of organic growth and the ridiculous pay of the leaders, but Andreotti takes the cake in 2012. In March, I highlighted the appalling pay raise by Pfizer's CEO (NYS: PFE) Ian Read, which boosted his compensation by 44% to $25 million, despite the loss of Lipitor, the world's best-selling drug, to patent expiration. However, when all is said and done, Pfizer can stand before investors and state that it returned 19.8% since the year began. Bristol-Myers, on the other hand, has fallen 1.8% this year, all while every major pharmaceutical index has motored higher. From a valuation perspective, Bristol-Myers' forward P/E is also at a significant premium to its big pharma peers.
Is Lamberto Andreotti the worst CEO of the year? That's going to be up to you and the rest of The Motley Fool community to decide. In the meantime, come back on Tuesdays and Thursdays for the next five weeks for the latest nominations, and be sure to hit up the CEO of the Week board to voice your opinion to the community.
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The article Our Fourth Nominee for Worst CEO of the Year: Lamberto Andreotti originally appeared on Fool.com.Fool contributor Sean Williams has no material interest in any companies mentioned in this article. He loves giving credit when credit is due. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong. Motley Fool newsletter services have recommended buying shares of Gilead Sciences. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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