After two years of operating under a deferred prosecution agreement, Bristol-Myers Squibb may soon be freed from federal oversight. The US Attorney in New Jersey, Christopher Christie, says he’s pleased with the drugmaker’s conduct and expects to decide next month whether to let the deal expire on June 15 as scheduled.

“I’m really happy with the way management has been dealing with the deferred prosecution agreement and with issues of corporate governance,” he tells The Wall Street Journal. These agreements “are put in place to attempt to correct behavior,” he said. “To the extent that we feel behavior has been modified at (the company), we can feel that it’s okay for the DPA to expire.”

A former federal judge, Fred Lacy, has been monitoring Bristol-Myers and pushed the board to fire former ceo Peter Dolan last year after he botched a deal to forestall a generic version of the Plavix bloodthinner. Since then, Christie says, “we see much more evidence of communication between the board and the executive suite, and among the members of the executive suite.”

The DPA was implemented after an accounting scandal a few years ago in which the drugmaker offerred incentives to drug distributors. The practice is known as channel stuffing and two former executives - former cfo Fred Schiff and former head of worldwide marketing Rick Lane - are scheduled to go to trial later this year.

Lifting the agreement would be a huge plus for Bristol-Myers. Since September, board member Jim Cornelius is acting as interim ceo, but the legal problems have intensified speculation that the drugmaker would have to merge, a notion that Cornelius hasn’t exacdtly dispelled. Finding a new ceo under such circumstances isn’t so easy.

Wall Street hopes the company will have more to say on Thursday when earnings are released.

One other piece of good news: Plavix scrips have recovered ground that was lost for a short while to a generic from Apotex. A federal court ordered the copycat off the market while the case is pending. This morning, Deutsche Bank’s Barbara Ryan writes in an investor note that “….generic supplies have been worked out of the channel. Total prescription levels are now on a par with pre-August 2006 levels.”

You can read more here.
SEC complaint against Schiff and Lane;
DOJ indictment of Schiff and Lane.[tags]Bristol-Myers Squibb, Fred Schiff, Jim Cornelius, Rick Lane[/tags]