The departure of chief executive Peter Dolan from Bristol-Myers Squibb has prompted speculation about the future direction of the company, and specifically whether it may face that future hand in hand with Schering-Plough.

Dolan’s departure comes at a low point for B-MS, which is in the midst of a $2.5 billion accounting investigation and the fallout of an aborted ‘sweetheart’ deal with Apotex to keep a generic version of its top-selling blood thinner Plavix (clopidogrel) off the US market.

The company is suffering the effects of generic competition to some of its major brands, although some recent launches are offsetting this, and prior to the Plavix threat had been looking forward to a sustained period of growth from 2007. But US lawmakers nixed its deal with Apotex, prompting the generics company to flood the market with its copycat version before B-MS secured a preliminary injunction forcing it to desist, and B-MS has had to scale down its financial forecasts for 2006 as a result.

S-P was in a similar slough of despond back in 2003 when Fred Hassan took up the post of CEO and started the company on the road to recovery. Back then S-P was struggling with the loss of patent protection on its top drug, accounting scandals and compliance issues with its manufacturing plants, but has steadily returned to form on the back of a stringent cost-cutting programme and a revitalisation of its product portfolio.

The rumours of a link between the two companies seem to stem from the view that Hassan could work similar magic with B-MS, bringing robust management to the combined company and getting the most out of B-MS’ well-regarded product pipeline.

Meanwhile, there have also been suggestions that Sanofi-Aventis, which partners B-MS on Plavix, could also be tempted to suggest a mega-merger to create the world’s largest drug company.

But a number of analysts dismissed the rumours, saying that it is extremely unlikely that a company would make a move for B-MS until the outcome of its ongoing lawsuit with Apotex, due to be heard next January, is known. Moreover, assimilating B-MS could jeopardise the turnaround at S-P, which at the midway point is coming to the end of the cost-cutting effort and starting to concentrate on the arguably trickier business of building value organically.