The scheme helped the firm meet sales targets

The firm revised down its sales for 1999, 2000 and 2001 by almost $2.5bn, saying that thanks to an incentive scheme there has been "an error of timing in revenue recognition".

The scheme encouraged wholesalers to build up excess stocks of Bristol-Myers drugs, in turn helping the company meet its own sales targets.

"The errors and inappropriate accounting which are corrected by this restatement arose... from a period of unrealistic expectations for certain of the company's products and programmes," the firm said.

Profits for the three years were revised down by $900m.

Torrent of lawsuits?

The revision comes almost a year after the Securities & Exchange Commission launched a probe into Bristol-Myers' accounting practices, as part of a drive to clean up Wall Street following the Enron scandal.

There are lawyers just waiting for the fax on the restatement, so they have the numbers to put in the lawsuits Richard Evans, analyst

And analysts warned that, with the SEC inquiry still ongoing, and Monday's announcement likely to launch a flood of lawsuits from investors angry at the firm's accounting, Bristol-Myers faces further challenges.

"You know there are plaintiffs lawyers just waiting for the fax on the restatement, so they have the numbers to put in the lawsuits," said Richard Evans, an analyst with Sanford C Bernstein Research.

But investors welcomed the lifting of at least some of the uncertainty surrounding the firm, with Robert Hazlett, an analyst at SunTrust Robinson Humphrey, saying Bristol-Myers could now be a tie-up target.

"A merger becomes more of a possibility because there is better awareness of Bristol's finances," Mr Hazlett said.

And further confirmation that the company expected 2003 profits to come in at a level of $1.60-1.65 a share also eased concerns.

Bristol-Myers stock stood $0.06 higher at $22.89 in midday trade in New York on Monday.

Difficult times

Bristol-Myers shares have suffered, like those in many other drugs giants, over fears that protective patents on best-selling drugs were heading towards expiry.

The company has in the past few years filed a rash of lawsuits to fend-off rival drugmakers attempting to start production of generic versions of cash-cow treatments such as the anti-cancer drug Taxol.

Late last year, Bristol-Myers announced a $670m preliminary agreement over the cases.

The company has also written down more than $1bn of its investment in ImClone, the biotech firm hit last year by an insider trading scandal.

On Friday, Bristol-Myers revealed it had reached agreement with the Federal Trade Commission and state attorneys general over anti-trust charges.