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Bristol to cut jobs and close plants
2007-12-05
Bristol-Myers Squibb Co (BMY.N) said on Wednesday earnings will grow at least 15 percent annually through 2010, helped by a major restructuring that will eliminate 10 percent of its work force and close more than half its factories over the next three years. The expected restructuring would generate $1.5 billion in new cost savings, company officials told investors and analysts at a meeting in New York, and help Bristol-Myers cope with the patent expiration in late 2011 on its blockbuster Plavix blood clot preventer. "The company is on track to report stellar growth, which should far exceed many of its peers, as well as the market overall," said Barbara Ryan, an analyst with Deutsche Bank. Mehta Partners analyst Shaojing Tong called Bristol's earnings projection "very impressive," saying he expects the industry to post only single-digit percentage profit growth through 2010. But Bristol's glowing earnings picture will likely then dim as Plavix faces competition with cheaper generic rivals, he said. Bristol-Myers also said it plans to sell its medical imaging business and is reviewing strategic alternatives for its ConvaTec wound healing unit and Mead Johnson nutritionals unit. Deals on the units would bring the company cash that could be plowed into its higher-profit core pharmaceuticals business. Bristol-Myers raised its 2008 earnings per share forecast, excluding special items, to $1.65 to $1.75 from a previous view of $1.60 to $1.70. That would reflect profit growth next year of up to 19 percent. "On balance, I like the actions they're taking today," said John Farrall, a health care analyst with National City Private Client Group. "They continue to take non-core assets out of the corporate structure -- that's a good thing," Farrall said. The company -- which globally has 43,000 employees, 27 drug manufacturing plants and annual sales of about $18 billion -- said the number of Bristol-Myers' "mature" branded products would be reduced by 60 percent by 2011. Bristol-Myers has suffered anemic earnings in recent years due to patent expirations on important medicines, including cancer drug Taxol, but it is on a profit upswing thanks to growing sales of newer medicines such as schizophrenia treatment Abilify and cancer drug Erbitux. "We have enough confidence in our products and people that we believe today we can talk about a real growth story after years of patent expirations," company Chief Executive Jim Cornelius said at the meeting. Even so, the slated patent expiration on $5 billion-a-year Plavix looms large, and savings from the restructuring would help offset plunging sales of the pill once generics appear. The $1.5 billion in cost savings would be on top of previously announced savings of $500 million by the end of 2007 and $100 million by the end of 2008 from other initiatives. But Bristol-Myers said it would incur pretax costs of $900 million to $1.1 billion associated with the latest restructuring moves, with about $300 million to come this year and up to another $500 million of costs in 2008. Analysts have been predicting that Bristol-Myers would close many of its plants and send production of its prescription medicines offshore, perhaps to nations like India and China that are increasingly involved in drug production. The company noted, however, it intends to step up its own manufacturing of highly profitable biotech drugs, which are proteins made in living cells out of genetic material. The restructuring comes on the heels of aggressive cost-cutting moves by other drugmakers, including Merck & Co Inc (MRK.N) and Pfizer Inc (PFE.N), which are also girding for patent expirations on their big drugs. Bristol's earnings in 2007 are expected to jump as much as 35 percent from last year, when sales of Plavix crumbled under competition from a generic rival made by Apotex Inc. The cheaper Apotex copycat is no longer being supplied to the market, however, after a federal judge ruled that it infringed patents on Plavix, which Bristol-Myers sells in partnership with Sanofi-Aventis (SASY.PA). Bristol-Myers, which was also reviewing its roster of experimental drugs at Wednesday's analyst meeting, boosted its dividend by 11 percent to 31 cents per share from 28 cents, the first increase since 2002. Bristol shares closed up 20 cents at $29.26 on the New York Stock Exchange. (Reporting by Ransdell Pierson; Editing by Derek Caney, Gerald E. McCormick, Richard Chang)
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