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Bristol-Myers to trim jobs, factories
Dec 5, 2007 Businessweek
Pharmaceuticals maker Bristol-Myers Squibb Co. on Wednesday said it would lay off about 4,300 employees and close more than half of its manufacturing plants, part of a broad restructuring aimed at cost savings of $1.5 billion by 2010.
The company, whose best-selling product is the anticoagulant Plavix, also lowered its 2007 earnings guidance and said it would spin off its medical imaging business. Bristol-Myers is also reviewing options for ConvaTec, a wound care products supplier, and its Mead Johnson Nutritionals business.
"It is difficult to see our valued colleagues leave the company, but right-sizing our workforce across all areas is critical to achieving our productivity goals and enhancing the competitive position of the company," Chief Executive James Cornelius said in a statement.
Bristol-Myers is only the latest pharmaceutical company to slash its work force, as brand drug makers struggle to battle generic drug competition. Across the industry, cost-reducing efforts have become widespread. Pfizer Inc., the world's largest drug maker, said earlier this year it is cutting 10,000 jobs, or 10 percent of its work force.
Bristol-Myers' job cuts represent 10 percent of its staff and will largely be made in 2008 and 2009, the company said. The company also said it will close more than 50 percent of its manufacturing facilities by the end of 2010.
At the same time, the company hinted at more buyouts, saying it "seeks to reallocate resources to enable additional strategic acquisitions," such as the recent purchase of biopharmaceutical company Adnexus Therapeutics.
Looking ahead, a sharp downturn in earnings and revenue is expected after Plavix's key patent expires in 2012, Cornelius said at the meeting.
"We don't have a complete answer on how to offset or mitigate that cliff," he said.
The drug, which the company markets with Sanofi-Aventis SA, booked $1.25 billion in sales in the most-recent quarter, helping double Bristol-Myers's third-quarter profit. Plavix also offset declining sales of cholesterol drug Pravachol.
Bristol-Myers said it now expects 2007 net earnings of $1.15 to $1.20 per share. The company, however, reaffirmed its adjusted earnings guidance at the high end of the range between $1.42 and $1.47 per share.
For 2008, the company forecast adjusted earnings per share of $1.65 to $1.75. Analysts polled by Thomson Financial expected earnings per share of $1.46 for 2007 and $1.72 for 2008.
Shares of New York-based Bristol-Myers fell 12 cents to $28.94 in afternoon trading.
Bristol-Myers Squibb Names Alan J. Lacy to Board of Directors
December 04, 2007: 04:05 PM EST
NEW YORK, Dec. 4 /PRNewswire-FirstCall/ -- Bristol-Myers Squibb Company today announced that Alan J. Lacy has been elected to its Board of Directors, effective January 2, 2008. Lacy will serve as a member of the Audit Committee.
Lacy, 54, is currently a senior advisor to Oak Hill Capital Partners, L.P., a private equity investment firm. From 1994 to 2006, he was employed by Sears, Roebuck and Co. and following the acquisition of the company, Sears Holdings Corporation. He held executive level positions of increasing responsibility in finance and operations, including his service as chief executive officer from 2000 to 2005. He also served as vice chairman from 2005 to 2006.
"We are very pleased to have a person of Alan's broad business and financial experience join our Board," said James D. Robinson III, chairman, Bristol-Myers Squibb. "His addition adds to an already outstanding group of directors."
"Alan is a man of high integrity and business acumen," added James M. Cornelius, chief executive officer, Bristol-Myers Squibb. "We look forward to his contributions as a director of our company as we continue to evolve into a next generation biopharma enterprise."
Bristol-Myers Squibb is a global biopharmaceutical and related healthcare products company whose mission is to extend and enhance human life.
Bristol-Myers Press Release
December 5, 2007 12:19 p.m.
NEW YORK, Dec. 5 -- During a meeting with investors today, Bristol-Myers Squibb Company (NYSE: BMY) will conduct a comprehensive review of its business and research and development operations, and outline its strategy to improve shareholder value, increase profitability and improve top line growth. The overview will provide investors with insight into how the company intends to implement its strategy and transform the company through its productivity initiative into a next-generation BioPharma company that pairs the scale and resources of a mid-sized pharmaceutical company with the entrepreneurial spirit and innovative focus of a biotech startup. The plan focuses the company's commercial and scientific units on growth areas, such as specialty and biologic medicines, while providing a framework to enhance productivity and reward entrepreneurship.
Strategic Review
During the meeting, senior management of the company will discuss the status of the strategic review the company has been conducting over the past several months and explain how it intends to continue the company's development into a next-generation BioPharma company. The company's vision of a BioPharma company is the outgrowth of a process that evaluated the company's four core businesses in great detail: specialty medicines, cardiovascular and metabolic drugs, mature pharmaceutical brands and the Health Care Group, and contains the following elements:
-- an innovative portfolio of new products targeted at serious unmet medical needs, or significant clinical advancement over existing therapies;
-- a Selectively Integrated Business Model, which complements internal capabilities with external innovation, streamlines manufacturing, creates a targeted approach to geographies and customers, utilizes strategic partnerships with suppliers and competitors, and focuses on innovative sales and marketing practices;
-- Strong Continuous Improvement capabilities, simplified processes, enhanced efficiency and effectiveness and aligned infrastructure to support growth.
The review reaffirmed several elements of the company's ongoing strategic focus. The company will continue to invest in key growth products, including specialty and biologic medicines, and cardiovascular and metabolic drugs. The company will also continue to scale back assets in its profitable, though declining, mature brands.
The company is seeking opportunities to maximize the value of its Health Care Group companies for shareholders. Consistent with this objective, the company plans to divest its Medical Imaging business. Further, the company is currently reviewing a range of strategic alternatives for its ConvaTec and Mead Johnson businesses. "We remain fully aware of the important contributions these businesses have made to earnings and cash flow, and we will take these factors into full consideration when weighing our strategic options," said James M. Cornelius, chief executive officer, Bristol-Myers Squibb.
As a next-generation BioPharma company, Bristol-Myers Squibb seeks to reallocate resources to enable additional strategic acquisitions, such as the recent acquisition of Adnexus Therapeutics, as well as pursue partnerships and other collaborative arrangements. These alliances should add to the company's innovative capabilities, portfolio and pipeline to amplify the company's ongoing focus on growth areas, such as specialty medicines and biologics.
Productivity Transformation Initiative
In addition to its overview of the company's strategy, senior management will discuss the scope and details of its Productivity Transformation Initiative, the company's first step to achieve a culture of continuous improvement which was begun earlier this year. Over 300 initiatives have been identified that will enhance the company's efficiency, effectiveness and competitiveness and substantially improve its cost base.
Key productivity initiatives include reducing general and administrative operations by simplifying, standardizing and outsourcing, where appropriate, processes and services, rationalizing the company's mature brands portfolio, consolidating its global manufacturing network while eliminating complexity and enhancing profitability, simplifying its geographic footprint and implementing a more efficient go-to-market model. Specific productivity goals include:
-- reducing the number of brands in the company's mature products portfolio by 60% between 2007 and 2011;
-- reducing the number of manufacturing facilities by more than 50 % by the end of 2010; and
-- reducing total headcount by approximately 10% between 2007 and 2010.
Some positions have been eliminated in 2007 and the substantial majority of positions will be eliminated in 2008 and 2009. "It is difficult to see our valued colleagues leave the company, but right-sizing our workforce across all areas is critical to achieving our productivity goals and enhancing the competitive position of the company. While we are reducing headcount in certain functions, we will continue to invest in R&D, biologics and commercialization talent," said Mr. Cornelius.
The productivity initiative is expected to generate approximately $1.5 billion in cost reductions and avoidance on a pre-tax basis versus the company's previous strategic plan for 2010. Costs associated with the implementation of the Productivity Transformation Initiative are estimated to be between $0.9 billion to $1.1 billion on a pre-tax basis, with approximately $300 million expected to be incurred in 2007 and $400 million to $500 million expected to be incurred in 2008. The ultimate timing of the recording of the charges cannot be predicted with certainty and will be affected by the occurrence of triggering events for expense recognition under U.S. Generally Accepted Accounting Principles (GAAP), among other factors.
Dividend Increase for 2008 and Quarterly Dividend
Today, the company announced that the Board of Directors declared an 11% dividend increase, the first increase since 2002. The dividend increase will result in a quarterly dividend of thirty-one cents ($.31) per share on the company's Common Stock for an indicative dividend for the full year of 2008 of $1.24 per share, subject to the normal quarterly review by the Board.
The next quarterly dividend on the $.10 par value Common Stock of the company will be payable on February 1, 2008 to stockholders of record at the close of business on January 4, 2008.
The Directors also declared a quarterly dividend of fifty cents ($0.50) per share on the $2.00 Convertible Preferred Stock of the corporation, payable March 3, 2008 to stockholders of record at the close of business on February 8, 2008.
Financial Outlook
Based on the strategic and operational assumptions that will be outlined at the meeting, the company expects non-GAAP earnings per share to grow at a minimum of 15% compounded annual growth rate, from the 2007 base, for the next three years, excluding costs associated with the Productivity Transformation Initiative and other specified items that have not yet been identified and quantified.
In addition, the guidance assumes certain other assumptions including that the company and its product partner, sanofi- aventis, maintain exclusivity for the PLAVIX(R) patent through at least 2010.
The company revised its 2007 fully diluted earnings per share guidance on a GAAP basis to $1.15 to $1.20 from $1.28 to $1.33, reflecting the estimated effect of potential fourth quarter charges of approximately $300 million relating to the company's Productivity Transformation Initiative. The company also reaffirmed its 2007 fully diluted earnings per share guidance on a non- GAAP basis to be between $1.42 and $1.47, and indicated that it expects non- GAAP fully diluted earnings per share to be at the top end of the range.
The company is providing 2008 fully diluted earnings per share guidance on a GAAP basis of $1.44 to $1.54. The company also is raising its estimated 2008 earnings per share guidance on a non-GAAP basis from a range of $1.60 to $1.70 to a range of $1.65 to $1.75, subject to certain assumptions. The fully diluted earnings per share guidance for 2008 includes earnings from the Medical Imaging business. A disposal of the Medical Imaging business would decrease fully diluted earnings per share by approximately $0.05. Further, this guidance assumes, compared to 2007:
-- high single-digit revenue growth;
-- overall flat gross margin, with improvement in Pharmaceuticals margin;
-- mid single-digit growth in research and development costs;
-- all other operating expenses flat with modest increases in Advertising and Promotion, offset by a significant reduction in G&A expense; and
-- increase in effective tax rate to approximately 24%. The GAAP guidance for 2008 includes the impact of restructuring and other charges related to the Productivity Transformation Initiative discussed below, but excludes proceeds from potential asset sales that have not yet been identified or quantified. Both the GAAP and non-GAAP guidance further assumes no significant acquisitions or divestitures and that the company and its product partner, sanofi-aventis, maintain exclusivity for the PLAVIX(R) patent through at least 2010.
Further, the non-GAAP 2008 guidance excludes charges related to the Productivity Transformation Initiative and other specified items that have not yet been identified and quantified, such as gains or losses from sale of businesses and product lines; from sale of equity investments and from discontinuations of operations; restructuring items that meet the requirements of SFAS 112 for severance and SFAS 146 for other exit costs; accelerated depreciation charges under SFAS 144 related to restructuring items described above; asset impairments; charges and recoveries relating to significant legal proceedings; upfront and milestone payments for in-licensing of products that have not achieved regulatory approval that are immediately expensed; copromotion or alliance charges and payments for in-process research and development which under GAAP are immediately expensed rather than amortized over the life of the agreement; income from upfront and milestone payments that is immediately recognized for out-licensing of products, including deferred income recognized upon termination; and significant tax events.
Details reconciling the 2007 and 2008 non-GAAP earnings per share guidance with GAAP amounts including specified items are provided in supplemental materials available on the company's website.
"With this adjustment to earnings guidance and the dividend increase, we're sending a clear message of confidence: We expect to be able to continue to reward our shareholders for their support, well into the future," said Mr. Cornelius.
Research and Development Update
In addition to discussing progress in transforming the R&D organization into a next-generation BioPharma model and executing its biologic strategy, the company also will provide an update on key late and early stage compounds in its pipeline. The company will continue to focus its efforts on serious disease -- in both specialty areas and high prevalence illnesses -- where there is significant unmet medical need. Senior members of the R&D organization will outline the strategy of building pipelines within products by broadening their clinical use through multiple indications.
Specific updates will focus on the company's late-stage programs in oncology, diabetes, cardiovascular disease and solid organ transplant rejection, including:
-- developmental diabetes compounds saxagliptin, a DPP4-inhibitor, and dapagliflozin, a novel SGLT-2 inhibitor, both of which are being developed in partnership with AstraZeneca PLC; the company reiterated its plan to submit saxagliptin for filing with the U.S. Food and Drug Administration (FDA) in 2008;
-- two cancer drugs: the internally developed and recently approved Ixempra (ixabepilone), a new cytotoxic designed to overcome drug resistance; and ipilimumab (MDX-010), a potential new immunotherapy paradigm;
-- an internally discovered biologic investigational compound, belatacept, a novel co-stimulation blocker under development to replace cornerstone therapy in solid organ transplantation, which the company expects to submit to the FDA for filing in the first half of 2009; and
-- an oral factor Xa inhibitor, apixaban, under development in partnership with Pfizer Inc., with the potential to provide predictable and reliable anticoagulation with a wider therapeutic window than current therapies.
Source: Company via PRNewswire-FirstCall
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