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Bristol-Myers to Cut Work Force 10% in Broad Restructuring

[This announcement was expected and the stock is flat today.]

http://online.wsj.com/article/SB119686773365814487.html

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By MIKE BARRIS
December 5, 2007 12:43 p.m.

Bristol-Myers Squibb Co. said it will cut 10% of its work force, or about 4,300 jobs, and shutter half of its 38 manufacturing plants in a plan to save about $1.5 billion by 2010 and boost profitability.

The drug maker also said it will divest itself of its medical-imaging business and is exploring alternatives for its ConvaTec wound-care unit and Mead Johnson nutritionals businesses. Bristol also announced its first dividend increase in five years.

The moves are part of Bristol's plan to increase its focus on areas of growth such as biologic therapies and treatments for diabetes and cancer. They come as the company's sales growth is pressured by competition from generic drugs. Bristol, New York, had sales of $17.9 billion last year.

Bristol also said it plans to reduce the number of brands in the company's mature-pharmaceuticals portfolio by 60% by 2011 as it sells assets in the "profitable, though declining" segment.

Pretax costs associated with the moves are estimated to be between $900 million and $1.1 billion, with about $300 million expected to be incurred in the fourth quarter and $400 million to $500 million in 2008.

"It's difficult to see our valued colleagues leave the company, but right-sizing our work force across all areas is critical to achieving our productivity goals and enhancing the competitive position of the company," Chief Executive James M. Cornelius said.

The company sees 2007 earnings at the high end of its October forecast of $1.42 to $1.47 a share. The company also boosted its 2008 earnings target, excluding items, by five cents a share to $1.65 to $1.75 a share. A sale of the medical-imaging business would reduce next year's earnings by about five cents a share, Bristol said.

Analysts surveyed by Thomson Financial predict 2007 earnings of $1.46 a share and 2008 earnings of $1.72 a share.

Bristol's work force has held steady at about 43,000 since 2004. Since then, other large drug makers have cut jobs and costs significantly, including Pfizer Inc. and Merck & Co. In addition to battling generic-drug makers, big pharmaceutical companies have faced difficulties getting new products on the market to replace lost sales.

"The business is changing pretty rapidly and the cost structure out of the industry is out of sync," Deutsche Bank analyst Barbara Ryan said last week. "You have a pretty violent loss of earnings from patent expirations and therefore an inherent cyclicality to the earnings. The industry needs to find ways to be more efficient and also to make its cost structure more flexible."

In July, Chief Executive James Cornelius said job cuts were likely to result from Bristol's strategic review of its business. His strategic review grouped Bristol into four clusters: cardiovascular and metabolic-disease treatments; specialty medicines; mature brands; and non-pharmaceutical health-care products.

The pharmaceutical unit generates nearly 80% of Bristol's total sales. The rest consists primarily of Mead Johnson, ConvaTec and the medical-imaging unit. Some analysts believe Bristol's nonpharmaceutical units could fetch $10 billion in a sale.

A sale of the nutritionals unit, which had about $2.3 billion in sales last year, could fetch a price between $5 billion and $7 billion, analysts say. One potential buyer is Nestle SA of Switzerland, some market watchers say. Nestle doesn't comment on market rumors, a spokesman said.

The quarterly dividend will rise 11% to 31 cents a share, the first increase since 2002. It will be payable Feb. 1 to shareholders of record as of Jan. 4.
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