Bristol-Myers Squibb Co, as part of an expected major restructuring, on Wednesday said by 2010 it would cut its work force 10 percent and slash the number of its manufacturing plants by more than half, to generate an additional $1.5 billion in savings.
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. Sales would bring the company cash that could be plowed into its higher-profit core pharmaceuticals business.
Further, the New York-based drugmaker 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 translates into an expectation of earnings growth next year of up to 19 percent.
On balance, I like the actions they're taking today, said John Farrall, a healthcare 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.
Details of the restructuring were not a surprise, but show that Bristol-Myers is moving in the right direction, Farrall said.
Savings of $1.5 billion from the new restructuring plans 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.
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.
Cost savings would help Bristol-Myers offset expected sharp sales declines in its $5 billion-a-year Plavix blood clot preventer when the drug loses patent protection in 2011 and faces competition from cheaper generics.
The restructuring comes on the heels of aggressive cost-cutting moves by other drugmakers, including Merck & Co Inc and Pfizer Inc, 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.
Bristol-Myers, which will review its restructuring plans and its roster of experimental drugs this afternoon at a meeting with industry analysts in New York, also increased its dividend by 11 percent to 31 cents per share from 28 cents, the first increase since 2002.
Bristol shares were down 19 cents to $28.87 in afternoon trading on the New York Stock Exchange.