Bristol-Myers Squibb, after nutrition business sale, has new pure pharma focus, $8B for deals

Bristol-Myers, now a pure pharma, to post results

TRENTON, N.J. — Bristol-Myers Squibb Co., the world’s No. 15 drugmaker by revenue, reports fourth-quarter earnings Thursday. The following is a summary of key developments and analyst opinion related to the period.

OVERVIEW: Like many other pharmaceutical companies, Bristol-Myers is seeing generic competition cut into sales of some of its top drugs, with more competitors to come — particularly in 2012. That’s when blood thinner Plavix, the world’s second-bestselling medication, loses U.S. patent protection.

But unlike most of its competitors, the New York company has chosen to narrow its focus, transforming itself into a biopharmaceutical company with its “String of Pearls” strategy to acquire biotech drugs. Other companies instead are diversifying by entering businesses such as vaccines or consumer and animal health products.

Toward that end, in December Bristol traded away its remaining shares in its former Mead Johnson infant nutrition business. Bristol-Myers traded its remaining 170 million shares of Mead Johnson stock to investors who owned Bristol-Myers shares, then retired those shares. That enabled Bristol to reduce the number of its outstanding shares to 1.7 billion from about 1.98 billion, a move that will boost earnings per share this year.

The tax-free, cashless transaction, coming shortly after its $2.1 billion September acquisition of Medarex Inc., leaves Bristol a purely biopharmaceutical company. Medarex has promising antibody technology used to make biologic drugs and is developing treatments for immune system diseases and cancer.

But right after the Mead Johnson transaction, Bristol reduced its forecast of earnings per share from continuing operations for all of 2009, to $1.51 to $1.56, compared to a previous range of $1.72 to $1.77.

Bristol still has more than $8 billion available for deals.

In November, it signed one worth up to $1 billion over time with Alder Biopharmaceuticals Inc. to develop the latter’s experimental drug for rheumatoid arthritis.

Bristol-Myers also got U.S. approval to sell Abilify, its No. 2 drug, to treat autism-related irritability in children aged 6 to 17.

Also during the fourth quarter, it launched its new diabetes drug, Onglyza, in Europe. The drug, which competes with Merck & Co.’s blockbuster Januvia in the DPP-4 inhibitor class, was launched in the U.S. last summer.

BY THE NUMBERS: Analysts polled by Thomson Reuters expect, on average, earnings per share of 41 cents and revenue of $5.12 billion. In the year-earlier period, earnings per share were 63 cents, partly because of a one-time 17-cent gain, while revenue was $5.25 billion.

ANALYST TAKE: Analyst Steve Brozak of WBB Securities says the company’s December reduction in its profit forecast “pretty much said it all.”

“They have the cash to buy products, partnerships, other companies,” and need to start doing so frequently, he said, adding that he really liked the Medarex acquisition.

“That did show some vision,” Brozak said.

UBS analyst Marc Goodman is more positive, noting the company’s sales growth is diversified, coming from several products “with solid growth potential, including Orencia for rheumatoid arthritis, Onglyza, No. 2 seller Abilify for schizophrenia, plus cancer and HIV drugs.

“We like the specialty pharma, partner-driven business model to diminish risk and believe management will continue to do smart, strategic, and accretive deals,” Goodman writes.

He says the company has three drugs in development that could drive growth after Plavix, taken by millions to prevent heart attacks, gets U.S. generic competition. Goodman sees a modest rise for the stock, now at about $24.50, with a 12-month target price of $27.

“Management has done a good job extracting value from the Mead Johnson split-off,” Goodman adds.

WHAT’S AHEAD: Analysts will be watching to see how well Onglyza sells, given Januvia’s big head start and heavy marketing.

Bristol is awaiting approval of belatacept, its heavily touted experimental drug to prevent rejection of kidney transplants, in May.

And the company also has data on several drugs coming out soon, including a study testing its Sprycel, which is approved for patients with chronic myeloid leukemia who weren’t helped by other treatments, in patients newly diagnosed with the cancer. That study compares Sprycel with Gleevec, a blockbuster cancer drug sold by Novartis AG.

STOCK PERFORMANCE: Shares rose 12 percent to $25.25 during the fourth quarter. For all of 2009, shares rose 8.6 percent.

(This version CORRECTS SUBS penultimate graf to correct to chronic myeloid leukemia, sted myelogenous.)