[NYTr] Crashing Economy: Bristol-Myers to Cut 10% of Job Force

[All the News That Doesn't Fit]

The New York Times - Dec 6. 2007
http://www.nytimes.com/2007/12/06/business/05cnd-bristol.html


Bristol-Myers to Cut 10% of Job Force

By STEPHANIE SAUL

Bristol-Myers Squibb announced a major overhaul today that will
eliminate about half of its 27 manufacturing sites worldwide and cut
its work force of 43,000 employees by more than 10 percent, as the
company adjusts to a business model that emphasizes specialty
pharmaceuticals rather than big-market drugs.

In a news release, Bristol-Myers said it would shed its medical imaging
division based in North Billerica, Mass., and was reviewing “strategic
alternatives” for two other large nonpharmaceutical operations.

Those include its baby formula business Mead Johnson Nutritionals,
based in Evansville, Ind., and its ConvaTec products business, based in
Skillman, N.J. ConvaTec specializes in products for wound care and
ostomies — surgical openings in the abdomen to eliminate bodily wastes.

Analysts have said that the operations of Mead Johnson and ConvaTec
together might bring in an about $13 billion if sold.

Bristol-Myers had said earlier this year that it planned to trim its
operations and work force, but had not released the details.

After its reduction, the drug maker, which has been based in Manhattan
since the 1940s, is expected to maintain a mere toehold in the city.
Although the news release did not address this change, the company is
expected to vacate all but one floor of its headquarters at 345 Park
Avenue, where it occupied 550,000 square feet as recently as 10 years
ago.

The company also announced it was increasing its quarterly dividend for
the first time since 2002, to 31 cents a share from the current 28
cents.

The company did not say exactly where layoffs would occur, but said
1,300 employees at various locations had already been notified. Most of
the jobs are in back-office operations, human resources, information
technology and finance, the company said.

Notices went out last week to an undisclosed number of employees in a
plant near Syracuse.

By the end of next year, the company expects to cut an additional 3,500
jobs — which would be in addition to any employees who leave
Bristol-Myers as a result of the spin-off or sale of operations.

In a separate announcement on Tuesday, the company said it was closing
a plant in Colón, Panama, where products are packaged.

In a move begun by his predecessor, Peter R. Dolan, the current chief
executive, James M. Cornelius, is shifting Bristol-Myers away from
reliance on its blood-thinner Plavix, which loses patent protection in
2011, to an array of specialty treatments, including the specialty
drugs Erbitux for cancer, Sustiva for HIV and Abilify for psychiatric
disorders, as well as cardiac and metabolic treatments.

Analysts have said that since 2001 the total volume of products sold by
Bristol-Myers has dropped 70 percent as the company has shifted from
high-volume, low-cost drugs to lower-volume, higher-priced products.

“Despite this shift, Bristol-Myers still has roughly the same number of
manufacturing sites and roughly the same number of employees as it did
eight years ago,” Roopesh Patel, an analyst at UBS Investment Research,
said recently in a note to clients.

Other drug makers have cut a total of more than 80,000 jobs in the last
five years, with more than 30,000 of those layoffs announced in the
last year alone.

Pfizer, the world’s biggest drug maker, has eliminated 10,000 jobs this
year, more than 10 percent of its work force. Merck announced a global
revamping in November 2005 that has already resulted in 6,000 layoffs;
the company is expected to lay off an additional 1,000 workers by the
end of next year. Johnson & Johnson earlier this year announced an
overhaul that would include cutting its work force by 4 percent, or
about 5,000 employees.

Bristol-Myers has announced plans to streamline operations before. But
its past efforts have not been seen as having much effect on expenses.

“Bristol has really been unable to cut costs on an absolute basis,” Dr.
Jon Lecroy, a pharmaceutical analyst for Natixis Bleichroeder, said in
a telephone interview.

Dr. Lecroy said that most investors would be looking more carefully at
the company’s pipeline, which is also expected to be discussed during a
conference with analysts this afternoon.

“Investors don’t typically give companies a lot of credit for
cost-cutting,” Dr. Lecroy said. “It doesn’t add to long-term growth.”

The stock, which has ranged from about $25 to $32 in the last year, was
at $29.13 around 3 p.m., up 7 cents.

Mr. Cornelius took over on an interim basis in September 2006 after the
company’s board sought Mr. Dolan’s resignation. More recently, Mr.
Cornelius agreed to remain as chief executive until May 2009.

Copyright 2007 The New York Times