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.
Bristol-Myers is the latest pharmaceutical company to slash its work force, as brand drug makers struggle to battle generic drug competition. 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. Merck & Co. is also cutting jobs.
"It is 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," Bristol-Myers Chief Executive James Cornelius said in a statement.
Bristol-Myers' job cuts represent 10 percent of its staff and will largely be made in 2008 and 2009, the company said. Analysts and investors expected workforce-related news from the company, since it first announced plans to implement cuts during its second-quarter earnings release. 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 November 2011, 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.
In a note to clients, Banc of America Securities analyst Chris Schott continued to express concern over upcoming patent expirations, despite the company's effort to cut costs.
He also described the analyst meeting as a neutral event for the shares.
"We do not believe that the potential near-term upside from expanded cost reductions will be able to offset the next wave of patent expirations in key Bristol franchises," said Schott, pointing to Plavix as well as anti-psychotic drug Abilify.
With sales rising 34 percent to $420 million in the third quarter, Abilify is also the fastest growing atypical anti-psychotic in U.S. and European markets, said Tony Hooper, president of the U.S. pharmaceuticals unit, at the meeting. Abilify's key patent expires in the U.S. in 2014. Bristol-Myers licenses Abilify from Japan's Otsuka Pharmaceutical Co.
Bristol-Myers' news comes on the heals of other big announcements from sector peers, Merck and Eli Lilly & Co., amid a negative industry forecast from Fitch Ratings.
Merck on Tuesday guided for 2007 and 2008 profit below Wall Street's expectations, and some analysts said the Whitehouse Station, N.J.-based drug maker could face a tough year.
Indianapolis-based Eli Lilly, meanwhile, is expected by some analysts to raise its earnings guidance at an analyst meeting Thursday.
Fitch Ratings said Wednesday the pharmaceutical industry will likely experience continued pressure from generic drug developers and regulatory scrutiny in 2008. The outlook for the sector remains stable, nonetheless, the agency said.
Shares of New York-based Bristol-Myers rose 14 cents to $29.20 in afternoon trading.