Bristol-Myers to Eliminate 4,800 Jobs

The New York Times - December 6, 2007
Stephanie Saul

From nytimes.com

Bristol-Myers Squibb said yesterday that it would cut approximately 10 percent of its work force of 43,000 employees, continuing a year of pharmaceutical industry layoffs as drug makers adapt to a more competitive environment.

Besides layoffs, the company said it would sell or close half its 27 manufacturing plants worldwide, farm out some manufacturing and winnow its portfolio of more than 500 products by about 60 percent. That will be accomplished both by selling mature products and eliminating product lines.

Generic competition, a dearth of new drugs and a more safety-conscious posture by the Food and Drug Administration are among factors that have led to the announcements of at least 35,000 industry layoffs during the last year, industry analysts said.

The chief executive of Bristol-Myers, James M. Cornelius, delivered the layoff news to investment analysts yesterday at a conference in Manhattan. He said that while it was difficult to cut employees, his company was late in doing so.

“I’ve counted: since 2000, there have been 100,000 job eliminations in what we think of as big pharma,” Mr. Cornelius said during a break in the conference. “We’re about the only company that has had the same head count.”

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

Of more than 43,000 people employed by Bristol-Myers, 1,300 were notified of their layoffs last week and an additional 3,500 will be let go in 2008. The cuts will be part of an overhaul that the company says will reduce annual expenses by $1.5 billion by 2010 and help it adjust to a business model that emphasizes specialty biotechnology products rather than big-market pharmaceuticals.

The company declined to say exactly where the layoffs had occurred, other than an unspecified number at a biotechnology plant in East Syracuse, N.Y. Many of the 1,300 jobs already eliminated are in administrative positions like human resources, information technology and finance, the company said.

Bristol-Myers had already announced that it would close manufacturing and packaging plants in Colón, Panama; Mayaguez, P.R.; and Barcelona, Spain.

The company is facing the same problem as many other drug makers: the looming loss of patent protection for an important drug. In Bristol-Myers’s case, that is the blood-thinning agent Plavix. A generic equivalent will be available beginning in 2011, when the company hits what it is calling the generic cliff. Plavix generates about $3 billion in annual sales for Bristol-Myers Squibb.

Industrywide, drugs with combined annual sales estimated at $60 billion will lose patent protection in the next five years. That reality is frequently cited for layoffs at drug companies, including Pfizer, the world’s biggest drug maker, which has announced job cuts of about 10,000 in the past year, or about 10 percent of its work force. Johnson & Johnson said this year that it would cut 4,800 position, or about 4 percent of its employees.

Merck announced a global revamping in November 2005 that included an overall work force reduction of about 10 percent. There have already been 6,000 jobs cut, and the company is expected to lay off 1,000 more workers by the end of next year.

James Kumpel, an analyst for the investment house Friedman, Billings, Ramsey, said that part of the problem facing drug makers was an increasingly cautious F.D.A.

This year through October, the agency approved only 14 new molecular entities — drugs that are entirely new compounds rather than changes in formulations. That is a decline of about 18 percent from the comparable period in 2006, and it is well below recent norms, according to Mr. Kumpel’s analysis.

Mr. Kumpel said the trend appeared to reflect the lowest rate of F.D.A. approvals since 1994.

“If the F.D.A. is not allowing drugs to get to the market, or is just holding them to much tougher standards than before, drug makers face the prospect of a lot of new drugs going off patent and no new blockbusters to take their place,” Mr. Kumpel said.

Despite the higher regulatory hurdle, Bristol-Myers appears poised to move away from its nonpharmaceutical health care businesses to focus even more narrowly on drugs. Mr. Cornelius, in a presentation, said Bristol-Myers would sell its medical imaging division, which is based in North Billerica, Mass. The unit employs about 800 people, 400 of them in North Billerica.

The company might also sell 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 Mead Johnson and ConvaTec together might bring in about $13 billion if sold.

After its overhaul, Bristol-Myers, which has been based in Manhattan since the 1940s, is expected to maintain a mere toehold in the city. A spokesman said the company was 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.

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

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

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

The stock, which has ranged from about $25 to $32 in the last year, closed yesterday at $29.26, up 20 cents.