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Web Date: November 20, 2009

Pharma Business

BMS is splitting off nutrition company to focus on biopharmaceuticals
Department: Business
Keywords: pharmaceuticals, Bristol-Myers Squibb

Bucking an industry trend toward diversification, Bristol-Myers Squibb is splitting off its Mead Johnson Nutrition business as an independent company so it can focus on its own biopharmaceutical operations. After holding an initial public offering (IPO) of Mead stock in February, Bristol-Myers is looking to liquidate its ownership stake entirely.

“Now is the right time to move forward with a split-off, given the excellent performance of Mead Johnson since the IPO earlier this year and our confidence in the current and future performance of our biopharmaceuticals business,” Bristol-Myers CEO James M. Cornelius said when he announced the plan this week. “With a successful execution of this split-off, we fully consider ourselves a biopharma company.”

Bristol-Myers owns 170 million shares, or 83%, of the infant-formula maker. It is giving its shareholders the opportunity to exchange some, none, or all of their Bristol-Myers shares for shares of Mead. Along with disposing of the Mead stock, the exchange will reduce the number of Bristol-Myers shares that are outstanding and result in a higher earnings-per-share ratio.

A potential downside, stock analysts at investment firm Credit Suisse point out, is that the split-off removes Bristol-Myers’ last source of earnings diversification and concentrates rewards and risks in just one sector. Many of Bristol-Myers’ competitors in the pharmaceutical industry, in fact, are embracing diversification by developing businesses in vaccines, generic drugs, and animal health.

As he explained in a conference call with analysts, Cornelius believes that a smaller and more efficient company focused on serious unmet medical needs and backed by a strong R&D organization actually has “a competitive advantage for trying to execute this strategy.”

Chemical & Engineering News
ISSN 0009-2347
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