#10 Bristol-Myers Squibb

345 Park Ave., New York, NY 10154-0037
Tel: (212) 546-4000 Fax: (212) 546-4020
www.bms.com

Headcount	35,000
Year Established	1887
Pharma Revenues	$17,715	+13%
Total Revenues	$20,597	+13%
Net Income	$5,247	+142%
R&D Budget	$3,585	+10%

2008 Top Selling Drugs
Drug	Indication	Sales	(+/-%)
Plavix	platelet inhibitor	$5,603	+18%
Abilify	schizophrenia	$2,153	+30%
Reyataz	HIV/AIDS	$1,292	+15%
Avapro	hypertension	$1,290	+7%
Sustiva	HIV/AIDS	$1,149	+20%
Erbitux	oncology	$749	+6%
Baraclude	hepatitis B	$541	+97%

Account for 72% of total pharma sales, up from 68% in 2007.

 

PROFILE

Bristol-Myers Squibb is facing patent expirations for two of its three top-sellers, Plavix (2011 for basic U.S. exclusivity) and Avapro (2012 for same), while its deal to market #2 seller Abilify is due to expire in 2012. The loss of all three products in that timeframe would leave BMS in an inescapable hole. So what’s a next-generation biopharma to do?

The Lowe Down Bristol-Myers Squibb has been slowly slipping down the ranks on lists like this one, and it’s not that they’re getting any smaller. Everyone else is getting bigger. And that’s why the company’s name is always mentioned when it comes time for speculation on the Next Big Pharma Deal. (The usual suspect is Sanofi-Aventis, but they keep denying that one). These rumors will continue to be wrong until one day when they’ll be right. As much as I dislike mergers, especially big whopping ones, it’s hard to see BMS continuing to watch the rest of the big players expand around them. It’ll be a tangly business when it comes, though, because they have a lot of alliances and partnerships outstanding. One thing that management likes to do at this company is to spread some of their risks around, giving them (at various times) large stakes with Sanofi-Aventis, AZ, Merck, and a host of well-publicized smaller deals with Exelixis, Medarex, Isis and others. They’ve made a career out of such retail-sized mergers — one day things will go wholesale, and the investment bankers can hardly wait.—Derek Lowe

Renegotiate! BMS renegotiated its co-marketing deal with Otsuka Pharmaceuticals to retain commercialization rights through April 2015. It was a critical move, because without Abilify, BMS would be doomed. Instead, the company bought itself a little time to execute its strategy this year.

The deal with Otsuka wasn’t cheap. BMS paid $400 million upfront, will take a reduced share of revenues (with Otsuka contributing 30% of commercialization costs, up from nothing), and the two companies will now collaborate on a pair of oncology drugs, Sprycel and Ixempra. On the plus side, Abilify continues to grow by leaps and bounds. In 1Q09, it posted a 30% boost to $589 million in worldwide sales.

Fortunately, raising cash a huge issue for BMS. The company has been feverishly raising funds in recent years by divesting itself of non-core businesses. Most recently, it sold off $800 million in shares in an IPO for its Mead Nutritionals business (about 17% of the unit’s total shares). BMS also accelerated its Productivity Transformation Initiative, targeting an additional $1.0 billion in savings, bringing the PTI’s total goal to $2.5 billion in cuts by 2010.

And last fall, the company was paid a billion dollars it didn’t want!

Last August, you see, BMS tried to buy out ImClone, its partner in biologic cancer treatment Erbitux. The sale process got pretty ugly, as many negotiations involving Carl Icahn tend to do (just ask Biogen Idec!). BMS opened with a bid of $60/share, raised it to $62, and folded when Lilly stepped in with a $70/share offer, for a total offer of $6.5 billion. BMS elected not to match the offer, and instead took $1.0 billion in cash for the 16.6% of ImClone that it already owned.

So what’s BMS going to do with all that cash (around $9 billion on hand)? Buy itself a string of pearls!

“String of pearls,” in this case, is the nickname BMS has given its strategy of “complementing and enhancing our internal capabilities with a suite of innovative alliances, partnerships and acquisitions.” Two years ago, I speculated that BMS executed late-stage partnerships with both AZ and Pfizer in an effort to make itself unbuyable; if one acquired them, they’d lose the rights to the other’s project. (Of course, that assumed that the two partnerships would yield marketable products. BMS/Pfizer’s apixaban failed in its first Phase III trial, so plans for a 2009 FDA submission have been scrapped. They began a Phase III program for treatment of acute coronary syndrome in 1Q09.)

Now, while several major players are involved in giant acquisitions, BMS is trying to find strategic fits with drugs in external development and smallish acquisitions, in hopes of bolstering the pipeline for another decade. Its “un-J&J-ification” has helped that process along, but it still requires diligence and patience. There’s no point in throwing good money after bad.

Since last year’s edition, BMS has entered partnerships with Exelixis (CV and cancer), Zymogenetics (hepatitis C), Nissan Chemical and Teijin Pharma (atrial fibrillation), PDL Biopharma (multiple myeloma), and the aforementioned Otsuka agreement, which does reduce BMS’ share of development and commercialization costs.

Everyday I Write The Book In last year’s report, I mentioned that former SVP Dr. Andrew G. Bodnar was up on charges of making a false statement to the feds during the patent fight over Plavix. Dr. B. copped a plea to the charge, but the judge threw the book at him anyway! Actually, Judge Ricardo Urbina sentenced Dr. Bodnar to write a book about his experience in the case (along with two years of probation and a $5,000 fine). It seems that Judge Urbina has gone this route before, sentencing white-collar criminals to write books (well, monographs) about the laws they circumvented. BMS management can always tell itself, “It could’ve been worse.” In December 2008, BMS and partner Sanofi-Aventis triumphed in a U.S. court of appeals against Apotex, the manufacturer that launched generic Plavix in 2006 (if you don’t know the story, it’s too complicated to get into here). The partners are seeking damages against Apotex, which, in its original, untenable agreement with BMS and Sanofi, was indemnified against damages. Let’s hope this marks the final chapter (bwah-ha-ha!) in the Plavix case.

All these deals are for the mid- to long-term, but BMS is close to market with several drugs. Will they (belatedly) fill in the gaps that’ll be left by Plavix and Avapro’s generic losses? BMS and development partner AstraZeneca were hoping for an FDA ruling on diabetes treatment Onglyza by April 30, 2009, but the agency pushed off the deadline by three months. Onglyza could become a huge seller, if first-in-class Januvia is any indication.

BMS also gained full approval of Sprycel in May 2009. The drug received accelerated approval two years earlier for chronic myeloid leukemia in patients who weren’t responding to Gleevec. It’s currently in Phase III trials against, um, castrate-resistant prostate cancer (CRPC).

There are also high hopes for belatacept, a biologic to block organ rejection in transplantation, currently in Phase III. That one is an in-house, unpartnered drug for BMS, so it may become another major trading chip or it could turn into the company’s next solo blockbuster. It’ll be great if the company has some big-selling biologics to move into its $750 million bio-manufacturing facility in Devens, MA when that site goes on-line in 2011.

Except for the Otsuka pact, none of these deals required a huge upfront payment, so BMS still has billions burning a hole in its pockets (and making it an appealing target for an acquisition). In June 2009, a rumor surfaced that BMS was looking to buy a stake in troubled biopharma Elan, as prelude to a full takeout, but sources squashed that rumor pretty summarily. Just like that rumor that Sanofi was looking to buy an unnamed U.S.-based pharma company. Boy, I hope those two aren’t linked. . .

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