Bristol-Myers Squibb will cut jobs, close plants, to save $1.5 billion

Pharma major Bristol-Myers Squibb Co said on Wednesday 5 December that its earnings will grow at least 15 per cent annually through 2010. This will be accomplished in part by a major restructuring that will eliminate 10 per cent of its workforce and close more than half its factories over the next three years.

The number of  'mature' branded products is also to be reduced by 60 per cent till 2011. The restructuring is expected to generate $1.5 billion in new cost savings, say company officials. The move is planned to help Squibb cope with the patent expiration in late 2011 on its bestselling blood clot prevention drug, Plavix.

The company also plans to sell its medical imaging business and is reviewing strategic alternatives for its ConvaTec wound healing unit and Mead Johnson nutritionals unit. Cash from the deals on these units is to be ploughed into its higher-profit core pharma business.

Squibb has raised its 2008 earnings per share forecast, excluding special items, from a previous range of $1.60 to $1.70 a share to $1.65 to $1.75 a share. That means an expected profit growth next year of up to 19 per cent.

The company has 43,000 employees and 27 drug manufacturing plants globally, generating annual sales of about $18 billion. It has suffered from poor earnings in recent years owing to patent expirations on important medicines including cancer drug Taxol. Now, it is back on a profit upswing, thanks to growing sales of newer medicines such as schizophrenia treatment Abilify and cancer drug Erbitux.

Notwithstanding this, the coming patent expiration on the $5 billion-a-year Plavix would result in plunging sales of the pill once generics appear, which will be cushioned by savings from the restructuring.