Bristol taps CEO, profit slides

Bristol names insider Cornelius as permanent CEO; announces heart drug deal with Pfizer; but stock slides 4 percent.

By Aaron Smith, staff writer

NEW YORK ( -- Drugmaker Bristol-Myers Squibb reported a slide in first-quarter profit and sales on Thursday, but still managed to beat forecasts, and named acting CEO James Cornelius its permanent chief executive - news that could make a buyout less likely.

But the company's stock price fell nearly 4 percent in morning trading.

Bristol (Charts, Fortune 500) reported first-quarter net sales of $4.5 billion, down from $4.7 billion for the same period the prior year. The company also said net earnings slipped to $690 million, or 35 cents per share in the quarter, compared to $714 million, or 36 cents a year earlier.

The analyst consensus forecast was for $4.3 billion in sales, and earnings of 23 cents, according to Thomson Financial.

The company also announced that Cornelius, the acting CEO since the former chief executive Peter Dolan was forced out eight months ago, was appointed as permanent CEO through 2009.

"[Cornelius] came to the job at a difficult time for Bristol-Myers Squibb. "He's brought stability and energy to the company. He's restored momentum, moved quickly to streamline operations, built a business and held down costs. Jim is the right person at the right time to lead this company forward."

Barbara Ryan, an analyst for Deutsche Bank North America who rates Bristol a "hold", said the signing of a two-year contract for Cornelius "changes nothing." She told that the stock price dropped because investors believe the appointment of a CEO removes the take-over possibility, though she disagrees with this assumption.

Ryan wrote, in a published note, that "Bristol obviously could not lure an external candidate and we view this as a purely cosmetic move to minimize the distractions/questions created by his interim status. The outlook for Bristol remains unchanged in our view, with a potential takeout still a likely possibility."

Cornelius said, in a call with analysts, that the company's strong performance prompted an increase in company guidance, to a range of $1.24 to $1.34 for the full year 2007. Excluding charges, guidance for the year is a range of $1.30 to $1.40.

Cornelius' resume includes the position of acting CEO for Guidant, where he brokered that company's sale to Boston Scientific (up $0.01 to $15.82, Charts, Fortune 500) in 2005. This has led some analysts to believe that Cornelius would lead Bristol in a merger with the larger French drug company Sanofi-Aventis (down $0.13 to $46.15, Charts). (Cornelius also served as chief financial officer for Eli Lilly & Co.) (down $0.01 to $59.50, Charts, Fortune 500)

Some analysts have theorized that the appointment of a permanent CEO could mean that Bristol is not seeking a buyer. When asked by an analyst about merger plans, Cornelius said he is "trying to the business as a freestanding company," without providing more detail.

Les Funtleyder, in a published note, wrote (prior to Cornelius' comments) that the permanent appointment of a CEO "makes it less likely of a near-term purchase by SNY," referring to Sanofi.

Cornelius, in a separate call with reporters, dismissed the "press speculation and rumors" surrounding a potential takeover.

"I've tried hard not to get people distracted with those rumors and focus on the business," said Cornelius.

Cornelius attributed part of the company's performance to "better than expected" sales for Bristol's top-selling drug Plavix, which prevents blood clots. Plavix sales slipped 5 percent in the first quarter to $938 million, the company said. But the CEO said Plavix experienced an 18 percent prescription increase in the first quarter, and now commanded 85 percent of the market share. The remaining share is held by Apotex's generic version.

A privately-held Canadian drugmaker Apotex flooded the market with generic Plavix in 2006 until the company was blocked by a federal judge in New York. The Food and Drug Administration had approved Apotex's generic as safe and effective, but the company had no legal clearance to produce the drug because Bristol holds the patent until 2011.

The federal judge still has to make a ruling in the Plavix case. The judge's decision to block generic production has led some analysts to believe that Bristol will emerge the victor. Ryan of Deutsche Bank North America wrote in a published note that an unfavorable ruling against Bristol is "highly unlikely."

Bristol also said its was co-developing with the drug giant Pfizer (up $0.27 to $26.59, Charts, Fortune 500) an anticoagulant that might be used to treat heart disease. As part of this deal, Pfizer will provide Bristol with a $250 million upfront payment, Bristol said.

The experimental drug, apixaban, is in late-stage trials and is being studied for stroke prevention. As part of the deal, Pfizer pays for 60 percent of development costs effective since Jan. 1, 2007 and going forward, while Bristol pays for 40 percent. Bristol is also eligible for up to $750 million in additional "milestone" payments, which occur when drug development reaches certain goals.

Bristol is based in New Brunswick, N.J.

The analysts quoted here do not own Bristol stock. Miller Tabak does not conduct business with the company, but Deutsche Bank North America seeks business with Bristol. Top of page