Bristol-Myers Sets Swap Offer Rate

Bristol-Myers Squibb Co. (BMY - Analyst Report), which intends to split its 83.1% stake in the Nutritional segment to concentrate exclusively on its biopharmaceutical business, announced that it will offer 0.6313 shares of Mead Johnson Nutrition Co.’s (MJN - Snapshot Report) common stock for each Bristol-Myers share in the exchange offer. The Nutritional segment operates under its subsidiary Mead Johnson and develops infant formulas such as Enfamil. The offer, which will witness Bristol-Myers exchange up to 170 million shares of its Nutritional segment, is set to end on Dec 17, 2009.
 
The offer will see Bristol-Myers accepting a maximum of 269.29 million shares of its common stock for exchange. The swap offer will be subject to proration if it is over-subscribed. In the event of the offer being consummated but not fully subscribed, Bristol-Myers intends to distribute any shares of Nutritional segment’s common stock it continues to own as a pro rata dividend to the shareholders of Bristol-Myers .
 
The split-off would enable Bristol-Myers to operate as a fully independent biopharma company, focusing exclusively on its Pharmaceuticals segment, which manufactures and sells branded pharmaceutical drugs such as Pravachol for cholesterol reduction, Plavix for hypertension and Erbitux for cancer.
 
Plavix, the antiplatelet blood thinner indicated to reduce heart attack risks in patients with atherosclerosis, is the top growth driver at Bristol. However, patent expirations loom large on the company starting 2011, when Plavix is likely to face generics in the United States.
 
The company has lost patent protection on products worth about $4 billion in sales over the past four years. Generic competition has resulted in drugs such as Cefzil, Paraplatin, Glucophage, Monopril and Taxol experiencing sales declines. However, the $1 billion addition in cost cuts in 2012−2013, the extension of the Abilify agreement with Otsuka and the acquisition of Medarex are indications that management is taking meaningful steps to prepare for the loss of exclusivity of Plavix.
 
Currently, we are Neutral on Bristol-Myers.

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