US health care giant Bristol-Myers Squibb has taken the same road as many of its peers, unveiling the latest round of unspecified cost-cutting measures aimed at garnering $500 million of extra savings in 2007 and a further $100 million the following year.
“We expect to be in a position to achieve a new period of sustainable revenue and earnings growth, starting in 2007 - based on our portfolio of important new marketed products, as well as a productive R&D pipeline,” commented chief executive Peter Dolan. “For this to occur, we must first stay focused on investing behind our growth drivers and our pipeline. And, perhaps most importantly, we must drive our current productivity efforts even harder and more systematically across the entire company, in order to have the resources to fund those investments.”
According to Dolan, the new belt-tightening measures are essential for the group to remain competitive, which is especially crucial in light of the US Food and Drug Administration’s recent conditional nod for the firm’s diabetes drug Pargluva (muraglitazar). The agency has requested additional information on heart safety with use of the agent before considering full approval, but this could take five years to compile, and so the group is considering whether to dump the product altogether. One way or the other this signifies a significant setback to the firm’s near-term growth strategy.
The move follows similar structural reshuffles at Pfizer, Merck and Wyeth over the last few months, but B-MS has actually been chopping away at expenses for some time now, with restructuring of its US and European sales forces around specialty products, refocusing pharmaceutical development and outsourcing some of its information technology activities helping to cut annual spending around $200 million in 2004 and in this year.
The company’s US sales team has been reduced to 2,800 people from 4,000 in the last five years, with around 56% now promoting specialty-care products compared to 20% in 2000. And B-MS may be forced to downsize its US sales force even further, shedding the portion of the force now at a loose end as Pargluva has been pushed aside for some years at least, although the group noted it is considering a range of options.
Cost-containment should also help the firm to protect its business from the double whammy of mounting generic competition and a lack of new growth drivers coming through the pipeline to fill the gap, a real headache for many pharma heavyweights. In April 2006 the group will face what is likely to be its final significant generic challenge until 2011, as the cholesterol-buster Pravachol (pravastatin sodium) looses its patent armour. But B-MS and partner sanofi-aventis are currently preparing for a court battle over a challenge to the US patent for the blood-thinner Plavix (clopidogrel), the former’s top-selling drug which pulling in sales of $980 million in the third quarter.