.bodytext {float: left; } .floatimg-left-hort { float:left; margin-top:10px; margin-right: 10px; width:300px; clear:left;} .floatimg-left-caption-hort { float:left; margin-bottom:10px; width:300px; margin-right:10px; clear:left;} .floatimg-left-vert { float:left; margin-top:10px; margin-right:15px; width:200px;} .floatimg-left-caption-vert { float:left; margin-right:10px; margin-bottom:10px; font-size: 12px; width:200px;} .floatimg-right-hort { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 300px;} .floatimg-right-caption-hort { float:left; margin-right:10px; margin-bottom:10px; width: 300px; font-size: 12px; } .floatimg-right-vert { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px;} .floatimg-right-caption-vert { float:left; margin-right:10px; margin-bottom:10px; width: 200px; font-size: 12px; } .floatimgright-sidebar { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px; border-top-style: double; border-top-color: black; border-bottom-style: double; border-bottom-color: black;} .floatimgright-sidebar p { line-height: 115%; text-indent: 10px; } .floatimgright-sidebar h4 { font-variant:small-caps; } .pullquote { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 150px; background: url(http://www.dmbusinessdaily.com/DAILY/editorial/extras/closequote.gif) no-repeat bottom right !important ; line-height: 150%; font-size: 125%; border-top: 1px solid; border-bottom: 1px solid;} .floatvidleft { float:left; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} .floatvidright { float:right; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} tr.d0 td { background-color: #ccccff; color: black; }
Dear Mr. Berko:

Dear S.L.:

Bristol-Myers Squibb Co. (BMY-$21.97) is the sequel to a failed drug company called Clinton Pharmaceutical. In 1887, pharmacists William Bristol and John Ripley Myers pooled five grand, bought Clinton and renamed the company Bristol, Myers.Revenues exploded and after a few small mergers – plus a few biggies like Clairol in 1968, Squibb in 1989 and DuPont Pharmaceuticals in 2001 – revenues stalled at the $20 billion level.

Even with brand names such as Bufferin, Enfamil, Ban, Capoten, Taxol, Glucophage, Coumadin and Pravachol, and a cornucopia of popular beauty aids, the yahoos who run this company need a lot more oomph to bring it into the 21st century.

I blame BMY’s vapid revenue growth and sporadic earnings on feckless management and a sapless board of directors, all of whom ought to be put in the stocks and publicly whipped by shareholders. Then the millions of dollars in compensation, expenses and stock they’ve received for their “Three Stooges” guidance must be returned with interest. And lastly, they must agree NEVER to serve on a corporate board again. I can think of no excuse for a respected company to sit idly by and watch its common stock crash from $75 a share a few years back to $22 today.

Expenses are too high by half and while Merck, Forrest, Pfizer, Wyeth, Novartis, Glaxo, etc. enjoy net profit margins between 22 percent and 32 percent, the BMY gang appears content as pigs in muck with net profit margins of 14 percent. Shame!

I’m hearing rumors from analysts at Standard & Poor’s, Zacks Investment Research and Bear Stearns that BMY is being evaluated as a takeover or merger candidate by several larger pharmaceuticals, including Pfizer, GlaxoSmithKline and Sanofi-Aventis.

Management, realizing and admitting to failure, has been busy selling unprofitable assets, shuttering over half its plants and equipment, divesting non-core operations (medical imaging, wound care operations, nutritional products) and reducing its work force by 12 percent. This raises cash, reduces costs and makes BMY a more attractive takeover candidate.

These moves will lower operating costs and increase net profit margins. However, it also begs the question why the company’s limpsy management suddenly got religion.

After paying a dividend of $1.12 per share for the past six years, CEO and chairman Jim Cornelius and his sycophantic board of directors consented to raise BMY’s dividend to $1.24. That’s an attractive and dandy yield of 5.6 percent and certainly makes it easier to hold the shares for a while until some other pharmaceutical company makes a move.

If BMY becomes a target, I think the buyout price could come in between $30 and $33 a share. Potential buyers know that the company’s oncology pipeline is impressively strong, that Abilify (an antipsychotic drug) is selling like mad ($1.8 billion last year), that Orencia (for rheumatoid arthritis), released in 2006, is beginning to take off and that Plavix revenues are poised to rebound.

So buy 300 shares quick as a bunny. You might have to sit on it for a year or more, but I believe that there may be little downside risk, because the stock seems to have made a strong base at the $20-$22 level.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@adelphia.net.© Copley News Service