Following a strategic review of Bristol-Myers Squibb's business, the company's management unveiled a productivity initiative Dec. 5 designed to cut $1.5 billion in costs and fashion the drug maker into a "next-generation biopharma."

"It's a visionary statement," CEO James Cornelius said during an investor meeting in New York outlining the strategy. "It really says in a shorthand way, take the best of what big pharma offers - that's the scale, that's the resources, the staying power - and combine it with the best of biotech."

The cost-cutting initiative will reduce spending by $1.5 billion by 2010 and include the elimination of 10 percent of Bristol's nearly 44,000 employees. Cost savings will include $400 million stemming from supply chain, $200 million from R&D, $550 million from commercial operations, and $350 million from general and administrative expenses.

Investors have been awaiting the restructuring announcement, which has been eagerly anticipated since the appointment of Cornelius as permanent CEO in April (¹ Also see "Bristol Extends Interim CEO Cornelius’ Reign, But Acquisition Rumors Persist" - Pink Sheet, 30 April, 2007., p. 3).

The 10 percent figure given for the headcount reductions actually represents a net change: Bristol intends to terminate 15 percent of its current workforce, but the firm also plans to hire new talent, particularly in research and biologics. Some positions have been eliminated in 2007, but the majority of cuts will come in 2008 and 2009.

As part of Bristol's transformation into a next generation biopharma, the company will continue to invest in key growth products including specialty and biologic medicines, cardiovascular and metabolic drugs, while scaling back assets that are considered "mature brands," a large but declining revenue base.

The company is undertaking a portfolio rationalization, with Bristol already having eliminated some products and SKUs in its mature brands portfolio. As a result of the program, the firm will transition from having 554 products in its mature brands portfolio in 2006 to 154 in 2007 and 62 in 2011, Worldwide Pharmaceuticals Exec VP and Chief Operating Officer Lamberto Andreotti stated.

Bristol will unload its Medical Imaging business and is continuing to weigh future options for its ConvaTec and Mead Johnson businesses.

The cash generated from the sale of businesses that are not deemed core to Bristol could be used to acquire or license new products or technologies, Cornelius indicated. Bristol will seek to form a "string of pearls," he said, noting that Adnexus Therapeutics represents the first pearl in the chain.

The company announced the acquisition of Adnexus and its novel fibronectin-based protein therapeutics discovery platform in September. At that time, the firm positioned the deal as a step towards a biopharma business model (² Also see "Bristol’s Transformation To Biopharma Business Progresses With Adnexus Buy" - Pink Sheet, 1 October, 2007., p. 20).

"In my mind, there are technologies, people, platforms and products out there that can be added to the Bristol-Myers Squibb portfolio at reasonable prices," Cornelius said. "We might have to raise some cash to be able to afford to do that and part of what you will continue to see us do is examine which strategic alternatives can generate cash."

The productivity plan also calls for a reduction by 50 percent of Bristol's existing 27 manufacturing plants by 2011. The firm will close or divest the plants as they are no longer needed, and will focus on bolstering its in-house biologics capability at its facility in Devins, Mass. while aggressively outsourcing manufacturing of mature products, Andreotti said.

The company will seek to streamline its geographic footprint with a "hub and spoke" model involving regional centers for distribution rather than full infrastructures in every country, the exec explained.

Costs associated with implementation of the restructuring are estimated to be between $900 million and $1.1 billion on a pre-tax basis, with approximately $300 million expected to be incurred in 2007 and $400 million to $500 million in 2008.

The company expects that non-GAAP earnings per share will grow at a minimum of 15 percent compound annual growth rate, from the 2007 base, for the next three years, including costs associated with the initiative. Bristol revised its 2007 fully diluted earnings per share guidance on a GAAP basis to $1.15 to $1.20 from $1.28 to $1.33, reflecting the impact of the $300 million in charges expected to be taken in the fourth quarter.

As the company moves forward, Cornelius said he expects to make more partnering deals along the lines of those Bristol has reached with Pfizer for the factor Xa inhibitor apixaban for thrombosis and with AstraZeneca for the diabetes agents saxagliptin and dapagliflozin.

Those types of partnerships fit into Bristol's R&D strategy, which is aimed at mitigating risks and cutting costs while increasing productivity, R&D President Elliott Sigal added. "Such partnerships allow us to use more internal resources to invest in our broader portfolio of specialty products and new indications," he said. "We are able to pursue multiple Phase III programs for apixaban and dapagliflozin to ensure a differentiated profile at launch by leveraging both companies' resources and strengths."

As Bristol's management seeks to transition the company into a "next generation biopharma," the drug maker's R&D engine will be tasked with producing more discovery output - particularly in the area of biologics - while limiting spending increases to a compound annual growth rate in the mid-single digits, Sigal said.

"We expect to increase overall discovery output by 50 percent with only a modest increase in investment over the next three years," he said. The company will reach this goal by increasing internal discovery productivity, leveraging outsourcing partnerships, like Bristol's discovery deal with Biocon, and tapping the discovery benefits provided with the acquisition of Adnexus, which Sigal said offers improved discovery cycle time and lower cost per development candidate.

In the first quarter, Bristol announced a discovery research deal with Bangalore, India-based Biocon's Syngene subsidiary, a custom research company specializing in synthetic chemistry and molecular biology.

Bristol R&D will also work to develop a culture of cost disciplined science, Sigal said, noting the firm is implementing a pharmacovigilance program and applying Six Sigma principles to simplify processes and eliminate "low value" work.

For example, he said Bristol would work to actively manage recruitment in drug trials rather than over-enrolling studies as has been a common practice in the industry. Limits on recruitment and improvements in data management during clinical trials could result in savings of $20 million, the exec estimated.

Another area of savings will come from better optimization of drug supply processes, he said, noting that 30 percent of supplies go unused at clinical sites. Bristol plans to save an additional $20 million from this area of research.

Productivity savings will allow Bristol to deliver its planned 2007 work at a cost increase of only 2 percent over 2006, compared to a 16 percent increase if productivity initiatives were not implemented. Thus, "We can hold our R&D spend to a compound annual growth rate in the mid-single digits while reinvesting our productivity savings and savings from alliances," Sigal said.

As Bristol transitions into a biopharma player, the company will aim to deliver two or more biologic candidates into the clinic every year for the next several years, according to the exec. Two of the six compounds it has in "full development" (registration phase or already filed) are currently biologics: ipilimumab for metastatic melanoma, and belatacept for solid organ transplantation.

The company is targeting a BLA filing for ipilimumab, a CTLA4 inhibitor currently in registration studies, in the first half of 2008 in previously treated metastatic melanoma patients, Senior VP-Global Clinical Development Brian Daniels said. Bristol, which is developing ipilimumab with Medarex, is neck and neck in a race with Pfizer, which is studying its own CTLA4 inhibitor tremelimumab in Phase III, also in melanoma (³ Also see "Pfizer Oncology Head Charles Baum: An Interview With “The Pink Sheet”" - Pink Sheet, 5 November, 2007., p. 11).

For belatacept, Bristol is targeting an initial registration program in renal transplant, including two studies comparing belatacept versus cyclosporine in 1,200 patients. The company is targeting a BLA submission in the first half of 2009.

Among the other drugs considered in full development by Bristol is the recently-approved novel chemotherapy Ixempra (ixabepilone). The microtubule inhibitor, part of a new antineoplastic class of epothilones, cleared FDA in October for metastatic or locally advanced breast cancer (⁴ Also see "Ixempra Gives Bristol New Start In Chemotherapy, Offers Refinement Of Taxol" - Pink Sheet, 22 October, 2007., p. 12).

The company plans to file an sNDA based on an ongoing Phase III study by the end of 2008 in the taxane pre-treated metastatic breast cancer population, a patient group that is approximately twice the size of its existing indication, according to Daniels.

Other drugs in the registration phase of development include the dipeptidyl peptidase-4 inhibitor saxagliptin and the glucose transporter-2 inhibitor dapagliflozin, both in development for diabetes under a deal with AstraZeneca.

The firms are targeting the first half of 2008 for an NDA filing for saxagliptin, while the first Phase III data on dapagliflozin is anticipated in 2009. The company is undertaking a wide-reaching program for dapagliflozin, including studies in treatment-naive patients as monotherapy and in combination with metformin, as well as in treatment-experienced patients as an add on therapy with metformin, a sulfonylurea or thiazolidinediones.

Bristol's final registration phase program is apixaban for thrombosis. Several studies are underway evaluating apixaban for VTE prevention in more than 16,000 patients. Two additional Phase III studies are currently evaluating the drug for stroke prevention. In addition, Bristol is about to embark on a Phase III program for the treatment of VTE, Daniels noted.

"We expect to have multiple indications ready for filing in 2009/2010, for VTE prevention, stroke prevention in atrial fibrillation and treatment of VTE," he said.

Sigal also highlighted a few programs in earlier development, including angiocept, coming out of the Adnexus acquisition, a vascular endothelial growth factor antagonist that blocks all ligands and has shown comparable or better activity than Genentech's Avastin (bevacizumab) in animal models. A separate candidate that Bristol intends to move into Phase III trials in the coming weeks is brivanib, which blocks the VEGF and FGF receptors. The company intends to pursue brivanib for an initial indication in colorectal cancer.

Bristol is one of a number of big pharmas seeking to bolster its biotech presence. Pfizer recently announced it would open a stand-alone "bioinnovation" facility as part of its R&D revamp (⁵ Also see "Pfizer Promotes Global R&D VP Mackay To Head Unit, Opens Biotech Center" - Pink Sheet, 8 October, 2007., p. 3).

Bristol also is not alone in undertaking a cost-reduction program and focusing on biotech: other big pharmas - including Novartis, Pfizer and AstraZeneca - have recently made similar moves. Novartis announced in October that it is eliminating 1,260 sales and marketing positions to save $230 million in 2008, while Pfizer is cutting 10,000 employees and AstraZeneca announced the elimination of 7,600 employees this year (⁶ Also see "Novartis Pharma CEO Is Jimenez; Reorg Entails Layoffs, New Biologics Unit" - Pink Sheet, 22 October, 2007., p. 11).

- Jessica Merrill (j.merrill@elsevier.com)

Bristol’s Take On Restructuring: Cut $1.5 Bil. In Costs, Try BioPharma Model

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