Drug maker Bristol-Myers Squibb Co. (BMY), Wednesday lowered its earnings outlook for fiscal 2009 from continuing operations as a result of the split-off of pediatric nutrition company Mead Johnson Nutrition Co. (MJN). The companies also announced the final results of the Mead Johnson exchange offer.
Evansville, Indiana-based Mead Johnson was a subsidiary of New York-based Bristol-Myers. Its portfolio of 70 products includes a range of nutritional needs for infants, children, and expectant and nursing mothers in 50 markets worldwide. Mead Johnson went public in February 2009, raising nearly $800 million through an initial public offering of 30 million of Class A common stock.
Bristol-Myers said it now expects full-year 2009 GAAP earnings from continuing operations in the range of $1.51 - $1.56 per share, down from its previous range of $1.72 - $1.77 per share. The company's non-GAAP earnings from continuing operations are currently estimated to be between $1.75 and $1.80 per share, in comparison with its prior forecast range of $2.00 - $2.05 per share.
On average, 10 analysts polled by Thomson Reuters currently expect a profit of $2.02 per share for fiscal 2009. Analysts' forecast typically excludes one-time items.
On November 15, Bristol-Myers announced its decision to split off its 83.1% holdings in Enfamil baby formula maker Mead Johnson as a final step towards forming a fully independent biopharmaceutical company. The split-off is expected to be net cash flow positive to the BioPharma business and accretive to earnings beginning in 2010.
Under the proposal, Bristol-Myers shareholders were offered exchange of some, none or all of their shares of Bristol-Myers common stock for shares of Mead Johnson common stock tax-free and at a discount. In early December, Bristol-Myers amended the offer by raising the upper limit on the exchange ratio to 0.6313 shares of Mead Johnson common stock per Bristol-Myers common share from 0.6027 shares of Mead Johnson common stock per Bristol-Myers common share.
The offer expired on December 17. Bristol-Myers and Mead Johnson in separate statements indicted up to 170 million shares of Mead Johnson common stock have been validly tendered and not withdrawn in the exchange.
Bristol-Myers accepted 269.29 million shares of its common stock in exchange for 170 million Mead Johnson common shares. Bristol-Myers accepted the tendered shares on a pro rata basis in proportion to the number of shares tendered due the over subscription of the offer.
Further, all shares tendered by eligible electing odd-lot stockholders have been accepted. The final proration factor of 53.8954842% was applied to all other tendered Bristol-Myers common shares to determine the number of such shares that would be accepted from each tendering stockholder, Bristol-Myers and Mead Johnson stated.
Mead Johnson will be reported as a discontinued operation for full-year 2009. In addition to the impact of the Mead Johnson split-off, the 2009 GAAP earnings from continuing operations guidance would reflect up-front licensing payments and funding to the Bristol-Myers Squibb Foundation for a philanthropic educational program in the US.
Bristol-Myers stated that total company net earnings will include discontinued operations consisting of the results of Mead Johnson, as well as an expected gain of about $7 billion due to the split-off. In addition, the earnings per share impact of the reduction of 269 million shares will be minimal due to the relatively short period of time that the lower weighted average number of shares will be outstanding.
Commenting on the split off of Mead Johnson, James Cornelius, chairman and chief executive officer of Bristol-Myers Squibb, stated, "We're pleased to have successfully completed the split off of Mead Johnson Nutrition Company, which now focuses us completely on biopharmaceuticals."
"As we continue our transformation into a next-generation BioPharma leader, we are confident in our ability to execute on our strategy and in the strong performance of our BioPharma business," Cornelius added.
The split-off of Mead Johnson reflects the confidence Bristol-Myers has in the success of Mead Johnson's growth strategy and its strong financial performance since the initial public offering.
For the recently closed third quarter, Bristol-Myers' profit declined to $966 million or $0.48 per share from $2.58 billion or $1.28 per share a year ago, mainly due to the absence of a substantial one-time gain recorded in the prior-year quarter from the sales of ConvaTec wound-care business. Sales were up 4% to $5.49 billion from $5.25 billion last year.
BMY is trading at $25.51, down $0.08, on a volume of 15.4 million shares.
MJN rose $0.16 and is trading at $43.25, on a volume of 1.53 million shares.
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