SECTION I – Summary of Company’s Business & Economic Environment where it operates.
Summary of Company’s Business
Since 2009, Bristol-Myers Squibb Company (BMS) has become a global biopharmaceutical focused company, consisting of global pharmaceutical/biotechnology and international consumer medicines businesses. BMS licenses, manufactures, markets, distributes and sells pharmaceutical product.The Company is engaged in the discovery, development and delivering of innovative medicines that help patients prevail over serious diseases such as Cancer, Diabetes, HIV, etc.
In 2008 the Company began its transformation to a next-generation BioPharma leader. As an essential strategy to achieve this, it has executed transformative changes to both maximize near term growthand focus the Company’s resources in Pharmaceutical and Biotech products. These changes included selling its non-pharmaceutical divisions and acquisition of Biotech leading companies, in order to strengthen its Biopharmaceuticals pipeline.
Until 2009 BMS reported two main sources of Revenue: Pharmaceuticals & Nutritionals. The Mead Johnson Nutritionals division (MJN) accounted for 16% of the totalBMS Net Sales. Following its transformation process to a fully Biopharma Company, in February 2009 MJN successfully completed an initial public offering (IPO). The split-off of the remaining interest in MJN was completed in December of the same year. Thus, for the 2009 and further financial statements, MJN’s financial reports are reported as Discontinued Operations.
BMSconducts its business primarily within the pharmaceutical/biotechnology industry. BMS is 17th among the top 20 pharmaceutical companies (ranked vs Gross Sales, March 2010), according to pharmaceutical market research company IMS. 2009 was a year characterized by a wave of mega-mergers and spinoffs that shook up the pharmaceutical industry. Today the Pharma sector continues to witness major mergerand acquisition deals. With most of the big pharma companies already facing or likely to face patent challenges for their blockbuster products, the companies have been looking towards mergers and acquisitions and in-licensing activities to make up for the loss of revenues that will arise with key products losing patent exclusivity.
SECTION II – Evaluation over time of Company’s ROE, DuPontComponents, additional ratios.
ROE ratio: As a Metric of overall performance, ROE ratio analysis may seem strange at first sight, due to its drastic increase in 2009 vs 2008, and its drop in 2010 to a lower level than 2008. Nevertheless, when analyzing separately the elements of ROE we see that Net Income (numerator) suffers significant changes in 2008 and 2009 compared to 2010 and previous years.These changes are explained by 2 key Gains from disposals: $1.98 billion*for Convatec & Medical Imaging (2008); $7.16 billion* from the MJN spinoff (2009).
Conclusion is that ROE fluctuations are the result of transformative changes (including selling its non-pharmaceutical divisions) to accomplish its transformation to a fully Biopharma Company, while maximizing near term growth.
*Figurespresented consider deduction of provision for income taxes ($118 in 2008; $1,433 in 2009)
Profitability: Drop in profitability in 2010 compared to the previous two years is also explained by the disposal of MJN, Convatec & Medical Imaging. Nevertheless, profitability is consistent at a double digit ratio throughout the three years; which indicates the Company consistently maximizes its Shareholders’equity.
Efficiency: This ratio shows that each dollar of assets generates $0.94 of sales. This ratio reveals insights into the Company’s productivity and efficiency. The high ratios of BMS suggest that assets are being used efficiently. The positive trend in the years compared also sustains that decision of disposing non-pharmaceutical divisions was assertive, therefore sustaining BMS’s...
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