For Bristol, steady course may be best navigation

By Lewis Krauskopf and Ransdell Pierson - Analysis

NEW YORK (Reuters) - Although its shares are mired near multiyear lows, Bristol-Myers Squibb Co (BMY.N) may be well advised to avoid drastic changes in its overall business strategy as it bids for ImClone Systems Inc IMCL.O.

Regardless of whether the drugmaker succeeds in its $4.5 billion bid for the roughly 83 percent of the biotechnology company it doesn't own, Bristol-Myers should continue on its path toward becoming a more pure "BioPharma" company, money managers and analysts said.

The end game for Bristol-Myers could be as takeover prey for a larger company as Big Pharma struggles to generate new drugs, but many doubt the right offer will come along any time soon.

Instead, expect Bristol to pursue small or mid-size deals to boost its pipeline in specialty areas such as oncology, and focus on brand-name pharmaceuticals and biotech medicines rather than branching out into generics, consumer products and other areas as some rivals are doing.

"Bristol basically has a two-pronged strategy: to grow, especially with biologics, and to cut costs, and I don't see any change to that overarching strategy," Morningstar analyst Matthew Coffina said.

Like other large pharmaceutical companies, Bristol-Myers faces a major patent expiration within the next few years -- to its Plavix blood-clot treatment -- and is cutting costs to gird for expected plunging sales of the $5 billion-a-year product.

"They're buying good and affordable companies and managing the cost side and cleaning up their portfolio" by divesting non-pharmaceutical businesses, said David Katz, chief investment officer of asset manager Matrix Asset Advisors, which owns about 597,000 shares of the company.

"They're doing everything right," Katz said. "We give the CEO very high marks."

STOCK UNDER PRESSURE

Although Bristol, which had sales of $19.3 billion last year, has forecast annual earnings growth of at least 15 percent through 2010, its shares have been pressured by worries over the November 2011 U.S. patent expiration of Plavix.

Further, potential competition to Plavix may be only weeks away if a new drug from partners Eli Lilly and Co (LLY.N) and Daiichi Sankyo (4568.T) wins approval.

The stock has fallen 23 percent in the past year, compared with a 4.5 percent decline for the American Stock Exchange Pharmaceutical Index .DRG of large drugmakers.

Acquiring all of its partner ImClone would give Bristol full U.S. rights to the fast-growing cancer drug Erbitux as well as a pipeline of other potential oncology treatments that could bolster future earnings. ImClone has said Bristol's $60-a-share bid is too low.

Coffina said Bristol would be able to use ImClone's new high-tech plant to make Erbitux and other biotech drugs either for sale or for internal research programs.

"I'd say they can settle down for at least a couple of years, and integrate ImClone," Coffina said.