The Wall Street Journal-20080201-Wyeth-s Profit Rises 19-- Bristol-Myers Posts Loss

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Wyeth's Profit Rises 19%; Bristol-Myers Posts Loss

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Wyeth posted a $1.02 billion quarterly profit but said it is re- evaluating its business model amid product-pipeline problems and generic-drug competition -- two industrywide difficulties that have hit Wyeth especially hard. At the same time, rival drug maker Bristol- Myers Squibb Co. posted a loss as it took an unexpected $275 million charge related to the broader economy and the credit crunch.

Wyeth's fourth-quarter profit was 19% higher than a year earlier. But the Madison, N.J., company expects flat sales and a drop in profit for 2008, as it anticipates a plunge in sales of its heartburn drug Protonix, which had sales of $1.91 billion in 2007. Wyeth said this week that it was launching a generic version of Protonix despite having two-and-a-half more years before its patent is set to expire, because the company was unable to reach a settlement agreement with Teva Pharmaceutical Industries Ltd. Wyeth has sued the Israeli drug company, which has marketed a generic version of Protonix. Wyeth also has sued Sun Pharmaceutical Industries Ltd., which Wednesday said it had introduced a generic version of the drug as well.

For Wyeth, that headache comes at the same time that it is enduring setbacks to win approval for new drugs. Wyeth's main lines of include vaccine and biotechnology products as well as primary-care drugs, and some of the medications encountering approval problems would be used largely in the last category. Wyeth said it is trying to cut costs for the near term -- it expects to reduce headcount by 4% to 6% in the first half of this year -- and will re-evaluate how it will grow over the longer term.

"Nothing is off limits," said Wyeth Chief Executive Bernard Poussot, referring to the strategic review. "We will look at every area of business, every piece of infrastructure, the way we operate."

Joseph Mahady, president of Wyeth's pharmaceuticals division, said the company would likely sharpen its focus on areas such as oncology, Alzheimer's disease and infectious-disease prevention. "It's a combination of where our science is taking us, and where the marketplace is going, that leads us to become a more specialty-based company," he said.

Wyeth shares have plunged in recent months -- they are down more than 30% since their 2007 high of $58.42 -- causing speculation that the company is becoming a takeover target. Mr. Mahady wouldn't say whether the company was considering a sale, but added that Wyeth doesn't feel compelled to put itself on the block. Wyeth also said it may try to make acquisitions of its own to help it fill out its drug pipeline. Shares of the company were down three cents to $39.67 in 4 p.m. New York Stock Exchange trading.

Bristol-Myers, which is going through its own restructuring program, said it took an "unexpected" $275 million charge stemming from the global credit crunch. Specifically, the New York company had $811 million of principal invested in a type of security whose value is reset at monthly auctions. These so-called auction-rate securities include municipal and corporate bonds and other securities. Bristol said the securities had AAA/Aaa credit ratings at the time of purchase, but some were subsequently downgraded and the company has been unable to sell some.

As a result, the value of the $811 million investment in auction- rate securities fell to $419 million as of Dec. 31, saddling the company with an "impairment charge" of $275 million.

"It certainly was unexpected, and I think we view it as a one-time hit," said Chief Executive James Cornelius. Bristol-Myers said it has changed its investment guidelines to reduce its risk exposure. Drug makers Wyeth, Schering-Plough Corp., Johnson & Johnson and Pfizer Inc., said they don't have a similar issue.

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Peter Loftus, Jacob Goldstein, Elena Berton and Avery Johnson contributed to this article.