Bristol-Myers Squibb is planning ahead. Looking toward to a few tough years of patent expirations and declining earnings--2011 through 2013, to be exact--the drugmaker is looking to armor itself with increased cash flow. By aggressively managing its inventory, receivables and payables, the company hopes to free up $750 million to $1 billion by 2011.
Jean-Marc Huet, senior vice president and CFO, told analysts at the Credit Suisse conference yesterday that his goal is to cut working capital as a percentage of sales. Last year, that figure was 17 percent, Dow Jones reports, better than the industry average of 21 percent--but not nearly as good as the industry best of 12 percent.
It's a sea change for Bristol, and for other pharma companies looking to implement the same sort of strategies. But according to an Ernst & Young report released last month, the industry as a whole needs to free up working capital for the patent expirations and pricing pressures ahead. In Bristol's case, top-selling Plavix is due to go off patent in 2011, and the company's rights to the antipsychotic Abilify end in 2012--and those are just a couple of the expected blows. "Historically our industry, as well as our company, have enjoyed such good gross margins," Huet said at the conference, "that we haven't had to focus as much on cash flow as we do today."