Bristol-Myers Relieves Its Headache

The over-the-counter consumer drug business has been a headache for pharmaceutical giant Bristol-Myers Squibb (NYSE: BMY) lately. Sales of Excedrin and Bufferin, along with other consumer brands, have been flat with segment sales declining from $424 million in 2001 to some $354 million in 2003. In a move to focus on its core mission, it's peddling its consumer medicines division, which some analysts say is worth up to $1 billion, to other pharmaceutical companies.

It's a move that should not really come as a surprise. Bristol-Myers has slowly been ridding itself of products that don't fall within its strategic arena of medicines that prevent and treat disease.

Focusing more on drugs sold to specialists rather than general practitioners, it sold Oncology Therapeutics Network -- a cancer drug distribution company -- to the private equity firm of JP Morgan Chase (NYSE: JPM). In September it also backed out of a deal with Hidden Gems pick Flamel (Nasdaq: FLML) to market a new formulation of the drug Basulin, a controlled-release insulin used to treat Type I and Type II diabetes. And in 2001 it sold its Clairol hair products division.

With enough well-known brands to stuff a doctor's black bag, the basket of consumer medicines and products could prove attractive to a number of possible suitors. In addition to the Excedrin brands and Bufferin, Bristol-Myers also has Comtrex cold and flu remedies and Keri moisturizing lotions. Some companies seem to be a natural fit for these products, including GlaxoSmithKline (NYSE: GSK), which sells $5 billion worth of consumer products including antacids and toothpaste; Johnson & Johnson (NYSE: JNJ), which sells both Tylenol pain reliever and Aveeno skin-care products; and Novartis (NYSE: NVS), which owns the TheraFlu brand of cold and flu remedies. Aspirin maker Bayer (NYSE: BAY) might also be interested in the painkillers. It recently bought the over-the-counter drug business of Roche in a $3 billion deal and hinted it might want to do more deals.

By concentrating only on drugs within its pharmaceutical business, it is signaling its intent on doing business where it offers the greatest return. Patents will be expiring within the next few years on a number of drugs it owns, and Bristol-Myers might be feeling the growing pressure for innovation in the face of the generic versions soon to hit the market. With the scrutiny that has also been brought to bear on COX-2 inhibitors such as Vioxx, Celebrex, Bextra, and Aleve, getting out of the consumer medicines market might give executives a better night's sleep.

Though the division represents only about 2% of Bristol-Myers' $21 billion sales, the company overall has seen sales falter and its stock decline some 12% last year. That's a situation stressful enough to cause anyone an Excedrin headache "this big."

Fool contributor Rich Duprey also remembers the commercials for Excedrin Headache No. 29. He owns shares of Flamel but does not own any of the other stocks mentioned in this article.