Sunday, April 12, 2009

Real Shareholder Value vs. Opportunistic Value

Bristol-Myers Squibb continues to work on getting right.

CEO James Cornelius said this week that, with $9 billion on hand, BMS would continue to seek to build its pipeline through strategic acquisitions and to remain viable as an independent mid-size biopharma company.

Since 2007, following it "String of Pearls" strategy, has bought or licensed or partnered with seven different companies on developing compounds.

On one hand, those deals in unto themselves represent a good independence strategy. Look at the gyrations that the Merck/Schering-Plough deal is going through with J&J over Remicade. With so many deals done, any acquirer of BMS would find it challenging, to say the least, to unwind a host of promising partnerships. After all, a key challenge in biopharma is assigning appropriate value to promises.

The key here, though, is increasing real shareholder value vs. opportunistic shareholder value. If you do a comparison in pharma of shareholder value between companies that grew through acquisition vs. companies that grew through organic developments, you will see that mergers significantly under-performed organically developed and launched growth.

Wy-Pfi says it is all about shareholder value. But in the short term that value will be balanced on the backs of all the employees turned out onto the street. Yes, it gives Pfizer more irons to keep hot in vaccines and biologics, something Pfizer was sorely missing. But growing Pfizer value through acquisitions has not been a sustaining value strategy except for Lipitor acquired via the Warner Lambert acquisition.

All these CEOs are really smart. But for the moment James Cornelius and his strategy goes to the head of class for truly growing the company and its pipeline with a steady product-based stratgy.