Financial Performance of Bristol-Myers Squibb - Thesis Example

Financial Performance of Bristol-Myers Squibb FNCE 442 Advanced Finance Executive Summary Bristol-Myers Squibb (BMS) Company is a foremost pharmaceutical manufacturer (Dillon, 2005), headquartered in New York and publicly traded at the New York Stock Exchange, with a strong record of developing innovative medicinal products for difficult medical conditions. At the beginning of the 2008 financial crisis, BMS adapted a strong risk management stance, identifying problem spots early and applying measures to prevent or mitigate the risks. At the same time, it has improved its operating efficiency and entered into strategic alliances with other drug companies to share the long-term development risk of R&D while enhancing its chances of new discoveries and product commercialization. The firm is threatened by the near-term lapse of several patents pertaining to its most profitable drugs, necessitating the need to push for new formulations. An examination of the financial statements and comparison with the performance of its closest competitor reveals that BMS continues to maintain its strong profitability and efficiency. BMS’s strong liquidity position and improved equity-to-debt ratio, and continued profit growth even during the 2008 crisis put this company into an exceptionally good position to take advantage of the coming economic recovery. The paper concludes that Bristol-Myers Squibb is strategically, operationally and financially capable of surviving the 2008-2010 economic recession, and of prospering in the coming economic recovery. Table of Contents Executive Summary ii Introduction 4 Works Cite 40 “Tranzyme Pharma signs collaboration agreement with Bristol-Myers.” PharmaWatch: Biotechnology, Vol. 9 Issue 1, p21 Jan2010 41 Introduction This paper is being undertaken in the nature of a company study from the point of view of a potential investor, on BMS and its prospects in the industry for the coming year. The study will begin with an examination of BMS’s objectives and strategies. This will be supported by a review of company events and undertakings in line with its stated mission and objectives. A strategic assessment of the Company, employing the SWOT analysis and Porter’s Five Forces Model, will determine the firm’s prospects for addressing the post-recession scenario. Bristol-Myers Squibb (BMS) came into existence in 1989, upon the merger of its predecessors, Bristol-Myers and Squibb Corporation, and it is from anytime after this date that the new company’s performance should be reckoned. The declared business operation of the company, as indicated in its report to the Securities and Exchange Commission (SEC), is “the discovery, development, licensing, manufacturing, marketing, distribution and sale of pharmaceutical and nutritional products.” Today, BMS is a $20 billion pharmaceutical giant based in New York City (BMS Website, 2010). BMS’s Objective & Strategies Objectives As with all businesses, BMS strives to produce sustained strong performance and shareholder value. Other than this, however, pharmaceutical firms, by nature of their business, have a higher social calling. The BMS mission is “to discover, develop, and deliver innovative medicines that help patients prevail over serious diseases” (BMS Website, 2010). Its avowed commitment, which comprises the company strategy, is to improve the quality of human life by finding solutions to cure disease and alleviate pain, and in the end allow people to lead longer, fuller lives. Strategies The overall strategy of BMS is comprised of two aspects: a strong research and development (R&D) effort, and an effective risk management approach. R&D is critical for BMS because this is its source of competitive advantage; any drug formulations that BMS develops is its exclusive property while the patent lasts, and good medicines will certainly be prescribed by doctors. However, 2009 fourth quarter performance reports of the US pharmaceutical sector indicate that the industry is showing strong signs of recovery (Eisberg, 2010). While this is a welcome development, it is however imminent that by 2011, many of BMS’s major patents will expire, opening the Company’s top products to legitimate reproduction by generic drugmakers. This threatens a potential loss of about half all the Company’s current sales between the period 2011 and 2013. Patents for its present products, Plavix and Avapro, will be expiring by then, followed by another star, antipsychotic drug Abilify, in 2015. It is thus imperative that BMS’s next generation of drugs should come on line by that time. The risk management strategy of the company involves risk identification, monitoring and mitigation, and effective incident management. Such had helped BMS weather out the difficult times and come out ahead. Even prior to 2007 when the economic debacle was just beginning to snowball, the Company brought in Sandra Cartie to occupy the newly created post of current chief audit executive (CAE). The company decided to establish the CAE position after a review by external consultants revealed BMS’s management practices followed a siloed approach that was not consistent with leading practices. (A “siloed approach” meant that employees were denied easy access to information, thereby hindering their ability to fully assess risk, make strategic decisions, and determine the best method to address the risk – Microsoft.com, 2007.) Among other things, Cartie created a “heat map,” which was a three-by-three grid that simply mapped all of the Company’s key risks. Each of the risks was graphically depicted according to likelihood and impact. All risk categories were evaluated – financial, operational, environmental and reputational. Then each week the Company’s management council – which has committed to “own” the risk – meet to discuss the key risks, confirm the risk tolerance for each, and determine that a plan for prevention, detection, correction and mitigation is at hand and operational to address it (Baker, 2009). Another strategy employed by BMS is the avoidance of bureaucracy. At BMS, the attention is towards keeping processes simple and personal. A source of competitive advantage is the ability to strike the right balance between impersonal rules and procedures characteristic of bureaucratic processes, and the exercise of subjective judgment and personal accountability. Bureaucracy tends to take on a life of its own, as people tend to be regimented by the limitations put around their roles, and forget the bigger picture. In order to combat bureaucracy, BMS adopts a position that their internal auditor should ensure that employees adopt value added roles in the conduct of their functions (Baker, 2009). Two of the company’s businesses, the medical-imaging and wound-care groups, have had a history of pulling in narrower profit margins for the Company, which is why in recent years BMS has began to shed these product lines and focus on the high-margin drug group (Peters and Conover, 2009). Consistent with the Company’s focus on the biopharmaceutical business, BMS has, as of December 2009, announced its intention to divest its holdings in Mead Johnson Nutrition. While Mead Johnson has been a solid performer from the time it began trading in February of 2007 (largely on the back of its successful Enfamil and Enfalac infant formulas), the company’s nearly 2% yield pales in comparison to BMS’s 5% (DRIP Investor, 2009). By divesting assets and businesses that do not contribute to biopharmaceuticals, the Company converts these assets to much needed liquidity, which enhances the firm’s working capital, reduces costs on activities that do not contribute to the firm’s synergies, and increases the company’s liquidity. Cash and near-cash assets are necessary during a liquidity crunch such as had occurred during the 2008 crisis. Another development affecting the pharmaceutical industry in general is the move by government regulators in Britain to require pharmaceuticals to share some of the costs of some of their drugs which are currently shouldered by the National Health Service (NHS), a form of company subsidy for socialized medicines. The recent move takes issue in particular with leukaemia drugs Sprycel and Tasigna, both manufactured by BMS. The drugs are said to cost $50,000 each for a year’s supply, despite the fact that there has not been sufficient evidence of the drug’s effectiveness (M.A., 2010). Committee meetings of the National Institute for Health and Clinical Excellence (NICE) are calling for the move and, if their initiative is successful, would cut into the profit margins of BMS at least for the two drugs mentioned. More than half of BMS’s sales are derived from the drugs developed by partnerships with other pharmaceutical firms. Partnerships allow for the sharing of development costs and diversification of the risks of clinical and regulatory failure. BMS partnerships have Analysis Porter Model and SWOT It is important for managers to analyze the competitive forces that beset the industry environment in which the company operates, in order to identify opportunities and threats (Hill & Jones, 2009). The framework developed by Michael E. Porter, identifies five forces that shap competition in an industry. These are: (1) the risk of entry by potential competitors; (2) intensity of rivalry among existing firms in the industry; (3) the bargaining power of buyers; (4) the bargaining power of suppliers; and (5) the threat of close substitutes to the products of the industry being analyzed (Hill & Jones, 2009, p. 42). The application of Michael Porter’s Five Forces Models yields the following analysis, Threat of substitutes BMS moves in an industry where the patent creates competitive difference. Before the patent expires, the company has a product that could not be legally imitated. Threat of substitutes is thus low, particularly with the intense R&D process that goes into developing the drug formulation. Threat of the entry of new competitors High entry barriers protect the industry participants due to the high cost of R&D, intensive scientific discipline, and prohibitively long development horizon. On the other hand, the development of generic medicine may prove a way for new players to enter the industry. Intensity of competitive rivalry There is a race to produce novel and effective drugs to address a wider range of conditions, and jealously guarded secrets in R&D heighten this competition. However, consolidation is suggested by the growing incidents of joint projects being entered into by large firms in tandem with smaller, more dynamic firms. Bargaining power of customers While patents exist, bargaining power of customers can be low, because most medicines have no substitutes. (Generic brands may only manufacture the same formulae when the patents expire; until then, generic pharmaceutical companies may not replicate the formulation, under pain of criminal prosecution. Such acts would be considered patent infringement, piracy, or even counterfeiting, a serious crime.) Medicines that are necessary, even critical, for a person’s continued health will have to be acquired even at high prices. Government, however, could step in to negotiate price adjustments with the drug companies (this was indicated in the discussion on subsidizing prices for socialized medicine). Bargaining power of suppliers Large companies such as BMS are capable of influencing the price of raw materials vis-à-vis their suppliers; however, specialized ingredients that require precision in their processing and development will negate to a significant extent the resistance of the Company to the power of suppliers to command prices. In summary, Porter’s five forces model shows that while patents are enforceable, entry barriers are high and threat of substitutes are low; thus, medicines can be sold at high profit margins, in order for BMS to defray its R&D costs before patents expire. Large pharmaceutical companies such as BMS are able to command their prices of both suppliers and customers, because of their large volume orders and multiple sources of raw materials, as well as exclusive control of the patents and distributions for final products. Finally, the intense rivalry among drug companies is mitigated by a need to cooperate in joint research and development projects. In the succeeding section the SWOT analysis will be Evaluate SWOT The following are the assessed strengths and weaknesses of the company, and the threats and opportunities its environment poses for it. Strengths Company strengths include best company practices of excellent risk management and reduction of bureaucracy. BMS has strong R&D capability and stable financial condition even during the economic crisis. Weaknesses BMS’s other business lines such as medical imaging, wound care, and nutritional products while profitable have remained slow earners in comparison with the biopharmaceutical products. This becomes the company’s weakness because slow-moving products take resources away from the main business but contribute less to the profit margin, entail additional operational cost to the company because they entail different manufacturing procedures, and they do not contribute to the strategic synergies of biopharmaceuticals. BMS wisely moved to consolidate by divesting of these businesses. Opportunities BMS sees opportunities in sharing R&D risks while ensuring its greater success by striking up agreements and joint projects with other companies that have R&D capabilities complimentary to it own. The synergies created by these combined efforts ensure a steady development of new products even as the patents of old shiners lapse. Threats Government legislation, first creating laws favoring generics products and secondly in requiring large firms to subsidize socialized medicine could prove a threat to the substantial margins drug firms enjoy out of their proprietary products. It could prove to be a threat because by subsidizing socialized medicine, large firms are required to provides medicines to the public at lower costs. It is a threat insofar as the prices of the products are not determined by economic forces, but by government-mandated pricing systems. Because of these, pharmaceutical firms may not recover the high cost of research and development that went to develop these products. In summary, BMS is faced with opportunities in the form of joint partnerships and projects with other pharmaceutical firms, through which research costs may be shared. At the same time, BMS is threatened with the lapse of several of its patents two years from now, at which time generic companies will be allowed to replicate their formulations and sell them cheaply. This threat could be addressed by BMS’s strength in top quality R&D to develop new medicines. At the same time BMS could concentrate its resources into the research efforts of its pharmaceuticals and reduce its weakness in less profitable product diversification. Following is the financial ratio analysis for the most recent five years for which BMS financial reports are available. Ratios for the years 2004-2008 Financial ratios  In the appendix of this paper are 14 financial tables showing the financial statements of BMS, its closest competitor Merck & Co., and the percent of sales income statements, common size balance sheets, and financial ratios of both companies. Initially, a horizontal and vertical analysis of both income statement and balance sheet shall be conducted, to gain a grasp of the relative proportions of the accounts against each other, and their growth over time. Discuss the ratio performance overall 1. Greater operational and cost efficiency For the purpose of this discussion, a vertical analysis of the percent-of-sales version of the comparative income statement of BMS for the five years is reproduced here. Table 1: BMS Percent-of-sales comparative income statements, years 2004-2008 From Appendix A-2 Before 2006, the company’s cost of goods sold increased from 31% to 33% of sales; marketing, selling and administrative expenses from 26% to 28%, and total expenses, which jumped by ten basis points from 77% to 87%. However, from 2006 to 2008, cost of goods sold dropped as a proportion of sales, from 33% in 2006 back to 31%. So did marketing, sales and administrative, from 28% to 23%, and total expenses from 87% to a better-than-2004 ratio of 73%. While R&D rose significantly from 2004 (13%) to 2006 (18%), and hardly diminished from 2006 (18%) to 2008 (17%), this is considered ideal. R&D is the most significant productive activity of the company, and if any expenses were to rise, it should be R&D. Furthermore, even as sales rose, inventory dropped and accounts receivables fell, signs of improving efficiency (BMS 2008 Annual Report, p. 1). These efficiencies resulted to a drop by 9% of sales in the total expenses from 2007 to 2008, and a substantial reduction by 14% of sales from 2006 to 2008. The BMS 2008 Annual Report attributes the improved gross margins to better resource management and “a new approach to expenses” (p.1). After 2006 the drop in costs meant that profit margins increased due to recognized efficiencies – that is, the same, or higher, ratio of profit to sales is realized. The drop in cost of good sold signifies that BMS is able to realize cost savings by either sourcing its raw materials from suppliers that afford a cheaper price, or that suppliers are producing more than demand can absorb and so are pricing their supplies lower. On the other hand, proportional decreases realized in marketing, sales and administrative costs indicate that BMS is succeeding in its cost containment measures. It is reducing costs that are not directly linked to production, thus it may be observed that greater efficiency in the marketing, sales and administrative functions point to improved business operation (BMS Annual Reports, 2006 to 2008). To validate these observations, the corresponding percent-of-sales income statements for Merck Co., for the same years 2004-2008, is presented below. Vertical analysis shows that costs attributable to materials and production (costs of sales) fell 2% of sales from 2007 to 2008, and 4% of sales from 2006 to 2008. Marketing and admin expense remained flat (as a ratio to sales) for 2007 to 2008, and improved by 5% of sales from 2006 to 2008. However, it is noticeable that while marketing and admin expense for 2006 to 2008 comprise 36% to 31% of sales, BMS devoted only 28% to 23% of its sales to marketing, selling and administrative expenses. BMS Chairman James M. Cornelius attributed this to “simplifying, standardizing, and in some cases, outsourcing processes and services, … and the way we manage cash flow.” (BMS 2008 Annual Report, p, 1). Proportionally, Merck is spending more per sales dollar on its expenses not directly linked to production, confirming the statement of the Chairman in his report that BMS is realizing greater efficiencies in its cost management efforts. Table 2: Merck Percent-of-sales comparative income statements, years 2004-2008 Source: Appendix B-2 2. Improved sales For this section, the time-series income statement for BMS and Merck shall be used, from 2004 to 2008 with base year at 2004. In the time series analysis, net sales from 2004 to 2006 deteriorated by some 15%, due to a market aberration that stemmed from “the way US law in this area is structured” (BMS 2006 Annual Report, p.2) . Demand dropped in certain drugs which were the subject of legal contest, when a generic company applied for and received permission to market its imitation drug even during the effectivity of the BMS patent (BMS 2006 annual report). From 2006, however, sales improved, and surpassed the 2004 level in 2008 by a 6% improvement. It is significant that cost of products sold also rose, and by a faster rate than sales, compared to 2004. This was offset, however, by a drop in the commensurate marketing, selling and administrative expenses, so that total expenses were held back only to a 1% rise from 2004. Table 3: BMS Time-series income statement, base year 2004 Source: Appendix A-3 Upon comparing Tables 3 and 4, it is apparent that net sales in 2008 as a ratio to 2004 for BMS is slightly better (1.06) than Merck (1.04). Cost of sales for BMS have risen more slowly (1.07) than Merck (1.12). Also, costs attributed to marketing, selling and admin actually experienced negative growth for BMS (0.96) while that of Merck grew slightly (1.02). Net profits have grown faster for BMS (2.2) than for Merck (1.34). Comparatively, then BMS experienced faster growth in sales and net profits, slower growth in cost of sales, and negative growth in marketing, selling and administrative costs, compared to Merck. Table 4: Merck Time-series income statement, base year 2004 Source: Appendix B-3 3. Rising profitability In Tables 1 and 2 (the percent of sales income statements), lower costs and better sales impacted to net earnings rising by 150%, from 10% of sales in 2006 to 25% in 2008. Earnings from continuing operations before minority interest, which comprised 27% of sales, rose by 24% from 2004, but viewed from the past year is a remarkable 52 percentage points, or a 72% improvement over 2007. This brings total net earnings to 220% of 2004 figures (Table 3) , an increase of 140% in just the past year. The improved earnings figure is due to the conduct of the company’s continuing operations, and thus may be expected to continue into the future. Please refer to discussion in number 2 above. The improvement in sales is attributable to a “shift in business portfolio” (Chairman’s Report, BMS 2008 Annual Report, p. 2), referring to the new products for which BMS has gained exclusivity by virtue of new patent rights. Furthermore, reduction in costs is due to and “ongoing, long-term, companywide effort to reset our cost base while fundamentally changing the way we work to be quicker, more agile, and more profitable (Chairman’s Report, BMS 2008 Annual Report, p. 1). 4. Stronger financial position The company has built a strong cash position (BMS 2008 Annual Report, p. 1). This is seen in Tables 5 and 6 as the ratio of cash to total assets, which is 27% for BMS for 2008, and 9% for Merck in 2008. The direction at which cash grew is also important, with cash position going down proportionally for Merck while it increased more than three times (as a proportion to total assets) for BMS. Given the financial crisis, a strong cash position was a strong defensive ploy. During crisis, cash is king, because tight liquidity would mean that a company would have to borrow at high interest rates just to ensure cash flow. The strengthened cash allows the company maneuverability in entering into agreements joint projects with other drug companies. The firm has built a war chest of cash reserves with the intention of making new acquisitions and partnership deals as the opportunity comes along (Peters & Conover, 2009). BMS is able to maximize its earnings potential with the use of financial leverage, using a 60% debt structure which allows equity holders to enjoy higher earnings. While it implies a higher financial risk, this is offset by the reduction in operational risk in the company’s strategy of creating R&D partnerships with other drug makers. Table 5: BMS Common-Size Balance Sheet, 2004-2008 Source: Appendix A-5 Table 6: Merck Common-Size Balance Sheet, 2004-2008 Source: Appendix B-5 Comparison of Liquidity, Activity, Leverage, Profitability, and Per Share Financial Ratios : BMS and Merck A look at the horizontal and vertical analysis of the financial statements (in the preceding discussion) showed that the efficiencies that were experienced by BMS also materialized for Merck, with the slight difference that BMS’s sales grew faster and so did its earnings, indicating that proportionally BMS’s relative costs fell faster than Merck’s. As with BMS, there is likewise a horizontal build-up of cash, although not as much as BMS when viewed in proportion to total assets. Liquidity: In Tables 7 and 8, BMS has a more liquid position than Merck due to its higher current ratio (2.2 to 1.35) and higher quick ratio (1.94 to 1.19). It is also assured of adequate net working capital. As shown in the horizontal and vertical analyses conducted, this is due to BMS’s stronger cash position than Merck. Activity: BMS has a faster inventory turnover (3.62 to 2.44), fixed asset turnover (3.81 to 1.99) as well as total asset turnover (0.70 to 0.51) than Merck. These resulted from the higher sales figures for BMS than for Merck, indicating greater activity. As to average collection period, however, Merck (57.8) has a shorter average collections period than BMS (65.8). The longer collection times for BMS may be attributable to a higher proportion of credit sales due to higher sales in general, and large pharmaceutical firms sell wholesale to large retail drug companies, for which a credit period is normally allocated. Debt: Both companies have more-or-less the same debt-to-asset ratio (BMS 0.59 to Merck 0.60), indicating that their current capital structure may be the prevailing level for the industry. In any case, the two companies assume the same risks associated with leverage. Profitability: The financial ratios show a slightly higher set of profitability ratios by Merck compared to BMS, but looking at the original statements it appears that this is the distortionary effect of income from affiliates, which does not form part of the operational income of the companies. The results of the horizontal and vertical analysis, which is more detailed in that it gives per account ratios, is more reliable. Therefore, the original position that BMS is more profitable than Merck shall be maintained. Per share ratios: EPS ratios for both companies shows that Merck records higher earnings per share than BMS. This is not due to higher profits, however, but fewer common shares outstanding, meaning that BMS has a more diluted share structure than Merck. Payout ratio for BMS (47%) is higher, however, than Merck (42%), suggesting the greater BMS dilution. Table 7: Liquidity, Activity, Debt, Profitability and Per Share Ratios for BMS, 2004-2008 Source: Appendix C-1 Table 8: Liquidity, Activity, Debt, Profitability and Per Share Ratios of Merck, 2004-2008 Source: Appendix C-2 Overall analysis of financial information Evaluate the objectives and Strategies BMS objectives were to produce safe and effective medicines that improve the human condition, at the most efficient cost possible; as a business, its aim is to create shareholder value by keeping the firm profitable. In this, BMS has consistently paid out an average of some 61% over the long term, and although the figure is high it does not appear to be in “immediate jeopardy” (Peters and Conover, 2009). However, the shedding of two groups in the company’s business and consolidation of its efforts in drugs would tend to increase the risk of a failed drug, not necessarily due to R&D but probably due to bad publicity or adverse legislation, puts this dividend payout record in a precarious situation. As of the writing of this report, BMS has not yet released its full annual report or its SEC financial report, and thus the 2009 results could not be figured into the ratio analysis. However, in the February 22 article by Eisberg (2010) in Chemistry & Industry, the Chairman and CEO, James Cornelius, is mentioned as divulging selected financial figures for the past quarter. Fourth quarter sales were said to have increased by 11% to $5 billion, translating to a 6% increase for the full year figure to $18.8 billion compared to one year before. Fourth quarter earnings before tax was pegged at $1.3 billion, down from $1.8 billion in 2008, while the full year EBT for 2009 was $1.2 billion, 20% up from past year’s $ 1 billion. Research and development costs were down to $1.1 billion, or a drop of 7% in the fourth quarter of 2009 from the year-ago figure. Recommend some key factors help to achieving the goal As is seen, BMS’s objectives as a business and corporate citizen are all adequately met, despite the dire economic situation. Some key factors the firm may consider are to explore new international markets and the possibility of tie-ups with firms in that jurisdiction. Abroad, however, one of the greatest threats to pharmaceuticals is that of the traffic of fake imitations that undercut their profits and likewise put the unwary customer in danger. The company should explore methods of ensuring that their products are protected against counterfeiting, maybe in the packaging or some similar aspect. Source: DRIP Investor, 2009 Conclusion From the preceding data, it is evident that BMS performs efficiently, manages its risks well, enjoys profitability, and is exceptionally well positioned to take advantage of the coming recovery. The foregoing price chart shows the market price of the stock being defensively strong, showing the preservation of value of stakeholders’ interest in the Company. It is thus concluded that BMS is a good investment for growth, income yield, and preservation of capital. APPENDIX A BMS’s R&D Partners for New Pharmaceutical Products 1. Sanofi Aventis SNY, with which they created cardiovascular drugs Plavix and Avapro, representing a third of the Company’s total sales (Peters and Conover, 2009). 2. AstraZeneca AZN, with whom they developed the diabetes drug Onglyza, the most important new drug in the Company’s arsenal of future offerings. Another drug being developed by this partnership is dapagliflozin, also a diabetes drug that promises to take off as another high-flying money earner for BMS (Peters and Conover, 2009). 3. Facet Biotech and BMS recently reported potentially promising data on elotuzumab, an investigational humanized antibody being tested for the treatment of relapsed multiple myeloma or MM (Datamonitor, 2010). 4. KineMed, a translational and personalized medicine development company based in Emeryville, California, broadened its collaboration with BMS in their research on a cure of Alzheimer’s disease and other neurodegenerative conditions. The collaboration between the two companies began in June of 2009, exploring possible therapy areas such as diseases of the nervous system, metabolic and cardiovascular disease, cancer, inflammation, and musculoskeletal diseases (Medical Device Daily, 2010). 5. Tranzyme Pharma also entered into a strategic collaboration with BMS, this time to discover and develop to commercialization certain novel macrocyclic compounds directed against identified medical conditions of interest. Tranzyme’s proprietary drug discovery technology, Macrocyclic Template Chemistry (MATCH), which identifies new drug candidates for multiple targets in various therapeutic areas, is at the center of interest in this collaborative venture. Under the agreement, Tranzyme will be principally responsible for early lead discovery, and BMS will be principally responsible for optimizing the identified lead compounds. BMS will also be solely in charge of completing preclinical and clinical development of the products that result from the collaboration, and for their commercial promotion and distribution globally (Datamonitor, 2010). APPENDIX B A. Bristol-Myers Squibb Financial Tables A-1. BMS Comparative Income Statement A-2 BMS Income Statement as Percent of Sales A-3 BMS Income Statement Horizontal Analysis A-4 BMS Comparative Balance Sheet A-5 BMS Common Size Balance Sheet A-6 BMS Horizontal Analysis B. Merck & Company Financial Tables B-1 Merck Comparative Income Statement B-2 Merck Income Statement as Percentage of Sales B-3 Merck Income Statement Horizontal Analysis B-4 Merck Comparative Balance Sheet B-5 Merck Common Size Balance Sheet B-6 Merck Balance Sheet Horizontal Analysis C. Financial Ratio Analysis C-1 Bristol-Myers Squibb Financial Ratios (Merck on page following) C-2 Merck & Co Financial Ratios Works Cited Baker, H K & Powell, G E 2005 Understanding Financial Management: A Practical Guide. Wiley Baker, Neil. “A New Direction.” Internal Auditor, Vol. 66 Issue 6, p32-36, Dec2009 Bristol-Myers Squibb Company Annual Reports 2004 – 2008 DRIP Investor. “Bristol-Myers Squibb To Split Off Mead Johnson Business.” DRIP Investor, Vol. 18 Issue 12, p2, Dec2009 Dillon, A J 2005 “The pharmaceutical industry’s response to the HIV/AIDS crisis”, AIDS in Africa: Engaging Canadians; The Pharmaceutical Industry’s Response. Health Partners International of Canada. 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