The drugmaker looks increasingly attractive and a sale is a “distinct possibility,” according to Tim Anderson, a pharma analyst at Sanford Bernstein. In an investor note this morning, he writes that Bristol “could be well-positioned as a future M&A target as the industry’s patent ‘cliff’ draws closer - although management has not said it explicitly, we believe Bristol may be entertaining a future sale of the company as one possibility.”

The patent cliff, by the way, refers to patent expirations in 2012 of two of its big-selling drugs - the Avapro blood pressure treatment and the Plavix blood thinner. Also that year, Bristol is scheduled to return US rights to the Abilify antipsychotic to its partner, Otsuka Pharmaceuticals. But relatives to its peers, he adds, Bristol also has many more promising meds in its pipeline. And at about $40 billion, Bristol has the second-smallest market cap among big drugmakers.

“Is Bristol a seller? We think so,” Anderson writes. “Forgetting for the moment whether there are any interested parties, with ceo Jim Cornelius at the helm, we think this is a distinct possibility. Originally, when Cornelius took over as interim ceo…it appeared to be a temporary position…However, on April 27, 2007…he was named permanent ceo, meaning he was likely to stay on longer, and at our firm’s recent (investor) conference, Cornelius said he planned on staying on as ceo as far as the eye can see.”

“Interestingly, Cornelius bought 100,000 shares of BMY recently, unrelated to options expiry – was this merely showy vote of confidence, or instead a calculated bet on the future of the company? It is also interesting to us that Bristol’s new cfo, Jean-Marc Huet, was a former investment banker at Goldman Sachs for several years prior…

“However, just because Bristol may be a willing seller doesn’t mean there is a willing buyer, and it was the market’s changed perception on this in December 2007 that led to a good portion of the share price decline that has ensued since then. At the meeting, among other things, Cornelius announced that Bristol would look to sell off key nonpharmaceutical assets in order to pursue its ’string of pearls’ acquisition strategy. To many investors, this appeared to signal that there must not be any buyers of the company, and that Bristol was instead being forced to make a go of it alone.

“Under the assumption that Bristol’s management and its board of directors have designs on selling the
company, we are beginning to view actions taken by the company as being directed towards accomplishing this goal. For example, the planned partial spin-out of Bristol’s Mead Johnson nutritionals business does two things - unshackles the division from the larger pharmaceuticals-focused organization, which could lead to operational improvements much in the same way that spinning out medical device company Zimmer Holdings did back in 2001, and it establishes fair value of the unit, should any potential buyer of the company want to keep it or sell it off.

“Evidence to the contrary that some may cite are the collaborative deals that Bristol has signed with other pharmaceutical companies whereby it will split the economics of certain pipeline programs. This includes two diabetes drugs with AstraZeneca and a blood thinner with Pfizer.”