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Is Bristol-Myers Breaking Up?

Bristol-Myers Squibb could be on track to break itself up, Cramer said, leaving one of the cheapest pure-play drug companies in the market. Here’s how it could happen:

Bristol-Myers might spin off part of Mead Johnson, BMY’s nutritionals division, bringing in anywhere from about $1 billion to $2 billion in an IPO. We’re not talking about all of Mead, though – maybe 10% or 20% – because the business is such a cash cow that investors aren’t willing to part with it yet (though Cramer said Heinz could pick up Mead sometime in the future). Add to this IPO money the $4.1 billion BMY got for ConvaTec last Friday, and Bristol-Myers is in good position to buy smaller pharma companies to liven up its pipeline and diversify away from its portfolio risk.

So why the sudden power moves? Because in three years some of Bristol-Myers’ top drugs go off patent, Cramer said. So these steps are being taken to “avert a catastrophic situation,” or at least one that has the potential to hurt BMY’s overall business.

Cramer said tomorrow’s analyst meeting should give some indication of whether or not his theory’s true, so watch for that. But either way he’s confident in BMY’s prospects, whether short term or long. Even if it takes some time for this story to play out, Bristol-Myer’s 5.4% yield is classic Mad Money “pay as you wait” investing. BMY’s almost a win either way.

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