April 24 (Bloomberg) -- Bristol-Myers Squibb Co.'s first- quarter profit fell 4.2 percent as restructuring expenses offset soaring sales of its blood thinner Plavix. The company said it will sell part of its infant-formula unit to raise cash.

Net income fell to $661 million, or 33 cents a share, from $690 million, or 35 cents a year earlier, the New York-based company said today in a statement. Earnings excluding some items beat analysts' estimates by 1 cent.

The results included $113 million in charges as the company cut jobs, shut plants and shed products, aiming to save $1.5 billion a year before 2012. That's when Plavix, with annual sales of $4.8 billion, loses patent protection. Total revenue climbed 20 percent as the company recovered from temporary generic competition to Plavix last year. Plavix sales jumped 39 percent.

``The company has been focusing on pharmaceuticals, and its efforts are consistent with that,'' said Michael Krensavage, an analyst with Raymond James & Associates, in a telephone interview today. ``It's cutting expenses, divesting non-drug businesses.''

The drugmaker reiterated its 2008 forecast for net earnings of $1.36 to $1.46 a share. First quarter earnings excluding certain items of 42 cents beat the 41-cent average expected by 13 analysts surveyed by Bloomberg.

Bristol-Myers rose 78 cents, or 3.6 percent, to $22.21 at 4:15 p.m. in New York Stock Exchange composite trading. The stock fell 25 percent in 12 months before today.

Exceeded Consensus

``We would expect the shares to be higher on this positive announcement, which exceeded consensus revenue and earnings,'' wrote James Kelly, an analyst at Goldman Sachs in New York, in a note to investors today. ``The announcement that the majority of the nutritionals business will be retained, not fully divested, is also positive, as it improves the stability of cash flows through Bristol-Myers' next patent hole in 2011-2013.''

Sales rose to $5.18 billion from $4.32 billion, excluding revenue from a medical imaging unit sold in January. Foreign exchange gains from converting overseas sales to weaker U.S. dollars contributed about 5 percent of the growth, Chief Financial Officer Jean-Marc Huet said today on a call with analysts. Rising sales volume accounted for 11 percent, and price increases were about 4 percent of revenue growth, he said.

Mead Johnson

Bristol-Myers also said it plans an initial public offering of a minority stake in its infant-formula division, Mead Johnson Nutritionals, which had sales of $703 million in the first quarter. About 10 percent ``and no more than 20 percent'' of the company will be offered for sale, Bristol-Myers said, adding it will retain at least 80 percent of the unit ``for the foreseeable future.''

``With its own publicly traded equity, Mead Johnson will be better able to pursue expansion and acquisition strategies to accelerate its growth,'' Chief Executive Officer James Cornelius said today on a conference call with analysts and investors. The company expects to file documents by the end of the year, with the IPO timing ``dependent on regulators, business and market conditions,'' he said.

The company said in December it was considering selling the unit, as well as ConvaTec, its wound-care subsidiary. The company sold its medical imaging business in January to raise cash to invest in developing new medicines.

ConvaTec ``has generated significant interest at attractive valuation levels,'' Cornelius said on today's call. ``We are continuing to move forward with ConvaTec and will provide updates in the near future.''

Auction-Rate Securities

Bristol-Myers booked a first-quarter charge of $25 million, writing off more auction-rate securities. In the previous quarter, Bristol-Myers booked $275 million in charges related to the securities. The company also reported $142 million in unrealized losses, mostly on auction-rate securities.

Sales of Plavix, co-marketed with Paris-based Sanofi- Aventis SA, climbed 39 percent to $1.31 billion in the first quarter, from $938 million a year earlier, when supplies of the cheaper generic version made by Apotex Inc. were temporarily available.

Sales of the schizophrenia drug Abilify rose 24 percent to $454 million. Revenue from the AIDS medicine Reyataz climbed 13 percent to $297 million and the AIDS therapy Sustiva grew 21 percent to $273 million. Sales of rheumatoid arthritis drug Orencia more than doubled to $87 million. Sales of hepatitis B treatment Baraclude more than doubled to $108 million.

The cancer treatment Erbitux, which Bristol-Myers markets in the U.S. with New York-based ImClone Systems Inc., generated $187 million, a 17 percent increase. The medicine is approved to treat colon cancer and tumors of the head and neck. German drugmaker Merck KGaA sells Erbitux in Europe.

Investment Losses

Bristol-Myers held $811 million in auction-rate securities, including some backed by subprime mortgages, at the end of 2007, it said in January. The company still has $40 million worth of subprime-backed investments ``remaining on our books,'' Huet said today. ``This represents approximately 13 percent of par value.''

``The credit markets have deteriorated somewhat since then,'' said Les Funtleyder, an analyst for Miller Tabak & Co. in New York, in a telephone interview. ``The overhang remains. Other companies in health care have taken some write-offs during the quarter. With auction-rate securities, it's really specific to what's backing them up.''

Bristol-Myers and other companies including ImClone invested their cash in AAA/Aaa auction-rate securities seeking higher returns than those available on U.S. government securities. Some of Bristol's holdings were linked to subprime- backed investments, which were written off last quarter. The credit crunch left the company unable to sell some of the rest.

Collapsed Market

The $330 billion auction-rate bond market collapsed within weeks of Bristol-Myers' January loss announcement, when dealers that run the periodic bidding to determine interest on the debt stopped using their own capital to prevent widespread auction failures. The auctions fail when there are too few bidders, leaving investors unable to liquidate their holdings.

The fourth-quarter investment losses cost Bristol-Myers treasurer Edward Dwyer his job. Jeffrey Galik was promoted to the position, Bristol-Myers said yesterday.

The company on March 5 said Huet would replace Andrew Bonfield as chief financial officer. Bonfield's departure was unrelated to the soured investments, Bristol-Myers said at the time.

To contact the reporter on this story: Beth Jinks in New York at bjinks1@bloomberg.net

Last Updated: April 24, 2008 16:23 EDT