BEHIND THE NEWS: Another daunting challenge for veteran exec Cornelius

Anyone surprised that at age 62, Jim Cornelius would take on the bruising job of leading embattled drugmaker Bristol-Myers Squibb shouldn’t be.

After all, the Zionsville businessman has surprised observers before. This is an executive who 12 years ago gave up one of the top jobs in corporate America-chief financial officer of Eli Lilly and Co.-to become chairman of Guidant Corp., then a much-maligned collection of medical-device firms that Lilly was spinning off into a stand-alone company.

A risky move, to be sure, but one that proved richly rewarding for both him and Guidant shareholders. Early this year, Cornelius helped engineer the company’s sale to Massachusetts-based Boston Scientific Corp. for $27 billion, or $80 a share. That represents a return of more than 2,000 percent for investors in the company’s 1994 initial public offering.

“Clearly, Jim is a very strategic leader who likes to be involved in change,” said Andy Paine, a retired Indianapolis banking executive who has known Cornelius for decades.

Even if that change is tumultuous.

When Cornelius joined Guidant, the company was starting to rebound from a round of regulatory snafus. The Food and Drug Administration had shuttered one division for a year because of manufacturing problems. It had halted shipments from another accused of filing improper paperwork.

In recent years, regulatory and productliability challenges continued to dog Guidant. But the company also built formidable strengths. Among them: It became a world leader in the development of defibrillators, pager-size devices that deliver an electric shock to correct a heartbeat gone awry. Defibrillator sales have boomed and revolutionized the treatment of heart disease.

No doubt, Cornelius will have to navigate rocky terrain in his new role as acting CEO of New York-based Bristol-Myers Squibb. The board tapped Cornelius for the post Sept. 12, the same day it announced it was dismissing CEO Peter Dolan after a series of problems, including a bungled attempt to keep a generic version of its blockbuster bloodthinner Plavix off the market.

A federal monitor overseeing Bristol-Myers had urged Dolan’s firing, alleging he’d failed to fully apprise the board of his tactics to protect Plavix from competition. The company was on a short leash because of an earlier multibillion-dollar scandal involving “channel stuffing”- overloading wholesalers with inventory in an effort to meet quarterly sales projections.

Bristol-Myers’ prospects dimmed further in August after a Canadian rival began flooding the market with generic Plavix. Shares of Bristol-Myers are down by half since 2001 and now trade for around $25, giving the company a market value of $48 billion.

Cornelius, who declined to be interviewed, had been a small player in the drama, serving as a member of Bristol-Myers’ board since last year.

Former Guidant Chief Financial Officer Keith Brauer told the Newark Star-Ledger that he asked Cornelius about the woes when the pair flew to New York last month for a belated dinner with investment bankers to celebrate Guidant’s sale.

“I just said, ‘Boy, I hope you can stay in retirement,'” Brauer recalled of the flight. “He said, ‘Yeah, it’s keeping me busy.’ ”

So now that Cornelius is steering the ship, what’s next?

Many on Wall Street bet he’ll seek a merger partner. They speculate the board picked Cornelius, in part, because he’s proven he’s adept at overseeing that process. New Jersey-based Johnson & Johnson and Boston Scientific dueled for weeks to buy Guidant, even as the Indianapolis company announced a stream of market-rattling product defects and recalls.

However, others think Cornelius will focus on righting the business and increasing sales, giving the board time to methodically search for Dolan’s permanent successor.

Those in that camp can cite Cornelius’ record of helping grow Guidant. From the IPO to the sale, Guidant boosted annual revenue from $775 million to $3.6 billion.

In a conference call, Bristol-Myers Chairman James Robinson left all options open.

“We will deal with any bona fide [merger] proposals,” he said. At the same time, Robinson said Cornelius’ charge is to “focus maniacally on execution and moving forward.”

Smulyan’s $20M

Wall Street is giving mixed reviews to Emmis Communications Corp. CEO Jeff Smulyan’s plan to give shareholders a special $4-a-share dividend later this year.

But Smulyan can take solace in one fact: Because he’s such a big shareholder, $20 million of the $149 million the dividend will cost will go to him, regulatory filings show.

While everyone likes to get a check in the mail, some analysts fret the company will pay a stiff price in the form of reduced financial flexibility.

Emmis “is placing itself at a leverage ratio that could force the company to firesale assets in the event of an advertising recession or continued radio industry weakness,” Stifel Nicolaus analyst Kit Spring said in a report.


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