Question: What does Bristol-Myers Squibb Co. make besides drugs?
Answer: Bad investment decisions.
The pharmaceutical company said Thursday that it was taking a $275-million write-off to reflect a sharp drop in the value of debt-related investments, including residential and commercial loans linked to sub-prime mortgages.
"Investors can now add to the list of questions to ask a pharmaceutical company in addition to asking about the studies and pipelines and patent expirations: What is your sub-prime exposure?" Carol Levenson, director of research at Gimme Credit, wrote in a note to clients.
The write-down "speaks poorly for the company's stewardship of its cash," Levenson said, predicting more to come.
Sub-prime mortgages are made to borrowers with shaky credit. As home prices have fallen and borrowers have defaulted, the loans and the securities that they back have plummeted in value. The collapse of the sub-prime market helped spawn the credit crunch that is threatening to tip the country into recession.