Earnings Beat At Bristol-Myers

Zacks Investment Research
updated | Zacks.com

Bristol-Myers Squibb Company’s (NYSE:BMY) first quarter 2012 earnings (excluding special items) of 64 cents per share beat the Zacks Consensus Estimate of 61 cents. First quarter earnings increased 10% from the year-ago period. Strong revenues aided earnings in the reported quarter. Newly launched products did very well during the quarter.

Net sales in the reported quarter climbed 5% to $5.25 billion. Revenues were just shy of the Zacks Consensus Estimate of $5.26 billion, mainly due to lower sales of Plavix and Avapro/Avalide. US net sales in the quarter climbed 6% to $3.5 billion. Sales in international markets increased 2% to $1.8 billion.

Quarter in Detail

Global net sales of Plavix, an anti-platelet blood thinner indicated to reduce the risk of heart attack in patients with atherosclerosis (the build-up of plaque and hardening of the arteries), fell 4% to $1.69 billion in the quarter. Plavix has been co-developed by Bristol-Myers with Sanofi (NYSE:SNY). US sales of the drug were down 1% to $1.63 billion. Plavix is slated to go off-patent in the US in May 2012. This will result in substantial revenue losses for Bristol-Myers.

Sales of Baraclude, one of the top prescribed therapies for hepatitis B virus, came in at $325 million, up 18%. Worldwide sales of HIV treatment Sustiva climbed 13% to $386 million in the reported quarter. Global sales of another HIV therapy, Reyataz, declined 2% to $358 million. Sales of rheumatoid arthritis (RA) drug, Orencia, stood at $254 million, up 28%, while leukemia drug, Sprycel, registered sales of $231 million, up 34%.

Furthermore, Onglyza/Kombiglyze, a type II diabetes treatment, contributed approximately $161 million to sales in the quarter as against $81 million in the first quarter of 2011.

Global sales of Abilify, approved for the treatment of schizophrenia and depression, was almost flat year over year at $621 million. Sales of cancer drug Erbitux increased 8% to $179 million in the first quarter of 2012.

Skin-cancer drug Yervoy approved in the US and EU in 2011, contributed $154 million to total revenues during the reported quarter, up 7% sequentially.

Hypertension treatment Avapro/Avalide disappointed in the first quarter of 2012. Global sales of Avapro/Avalide came in at $207 million in the reported quarter, down 23% due to generic competition.

Adjusted gross margin as a percentage of net sales stood at 75.2% in the reported quarter as against 73.7% in the comparable quarter of 2011. Adjusted marketing, selling and administrative expenses in the reported quarter climbed 7.6% to approximately $994 million. Adjusted research and development expenses for the quarter increased 2.3% to $851 million as Bristol-Myers continues to invest in its pipeline.

Outlook Backed

Apart from announcing financial results, Bristol-Myers also maintained its earlier guidance for 2012. The pharma major continues to expect adjusted 2012 earnings in the range of $1.90 – $2.00 per share. The Zacks Consensus Estimate for 2012 is $1.96 per share, towards the higher end of the guidance provided by the company.

Bristol-Myers expects to end 2012 with revenues in the range of $17.2-$18.2 billion. The Zacks Consensus Estimate for 2012 is $18.0 billion, within the guidance provided by the company.

Neutral on Bristol-Myers

We currently have a Neutral recommendation on Bristol-Myers. The stock carries a Zacks #3 Rank (Hold rating) in the short run. Even though we are concerned about the high generic risk on many of Bristol-Myers’ leading franchises, we believe that the company’s diversified business model coupled with its strong financial position will help in tough situations.

Bristol-Myers is looking to combat the generic threat through partnering deals and acquisitions. Apart from acquisitions and partnership deals, Bristol-Myers is looking to introduce new products to augment its product portfolio to combat the generic threat. Bristol-Myers has met with a fair amount of success towards achieving this objective. Many new products were launched/ approved in 2011.

Bristol-Myers continued to receive encouraging news in its endeavor to expand its product portfolio. Earlier in the month, the Committee for Medicinal Products for Human Use of the European Medicines Agency (EMA) issued a positive opinion regarding the approval of type II diabetes candidate Forxiga (dapagliflozin) in the EU. Bristol-Myers has co-developed Forxiga with AstraZeneca (NYSE:AZN).

Moreover, a key action date is coming up at Bristol-Myers next month when the US Food and Drug Administration (FDA) is scheduled to decide on blood thinner Eliquis, co-developed with Pfizer (NYSE:PFE), for preventing stroke in patients suffering from atrial fibrillation. Positive news from the FDA will help boost the stock.

 
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