Bristol-Myers Squibb Company’s (BMY) first quarter 2011 earnings (excluding special items) of $0.58 per share surpassed the Zacks Consensus Estimate by $0.05 and the year-ago earnings by $0.02. Higher revenues boosted earnings in the reported quarter. On a reported basis (including special items), Bristol-Myers’ earnings in the quarter increased 33% to $0.57 per share. The healthcare reform enacted in 2010 negatively impacted earnings in the reported quarter by $0.03.
Net sales in the reported quarter climbed 4% to $5.0 billion. Revenues also surpassed the Zacks Consensus Revenue Estimate of $4.93 billion driven by the impressive showing of Bristol-Myers’ lead drugs including blood thinner Plavix.
US net sales in the quarter climbed 5% to $3.3 billion. However, international sales increased 3% to $1.8 billion including a 2% positive foreign exchange (Fx) impact.
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), climbed 6% to $1.76 billion in the quarter.
Worldwide sales of HIV treatment Sustiva climbed 2% to $343 million in the reported quarter. However, global sales of another HIV therapy, Reyataz, slipped 2% to $366 million. Sales of Baraclude, one of the top prescribed therapies for hepatitis B virus, came in at $275 million, up 27%. Sales of rheumatoid arthritis drug, Orencia, stood at $199 million, up 18%, while leukemia drug, Sprycel, registered sales of $172 million, up 31%.
Furthermore, Onglyza/Kombiglyze, a type II diabetes treatment, co-developed with AstraZeneca plc (AZN) contributed approximately $81 million to sales in the quarter as against $10 million in the first quarter of 2010. Global sales of Abilify, approved for the treatment of schizophrenia and depression increased 1% to $624 million.
However, hypertension treatment Avapro/Avalide and cancer drug Erbitux disappointed in the first quarter of 2011. Global sales of Avapro/Avalide came in at $290 million in the reported quarter, down 8%. Erbitux generated sales of $165 million in the reported quarter, down 1%.
Gross margin as a percentage of net sales stood at 73.2% in the reported quarter as against 72.8% in the comparable quarter of 2010. Marketing, selling and administrative expenses in the reported quarter climbed 3% to $928 million. Advertising and product promotion for the quarter increased 1% to $214 million. Research and development expenses for the quarter increased 3% to $935 million as Bristol-Myers continues to invest in its pipeline.
Guidance Backed
Following the release of first quarter results, Bristol-Myers maintained its guidance for 2011. The pharma major continues to expect adjusted 2011 earnings in the range of $2.10-$2.20 per share. The Zacks Consensus Estimate for 2011 currently stands at $2.17 per share, well within the guidance range provided by the company.
Major pipeline developments
Bristol-Myers also provided an update on its pipeline progress during the quarter. In March 2011, the US Food and Drug Administration (FDA) delivered a huge boost to Bristol-Myers by approving its cancer candidate Yervoy (ipilimumab). The drug was cleared for treating patients suffering from metastatic melanoma, the severest form of skin-cancer. Yervoy, launched in April 2011, is approved for both treatment-naïve and experienced patients.
In March 2011, Bristol-Myers’ Eliquis (apixaban), co-developed with Pfizer Inc. (PFE), was recommended for approval in the European Union (EU) for preventing venous thromboembolic events in adults who have undergone elective hip or knee replacement surgery. Nulojix (belatacept) was also recommended for approval in the EU for use in adults undergoing kidney transplants.
Moreover, the FDA accepted the new drug application (NDA) for Bristol-Myers’ diabetes candidate dapagliflozin in March 2011. A response from the US regulatory body is expected to be out in the final quarter of 2011 (target date: October 28, 2011). Dapagliflozin has been co-developed with AstraZeneca.
In January 2011, Bristol-Myers and partner Sanofi-Aventis (SNY) were provided with an additional 6-month market exclusivity period by the FDA for Plavix. The blood thinner now goes off patent on May 17, 2012 in the US.
In February 2011, the FDA approved a revision to the label of type II diabetes drug, Onglyza (saxagliptin). The expanded label includes data from two studies. While one study indicated that Onglyza can be used in adults with type II diabetes suffering from kidney failure, another study emphasized the effectiveness of the combination of Onglyza and metformin.
Moreover, in March 2011, the European Commission cleared Bristol-Myers’ Baraclude (entecavir) for treating adults suffering from chronic hepatitis B with decompensated liver disease.
Our Recommendation
We currently have a ‘Neutral’ recommendation on Bristol-Myers, which is supported by a Zacks #3 Rank (short-term ‘Hold’ rating). Our biggest concern for the company is the high exposure to generic risk on many of its leading franchises.
The company has been trying to combat the generic threat by bringing in new products through in-licensing deals and acquisitions. We believe the diversity and strength of the company’s business should continue to provide strong growth in future.
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