Bristol-Myers Squibb Company
) is all set to unveil its second quarter 2012 results before
the start of trading on July 25, 2012. The Zacks Consensus Estimate
for the second quarter of 2012 is 50 cents (year-over-year decrease
of 10.7%) on revenues of $4,460 million (year-over-year decrease of
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First Quarter Recap
Bristol-Myers' 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.
Agreement of Estimate Revisions
Over the last 30 days, 6 of the 14 analysts covering Bristol-Myers
for the second quarter of 2012 have revised their earnings
estimates, 3 in either direction. The second quarter of 2012 saw
blockbuster blood-thinner Plavix, co-developed with
), going off patent in the US (May 17, 2012). The loss of
exclusivity on Plavix in the US will result in substantial revenue
losses for Bristol-Myers.
The impact of Plavix's loss of exclusivity is more accurately
reflected by the significant downward bias for the third quarter of
2012. During the last 30 days, 6 analysts have trimmed their
estimates for the third quarter of 2012 with a sole upward
Annual earnings estimates for fiscal 2012 and fiscal 2013 too have
witnessed a significant downward bias over the last 30 days. While
fiscal 2012 estimates have been slashed by 7 analysts with a sole
upward movement over the last 30 days, fiscal 2013 estimates have
been trimmed by 8 analysts with a sole upward movement over a
similar time period.
Bristol-Myers is looking to combat the generic threat through
partnering deals and acquisitions. Towards fulfilling this
objective and bolstering its position in the lucrative diabetes
market, Bristol-Myers announced in June 2012 that it will purchase
Amylin Pharmaceuticals, Inc.
), for $31.00 per share or approximately $5.3 billion in cash.
Apart from acquisitions and partnership deals, Bristol-Myers is
looking to introduce new products to augment its product portfolio
to combat the generic threat. In July 2012, Bristol-Myers received
some good news on this front when the US Food and Drug
Administration (FDA) approved a label expansion of cancer drug,
Erbitux, co-developed with
The companies gained approval for the use of Erbitux as a
first-line treatment in combination with FOLFIRI in patients with
wild-type KRAS, epidermal growth factor receptor -expressing
metastatic colorectal cancer.
However, Bristol-Myers has also suffered a couple of setbacks over
the last few months. In July 2012, the company suffered a pipeline
setback when its candidate, brivanib, performed disappointingly in
a phase III study (BRISK-FL) in the hepatocellular carcinoma
In June 2012, the company suffered a regulatory setback when the
FDA declined to approve Bristol-Myers/
) anti-clotting drug Eliquis (apixaban) on the basis of the
submitted data and issued a complete response letter. Bristol-Myers
and Pfizer are looking to get the blood thinner approved in the US
for preventing strokes and systemic embolism in patients suffering
from nonvalvular atrial fibrillation (AF). AF refers to a cardiac
rhythm disorder characterized by an erratic heartbeat.
Magnitude of Estimate Revisions
The earnings estimate for the second quarter of 2012 has remained
static at 50 cents over the last 30 days with the positive
revisions canceling out the downward movements. Given the downward
bias in earnings estimate revisions over the last month, earnings
estimates for the third quarter, fiscal 2012 and fiscal 2013 have
gone down by a penny, 2 cents and 5 cents to 42 cents, $1.94 and
Bristol-Myers has surpassed earnings estimates in three of the last
four quarters. The company, while missing estimates in the final
quarter of 2011, recorded a maximum positive surprise of 5.17% in
the third quarter of 2011. On an average, the earnings surprise was
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.