Bristol-Myers Squibb Company
) second quarter 2012 earnings (excluding special items) of 48
cents per share fell short of the Zacks Consensus Estimate of 49
cents by a penny. Second quarter earnings declined 14% from the
Earnings were hurt primarily by the reduced sales of
) blockbuster blood-thinner Plavix, which went off-patent in the US
on May 17, 2012.
Net sales in the reported quarter declined 18% to $4.44 billion.
Revenues were just shy of the Zacks Consensus Estimate of $4.45
billion, mainly due to lower sales of Plavix and Avapro/Avalide. US
net sales in the quarter declined 27% to $2.6 billion. Sales in
international markets decreased 1% to $1.9 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), plummeted 60% to $741 million in the quarter. US sales
of the drug were down 60% to $701 million. The genericization of
the drug in the US was responsible for the massive decline.
Sales of Baraclude, one of the top prescribed therapies for
hepatitis B virus, came in at $357 million, up 22%. Worldwide sales
of HIV treatment Sustiva climbed 5% to $388 million in the reported
Global sales of another HIV therapy, Reyataz, climbed 3% to $406
million. Sales of rheumatoid arthritis (RA) drug, Orencia, stood at
$290 million, up 27%, while leukemia drug, Sprycel, registered
sales of $244 million, up 26%.
Furthermore, Onglyza/Kombiglyze, a type II diabetes treatment,
contributed approximately $172 million to sales in the quarter, up
54% from the year-ago period.
Global sales of Abilify, approved for the treatment of
schizophrenia and depression, climbed 1% to $711 million. Sales of
cancer drug Erbitux increased 3% to $179 million in the second
quarter of 2012.
Skin cancer drug Yervoy, approved in the US and EU in 2011,
contributed $162 million to total revenues during the reported
quarter, up 5.2% sequentially and 71% year over year.
Hypertension treatment Avapro/Avalide recorded a 53% decline in
sales which came in at $117 million in the reported quarter. The
drug lost patent protection in the US in March this year.
Adjusted gross margin as a percentage of net sales stood at
75.3% in the reported quarter as against 73.1% in the comparable
quarter of 2011. Adjusted marketing, selling and administrative
expenses in the reported quarter declined 3% to $999 million.
Adjusted research and development expenses for the quarter
increased approximately 5.1% to $917 million as Bristol-Myers
continues to invest in its pipeline.
2012 Outlook Backed
Apart from announcing financial results, Bristol-Myers
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 $1.94 per
share, well within the guidance provided by the company.
Even though the genericization of Plavix and Avapro has resulted
in significant loss of revenues for Bristol-Myers, 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. Towards fulfilling this
objective and bolstering its position in the lucrative diabetes
market, Bristol-Myers announced in June 2012 that it will acquire
Amylin Pharmaceuticals, Inc.
), for $31.00 per share or approximately $5.3 billion in
Bristol-Myers also announced that it will expand its partnership
) on diabetes drugs for developing and marketing Amylin's diabetes
candidates/drugs following the closure of the Amylin deal.
The 2012 projection of adjusted earnings assumes that the
impending purchase of Amylin and the agreement with AstraZeneca
will hurt Bristol-Myers' 2012 earnings by 3 cents per share. We
note that Bristol-Myers reaffirmed its adjusted earnings outlook
for 2012 despite the expected negative impact.
Apart from acquisitions and partnership deals, Bristol-Myers is
looking to introduce new products to augment its product portfolio
to combat the generic threat. However, Bristol-Myers has also
suffered a couple of setbacks over the last few months in its
efforts to expand its pipeline/product portfolio.
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 indication.
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.
We currently have a Neutral recommendation on Bristol-Myers. The
stock carries a Zacks #3 Rank (Hold rating) in the short run.
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