We are maintaining our Neutral recommendation on
Bristol-Myers Squibb Company
(
BMY
) with a target price of $35.00. The stock carries a Zacks #3 Rank
(Hold rating) in the short run.
Bristol-Myers disclosed its second quarter 2012 results in July
2012. The company posted earnings of 48 cents per share, short of
the Zacks Consensus Estimate by a penny.
Earnings were hurt primarily by the reduced sales of blockbuster
blood-thinner Plavix, co-developed with
Sanofi
(
SNY
), which went off-patent in the US on May 17, 2012. Net sales in
the quarter declined 18% to $4.44 billion, just shy of the Zacks
Consensus Estimate of $4.45 billion.
Global net sales of Plavix plummeted 60% to $741 million in the
second quarter. US sales of the drug were down 60% to $701 million.
Moreover, the genericization of hypertension treatment
Avapro/Avalide (March 2012) also hurt sales during the second
quarter. Avapro/Avalide recorded a 53% decline in sales, which came
in at $117 million during the second quarter of 2012.
We believe that Bristol-Myers has entered a challenging period
following Plavix's genericization with revenues from newly launched
products not being enough to compensate the massive loss of
revenues due to the blockbuster drug going off-patent.
With generic competition affecting the company, Bristol-Myers'
pipeline needs to deliver. However, the company has already
witnessed pipeline and regulatory setbacks in the last few
quarters. In August 2012, Bristol-Myers discontinued a phase II
study evaluating hepatitis-C candidate, BMS-986094, following heart
failure of a patient in the trial. The patient subsequently
died.
We view the discontinuation of BMS-986094 as a huge pipeline
setback for Bristol-Myers. We believe this has put the company on
the back foot in its bid to be a top player in the lucrative HCV
market.
In July 2012, brivanib performed disappointingly in a phase III
study for hepatocellular cancer. In June 2012, the company suffered
a regulatory setback when the FDA declined to approve anti-clotting
drug Eliquis, co-developed with
Pfizer
(
PFE
), on the basis of the submitted data. Such pipeline/regulatory
setbacks pose major challenges as Bristol-Myers aims to recoup from
the loss of exclusivity of blockbuster blood-thinner Plavix.
Bristol-Myers is looking to combat the generic threat hanging
over its key drugs through partnering deals and acquisitions and
introducing new products to augment its product portfolio.
In August 2012, Bristol-Myers acquired Amylin Pharmaceuticals in
a bid to diversify its business to combat the generic threat while
bolstering its position in the lucrative diabetes market.
Bristol-Myers also expanded its partnership with
AstraZeneca
(
AZN
) on diabetes drugs for developing and marketing Amylin's diabetes
candidates/drugs. The Amylin acquisition is a smart strategic move
by Bristol-Myers since it already has a presence in the diabetes
market.
ASTRAZENECA PLC (AZN): Free Stock Analysis
Report
BRISTOL-MYERS (BMY): Free Stock Analysis Report
PFIZER INC (PFE): Free Stock Analysis Report
SANOFI-AVENTIS (SNY): Free Stock Analysis
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