Biopharmaceutical giant Bristol-Myers Squibb Company ( BMY - Analyst Report ) 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 17.9%).

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 Sanofi ( SNY - Analyst Report ) , 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 movement.

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 Eli Lilly ( LLY - Analyst Report ) .

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 indication.

In June 2012, the company suffered a regulatory setback when the FDA declined to approve Bristol-Myers/Pfizer’s ( PFE - Analyst Report ) 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 $1.88 respectively.

Surprise History

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 2.07%.

Our Recommendation

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.