FDA Nod for BMY Drug Label Update

Bristol-Myers Squibb Company ( BMY - Analyst Report ) recently announced that the US Food and Drug Administration (FDA) has cleared a label update for its hepatitis B virus (HBV) therapy, Baraclude. The FDA has allowed Bristol-Myers to update Baraclude’s label so that data on African Americans and liver transplant recipients suffering from HBV may be included.

The FDA approved the label update on the basis of data from two studies. One study (ETV-085: n=46) evaluated Baraclude in African-American patients suffering from chronic HBV. Another study (ETV-109: n=65) evaluated Baraclude in patients, who had to undergo liver transplant due to HBV related complications.

Baraclude is currently approved for the treatment of chronic HBV in adults with evidence of active viral replication and persistent increase in serum aminotransferases or histologically active disease. The safety and efficacy of Baraclude for treating pediatrics (less than 16 years of age) suffering from HBV has not yet been established.

Even though impressed by the label update of Baraclude, since HBV is an area of concern for the African-American population, we believe that investor focus will remain on how Bristol-Myers fares following the US loss of exclusivity of its blood thinner Plavix on May 17, 2012. Moreover, hypertension treatment Avapro/Avalide went off patent in the US in March 2012.

Following the genericization of blood thinner Plavix and hypertension therapy Avapro/Avalide in major markets across the globe, Bristol-Myers and partner Sanofi ( SNY - Analyst Report ) revamped their long-standing alliance regarding the drugs. The new agreement will be effective from January 1, 2013.

The loss of exclusivity of these drugs in the US hurt Bristol-Myers’ second quarter 2012 results with net sales declining 18% to $4.44 billion. US sales of Plavix plummeted 60% to $701 million in the second quarter of 2012 (global sales were also down 60% to $741 million). US sales of Avapro/Avalide were down 85% to $20 million during the second quarter of 2012.

We expect Bristol-Myers’ results in the third quarter of 2012 (scheduled to be announced on October 24) to be impacted adversely by the genericization of Plavix in the US.

Bristol-Myers is looking to combat the generic threat through partnering deals and acquisitions and is introducing new products to augment its product portfolio. The Amylin buy in August 2012, through which Bristol-Myers expanded its presence in the lucrative diabetes market, is an effort to combat the substantial revenue losses due to Plavix’s genericization in the US.

Neutral on Bristol-Myers

Currently, we have a long-term Neutral recommendation on Bristol-Myers. The stock carries a Zacks #3 Rank (Hold rating) in the short run.