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Bristol-Myers Beats on Earnings, Revs in Q3

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Bristol-Myers Squibb Company’s (BMY - Free Report) third quarter 2013 earnings (excluding special items) of 46 cents per share beat the Zacks Consensus Estimate by 2 cents. Adjusted earnings in the third quarter of 2013 were 12% above the year-ago figure driven by higher revenues.

Net sales in the reported quarter increased 9% to $4.1 billion, driven by strong sales of drugs targeting the oncology and diabetes markets. Revenues edged past the Zacks Consensus Estimate of $4 billion. U.S. net sales in the quarter climbed 1% to $2 billion. Sales in international markets increased 18% to $2 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), declined 34% to $42 million in the quarter. U.S. sales of the drug were down 58% to $18 million.

The genericization of the drug in the U.S. was responsible for the massive decline. Hypertension treatment Avapro/Avalide recorded a 25% decline in sales to $71 million in the reported quarter.

Avapro/Avalide and Plavix went off-patent in the U.S. in Mar 2012 and May 2012, respectively. Following the genericization of Plavix and Avapro/Avalide in major markets across the globe, Bristol-Myers and partner Sanofi (SNY - Free Report) revamped their long-standing alliance regarding the drugs. The new agreement has taken effect from Jan 1, 2013. Newly launched anti-clotting drug, Eliquis, co-developed with Pfizer Inc. (PFE - Free Report) , posted sales of $41 million in the third quarter of 2013, as against $12 million recorded in the preceding quarter.

Sales of Baraclude, one of the top prescribed therapies for hepatitis B virus, came in at $378 million, up 9% year over year. Worldwide sales of HIV treatment Sustiva came in at $389 million in the third quarter of 2013, up 5%. Global sales of another HIV therapy, Reyataz, climbed 3% to $375 million.

The key cancer drugs at Bristol-Myers performed very well in the third quarter of 2013. Leukemia drug, Sprycel, registered sales of $316 million, up 20%. Skin-cancer drug Yervoy, approved in the U.S. and EU in 2011, contributed $238 million to total revenue during the third quarter of 2013, up 33% from the year-ago period. Sales of another oncology drug at Bristol-Myers, Erbitux, also improved during the third quarter of 2013. Sales climbed 6% to $183 million in the reported quarter.

Diabetes drugs like Bydureon (up 335% to $87 million), Byetta (up 93% to $106 million) and Onglyza/Kombiglyze (up 19% to $211 million) performed impressively during the third quarter of 2013. Moreover, sales of diabetes drug Forxiga (dapagliflozin), approved in the EU and some other ex-U.S. markets, came in at $7 million during the quarter. The U.S. Food and Drug Administration will decide on the drug by Jan 11, 2014. U.S. approval will boost its sales potential.

Global sales of Abilify, approved for the treatment of schizophrenia and depression, decreased 16% to $569 million. The drug performed disappointingly in the U.S. with sales declining 25% . Sales of rheumatoid arthritis drug, Orencia, stood at $375 million, up 22%.

Adjusted gross margin as a percentage of net sales stood at 72.8% in the reported quarter as against 75% in the comparable quarter of 2012. Adjusted marketing, selling and administrative expenses in the reported quarter were 2.5% below the year-ago figure of $1 billion. Adjusted research and development expenses for the quarter fell marginally to $893 million.

2013 Earnings Guidance Maintained

Bristol-Myers continues to expect adjusted earnings for 2013 in the range of $1.70-$1.78 per share. The Zacks Consensus Estimate for 2013 currently hints at earnings of $1.72 per share.

Our Take

We are impressed by the strong sales of the newly launched drugs at Bristol-Myers during the third quarter of 2013. The earnings beat in the quarter was primarily due to the strong sales of the new drugs, especially in the cancer and diabetes fields. Bristol-Myers has been trying to offset the declining sales of some of its important products by bringing in new products through in-licensing deals. We are also impressed by the company’s efforts to develop its pipeline.

Bristol-Myers, a biopharmaceutical company, carries a Zacks Rank #4 (Sell). Actelion Ltd. appears to be more attractive in the biopharma space with a Zacks Rank #1 (Strong Buy).

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