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Why Is Bristol-Myers (BMY) Up 4% Since Last Earnings Report?

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A month has gone by since the last earnings report for Bristol-Myers Squibb (BMY - Free Report) . Shares have added about 4% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Bristol-Myers due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Bristol-Myers Tops Q4 Earnings, Withdraws Opdivo sBLA

Bristol-Myers’ fourth-quarter 2018 earnings of 94 cents per share exceeded the Zacks Consensus Estimate of 85 cents and the year-ago quarter earnings of 68 cents.

Total revenues of $5.97 billion marginally lagged the Zacks Consensus Estimate of $5.98 billion but increased 10% from $5.45 billion recorded in the year-ago period. Continued strong sales of Opdivo and Eliquis contributed to the top line in the reported quarter, offsetting a decline in sales of virology and hepatitis franchises.

Revenues for full-year 2018 were $22.6 billion, up 9% from the year-ago period. Earnings per share rose 32% to $3.98. In January, the company announced an agreement to acquire another leading biotech player, Celgene for a whopping $74 billion.

However, the company announced the voluntary withdrawal of label expansion application for Opdivo in first-line ling cancer.

Quarterly Details

Revenues were up 12% year over year when adjusted for foreign exchange impact. Revenues increased 16% to $3.3 billion in the United States and 3% outside the country. Ex-U.S. revenues were up 7% when adjusted for foreign exchange impact.

Opdivo, which is approved for multiple cancer indications, continued its impressive performance with sales up 33% year over year to $1.8 billion and became the top revenue generator for the company. Cardiovascular drug, Eliquis, also witnessed strong growth. Sales of the drug rose 25% to $1.71 billion. Sales of Opdivo and Eliquis rose 43% and 27%, respectively, in the United States.

Leukemia drug, Sprycel raked in sales of $536 million, up 2% year over year. U.S. sales of the drug remained almost flat at $300 million.
Sales of rheumatoid arthritis drug, Orencia, were up 10% in fourth-quarter 2018 to $731 million. Melanoma drug, Yervoy, contributed $384 million to the top line during the reported quarter, up 43%. U.S. sales of the drug were up 51% to $273 million.

Multiple myeloma drug, Empliciti recorded sales of $69 million, up 10% year over year.

However, the performance of key drugs in the Virology unit continues to disappoint. Sales of Baraclude declined 29% to $165 million. The Sustiva and Reyataz franchises deteriorated 69% and 31% year over year to $54 million and $99 million, respectively. Sales at the Hepatitis C franchise fell 93%.

Adjusted research and development (R&D) expenses in the quarter were down 3.8% to $1.36 billion. Adjusted marketing, selling and administrative expenses increased 1.5% to $1.34 billion.

Gross margin was 71.7% in the quarter compared with 69.2% in the year-ago quarter. The year-ago period results included an inventory charge.

Regulatory Update

In the press release, the company announced the voluntary withdrawal of the supplemental Biologics License Application (sBLA) seeking approval of Opdivo+Yervoy as a treatment for first-line non-small cell lung cancer with tumor mutational burden ≥10 mutations/megabase following discussions with the FDA. In October, the FDA had extended the action date by three months for the sBLA to May 2019 upon submission of updated overall survival (“OS”) data by the company.

Bristol-Myers stated that further evidence is required to understand the relationship of TMB and PD-L1 and evaluate Opdivo’s impact on improving OS in the patient population. The analysis can be done upon receiving final data from part Ia of the Checkmate-227 study, which is expected in the first half of 2019. However, it will be available after May, beyond the review period for the sBLA, which resulted in the withdrawal.

In January, Opdivo+Yervoy received approval in Europe for treating patients with intermediate- and poor-risk advanced renal cell carcinoma in first-line setting. The FDA approved a label expansion of Sprycel in the same month to include pediatric patients one year of age or older with newly diagnosed Philadelphia chromosome-positive (Ph+) acute lymphoblastic leukemia (ALL) in combination with chemotherapy. In December, the Committee for Medicinal Products for Human Use recommended the approval of the drug in similar indication in Europe.
In November, Empliciti’s label was expanded to include third or later-line multiple myeloma in adult patients. The drug was approved in combination with pomalidomide and dexamethasone.

Acquisitions

In January, Bristol-Myers announced that it will acquire Celgene in a cash and stock transaction. The acquisition is expected to be 40% accretive to the bottom line on a standalone basis in the first full year and result in cost synergies of approximately $2.5 billion by 2022. The merged entity will generate more than $45 billion in cash flow over the first three full years.

Pipeline Update

In November, the company announced the failure of the phase III CheckMate-451 study evaluating Opdivo in combination with Yervoy as a maintenance therapy in patients with extensive-stage small cell lung cancer without disease progression after completion of first-line platinum-based chemotherapy.

2019 Guidance Reiterated

Bristol-Myers reiterated its adjusted earnings and revenue expectations for 2019. The company projects earnings in the range of $4.10 to $4.20 per share. The Zacks Consensus Estimate for earnings is pegged at $4.14. The company expects worldwide revenues to increase in mid-single digits.

 

How Have Estimates Been Moving Since Then?

Fresh estimates followed an upward path over the past two months.


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