Bristol-Myers Squibb Company’s (BMY) third-quarter 2014 earnings (excluding special items) of 45 cents per share beat the Zacks Consensus Estimate by 4 cents. The earnings beat pleased the investors. Consequently, the stock gained in early trading.
Including one-time items, Bristol-Myers’ third-quarter 2014 earnings came in at 43 cents, up 2% year over year.
Net sales in the third quarter (excluding revenues from the divested diabetes business) climbed 7% to $3.88 billion, driven by strong sales of drugs targeting the oncology market. Strong sales of the company’s rheumatoid arthritis drug, Orencia, and anti-clotting drug, Eliquis, also boosted the top line in the reported quarter. Revenues (including the divested business) slipped 4% to $3.92 billion. Total revenues were ahead of the Zacks Consensus Estimate of $3.8 billion. We note that Bristol-Myers had sold its diabetes business to AstraZeneca (AZN) earlier in the year.
The Third Quarter in Detail
The company posted disappointing sales in the U.S. and international markets. Sales in U.S. markets declined 3% to $2 billion. Sales in international markets were down 4%.
Key cancer drugs at Bristol-Myers have however performed very well in the third quarter of 2014. Leukemia drug, Sprycel, registered sales of $385 million, up 22%. Skin-cancer drug Yervoy, approved in the U.S. and EU in 2011, contributed $350 million to the total revenues during the reported quarter, up 47%. Sales of another oncology drug, Erbitux, also improved during the quarter. Erbitux sales increased 2% to $187 million in the reported quarter.
The performance of key drugs in the virology unit was disappointing. Sales of Baraclude declined 14% to $325 million. Sales of the drug are expected to decline further due to generic competition. In Sep 2014, Teva Pharmaceutical Industries Ltd. (TEVA) launched its generic version of Baraclude. Sales of HIV treatments Reyataz and Sustiva also dropped 10% and 8% to $338 million and $357 million, respectively.
Global sales of Abilify, approved for the treatment of schizophrenia and depression, declined 21% to $449 million. The drug, however performed encouragingly in the U.S. with sales climbing 8% to $407 million. Sales of Orencia stood at $444 million, up 18%.
Sales of Eliquis were $216 million during the reported quarter, up 26.3% sequentially. The drug has received quite a few approvals this year. In Mar 2014, Eliquis was approved in the U.S. for an additional indication – to bring down the risk of blood clots in patients who have undergone hip or knee replacement surgery.
The drug was cleared by the FDA in August this year for the treatment of deep vein thrombosis (DVT) and pulmonary embolism (PE) and bringing down the risk of recurrent DVT and PE following initial therapy. In Jul 2014, the EU cleared the drug for the treatment of DVT and PE and the prevention of recurrent DVT and PE in adults. Bristol-Myers has a partnership with Pfizer (PFE) on Eliquis. The hepatitis C virus (HCV) franchise at Bristol-Myers contributed $49 million to the company’s top line in the reported quarter.
Adjusted gross margin, as a percentage of net sales (excluding the diabetes business), stood at 76.1% in the reported quarter against 72.8% in the comparable quarter of 2013. Adjusted marketing, selling and administrative expenses in the reported quarter were 4.6% below the year-ago figure of $976 million. Adjusted research and development expenses for the quarter climbed 2.8% to $918 million due to the company’s efforts to develop its pipeline.
2014 Earnings Outlook Maintained
Bristol-Myers continues to expect 2014 adjusted earnings per share in the range of $1.70 to $1.80. The company’s 2014 revenue guidance is also maintained in the range of $15.2 billion to $15.8 billion. The Zacks Consensus Estimate for 2014 is pegged at $1.77 per share on revenues of $15.53 billion.
Our Take
We are impressed by the strong sales of drugs like Orencia, Eliquis, Yervoy and Sprycel in the third quarter of 2014. We are also impressed by Bristol-Myers’ efforts to develop its pipeline. We believe investor focus will remain on updates regarding the company’s high-profile immuno-oncology candidate, Opdivo, going forward.
Focus will also be on the newly-approved cocktail therapy, Daklinza plus Sunvepra, for treating chronic HCV. In Jul 2014, the Japanese Ministry of Health, Labour and Welfare cleared the combination of Daklinza and Sunvepra for treating patients suffering from the genotype 1 strain of chronic HCV, including those affected by compensated cirrhosis.
Bristol-Myers carries a Zacks Rank #3 (Hold). A better-ranked stock in the biopharma space is Regeneron Pharmaceuticals (REGN). The company sports a Zacks Rank #2 (Buy).
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