Bristol-Myers Declines as Sales Drop Outweighs Pipeline

Bristol-Myers Squibb Co. (BMY) fell the most in more than eight months after slow sales of existing products trumped investors’ interest in new cancer and hepatitis C drugs the company has in development.

The shares fell 3 percent to $40.22 at 4 p.m. New York time, the biggest one-day decrease since Aug. 2. Bristol-Myers earlier today reported first-quarter earnings excluding one-time items of 41 cents a share, 1 cent less than the average of 17 analysts’ estimates compiled by Bloomberg. Sales were $3.83 billion, compared with the average analysts’ estimate of $3.87 billion.

“A lot of what they call their core products, across the board, were a little light,” said Jeff Jonas, co-portfolio manager of the Gabelli Healthcare & Wellness Trust, which owns the stock. That included Eliquis, a potential top-selling blood thinner and three key diabetes drugs.

Bristol-Myers has no device or consumer units, unlike competitors such as Merck & Co. (MRK), and investors have focused on the roster of experimental drugs. The company is aiming its research and development focus at new cancer drugs that use the body’s immune system to fight the disease, like its melanoma treatment Yervoy.

“It has jettisoned its various non-pharma businesses to become among the most ‘pure play’ pharmaceutical companies,” Tim Anderson, an analyst with Sanford C. Bernstein & Co., said in a note to clients before the earnings were announced.

Photographer: Robert Bruschini/Bristol Myers Squib via Bloomberg

Sales of Yervoy, approved in 2011, increased 49 percent to $229 million in the quarter, the company reported. Close

Sales of Yervoy, approved in 2011, increased 49 percent to $229 million in the quarter,... Read More

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Photographer: Robert Bruschini/Bristol Myers Squib via Bloomberg

Sales of Yervoy, approved in 2011, increased 49 percent to $229 million in the quarter, the company reported.

Eliquis Sales

For that strategy to pay off, though, the new products, like Eliquis, have to deliver. In its first quarter on the market, the pill generated $22 million, half the average of three analysts’ estimates. Bristol-Myers sees the drug as a foundation for its sales over the next decade and revenue may be $3.8 billion for the company in 2018, according to analysts’ estimates.

“We are on track with our expectations,” Chief Financial Office Charles Bancroft said on a conference call today discussing the results. “We continue to believe that Eliquis will be the leading agent, over time.”

Bristol-Myers already has the highest valuation of any large U.S. drugmaker -- its price-to-earnings ratio is 25. “I think they’ll deliver on it, but I think the market is valuing them that they’ll deliver,” said Judson Clark, an analyst at Edward Jones & Co. who has a hold rating on the stock.

Revenue Loss

While the company has promising experimental cancer and hepatitis C drugs, it is dealing with the loss of top products like Plavix, an anti-stroke drug, and Avapro and Avalide, a blood pressure therapy sold under both names. “We’re looking at four years before they get back to their peak earnings,” Clark said in a telephone interview.

Photographer: JB Reed/Bloomberg

Sales of Bristol-Myers’s drugs that lost patent protection have largely disappeared. Plavix revenue fell to $91 million. Close

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Photographer: JB Reed/Bloomberg

Sales of Bristol-Myers’s drugs that lost patent protection have largely disappeared. Plavix revenue fell to $91 million.

Two diabetes drugs purchased with the acquisition of Amylin Pharmaceuticals for $6.49 billion last year also failed to meet estimates. Bydureon sold $52 million, less than analysts’ estimates of $86 million. Byetta, also from Amylin, sold $85 million, less than analysts’ projected $99 million.

The company said a reorganization of its diabetes sales force that was part of the acquisition accounts for some of the sales issue.

“During this period of transition, in a very competitive market, we’ve seen some disruption to our commercial effort,” said Giovanni Caforio, the president of Bristol-Myers’ U.S. drug business.

Plavix, which last year was Bristol-Myers’ top product, lost 95 percent of its $1.7 billion in quarterly sales from a year earlier, and Avapro/Avalide saw sales fall 78 percent to $46 million.

Forecast Affirmed

Net income fell to $609 million, or 37 cents a share, from $1.1 billion, or 64 cents, a year earlier, the company said. Bristol-Myers affirmed its forecast for annual earnings excluding one-time items of $1.78 to $1.88 a share announced in January.

The company benefited from a tax rate 5 percentage points under what it has projected for this year. The first quarter effective tax rate, excluding certain items, was 11 percent, less than the 16 percent rate projected for the year. That was in part from a U.S. research-and-development tax credit.

Two of the company’s top experimental products may move faster than expected after receiving special designations from the U.S. Food and Drug Administration that can reduce the agency’s review time and lead to quicker marketing approval.

‘Breakthrough’ Drugs

Nivolumab, an immune-oncology drug, will get “fast track” designation for non-small-cell lung cancer, renal cell carcinoma and advanced melanoma. The company’s hepatitis C treatment, a combination of three drugs, will also get status from the FDA as a “breakthrough” medication, meaning it, too, can be approved early.

New drugs generally need three phases of clinical testing on safety and effectiveness to win FDA approval. The FDA bases its decision to award the special statuses on how effective the drug is in early trials and the size of the unmet medical need for the disease.

Sales of Yervoy, the immune-oncology drug approved in 2011, increased 49 percent to $229 million, the company reported. Sales of the drug may reach $1.54 billion by 2018, according to an average of three analysts’ estimates compiled by Bloomberg.

To contact the reporter on this story: Drew Armstrong in New York at darmstrong17@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net

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