Bristol-Myers Beat Estimates on Strong Hepatitis C Sales

  • Drugmaker boosts 2016 EPS forecast to as much as $2.65
  • Hepatitis C revenue growth may be challenged by competition

Bristol-Myers Squibb Co. reported second-quarter earnings that beat analysts’ estimates partly on strong sales from its hepatitis C drugs, a segment that’s likely to face increased competition in the years ahead.

The company is pegging its future on the development of immune-based cancer therapies like Opdivo and Yervoy. Sales of those drugs were either in line or weaker than anticipated in the quarter.

Profit excluding some items totaled 69 cents a share, the New York-based company said Thursday in a statement. That topped the 66-cent average of estimates compiled by Bloomberg. Revenue increased 17 percent from a year earlier to $4.87 billion, compared with predictions of $4.65 billion.

“Although on the surface this appears like a strong quarter, investors’ focus will be on the 17 percent Yervoy miss and potential longer-term implications for the immune-oncology franchise since that is Bristol’s key growth driver,” BMO analyst Alex Arfaei said in a note to clients.

Bristol-Myers fell 1.8 percent to $75.07 at 10:44 a.m. in New York trading. The shares had climbed 11 percent this year through Wednesday.

Standout Sales

Hepatitis C drug sales of $546 million were a standout in the quarter, beating estimates of $379 million. Analysts expect that revenue to decline because of competition from drugs made by Gilead Sciences Inc., AbbVie Inc. and Merck & Co.

“This franchise continues to hold in fairly well, yet seems destined for a slowdown due to changing competitive dynamics,” Sanford C. Bernstein & Co. analyst Tim Anderson said in a research note. The segment posted the biggest beat to analysts’ drug sales estimates in the quarter, he said.

Going forward, Bristol-Myers’ immunotherapies are expected to be key growth drivers. Both Yervoy and Opdivo are improvements over previous therapies and are being studied for use against various cancers. 

Analysts estimate Yervoy and Opdivo will contribute more than half of the company’s sales by 2020, and second-quarter results explain why: Sales of the drugs contributed to a 46 percent increase in U.S. revenue. Opdivo’s sales rose more than sixfold to $840 million, in line with the $840.4 million estimated by analysts. Total sales for the drug last year were $942 million and are projected to rise to $7.7 billion by 2018.

Yervoy’s U.S. sales rose 32 percent to $179 million while global sales fell 19 percent to $241 million, missing the $292 million estimated by analysts. Yervoy is facing competition from drugs like Opdivo and Merck’s Keytruda, which are starting to replace the use of Yervoy as a single-agent treatment for advanced skin cancer. Yervoy is now approved for use with Opdivo in skin cancer but the combination has more side effects.

The two drugs carry high price tags, though Bristol-Myers Chief Executive Officer Giovanni Caforio said in June that he doesn’t foresee cancer treatments facing the pricing pressures that drugmakers have seen in other disease areas, such as hepatitis C.

Heart drug Eliquis is another key to the company’s growth yet second-quarter sales of $777 million fell short of the average estimate of $796 million. Orencia, a rheumatoid arthritis treatment, had sales of $593 million, a result Arfaei called “impressive.”

Other highlights from the second quarter:

  • Net income was $1.17 billion, or 69 cents a share, compared with a year-earlier loss of $130 million, or 8 cents, because of an $800 million accounting charge.
  • Bristol-Myers raised its 2016 profit forecast to a range of $2.55 to $2.65 a share. The company had previously said adjusted earnings would be $2.50 to $2.60 a share and sales would increase by a low double-digit percentage. The company didn’t adjust its revenue guidance for the year.
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