Bristol-Myers’ Second Quarter Earnings Will Fight Patent Cliff Effects
Bristol-Myers Squibb (NYSE:BMY) will announce its second quarter earnings report on Wednesday, July 25. The company reported a solid previous quarter where it posted strong growth in revenues and net income. However, we anticipate the second quarter results will be impacted significantly from the loss of patent exclusivity for its blockbuster selling drug Plavix, which constituted nearly 33% of the overall revenues for the company in 2011. In anticipation of the resulting effects, the company has authorized a $3 billion for a share repurchase program in a bid to show its confidence in long-term growth of the company. [1]
We currently have a price estimate of $36 for the company, in-line with its current market price.
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Patent expiry for Plavix
The patent for Plavix expired on May 17 earlier this year in the US. The drug has already lost patent exclusivity in other major world markets. We anticipate significant and sharp decline in net sales of Plavix post patent exclusivity due to competition from cheaper generics.
Plavix registered net sales of nearly $7.1 billion in 2011, constituting approximately 33% of the $21.2 billion in overall sales for the company. Thus, a decline in its net sales shall impact the top line significantly. Plavix is a cardiovascular drug that helps prevent heart attacks and treats certain other arterial diseases.
Another cardiovascular drug, Avapro lost patent exclusivity in March 2012. The drug generated revenues of $952 million in 2011. We anticipate the revenues from Avapro to decline significantly as well, due to generic competition.
The loss of revenue from lower sales of Plavix and Avapro will impact the total revenues generated by Bristol-Myers in the second quarter, significantly.
Share repurchase program to ease concerns of shareholders
However, in anticipation of lower earnings, the company has authorized an additional $3 billion for share repurchase. This sends out a positive message to the investor community that the company has confidence in its long-term growth, and will help address shareholder concerns that rise in the event of a revenue decline in second quarter earnings.
Thus, on the whole we anticipate Bristol-Myers’ second quarter earnings to be impacted significantly from the loss of patent exclusivity for Plavix. However, the share repurchase program shall help address shareholder concerns.
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Notes:- Bristol-Myers Squibb Announces the Authorization of an Additional $3 billion for Share Repurchase Program, June 26 2012, www.businesswire.com [↩]