Plavix Patent Cliff Will Impact Bristol-Myers’ Earnings

by Trefis Team
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Bristol-Myers Squibb (NYSE:BMY) will announce fourth quarter and full year 2012 earnings Thursday, January 24. The biopharmaceutical major is coming off a patent cliff. In May 2012 it lost patent exclusivity of its blockbuster cardiovascular drug Plavix, and as a result in the nine months ended September 30, 2012, revenues and earnings of the company declined 15% and 63% respectively, on a year-over-year basis. [1] Earnings were also impacted by a $1.8 billion impairment charge in the third quarter related to the stoppage of drug trials of a Hepatitis C drug (BMS-986094).

In the fourth quarter, we anticipate the decline in revenues and earnings to continue as sales of Plavix continue to fall due to generic competition. However, this decline will be partially offset by growth in sales of other key drugs (Yervoy, Onglyza, Orencia and Sprycel) in Bristol-Myers’ portfolio. Additionally, regulatory approval for Eliquis in the non-valvular atrial fibrillation (NVAF) market of European Union (EU) will contribute towards offsetting the impact from Plavix’s patent expiry.

For the full year 2012, Bristol-Myers forecasts earnings in the range of $0.95 to $1.05 per share, down from $2.18 per share in 2011. [2] [3] We currently have a stock price estimate of $33.59 for Bristol-Myers, marginally below its current market price.

See our complete analysis of Bristol-Myers here

Plavix Patent Expiry

Plavix lost patent exclusivity in May 2012, and Avapro, another cardiovascular drug in Bristol-Myers’ portfolio lost exclusivity in March 2012. The combined sales of these two drugs constituted more than a third of the total sales of Bristol-Myers in 2011. Post patent expiry, sales of both Plavix and Avapro, witnessed a sharp and significant decline due to competition from cheaper generics. In the first three quarters of 2012, sales of Plavix declined 54% y-o-y to $2.5 billion and sales of Avapro declined 45% y-o-y to $419 million. [1] These declining sales will lower total sales and earnings of the company in the fourth quarter.

Sales Growth Of Other Key Drugs

1) Ongoing growth in sales of Yervoy, Onglyza, Orencia and Sprycel: On the bright side, sales of several other drugs in Bristol-Myers portfolio are rising due to wider adoption. In the nine months ended September 30, 2012, sales of Yervoy (an anti-cancer drug) increased 130% y-o-y to $495 million, of Onglyza (an anti-diabetic drug) increased 60% y-o-y to $511 million, of Orencia (drug for treatment of rheumatoid arthritis) increased 29% y-o-y to $851 million, of Sprycel (an anti-cancer drug) increased 28% y-o-y to $738 million and of Baraclude (drug for treatment of Hepatitis B) increased 17% y-o-y to $1 billion. Excluding Plavix and Avapro, sales of all other drugs combined increased 9% y-o-y  in the first three quarters. [1]

2) NVAF approval for Eliquis in the EU: Additionally in November 2012, Bristol-Myers received EU approval for Eliquis as a treatment option for prevention of heart attacks in patients with an irregular heart beat not caused by a heart valve problem, which is called non-valvular atrial fibrillation (NVAF). This approval allowed the company to exploit the multi-billion dollar NVAF market in the EU. Eliquis is expected to become a key drug for Bristol-Myers in the future and is central to the company’s strategy of offsetting the loss in its sales from patent expiry of Plavix.

3) Type 2 diabetes approval for Forxiga: During the fourth quarter, the company also received regulatory approval in the EU for Forxiga as a treatment option for type 2 diabetes. The drug belongs to an upcoming class of diabetes drugs called SGLT2 and will help Bristol-Myers address the multi-billion dollar type 2 diabetes treatment market in the EU.

These regulatory approvals along with continuing growth in sales of other drugs will help the company partially offset the impact from Plavix patent expiry in the fourth quarter.

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Notes:
  1. 2012 Q3 10-Q, October 24 2012, www.bms.com [] [] []
  2. Bristol-Myers Squibb Reports Third Quarter 2012 Financial Results, October 24 2012, www.bms.com []
  3. 2011 10-K, February 17 2012, www.bms.com []
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