Bristol-Myers Squibb (NYSE:BMY) is scheduled to announce its results for Q1 2013 on April 25. All eyes will be on the performance of its new drugs, which will be the key drivers of revenue growth going forward. The company has started to feel the pressure of generic competition and declining net sales due to patent expiry of its bestselling drug Plavix and the loss of patent rights to hepatitis B drug Baraclude while its other successful drugs like Abilify and Sustiva are set to lose their patents over the coming years.
Our current price estimate for the company is around $36, which is around 10% lower than the market price. We will update our estimate once the company releases its quarterly earnings.
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Revenues From Established Drugs To Decline
Bristol-Myers Squibb has several successful drugs in its stable and each of those drugs earns over a billion dollars in revenues annually. However, many of these drugs like Abilify ($2.8 billion in revenues in 2012) and Sustiva Franchise ($1.5 billion in revenues in 2012) are scheduled to lose their patent covers in the coming years. Thereafter, these drugs are likely to face stiff competition from generic drug manufacturers and consequently lose market share.
The company has already started feeling the heat of this trend as its net sales declined sharply last year due to Plavix’s patent expiry. Plavix was Bristol’s best-selling drug for heart diseases and brought around $6.7 billion in revenues for the company in 2011. However, with the loss of exclusivity in 2012, the drug saw fierce competition from generic manufacturers and its sales declined by 64% last year. 
Baraclude Sales To Be Impacted Much Sooner
While the patent cliff for drugs like Abilify and Sustiva are still a couple of years away, Bristol-Myers is likely to lose some market share in the hepatitis B segment much sooner. In February, the company lost its patent rights for Baraclude, a hepatitis B drug, in a lawsuit against Teva Pharmaceuticals. The lawsuit struck Baraclude from the patent list and allowed Teva to launch its own version of the drug. 
Baraclude brought about $1.4 billion in revenues for Bristol in 2012 and this figure could see a rapid decline once Teva gets FDA approval for its variant of the drug and launches it in the U.S. market.
New Drugs Will Be In Focus
Given the above trend, it is obvious that the company’s focus has shifted to new drugs in its pipeline. Fortunately, some of its new drugs have shown promise with the potential to become bestsellers. In the fourth quarter, the sales of Yervoy (an anti-cancer drug) increased 47% y-o-y to $211 million, the sales of Onglyza (an anti-diabetic drug) increased 29% y-o-y to $198 million, the sales of Orencia (a drug for treatment of rheumatoid arthritis) increased 26% y-o-y to $325 million, and the sales of Sprycel (an anti-cancer drug) increased 24% y-o-y to $281 million.
The company has also received some important regulatory approvals for drugs like Eliquis and Forxiga last quarter. Eliquis was approved in several countries to reduce the risk of stroke and systemic embolism in patients with nonvalvular atrial fibrillation and Forxiga was approved in Europe for treatment of type 2 diabetes. We expect status updates on these drugs in the upcoming earnings release.Notes:
- SEC Filings, Bristol-Myers Squibb [↩]
- Bristol-Myers loses Baraclude patent fight with Teva, FiercePharma, February 12, 2013 [↩]