Bristol-Myers Squibb Earnings Preview: What We Are Watching

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Bristol-Myers Squibb (NYSE:BMY)  will release its Q3 2014 results on October 24th. We expect strong performance from its key drugs Eliquis and Yervoy. Additionally, the anti-viral drugs business will see the impact of the approval of the HCV drug Daklinza in Europe and Japan. Overall, we expect reasonable growth for Bristol-Myers Squibb. Additionally, the recent HCV approval and the expected approval of its immuno-oncology drug Nivolumab are something to cheer about and could support the company’s growth over next 5-6 years. Here is what the investors can expect from Bristol-Myers Squibb’s upcoming earnings.

Our price estimate for Bristol-Myers Squibb stands at $36, implying a discount of about 30% to the market.

See our complete analysis for Bristol-Myers Squibb


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Eliquis And Yervoy Will Showcase Strong Growth

Eliquis will continue to exhibit strong growth, driven by its continued adoption among healthcare specialists and the approval for conditions beyond atrial fibrillation. In late July, the European Commission approved the drug for the treatment of Deep Vein Thrombosis (DVT) and Pulmonary Embolism (PE), as well as for the prevention of recurrence of these conditions. Eliquis is essentially a blood thinner. The drug’s sales jumped to $277 million in the first half of 2014, compared to just $34 million during the same period a year ago. The sequential growth is strong as well, with Q2 2014 sales jumping by 60% over the preceding quarter. In addition, Yervoy, which is a cancer drug, has witnessed strong performance this year. Its sales increased by 38% year over year during Q2 2014 and we expect the demand to remain strong globally.

Daclatasvir Approval In Europe And Japan Will Help Virology Segment

Bristol-Myers Squibb saw a decline of about 7% in revenues from its virology segment (anti-infective drugs) in the first half of 2014. The growth in Baraclude, which is an anti-viral medication aimed at treating Hepatitis B, was more than offset by the decline in sales of Reyataz and Sustiva. While increased competitive pressure is plaguing Reyataz’s growth, Sustiva is facing the impact of loss of exclusivity in Europe. While a significant chunk of BMY’s revenues comes from its anti-viral drugs, the value contribution is low due to relatively grim outlook. In such a situation, the recent approval of Hepatitis C drug Daklinza (daclatasvir) in Europe and Japan comes as a pleasant development. We will revise our forecasts based on this event.

Daklinza is effective across several genotypes of diseases and has shown cure rates of up to 100% when used in combination with Gilead Sciences’ blockbuster drug Sovaldi. Although Gilead Sciences did not partner officially with Bristol-Myers Squibb in clinical trials and instead wishes to use its own combinational therapy, the encouraging data of Daklinza-Sovaldi therapy could influence healthcare providers to go for this combination. At this point, it is not clear whether insurers will create obstacles in the path of reimbursing this combination. If that doesn’t happen, Bristol-Myers Squibb could add significant incremental revenues by targeting roughly 9 million HCV patients in Europe. Most of these patients are infected with genotype-1 of the disease, but that isn’t an issue as Daklinza works across multiple genotypes. The pricing is likely to be high considering that the drug helps in reducing treatment window and potentially mitigates patients’ risk of developing liver complications. Liver transplants resulting from these complications can be extremely expensive.

There are about 1.2 million Hepatitis C patients in Japan, and 70% of them have genotype 1B of the disease. Furthermore, a significant number of these patients are over the age of 65 and hence, have more disease-related complications and reduced ability to tolerate interferon-based therapies. Daklinza is interferon-free, and can make a mark here.

Update On Immuno-Oncology Pipeline

Immuno-oncology is a promising area for Bristol-Myers Squibb and we look forward to updates on this front. According to some estimates, the market for immuno-oncology drugs could be as big as $35 billion. There is a huge opportunity to profit from successful drugs given that small-molecule R&D productivity has declined during the last decade. With their focus on biologics and relatively strong immuno-oncology pipelines, Merck (NYSE:MRK), Bristol-Myers Squibb and Roche each stand to gain.

The FDA in the U.S. has granted breakthrough status to Britol-Myers Squibb’s drug Nivolumab for advanced melanoma and has agreed to review the license application on priority basis. The review is likely to be completed by the end of March 2015. Additionally, the EMA (European Medicines Agency) is going to accelerate the review and assessment of nivolumab for treatment of advanced melanoma as well. These developments are encouraging for Bristol-Myers Squibb, which earlier had fast tracked clinical trials of nivolumab due to successful results. The company has also announced a partnership with Ono Pharmaceutical to collaborate on the development and commercialization of Novolumab, Yervoy and few other early stage immuno-oncology drugs in Japan, South Korea and Taiwan.

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