Bristol-Myers Squibb Rises On Earnings Boost

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Bristol-Myers Squibb‘s (NYSE:BMY) shares inched up following its Q3 2014 earnings announcement. Although net sales were down, the increasing adoption of Eliquis, the growth in oncology drugs and a decent start to Hepatitis C franchise presented a silver lining. We believe that these segments are likely to be major growth contributors for Bristol-Myers Squibb in the coming years. Another good news item is that the patent expiration date for Sustiva, which is the company’s biggest anti-viral drug as of now, has been extended from 2015 to 2017. This will help it offset an expected revenue decline of roughly $400 million in its mature products in 2015. Also, The FDA in the U.S. has granted breakthrough status to Bristol-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.

Our current price estimate for Bristol-Myers Squibb stands at $36, implying a discount of about 30% to the market.  We are currently updating our pricing model to reflect recent results and broader developments in pharmaceutical industry.

See our complete analysis for Bristol-Myers Squibb


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Eliquis Exhibited Strong Growth As Expected

Eliquis continued its strong growth, with revenues for the third quarter totaling $216 million as compared to just $41 million during the same period a year ago. [1] The drug’s adoption among healthcare specialists has been impressive and the approval for conditions beyond atrial fibrillation has certainly helped. At the end of July 2014, 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’ sales for the first nine months of 2014 stood at $493 million, a year-over-year jump of 557%. It could become a blockbuster drug next year for the company. We estimate that cardiovascular division accounts for more than 20% of Bristol-Myers Squibb’s value as per our estimates.

Daklinza Is Off To A Decent Start, Next Quarter Will Shed More Light On Adoption

Bristol-Myers Squibb saw a decline of about 7% in revenues from its virology segment (anti-infective drugs) in the first half of 2014. This decline came down slightly to 6.4% in Q3 2014 due to incremental revenues from Hepatitis C franchise (Daklinza and Sunvepra). For the past few quarters, the growth in Baraclude has been 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. Out of $49 million in revenues that came from Hepatitis C drugs, $38 million came from Daklinza alone. The company has stated that initial response has been good and the drug’s approval in Europe and Japan is going to be a key contributor to the franchise’s growth going forward.

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. The encouraging data of Daklinza-Sovaldi therapy could influence healthcare providers to go for this combination. Bristol-Myers Squibb could add significant incremental revenues by targeting roughly 9 million HCV  (i.e., Hepatitis C Virus) patients in Europe and 1.2 million patients in Japan. The pricing is likely to remain 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.

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Notes:
  1. Bristol-Myers Squibb’s SEC Filings []