Why Did Bristol-Myers Squibb’s Shares Fall Post Earnings?

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Bristol-Myers Squibb‘s (NYSE:BMY) stock has declined by almost 5% following its Q2 2015 earnings despite the company registering strong overall revenue growth of 7%. [1] So why did this happen? It appears that strong topline growth did not translate proportionately to profits even though it did induce  a change in full year EPS guidance. BMY registered a net loss due to high R&D expenses (primarily related to acquisition) and the change in full year guidance suggests that the coming quarters may not see significantly better growth than Q2. Also, it seems that the revenue increase came primarily from mature products and key growth-stage franchises such such as Yervoy performed below expectations. [1] The situation is not alarming and the results led to small re-adjustment in investor expectations. In the medium to long term, the focus will continue to be on Opdivo and similar drugs, as well as pending regulatory approvals for a number of combination therapies.  In addition, we will be tracking the ramp up of Eliquis and Hepatitis C franchise. So what could possibly be the near term trigger?

Our current price estimate for Bristol-Myers Squibb stands at $66, roughly in line with the market. It will be the dual regimen of Yervoy and Opdivo hitting the market.

See our complete analysis for Bristol-Myers Squibb

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The sales of Bristol-Myers Squibb’s cancer drugs have grown rapidly in recent quarters, particularly Yervoy and Opdivo (Nivolumab). However, growing competition in the U.S. managed to put brakes on Yervoy’s surge, and the drug’s sales in fact declined during the second quarter of 2015 compared to same period a year ago. This may continue to be the case until the combination regimen of Yervoy and Opdivo is approved by the regulatory agencies, which may happen towards the last quarter of this year. Although Yervoy has not met the  primary end point in some recent trials, the company remains committed to the drug as it sees it as an important part of its strategy of developing combination therapies.

From longer term perspective, Opdivo’s potential approval for non-squamous NSCLC will play a key role for BMY as it will help the drug expand its market by almost threefold. Blood thinning drug Eliquis is doing well in Europe, and even better in the U.S., Japan, the U.K., Spain and Germany. The drug could become a multi-billion dollar franchise for Bristol-Myers Squibb. The company is in a strategic partnership with Pfizer to market this drug.

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Notes:
  1. Bristol-Myers Squibb Reports Second Quarter Financial Results, BMY Press Release, Jul 23 2015 [] []