No Wonder Bristol-Myers Squibb’s Shares Are Slightly Up Following The Earnings Announcement

Bristol-Myers Squibb‘s (NYSE:BMY) stock is up nearly 5% following its Q3 2015 earnings announcement. This seems like a complete reversal of the situation that occurred when the second quarter results were released. This time, the difference is Bristol-Myers Squibb’s strong performance relative to its peers. In addition, we believe it likely investors are acknowledging the fact that Yervoy’s sales decline is perhaps not as important as Opdivo’s rise and that the latter should get much more weighting. Unlike some other pharma companies, Bristol-Myers Squibb managed to post positive growth despite the negative impact of currency movements. This can be attributed to the growth in sales of Eliquis (a blood thinning drug), Opdivo (an immuno-oncology drug) and the Hepatitis C franchise. Except for Eliquis, which operates in a more competitive and mature market flooded with generics, the other drugs are competing in growth markets. This is a good sign for the company. We expect Eliquis, Opdivo and other cancer drugs, and Hepatitis C franchise to reign in a combined $15+ billion in sales by 2022, representing growth of nearly 575% over 2014 figure.

We are currently reviewing our price estimate for Bristol-Myers Squibb in the light of recent earnings and will have an update ready soon.

See our complete analysis for Bristol-Myers Squibb

While we do expect growth from Eliquis, it is Bristol-Myers Squibb’s cancer drugs which have the strongest potential of swinging the company’s valuation simply because there is tremendous scope in cancer research due to the sheer variety of cancer types and relatively low efficacy of existing drugs. Moreover, harvesting the body’s immune system has proven to be effective in terms of targeting and killing cancer cells. Bristol-Myers Squibb’s cancer drug revenues have jumped substantially in recent quarters. While Yervoy is now seeing a decline in sales due to competition from immune-oncology drugs (revenues were down 31% globally in Q3 2015), Opdivo is ramping up sharply. We expect Yervoy’s sales decline to slow down going forward due to recent approval of combination therapy of Opdivo and Yervoy for the treatment of metastatic melanoma. In addition, Opdivo received the approval of FDA for broader use in the treatment of metastsatic non-squamous non-small cell lung cancer. The drug has also received breakthrough status for renal cell carcinoma. Opdivo’s approval for non-squamous NSCLC will play a key role for the company as it will help the drug expand its market by almost threefold.

Additionally, combination therapies hold strong potential for immuno-oncology and Roche and Pfizer have acknowledged it. We expect Bristol-Myers Squibb to push more in this area as not only it will provide growth opportunities, it will also help the company defend itself against competition in future due to increased complexity of the treatment, which may not be easily replicable.

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