Bristol-Myers Earnings Preview: Management View Important After Opdivo’s Recent Debacle

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Bristol Myers Squibb

Bristol- Myers Squibb (NYSE: BMY) will report its Q3’16 earnings on Thursday, October 27th. The company’s stock has been battered after it reported in August that the Opdivo CheckMate 026 study did not show any benefit as first-line treatment drug for lung cancer versus conventional chemotherapy. Since then the company’s stock has fallen by about 35%. However, for Q3’16 we expect Opdivo was the main driver of revenue of growth. Overall, we believe the quarter’s revenue grew in mid double digits as compared to same period last year. Further, we expect Bristol-Myers to report a slight increase in selling & marketing expense on account of an expected increase in marketing efforts in light of recent Opdivo debacle.

Bristol-Myers had reported a revenue of $4.9 billion in Q2’16, up 17% on year-over-year basis. The non-GAAP EPS for the same period was $0.69, an increase of 30% as compared to Q2’15. The company is on track to achieve its non-GAAP EPS guidance of $2.55 to $2.65.

Our price estimate of $72 for Bristol-Myers Squibb stands at nearly 45% premium to the market. We expect to revise our forecasts, as well as our risk estimates following earnings announcement.

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However, you can use our widget embedded below to build your own price estimates:

Despite Recent Failures And Increasing Competition, Opdivo Is Expected To Shine

For Q3’16, we expect BMS to report strong growth for Opdivo. The drug is expected to gain market share, especially in second-line lung cancer and melanoma treatment.  There are certain challenges that it currently faces. It has failed to achieve the required results in its first-line non-small cell lung cancer treatment study. Further, the field of immuno-oncology is getting competitive in the second-line treatment of lung cancer with Merck’s Keytruda and Roche’s Tecentriq posing immediate challenges. However, we estimate Opdivo to keep performing on the basis of the existing indications for which it is approved. We forecast the drug to generate revenue of about $4.5 billion by 2020. Going forward the drug will benefit from combination usage with other therapies.

Apart from immuno-oncology, we also expect BMS to report strong numbers for its Hepatitis C franchise, its cardiovascular drug Eliquis for Q3’16 as compared to same period last year. It is worth noting that these two products account for over 25% to our 2016 revenue forecast while Opdivo makes up for about 12%.

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