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- Why Did We Update Our Price Estimate For Bristol-Myers Squibb?
Bristol-Myers Squibb (NYSE:BMY) is scheduled to report its earnings for Q3 2013 on October 23. Last quarter, the company reported a 9% year-on-year decline in its revenue. However, the decline was primarily due to the U.S. patent expiries of Avapro/Avalide and Plavix (two of the company’s best-selling drugs) in March 2012 and May 2012, respectively. Excluding the impact of these two drugs, the pharmaceutical giant’s net revenue actually grew by 10% year-on-year, driven by some of the newer drugs in its pipeline – namely, Yervoy, Onglyza, Sprycel and Orencia.
This quarter, Bristol could again post an year-on-year decline in revenue due to the Avapro/Avalide and Plavix patent expiries. However, its new drugs are likely to continue growing at impressive rates as their demand remains strong. While the performance of new drugs is going to be important, we will also be closely watching the performance of Eliquis, its flagship anticoagulant drug which has been underperforming expectations since its launch. We also expect the upcoming earnings call to provide an update about Bristol’s late-stage pipeline, especially in the immuno-oncology segment.
Our price estimate for Bristol-Myers Squibb is around $36, almost 25% below the current market price. We will be updating our model to account for these earnings once they are released.
Eliquis Is Crucial For Bristol’s Future
Eliquis is a new drug for preventing blood clots in patients with atrial fibrillation, and its sales are estimated to reach almost $4 billion over the next 4-5 years. The drug was initially scheduled to receive FDA approval in March 2012. However, the regulatory body postponed its approval twice and gave the green light only at the end of 2012 as it suspected that some of Eliquis’ clinical trial data had been tampered with at a test site in China. 
Meanwhile, competing drugs such as Xarelto (developed by Bayer AG and Johnson & Johnson) and Pradaxa (developed by Boehringer Ingelheim) entered the U.S. market and carved out a niche for themselves, thereby making it tough for Eliquis to generate traction after its launch. At $22 million and $12 million respectively, Eliquis’s sales for the first two quarters of this year were disappointing.
However, we are still optimistic about the drug because it has a favorable clinical profile relative to both Xarelto and Pradaxa. Further, Bristol’s management has been aggressively marketing it in key U.S. territories. We will be looking to hear from the company’s management on the earnings call about the impact these efforts have had until now. (Read more about Eliquis’ clinical profile in our previous article: Despite Near-Term Troubles Eliquis’ Future Looks Bright)
Immuno-oncology Pipeline Is Also Likely To Remain In Focus
Over the past few months, Bristol’s stock has run up almost 20%, mostly due to the optimism about its immuno-oncology portfolio. Specifically, a drug called Nivolumab has generated a lot of excitement and has been hailed by some analysts as “the beginning of the end of cancer”. Notes:
- Chinese Trial Misconduct Delayed Bristol-Myers Medicine, Bloomberg, July 9, 2013 [↩]
- Bristol-Myers shares jump on ‘beginning of the end of cancer’, MarketWatch, May 22, 2013 [↩]