Bristol-Myers Squibb's Q2 profit slips on higher R&D costs; Yervoy, Eliquis sales top estimates

Bristol-Myers Squibb's second-quarter net profit slipped 38 percent year-over-year to $333 million, hit by the sale of the company’s share in a diabetes joint venture to AstraZeneca and higher R&D expenses. In addition, quarterly revenue slipped 4 percent to $3.9 billion, but pulled just ahead of analyst expectations due to higher than anticipated sales of cancer therapies.

"During the second quarter we delivered strong financial and operating results," commented CEO Lamberto Andreotti, adding the figures "reflect the promise of our late-stage pipeline, the strong performance of our in-line products and the continued success of our strategy in driving growth for the company." With the exclusion of the lost diabetes income, which slipped 94 percent year-over-year to $27 million, worldwide revenue in the second quarter was up by 7 percent. In addition, R&D expenses climbed 49 percent in the three-month period to $1.4 billion, which reflected impairment and acquisition-related charges of $458 million.

In the quarter, US sales fell 7 percent to $1.9 billion, while international revenue declined 1 percent to $2 billion. Combined sales of the company's three cancer drugs, Yervoy, Sprycel and Erbitux, jumped by 22 percent to $875 million. Specifically, revenue from Yervoy climbed 38 percent to $321 million, topping analyst estimates of $292 million. In addition, sales of Eliquis, which Bristol-Myers sells with Pfizer, rose from $12 million in the year-ago period to $171 million, beating analyst forecasts of approximately $129 million.

For other products, Abilify slipped 1 percent to $555 million, as Bristol-Myers Squibb lost marketing rights in Europe to Otsuka Pharmaceutical, and Orencia sales climbed 14 percent to $402 million. In addition, Baraclude sales fell 1 percent to $369 million, while revenues from Reyataz and Sustiva slipped 16 percent and 12 percent to $362 million and $361 million, respectively. Chief financial officer Charles Bancroft explained that Baraclude was affected by lower demand in China, while Reyataz is facing increased competitive pressure in the HIV market.

For the full year, Bristol-Myers Squibb affirmed its per-share earnings forecast of $1.70 to $1.80, with analysts expecting earnings of $1.77 per share. This forecast is based on the company retaining exclusivity on Baraclude sales in the US at least through the end of 2014.

"The focus on investors is not on numbers but instead mainly on PD-1 development," commented ISI Group analyst Mark Schoenebaum, referring to Bristol-Myers Squibb's Opdivo (nivolumab). Earlier this month, the company revealed that it plans to file for FDA approval of Opdivo in the third quarter for the treatment of patients with previously treated advanced melanoma. BMO Capital Markets analyst Alex Arfaei agreed that "the focus remains on...immuno-oncology," highlighting studies of Opdivo in non-small-cell lung cancer, which he said have "a very high probability of success." Earlier this week, Bristol-Myers Squibb announced that it will partner with Ono Pharmaceuticals to develop and commercialise immuno-oncology treatments for patients in Japan, South Korea and Taiwan. For related analysis, see ViewPoints: Bristol-Myers Squibb claws back some ground in PD-1 melanoma race, but what can Merck & Co. do with its first-to-market advantage?

Additionally, the drugmaker recently announced that the all-oral, interferon-free regimen of Daklinza (daclatasvir) and Sunvepra (asunaprevir) was cleared for the treatment of hepatitis C in Japan. The combination treatment has also been filed for FDA approval after receiving a breakthrough designation in February, with a final decision expected before the end of the year. Meanwhile, the European Medicines Agency's Committee for Medicinal Products for Human Use adopted a positive opinion last month supporting the use of Daklinza in combination with other therapies for the treatment of hepatitis C.

Andreotti said Thursday that Bristol-Myers Squibb is open to acquisitions of all sizes, particularly in its key areas of immuno-oncology and virology. However, Bancroft noted that a tax-inversion deal is not a priority for the company, as the drugmaker currently has a relatively low tax rate.

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