Bloomberg News

Bristol-Myers Misses Estimates on Costs to Sell New Drugs

January 31, 2012

(Updates with opening share price in fifth paragraph.)

Jan. 26 (Bloomberg) -- Bristol-Myers Squibb Co. failed to beat analysts’ fourth-quarter profit estimates as the company invested in new products and sales fell for Plavix and Avapro, top-selling pills that will face generic competition this year.

Net income rose to $852 million, or 50 cents a share, from $483 million, or 28 cents, a year earlier when the company reported one-time tax charges from restructuring. Excluding certain items, profit was 53 cents a share, 2 cents below the average of 15 analyst estimates compiled by Bloomberg. Revenue increased 7 percent to $5.45 billion, while spending on marketing and sales grew 22 percent to $1.22 billion.

Bristol-Myers agreed this month to buy Inhibitex Inc. for $2.5 billion, gaining experimental hepatitis C drugs as it seeks to diversify and add new products. Sales of the blood-thinner Plavix, which generated 31 percent of the quarter’s revenue, declined 3 percent to $1.67 billion, the New York-based drugmaker said today in a statement.

“This is a new product story, and the product performance in the quarter was quite good,” said Barbara Ryan, an analyst with Deutsche Bank AG in New York, whose recommendations for the stock over the past year provided the best returns compared with others who cover the shares.

Bristol-Myers rose less than 1 percent to $32.85 at 9:52 a.m. New York time. The stock has gained 27 percent in the past 12 months.

New Medicines

Plavix, Bristol-Myers’s top-selling drug, loses patent exclusivity in May. To prepare for that day, Bristol-Myers has since 2007 executed a strategy of mid-size partnerships and acquisitions known as the “string of pearls.”

Bristol-Myers forecast 2012 revenue at the bottom end of analysts’ estimates. The company anticipates 2012 revenue from $17.2 billion to $18.2 billion compared with the $18.3 billion average estimate of 17 analysts surveyed by Bloomberg. Full-year earnings will be $1.90 to $2 a share, while the analysts had estimated $1.96.

Mark Schoenebaum, an analyst with ISI Group in New York, called the quarterly results a “small” miss by Bristol-Myers, said.

“We expect stock to be flat to down small as many investors had expected lukewarm 2012 guidance,” he said in a note to clients.

Eliquis Awaits

This year, the company is awaiting U.S. approval of Eliquis, a blood-thinner it developed with Pfizer Inc. that is already being sold in Europe. Yervoy, a medicine for advanced melanoma, was cleared in March in the U.S. and generated $144 million in fourth-quarter sales.

“We will build on the momentum of 2011 as we transition beyond the loss of exclusivity of Plavix and Avapro,” Chief Executive Officer Lamberto Andreotti said in the statement.

Eliquis may dominate sales for stroke-preventing blood thinners in heart patients, according to analysts for ISI Group and Leerink Swann & Co. Leerink estimates the market for the drugs at $7 billion to $9 billion a year.

Along with Plavix, sales of Avapro, which is used to treat high blood pressure and kidney disease in diabetics, fell 23 percent in the fourth-quarter to $195 million. The pill is Bristol-Myers’s fifth-ranked by sales.

Sprycel, Onglyza

Sales of Bristol-Myers’s newer drugs fared better. Sprycel, a treatment for chronic myeloid leukemia, rose 34 percent from a year earlier to $227 million. Revenue from Onglyza, a pill used to lower blood sugar in diabetics, more than doubled to $153 million. Patents on the two drugs don’t expire until 2020 and 2021, respectively.

The company also incurred costs from the 2010 health care overhaul law. About one-quarter of the 22 percent increase in marketing, sales and administrative costs came from mandatory discounts for Medicare patients and fees on pharmaceutical companies. In total, that took 4 cents from earnings per share, the company said.

Advertising and product promotion spending increased 5 percent to $285 million, Bristol-Myers said in the statement.

--Editors: Andrew Pollack, Bruce Rule

To contact the reporter on this story: Drew Armstrong in Washington at darmstrong17@bloomberg.net;

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net


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