Bristol-Myers Squibb's Dividend Increase And Promising New Drugs

Jan.29.13 | About: Bristol-Myers Squibb (BMY)

Dividend

Bristol-Myers Squibb Company (NYSE:BMY) is paying a cash dividend of $0.35 per share scheduled for February 01, 2013. The ex-dividend date was on January 02. The new dividend represents a 2.94 percent increase over the prior quarter.

This is the fourth consecutive year that the company has increased dividend.

BMY has two authorizations to repurchase shares totaling $6 billion. In the past year $4.2 billion was purchased, leaving $1.8 billion on that authorization.

Approvals

Significant regulatory approvals were gained in the fourth quarter.

Eliquis, which reduces the risk of stroke in patients with nonvalvular atrial fibrillation, developed with partner Pfizer (NYSE:PFE), has been approved in the U.S., Europe, Japan, Canada and South Korea. Eliquis is going to be launched in the US in early February.

In the UK the National Institute for Health and Clinical Excellence (NASDAQ:NICE) has recommended Eliquis for the treatment of atrial fibrillation. NICE has concluded that Eliquis represents a cost-effective and clinically more efficacious option than warfarin, while also resulting in fewer bleeding incidents.

Forxiga, developed with partner AstraZeneca (NYSE:AZN), a type 2 diabetes medicine, was approved in Europe.

Just a few months before Forxiga has been rejected by the FDA due to bladder and breast cancer worries, but the companies may resubmit an application in the middle of 2013 armed with fresh data from their clinical trials.

Diabetes

Bristol is now the only company in the market which has three novel classes of medications for diabetes.

Diabetes is a progressive disease that requires a combination of treatment approaches over time.

Forxiga, a once-daily oral agent, is a first-in-class SGLT2 drug. It works independently of insulin, pushing blood glucose out of the body via the kidneys. It is designed to complement the usual metformin-plus-insulin treatment, and it appears to help weight loss and lower blood pressure.

Other companies are busy developing potential head-to-head competitors to Forxiga, including Johnson & Johnson (NYSE:JNJ)'s canagliflozin and Lilly (NYSE:LLY) and German partner Boehringer Ingelheim's empagliflozin, which they plan to submit for approval in 2013.

Forxiga is the fourth drug to win approval for the collaborative effort with AstraZeneca.

Forxiga joins Onglyza, a DPP4 inhibitor, and two Onglyza combo pills in the in-house stable. The worldwide sales for the Onglyza franchise rose 29 percent to $198 million during the fourth quarter.

As the DPP-4 class is becoming more crowded, Onglyza is expected to remain competitive, and the class itself is expected to grow.

Byetta and Bydureon were acquired with the purchase of Amylin Pharmaceuticals earlier in 2012, giving Bristol the GLP-1 leg in the diabetes franchise.

The Bristol-AstraZeneca diabetes partnership has a sizable set of products to promote.

In the U.S. the sales forces of Bristol-Myers Squibb, Amylin and AstraZeneca were combined to promote both Onglyza, the Byetta/Bydureon franchise and the launch of Kombiglyze XR in Europe. Fully integrated sales, marketing and medical teams are now in place to sell the entire portfolio.

Bristol reported $152 million in revenues for Bydureon and Byetta in the fourth quarter. This includes just $5 million in royalties from international markets. The company will begin reporting direct sales for Bydureon and Byetta outside the U.S. after completing the transition of commercial responsibilities from Lilly by April 1 2013.

Melanoma

Yervoy had a very strong fourth quarter; global sales were $211 million, up 18 percent sequentially from the third quarter. In less than two full years on the market, Yervoy global sales topped $700 million for 2012, making Yervoy one of the best oncology launches of the last decade.

In the U.S. Bristol focused on the efficacy message of Yervoy, shifting the focus of treatment in metastatic melanoma to the potential for long-term survival, and expanding the prescribing base beyond large institutions.

Both of these initiatives seem to be gaining traction. U.S. sales rose up nearly 15 percent from the third quarter. The company is also in the process of fully launching Yervoy in Europe and continue to get approvals in other regions. There is ample opportunity for Yervoy to grow.

Abilify

Abilify is a schizophrenia drug sold in partnership with Japanese company Otsuka.

A recent court victory could block generic competition to Abilify in the U.S. until April 2015.

In the fourth quarter Bristol's Abilify sales were up 11 percent to $819 million, but in 2013 the formula changes lowering Bristol's share from the current flat 51.5 percent to a new tiered revenue structure of approximately 35 percent.

PDL-1

2013 is going to be an important year for the experimental PD-1 trials.

Anti-PD-L1 monoclonal antibody Nivolumab binds to PD-L1, blocking its binding to and activation of its receptor, PD-1 (Programmed Death 1). This action stimulates the T-cell-mediated immune response to cancer. PD-L1 is expressed broadly in multiple cancers.

Nivolumab is currently in five significant Phase 3 studies: there are two lung studies, a renal cell carcinoma (a type of kidney cancer that starts in the lining of very small tubes in the kidney) study, and also two melanoma studies in Phase 3.

Investor's summary

Net sales for the fourth quarter were $4.2 billion, down 23 percent from the fourth quarter last year, primarily due to the loss of exclusivity of Plavix and Avapro.

Excluding Plavix and Avapro, global sales in the fourth quarter grew 13 percent led by gains in key brands that are considered crucial to the company's future, such as Yervoy ($211 million worldwide sales, 47 percent up from last year), Onglyza/Kombiglyze ($198 million, up 29 percent), Orencia ($325 million, up 26 percent) and Sprycel ($281 million, up 24 percent).

For 2013 the company projects earnings per share in the range of $1.54 to $1.64.

The gross margin as a percent of sales is expected to be between 72 to 73 percent, a decrease of approximately 300 basis points from last year. The explanation is that in Eliquis and the diabetes portfolio Bristol has partners and the partner's share is booked under "cost of goods sold", which depresses the gross margin.

In the past 52 weeks the share price ranged from $30.64 to $36.71.

2012 was a very important year for Bristol; the process of replacing its long term superstar Plavix with a portfolio of new stars for the future has begun.

2013 will be a continuation of that: a year of clinical advances, launches, commercial execution, investment, all of which has a basic aim of allowing the company to renew itself.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.