Bristol-Myers Squibb (NYSE:BMY) has made its impact felt in the Drug Manufacturers industry, especially with its life-enhancing treatment options for HIV/AIDS, mental disorders and heart diseases. The company's stock, which is currently trading at $43.69, was recently downgraded from Neutral to Underperform by some analysts. The major reason for this downgrade is related to the company's unimpressive earnings report for second quarter of fiscal 2013. The management's lowering of the company's earnings and revenue guidance for 2013 also contributed to the company's travails.
It has not been the best of times for Bristol-Myers as its earnings and revenues has declined significantly when compared to the same quarter of the previous year. This has been impacted by the genericization of a good number of the company's patented drugs. The drugs affected include Avapro/Avalide, used in the treatment of high blood pressure. It became generic in the U.S. in March 30, 2012, thereby facing stiff competition. Avapro/Avalide declined 52% in the reported quarter. Another drug that has suffered the same fate is Plavix with its travail starting from its going off-patent in May 17, 2012. Plavix declined a whooping 94% in global net sales with the U.S. sales faring worse as it plummeted 97%. Little wonder why the company experienced such a significant loss of revenues.
It is also notable that the company's cold and flu medicine, Fervex, was recalled from France and other international markets where the local over-the-counter drug is being sold. This happened in June and was as a result of contamination concerns. All these negatively impacted the company's sales for the quarter and led to Bristol-Myers cutting its outlook for the year. In comparison to its former guidance of $1.78-$1.88 EPS, it now has a guidance of $1.70-$1.78. The former global net sales guidance of $16.2-$17.0 billion was lowered to $16.0-$16.5 billion.
There is no denying the fact that the generic competition facing most of Bristol-Myers' patented drugs is adversely affecting the company's revenues and earnings. On July 29, 2013, the company announced its strategic business relationship with Samsung Biologics. The business deal, which is binding for 10 years, will see Samsung Biologics manufacturing a commercial antibody cancer treatment for Bristol-Myers. With a new patent on a long range and the royalties it is still getting from Cadence Pharmaceuticals (CADX), the company's revenue will surely see a new turn, and from the look of things, this might not be the only business relationship the company is entering into.
This brings us to Sanofi, currently trading at $52.81, with the company also suffering from loss of revenues like Bristol-Myers. Sanofi operates in three basic segments which are Pharmaceuticals, Human Vaccines and Animal Health. The company maintains a co-promotion agreement with Bristol-Myers for Plavix and Avapro/Avalide, and with the drugs going off-patent in the U.S. in the previous year and facing stiff generic competition, Sanofi's revenue has been negatively impacted right from the second quarter of fiscal 2012. Another drug from Sanofi that is facing stiff generic competition is Eloxatin, which went off-patent in the U.S. in August, 2012.
However, things were better in the second quarter of fiscal 2013 as the company reported 9.8% decrease in net sales on a reported basis as compared to 43.3% decrease reported in the same quarter of 2012. There was a strong performance in the company's growth platform which accounted for 71.4% of total sales for the quarter. Eloxatin sales were down 83.7% due to fierce generic competition, Avapro/Avalide down 27.5%, Lovenox down 9.2% and Plavix down 1.3%. The company also reported earnings per share of 72 cents for the quarter, well below analyst consensus estimate of 89 cents. Sanofi reported 18.5% decline in earnings at constant exchange rates in comparison to the same quarter of the previous year. All these were as a result of the company and its partner, Bristol-Myers, losing exclusive rights to most of the drugs that drive both companies' revenues and net income.
With Sanofi's earnings being threatened by the generic competition facing a good number of its key products, the company is looking towards new business partnerships/deals and acquisitions in order to set it on improved revenue track again. Sanofi is a great company, and since it is making spirited efforts in further developing its pipeline, there are better prospects out there for the company and investors alike. The company is presently channeling more energy towards expanding the Human Vaccines segment of its business. This is anticipated to drive sales in vaccine in the nearest future.
Gilead Sciences (NASDAQ:GILD)
It is a different story for Gilead Sciences, currently trading at $59.21. With its focus mainly on treatments for viral, fungal and bacterial infections, the company has made a mark in the healthcare sector. It also develops and markets treatments for cancer.
Gilead's second quarter 2013 earnings report showed that the company's revenue increased 15% YoY. Product sales rose 14% globally and 20% in the U.S. This growth was mostly impacted by the 159% YoY growth of Complera/Eviplera. The company's antiviral sales increased 15% with Viread leading the pack at a growth of 16%, closely followed by Atripla at 4% and Truvada at 3%.
However, the news of huge insider sales of the company's stocks led to a slip in the stock price on June 6, 2013. The report showed that within the first few days of the month of August, 2013, the company's Chairman and CEO, along with two directors and a VP have sold approximately 578 thousand shares.
Although Gilead currently holds a fair share of the HIV franchise market and has maintained sustainable profitability, it is not a company that relies on a single income stream, as it continues to look for other income streams apart from Atripla. With its new combination pill Complera, the company has been able to achieve a high level of growth in revenues. Also, the company faces minimal exposure to its key products going off-patent, unlike Bristol-Myers and Sanofi. For example, the company's key patents for Viread in the U.S. will last until 2018. This means that while its peers are battling with fierce generic competition, it will be growing its profitability.
In comparison to Bristol-Myers and Sanofi, Gilead is presently making the most of the opportunities in the industry as a good number of its key products are yet to face genetic competition like its peers. However, with the moves being initiated by Bristol-Myers and Sanofi, all hope is not lost, especially for Sanofi, that derives sales from three major segments.
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.