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The dynamics of the health care sector are changing rapidly - for a long time, Pharma companies focused on large population diseases. However, now the companies are focusing on rare diseases and the expensive and high-margin treatments for these diseases. Some companies were built on one drug and later these companies became one of the biggest players in the health care sector. At the moment, some of the bigger players are relying on small population diseases and high-margin orphan drugs. One of the best examples is Bristol-Myers Squibb (NYSE:BMY) - the company has been facing falling revenues due to the expiration of patents on some of its highest revenue generators. However, its cancer drug, Yervoy is a shining light at the end of the tunnel for the company.

Falling Revenues Due to Generic Competition

Bristol-Myers-Squibb is facing stiff competition from generic drug manufacturers as the patents for its two blockbuster drugs, Plavix and Avapro expired. These two drugs contributed over $2.7 billion in revenues during the first six months of the last year. However, for the current year, these drugs contributed only $237 million in combined revenues. As a result, total revenues of the company have taken a massive hit.

For the most recent quarter, revenues for Plavix came down to $44 million compared to $741 million for the same quarter last year. On the other hand, revenues for Avapro stood at just $56 million compared to $117 million for the same quarter last year. Expiring patents have created a large gap in revenues for the company which needs to be filled with a new stream of revenues.

Is Yervoy the Savior Bristol-Myers Squibb Needs?

Yervoy was the only positive from the most recent earning announcement of the company -the drug showed a growth of about 44% during the quarter. Revenues from Yervoy reached $233 million during the quarter compared to $162 million at the same time last year. Yervoy is the most rapidly growing drug in the portfolio of the company. Furthermore, the recent studies showing the efficacy of the drug are likely to further enhance the revenue generation capacity of the drug. According to a research conducted by Stephan Hodi and Dana Farber Cancer Institute, the drug adds up to 10 years of life for cancer patients. If Yervoy continues its revenue growth then the drug will soon plug the holes in revenue caused by patent expiration of Plavix and Avapro.

The only other drug showing noticeable growth in revenues is Sprycel (another cancer drug) - the drug recorded year-over-year growth of about 28% for the most recent quarter. However, the company is facing some patent issues for Sprycel in India. One positive for the company regarding Sprycel is that the FDA has allowed the company to expand the label of the drug. In June, FDA allowed the company to add the label that includes three-year efficacy and safety data for patients with newly diagnosed Philadelphia chromosome-positive (Ph+) chronic myeloid leukemia in chronic phase, and 5-year data for the same patients who are resistant or intolerant to Gleevec (another cancer drug marketed by Novartis).

Partnerships and Competition

The company is working on partnerships to increase the label of the drug and tackle the competition. The most important partnership is with Sanofi (NYSE:SNY) where the company is trying to combine Yervoy with a white blood cells boosting drug from Sanofi. The treatment is showing a lot of promise and two-thirds of the patients taking the combined treatment are alive compared to the success rate of 50% on Yervoy alone.

Merck (NYSE:MRK) is also working on a cancer drug, which will be a close competitor to Yervoy. Merck achieved quite impressive results in the Phase II trials of the drug and the company is going to start Phase III trials for the drug soon. Due to the impressive results in the Phase II trials, the company is hoping to get a breakthrough designation from the FDA. As a result, Yervoy might face increased competition in the near future.

Conclusion

Bristol-Myers Squibb stock is up over 40% over the last twelve months, which is surprising taking into account the big hit its revenues took during the past year. However, it also indicates that the investors have belief in the pipeline of the company as well as the current portfolio. As I mentioned above, if Yervoy continues its current growth, the investors will be proven right as the gap in revenues will be filled soon.

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.

Source: Bristol-Myers Squibb Will Prove To Be A Solid Investment