Bristol-Myers Squibb: Investors Can Focus On The Future After Plavix

Oct.29.12 | About: Bristol-Myers Squibb (BMY)

Shares of Bristol-Myers Squibb (BMY) ended last week largely unchanged. The global biopharmaceutical company reported its third quarter results on Wednesday.

Third Quarter Results

Bristol-Myers reported third quarter revenues of $3.74 billion, down 30% on the year. Excluding the patent expiration of Plavix and Avapro/Avalide, revenues were up 7% on the year. Revenues came in short of analysts expectations, who looked for quarterly revenues of $3.96 billion.

The company took a $1.8 billion non-cash impairment charge related to the discontinued development of BMS-986094, a nucleotide polymerase which was in Phase II development for the treatment of hepatitis C.

The company reported a net loss of $711 million on the back of the impairment charges. Net losses came in at $0.43 per share, compared to a profit of $0.56 last year. Non-GAAP net earnings came in at $685 million, or $0.41 per share. Earnings fell a penny short of analysts expectations.

CEO Lamberto Andreotte commented on the results:

Bristol-Myers Squibb faced challenges in the third quarter, including the discontinuation of BMS-986094 for the treatment of hepatitis C. I am proud of how we worked through these challenges and made the right decisions for patients. We remain strong and well-positioned for future success as demonstrated by the achievement of regulatory milestones for Eliquis and Orencia, the presentation of long-term survival data for Yervoy, the completion of our acquisition of Amyline, and the performance of our key brands.


For the full year of 2012, Bristol-Myers now anticipates full year GAAP earnings per share of $0.95-$1.05 per share. This compares to a previous guidance of $1.78-$1.88 per share.

Bristol-Myers confirms its non-GAAP earnings guidance of $1.90-$2.00 per share.

Full year sales are anticipated to come in between $17.4 and $17.8 billion, assuming Plavix worldwide sales of roughly $2.6 billion. Full year gross margins are expected to rise some 100 basis points.


Bristol-Myers ended its third quarter with $6.6 billion in cash, equivalents and marketable securities. Short and long term borrowings total some $7.4 billion, for a modest net debt position.

For the first nine months of 2012, Bristol-Myers generated revenues of $13.4 billion. Net earnings attributable to shareholders came in at $1.03 billion, or $0.61 per diluted share. The $1.8 billion impairment for BMS-986094 severely impacted earnings.

The market currently values the firm at $55.5 billion. This values the firm at 3.2 times annual revenues. The firm is valued at 33-34 times net earnings for 2012. Excluding the impairment charge, the firm is valued at roughly 16 times earnings.

Currently, Bristol-Myers Squibb pays a quarterly dividend of $0.34 per share, for an annual dividend yield of 4.0%.

Investment Thesis

Year to date, shares of Bristol-Myers have fallen some 5%. Shares traded between $32 and $36 for the entire year of 2012. Currently, shares are exchanging hands at $33.62.

Over the past five years, shares have risen some 13%. Shares fell from $30 at the end of 2007 to lows of $18 during the crisis in 2008 and 2009. Shares steadily rose to highs of $36 earlier this year. Between 2008 and 2012, Bristol-Myers consolidated its revenues from $17.7 billion in 2008 to an estimated $17.6 billion in 2012. Net income fell from $6.2 billion in 2008, to an estimated $1.7 billion in 2012. As mentioned above, this year's profits are severely impacted by the impairment charges.

A main reason for the stagnation was the decline of Plavix whose sales have been decimated. The blood thinner drugs reported revenues of $7.1 billion for the full year of 2011, but sales have fallen to an estimated $2.6 billion in 2012. For the third quarter, worldwide sales of Plavix have fallen some 96% to just $64 million. In May of this year, patents of the drugs expired causing a lot of generic competition.

To combat the decline, Bristol-Myers bought diabetes drugmaker Amylin Pharmaceuticals earlier this year for $5.3 billion. Amylin's drugs "Byetta" and "Bydureon" added $55 million and $20 million in sales over the past quarter, respectively.

Bristol-Myers continues to pay out a generous 4.0% dividend yield, despite the implosion of sales of Plavix. The firm remains well capitalized and profitable, making it capable to continue to pay out generous dividends. The acquisition of Amylin with the drugs "Byetta" and "Bydureon" gives shareholders some future perspective, although the contribution is limited in the short term.

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.