Bristol-Myers (BMY) Beats On Q2 Earnings & Sales, Raises View

Bristol-Myers Squibb Company (NYSE:BMY) reported better-than-expected results for the second quarter of 2019 on the stellar performance of its blood thinner drug, Eliquis. However, results were overshadowed by the failure of the part 2 of the phase III Checkmate-227 study on Opdivo for the lucrative indication of first-line non-squamous non-small cell lung cancer (NSCLC).

Shares are down in pre-market trading on the same. Bristol-Myers’ shares have decreased 16.8% in the year so far compared with the industry’s decline of 0.8%.

Second-quarter 2019 earnings of $1.18 per share easily beat the Zacks Consensus Estimate of $1.06 and increased from the year-ago quarter’s earnings of $1.01.

Total revenues of $6.27 billion comprehensively surpassed the Zacks Consensus Estimate of $6.04 billion and increased 10% from $5.7 billion in the year-ago period. Continued strong sales of Opdivo, Eliquis and Orencia contributed to the company’s top line in the reported quarter.

Quarterly Details

Revenues were up 13% year over year, when adjusted for foreign exchange impact. Revenues increased 14% to $3.7 billion in the United States and 5% outside the country. Ex-U.S. revenues were up 12%, when adjusted for foreign exchange impact.

Eliquis witnessed strong growth and became the top revenue generator for the company yet again. Sales of the drug rose 24% to $2.04 billion. We note that Bristol-Myers has a collaboration agreement with Pfizer (NYSE:PFE) for Eliquis. Opdivo, which is approved for multiple cancer indications, continued its impressive performance, with sales up 12% year over year to $1.8 billion. Sales of Opdivo and Eliquis rose 9% and 30%, respectively, in the United States.

Leukemia drug, Sprycel, raked in sales of $544 million, up 2% year over year. Sales of rheumatoid arthritis drug, Orencia, were up 9% to $778 million. Melanoma drug, Yervoy, contributed $367 million to the top line, up 17% year over year.

Multiple myeloma drug, Empliciti, recorded sales of $91 million, up 42% year over year .

However, performance of key drugs in the Virology unit disappointed. Sales of Baraclude declined 18% to $147 million. Sales of other brands (including Sustiva, Reyataz, Daklinza and all other products that have lost exclusivity in major markets) fell 23% year over year to $481 million.

Adjusted research and development (R&D) expenses in the quarter were down 4.2% to $1.28 billion. Adjusted marketing, selling and administrative expenses decreased 5.1% to $1.1 billion.

Gross margin was 68.2% in the quarter compared with 71.5% in the year-ago quarter.

Celgene Acquisition Update

Earlier in the year, the company announced that it will acquire biotech bigwig Celgene Corporation (NASDAQ:CELG) for a whopping $74 billion. The acquisition was finally given a green signal a few months back after facing opposition from some of the shareholders. However, Bristol-Myers needs to sell one of Celgene’s blockbuster drugs, Otezla, to complete the impending merger on a timely basis in light of concerns expressed by the U.S. Federal Trade Commission (FTC). We remind investors that the company has a tyrosine kinase 2 (TYK2) inhibitor, BMS-986165, in its pipeline, which is being evaluated in several autoimmune diseases, including psoriasis. The regulatory agency was concerned about a possible overlap between Otezla and BMS-986165 in the pipeline. Hence, Bristol-Myers decided to sell Otezla.

Moreover, the company now expects to conclude the merger by the end of 2019 or beginning of 2020.

Pipeline Update

The part 1a of the phase III Checkmate-227 study, evaluating Opdivo plus low-dose Yervoy versus chemotherapy, met the co-primary endpoint of overall survival in first-line NSCLC patients, whose tumors express PD-L1 ≥1%. However, part 2 of the study evaluating Opdivo plus chemotherapy versus chemotherapy alone did not meet its primary endpoint of overall survival in first-line non-squamous NSCLC patients, regardless of PD-L1 status.

The phase III CheckMate-498 trial, evaluating Opdivo plus radiation versus temozolomide plus radiation in patients with newly diagnosed O6-methylguanine-DNA methyltransferase (MGMT)-unmethylated glioblastoma multiforme (GBM), did not meet its primary endpoint of overall survival at final analysis.

Business Development Update

Earlier, Bristol-Myers, Bayer (DE:BAYGN) and Ono Pharmaceutical Co., Ltd. announced a clinical trial collaboration to evaluate Opdivo in combination with Bayer’s Stivarga in patients with micro-satellite stable metastatic colorectal cancer.

2019 Guidance Updated

Bristol-Myers updated its adjusted earnings expectation for 2019. The company projects earnings of $4.20-$4.30 per share (previous guidance: $4.10-$4.20). The Zacks Consensus Estimate for earnings is pegged at $4.16.

Our Take

While Bristol-Myers’ performance in the second quarter was encouraging, beating on both earnings and sales primarily on robust sales of Opdivo and Eliquis, pipeline setbacks were a concern. The failure of the part 2 of the Checkmate-227 study was disappointing, given the potential of the NSCLC market. Additionally, the approval of Merck’s (NYSE:MRK) Keytruda for first-line NSCLC adds to Bristol-Myers’ woes.

Bristol-Myers currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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