REFILE-UPDATE 3-Bristol-Myers Squibb sales disappoint, shares fall

Thu Apr 25, 2013 1:17pm EDT

By Ransdell Pierson

April 25 (Reuters) - Bristol-Myers Squibb reported disappointing first-quarter sales, prompting a drop in shares that have risen sharply this year on enthusiasm for its lineup of promising experimental drugs.

The company on Thursday said sales plunged 27 percent to $3.83 billion, slightly below Wall Street expectations of $3.88 billion, as its Avapro blood pressure drug and Plavix blood clot preventer faced competition from cheaper generics.

Bristol-Myers, whose stock was down 2.5 percent by midday, earned $609 million, or 37 cents per share in the quarter. That was down from $1.1 billion, or 64 cents per share, a year earlier.

Excluding special items, Bristol-Myers earned 41 cents per share, matching the analysts' average forecast, according to Thomson Reuters I/B/E/S.

The company managed to meet the earnings forecast because its effective tax rate fell to 11 percent from 26.7 percent a year earlier, due to a new federal credit for research and development. Wall Street had been expecting a tax rate in the 15 percent range.

"The (results) were a bit disappointing, and Bristol-Myers didn't talk about their expectations for 2014," said Herman Saftlas, an analyst with S&P Capital Inc.

Even after Thursday's sharp decline, company shares trade at 18 times Bristol-Myers' expected per share earnings for 2013, well above the price-to-earnings ratio of 14 for the drug sector. Saftlas said even a slight miss of sales expectations was enough to convince many investors to unload shares.

"With a premium like that, you can't disappoint on anything, and even a small disappointment leads to a correction," Saftlas said.

Bristol-Myers said it still expected full-year earnings of $1.78 to $1.88 per share, which would be a decline of up to 11 percent from 2012.

Plavix sales dropped 95 percent to $91 million in the quarter, but J.P.Morgan analyst Chris Schott said that was about $45 million above expectations. Avapro's fell 78 percent to $46 million.

Most of the company's newer drugs showed strong growth, although slightly below estimates, Schott said. Sales of melanoma treatment Yervoy jumped 49 percent to $229 million, while sales of leukemia drug Sprycel rose 24 percent to $287 million.

Combined sales of diabetes drugs Onglyza and Kombiglyze increased 25 percent to $202 million, while sales of rheumatoid arthritis medicine Orencia rose 26 percent to $320 million.

"The main takeaway message is that a lot of new products are helping mitigate the Plavix loss, so Bristol-Myers is pretty well positioned," said Morningstar analyst Damien Conover.

Analysts expect Bristol-Myers' earnings to rebound next year, growing by a mid-teen percentage rate, as the Avapro and Plavix declines level off and newer drugs continue to grow.

Investors have especially high hopes for Eliquis, a blood clot preventer approved in December to prevent strokes among patients with an irregular heartbeat called atrial fibrillation. They expect the pill, developed in partnership with Pfizer Inc , to become a preferred alternative to the standard treatment, warfarin.

Eliquis had U.S. sales of $17 million in the quarter, below the $36 million that Wall Street expected, ISI Group analyst Mark Schoenebaum said.

"But it's very early days, and we think the company will get a pass for another quarter or two," Schoenebaum said, giving sales representatives more time to drive up sales. Morningstar's Conover predicted Eliquis will eventually capture annual sales of $6.5 billion, to be split with Pfizer.

Bristol-Myers is developing a slate of other potentially lucrative drugs, including treatments for hepatitis C and various forms of cancer. One cancer drug, which blocks a protein called PD-1, could claim the spotlight next month at a major cancer meeting in Chicago. If approved, Conover said the drug could generate annual sales of $2.5 billion.

"We think Bristol-Myers has one of the best pipelines in the industry," said Edward Jones analyst Judson Clark.

But some of Bristol-Myers' experimental drugs have recently fallen by the wayside. U.S. regulators rejected dapaglifozin, a new type of treatment for type 2 diabetes, early last year due to safety concerns. Six months later, its brivanib drug failed in a late-stage trial to prolong survival in liver cancer patients.

Bristol-Myers pulled the plug last August on another treatment for hepatitis C after a patient died of heart failure in a mid-stage trial. The company, with a charge of $1.8 billion in the 2012 third quarter, wrote off the once-promising drug.

Shares of Bristol-Myers were down $1.04 to $40.41 on the New York Stock Exchange.

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