Bristol-Myers Squibb reports strong sales and earnings growth for third quarter 2009

Oct 22 2009

Bristol-Myers Squibb Company (NYSE:BMY) today reported strong sales and earnings growth for the third quarter 2009.

“The performance in the third quarter of 2009 clearly shows the results of our outstanding business performance, disciplined financial management and overall strategic execution,” said James M. Cornelius, chairman and chief executive officer. “We are transforming Bristol-Myers Squibb into a BioPharma leader and the recent approval and launch of ONGLYZA for the treatment of type 2 diabetes is a great example of what we do best: discover, develop and deliver innovative medicines that help patients prevail over serious diseases.

“As part of our transformation, we are continuing to advance our String of Pearls strategy and I’m pleased to see that we’ve rapidly integrated Medarex into our R&D organization. Since formally acquiring Medarex in September, its scientific leadership, clinical assets and platform technologies have been a welcome addition as we work toward becoming a leader in immuno-oncology.”

THIRD QUARTER FINANCIAL RESULTS

• Bristol-Myers Squibb posted third quarter 2009 net sales from continuing operations of $5.5 billion, an increase of 4%, or 7% excluding foreign exchange impact, compared to the same period in 2008.
• Gross profit improved to 71.5% of net sales in the third quarter 2009 compared to 68.9% in 2008. The improvement was driven by higher biopharmaceutical average prices, realized manufacturing efficiencies, including savings from continuous improvement efforts, favorable foreign exchange impact and favorable worldwide product mix.
• Marketing, selling and administrative expenses decreased by 8%, or 5% excluding foreign exchange impact, to $1.1 billion in the third quarter of 2009 compared to the same period in 2008, primarily due to a continued reduction in general and administrative expenses through continuous improvement initiatives.
• Advertising and product promotion spending was flat or increased 3% excluding foreign exchange impact, to $361 million in the third quarter of 2009 compared to 2008.
• Research and development expenses were relatively flat or increased 2% excluding foreign exchange impact, to $838 million in the third quarter of 2009 compared to the same period in 2008.
• The effective tax rate on earnings from continuing operations was 25.2% for the third quarter compared to 26.7% in 2008.
• The company reported third quarter net earnings from continuing operations attributable to Bristol-Myers Squibb Company of $966 million or $0.48 per diluted share, compared to $588 million or $0.29 per diluted share for the same period in 2008.
• The company reported third quarter non-GAAP net earnings from continuing operations attributable to Bristol-Myers Squibb Company of $1,046 million or $0.52 per diluted share, compared to $910 million or $0.45 per diluted share for the same period in 2008. An overview of specified items is discussed under “Use of Non-GAAP Financial Information.”
• Cash, cash equivalents and marketable securities were $7.9 billion as of September 30, 2009. The company maintains a strong net cash position of $1.3 billion. This takes into account the $2.1 billion net impact of the Medarex acquisition. Cash flow from operating activities amounted to $1.5 billion during the third quarter of 2009 and the company remains focused on strengthening its balance sheet and maintaining financial flexibility. Based on Mead Johnson Nutrition Company’s announcement today that it is considering options to refinance its outstanding intercompany debt, Bristol-Myers Squibb expects to receive approximately $1.75 billion in cash upon closing of the refinancing.

SEGMENT RESULTS

BioPharmaceuticals

• BioPharmaceuticals net sales totaled $4.8 billion in the third quarter of 2009, representing an increase of 6%, or 9% excluding foreign exchange impact, compared to the same period in 2008. U.S. BioPharmaceuticals net sales increased 12% to $3.0 billion in the third quarter of 2009 compared to 2008. International BioPharmaceuticals net sales decreased 2%, or increased 5% excluding foreign exchange impact, to $1.8 billion.
  • Sales growth in the third quarter was led by continued sales increases for PLAVIX® (+8%) and strong global sales growth for ABILIFY® (+16%).
  • The virology portfolio continues to demonstrate worldwide sales growth, led by BARACLUDE® for hepatitis B (+33%), the Sustiva franchise (+7%) and REYATAZ® for HIV (+5%).
  • ORENCIA® and SPRYCEL® grew worldwide 36% and 30%, respectively as compared to the same period in 2008.
  • ERBITUX® sales were down 3% compared to the third quarter 2008.
  • ONGLYZA® has been launched in the U.S. and Europe and contributed approximately $20 million in sales in the third quarter.
• BioPharmaceuticals realized a 170 basis point increase in gross margin compared to the third quarter of 2008. Key drivers of the improvement were higher biopharmaceutical average price, cost savings, including those related to continuous improvement initiatives, foreign exchange favorability and product mix.
• BioPharmaceuticals pre-tax earnings increased 19% to $1.2 billion in the third quarter of 2009 compared to the same period in 2008. The increase in earnings was driven by increased sales, improved gross margins as well as reductions in marketing, selling and administrative expenses from the company’s continuous improvement initiatives.

Mead Johnson Nutrition Company

• Mead Johnson’s net sales totaled $699 million in the third quarter of 2009, representing a 6% decrease, or 2% excluding foreign exchange impact, compared to the same period in 2008.
• Bristol-Myers Squibb’s share of Mead Johnson’s earnings decreased by 20% to $127 million primarily due to the impact of items attributed to the February 2009 initial public offering, including the 17% reduction in ownership.

THIRD QUARTER PRODUCT AND PIPELINE UPDATE

Metabolics/Cardiovascular

• Bristol-Myers Squibb and AstraZeneca announced on July 31 that the U.S. Food and Drug Administration (FDA) approved ONGLYZA® (saxagliptin), a dipeptidyl peptidase-4 (DPP4) inhibitor, for the treatment of type 2 diabetes mellitus in adults. The companies also announced on October 5 that the European Commission granted marketing authorization for ONGLYZA.
• In October, the company announced results of a 18-week Phase IIIb study in adults with type 2 diabetes with inadequate glycemic control on metformin therapy alone. The study showed that the addition of treatment with ONGLYZA 5mg per day achieved the primary objective of demonstrating non-inferiority compared to addition of treatment with JANUVIA (sitagliptin) 100mg per day in reducing glycosylated hemoglobin level (HbA1c) from baseline.
• In October, the company also announced results from a 24-week Phase III clinical study of the investigational drug dapagliflozin. The study showed that dapagliflozin, added to metformin, demonstrated significant mean reductions in the primary endpoint, HbA1c, and in the secondary endpoint, fasting plasma glucose in patients with type 2 diabetes inadequately controlled with metformin alone, as compared to placebo plus metformin. The study also showed that individuals receiving dapagliflozin had statistically greater mean reductions in body weight compared to individuals taking placebo.
• Bristol-Myers Squibb and sanofi-aventis announced results of the CURRENT OASIS-7 study at the European Society of Cardiology. The study provided information about an intensified dose-regimen of PLAVIX® in acute coronary syndrome (ACS) patients intended to undergo angioplasty.
  • While the study showed no added benefit on the composite primary end-point (cardiovascular death, heart attack or stroke at 30 days) with the higher dose when the entire ACS study population was considered, potentially medically relevant differences in patient outcomes were observed in relevant subgroups pre-specified for preliminary analysis, such as the percutaneous coronary intervention group.
• In July, the results of the apixaban ADVANCE-2 study were presented at a late-breaking clinical trial session at the Congress of the International Society of Thrombosis and Hemostasis. The study demonstrated that apixaban was superior to the European regimen of enoxaparin (standard of care) for reducing the risk of venous thromboembolism in patients undergoing total knee replacement surgery and showed lower observed bleeding rates compared to enoxaparin. The study also showed that the overall safety profile for apixaban was similar to enoxaparin.

Oncology

• On September 23 at the European Cancer Organisation/European Society of Medical Oncology Multidisciplinary Congress (ECCO/ESMO), data were presented on two Phase III ERBITUX® studies in first-line metastatic colorectal cancer patients.
  • A retrospective analysis of the Phase III CRYSTAL study demonstrated that ERBITUX®, when added to a FOLFIRI chemotherapy regimen, was shown to increase median overall survival in first-line metastatic colorectal cancer (mCRC) patients compared to those receiving FOLFIRI alone. In a subset of patients with wild-type K-ras tumors, median overall survival was increased to 23.5 months in patients who received ERBITUX plus FOLFIRI compared to 20 months for those taking FOLFIRI alone.
  • Another Phase III study of ERBITUX plus chemotherapy (primarily capecitabine plus oxaliplatin) in first-line mCRC, known as COIN, was conducted in the UK by the Medical Research Council. The COIN study did not meet its primary endpoint of overall survival.
• On July 20, the FDA approved revisions to the U.S. prescribing information for ERBITUX® concerning treatment of patients with epidermal growth factor receptor (EGFR)-expressing mCRC.

Immunology

• The company announced on September 3 that the FDA had accepted, for filing and review, the company’s submission of a biologic license application for belatacept, which is in ongoing Phase III development for use in kidney transplantation. The Prescription Drug User Fee Act (PDUFA) goal date for the FDA is May 1, 2010.
• On August 26, the company announced that clinical data added to the labeling for ORENCIA® support use of ORENCIA for patients with moderate to severe rheumatoid arthritis of less than or equal to two years duration. The efficacy and safety data further support use of ORENCIA in new-to-biologic patients with moderate to severe rheumatoid arthritis.

STRATEGIC UPDATE

Bristol-Myers Squibb completed its tender offer for the acquisition of Medarex, Inc. on September 1. The acquisition positions Bristol-Myers Squibb for long-term leadership in biologics; gives the company full rights to a promising Phase III compound, ipilimumab; significantly expands the company’s oncology and immunology pipeline and provides access to novel antibody discovery technology.

On September 15, Bristol-Myers Squibb announced the sale of its OTC assets in Asia Pacific, excluding China and Japan, and shares in PT Bristol-Myers Squibb Indonesia Tbk to Taisho Pharmaceutical Company Ltd. for $310 million, due in the fourth quarter.

On October 1, the company sold its mature pharmaceutical brands and a manufacturing facility in Australia to Sigma Pharmaceuticals Limited for $62 million, also due in the fourth quarter.

2009 GUIDANCE

Bristol-Myers Squibb is raising its 2009 GAAP EPS from continuing operations guidance to $1.72 to $1.77 and refining its non-GAAP EPS from continuing operations guidance to $2.00 to $2.05. Key 2009 guidance assumptions include mid single-digit revenue growth (high single digit growth excluding foreign exchange); a full-year gross margin improvement of approximately 200 basis points; advertising and promotion increase in the low-to-mid single-digit range; marketing, sales and administrative expense decrease in the low-to-mid single digits; research and development expense growth in the mid single-digit range; and an effective tax rate of approximately 25%.

The company reaffirms guidance that it expects non-GAAP earnings per share from continuing operations attributable to the company to grow at a minimum 15 percent compounded annual growth rate, from the 2007 base through 2010 without rebasing for the sale of the ConvaTec business, excluding the impact of any U.S. healthcare reforms, costs associated with productivity transformation initiatives and other specified items that have not yet been identified and quantified.

The financial guidance for 2009 and the three-year compound annual growth rate include the impact of the company’s acquisition of Medarex and exclude any potential future strategic acquisitions and divestitures. The acquisition of Medarex is expected to decrease the company’s earnings per share by $0.02 to $0.03 in 2009 and $0.07 to $0.09 in 2010.

The non-GAAP 2009 guidance and the three-year compound annual growth rate exclude other specified items such as gains or losses from sale of businesses and product lines; from sale of equity investments and from discontinued operations; restructuring and other exit costs; accelerated depreciation charges; asset impairments; charges and recoveries relating to significant legal proceedings; upfront and milestone payments for licensing arrangements; debt retirement costs; impairments to investments; and significant tax events.

Source: Bristol-Myers Squibb