Biotech Values

[DewDiligence]

BMY was up 4% Thursday (a very big move for such a stable stock)
because the 2010 EPS hit from ObamaCare of $0.12 turned out to be
smaller than investors had feared. Investors had expected a bigger hit
because 2/3 of BMY’s sales come from the US and one of BMY’s biggest
drugs, Abilify, derives a high proportion of its sales from Medicaid.

Beyond the headline numbers, BMY’s earnings report contained good
news and bad news. The good news: BMY’s underlying business strength
would have caused 2010 EPS guidance to be raised by $0.05 if not for
ObamaCare; thus, the net cut to BMY’s 2010 EPS guidance was only $0.07
despite the $0.12 hit from ObamaCare. The bad news: the ObamaCare hit
will be twice as large in 2011 as in 2010, causing revenue to be clipped by
$600-800M. (See #msg-49486773 for a blow-by-blow description of why the
hit becomes much larger in 2011.)

http://www.zacks.com/stock/news/33554/Bristol-Myers+Tops+but+Trims

›Bristol-Myers Tops but Trims

Thursday April 29, 2010, 1:51 pm EDT

Bristol-Myers Squibb Company (NYSE: BMY) earned 56 cents per share in the first quarter of fiscal 2010, far above the Zacks Consensus Estimate by 5 cents. The company had earned 42 cents per share in the year-ago quarter. However, the company has reduced its 2010 forecast prompted by costs associated with U.S. healthcare reform.

On a reported basis, Bristol-Myers earned 43 cents per share in the first quarter of 2010 as opposed to 33 cents in the comparable quarter of 2009.

Net sales in the reported quarter climbed 11.3% year-over-year to $4.81 billion. The favorable currency exchange rates favorably boosted revenues in the quarter by approximately 3%. The recently enacted healthcare reform has negatively impacted net sales in the reported quarter by 1%.

The jump in net sales for the reported quarter was primarily attributable to strong sales of Plavix, an anti-platelet blood thinner indicated to reduce the risk of heart attack in patients with atherosclerosis (the build-up of plaque and hardening of the arteries), and Baraclude for treating hepatitis B virus. In addition, Bristol reports robust sales of HIV treatment drugs Reyataz and Sustiva.

Global net sales of Plavix, co-marketed with Sanofi-Aventis (NYSE: SNY), climbed 16% year-over-year to $1.67 billion in the quarter. Worldwide sales of Sustiva in the quarter came in at $335 million, up 15%. Reyataz sales for the quarter stood at $373 million, up 16%, and Baraclude sales came in at $216 million, up 42%.

Global sales of Abilify, for the treatment of schizophrenia and depression, came in at $617 million, up 5% from the year-ago quarter. Sales of the rheumatoid arthritis drug Orencia stood at $169 million, up 36%, while the leukemia drug Sprycel registered sales of $131 million, up 49%. The global net sales of Ixempra for the reported quarter climbed 21% year-over-year to $29 million.

Cancer drug Erbitux generated sales of $166 million in the reported quarter, up 1%. Furthermore, Onglyza a type II diabetes treatment, co-developed with AstraZeneca plc (NYSE: AZN) contributed approximately $10 million to sales in the quarter. The gross margin as a percentage of net sales stood at 72.8% in the reported quarter.

Marketing, selling and administrative expenses were flat at $900 million in the reported quarter. Advertising and product promotion for the quarter came in at $212 million as against $248 million in the first quarter of 2009. Research and development expenses came in at $910 million, compared to $908 million in the year-ago quarter.

Bristol-Myers exited the quarter with $5.13 billion in cash and cash equivalents. The effective tax rate on earnings stood at 24.2% for the quarter as against 23% in the year-ago quarter.

Outlook Trimmed

Bristol-Myers has provided guidance for 2010. The company estimates healthcare reform to impact earnings by 12 cents in 2010. Bristol-Myers has trimmed its 2010 earnings (excluding special items) forecast by 5 cents to $2.10 per share - $2.20 per share as the impact of healthcare reform is expected to partially offset the strong underlying business and mitigating initiatives undertaken by Bristol-Myers. The company had projected 2010 earnings (excluding special items) in the range of $2.15 per share to $2.25 per share in January 2010.

The company updated its 2010 reported earnings guidance range to $1.84 to $1.94 per share. The forecast reflects higher manufacturing rationalization costs and a licensing transaction, in addition to the impact of the healthcare reform. The 2010 guidance assumes a mid-single-digit revenue growth.‹