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Bristol-Myers Hits 52-Week High

Zacks Equity Research

Shares of Bristol-Myers Squibb Company (BMY) ended the trading session on Mar 12, 2013 by hitting its 52-week high of $38.22. The long-term expected earnings growth rate for this stock is 5.3%.

On Jan 24, 2013 Bristol-Myers reported higher-than-expected earnings in the final quarter of 2012 on the back of lower costs. However, adjusted earnings in the final quarter of 2012 were 11% below the year-ago earnings.

The year-over-year decline in earnings was due to reduced sales of hypertension treatment Avapro/Avalide and blood-thinner Plavix, which went off-patent in the US in Mar 2012 and May 2012, respectively. Bristol-Myers co-developed the drugs with Sanofi (SNY).

Bristol-Myers is looking to strengthen its product portfolio by launching new drugs to make up for the loss of revenues following the genericization of key drugs, especially Plavix. The company met with a fair amount of success in this respect in 2012. Many new products were approved in 2012. The approval of Eliquis for reducing the risk of strokes and systemic embolism in patients suffering from nonvalvular atrial fibrillation (NVAFF) in the US, EU and Japan has boosted the stock.

In Jul 2012, Erbitux’ label was successfully expanded in the US when the FDA cleared the drug as a first-line treatment in combination with FOLFIRI in patients with wild-type KRAS, epidermal growth factor receptor (:EGFR)-expressing metastatic colorectal cancer. The EU approval of Forxiga for treating type II diabetes patients is another significant event for Bristol-Myers in 2012. Many important products were approved in 2011 as well. We expect Bristol-Myers to continue launching new products in 2013 as well. Given the strong product portfolio, we expect Bristol-Myers to easily achieve its 2013 earnings guidance of $1.78–$1.88 per share.

Moreover, Bristol-Myers is looking to combat the generic threat hanging over its key drugs through partnering deals and acquisitions. In Feb 2013, Bristol-Myers announced that it has inked a deal with Reckitt Benckiser Group plc for three years. As per the terms of the deal, Reckitt Benckiser will get exclusive rights to commercialize several over-the-counter drugs in Bristol-Myers’ portfolio targeting Latin American markets (primarily Mexico and Brazil). In Aug 2012, Bristol-Myers acquired Amylin Pharmaceuticals, Inc. in a bid to diversify its business to combat the generic threat and bolster its position in the lucrative diabetes market. We believe that such strategic deals/acquisitions will help Bristol-Myers augment its product portfolio/pipeline, thereby driving the top line.

Other Stocks to Consider

Bristol-Myers, a large-cap pharma company, carries a Zacks Rank #3 (Hold). Stocks such as Eli Lilly and Company (LLY) and Novo Nordisk (NVO) appear to be more attractive in the large-cap pharma space. Both the stocks carry a Zacks Rank #2 (Buy).

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