Bristol-Myers faces growing competition for key drugs as it reports 3Q results

Earnings Preview: Bristol-Myers 3Q earnings report

NEW YORK — Bristol-Myers Squibb Co., the world’s No. 15 drug maker by revenue, reports earnings for the third quarter on Thursday morning. The following is a summary of key developments and analyst opinion related to the period.

OVERVIEW: Growing competition for its top drugs threatens revenue for the maker of blood thinner Plavix, the world’s second-bestselling medication, and psychiatric drug Abilify. That’s before generic competition to multiple medicines starts hitting in a couple years.

Plavix has long been the standard anti-clotting treatment. It brought the company about $5.6 billion in revenue last year, and partner Sanofi-Aventis SA made about $3.7 billion more on foreign sales.

Plavix got its first real competition when Eli Lilly & Co.’s Effient got approved in July. Effient prevents more heart attacks than Plavix, but also causes more internal bleeding, so it will carry a boxed warning about that risk.

Three other blood thinners could get approved in the U.S. soon.

Research in August showed one of them, Brilinta from AstraZeneca PLC, reduced patients’ chances of dying by 20 percent, compared with Plavix. Johnson & Johnson’s Xarelto got a favorable review from FDA advisers in March, and Boehringer Ingelheim’s Rendix already is on sale in about 40 other countries.

Abilify, the No. 2 drug for Bristol-Myers with $2.2 billion in 2008 sales, got even more competition in August when the Food and Drug Administration approved Schering-Plough Corp.’s Saphris for schizophrenia and bipolar disorder. Existing competitors include Pfizer Inc.’s Geodon, Johnson & Johnson’s Risperdal, AstraZeneca PLC’s Seroquel and Eli Lilly & Co.’s Zyprexa. The drugs have combined sales of well over $15 billion a year.

On the upside, the FDA in July approved Onglyza, a new diabetes drug developed with partner AstraZeneca PLC. It was approved for sale in the European Union’s 27 countries two weeks ago. The drug is part of the DPP-4 inhibitor class of diabetes drugs, so it competes with Merck & Co.’s popular Januvia.

In September, Bristol-Myers completed a $2.1 billion acquisition of Medarex Inc., a biotech drugmaker developing treatments for immune system diseases and cancer. The two companies previously had been collaborating on a late-stage drug candidate, ipilimumab, for advanced skin cancer.

In July, GlaxoSmithKline PLC bought Bristol-Myers’s branded generic business in Lebanon, Jordan, Syria, Libya and Yemen for about $23.2 million in cash.

BY THE NUMBERS: Analysts polled by Thomson Financial expect, on average, earnings per share of 51 cents and revenue of $5.5 billion. In the year-earlier period, earnings per share were $1.29 per share, thanks to a boost from selling part of the business, and revenue was $5.25 billion.

ANALYST TAKE: Credit Suisse analyst Catherine Arnold expects strong growth from Bristol-Myers, led by sales of Abilify. She writes that investors no longer see Bristol as a potential acquisition target. Now, after its acquisition of Medarex, speculation is about which company Bristol will go after next. She thinks deals with Alexion, Biomarin, Rigel and Vertex all have “substantial merit.”

Meanwhile, she said investor focus remains on cost savings, sales of four growth drivers — Plavix, Orencia for rheumatoid arthritis, leukemia drug Sprycel and combination HIV drug Atripla — along with some key drugs in development. Those include the experimental blood thinner apixaban, which Bristol is developing along with Pfizer Inc., and the Medarex drug, ipilimumab.

Miller Tabak analyst Les Funtleyder says the key issue this quarter will be how well the launch of diabetes drug Onglyza is going. He also anticipates an update on late-stage testing of another potential diabetes drug, dapagliflozin, that works by helping the kidneys eliminate excess glucose.

Funtleyder wants to hear any new plans for the Mead Johnson nutrition business — Bristol-Myers spun off part but still has an 80 percent stake — and hopes for an update on the company’s “String of Pearls” strategy to buy up biotech assets and sell off non-core businesses.

He thinks the stock is attractive but won’t move much in the near term because of concerns about health care reform legislation and investor preference for cyclical stocks.

WHAT’S AHEAD: Onglyza, already on sale in the U.S., Canada and parts of Europe, will be launched in additional countries.

Bristol-Myers awaits a decision by year’s end on whether it and partner Otsuka Pharmaceutical Co. of Japan can market Abilify in the U.S. for a new use, irritability in kids with autism.

The company says it is still pursuing licensing and other deals, and it is awaiting approval of belatacept, for prevention of rejection of kidney transplants, next spring.

STOCK PERFORMANCE: Shares rose 14 percent to $22.52 during the third quarter.