In the latest quarter, Bristol posted net sales of $3.9 billion, a decrease of 27% compared to the same period a year ago. The U.S. patent expiration of top seller Plavix in May 2012 led American net sales to decrease 44% to $2 billion, though international sales increased 6% to $1.9 billion. Bristol’s net earnings came in at $609 million, or $0.37 per share, in the quarter compared to $1.1 billion, or $0.64 per share, a year ago. Adjusted net earnings were $679 million, or $0.41 per share, compared to $1.1 billion, or $0.64 per share, for the same period in 2012.
The loss of Plavix patent protection was a serious blow to the company but other meaningful patent losses over the next couple of years look very likely. Expirations are expected for a drug called Baraclude in 2013 and for Abilify and Sustiva in 2015. These drugs together generate around $5.1 billion of revenue a year, about 30% of the current sales run rate.
Given the state of the company, Bristol Myers Squibb Co. (NYSE:BMY) shares look a bit expensive. Based on a generous assumption of annual sales around $18 billion with cash earnings of $3.88 billion, the company is valued at a robust 19x multiple using a cash earnings times a capitalization multiple valuation. Using 2013 company guidance of roughly $16.4 billion in revenue and cash earnings of $2.46 billion, the shares trade at a very aggressive 30x multiple.
In comparison, competitor Merck looks to trade at a confident but less ambitious level. It reported worldwide sales of $10.7 billion for the first quarter of 2013, a decrease of 9% compared with the prior year. Pharmaceutical sales declined 12% to $8.9 billion, though revenue from emerging markets grew 6% with China providing much of the growth with sales increasing 23%.
Merck expects full-year 2013 adjusted earnings to be between $3.45 and $3.55 a share, which equates to revenue around $46 billion and cash earnings of roughly $8.84 billion. Based on these figures, the company currently trades near a 16x multiple.
Conclusion
The results from Bristol Myers Squibb Co. (NYSE:BMY)’s new oncology drug look extremely promising. But that promise and more may already be priced into the stock. Hopefully, a large number of patients will be able to benefit from the company’s discovery. But investors might want to be a bit cautious with the stock. By not paying too much, they might also derive a reward from owning the company’s shares.
Bob Chandler has a short position in Bristol-Myers Squibb. The Motley Fool owns shares of Dendreon. Bob is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article Beware the Bullishness on Bristol-Myers originally appeared on Fool.com and is written by Bob Chandler.
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