Bristol-Myers Squibb Co. Earnings: What's Next for the Drugmaker?

Bristol-Myers Squibb (NYSE: BMY  ) will release its quarterly report on Friday, and the stock has already built in strong expectations about the drug developer's future, rising to their best levels since the early 2000s. Yet even though the company has worked to focus on its most lucrative potential treatment areas, Bristol-Myers will still have to contend with Merck (NYSE: MRK  ) , Gilead Sciences (NASDAQ: GILD  ) , and other pharma giants in developing blockbuster drugs that can outcompete those of its rivals.

Bristol-Myers Squibb has done a great job over the past year in finding growth opportunities, with promising work in diabetes and other high-profile areas. But more recently, the company has looked at narrowing in on specific categories of drugs, including cancer treatments and immunotherapy. That transformation could help Bristol-Myers grow earnings even faster, but it still leaves the company open to plenty of competition. Let's take an early look at what's been happening with Bristol-Myers Squibb over the past quarter and what we're likely to see in its report.

Stats on Bristol-Myers Squibb

Analyst EPS Estimate

$0.43

Change From Year-Ago EPS

(8.5%)

Revenue Estimate

$4.30 billion

Change From Year-Ago Revenue

2.6%

Earnings Beats in Past 4 Quarters

2

Source: Yahoo! Finance.

Can Bristol-Myers earnings turn back upward?
In recent months, analysts have gotten nervous about the long-term potential for Bristol-Myers Squibb earnings, reducing their full-year 2014 projections by $0.17 per share. That hasn't stopped the stock's rise, though, with gains of 11% since mid-October.

Bristol-Myers Squibb's third-quarter earnings report was reasonably strong, with sales climbing 9% despite the ongoing impact of the loss of patent protection on former blockbuster drug Plavix. Bristol-Myers has seen success from some of its newer drugs, with skin-cancer treatment Yervoy's sales climbing 33% during the quarter. Moreover, international growth has been solid, with sales up 18% internationally despite pressure from a wide-ranging Chinese probe of several pharmaceutical companies that has had a big impact on sales throughout the industry.

Source: TaxFix.co.uk, Flickr.

But the real driver for Bristol-Myers has been promising drug results and strategic moves. In late October, the company said that its nivolumab treatment for non-small cell lung cancer produced impressive survival results, encouraging an analyst upgrade of the stock. Moreover, Bristol-Myers became the first company to submit an all-oral hepatitis C treatment regimen for approval in Japan, following phase 3 data supporting the combination of its daclatasvir and asunaprevir drugs. In light of Gilead's lead in the hepatitis C space with its Sovaldi all-oral treatment, Bristol-Myers' victory in Japan was substantial, and it's working with Merck on a potential new combination therapy as well.

Bristol-Myers has made a huge strategic bet, though, with the sale last month of its stake in its diabetes treatment prospects to AstraZeneca (NYSE: AZN  ) . The move will allow Bristol-Myers to focus more on cancer drugs as well as its antiviral immunotherapies and some specialty drugs, but it ups the ante in forcing the company to fend off its competitors in those areas in order to succeed. Still, given the highly competitive diabetes market, Bristol-Myers might be better able to thrive in its remaining business areas without having to deal with the distraction of the highly dynamic diabetes-treatment area, where the FDA has been increasingly stringent in requiring costly trials.

In the Bristol-Myers earnings report, watch for the company to give a more detailed picture of its strategy after divesting its diabetes business. With more resources to dedicate to its remaining focus areas, Bristol-Myers Squibb needs to establish its ability to produce growth from its best prospects now and in the future.

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