Can Bristol-Myers Squibb Make a Comeback in 2014?

So far this year Bristol-Myers Squibb (NYSE: BMY  ) has underperformed the broader market. The impending loss of Abilify and Baraclude exclusivity is weighing on the stock. Luckily, newer commercial stage products and a late-stage cancer therapy are highly encouraging. Let's take a closer look at some growth drivers to see if they can carry the company over its rapidly approaching patent cliff.

BMY Chart

Source: Bristol-Myers Squibb data by YCharts.

Earning more with less
Over the past several years Bristol-Myers has significantly narrowed its focus to a more easily managed stable of rapidly growing drugs. The strategy appears to be working. During the first quarter, four of the company's potential blockbusters (according to current run rate) reached double-digit, year-over-year growth. Despite having far more commercial stage products, Merck  (NYSE: MRK  )  and Pfizer  (NYSE: PFE  )  combined can claim just three.

Leading the pack at Bristol-Myers is leukemia therapy Sprycel. First quarter year-over-year sales of the oral kinase inhibitor grew 19% to $342 million. Sprycel is now neck-and-neck with Novartis'  (NYSE: NVS  )  next-generation kinase inhibitor Tasigna, which reported first quarter sales of $337 million.

Both therapies are marketed as improvements over the successful, but aging Gleevec. If we use 2013 Gleevec sales of about $4.7 billion as a rough measurement of the kinase inhibitor market, it looks like Sprycel has plenty of room to grow, although of course it needs to stay ahead of the competition.

During Bristol's first quarter earnings call, management dropped hints that Sprycel is elbowing its way to the front by beating Tasigna in terms of U.S. market share. You'll want to keep an eye on this race going forward, because winning it could go a long way toward replacing losses from the upcoming patent cliff.

Catching up
Eliquis hasn't hit blockbuster status like Sprycel, but it might get there soon. Partners Bristol-Myers and Pfizer are finally making some progress with the next-generation blood thinner. Recent investments in physician education and direct-to-consumer advertising appear to be working, as first quarter sales of Eliquis grew 49% to $106 million last quarter. Sales are still fairly low, but at this rate, the blood thinner could reach blockbuster status next year.

A report AdverseEvents released earlier this year might help it along. The study suggests adverse events, and deaths, among patients receiving Eliquis is roughly half that of patients using Xarelto from partners Johnson & Johnson (NYSE: JNJ  ) and Bayer.

Johnson & Johnson was quick to point out that far less data from Eliquis patients was available at the time of the AdverseEvents study, but sequential sales figures for the competing blood thinners suggest physicians may have noticed anyway. Johnson & Johnson recorded first quarter Xarelto sales of $319 million, an increase of about 18% from the previous quarter. That's an impressive gain, but it's much slower than Eliquis' sequential increase over the same two periods. Keep your eyes open over the next few quarters to see if Eliquis continues closing the (still substantial) gap.

Sharing the lead
Looking beyond Bristol's commercial stage products, the biggest growth driver could be nivolumab, the anti-PD1 cancer immunotherapy in late-stage trials for a number of oncology indications. The race to win approval in the exciting cancer immunotherapy field is heating up between Merck and Bristol-Myers.

Merck has been pushing MK-3475 through the development process as quickly as possible. The company is in the middle of a rolling biologics license application or BLA, for advanced melanoma that it intends to finish next quarter.

Last week Bristol-Myers announced that the FDA will allow a rolling submission for nivolumab based on results from a third-line lung cancer study. Bristol intends to complete the BLA before the end of the year. Given that Merck will likely finish its BLA before Bristol-Myers, nivolumab probably won't be the first anti-PD1 on the market. Luckily, they're applying for separate indications.

Final take
With peak annual sales estimates north of $8 billion, nivolumab alone could carry Bristol-Myers over its patent cliff. Unfortunately, the FDA is unlikely to reach a decision before the end of the year. Growth among currently market products is impressive, but the company is already trading at a high PE ratio of about 29. The stock might not overtake the broad market this year, but 2015 could be very interesting given the various potential growth drivers.

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