Bristol-Myers' Comeback Continues

Some large-cap drugmakers are in much better shape than others, even if their valuations don't always show it. Last week, Bristol-Myers Squibb (NYSE: BMY  ) , now one of the more prosperous large-cap pharmas, released another round of good news in its first-quarter financial results.

Ever since Bristol-Myers Squibb and partner Sanofi-Aventis (NYSE: SNY  ) vanquished the generic competition for Bristol-Myers' top drug Plavix in 2006, the company's financial fortunes have rebounded. In the first quarter, Bristol-Myers' sales from continuing operations gained a healthy 20%, and its adjusted operating income rose an even larger 51%, thanks to the resurgence of its anticoagulant Plavix. Plavix accounted for 31% of Bristol-Myers' pharmaceutical sales this quarter, and the drug's worldwide sales rose 39% year over year, now that the lingering effects of its generic competition have worn off.

While Plavix represents Bristol-Myers' most important near-term growth determinant, more recently launched drugs, like cancer treatments Sprycel and Ixempra, will help to determine the company's longer-term financial fortunes. Although these compounds amount to only a fraction of Plavix's sales today, combined revenue from Sprycel and Ixempra climbed 28% sequentially. Regarding its pipeline, Bristol-Myers predicts a "mid-year" FDA New Drug Application filing for its diabetes treatment saxagliptin, a potential competitor to Merck's (NYSE: MRK  ) Januvia.

Like other large-cap drugmakers such as Biogen Idec (Nasdaq: BIIB  ) , Bristol-Myers has issued multiyear financial guidance. Its stated goal is 15% non-GAAP compound annual earnings-per-share growth from 2007 through 2010. After its robust first-quarter results, Bristol-Myers seems one step closer to this target.

Many traditional large-cap pharmas like Pfizer (NYSE: PFE  ) and Eli Lilly (NYSE: LLY  ) will face tough revenue challenges when their top drugs gain generic competition in the next three years. Bristol-Myers is no different; even after fighting off more immediate competition, its key Plavix patents will expire no later than in 2011 in the U.S. In that light, it's crucial for Bristol-Myers' late-stage pipeline and newly launched drugs to keep maturing strongly.