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How Bristol-Myers Squibb Trounced Wall Street's Q4 Estimates

By Keith Speights - Feb 6, 2020 at 11:33AM

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In a word: Celgene.

All you have to do to gauge how good Bristol-Myers Squibb's (BMY 1.49%) fourth-quarter numbers were is look at the drugmaker's share price. The company announced its 2019 fourth-quarter and full-year results before the market opened on Thursday. Shares jumped close to 3% in early trading.

Investors were obviously happy with BMS' Q4 results. And there was one overwhelming factor behind the company's success in the quarter: Its recent acquisition of Celgene.

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Image source: Getty Images.

Blowing past Wall Street estimates

To say that Bristol-Myers Squibb beat Wall Street's Q4 estimates is an understatement. It absolutely trounced them.

The average analysts' revenue estimate for BMS in the fourth quarter was $6.14 billion. BMS reported Q4 revenue of $7.9 billion, up 33% year over year.

What about earnings? The consensus Wall Street estimate called for BMS to post adjusted earnings per share (EPS) of $0.88. The company's actual adjusted EPS in the fourth quarter came in at $1.22. 

There was a catch, of course. Analysts didn't include the impact of the Celgene acquisition in their estimates. Bristol-Myers Squibb closed that acquisition on Nov. 20, 2019, so its fourth-quarter results reflected more than one month of revenue generated by Celgene's products.

In total, BMS' revenue increased by $1.97 billion year over year in Q4. Celgene's top five drugs generated $1.85 billion of that growth. Were it not for BMS' acquisition of Celgene, we would be talking about how the company missed Wall Street estimates instead of blowing past them.

Growing and slowing

That's not to say that Bristol-Myers Squibb didn't have some of its own growth drivers. Its blockbuster blood thinner Eliquis raked in sales of $2.03 billion in the fourth quarter, up 19% year over year. Sales for arthritis drug Orencia jumped 8% to $792 million. BMS' fastest-rising star in Q4 was multiple myeloma drug Empliciti, with sales soaring 36% year over year.

However, not all of BMS' lineup performed well during the fourth quarter. Most significantly, the company's powerhouse cancer immunotherapy Opdivo saw sales slip 2% year over year to $1.76 billion. Sales for hepatitis B drug Baraclude sank 26% lower to $122 million. BMS' other established brands (which include several older antiviral drugs plus some of Celgene's legacy products) experienced a 39% sales decline.

Celgene's top drugs clearly made the difference in producing a great quarter versus a dismal quarter for Bristol-Myers Squibb. Even better, sales for those drugs are growing rapidly.

BMS reported Q4 net sales (which include sales made prior to and after the acquisition of Celgene) for blood cancer drug Revlimid of $2.8 billion, up 10% year over year. Sales for another blood cancer drug gained with the Celgene acquisition, Pomalyst, jumped 23% higher. Celgene's cancer drug Abraxane pulled in close to $300 million, a 25% year-over-year increase.

The Celgene deal also caused Bristol-Myers Squibb's costs to rise, though. BMS said that its marketing, selling, and administrative expenses in the fourth quarter grew 30% year over year primarily due to $400 million in spending related to its acquisition of Celgene. The buyout boosted BMS' research and development costs by $500 million in Q4. 

In addition, BMS recorded $1.1 billion for the amortization of acquired intangible assets mainly due to the Celgene transaction. Its income taxes were also much higher thanks primarily to the sale of Celgene's immunology drug Otezla to Amgen.

What's on the way

Bristol-Myers Squibb projects full-year 2020 revenue will be between $40.5 billion and $42.5 billion. The company expects full-year 2020 adjusted EPS of between $6 and $6.20. BMS even provided early guidance for full-year 2021, with the drugmaker projecting adjusted EPS between $7.15 and $7.45. As was the case with its Q4 results, most of the growth on both the top and bottom lines in 2020 and 2021 will be due to the impact of the Celgene acquisition.

The main thing to watch with pharmaceutical stocks, though, is the progress of their pipelines. An FDA approval decision on a combo of Opdivo and Yervoy in treating advanced hepatocellular carcinoma (HCC) is expected by March 10, 2020. The FDA should announce its decision on approval of the combo as a first-line therapy for non-small-cell lung cancer by May 15, 2020.

BMS anticipates FDA approval for Celgene's ozanimod in treating multiple sclerosis by March 25, 2020. It also looks for another FDA approval for Reblozyl, which was developed by Celgene and its partner Acceleron Pharma, in treating anemia associated with myelodysplastic syndromes (MDS) by April 4, 2020. Other major approval decisions are also on the way for Celgene's cell therapies liso-cel and ide-cel.

Some investors were critical of BMS' decision to buy Celgene when the deal was first announced. It's clear now, though, that the big drugmaker would be in a much worse position -- in the fourth quarter and beyond -- without the transformative deal.

Keith Speights owns shares of Bristol-Myers Squibb. The Motley Fool owns shares of and recommends Bristol-Myers Squibb. The Motley Fool recommends Amgen. The Motley Fool has a disclosure policy.

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