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Can Bristol-Myers Squibb Beat the S&P in 2014?

By Peter Stephens – Feb 21, 2014 at 5:05PM

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Shares of Bristol-Myers Squibb (NYSE: BMY) have been performing well of late, but can it beat the S&P 500 in 2014?

Shareholders in Bristol-Myers Squibb (BMY 0.31%) have had a great year, with shares in the company gaining 46% -- comfortably beating the S&P 500, which has gained 21%.

Furthermore, Bristol-Myers Squibb has made an encouraging start to 2014, with shares up 0.5% -- 1% ahead of the S&P 500, which is currently down 0.5% in 2014. Can Bristol-Myers Squibb extend its outperformance through 2014, and comfortably beat the wider index, as it did last year? Or will the S&P 500 overturn Bristol-Myers Squibb's narrow lead?

Patent expiries
As all Foolish investors know, the pharmaceutical sector is going through a period of change, with many key, blockbuster drugs going off-patent this year, next year, and through the end of the decade. Therefore, the onus is on companies such as Bristol-Myers Squibb to counter these challenges through the development of new blockbuster drugs to replace them. Indeed, the news flow concerning such developments has a major impact on the share prices of pharmaceutical stocks over the short run, so it's worth highlighting some key developments that have occurred recently for Bristol-Myers Squibb that could have a major impact on its future share price.

Potential catalysts In 2014
In its most recent fourth-quarter results, Bristol-Myers Squibb reported key updates surrounding drugs such as Eliquis and Nivolumab. The former had a Supplemental New Drug Application accepted for review by the FDA for the treatment of deep vein thrombosis (DVT) and pulmonary embolism (PE), with the goal date for a decision being August of this year. Furthermore, the European Medicines Agency (EMA) also accepted for review an application for Eliquis for the treatment of DVT and PE.

Meanwhile, cancer prospect Nivolumab continues to be the subject of ongoing studies, with Bristol-Myers Squibb awaiting further data before advancing it to trials in combination with the long-established drug, ipilimumab. Further news on both drugs is anticipated throughout 2014 and, as mentioned, is likely to have a major impact on shares.

A sector-wide challenge
Of course, Bristol-Myers Squibb isn't the only pharmaceutical stock that is set to report highly relevant news flow in 2014 regarding its pipeline. For instance, Pfizer (PFE -0.33%), which partners Bristol-Myers Squibb on the aforementioned Eliquis drug, has experienced positive news flow in 2014. Palbociclib (a breast cancer drug), and Prevnar (a pneumonia vaccine) have the potential for further upbeat developments to push shares higher throughout the year.

In addition, Merck (MRK 0.22%) has recently reported a number of encouraging developments, notably lambrolizumab, where Merck has announced four collaborations to evaluate novel combination regimens and initiation of a Phase 1 study in 20 new cancer types. As with Pfizer and Bristol-Myers Squibb, Merck is battling against patent expiries, but the market is warming to its comeback, with shares being up 12% already in 2014.

Looking ahead
In addition, Bristol-Myers Squibb will use 2014 to continue with its restructuring toward being a specialist, niche player that is focusing on specialist treatments rather than mass-market drugs. The company hopes that in doing so, it will improve margins; but this will take time -- as reflected in the company's earnings-per-share growth prospects for the year, which show a decline of around 2% is expected this year.

However, it seems as though this has been priced in by the market and, with investors seemingly keen to buy in to the restructuring story, and being encouraged by the progress and strength of the company's pipeline, Bristol-Myers Squibb looks set to have another strong year in 2014. Indeed, with further progress surrounding its restructuring and additional positive news flow regarding its pipeline, it could well extend its lead over the S&P 500 in 2014.

Peter Stephens has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Stocks Mentioned

Pfizer Stock Quote
Pfizer
PFE
$50.91 (-0.33%) $0.17
Merck & Stock Quote
Merck &
MRK
$110.04 (0.22%) $0.24
Bristol-Myers Squibb Stock Quote
Bristol-Myers Squibb
BMY
$81.13 (0.31%) $0.25

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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