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Is Bristol-Myers Squibb All Set for a Strong 2014?

By Peter Stephens – Mar 1, 2014 at 3:30PM

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After a great 2013, can Bristol-Myers Squibb (NYSE: BMY) perform as well in 2014?

Bristol-Myers Squibb (BMY 0.56%) enjoyed a scintillating year in 2013, as its shares posted gains of 66% -- well ahead of the S&P 500's return of 32%.

A key reason for this success could have been that the market is gradually warming to its new strategy, with Bristol-Myers Squibb shifting away from being a producer of mass-market drugs to a specialist, niche player. Furthermore, its results from the fourth quarter of 2013 showed that the company continues to make encouraging progress.

Although fourth-quarter net profit fell by 21.5%, this was due to the comparator results (the fourth quarter of 2012) having a $411 million tax benefit resulting from the writing off of a failed experimental medicine. The results, though, were ahead of Wall Street expectations and showed top-line growth of 6% for the quarter. However, after such an impressive year, can Bristol-Myers Squibb do more of the same in 2014?

Upbeat news flow
Recent pipeline developments have been encouraging for Bristol-Myers Squibb. For instance, it reported this week that the FDA has granted investigational DCV Dual Regimen (daclatasvir and asunaprevir) Breakthrough Therapy Designation for use as a combination therapy in the treatment of hepatitis C. This is positive news for the company and is based on data from its ongoing Phase 3 clinical trial program, with Breakthrough Therapy Designation likely to mean expedited development and review of the drug.

It also announced this week that the FDA has approved a drug developed alongside AstraZeneca (AZN -0.21%) to treat rare and potentially fatal disorders involving the loss of body fat. The drug, Myalept, has been developed in a partnership between Bristol-Myers Squibb and AstraZeneca and has been approved as a replacement therapy to treat complications caused by leptin hormone deficiency in patients with congenital generalized lipodystrophy. This involves a loss of fat tissue, leading to low levels of leptin, which can ultimately cause diabetes and pancreatitis.

In addition, Bristol-Myers Squibb also announced (alongside its partner, Pfizer (PFE -0.16%)) the results of a sub analysis of the phase 3 Aristotle trial in relation to patients with nonvalvular atrial fibrillation, or NVAF, which found that their Eliquis treatment was more effective than warfarin in reducing the risk of stroke and in reducing mortality across age groups. It was also associated with less bleeding and less intracranial haemorrhage, regardless of age. Again, this is encouraging news flow for Bristol-Myers Squibb and Pfizer, with the drug already approved to reduce the risk of stroke and systemic embolism in patients with NVAF in the U.S. and the European Union.

Elsewhere in pharmaceuticals
Of course, Bristol-Myers Squibb, Pfizer and AstraZeneca aren't the only stocks to have experienced positive news flow. Pharmaceutical peer, Eli Lilly (LLY -1.13%), just last week said that a once-weekly drug for type 2 diabetes was comparable to Novo Nordisk's once-daily treatment, Victoza, in reducing a measure of blood sugar in a patient study. Indeed, Eli Lilly hopes that this development could give it a competitive advantage, with sales of the drug having the potential to reach $2 billion, should it be approved by regulators.

Above-average yields
Despite shares increasing by 66% in 2013, Bristol-Myers Squibb continues to offer an above-average yield. Shares currently yield 2.6%, which is ahead of the S&P 500 yield of 1.95%. It also compares reasonably well to the yields offered by Eli Lilly and Pfizer, with the sector peers yielding 3.3% and 2.7% respectively.

For this reason, it looks as though all three stocks could have a promising year. Indeed, they are all ahead of the S&P thus far in 2014, with Bristol-Myers Squibb at the rear of the pack (up 1.5%, while Pfizer is up 5.2% and Eli Lilly has gained 16.8%, with the S&P 500 flat in 2014). However, because of its underperformance versus its peers in the first two months of the year, Bristol-Myers Squibb could reduce the gap and continue to outperform the wider index during the remainder of the year. Indeed, it looks all-set to have a strong 2014.

Peter Stephens owns shares of AstraZeneca. The Motley Fool has no position in any of the stocks mentioned. We Fools don't 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.

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