Earnings season has descended upon us once again, with some of the top names in health care reporting today. So, let's take a closer look at Bristol-Myers Squibb (NYSE:BMY), Merck & Co. (NYSE:MRK), and Sanofi's (NASDAQ:SNY) first-quarter earnings.

Bristol-Myers beats consensus but not in a good way
Sometimes a beat on earnings isn't exactly good news, shown by Bristol-Myers first-quarter earnings release this morning. Although this pharma giant beat consensus on earnings per share by $0.03 or 7%, revenue fell by 1% year over year. So, you need to understand that this beat on earnings is the result of a lower effective tax rate for the year, not top-line growth. Specifically, the company reported that its effective tax rate fell by 2.6 percentage points for the year, from 7.6% to 5% for the same period a year ago.

Because overall U.S. sales fell by 10% in the first quarter compared to a year ago, Bristol-Myers also missed consensus on revenue by $80 million. On the bright side, most of this miss can be attributed to its diabetes alliance with AstraZeneca, which the company divested in the quarter for a total of $3.3 billion. 

Bristol-Myers also increased the lower bound of its 2014 annual guidance by $0.05 to $1.70, while maintaining the upper bound at $1.80 and acquired privately held iPierian for $175 million in the first quarter. This deal should boost the company's portfolio of therapies for neurodegenerative disorders. Overall, it looks like a decent first quarter for this pharma stalwart, although the market appears displeased with the revenue miss, as shares are down about 2%.

Merck also beats on earnings but misses on revenue
Merck beat consensus estimates on earnings today by over 11%, reporting earnings per share of $0.88 for the quarter on $10.26 billion in revenue. Even so, the company missed on revenue for the quarter by $180 million due to generic competition for its allergy and asthma drug Singulair, as well as a decline in revenues for both its consumer care and animal-health units. Merck's management said that foreign exchange rates also hurt revenues in the quarter. Despite this miss on revenues, Merck shares are moving higher today.

My view is that Merck is continuing its recent bull run largely because of investor enthusiasm for its cancer immunotherapy drug MK-3475. The company started the regulatory process for the drug earlier this year by submitting a rolling submission to the Food and Drug Administration, which is expected to be completed by mid-2014. MK-3475's initial indication as a treatment for advanced melonoma is expected to bring in close to $500 million in revenues, if it's ultimately approved. And while that may seem small compared to Merck's overall revenues, it would undoubtedly help the company compensate for lost revenues from increasing generic competition for some of its former star drugs. 

Sanofi's first-quarter sales were sluggish
Shares of the French biopharma Sanofi are down today due to decreasing sales for its animal health and vaccine units, as well as depreciation in major foreign currencies such as the U.S. dollar during the quarter. Overall, Sanofi sales slipped by 2.7% for the quarter in constant currencies, compared to a year ago. Even so, earnings per share still grew by 5.8% (in constant currencies) year over year. 

On the bright side, Sanofi's subsidiary Genzyme sported a stellar 21.5% growth rate in sales for the quarter, driven mostly by increasing sales of its relapsing MS treatment Aubagio. Sanofi's diabetes franchise and consumer health-care units also posted double-digit growth for the quarter. Finally, Sanofi expects to achieve several clinical and regulatory milestones for some of its top experimental treatments during the year that are worth keeping tabs on going forward.  

Foolish wrap-up
While earnings are always important for investors to pay attention to, this quarter is proving to be particularly important because they appear to be driving the frenzy of M&A activity in the health care sector lately. A common theme that is emerging is that large pharmas are keenly interested in generating cost savings during a time of falling revenues, stemming from the so-called patent cliff. As all three of these top pharma companies' revenues fell in the quarter, you shouldn't be surprised to see even more M&A activity in the coming weeks. Stay tuned!