Bristol-Myers Squibb (NYSE:BMY) posted its third-quarter earnings this morning before the bell, beating consensus on both earnings per share and revenue. Specifically, the company reported GAAP EPS of $0.43 for the quarter, compared to the Street's estimate of $0.42. Revenue came in at $3.92 billion for the three month period, topping consensus by $12 million. Bristol also lowered its 2014 GAAP EPS guidance to $1.15-$1.25, down from $1.50-$1.60, presumably due to higher than expected research and development costs.  

Despite these rosy quarterly numbers, Bristol still saw revenue drop by 4% year-over-year, reflecting the loss of exclusivity for former top selling drugs like the blood thinner Plavix and the divestiture of its diabetes franchise to AstraZeneca (NASDAQ:AZN). On a GAAP basis, EPS edged higher by 2% relative to a year ago, mostly due to the company's widespread restructuring efforts in the wake of the patent cliff.

Top-line is being held steady by newer drugs
A deeper look at today's report shows that most of Bristol's strong revenue performance during the quarter can be attributed to handful of newer drugs, namely Yervoy, Sprycel, Orencia, and Eliquis. For example, the company's skin cancer drug, Yervoy, saw sales grow by 47% to $350 million, relative to the same period a year ago. Sprycel sales also jumped by 22% to $385 million during the quarter.

What's key to understand is that the double digit sales growth of these next generation drugs did more than simply offset the marked decline in former stars like Abilify, which saw sales drop by a whopping 21% during quarter. If its diabetes alliance with AstraZeneca is excluded, for instance, we can see that Bristol's revenue actually grew by 7% year-over-year. 

New drug launches should help to further boost its top-line soon
Putting this quarter's sales numbers aside for the moment, Bristol's management was quick to point out that its PD-1 inhibitor, Opdivo, and its hepatitis C dual regimen of Daklinza and Sunvepra should help to return the company to growth in the near future. Presently, Opdivo is under regulatory review for advanced melanoma, and the company's hepatitis C regimen has been launched in Japan and several countries within the EU.  

Even so, I think it's best to take a skeptical view of both of these products for the time being. Opdivo would initially be approved for an indication that is stacked with new drugs, making it hard to carve out a profitable niche. Moreover, Bristol decided not to launch its hepatitis C regimen in the U.S. following the approval of Gilead Sciences' (NASDAQ:GILD) fixed dose combo pill Harvoni earlier this month. In short, these two products look like they have limited upside because of these issues, at least for the moment.    

What to watch
Bristol is in a battle with its Big Pharma competitors to gain market share in the next round of "game-changing" drugs, such as PD-1 inhibitors and so-called "terminator" hep C treatments. At present, it looks like it lost the first round to Gilead in the hep C arena, putting a heavier focus on Opdivo to perform well. Nonetheless, Opdivo is in a tight race with Merck's (NYSE:MRK) competing PD-1 inhibitor, Keytruda, to gain market share. Put simply, this is a pivotal issue for investors to keep a close watch on going forward.  

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