AEGiS-WSJ: Bristol-Myers Squibb's Profit Nearly Doubles to $1 Billion

Important note: Information in this article was accurate in 2005. The state of the art may have changed since the publication date.

Bristol-Myers Squibb's Profit Nearly Doubles to $1 Billion

Wall Street Journal - July 29, 2005
Paul Davies at paul.davies@wsj.com

Bristol-Myers Squibb Co.'s second-quarter earnings nearly doubled, helped by a small sales increase, favorable tax benefits and a favorable comparison with the year-earlier quarter, when it took a heftier charge for litigation expenses. The company also announced plans to launch a rheumatoid arthritis drug early next year.

The New York company, maker of cholesterol drug Pravachol and blood-thinner Plavix, earned $1 billion, or 50 cents a share, during the quarter, up 90% from $527 million, or 27 cents a share, a year earlier. Sales increased 1.5% to $4.89 billion from $4.82 billion.

In the most recent quarter, tax benefits added $294 million to earnings, while the company took a charge of $269 million for additional litigation expenses related mainly to its recent deferred prosecution settlement with the U.S. Attorney in New Jersey over accounting and wholesaler inventory issues dating back several years. That charge was offset by $295 million in insurance-coverage reimbursement for the accounting and wholesaler issues. A year earlier, the company took a $455 million charge for litigation expenses.

In its pharmaceutical business, Bristol-Myers continues to face pressure as key products lose patent protection and the company transitions to new products coming through the pipeline.

The company is gearing up for the launch next year of a new drug, Abatacept, to treat rheumatoid arthritis. The Food and Drug Administration is expected to hold an advisory-committee meeting to discuss the drug in September. Bristol-Myers plans to provide the initial supply of the drug, and it expects to seek FDA approval for Swiss manufacturing partner Lonza Group AG to produce the drug for the U.S. market to ensure there is enough supply to meet demand.

Meanwhile, sales of Pravachol, which loses patent protection in April 2006, fell 5% to $625 million from $656 million. U.S. prescriptions declined 14% due to increased competition from Lipitor and Vytorin, two rival drugs. Pravachol is the company's second-biggest selling drug.

Sales of Plavix, which is co-marketed with Sanofi-Aventis, increased 26% to $968 million from $769 million. Plavix faces a patent challenge from generic drug makers that is expected to begin trial later this year. Bristol-Myers said it expects to successfully defend the patent challenge, but a loss would have a major impact on sales and earnings.

Sales of other key drugs rose. Abilify, a schizophrenia treatment, more than doubled to $240 million from $122 million. Sales of Reyataz, an HIV treatment, more than doubled to $183 million from $85 million. Marketing, selling and administrative expenses increased 6% to $1.3 billion. Research and development costs increased 4% to $649 million.

"Despite short-term pressure on earnings, we'll continue to increase our investments in R&D, pipeline priorities, [and] new product launches," Chief Executive Peter R. Dolan said in a prepared statement.

European drug makers GlaxoSmithKline PLC and AstraZeneca PLC also reported higher earnings Thursday, although Glaxo's results were held back by the impact of manufacturing problems in Puerto Rico. AstraZeneca's second-quarter profit increased nearly 50% on strong drug sales and the firm named a new CEO.
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