Updated from 9:22 a.m. EDT
reported second-quarter earnings that soundly beat Wall Street's predictions thanks to a sharply lower effective tax rate, as well as strong showings from its schizophrenia, anticoagulant and HIV drugs.
The company also reaffirmed full-year earnings guidance that fit analysts' estimates. Shares rose 30 cents, or 1.2%, to $25.40 in early trading Thursday.
The New York-based drug company said earnings from continuing operations were $933 million, or 47 cents a share, on revenue of $4.89 billion for the three months ended June 30. The consensus prediction in a Thomson First Call survey was a profit of $731.5 million, or 36 cents a share, on revenue of $4.8 billion.
Andrew Bonfield, the chief financial officer, said the 11-cent difference between the company's performance and the consensus estimate was primarily due to favorable tax comparisons with the same quarter last year. The tax benefits accounted for 9 cents to 10 cents, while an improved performance accounted for 1 cent to 2 cents.
"We had a solid performance in the quarter," said Peter R. Dolan, the chief executive. "Despite short term pressure on earnings, we'll continue to increase our investments in R&D, pipeline priorities, new product launches and marketed growth drivers."
Dolan said the company anticipates renewed growth during the years 2007-2011, assuming experimental products, now in late-stage clinical trials, come to market and current top drugs keep performing well. The other big issue is whether Bristol-Myers Squibb and its partner
will prevail in a patent challenge by two generic drug companies against the anticoagulant Plavix, Bristol-Myers Squibb's best-selling drug.
On a GAAP basis, the company reported second-quarter earnings from continuing operations of $991 million, or 50 cents a share. That compares with $523 million, or 27 cents a share, for the same period last year. Second-quarter 2004 revenue was $4.82 billion.
The company predicted full-year earnings, on a non-GAAP basis, would be in the range of $1.35 to $1.45. The average Wall Street estimate is $1.40.
The company's latest second-quarter results were affected by several one-time items, including $269 million for increasing the
litigation reserves related to the settlement last month with the federal government of past wholesaler inventory and accounting irregularities. In addition, Bristol-Myers Squibb had $85 million in charges primarily associated with early debt retirement and a $295 million recovery from insurers, mainly for the inventory and accounting issues.
Also, the company recorded a $135 million tax benefit, reflecting an adjustment to its taxes due to its repatriation of foreign-subsidiary earnings at a reduced tax rate. The repatriation is permitted under a law signed by President Bush last year, giving companies one year to repatriate earnings at about one-seventh the traditional tax rate.
CFO Bonfield said Bristol-Myers Squibb repatriated $6.2 billion during the first quarter and expects to repatriate another $2.8 billion by the end of the year.
The $135 million tax benefit played a role in the lower tax rate for the second quarter, as did a gain of $159 million related to "certain tax contingencies," the company said. The benefits were partially offset by costs of $55 million for the tax treatment of some litigation reserves.
When all the tax math was done, Bristol-Myers Squibb reported a second quarter effective income tax rate of minus 1.9% vs. the second-quarter 2004 tax rate of 15.3%. During the second quarter of 2004, Bristol-Myers Squibb recorded $455 million in charges for litigation reserves and $86 million in other one-time charges.
For the latest quarter, sales of the company's biggest drug, the anticoagulant Plavix, gained 26% to $968 million. Sales of the schizophrenia drug Abilify jumped 97% to $240 million, and sales for the HIV/AIDS drug Reyataz more than doubled to $183 million. Among other major products, sales of the cholesterol drug Pravachol dropped 5% to $625 million, the blood pressure drug Avapro added 11% to $258 million, and the HIV/AIDS drug Sustiva advanced 9% to $167 million.