Bristol-Myers Posts Solid Quarter

The company tops Wall Street earnings estimates, sparking a modest gain in its stock price.
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Updated from 9:07 a.m. EDT

Bristol-Myers Squibb

(BMY) - Get Report

said Thursday that it handily beat Wall Street earnings estimates, producing a modest advance in its stock price.

The New York-based pharmaceutical company reported second-quarter earnings per share of 45 cents, well ahead of the 38-cent consensus of 26 analysts polled by Thomson First Call.

EPS for the quarter was up 80% from the 25 cents for the same period last year. Net earnings of $878 million rose 83% from the year-ago quarter's $479 million. Sales gained 22% to $5.1 billion, from $4.1 billion.

The company also reaffirmed its full-year earnings guidance of $1.60 to $1.65 a share.

But the big earnings gain produced a small stock gain. Company shares rose 2.2%, or 57 cents, closing at $26.44.

The modest market move "was probably because of management's caution about patent expirations in the next couple of years," said Stephen A. O'Neil, a health care analyst for the Louisville, Ky., investment banking firm Hilliard Lyons. O'Neil has a neutral rating on the stock; he owns shares, but he doesn't know of any investment banking relationship with his firm and Bristol-Myers Squibb.

Company executives acknowledged Thursday in a conference call with analysts that patent expirations could knock out $1 billion per year in sales. Peter R. Dolan, the company's chairman, chief executive and president, said patent expirations will start having an effect in the fourth quarter of 2003, adding that the $1 billion figure will start in 2004.

Andrew Bonfield, the chief financial officer, said patent expirations on the cholesterol-fighting drug Pravachol, the company's biggest product, will start next year and run through 2006. Bristol-Myers loses U.S. exclusivity on the drug in October 2005.

Executives also conceded that the big gain in the second quarter was due in part to the weak results of last year's second quarter, as Bristol-Myers Squibb continued to feel the affects of high drug wholesaler inventories. The company experienced a heavy buildup of inventories at the wholesale level, primarily in 2001, thanks primarily due to incentives offered to wholesalers.

By April 2002 it began working to reduce those wholesaler inventories, and by October 2002 the company decided to restate earnings for the three years ended Dec. 31, 2001, as well as for the first two quarters of 2002.

Dolan and other executives said Thursday that they are counting on strong sales from existing products as well as recently launched and "late-stage

research pipeline" products to offset the sales losses due to patent expirations.