3 Things to Really Like About Bristol-Myers Squibb's Q4 Earnings Results

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When Bristol-Myers Squibb (NYSE: BMY) reported its third-quarter earnings results in October, some investors might have wondered if they needed to worry. The big pharma company posted a year-over-year earnings decline even worse than what Wall Street expected. However, those results weren't as bad as they seemed at first glance.

Bristol-Myers Squibb announced its fourth-quarter and full-year 2017 results before the market opened on Monday. Any reasons to worry seemed to be brushed aside as the company delivered a positive surprise. Here are three things to really like about BMS' results.

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1. Beating estimates

Bristol-Myers Squibb reported fourth-quarter revenue of $5.45 billion. Not only did that figure reflect a 4% increase over the prior-year period, but it topped the consensus analysts' estimate of $5.35 billion.

The drugmaker also beat Wall Street estimates with its bottom-line result. BMS announced non-GAAP net earnings of $0.68 per share in the fourth quarter, an increase of 8% over the prior-year period. The average analysts' Q4 earnings estimate was $0.67.

Eliquis was by far the biggest contributor to Bristol-Myers Squibb's success in the fourth quarter. The anticoagulant was the company's top-selling product in Q4, generating $1.36 billion during the quarter. That reflected a whopping 44% jump from the fourth quarter of 2016.

It should be noted that the pharma company did report a GAAP net loss in the fourth quarter of $2.3 billion, or $1.42 per share. However, this loss was due to a one-time $3 billion transitional impact from U.S. tax reform. Going forward, BMS will enjoy a lower effective tax rate.

Bristol-Myers Squibb also provided full-year 2018 guidance that was in line with Wall Street projections. The company expects non-GAAP earnings per share for 2018 will be between $3.15 and $3.30. The midpoint of that range is right at the consensus analysts' 2018 earnings estimate of $3.23.

2. CheckMate-227 results

Technically, Bristol-Myers Squibb announced the results from its late-stage CheckMate-227 clinical study separately from its Q4 earnings update. However, the company's CEO, Giovanni Caforio, certainly touted those results in his comments included in the fourth-quarter earnings release. And I don't blame him. They were that good.

The company evaluated a combination of Opdivo and Yervoy in the CheckMate-227 study as a first-line treatment of non-small cell lung cancer (NSCLC) in patients with high tumor mutation burden (TMB). BMS stated that the combo of the two immuno-oncology (I-O) drugs met its co-primary endpoint of progression-free survival (PFS) in patients with high TMB, regardless of PD-L1 expression. The study will continue to evaluate the combo in the other co-primary endpoint, overall survival in patients whose tumors express PD-L1.

BMS' CheckMate-227 results were also good news for Foundation Medicine (NASDAQ: FMI). In the study, TMB was assessed using Foundation Medicine's FoundationOne CDx, the first Food and Drug Administration-approved broad companion diagnostic for solid tumors. The CheckMate-227 study showed that TMB could be a key predictive biomarker to identify NSCLC patients would could potentially benefit from I-O therapy.

3. Cash position

With the Q4 revenue and earnings beat plus the exciting CheckMate-227 results, it might be easy to overlook another important number in Bristol-Myers Squibb's latest quarterly update. The company's cash position at the end of 2017 was $9.3 billion, including cash, cash equivalents, and marketable securities.

This amount was only a little lower than the $9.65 billion reported at the end of the third quarter of 2017 despite the big one-time tax payment and a licensing deal with Japanese drugmaker Ono Pharmaceutical made in Q4. BMS' cash position is still in great shape, because its cash flow remains strong.

That's good news for shareholders for a couple of reasons. First, BMS announced a 2.6% dividend hike in December. The company continues to be well positioned to keep those dividends flowing. Second, BMS could be interested in making an acquisition to bolster its pipeline. Its solid balance sheet and nice cash stockpile give it the flexibility for a deal.

What not to like

There were also a few things to not like so much in Bristol-Myers Squibb's fourth-quarter results. Although the company beat Wall Street revenue estimates, overall sales are being weighed down by older drugs. BMS' hepatitis C franchise, for example, saw Q4 sales plunge 74% year over year to $59 million. Hep C was once a blockbuster franchise for the drugmaker.

And while Opdivo continues to do well, sales for the I-O drug increased only 4% over the prior-year period during the fourth quarter. That's a far cry from the 38% year-over-year growth for Opdivo in the third quarter.

Also, Bristol-Myers Squibb's guidance for 2018 calls for revenue growth only in the low- to mid-single digit percentages. Even though the prospects continue to be bright for Eliquis and Opdivo, this shows just how much baggage BMS has.

Still, the company reported a good quarter and great late-stage results. Those results bode well for sustained growth for Opdivo, which is on track to become the No. 2 best-selling cancer drug in the world over the next few years. Bristol-Myers Squibb isn't my favorite pharma stock, but I think it should perform relatively well over the long run.

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Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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