5 Things Bristol-Myers Squibb Co.'s Management Wants You to Know

By George BudwellFool.com

Bristol-Myers Squibb'sdramatic reorganization effort, following the loss of patent protection forseveral top-selling drugs, appears to be hitting an inflection point. Although total revenue was down by 3% in 2014, to $15.9 billion, the drugmaker saw impressive sales growth for a number of newer products, including Eliquis, Orencia, and Yervoy, according to its fourth-quarter earnings release. As a result, Bristolactuallygrew its top line by 6% last year, when excluding the now-divested diabetes alliance withAstraZeneca.

Even a close inspection of the quarterly and annual numbers, though, can't tell the full story of this pharma giant's ongoing transformation. For that, we need to delve into the company's recent conference call. Here are five things Bristol's management wants investors to know going forward.

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Giovanni Caforio, Source: Bristol-Myers Squibb.

Management shake-upBecause Bristol's turnaround has more or less gone according to plan,CEO Lamberto Andreotti felt now is the time to step down, handing the reins to COOGiovanni Caforio. Andreotti briefly discussed this transition: "I am very pleased that Giovanni Caforio will be [my] successor as CEO. Giovanni is a global business leader with broad industry and management experience including a solid background in oncology."

Caforio is a natural choice to take over leadership atBristol given his nearly eight years helping to shape the company's oncology program. Caforio in 2007 became senior vice president for U.S. oncology at Bristol, eventually earning key leadership positions in the company's global oncology unit. He is scheduled to take over as CEO on May 5, according to the company.

Biological-based medicines are becoming increasingly importantAfter being stung by the loss of exclusivity for the small-molecule megablockbuster Plavix, Bristol has placed a greater emphasis on developing biologics (medicines developed from biological sources). The reason is simple: biologics tend to have long shelf lives because the generic versions known as "biosimilars" are hard to manufacture and don't offer the same dramatic discounts to consumers as their small-molecule counterparts. Specifically, most biosimilars on the market in Europe only offer discounts of about 30% compared to name-brand drugs, while generics for small-molecule drugs frequently cost 80% to 85% less than the branded versions.

Andreotti noted this marked shift toward biologics on the conference call: "[W]e committed significant resources to increase our biologic capacity, announcing strategic investments to expand our Devens, Mass., facility and building a new plant in Ireland. Biologics now comprise about 50% of our R&D portfolio and that number will continue to grow."

This strategic move could mean a far less volatile drop-off in revenue the next time Bristol runs up against a host of patent losses, which is probably why many of its peers are also pushing hard to bulk up their biologics portfolios.

Top line is growingBristol is starting to overcome its patent issues via the strong performance of newer products. Caforio highlighted this point on the call: "During the fourth quarter, we delivered 9% sales growth across our diversified portfolio and across our key markets, excluding our diabetes franchise and impact of foreign exchange."

Caforio attributed this upswing in revenue mainly to the cancer drug Yervoy's 41% year-over-year increase in sales in the fourth-quarter, along with the label expansion last August that enabled Eliquis, a drug co-developed by Pfizer, to be prescribed as a treatment for both deep-vein thrombosis and pulmonary embolisms. Eliquis sales grew by 20% from the third quarter, to $281 million, largely as a result of this label expansion.

Hepatitis C drug sales are off to a good startBristol's newly launched hepatitis C medicines also performed admirably during the fourth quarter, posting sales of $207 million. Going forward, Caforio appears intent on carving out a specialty niche within this highly competitive market: "Regarding hepatitis C, we had a really good quarter. Generally speaking, our strategy is to focus on difficult to treat patients and the unique medical need of each market." In a nutshell, Bristol's approach to this market could translate into a sustainable revenue source, unlike some other hep C drugs that turned out to beflashes in the pan.

Source: Bristol-Myers.

More immuno-oncology!With the novel immunotherapy Opdivo gaining regulatory approval for advanced melanoma and its late-stage trial for lung cancer halted early for efficacy, Bristol is plowing ahead with its goal of becoming a leader in the immuno-oncology field. Chief Financial Officer Charles Bancroft aptly summed this vision up on the call: "We are committed to fully advancing by leading immuno-oncology portfolio. Our clinical collaboration strategy reflects our belief that combination therapy will be a key component of I-O [immuno-oncology] in the future. And that we are open to exploring external I-O opportunity."

Unpacking these statements a bit, Bristol has been busy signing numerous research deals with partners includingCelgene, Novartis, andFive Prime Therapeuticsto bolster its immuno-oncology platform. This trend appears set to continue going forward.

The article 5 Things Bristol-Myers Squibb Co.'s Management Wants You to Know originally appeared on Fool.com.

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