Bristol-Myers Squibb Crushes First-Quarter Earnings: Here's Why

Bristol-Myers Squibb reported its first-quarter earnings before the bell Tuesday morning, handily beating consensus estimates for both diluted earnings per share on a non-generally accepted accounting principles basis and revenue. According to the release, Bristol earned $0.71 per share on a non-GAAP basis, topping the Street's estimates by $0.21.Revenue came in at $4.04 billion, exceeding consensus by $204 million.

Compared to the same period a year ago, total revenue grew by 6% and non-GAAP EPS by a healthy 54%. Excluding the company's former Diabetes Alliance (sold to AstraZeneca) and the negative impact of unfavorable currency exchange rates during the quarter, year-over-year revenue jumped by a princely 17%.

Given this upswing in revenue and earnings, Bristol also slightly revised the lower end of its full-year EPS guidance. Specifically, the biopharma now estimates non-GAAP EPS will range from $1.60 to $1.70, up from $1.55 to $1.70.

Let's dig into Bristol's strong first quarter to see how the company arrived at these impressive numbers, and consider what's in store for investors going forward.

Bristol's product pipeline is turning overA quick look across Bristol's pharma sales during the quarter shows that new products like its hepatitis C franchise, composed of DaklinzaandSunvepra;oncology drugs like Opdivo, Sprycel, and Yervoy; and cardiovascular products such as Eliquis, are all helping the company turn the page on the patent cliff.

Despite being shut out of the U.S. market at the moment, Bristol's hep C drug sales, for instance, came in at a respectable $264 million for the three-month period, putting it on track to potentially reach blockbuster status later this year (more on this later).

Oncology drug sales also continued their upward trend, with Opdivo raking in $40 million and Sprycel and Yervoy sales growing, yet again, by double-digits (10% and 20%, respectively).

Royalties from the anti-psychotic medicine Abilify came in far stronger than expected during the quarter, at $554 million, perhaps making it the main driver behind this earnings beat. However, the drug is set to face generic competition starting this month, meaning sales should start to fall off markedly.

What's next?Bristol's focus going forward is squarely on key new products such as Opdivo and its hepatitis C franchise. As management noted in its press release, Opdivo is close to gaining an approval for advanced melanoma in the EU and is nearing launch formetastatic squamous non-small cell lung cancer with progression on or after platinum-based chemotherapy in the U.S. These two events should boost Opdivo sales later in the year, and presumably act as a buffer against falling Abilify sales.

The news on the hepatitis C front, though, isn't as good. While Daklinza has posted some rather impressive clinical trial results when used in combination with Gilead Sciences' Sovaldi for hard-to-treat patients, a host of competitors -- Gilead included -- are already closing in on new hep C cocktails that would reduce the average treatment duration from three months to about two months. In short, Bristol is quickly being left behind in the hep C arena, and it might never catch up.

Is Bristol a compelling buy after this blowout quarter?While Bristol's product line is starting to shake off the ravages of the patent cliff, I'm not confident the company will beat consensus again this year. And without a nice surge in earnings, this biopharma stock looks, to me, overvalued.

After all, this uptick in Abilify royalties won't come into play in subsequent quarters, and other hepatitis C drugs are sure to soon cut into Bristol's drug sales in foreign markets. That's why I think it might be best to consider exiting this Big Pharma stock on the back of this strong quarter, or staying on the sidelines if you haven't already taken a position.

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George Budwell owns shares of Gilead Sciences. The Motley Fool recommends Gilead Sciences. The Motley Fool owns shares of Gilead Sciences. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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