Bristol-Myers Squibb Company Reports Financial Results For The Second Quarter And First Half Of 2006
- Posts Second Quarter 2006 GAAP EPS of $0.34 and Non-GAAP EPS of $0.35
- Reaffirms 2006 EPS Guidance
- Approvals of SPRYCEL(TM) and ATRIPLA(TM) Highlight Successful Development of Pipeline Compounds
NEW YORK, NEW YORK (July 27, 2006) -- Bristol-Myers Squibb
Company (NYSE: BMY) today reported financial results for the second quarter
and six months ended June 30, 2006 and reaffirmed earnings guidance for the
Bristol-Myers Squibb posted second quarter 2006 net sales from
continuing operations of $4.9 billion. The company reported second quarter
2006 net earnings from continuing operations of $667 million, or $0.34 per
diluted share, under U.S. Generally Accepted Accounting Principles (GAAP),
compared to $991 million, or $0.50 per diluted share for the same period in
2005. On a non-GAAP basis excluding specified items, second quarter 2006
net earnings from continuing operations were $680 million, or $0.35 per
diluted share, compared to $933 million, or $0.47 per diluted share for the
same period in 2005. The decrease in net earnings in 2006 as compared to
2005 is mainly due to the significantly lower tax rate in 2005 resulting
from the benefits realized from the resolution of a tax audit and a one
time American Jobs Creation Act related tax adjustment, and continued
increased investment in 2006 for pharmaceutical research and development.
"Since the beginning of the year, Bristol-Myers Squibb has launched
four important pharmaceutical products. These include novel treatments for
cancer and rheumatoid arthritis that were discovered in our own labs, one
in-licensed therapy for serious depression in adults, and a once-daily
single tablet regimen for HIV-1 that contains our SUSTIVA(R) product along
with two antiretrovirals from Gilead Sciences" said Peter R. Dolan, chief
executive officer, Bristol-Myers Squibb. "The strong productivity of our
pipeline and continued solid double-digit growth in sales of our key
products PLAVIX(R), ABILIFY(R), REYATAZ(R) and ERBITUX(R), as well as the
solid prospects for our recently approved products, ORENCIA(R),
BARACLUDE(R) and SPRYCEL(TM), are all preparing the company to enter a
period of sustained sales and earnings growth over several years, beginning
in 2007. We intend to sustain this momentum through continued investment in
R&D and new product launches, as we begin to put in place specific plans to
realize a minimum of $600 million in additional annual cost savings by
For the six months ended June 30, 2006, net sales from continuing
operations increased 1%, despite a 1% unfavorable foreign exchange impact,
to $9.5 billion compared to the first six months of 2005. Under GAAP, net
earnings from continuing operations in the first six months of 2006 were
$1.4 billion, or $0.70 per diluted share, compared to $1.5 billion, or
$0.78 per diluted share for the same period last year. On a non-GAAP basis,
excluding specified items, Bristol-Myers Squibb reported net earnings from
continuing operations of $1.3 billion, or $0.67 per diluted share for the
six months ended June 30, 2006, compared to $1.6 billion, or $0.81 per
diluted share for the same period last year.
NEW PRODUCT AND PIPELINE DEVELOPMENTS
In May, the U.S. Food and Drug Administration (FDA) approved a
supplemental Biologics License Application (sBLA) that permits a third
party to manufacture ORENCIA(R) (abatacept) at an additional facility.
ORENCIA(R) is a novel biologic agent for the treatment of rheumatoid
arthritis that was launched in the U.S. in February. The facility will
support increased production capacity necessary to meet expected long-term
demand for ORENCIA(R). As a result, the company expanded from a
single-source distribution system, which will enable physicians and
healthcare providers to more easily obtain ORENCIA(R) through their normal
supply channels. Initial market reaction to ORENCIA(R) has been positive,
and the company expects to see continued growth as physicians, healthcare
professionals and patients become more familiar with ORENCIA(R).
On June 28, the FDA granted accelerated approval of SPRYCEL(TM)
(dasatinib), an oral inhibitor of multiple tyrosine kinases, for the
treatment of adults with chronic, accelerated, or myeloid or lymphoid blast
phase chronic myeloid leukemia (CML) with resistance or intolerance to
prior therapy, including GLEEVEC(R) (imatinib mesylate). The FDA also
granted approval of SPRYCEL(TM) for the treatment of adults with
Philadelphia chromosome-positive acute lymphoblastic leukemia (Ph+ALL) with
resistance or intolerance to prior therapy. Ph+ALL is a rapidly progressive
cancer of the blood and bone marrow, usually occurring in adults.
In June, the company also received approval from the European
Commission for BARACLUDE(R) for the treatment of chronic hepatitis B virus
infection. BARACLUDE(R) was also approved in Japan in July. BARACLUDE(R) is
currently approved in more than 40 countries worldwide, including the
United States and China.
In June, the company announced plans to locate its new large-scale,
expandable, multi-product bulk biologics manufacturing facility in Devens,
Massachusetts, subject to final agreement between the company and the
State. Construction is expected to begin later this year, and the facility
is projected to be operationally complete in 2009. Commercial production of
biologic compounds is anticipated to begin in 2011.
On July 12, Bristol-Myers Squibb and Gilead Sciences, Inc. announced
FDA approval of ATRIPLA(TM) (efavirenz 600 mg/ emtricitabine 300 mg /
tenofovir disoproxil fumarate 200 mg) for the treatment of human
immunodeficiency virus (HIV) infection in adults. ATRIPLA(TM) is the
first-ever once-daily single tablet three drug regimen for HIV intended as
a stand-alone therapy or in combination with other antiretrovirals. The
product combines SUSTIVA(R) (efavirenz), manufactured by Bristol-Myers
Squibb, and TRUVADA(R) (emtricitabine and tenofovir disoproxil fumarate),
manufactured by Gilead Sciences.
SECOND QUARTER RESULTS
-- Second quarter 2006 net sales from continuing operations remained
constant at $4.9 billion compared to the same period in 2005. U.S. net
sales increased 5% to $2.8 billion for the quarter compared to 2005,
driven by the strong performance of pharmaceutical growth drivers and
nutritional products, while international net sales decreased 7% to
-- Marketing, selling and administrative expenses decreased by 7% to
$1.2 billion in the second quarter of 2006 compared to the same period
in 2005, mainly due to the reclassification of certain costs from
marketing, selling and administrative expenses to cost of products sold
and lower sales force expenses resulting from the previously announced
restructuring of the U.S. primary care sales organization that became
effective in March 2006.
-- Advertising and product promotion spending decreased by 4% to
$352 million in the second quarter of 2006 from $365 million in the
same period in 2005, primarily driven by the divestiture of the U.S.
and Canadian Consumer Medicines business in 2005 and lower spending on
mature brands, despite increased investments in growth drivers and new
products including ORENCIA(R) and SPRYCEL(TM).
-- Research and development expenses increased by 14% to $740 million in
the second quarter of 2006 from $649 million in the same period in
2005, principally reflecting continued investments in late-stage
compounds. Investment in pharmaceutical research and development
equaled 17.8% of pharmaceutical sales in the second quarter of 2006,
compared to 15.6% in the same period in 2005.
-- In the second quarter of 2006, the company recorded pre-tax charges of
$22 million related to the adoption of a new accounting standard for
stock option expensing that became effective on January 1, 2006. The
charges were recorded in cost of products sold, marketing, selling and
administrative expenses, and research and development expenses.
The effective income tax rate on earnings from continuing operations
before minority interest and income taxes was 23.1% and -1.9% for the three
months ended June 30, 2006 and 2005, respectively. The higher effective tax
rate was primarily driven by a net tax benefit in 2005 resulting from the
resolution of certain tax contingencies on the completion of examinations
by the Internal Revenue Service and an adjustment to the tax provision for
the special one-time repatriation of foreign earnings.
In the three months ended June 30, 2006 and 2005, the company recorded
specified income and expense items that affected the comparability of the
The pre-tax specified items in 2006 included:
* $24 million in charges primarily related to accelerated depreciation,
and downsizing and streamlining of worldwide operations; and
* $14 million income from a settlement of a litigation matter.
The pre-tax specified items in 2005 included:
* $269 million charges for increase in litigation reserves, primarily for
wholesaler inventory and various accounting matters;
* $85 million net charges primarily associated with early debt retirement
costs in connection with the repurchase of the company’s $2.5 billion
Notes due 2006; and
* $295 million income from insurance recoveries, primarily for wholesaler
inventory and various accounting matters.
For additional information on specified items, see Appendix 1. Details
reconciling these non-GAAP amounts with GAAP amounts including specified
items are provided in supplemental materials available on the company’s
Worldwide pharmaceutical sales decreased 1% to $3.9 billion in the
second quarter of 2006 compared to the same period in 2005.
U.S. pharmaceutical sales increased 5% to $2.2 billion in the second
quarter of 2006 compared to the same period in 2005, primarily due to the
continued growth of PLAVIX(R), AVAPRO(R)/AVALIDE(R), ERBITUX(R),
ABILIFY(R), REYATAZ(R) and SUSTIVA(R), and sales of new products EMSAM(R)
and ORENCIA(R), partially offset by the loss of exclusivity of
PRAVACHOL(R). In aggregate, estimated wholesaler inventory levels of the
company’s key pharmaceutical products sold by the U.S. Pharmaceutical
business at the end of the second quarter remained stable at slightly over
International pharmaceutical sales decreased 8% to $1.7 billion for the
second quarter of 2006 compared to the same period in 2005. The sales
decrease was mainly due to a decline in PRAVACHOL(R) and TAXOL(R) sales
resulting from increased generic competition in Europe, partially offset by
increased sales of newer products including REYATAZ(R) and ABILIFY(R). The
company’s reported international sales do not include copromotion sales
reported by its alliance partner, sanofi-aventis, for PLAVIX(R) and
AVAPRO(R)/AVALIDE(R), which continue to show growth in the second quarter
Pharmaceutical Growth Drivers
Worldwide sales of the products that the company views as current and
future growth drivers increased to 56% of worldwide pharmaceutical sales in
the second quarter of 2006, compared to 45% in the same period in 2005.
U.S. sales of these growth drivers accounted for approximately 78% and 66%
of total U.S. pharmaceutical sales in the second quarter of 2006 and 2005,
* Sales of PLAVIX(R), a platelet aggregation inhibitor that is part of the
company’s alliance with sanofi-aventis, increased 18% to $1,145 million
in the second quarter of 2006 from $968 million in the same period in
2005, primarily due to increased demand. Estimated total U.S.
prescription demand increased approximately 14% compared to 2005.
* Sales of AVAPRO(R)/AVALIDE(R), an angiotensin II receptor blocker for
the treatment of hypertension, also part of the sanofi-aventis alliance,
increased 9%, including a 1% favorable foreign exchange impact, to
$280 million in the second quarter of 2006 from $258 million in the same
period in 2005. U.S. sales increased 6% to $167 million in the second
quarter of 2006 from $157 million in the same period in 2005, primarily
due to wholesaler inventory fluctuations and higher average net selling
prices. Estimated total U.S. prescription demand increased
approximately 4% compared to 2005, although overall volumes were down
due to changes in customer channel strategy. International sales
increased 12%, including a 2% favorable foreign exchange impact, to
$113 million compared to the same period in 2005.
* Total revenue for ABILIFY(R), an antipsychotic agent for the treatment
of schizophrenia, acute bipolar mania and bipolar disorder, increased
35% to $324 million in the second quarter of 2006 from $240 million in
the same period in 2005. U.S. sales increased 34% to $267 million in
the second quarter 2006 from $200 million in the same period in 2005,
primarily due to higher demand and higher average net selling prices.
Estimated total U.S. prescription demand increased approximately 21%
compared to the same period last year. Total revenue for ABILIFY(R)
primarily consists of alliance revenue representing the company’s 65%
share of net sales in countries where it copromotes with Otsuka
Pharmaceutical Co., Ltd.
* Sales of REYATAZ(R), a protease inhibitor for the treatment of HIV,
increased 29% to $236 million in the second quarter of 2006 from
$183 million in the same period in 2005, primarily due to increased
demand in the U.S. and Europe. Estimated total U.S. prescription demand
increased approximately 18% compared to 2005. European sales increased
42% to $74 million in the second quarter of 2006 from $52 million in the
same period in 2005.
* Sales of ERBITUX(R), which is sold by the company almost exclusively in
the U.S., increased 76% to $172 million in the second quarter of 2006
from $98 million in the same period in 2005, driven by usage in the
treatment of head and neck cancer, an indication that was approved by
the FDA in March 2006, augmented by the continued growth for the
treatment of colorectal cancer. ERBITUX(R) is marketed by the company
under a distribution and copromotion agreement with ImClone Systems
Pharmaceutical products other than those the company views as current
and future growth drivers are generally more mature products.
* Sales of PRAVACHOL(R), an HMG Co-A reductase inhibitor, decreased 48% to
$323 million in the second quarter of 2006 from $625 million in the same
period in 2005. U.S. sales decreased 64% to $128 million in the second
quarter of 2006 from $353 million in the same period in 2005, mainly as
a result of market exclusivity expiration in April 2006. Estimated
total U.S. prescriptions declined by approximately 58% compared to 2005.
International sales decreased 28%, including a 1% unfavorable foreign
exchange impact, to $195 million in the second quarter of 2006 from
$272 million in the same period in 2005, reflecting generic competition
in key European markets.
* Sales of TAXOL(R), an anti-cancer agent sold almost exclusively in
non-U.S. markets, decreased 20%, including a 2% unfavorable foreign
exchange impact, to $149 million in the second quarter of 2006 from
$186 million in the same period in 2005, primarily due to increased
generic competition in Europe.
* Sales of SUSTIVA(R), a non-nucleoside reverse transcriptase inhibitor
for the treatment of HIV, increased 16% to $193 million in the second
quarter of 2006 from $167 million in the same period in 2005. Estimated
total U.S. prescription growth was approximately 7% for the second
quarter of 2006. On July 12, the FDA approved ATRIPLA(TM), a
combination therapy that includes SUSTIVA(R).
HEALTH CARE GROUP
The combined second quarter 2006 revenues from the Health Care Group
increased 1% to $1,012 million compared to the same period in 2005.
Excluding a 6% unfavorable impact from the divestiture of the U.S. and
Canadian consumer medicines business in the third quarter of 2005, Health
Care Group sales increased 7% in the second quarter of 2006.
* Worldwide Nutritional sales increased 6%, including a 1% favorable
foreign exchange impact, to $582 million in the second quarter of 2006
from $548 million in the same period in 2005. U.S. Nutritional sales
increased 6% to $282 million in the second quarter of 2006, primarily
due to increased sales of ENFAMIL(R), the company’s best-selling infant
formula. International Nutritional sales increased 7% to $300 million
in the second quarter of 2006, including a 2% favorable foreign exchange
impact, primarily due to increased sales of toddlers and children’s
nutritional products and follow-on formulas.
Other Health Care
* Worldwide ConvaTec sales increased 6%, despite a 1% unfavorable foreign
exchange impact, to $262 million in the second quarter of 2006 from
$247 million in the same period in 2005.
* Worldwide Medical Imaging sales increased 11% to $168 million in the
second quarter of 2006 from $151 million in the same period in 2005.
This increase was due to the growth in the sale of TechneLite(R)
technetium Tc99m Generators, partly resulting from gain in market share
following a competitor’s temporary withdrawal from the market up to
April of this year, and the growth of DEFINITY(R), during a competitor’s
continued temporary withdrawal from the market. CARDIOLITE(R) sales
decreased 3% from the same period in 2005.
Bristol-Myers Squibb reaffirms its 2006 full year earnings guidance of
fully-diluted earnings per share from continuing operations to be between
$1.15 and $1.25 on an adjusted non-GAAP basis, which excludes specified
items as discussed under “Use of Non-GAAP Financial Information.”
The company also reaffirms its 2006 fully-diluted earnings per share
range to be between $1.15 and $1.25, when adding back specified items.
These specified items are expected to have no net impact on the company’s
estimated earnings guidance for 2006. Details reconciling adjusted non-GAAP
amounts with the amounts reflecting specified items are provided in
supplemental materials available on the company’s website. This information
does not include other specified items that may occur during the rest of
Anticipated sales declines due to continued exclusivity losses during
2006 are expected to be more or less offset by growth in sales of the
company’s growth drivers and new products. The gross margin is expected to
stabilize as the relatively high margins realized on the sale of the growth
drivers and certain new products more or less offset lost margins from
older products that have lost or are expected to lose exclusivity. Earnings
will be adversely affected by investment in the development of additional
new compounds, investments to develop and support the introduction of new
products, the impact from the adoption of stock option expensing under the
new accounting standard and the impact on future earnings from the sale of
As previously disclosed, the company has experienced substantial
revenue losses due to the expiration of market exclusivity protection for
certain of its products. The company expects substantial incremental
revenue losses in 2006, representing continuing declines in revenues from
products that lost market exclusivity in previous years, as well as
declines in revenues of certain additional products that have lost market
exclusivity this year. For 2006, the company estimates reductions of net
sales in the range of $1.4 billion to $1.5 billion from the 2005 levels for
products that have lost exclusivity protection in 2004, 2005 or 2006,
primarily PRAVACHOL(R), TAXOL(R) and CEFZIL(R). The timing and amounts of
sales reductions from exclusivity losses, their realization in particular
periods and the eventual levels of remaining sales revenues are uncertain
and dependent on the levels of sales at the time exclusivity protection
ends, the timing and degree of development of generic competition (speed of
approvals, market entry and impact) and other factors.
The company’s expectations for future sales growth include increases in
sales of PLAVIX(R), which had net sales of $3.8 billion for 2005, and is
currently the company’s largest product ranked by net sales. The
composition of matter patent for PLAVIX(R), which expires in 2011, is
currently the subject of litigation in the United States. As previously
disclosed, the Apotex litigation has been suspended pending possible
finalization of the previously announced proposed settlement among the
parties. The proposed settlement is subject to certain conditions,
including antitrust review and clearance by the Federal Trade Commission
(FTC) and state attorneys general. In the response to concerns raised by
the FTC and state attorneys general to that proposed settlement agreement,
the company, sanofi-aventis and Apotex have amended the agreement. The
modified agreement remains under review by the FTC and the state attorneys
general. There is no assurance that the terms of the modified agreement
will address all the concerns of the FTC or the state attorneys general.
There remains significant risk that antitrust clearance will not be
obtained. In such event, the proposed settlement would be terminated, and
the litigation would be reinstated. If the litigation were reinstated,
sanofi-aventis and Bristol-Myers Squibb intend to vigorously pursue
enforcement of their patent rights in PLAVIX(R). Additional patent
proceedings involving PLAVIX(R) are ongoing in the United States and in
less significant markets for the product. The company continues to believe
that the PLAVIX(R) patents are valid and infringed, and with its alliance
partner and patent-holder sanofi-aventis, is vigorously pursuing these
cases. It is not possible at this time reasonably to assess the ultimate
outcome of these litigations, or the timing of potential generic
competition for PLAVIX(R).
The company learned yesterday that the Antitrust Division of the United
States Department of Justice is conducting a criminal investigation
regarding the proposed settlement of the Apotex litigation described above.
The company and its subsidiaries are the subject of a number of
significant pending lawsuits, claims, proceedings and investigations,
including the matters described above. It is not possible at this time
reasonably to assess the final outcome of these investigations or
litigations. Management continues to believe, as previously disclosed, that
during the next few years, the aggregate impact, beyond current reserves,
of these and other legal matters affecting the company is reasonably likely
to be material to the company’s results of operations and cash flows, and
may be material to its financial condition and liquidity. The company’s
expectations for 2006 described above do not reflect the potential impact
of litigation on the company’s results of operations.
For additional discussion of legal matters including PLAVIX(R) patent
litigation, see "Item 8. Financial Statements and Supplementary Data - Note
17 Legal Proceedings and Contingencies" in the company’s Form 10-Q
Quarterly Report for the period ended March 31, 2006.
Use of Non-GAAP Financial Information
This press release contains non-GAAP earnings and earnings per share
information adjusted to exclude certain costs, expenses, gains and losses
and other specified items. Among the items in GAAP earnings but excluded
for purposes of determining adjusted earnings are: gains or losses from
sale of businesses and product lines; from sale or write-down of equity
investments and from discontinuations of operations; restructuring items
that meet the requirements of SFAS 112 for severance and SFAS 146 for other
exit costs; accelerated depreciation charges under SFAS 144 related to
restructuring items described above; asset impairments; charges and
recoveries relating to significant legal proceedings; upfront and milestone
payments for in-licensing of products that have not achieved regulatory
approval that are immediately expensed; copromotion or alliance charges and
payments for in-process research and development which under GAAP are
immediately expensed rather than amortized over the life of the agreement;
income from upfront and milestone payments that is immediately recognized
for out-licensing of products, including deferred income recognized upon
termination; and significant tax events, including the repatriation of
special dividends pursuant to the American Jobs Creation Act of 2004. This
information is intended to enhance an investor’s overall understanding of
the company’s past financial performance and prospects for the future. For
example, non-GAAP earnings per share information is an indication of the
company’s baseline performance before items that are considered by the
company not to be reflective of the company’s operational results. In
addition, this information is among the primary indicators the company uses
as a basis for evaluating company performance, allocating resources,
setting incentive compensation targets, and planning and forecasting of
future periods. This information is not intended to be considered in
isolation or as a substitute for diluted earnings per share prepared in
accordance with GAAP.
Statement on Cautionary Factors
This press release contains certain forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995
regarding, among other things, statements relating to goals, plans and
projections regarding the company’s financial position, results of
operations, market position, product development and business strategy.
These statements may be identified by the fact that they use words such as
“anticipate”, “estimates”, “should”, “expect”, “guidance”, “project”,
“intend”, “plan”, “believe” and other words and terms of similar meaning in
connection with any discussion of future operating or financial
performance. Such forward-looking statements are based on current
expectations and involve inherent risks and uncertainties, including
factors that could delay, divert or change any of them, and could cause
actual outcomes and results to differ materially from current expectations.
These factors include, among other things, market factors, competitive
product development, pricing controls and pressures (including changes in
rules and practices of managed care groups and institutional and
governmental purchasers), economic conditions such as interest rate and
currency exchange rate fluctuations, judicial decisions and governmental
laws and regulations related to Medicare, Medicaid and healthcare reform,
pharmaceutical rebates and reimbursement, claims and concerns that may
arise regarding the safety and efficacy of in-line products and product
candidates, changes to wholesaler inventory levels, changes in, and
interpretation of, governmental regulations and legislation affecting
domestic or foreign operations, including tax obligations, difficulties and
delays in product development, manufacturing and sales, patent positions
and litigation, including the outcome of the PLAVIX(R) litigation in the
U.S., the ability to realize projected cost savings by 2008 discussed in
this press release and the expiration of patents on certain other products,
and the impact and result of governmental investigations. There can be no
guarantees with respect to pipeline products that future clinical studies
will support the data described in this release, that the products will
receive necessary regulatory approvals, or that they will prove to be
commercially successful. For further details and a discussion of these and
other risks and uncertainties, see the company’s periodic reports,
including current reports on Form 8-K, quarterly reports on Form 10-Q and
the annual report on Form 10-K, furnished to and filed with the Securities
and Exchange Commission. The company undertakes no obligation to publicly
update any forward-looking statement, whether as a result of new
information, future events or otherwise.
Company and Conference Call Information
Bristol-Myers Squibb is a global pharmaceutical and related health care
products company whose mission is to extend and enhance human life.
There will be a conference call on July 27, 2006 at 10:00 a.m. (EDT)
during which company executives will address inquiries from investors and
analysts. Investors and the general public are invited to listen to a live
webcast of the call at http://www.bms.com/ir or by dialing 913-312-1294.
Materials related to the call will be available at the same website prior to the call.
ABILIFY(R) is a trademark of Otsuka Pharmaceutical Company, Ltd.
AVAPRO(R), AVALIDE(R) and PLAVIX(R) are trademarks of sanofi-aventis
Erbitux(R) is a trademark of ImClone Systems Incorporated
EMSAM(R) is a trademark of Somerset Pharmaceuticals, Inc.
GLEEVEC(R) is a trademark of Novartis, Inc.
TRUVADA(R) is a trademark of Gilead Sciences, Inc.
ATRIPLA is a trademark of both Bristol-Myers Squibb Co. and Gilead Sciences, Inc.
- Contact Information
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- Bristol-Myers Squibb
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