BMS to overhaul R&D, operations and manufacturing as it trots out Street-beating Q3

Bristol-Myers Squibb building
In announcing Q3 results Thursday, Bristol-Myers Squibb said it plans an overhaul to R&D, operations and manufacturing. Photo courtesy of Flickr user A4 / CC BY-SA 2.0.

As sales of its star immuno-oncology med Opdivo fell short for the quarter, Bristol-Myers Squibb ($BMY) unveiled an operational rejig spanning R&D and manufacturing. But contrary to Opdivo's miss, the company's Q3 actually blew past analyst estimates.

Bristol-Myers said its operations will be more "streamlined" after the restructuring, allowing the company to invest in key areas. The drugmaker says it plans to focus its spending where it can deliver most, and overhaul its R&D operations and manufacturing. 

Bristol's overall costs will likely remain flat over the next several years, rather than declining as a result of the revamp, as some companies have aimed for.

The manufacturing moves appear to be designed to shift production toward the type of drugs where Bristol-Myers is pinning its future. It'll "broaden biologics capabilities to reflect current and future portfolio," according to its earnings release.

While the company didn't offer many details about the changes, CEO Giovanni Caforio expects the "operating model to evolve over the next 18 months and will share more information as we progress," a BMS spokesperson told FiercePharma.

Even though its Opdivo failed in a clinical trial for a very lucrative first-line treatment in lung cancer, BMS said it expects the PD-1 inhibitor to continue to be a star. 

“While we are disappointed with the results of CheckMate -026, a setback in first-line lung in the short term, our overall strategic focus does not change," Caforio said in a statement. "Going forward, we see growth in both the near and long term to continue to be driven by Opdivo, Eliquis and Orencia, and by an exciting pipeline of specialty medicines over time."

Bristol also said it’d be starting a new $3 billion share buyback while announcing Q3 results that handily beat analyst estimates.

In the third quarter, BMS grew sales 21% to $4.9 billion, surpassing consensus estimates by $130 million. To get there, the company relied on “beats across the board,” Evercore ISI’s John Scotti wrote in a note to clients. However, Opdivo came in at $920 million during the period, slightly missing estimates, but way up from last year’s $305 million.

With the results, BMS hiked its non-GAAP EPS guidance for the year to a range of $2.80 to $2.90, from previous guidance of $2.55 to $2.65. It also announced next year’s EPS guidance of $2.85 to $3.05, a development that will help “alleviate nervousness” going into next year, Scotti wrote.

Eliquis, the company’s next-gen anticoagulant racing with competitors from Johnson & Johnson ($JNJ) and Boehringer Ingelheim/Bayer, turned in 90% growth to $884 million during the period.

On the other side of the coin, each of the company’s meds in virology declined on the period, along with antipsychotic med Abilify, which fell 37% to $29 million.

EPS for the quarter was 77 cents, “well above” analyst estimates, Leerink’s Seamus Fernandez wrote in a note. BMS shares were up on the results in early trading Thursday.

One key point, Fernandez noted, is that BMS reported its expenses should be more or less flat through 2020, creating “significant potential operating leverage” as the drugmaker’s “broad IO clinical development efforts will deliver data from a host of registration-potential trials” over the next two years.

The Street-beating results are likely welcome to investors who have tracked a series of recent challenges for Opdivo, kicking off back in August when the drug failed to meet goals for use as a first-line treatment for lung cancer. Merck’s ($MRK) Keytruda, in contrast, just this week won FDA approval in the lucrative indication.

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