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| BMY > SEC Filings for BMY > Form 10-Q on 28-Apr-2009 | All Recent SEC Filings |
28-Apr-2009
Quarterly Report
Executive Summary
Bristol-Myers Squibb Company (which may be referred to as Bristol-Myers Squibb, BMS or the Company) is a global BioPharma and nutritional products company whose mission is to extend and enhance human life by providing the highest quality biopharmaceutical and nutritional products. The Company is engaged in the discovery, development, licensing, manufacturing, marketing, distribution and sale of biopharmaceuticals and nutritional products. The Company has two reportable segments-BioPharmaceuticals and Mead Johnson. The BioPharmaceuticals segment consists of the global biopharmaceutical and international consumer medicines business, which accounted for approximately 86% of the Company's first quarter 2009 net sales. The Mead Johnson segment consists of the Company's 83.1% interest in the newly publicly traded Mead Johnson Nutrition Company (Mead Johnson), which is primarily an infant formula and children's nutrition business, and which accounted for approximately 14% of the Company's first quarter 2009 net sales.
Financial Highlights
The following table is a summary of operating activity:
Three Months Ended March 31,
Dollars in Millions 2009 2008
Net Sales $ 5,015 $ 4,891
Gross Margin 3,602 3,321
Gross Margin as a percentage of sales 72 % 68 %
Net Earnings 921 891
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Net Sales
The Company's net sales increased 3% despite a 5% unfavorable foreign exchange impact. ABILIFY* (aripiprazole) and PLAVIX* (clopidogrel bisulfate) continue to drive sales growth with sales increases of 30% and 10%, respectively. Significant contributions to sales growth are also provided by other key products including ORENCIA (abatacept), SPRYCEL (dasatinab) and the Company's virology portfolio, led by REYATAZ for HIV and BARACLUDE for hepatitis B. ERBITUX* sales were down 12%.
Net Earnings
The increase in net earnings was attributed to sales growth and favorability in gross margins, a portion of which is attributed to realized manufacturing savings from the Company's productivity transformation initiative (PTI), cost improvements, favorable product mix and price increases amongst other specified items discussed in "-Specified Items" below.
Strategy
The Company's multi-year strategy is transformation into a next-generation BioPharma company. The strategy encompasses all aspects and all geographies of the business and will yield substantial cost savings and cost avoidance and increase the Company's financial flexibility to take advantage of attractive market opportunities that may arise.
As part of the Company's strategy, its subsidiary Mead Johnson completed an initial public offering of its Class A common stock. Net proceeds received were $782 million and the Company holds an 83.1% interest in Mead Johnson and 97.5% of the combined voting power of the outstanding common stock.
In addition, the Company extended its ABILIFY* comarketing agreement in the U.S. and entered into oncology collaboration in the U.S., Japan and European Union (EU) markets with Otsuka Pharmaceutical Company Ltd. (Otsuka) in April 2009.
Managing costs is one part of the Company's overall strategy as it transitions to a next-generation BioPharma company, focused on delivering its present commitments, maximizing near-term growth opportunities and improving its earnings base in 2012-2013. The Company's announced PTI is designed to create a total of $2.5 billion in annual productivity savings and cost avoidance by 2012. The charges associated with the PTI are estimated to be an aggregate range of $1.3 billion to $1.6 billion, which includes $724 million of costs already incurred.
The Company will continue to focus on the development of our BioPharmaceuticals business and will maintain growth by investing in research and development. The Company will continue to invest in key growth products, including specialty and biologic medicines and cardiovascular and metabolic drugs. The Company is seeking to reallocate resources to continue its string of pearls strategy and enable strategic transactions, such as a global collaboration agreements with ZymoGenetics, Inc. (ZymoGenetics) and Exelixis Inc.
Product and Pipeline Developments
PLAVIX*
• In March 2009, the Company and Sanofi-Aventis (Sanofi) announced new findings from their Active A trial. The landmark investigational study on PLAVIX* provided results that demonstrated that, for patients with atrial fibrillation who were at increased risk for stroke and could not take an oral anticoagulant, taking PLAVIX* in addition to aspirin significantly reduced major vascular events by 11% over aspirin alone. The greatest benefit was in reduction of stroke by 28%, which is the primary goal of physicians treating patients with arterial fibrillation. As expected, compared to aspirin alone, taking PLAVIX* in addition to aspirin significantly increased the rate of major bleeding.
ERBITUX*
• In March 2009, the Company and Eli Lilly and Company (Lilly) announced that the companies received a complete response letter from the U.S. Food and Drug administration (FDA) for the first-line squamous cell carcinoma of the head and neck (SCCHN) supplemental Biologics License Application (sBLA) for ERBITUX* (cetuximab). In its complete response letter the FDA requested an additional pharmacokinetic study to confirm the comparability of ERBITUX* used in the first-line head and neck submission as compared to the ERBITUX* currently marketed in the United States. As previously announced, Lilly and the Company recently withdrew the advanced non-small cell lung cancer sBLA for ERBITUX* because of the same matter. In both cases, the companies continue to work with the FDA to confirm pharmacokinetic comparability.
ABILIFY*
• In January 2009, the Company submitted a supplemental new drug application for ABILIFY* to the FDA for treatment of irritability associated with autistic disorder for pediatric patients aged 6 to 17 and the FDA has accepted the filing.
IXEMPRA
• In March 2009, the Company withdrew its marketing authorization application for IXEMPRA (ixabepilone), which was submitted to the European Medicines Agency in September 2007.
Dapagliflozin
• In March 2009, the Company and AstraZeneca PLC (AstraZeneca) published findings from a 12-week, Phase IIb dose-ranging study that dapagliflozin produced clinically meaningful reductions across all key glycemic measures studied in treatment-naive type 2 diabetes patients, compared to placebo. The study findings also showed that patients receiving dapagliflozin experienced greater reductions in body weight compared to patients on placebo.
ONGLYZA
• In April 2009, the FDA's Endocrinologic and Metabolic Drugs Advisory Committee voted 10 to 2 that the data supporting the new drug application for ONGLYZA (saxagliptin) for the treatment of adults with type 2 diabetes were sufficient to rule out unacceptable cardiovascular risk relative to comparators in the program. The Committee also unanimously recommended that Bristol-Myers Squibb and AstraZeneca perform a post-marketing trial to confirm the cardiovascular profile of ONGLYZA. The companies announced on April 23, 2009 that the Prescription Drug User Fee Act (PDUFA) date has been extended from April 30, 2009 to July 30, 2009.
NTC-801
• In March 2009, the Company announced a global collaboration with Nissan Chemical Industries, Ltd. and Teijin Pharma Limited (Nissan) for the development and commercialization of NTC-801, a selective inhibitor of the acetylcholine-activated potassium ion channel, currently in Phase I development in Japan, for the maintenance of normal sinus rhythm in patients with atrial fibrillation.
Apixaban
• In April 2009, the Company and Pfizer Inc. initiated the Phase III program for the treatment of Acute Coronary Syndrome.
PEG-Interferon Lambda
• In January 2009, the Company announced a global collaboration with ZymoGenetics on its PEG-Interferon lambda, a novel type 3 interferon currently in Phase Ib development for the treatment of hepatitis C. In April 2009, the Company and ZymoGenetics announced positive 4-week results of PEG-Interferon lambda with ribavirin for the treatment of hepatitis C from an ongoing Phase Ib clinical trial.
Three Months Results of Operations
The following discussions of the Company's results of continuing operations exclude the results related to the ConvaTec and the Medical Imaging businesses prior to their divestitures. These businesses have been segregated from continuing operations and included in discontinued operations for the three months ended March 31, 2008, refer to "Item 1. Financial Statements-Note 6. Discontinued Operations" for further discussion.
The Company's results of operations were as follows:
Three Months Ended March 31,
Dollars in Millions 2009 2008 % Change
Net Sales $ 5,015 $ 4,891 3%
Earnings from Continuing Operations before Income Taxes $ 1,384 $ 1,207 15%
% of net sales 27.6 % 24.7 %
Provision for Income Taxes $ 463 $ 330 40%
Effective tax rate 33.5 % 27.3 %
Net Earnings from Continuing Operations $ 921 $ 877 5%
% of net sales 18.4 % 17.9 %
Net Earnings Attributable to Noncontrolling Interest $ 283 $ 230 23%
% of net sales 5.6 % 4.7 %
Net Earnings Attributable to Shareholders $ 638 $ 661 (3)%
% of net sales 12.7 % 13.5 %
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The composition of the change in net sales was as follows:
Three Months Ended March 31, 2009 vs. 2008
Net Sales Analysis of % Change
Total Foreign
Dollars in Millions 2009 2008 Change Volume Price Exchange
U.S. $ 3,031 $ 2,747 10% 5% 5% -
Non-U.S. 1,984 2,144 (7)% 3% 2% (12)%
Total $ 5,015 $ 4,891 3% 4% 4% (5)%
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The increase in U.S. net sales was driven by growth in key U.S. biopharmaceutical products, which are described below in further detail. Decreases in international net sales were primarily due to a strengthening U.S. dollar relative to certain foreign currencies, especially the euro and U.K. pound, and generic competition for PLAVIX* and certain mature brands. These decreases were partially offset by growth in certain key products, including BARACLUDE, ORENCIA, SPRYCEL and Mead Johnson products.
In general, the Company's business is not seasonal. For information on U.S. biopharmaceutical prescriber demand, reference is made to the table within "-BioPharmaceuticals" below, which sets forth a comparison of changes in net sales to the estimated total prescription growth (for both retail and mail order customers) for certain key biopharmaceuticals products and new products sold by the U.S. BioPharmaceuticals business. The U.S. and non-U.S. net sales are based upon the location of the customer.
The Company operates in two reportable segments-BioPharmaceuticals and Mead Johnson. The Company's net sales by segment were as follows:
Three Months Ended March 31,
Net Sales % of Total Net Sales
Dollars in Millions 2009 2008 % Change 2009 2008
BioPharmaceuticals $ 4,322 $ 4,188 3% 86.2% 85.6%
Mead Johnson 693 703 (1)% 13.8% 14.4%
Total $ 5,015 $ 4,891 3% 100.0% 100.0%
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The Company recognizes revenue net of various sales adjustments to arrive at net sales as reported in the consolidated statements of earnings. These adjustments are referred to as gross-to-net sales adjustments. The reconciliations of the Company's gross sales to net sales by each significant category of gross-to-net sales adjustments were as follows:
Three Months Ended March 31,
Dollars in Millions 2009 2008
Gross Sales $ 5,692 $ 5,540
Gross-to-Net Sales Adjustments
Prime Vendor Charge-Backs (126 ) (129 )
Women, Infants and Children (WIC) Rebates (195 ) (197 )
Managed Health Care Rebates and Other Contract Discounts (102 ) (85 )
Medicaid Rebates (63 ) (52 )
Cash Discounts (71 ) (62 )
Sales Returns (41 ) (29 )
Other Adjustments (79 ) (95 )
Total Gross-to-Net Sales Adjustments (677 ) (649 )
Net Sales $ 5,015 $ 4,891
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Gross-to-net sales adjustments increased by 4%. Managed health care rebates and other contract discounts increased by 20% primarily due to increased Medicare rebates.
The activities and ending balances of each significant category of gross-to-net sales reserve adjustments were as follows:
Women, Managed Health
Infants and Care Rebates and
Prime Vendor Children Other Contract Medicaid Cash Sales Other
Dollars in Millions Charge-Backs (WIC) Rebates Discounts Rebates Discounts Returns Adjustments Total
Balance at January 1, 2009 $ 45 $ 195 $ 154 $ 133 $ 31 $ 209 $ 115 $ 882
Provision related to sales made
in current period 126 195 102 63 70 38 85 679
Provision related to sales made
in prior periods - - - - 1 3 (6 ) (2 )
Returns and payments (135 ) (169 ) (103 ) (56 ) (71 ) (51 ) (80 ) (665 )
Impact of foreign currency
translation - - - - - (1 ) (3 ) (4 )
Balance at March 31, 2009 $ 36 $ 221 $ 153 $ 140 $ 31 $ 198 $ 111 $ 890
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BioPharmaceuticals
The composition of the change in biopharmaceutical net sales was as follows:
Three Months Ended March 31, 2009 vs. 2008
Net Sales Analysis of % Change
Total Foreign
Dollars in Millions 2009 2008 Change Volume Price Exchange
U.S. $ 2,784 $ 2,459 13% 7% 6% -
Non-U.S. 1,538 1,729 (11)% 3% (1)% (13)%
Total $ 4,322 $ 4,188 3% 5% 3% (5)%
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U.S. biopharmaceutical net sales increased primarily due to increased sales of PLAVIX*, ABILIFY*, the HIV portfolio and ORENCIA. International biopharmaceutical net sales decreased as a result of unfavorable foreign exchange rates due to the strengthening U.S. dollar which more than offset increased sales of BARACLUDE (entecavir), SPRYCEL, ORENCIA, ABILIFY*, and the HIV portfolio. The Company's reported international net sales do not include copromotion sales reported by its alliance partner, Sanofi for PLAVIX* and AVAPRO*/AVALIDE* (irbesartan/irbesartan-hydrochlorothiazide).
Net sales of key biopharmaceutical products represent 81% and 74% of total biopharmaceutical net sales in the first quarter of 2009 and 2008, respectively. The following table details U.S. and international biopharmaceuticals net sales by key products, percentage change from the prior period, as well as the foreign exchange impact when compared to the prior period. Commentary detailing the reasons for significant variances for key products is provided below:
Three Months Ended March 31,
% Change
Attributable to
Dollars in Millions 2009 2008 % Change Foreign Exchange
Cardiovascular
PLAVIX*
U.S. $ 1,296 $ 1,139 14% -
Non-U.S. 139 169 (18)% (14)%
Total 1,435 1,308 10% (2)%
AVAPRO*/AVALIDE*
U.S. 173 174 (1)% -
Non-U.S. 129 131 (2)% (16)%
Total 302 305 (1)% (7)%
Virology
REYATAZ
U.S. 176 160 10% -
Non-U.S. 146 137 7% (16)%
Total 322 297 8% (7)%
SUSTIVA Franchise (total revenue)
U.S. 190 175 9% -
Non-U.S. 102 98 4% (20)%
Total 292 273 7% (7)%
BARACLUDE
U.S. 36 29 24% -
Non-U.S. 116 79 47% (13)%
Total 152 108 41% (10)%
Oncology
ERBITUX*
U.S. 162 185 (12)% -
Non-U.S. 2 2 - -
Total 164 187 (12)% -
SPRYCEL
U.S. 30 20 50% -
Non-U.S. 58 46 26% (21)%
Total 88 66 33% (15)%
IXEMPRA
U.S. 22 25 (12)% -
Non-U.S. 2 - N/A N/A
Total 24 25 (4)% -
Affective (Psychiatric) Disorders
ABILIFY*
U.S. 481 348 38% -
Non-U.S. 108 106 2% (18)%
Total 589 454 30% (4)%
Immunoscience
ORENCIA
U.S. 99 73 36% -
Non-U.S. 25 14 79% (31)%
Total 124 87 43% (5)%
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PLAVIX* - a platelet aggregation inhibitor that is part of the Company's alliance with Sanofi
• U.S. net sales increased primarily due to higher average selling prices and increased demand. Estimated total U.S. prescription demand increased approximately 4% in the first quarter of 2009.
• International net sales were negatively impacted by the August 2008 launch in Germany of a clopidogrel alternative salt (clopidogrel besylate).
• See "Item 1. Financial Statements-Note 21. Legal Proceedings and Contingencies-PLAVIX* Litigation," for a discussion of PLAVIX* exclusivity litigation in both the U.S. and EU.
AVAPRO*/AVALIDE* (known in the EU as APROVEL*/KARVEA*) - an angiotensin II receptor blocker for the treatment of hypertension and diabetic nephropathy that is also part of the Sanofi alliance
• Worldwide net sales decreased slightly primarily due to an unfavorable foreign exchange impact for non-U.S. sales partially offset by higher average selling prices. Estimated total U.S. prescription demand decreased approximately 9%.
• In Spain, APROVEL*/KARVEA* began to experience generic competition in the first quarter of 2009 and the Company expects this competition to increase over time. In 2008, the annual net sales of APROVEL*/KARVEA* in Spain were $57 million.
REYATAZ - a protease inhibitor for the treatment of HIV
• U.S. net sales increased primarily due to higher estimated total U.S. prescription demand of approximately 7%.
• International net sales increased primarily due to higher demand across most markets with Europe being the key driver due to the June 2008 approval for front-line treatment.
SUSTIVA Franchise - a non-nucleoside reverse transcriptase inhibitor for the treatment of HIV, which includes SUSTIVA (efavirenz), an antiretroviral drug, and bulk efavirenz, which is also included in the combination therapy, ATRIPLA* (efavirenz 600mg/emtricitabine 200 mg/tenofovir disoproxil fumarate 300 mg), a product sold through a joint venture with Gilead Sciences, Inc. (Gilead)
• U.S. net sales increased primarily due to price increases as well as higher demand. Estimated total U.S. prescription demand increased approximately 9%.
• International net sales increased despite unfavorable foreign exchange primarily due to continued demand generated from the launch of ATRIPLA* in Canada and the EU in the fourth quarter of 2007.
• In April 2009, Teva Pharmaceuticals, Ltd. (Teva) filed an Abbreviated New Drug Application with the FDA to manufacture and market a generic version of ATRIPLA*. For further details see "Item 1. Financial Statements-Note 21.
BARACLUDE - an oral antiviral agent for the treatment of chronic hepatitis B
• Worldwide net sales increased primarily due to continued growth across all markets, particularly international markets.
• There continues to be increased awareness and acceptance of its long-term efficacy, safety and resistance as evidenced by the American Association for the Study of Liver Disease recommendation of BARACLUDE (entecavir) as a first-line treatment option.
ERBITUX* - a monoclonal antibody designed to exclusively target and block the Epidermal Growth Factor Receptor, which is expressed on the surface of certain cancer cells in multiple tumor types as well as normal cells and is currently indicated for use against colorectal cancer and head and neck cancer. ERBITUX* is part of the Company's strategic alliance with Lilly
• U.S. net sales decreased primarily due to study results released in 2008 regarding the impact of the K-ras gene expression on the effectiveness on patients with colorectal cancer.
SPRYCEL - an oral inhibitor of multiple tyrosine kinases, for the treatment of adults with chronic, accelerated, or myeloid or lymphoid blast phase chronic myeloid leukemia with resistance or intolerance to prior therapy, including GLEEVEC* (imatinib meslylate)
• Worldwide net sales increased primarily due to higher demand from previously launched markets, growth attributed to recently launched markets as well as higher U.S. average selling prices.
IXEMPRA - a microtubule inhibitor for the treatment of patients with metastatic or locally advanced breast cancer
• Worldwide net sales were relatively flat.
ABILIFY* - an antipsychotic agent for the treatment of schizophrenia, bipolar mania disorder and major depressive disorder and is part of the Company's strategic alliance with Otsuka
• U.S. net sales increased primarily due to increased demand and higher average selling prices. Estimated total U.S. prescription demand increased approximately 31% and was primarily attributed to the 2008 and 2007 indications for certain patients with bipolar disorder and major depressive disorder.
• International net sales increased primarily due to increased prescription demand, which was aided by a new bipolar indication in the second quarter of 2008 in the EU.
ORENCIA - a fusion protein indicated for adult patients with moderate to severe rheumatoid arthritis who have had an inadequate response to one or more currently available treatments, such as methotrexate or anti-tumor necrosis factor therapy
• Worldwide net sales increased primarily due to increases in demand.
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