Bristol-Myers Squibb Company’s (BMY - Analyst Report) fourth-quarter 2014 earnings (excluding special items) of 46 cents per share beat the Zacks Consensus Estimate by 6 cents but were down 10% year over year.

Including one-time items, Bristol-Myers’ fourth-quarter 2014 earnings came in at 1 cent, down 98% year over year.

Net sales in the fourth quarter (excluding revenues from the divested diabetes business) climbed 6% to $4.211 billion, driven by strong sales of drugs targeting the oncology market. Strong sales of the company’s rheumatoid arthritis drug, Orencia, and anti-clotting drug, Eliquis, also boosted the top line in the reported quarter. Revenues (including the divested business) slipped 4% to $4.258 billion.

Total revenues were ahead of the Zacks Consensus Estimate of $4 billion. We note that Bristol-Myers had sold its diabetes business to AstraZeneca (AZN -Analyst Report) last year.

The company’s earnings (excluding special items) of $1.85 per share in 2014 were above the Zacks Consensus Estimate of $1.79. 2014 earnings increased 2% year over year. Revenues came in at $15.879 billion, down 3% but above the Zacks Consensus Estimate of $15.655 billion.

The Fourth Quarter in Detail

The company posted disappointing sales in the U.S. and flat sales in international markets. Sales in U.S. markets declined 8% to $2.082 billion.

Key cancer drugs at Bristol-Myers have however performed very well in the fourth quarter of 2014. Leukemia drug Sprycel registered sales of $398 million, up 9%. Skin-cancer drug, Yervoy, approved in the U.S. and EU in 2011, contributed $366 million to total revenues during the reported quarter, up 41%.

Sales of another oncology drug, Erbitux, slightly improved during the quarter. Erbitux sales increased 1% to $181 million in the reported quarter. Opdivo, which gained accelerated approval in Dec 2014 for the melanoma indication based on tumor response rate and the durability of response, generated revenues of $5 million.

The performance of key drugs in the virology unit was disappointing. Sales of Baraclude declined 17% to $341 million. Sales of the drug are expected to decline further due to generic competition. In Sep 2014, Teva Pharmaceutical Industries Ltd. (TEVA - Analyst Report) launched its generic version of Baraclude. Sales of HIV treatments Reyataz and Sustiva, also dropped 17% and 5% to $318 million and $407 million, respectively.

Global sales of Abilify, approved for the treatment of schizophrenia and depression, declined 25% to $476 million. Sales of Orencia stood at $443 million, up 12%.

Sales of Eliquis were $281 million during the reported quarter, up approximately 30% sequentially. Bristol-Myers has a partnership with Pfizer (PFE - Analyst Report) on Eliquis. The hepatitis C virus (HCV) franchise at Bristol-Myers contributed $207 million to the company’s top line in the reported quarter.

Adjusted marketing, selling and administrative expenses in the reported quarter were $1.15 billion, 8.7% above the year-ago figure. Adjusted research and development expenses for the quarter climbed 21% to $1.139 billion.

2015 Earnings Outlook

Bristol-Myers expects adjusted earnings for 2015 in the range of $1.55–$1.70 per share. The Zacks Consensus Estimate of $1.71 per share is marginally above the high end of the guidance range. The company expects 2015 revenues in the range of $14.4–$15.0 billion, which is below the Zacks Consensus Estimate of $15.548 billion.

Our Take

We are impressed by the strong sales of drugs like Orencia, Eliquis, Yervoy and Sprycel in the fourth quarter of 2014. We are also impressed by Bristol-Myers’ efforts to develop its pipeline. However, the company’s 2015 outlook was disappointing. Shares of the company fell in pre-market trading.

We believe investor focus will remain on updates regarding the company’s high-profile immuno-oncology drug, Opdivo, going forward.

Bristol-Myers carries a Zacks Rank #3 (Hold). A better-ranked stock in the health care space is Teva. The company holds a Zacks Rank #2 (Buy).

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