Bristol-Myers Squibb, a Life Saver?

Bristol-Myers Squibb Co. (BMY),

November 13, 2023

(AI generated investment deep dive into a company of interest)

Company Overview

Bristol-Myers Squibb Co. (BMS) is a global biopharmaceutical firm that focuses on the discovery, development, licensing, manufacturing, marketing, distribution, and sales of biopharmaceutical products. The company operates in several therapeutic areas, including oncology, hematology, cardiovascular, immunology, and neuroscience. BMS' key products are sold worldwide, generating total revenues of $46,159 million in 2022. The company has expanded its portfolio through significant acquisitions, such as MyoKardia in 2020 and Turning Point in 2022, moving into precision oncology and cardiovascular segments.

BMS is also involved in the development of chemically-synthesized or small molecule drugs, biologics, and chimeric antigen receptor (CAR) T-cell therapies. The company's primary products include Sotyktu, Revlimid, and Abraxane, protected by robust patent protections that maintain market exclusivity. BMS also has proprietary technology, such as the Nab technology platform used in Abraxane, providing a competitive advantage and forming part of its new business growth prospects.

A potential area of future growth for BMS is its biological product line, which could be boosted by U.S. Healthcare regulations allowing the approval of similar versions of biological products under less stringent data requirements. BMS markets major biologic products such as Opdivo, Orencia, Yervoy, and others. Key products' exclusivity dates range from 2025 to 2036 in the US, EU, and Japan, with a significant portion of the company's revenue coming from sales in these three locations.

Despite facing challenges from generic manufacturers to several of its patents, BMS is offsetting potential setbacks with upcoming patents (pending approval), expected to expire between 2026 and 2037. The company is also focusing on R&D, specializing in unmet medical needs such as oncology, hematology, immunology, cardiovascular diseases, and fibrotic diseases. In 2022, BMS invested $9.5 billion in R&D, with late-stage development programs representing approximately 45% of the annual R&D expenses.

 By the Numbers

• Annual 2022 GAAP EPS decreased from $3.12 to $2.95, while non-GAAP EPS increased by $0.54.
• 2022 U.S. revenues increased by 9% to $31.83 billion, while international revenues decreased by 17% to $13.5 billion.
• Gross product sales for 2022 were $69.633 billion, a 3% increase from 2021.
• Net product sales declined by 1% to $44.671 billion in 2022.
• Eliquis and Opdivo saw a 21% and 15% increase in U.S. revenues respectively.
• Revlimid and Abraxane revenues declined by 22% and 31% respectively in 2022.
• Total expenses for 2022 were $38,446 million, a slight increase from $38,287 in 2021.
• Research and Development expenses decreased by 7%, from $10,195 million to $9,509 million.
• Earnings before income taxes were $7,713 million in 2022, compared to $8,098 million in 2021.
• Effective tax rate was 17.7% in 2022, up from 13.4% in 2021.

Quarterly Q3 2023 Report:

• Total revenues for the nine months ending on September 30, 2023, were $33,529 million, a 4% decrease.
• Diluted GAAP earnings per share were $2.99.
• Q3 2023 revenues fell by 2% to $10,966 million.
• U.S. revenues decreased by 4% in Q3 2023.
• International revenues increased by 3% in Q3 2023.
• Net product sales were $10,645 million.
• Revlimid's U.S. revenues decreased by 44%.
• Total expenses for the first nine months of 2023 were $26.763 billion, a 7% decrease.
• Interest expense decreased from $299 million in 2022 to $280 million in 2023.
• Earnings before income taxes were $2,137 million in Q3 2023.
• Effective tax rate was 9.5% for Q3 2023, down from 27.2% in the same period in 2022.

Stock Performance and Technical Analysis

The current stock price of $51.28 is intriguing in terms of investment. There has been a significant increase in the daily stock volume with 13,124,367 shares/day as opposed to the longer-term average of 9,653,666.32 shares/day. This increase in volume could suggest escalating interest in the stock, and it may imply a substantial change in the stock's trajectory. However, it's crucial to note that the current price is 0% above its 52-week low . This indicates that the stock has been trading nearer its lowest price in the past year, which could be a buying opportunity or a sign of a troubled company.

Money Flow indicators signify that the stock is under moderate buying pressure, which typically suggests investors are buying the stock and driving the price up. However, the stock is also under distribution according to the same indicators, which means shares are being sold in large quantities, potentially driving the price down. This mixed signal could indicate a market indecision about the company's value.

The Moving Average Convergence Divergence (MACD) is a trend-following momentum indicator that shows the relationship between two moving averages of a security’s price. Currently, the MACD is bearish at -1.29, suggesting that the short-term momentum is lower than the long-term momentum, indicating a potential downward turn in price.

In conclusion, this stock presents a complex picture. There are signs of both buyer interest and seller activity, which could create volatility. The bearish MACD suggests caution. As an investor, these factors must be weighed carefully, alongside fundamental analysis of the company's business performance and prospects.

The ‘Bull’ Perspective

Summary:

1. Consistent Revenue Generation: Despite a 4% decrease in total revenue, BMY has displayed robust revenue generation, with total revenues amounting to $33,529 million for the nine months ending on September 30, 2023.
2. Strong International Performance: The company's international revenues increased by 3% during Q3 2023, indicating a healthy demand for its products overseas.
3. Decrease in Total Expenses: BMY has managed to reduce its total expenses by 7% in the first nine months of 2023 compared to 2022, showing strong cost management.
4. Effective Tax Rate Reduction: The company's effective tax rate has significantly reduced to 9.5% in Q3 2023 from 27.2% in the same period in 2022.
5. Strong Product Portfolio: Despite a decline in Revlimid sales, the company has seen an increase in revenues for most of its products, highlighting a diversified product portfolio.

Consistent Revenue Generation
Despite a 4% decrease in total revenue, Bristol Myers Squibb Co has shown a strong ability to generate revenue. For the nine months ending on September 30, 2023, the company's total revenues amounted to $33,529 million. This decrease is primarily attributed to lower Revlimid sales and an increase in patients receiving free medicine from a patient assistance foundation. However, it's worth noting that the company still maintains a strong revenue base, which is a positive sign for potential investors.

Strong International Performance
Bristol Myers Squibb Co's international revenues increased by 3% during Q3 2023, indicating a healthy demand for its products overseas. This increase was largely due to increasing demand for Opdivo, sales from the new product portfolio, and favorable foreign exchange rates. This suggests that the company has a strong international presence and is well-positioned to benefit from global growth opportunities.

Decrease in Total Expenses
Bristol Myers Squibb Co managed to reduce its total expenses by 7% in the first nine months of 2023 compared to 2022, amounting to $26.763 billion. This decrease shows that the company is effectively managing its costs, which could lead to improved profitability in the future. This is a positive sign for investors as it indicates that the company is focused on improving its bottom line.

Effective Tax Rate Reduction
The company's effective tax rate has significantly reduced to 9.5% in Q3 2023 from 27.2% in the same period in 2022. This reduction was due to newly issued guidelines regarding the deductibility of certain non-US research and development expenses. A lower tax rate allows the company to retain more of its earnings, which could be used for reinvestment or distribution to shareholders.

Strong Product Portfolio
Despite a decline in Revlimid sales, the company has seen an increase in revenues for most of its products, highlighting a diversified product portfolio. The growth in sales of Opdivo, Yervoy, and Orencia is particularly noteworthy. This suggests that the company's revenue streams are not solely dependent on one product, which could provide a buffer against potential downturns in individual product sales.

In conclusion, despite facing several risks, Bristol Myers Squibb Co presents a compelling investment case characterized by consistent revenue generation, strong international performance, effective cost management, a reduced tax rate, and a diversified product portfolio. These factors, combined with the company's established presence in the pharmaceutical industry, make it a promising investment opportunity.

The ‘Bear’ Perspective

Upfront Summary:

1. Bristol Myers Squibb Co's Q3 2023 report reveals a 4% decrease in revenue for the nine months ending on September 30, 2023, with total revenues amounting to $33,529 million.
2. The company's key product, Revlimid, has suffered a significant decrease in U.S. sales due to generic erosion and an increase in patients receiving the drug for free from the Bristol Myers Squibb Patient Assistance Foundation.
3. Despite a decrease in total expenses for the first nine months of 2023, the company's earnings before income taxes were $2,137 million, indicating a lack of robust profitability.
4. The company faces a range of business risks, including pricing pressures, market exclusivity loss, and intense competition from other manufacturers and generic drugs.
5. Bristol Myers Squibb Co's heavy reliance on its key products, Revlimid, Eliquis, and Opdivo, for its revenues, cash flows, and earnings, exposes it to significant financial risks.

Elaboration:

1. Bristol Myers Squibb Co's recent financial performance has been less than stellar. According to their Q3 2023 report, the company saw a 4% decrease in revenue for the nine months ending on September 30, 2023. This decline in revenue, which totaled $33,529 million, is primarily attributed to lower sales of Revlimid and an increase in patients receiving free medicine from a patient assistance foundation. Such a decrease in revenue, especially during a period of economic recovery, raises concerns about the company's financial health and future growth prospects.
2. The company's key product, Revlimid, is facing a significant decrease in U.S. sales. This decrease, which amounts to a 44% drop, is due to generic erosion and an increase in patients receiving the drug for free from the Bristol Myers Squibb Patient Assistance Foundation. The company predicts a decline in global revenues for Revlimid to approximately $6 billion in 2023. This is a significant concern, as Revlimid is one of the company's primary revenue drivers.
3. Despite a decrease in total expenses for the first nine months of 2023, the company's earnings before income taxes were $2,137 million. This indicates a lack of robust profitability and may suggest that the company is not effectively managing its costs. Furthermore, the company's effective tax rate was 9.5% for Q3 2023, down from 27.2% in the same period in 2022, due to newly issued guidelines regarding the deductibility of certain non-US research and development expenses. This lower tax rate may not be sustainable in the long run, potentially impacting future profitability.
4. Bristol Myers Squibb Co faces a range of business risks that could further impact its financial performance. These include pricing pressures, the development and commercialization of new products, changes in laws or regulatory policies, and patent protection loss. The company's success depends on its ability to bring new products to market, replace sales from products facing market exclusivity loss, and maintain a strong pipeline through acquisitions and licensing. However, given the current market dynamics and the company's recent performance, these challenges seem daunting.
5. Lastly, Bristol Myers Squibb Co's heavy reliance on its key products, Revlimid, Eliquis, and Opdivo, for its revenues, cash flows, and earnings, exposes it to significant financial risks. A reduction in revenue from these products could impact the company's earnings and cash flow, leading to financial instability. With Revlimid already facing a significant decrease in sales, the company's financial future seems uncertain.

In conclusion, given the company's recent financial performance, the challenges it faces, and its reliance on a few key products, a bearish stance on Bristol Myers Squibb Co seems warranted. Investors should exercise caution and consider these factors before making investment decisions.