“From January 1, 1990 to September 12, 2019, Bristol Myers stock has returned 972% versus the S&P 500 return of roughly 751%. BMY is gearing up for another innovation run after the acquisition of Celgene.”
COMPANY PROFILE
Bristol-Myers Squibb is a global biopharmaceutical company whose mission is to discover, develop and deliver innovative medicines that help patients prevail over serious diseases.
Recent Earnings
Bristol-Myers Squibb posted third quarter revenues of $6.0 billion, an increase of 6% compared to the same period a year ago. Revenues increased 7% when adjusted for foreign exchange impact.
U.S. revenues increased 7% to $3.5 billion in the quarter compared to the same period a year ago. International revenues increased 3%. When adjusted for foreign exchange impact, international revenues increased 7%.
Gross margin as a percentage of revenue decreased from 71.0% to 69.9% in the quarter primarily due to product mix.
Marketing, selling and administrative expenses decreased 4% to $1.1 billion in the quarter.
Research and development expenses increased 8% to $1.4 billion in the quarter.
The effective tax benefit rate was 1.3% in the quarter, compared to an effective tax rate of 11.8% in the same period a year ago. The decrease in the effective tax rate was due to jurisdictional tax rates and other tax impacts attributed to pension settlement charges and the UPSA business divestiture gain in 2019.
The company reported net earnings attributable to Bristol-Myers Squibb of $1.4 billion, or $0.83 per share, in the third quarter, compared to net earnings of $1.9 billion, or $1.16 per share, for the same period a year ago.
The company reported non-GAAP net earnings attributable to Bristol-Myers Squibb of $1.9 billion, or $1.17 per share, in the third quarter, compared to net earnings of $1.8 billion, or $1.09 per share, for the same period a year ago. An overview of specified items is discussed under the “Use of Non-GAAP Financial Information” section.
Cash, cash equivalents and marketable securities were $33.5 billion as of September 30, 2019. The net cash position was $8.5 billion as of September 30, 2019.
The company expects to close the Celgene transaction by the end of 2019.
Product Sales/Business Highlights
Growth in global revenues for the third quarter of 2019, compared to the third quarter of 2018, was driven by:
Eliquis, which grew by 22%
Opdivo, which grew by 1%
Orencia, which grew by 14%
Sprycel, which grew by 14%
Yervoy, which decreased by 8%
2019 FINANCIAL GUIDANCE
Bristol-Myers Squibb is decreasing its 2019 GAAP EPS guidance range from $3.73 - $3.83 to $3.46 - $3.56 and increasing its non-GAAP EPS guidance range from $4.20 - $4.30 to $4.25 - $4.35. Both GAAP and non-GAAP guidance assume current exchange rates. Key revised 2019 GAAP and non-GAAP line-item guidance assumptions are:
• An effective tax rate of 13% to 14% for GAAP and approximately 16% for non-GAAP
Opinion
From a factor scoring perspective versus the other 199 brands in the brands index, here’s where Bristol-Myers scores well as of 9/17/19:
91% high dividend yield
91% high free cash flow yield - a solid value metric
87% high margins versus industry peers
96% margin expansion
95% high 1YR EPS growth
84% high absolute operating margins
83% sales surprises last quarter
81% high total cash over total market cap
The BMY allocation is about having an allocation to medical innovation for the “extension of life” theme. With an aging society, science and innovation should have a strong tailwind. There will be bumps along the way given potential missed milestones and political rhetoric into next years election but the reality is, pharma and biotech companies are not the problem, they do not get paid what the headline prices indicate, our healthcare system is bogged down from the middle-men between pharma and consumers. The pharma lobby is large and strong so I would not expect any political progress on significantly reducing drug prices. The middle-men, however, are directly in the crosshairs of politicians.
BMY’s acquisition of Celgene was a bold move by management and should vault BMY’s innovation to the front of the group and I expect this acquisition to be one of the most transformative since JNJ bought Warner Lambert. We now have a pharma/biotech stock with a 12% earnings yield and significant revenue growth potential while scoring well across some of the important growth & innovation metrics I use to help identify innovation leaders.