News

The going has been pretty good for Bristol Myers BMY in the past six months. Shares of this biotech giant have rallied 36.4% in the said timeframe against the industry’s decline of 1.8%. The stock has also outperformed the sector and the S&P 500 during this period.

This stupendous rally after touching a 52-week low in July has enabled BMY to regain its lost territories and provided anxious investors with a ray of hope. The stock touched a 52-week high of $61.08 on Nov. 11.

Strong quarterly performance, an increase in annual guidance and approval of new drugs have likely improved investors’ sentiment for BMY.

Bristol Myers Outperforms Industry, Sector & S&P 500

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Newer Drugs Boost BMY’s Top Line

Newer drugs like Reblozyl, Breyanzi, Camzyos and Opdualag have enabled BMY to stabilize its revenue base amid generic competition for its legacy drugs. Reblozyl has put up a stellar performance in the past few quarters, with strong growth in the United States and international markets. The drug should contribute significantly in the coming decade.

The sales of its oncology drug, Opdualag, have been robust, fueling the top line. Per BMY, the drug has already become a standard of care in first-line melanoma setting in the United States with a market share of 30%.

Sales of CAR T cell therapy, Breyanzi, also continue to gain traction from the approval of new indications and expanded manufacturing capacity.

New Drug Approvals, Regulatory Updates Boost BMY

BMY recently won FDA approval for xanomeline and trospium chloride (formerly KarXT), an oral medication for the treatment of schizophrenia in adults. The drug was approved under the brand name Cobenfy, representing the first new pharmacological approach to treating schizophrenia in decades. The approval of Cobenfy for schizophrenia broadens BMY’s portfolio and validates the acquisition of Karuna Therapeutics.

BMY had earlier acquired Mirati Therapeutics for $4.8 billion. The acquisition added Mirati’s lung cancer drug Krazati (adagrasib) to its oncology portfolio.

The acquisition of RayzeBio added its proprietary radiopharmaceutical platform, along with its innovative pipeline of potentially first-in-class and best-in-class actinium-based radiopharmaceutical therapeutics, to Bristol Myers’ oncology portfolio.

The Committee for Medicinal Products for Human Use (“CHMP”) of the European Medicines Agency recently gave a positive opinion for repotrectinib, a next-generation tyrosine kinase inhibitor.

The CHMP recommended the drug for the treatment of adult patients with ROS1 -positive advanced non-small cell lung cancer, adults and pediatric patients aged 12 years and older with advanced solid tumors expressing an NTRK gene fusion, and those who have received a prior NTRK inhibitor, or have not received a prior NTRK inhibitor and treatment options not targeting NTRK provide limited clinical benefit, or have been exhausted. A decision is expected in January 2025.

Challenges for Older BMY Drugs

While the newer drugs drive growth, one of BMY’s top drugs, Revlimid (indicated for multiple myeloma), faces generic competition, adversely impacting its top line.

While Revlimid sales continue to decline, the drug managed to beat estimates in the third quarter and provided an upside to the top line.

Blood thinner medicine Eliquis, for which BMY has a worldwide co-development and co-commercialization agreement with pharma giant Pfizer PFE, is the biggest contributor to the top line. An upside in Eliquis sales in the third quarter helped BMY beat on revenues in the quarter.

Opdivo has maintained momentum for the company on continued label expansions. Last month, the CHMP recommended approval of Opdivo (nivolumab) plus Yervoy (ipilimumab) for the first-line treatment of adult patients with microsatellite instability-high or mismatch repair deficient unresectable or metastatic colorectal cancer.

However, Eliquis is slated to face generic competition later in the decade, and Opdivo might face a slowdown as core indications mature.

These three drugs comprise a major chunk of the company’s revenues. Meanwhile, the leukemia drug Sprycel is also facing generics in the United States, adversely impacting its sales. Pomalyst is facing generics in Europe.

Cost-Cutting Measures Should Boost Earnings

In April 2024, BMY announced a strategic cost-reduction plan that should result in approximately $1.5 billion savings by the end of 2025. The company will prioritize investing in candidates that will deliver the best long-term returns and optimize operations across the organization.

BMY’s High Debt Ratio Worrisome

While BMY’s strategy of acquiring companies like Gilead Sciences GILD with promising drugs/candidates is encouraging, it has resulted in colossal debt to finance these acquisitions.

As of Sept. 30, 2024, Bristol Myers’ total debt-to-total capital ratio was a staggering 74.3%. This is worrisome. The company had cash and equivalents of $7.9 billion and a long-term debt of $48.7 billion as of the aforementioned date.

BMY's Valuation

Going by the price/earnings ratio, BMY’s shares currently trade at 8.63x forward earnings, lower than its mean of 8.65x and 17.05x for the large-cap pharma industry.

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Estimate Movement

Over the past 60 days, the Zacks Consensus Estimate for 2024 earnings per share (EPS) has increased to $0.91 from $0.76. EPS estimate for 2025 has also gained 13 cents.

It’s worth noting that the annual earnings estimate has taken a massive hit due to acquisition-related expenses in 2024.

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Conclusion

Large biotech companies are considered safe havens for investors interested in this sector. The recent rally raises hope of a turnaround for BMY. Newer drugs pave the way for growth and approval of additional new drugs should further bolster the portfolio.

Given the stock's current trading levels, it would be prudent for investors already owning the stock to stay invested. Any dip in the share price can be used as a buying opportunity, as BMY is a good stock to own in the long term, and we believe there is room for more growth.

BMY has also been consistently paying out dividends. The current yield of 4.04% is quite attractive.

Bristol Myers currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.