VALUATION HIGHLIGHTS
- Oncology Drugs constitute 47% of the Trefis price estimate for Bristol Myers Squibb's stock.
- Cardiovascular Drugs constitute 28% of the Trefis price estimate for Bristol Myers Squibb's stock.
- All Other Drugs constitute 14% of the Trefis price estimate for Bristol Myers Squibb's stock.
WHAT HAS CHANGED?
BMY Stock vs. S&P 500 Performance
The performance of BMY stock with respect to the index has been quite volatile. Returns for the stock were 3% in 2021, 19% in 2022, -26% in 2023, and 16% in 2024.
In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, 24% in 2023, and 23% in 2024 — indicating that BMY underperformed the S&P in 2021, 2023 and 2024.
FDA Approves Schizophrenia Treatment — Cobenfy
The U.S. FDA approved Cobenfy for the treatment of Schizophrenia on Sep 26, 2024. This is a big approval for BMS. Cobenfy doesn't have classic side effects as is the case with the other antipsychotic drugs. Cobenfy was being developed by Karuna Therapeutics, which was acquired by BMS earlier this year. The peak annual sales for Cobenfy are expected to be around $8 billion.
Q4 2024 Performance
Bristol Myers Squibb garnered $12.3 billion in Q4'24 sales, reflecting an 8% rise y-o-y. This can primarily be attributed to higher sales of new drugs, including Reblozyl and Opdualag, which more than offset lower sales of legacy drugs, including Revlimid and Sprycel. Looking at the bottom line, the company reported an adjusted profit of $1.67 per share, compared to $1.70 in the prior-year quarter.
Recent Acquisitions
Bristol Myers Squibb to counter the falling sales of Revlimid, which now faces biosimilar competition, went on an acquisition spree, closing three acquisitions – Mirati Therapeutics, RayzeBio, and Karuna Therapeutics – over the last year or so. It spent around $24 billion combined on these acquisitions.
Significant Uptick In Eliquis Sales
Eliquis has seen strong growth of late, and it has become the leader in the oral anticoagulants (OAC) market (total prescriptions) in the U.S. amid market share gains. The drug's sales grew sharply from $1.9 billion in 2016 to $13.3 billion in 2024. However, Eliquis sales could start declining from 2026 as it nears its patent expiry, which will likely result in stiff competition from other drugs.
Celgene Merger
Bristol Myers Squibb, in late 2019, completed the acquisition of Celgene Inc. for $50 per share in cash and one share of Bristol Myers Squibb for each share of Celgene. This translates into a $74 billion transaction value and $90 billion if we include the debt.
POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE
Below are key drivers of Bristol Myers Squibb's value that present opportunities for upside or downside to the current Trefis price estimate for the company's stock:
Less Than Expected Success In Oncology
- Bristol Myers Squibb Oncology Drugs Revenue: Over the past decade, Bristol-Myers Squibb experienced rapid growth in its cancer drug sales, primarily fueled by the success of Opdivo (Nivolumab) and Revlimid. However, our current forecast anticipates a slowdown in this growth, projecting revenues from oncology drugs to be around $21 billion in 2031, down from $25 billion in 2024. This expected deceleration is mainly due to anticipated lower sales of Revlimid as it faces biosimilar competition. On the other hand, if other drugs in the portfolio achieve strong revenue growth and Revlimid's sales decline less than expected, potentially leading to division revenue of $29 billion by the end of our forecast period, there could be a 20% upside to our price estimate.
Immunology Ramp Up Exceeds Expectations
- Bristol Myers Squibb Immunology Drugs Revenue: With Bristol-Myers Squibb's key immunology drug, Orencia, having lost its market exclusivity in 2022, we anticipate a decline in its sales due to biosimilar competition. Despite this, we forecast the segment's sales to reach $5.7 billion by the end of our forecast period, up from $4.4 billion in 2024, driven by the growth of newer drugs such as Zeposia and Sotyktu. However, given the expanding market and potentially less intense competition for Orencia than anticipated, our estimates might be conservative. If the segment achieves an additional $4 billion in annual sales by the end of our forecast period, this could translate to a nearly 10% upside in our price estimate for Bristol-Myers Squibb.
BUSINESS SUMMARY
Bristol Myers Squibb is a global biopharmaceutical company focused on the discovery, development, and commercialization of pharmaceutical products.
Over the past several years, the company has strategically shifted its focus to become a core biopharmaceutical entity. This transformation involved divesting non-pharmaceutical businesses such as Medical Imaging and ConvaTec in 2008, and Mead Johnson in 2009. Simultaneously, BMS strategically acquired Kosan Biosciences in 2008, Medarex in 2009, ZymoGenetics in 2010, Amira Pharmaceuticals in 2011, Inhibitex and Amylin Pharmaceuticals in 2012, and Celgene in 2019. It also acquired Turning Point Therapeutics in 2022, and Mirati, Karuna, and RayzeBio in 2024.
The company's product portfolio consists mainly of small molecule drugs, which are chemically synthesized, and biologics, which are derived from biological processes. Bristol Myers Squibb generates the majority of its revenue from products within the oncology, virology, immunology, neuroscience, and cardiovascular therapeutic areas. Notably, the company sold its global anti-diabetics business to AstraZeneca in 2014.
SOURCES OF VALUE
Oncology drugs form the most valuable business segment for Bristol Myers Squibb.
High Revenue Contribution
Oncology drugs accounted for 53% of Bristol Myers Squibb's revenue in 2024, making it the biggest therapeutic segment for the company. This can be attributed to the strong uptake of Opdivo sales and the high contribution of Revlimid.
Expected Slowdown For Oncology Drugs
We expect revenue from oncology drugs to see a slight decline in the coming years, from $25 billion in 2024 to nearly $22 billion by the end of our forecast period in 2031.
Consequently, the revenue contribution will decline from 53% to around 46% during the same time period. In contrast, we expect most other business segments to grow at a faster pace.
KEY TRENDS
Growing Market Share of Eliquis
Eliquis has experienced remarkable recent growth, establishing itself as the leading oral anticoagulant (OAC) in the U.S. by total prescriptions, thanks to significant market share gains. The global anticoagulants market is projected to expand at a robust high single-digit rate in the coming years. As a key player in this market, Bristol Myers Squibb's Eliquis is well-positioned to benefit from this overall growth in the near term. However, we anticipate Eliquis sales will begin to decrease starting in 2026 as its patent nears expiration, likely leading to intense competition from other drugs.
Patent Expiry Leads To Significant Loss In Net Sales
In the pharmaceutical sector, the expiration of a patent typically results in the widespread adoption of generic versions. This shift occurs because patented medications are generally more expensive. Consequently, the net revenue from the original patented drug usually experiences a substantial, often rapid, decline.
As a result, pharmaceutical companies that focus on research and development must consistently invest in creating and launching new drugs. This ongoing innovation is crucial to counterbalance the revenue lost when their existing medications face generic competition after patent expiration.
Launch of New Drugs Or Approval For An Additional Indication
The introduction of a new drug or the approval of an existing drug for an additional use (another indication) presents an avenue for increasing overall revenue.
Consequently, a pharmaceutical company's drug pipeline is of utmost importance for maintaining revenue generation over the long term.
Generic Competition And Patent Litigation
Unlike research-based pharmaceutical companies, generic drug manufacturers do not have to invest in expensive and lengthy clinical trials to demonstrate the safety and effectiveness of their medications. Instead, they can rely on the clinical trial data of the original patented drug to gain regulatory approval. This significantly reduces their costs, allowing them to price their generic products much lower than the patented drugs. As a result, once a patent expires, generic competition typically leads to a near complete erosion of the patented drug's sales.
Occasionally, generic drug companies will introduce their versions of a medication before the relevant patent has expired, which often results in patent infringement lawsuits initiated by the pharmaceutical company holding the patent. If the pharmaceutical company loses these legal battles, it can face substantial revenue losses.
Globalization of Healthcare Reforms
Governments globally are pursuing healthcare reforms, many with the goal of lowering healthcare expenses. Some of these initiatives could lead to price decreases in the pharmaceutical industry, potentially hindering revenue growth.
