Bristol Myers: Looking Good For 2023

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Late this summer, I concluded successful this premium article that Bristol Myers (NYSE:BMY) was still successful a bully place, aft its shares had seen a meaningful outperformance, notably connected a comparative basis. This came arsenic nan operational capacity was largely successful statement pinch expectations, though softness was nan consequence of a stronger dollar. The institution commanded humble valuations arsenic maturation had to travel from caller merchandise introductions and M&A activity, pursuing immoderate patent expirations successful nan portfolio.

A Starting Point

Bristol Myers has undergone a monolithic translator since its $90 cardinal woody for Celgene successful 2019, a transaction group to create a $37 cardinal business which was group to station EBIT of $16 billion. This net powerfulness was severely needed arsenic pro forma nett indebtedness would emergence to $52 billion.

With net powerfulness seen astir $5 per share, and potential synergies and reduced financing costs complete clip having nan imaginable to turn these net per share, a valuation successful nan mid-40s looked rather compelling.

To offset immoderate of nan summation successful leverage pursuing this deal, nan institution sold its Otezla authorities successful a $13 cardinal woody to Amgen (AMGN) arsenic each of this resulted successful a re-rating successful nan stock value to $60-$70 by nan summertime of 2021.

The institution alternatively quickly embarked connected acquisitions again, including a $13 cardinal woody of MyoKardia successful 2020, a woody done which nan institution obtained nan chronic bosom illness supplier mavacamten. The re-rating successful nan stock value and acquisition of MyoKardia was supported by coagulated operating conditions, pinch 2020 income of $42 cardinal comfortably surpassing nan pro forma income numbers astatine nan clip of nan Celgene woody announcement. Earnings were posted astatine $6.00 per share, pinch nan institution guiding for 2021 net to emergence to $7.00 per share, each while nett indebtedness was down to astir $30 billion, aided by integrated deleveraging and nan waste of Otezla.

As it turned out, revenues for nan twelvemonth 2021 roseate 9% to much than $46 billion, albeit that Bristol Myers still has a attraction consequence pinch income of Revlimid, Eliquis and Opdivo mixed being responsible for $31 cardinal sales, astir two-thirds of full revenues. The institution posted adjusted net of $7.51 per stock successful 2021, successful statement pinch nan original guidance.

For 2022, a overmuch much humble outlook was issued, pinch income seen astir $47 cardinal and net seen astir $7.80 per share. The deficiency of existent maturation comes arsenic nan institution expects a existent effect from nan expiration of Revlimid. That was nan original guidance, arsenic a stronger dollar made that nan institution updated for income to travel alternatively flattish, cutting nan net guidance a spot arsenic well.

In June of past year, nan institution moreover announced a $4.1 cardinal woody to get Turning Point Therapeutics, an oncology institution which focuses connected non-small compartment lung cancer, being granted nary little than 3 breakthrough therapy designations by nan FDA, pinch lead campaigner repotrectinib expected to beryllium approved successful 2023.

With net powerfulness seen astir $7.50 per stock by past summer, and shares trading astatine $66, it was clear that valuations were not demanding astatine all, arsenic a pro forma nett indebtedness load of $33 cardinal pursuing nan Turning Point woody was still very manageable.

Given nan still favorable set-up, I concluded to stay upbeat connected Bristol Myers, though I would beryllium tempted to return immoderate profits if shares mightiness revisit nan $80 mark, levels seen successful outpouring of 2022.

An Update

Since trading astatine $66 successful August, BMY shares person seen a swift betterment to nan $80 people successful December, I trim portion of my position based connected nan chat above. Like galore pharmaceutical names, shares person been a awesome underperformance arsenic of late, now trading down to $71 per stock again.

In October, Bristol Myers reported 3rd 4th income astatine $11.2 billion, down 3% connected a reported basis, though that revenues were level if we set for nan effect of a beardown dollar. Adjusted earnings, mostly adjusted for amortization charges, were reported astatine $1.99 per share, six cents up of nan twelvemonth before.

Pressure connected nan topline numbers has been driven by expiration of Revlimid, whose income fell 28% from $3.3 cardinal to $2.4 cardinal connected an yearly basis. This was offset by a 5% summation successful nan halfway "in-line" products business which contributed a small complete $8 cardinal successful income and a 61% summation successful nan "new merchandise portfolio", which included caller gross publication from Opdualag, Camzyos and Sotyktu.

To supply comfortableness and comparative entreaty successful this higher liking complaint environment, Bristol Myers announced a 3 penny hike successful its quarterly dividend to $0.57 per stock successful December, adding to an uninterrupted dividend way grounds which started 91 years ago.

In February, nan institution posted 4th fourth income of $11.4 billion, down 5% connected nan twelvemonth before, and down a percent if we set for currencies. Revlimid income now fell 32% to $2.3 billion, arsenic continued unit connected income of this supplier (still responsible for 20% of sales) will wounded nan maturation floor plan for immoderate clip to come.

This was offset by a 4% summation successful "in-line" products business and now an 83% summation successful nan caller merchandise portfolio, pinch mixed revenues of $645 cardinal starting to make a existent contribution. Fourth 4th adjusted net fell 2 pennies to $1.82 per share. For nan year, nan institution posted net of $7.70 per share, pinch nett indebtedness posted astatine $30 billion.

Moving Into 2023

For nan existent year, nan institution expects revenues to turn by astir 2% to astir $47 cardinal pinch adjusted net seen astatine a midpoint of $8.10 per share. This is rather awesome fixed nan patent expiration of Revlimid, arsenic Bristol Myers expects revenues to travel successful astir $6.5 cardinal for this supplier this year. This came aft 2022 income were down 22% to $10.0 cardinal already, arsenic nan $3.5 cardinal shortfall itself is responsible for a 7-8% headwind to reported income maturation this year.

The guidance is rather comforting arsenic I americium warming up again to initiate a afloat position here. At conscionable 9 times adjusted earnings, pinch leverage being very reasonable, and nan 2023 guidance being rather comforting, worth is imminent. Revlimid will apt unit nan topline results for immoderate clip to come, but Bristol Myers has immoderate maturation engines successful location arsenic well, to make a meaningful effect arsenic well.

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