Bristol-Myers Squibb (NYSE:BMY) isn't having a great year. The big pharma stock has spent most of 2019 in negative territory. Many investors weren't happy with the decision to acquire Celgene (NASDAQ:CELG). And BMS has experienced some clinical-study disappointments for its blockbuster cancer drug, Opdivo.

But is Bristol-Myers Squibb still a smart pick for long-term investors? Let's look at the reasons to consider buying the stock and the reasons to avoid it.

Female scientists in a lab

Image source: Getty Images.

Why consider buying BMS

Growth and income. Those are the two reasons you should think about buying BMS stock. The income component is easier to address. Bristol-Myers Squibb's dividend currently yields north of 3.4%. The drugmaker uses only 43% of its earnings to fund the dividend program, so those dividends should keep on flowing. 

Don't underestimate the importance of the dividend. Over the last 10 years, the big pharma's share price has risen close to 120%. But its total return during that period was over 200% thanks to its dividends.

Bristol-Myers Squibb certainly has the firepower to deliver solid growth in the future. Market researcher EvaluatePharma ranked the drugs that it thinks will be the biggest blockbusters of 2024; BMS claimed two of the top five spots, with Eliquis at No. 3 and Opdivo at No. 4.

In addition, BMS has several other drugs in its lineup with solid sales momentum. Autoimmune disease drug Orencia and cancer immunotherapy Yervoy continue to generate strong sales growth. The company's brightest rising star right now is multiple myeloma drug Empliciti.

Acquiring Celgene really changes the growth dynamics for BMS. Celgene's Revlimid already stands as one of the best-selling drugs in the world, and sales are still climbing. Multiple myeloma drug Pomalyst and cancer drug Abraxane are two other big winners for Celgene right now.

But it's Celgene's pipeline that made the biotech so attractive for BMS. Celgene could have five new blockbusters that either have been recently approved or have a good shot at winning approval in the near future: fedratinib, ozanimod, liso-cel, bb2121, and luspatercept. 

Why stay away

Investing in pharmaceutical stocks comes with several risks, but none are greater than the potential for clinical and regulatory setbacks and the threats presented by competitors. These big risks are the main reasons why you might want to stay away from Bristol-Myers Squibb.

As mentioned earlier, BMS has already had clinical setbacks in 2019. The company announced in July that part 2 of its Checkmate-227 late-stage clinical study evaluating Opdivo in combination with chemotherapy as a first-line treatment for non-squamous non-small-cell lung cancer (NSCLC) didn't meet its endpoint. Much of the company's fortunes hinge on success for Opdivo in clinical trials. 

The acquisition of Celgene increases Bristol-Myers Squibb's pipeline risk. Last year, EvaluatePharma ranked Celgene as the riskiest big biotech on the market based on its dependence on pipeline candidates to generate growth. If any of Celgene's promising drugs fail to win regulatory approval, it would be a big blow to BMS.

Buying Celgene also could make BMS more susceptible to threats from competitors. Revlimid faces generic competition in limited volumes beginning in 2023. The drug currently makes up over 60% of Celgene's total revenue.

Bristol-Myers Squibb has plenty of competition for its top product, too. Merck's Keytruda has eclipsed Opdivo among cancer immunotherapies. Other new cancer drugs could threaten to capture some of Opdivo's market share as well. 

To buy or not to buy?

So is Bristol-Myers Squibb a stock to buy or a stock to avoid? My view is that it's a good pick for investors with a long-term perspective.

I like the prospects for approval for the drugs that BMS will gain with its acquisition of Celgene. I expect that Revlimid will continue to generate strong sales well into the next decade even with competition from generic versions of the drug.

With Opdivo, Eliquis, and the contribution from Celgene's drugs, I think that BMS could deliver earnings growth in the high-single-digit percentages. Add in the strong dividend and BMS should be able to provide an attractive total return to investors over the long run.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.