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Bristol-Myers Squibb Stock Is Too Cheap to Ignore

By Prosper Junior Bakiny - Feb 10, 2020 at 11:17AM

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The acquisition of Celgene is working wonders so far.

Bristol-Myers Squibb's (BMY 1.64%) decision to acquire Celgene in a cash and stock transaction valued at $74 billion wasn't particularly well-received. For instance, one of the company's largest institutional shareholders -- Wellington Management -- came out in opposition of the deal on the grounds that it put unnecessary risk on Bristol-Myers' shareholders. Also, the U.S. Federal Trade Commission (FTC) expressed antitrust concerns after the acquisition was announced. Bristol-Myers sold Celgene's psoriasis drug Otezla to Amgen (AMGN 0.94%) for $13.4 billion in cash to appease government regulators.

Despite all of these challenges, Bristol-Myers officially closed its acquisition of Celgene on Nov. 20, 2019. And in its first earnings release since then, the pharma company showed just why it spent a fortune on this blockbuster deal. 

A pharmacist smiling behind a drug store counter

Image source: Getty Images.

Bristol-Myers crushes fourth-quarter estimates

During the fourth quarter, Bristol-Myers reported a revenue figure of $7.9 billion, a 33% year-over-year increase and significantly better than the $6.14 billion analysts were expecting. Further, the company's bottom line also came out far ahead of consensus analyst estimates. Bristol-Myers posted an adjusted earnings per share (EPS) figure of $1.22, easily outpacing the $0.88 analysts were looking for. During the quarter, several of the company's products had strong performances. For instance, the company's drug Eliquis -- which is used to prevent blood clots in certain patients -- recorded sales of $2 billion, 19% higher than the year-ago period.

Also, Orencia -- which is used to treat the symptoms of rheumatoid arthritis -- posted sales of $792 million, an 8% year over year increase. However, Bristol-Myers' blockbuster cancer drug Opdivo didn't perform well, recording $1.8 billion in sales and representing a 2% decline compared to the prior-year quarter. It's worth noting that Opdivo is still being evaluated for other cancers, and research firm EvaluatePharma projects that Opdivo could be one of the five best-selling drugs in the world by 2024. In other words, this drug could remain a growth driver for Bristol-Myers.

Through the acquisition of Celgene, Bristol-Myers got its hands on such products as multiple myeloma drug Revlimid, which had sales for the third quarter of $1.3 billion. This only includes Revlimid's sales from the time of the closing of the acquisition -- on Nov. 20 -- to the end of Bristol Myers' third quarter, on Dec. 31. Revlimid should make a more significant impact on the company's top line from here. 

More to look forward to 

In addition to its strong financial performance, Bristol-Myers boasts interesting pipeline candidates, including many of its current products that are seeking new indications. The company's drugs Empliciti and Revlimid are currently being evaluated for the treatment of multiple myeloma. Also, Orencia is currently in phase 3 testing for the treatment of idiopathic inflammatory myopathy, a group of conditions characterized by muscle weakness and inflammation.

Through its partnership with bluebird bio (BLUE 2.80%), Bristol-Myers is developing a drug called liso-cel, which is currently in testing for several conditions, including Large B-cell Lymphoma and Chronic Lymphocytic Leukemia. There's also ide-cel, a potential treatment for multiple myeloma, which is currently in phase 3 testing. Bristol-Myers acquired the rights to liso-cel and ide-cel thanks to its acquisition of Celgene, and the company famously claimed that its late-stage pipeline after the Celgene transaction could generate more than $15 billion in revenue. 

Why you should buy now

Bristol-Myers will likely continue posting strong financial results, and its pipeline boasts several promising candidates as well. What's more, the company is currently trading at just 8.8 times future earnings, and its price-to-earnings growth (PEG) ratio is 0.78. At these levels, investors would do well to buy shares of Bristol-Myers and hold them for the long-term.

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Stocks Mentioned

Bristol Myers Squibb Company Stock Quote
Bristol Myers Squibb Company
$78.96 (1.64%) $1.27
Amgen Inc. Stock Quote
Amgen Inc.
$245.37 (0.94%) $2.28
bluebird bio, Inc. Stock Quote
bluebird bio, Inc.
$4.40 (2.80%) $0.12

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