3 Things About Bristol Myers Squibb That Smart Investors Know

Bristol Myers Squibb (BMY 0.34%) shareholders have had a tough go of it lately, watching its shares fall more than 20% so far this year. As a result of the drop, the pharmaceutical stock trades for only 15 times earnings, and the yield on its dividend is now around 4%.

However, there are solid reasons for the stock's decline. Bristol Myers reported six-month revenue of $22.5 billion, down 4% year over year, even as earnings per share (EPS) climbed 65% to $2.06 over the same period. The company also lowered guidance, saying it now expects full-year revenue to show a single-digit percentage drop from last year's $46.6 billion. At the same time, it expects full-year EPS of $3.72 to $4.02, up from $2.95 last year.

So what should one make of these various currents coursing through the company's numbers? Here are three things about Bristol Myers Squibb that smart investors know.

1. The company is facing major patent cliffs

Through six months this year, cancer treatment Opdivo and blood thinner Eliquis brought in $10.9 billion in revenue, 48.6% of the company's overall six-month revenue of $22.5 billion. That's a problem, because both drugs are facing patent cliffs.

The company's third-best-selling drug, oncology workhorse Revlimid, lost its patent protection in 2022, and its revenue was down 48% year over year through six months this year.

Opdivo will face loss of exclusivity in 2028. In the meantime, Bristol Myers continues to add new indications for the drug. On Oct. 13, the company announced that the Food and Drug Administration (FDA) had given its approval for the drug to treat stage IIB or IIC melanoma patients over 12 who have had complete resection.

The company also recently reported positive phase 3 trial results for Opdivo as a combination therapy with Yervoy as a first-line treatment of metastatic non-small cell lung cancer.

Eliquis has since 2020 faced generic pressure in Europe. Its U.S. patents begin to expire in 2026. Right around that time, the company will also face pricing pressure as the drug is among the first 10 selected by The Centers for Medicare and Medicaid Services (CMS) for price negotiation. The White House said that the drug was used by more than 3.7 million Medicare enrollees from June 2022 through May 2023, with an average out-of-pocket cost of $608 for each enrollee.

2. There's plenty of potential in new drugs, pipeline

In 2022, the FDA approved nine new Bristol drugs, led by heart medicine Camzyos, plaque psoriasis treatment Sotyktu, and oncology drug Opdualag. This year, the company has gotten new approved indications in the U.S. or overseas for Camzyos, oncology drug Opdivo, anemia drug Reblozyl, CAR-T cell therapy Breyanzi, and Sotyktu.

The new therapies are just now starting to pay off. Through the first six months, the company's new product portfolio brought in around $1.5 billion, up 91% over the same period last year, when it delivered roughly $2 million in sales for the entire year. Bristol Myers has said it expects to see $25 billion in yearly non-risk adjusted revenue from those nine therapies by 2029.

Bristol Myers is focused on delivering new drugs to its pipeline. During a Sept. 14 Research and Development Day presentation, the company said its goals include roughly 10 new Investigational New Drug Applications each year, improving its success rate for approvals, as well as cutting down the timeline from human trials to drug approval to an average of 6.5 years.

Bristol Myers also said it expects over the next 18 months to double the number of drugs in registrational trials. Plus, it sees 25 more indication expansion possibilities for current drugs and nine early assets that it expects to move into the pipeline soon.

3. Bristol Myers has plenty of money for deals

Bristol Myers has spent big over the past two years to buy promising therapy assets. Last year, it spent $4.1 billion to acquire Turning Point Therapeutics, gaining repotrectinib, a small-molecule therapy to treat non-small cell lung cancer (NSCLC). The drug fared well in phase 1/2 trials, and an FDA decision on its approval is expected by Nov. 27.

On Oct. 8, the company reported it was spending $4.8 million to buy Mirati Therapeutics (NASDAQ: MRTX), which already has a promising product, lung cancer drug Krazati, and a pipeline that includes MRTX1719, which has shown promise in early trials to treat several different tumors with MTAP deletion, including NSCLC, bile duct cancer, and melanoma, as well as potential pancreatic cancer therapy MRTX1133.

The company already has a strong oncology portfolio, but the latest addition would give Bristol Myers more diversity within its pipeline.

Risk, but plenty of potential reward

Bristol Myers is facing its second consecutive year of lower annual revenue. That's a worrying trend, and there are legitimate questions whether the company's new drugs can replace the revenue that it will lose due to patent expirations, or at least how long that will take.

However, if it is able to use its beefed-up pipeline and purchased assets to drive growth, buying the stock at its current price would be a good long-term bargain.

In the meantime, investors can afford to be more patient because of the company's generous quarterly dividend. The company raised its dividend by 5.6% last year to $0.57 per share, the 14th consecutive year it has increased it.