Bristol-Myers Squibb (BMY) 23Q1 Update

23Q1 revenues declined 2.7% to $11.3 billion, less than 22Q4’s decline, but were 3% higher than projected.  Sales of Eliquis rose 27.3% sequentially and 6.6% YOY to $3.4 billion.  Revlimid sales fell 22.6% and 37.4%, respectively, due to patent expiry.  GAAP diluted EPS was $1.07, up 81.3% over 22Q1’s $0.59 and 11.5% above my estimate of $0.96.  Non-GAAP EPS was $2.05, up 4.3% over 22Q1’s $1.96 and three cents better than my estimate of $2.02.  The big jump in GAAP EPS was due mostly to a $1 billion positive swing in other income, most of which was classified as exceptional and therefore excluded from non-GAAP results.

Although 23Q1 revenues and EPS exceeded my estimates, the slow uptake on two key new medicines, Sotyktu and Camzyos, is a concern.  In the six months following its launch, Sotyktu generated $16 million in revenues in 23Q1.  Similarly, Camzyos’ revenues were only $29 million nearly a year after its launch.  Management asserts that its new product portfolio is on track to meet revenue targets.  The portfolio’s 23Q1 total revenues of $723 million were up 12.1% sequentially (or 58% annualized).  Still, it’s a long way from the current annualized run rate of $3 billion to the company’s 2030 target of at least $25 billion.

BMY announced that Chairman and CEO Giovanni Caforio would retire as CEO on November 1.  EVP and Chief Commercialization Officer Christopher Boerner was named EVP and COO and will replace Mr. Caforio as CEO.  Mr. Caforio will continue to serve as Executive Chairman for a transition period set by the Board.

Management reaffirmed its full year guidance of GAAP EPS of $4.03-$4.33 and non-GAAP EPS at $7.95-$8.25.  Based upon the modestly better-than-anticipated 23Q1 performance, I have raised my 2023 GAAP EPS estimate to $4.15, from $4.08, and non-GAAP EPS to $8.06 from $8.04.  For 2024, I have reduced my GAAP EPS estimate from $4.67 to $4.50 and my non-GAAP estimate from $8.45 to $8.22, due in part to a slower than anticipated ramp in new product sales. BMS’s stock has underperformed both the market and peers since October.  Its valuation discount vs. peers has therefore widened.  Assuming that BMY will show more sales traction by 2024, I anticipate that BMY’s one-year forward non-GAAP multiple will improve to 9.5 from 8.3 currently.  However, with a lower 2024 EPS estimate, the PT declines to $78 from $80.  That still represents a potential return of 20%, including the 3.4% dividend yield.  Accordingly, I am maintaining my performance rating of “1” (Strong BUY).

This is a summary of my recent report on Bristol-Myers Squibb Company (BMY). To obtain a copy of the full report, please reach out to me using the contact information provided below.

May 1, 2023

Stephen P. Percoco
Lark Research
839 Dewitt Street
Linden, New Jersey 07036
(908) 975-0250

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