Bristol-Myers Squibb Update

Raising 2022 Estimate and Adding 2023, Maintaining Outperform Rating and Price Target of $73

Bristol-Myers Squibb Company (BMS) achieved many operational milestones in 2021, advancing its development pipeline through clinical trials, new drug applications and regulatory approvals.  At its November Investor Event, management said that it would further advance these initiatives in 2022 and beyond, bolstering its early- and mid-stage pipeline through internal development, licensing agreements, partnerships and acquisitions.  Facing the headwinds from loss of exclusivity (LOE) for some of its key products, the company must generate significant revenues from new medicines and grow revenues of its existing brands through new indications and product extensions.

Management has expressed confidence in BMS’s ability to achieve its objectives.  Although the company faces a decline of $10-$12 billion in revenues to 2025, it expects to add $8-$10 billion primarily from Eliquis and its immunology-oncology franchise and another $10-$13 billion from new products.  On a net basis (to the midpoint of the ranges), revenues would grow to $50 billion in 2025, which represents a compounded annual growth rate (CAGR) of 1.9% from 2021.

2021 results were mostly in-line with expectations and management’s guidance.  Revenues increased by 9.1% to $46.4 billion.  Net income of $7.0 billion reversed 2020’s impairment charge-driven $9.0 billion loss and exceeded both expectations and guidance, due to a lower than anticipated tax rate.  With no acquisitions in 2021, free cash flow (defined as CFOA plus CFIA) improved to $15.7 billion from $3.2 billion in 2020.  After paying $4.4 billion of dividends, BMS used the remaining cash to repay $6.2 billion of debt and buy back $6.0 billion of stock.

For 2022, my projections anticipate revenues of $47.0 billion, (diluted) GAAP EPS of $3.53 and non-GAAP EPS of $7.80, all in line with guidance.  At the current quote, BMS’s stock trades at a forward multiple of 19.0 times, which is roughly consistent with the peer group average.  Given the inherent risks in its business, including the costs and uncertain prospects associated with acquisitions, which are not reflected adequately in non-GAAP earnings, its stock is not especially cheap; but helped by its attractive dividend yield of 3.2%, it can still deliver a solid total return, if the company achieves its revenue and earnings guidance.

I am maintaining my outperform rating and also my price target of $73.  Twelve months from now, that price target would give the stock a one year forward multiple of 17.9, modestly below the current level of 19.0, based upon projected 2023 GAAP earnings of $4.08.  On a Non-GAAP basis, my price target equates to a twelve month forward multiple of 9.0 times projected 2023 EPS of $8.15, slightly above the current forward multiple of 8.6 times.  Including the dividend, my price target represents a total return potential of 12.2%, which is probably more than what the market is likely to deliver this year.

This is a summary of my update report on Bristol-Myers Squibb. Reach out to me to obtain a copy of the full report.

February 27, 2022

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

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