Is Bristol-Myers Squibb Stock A Buy?

Bristol-Myers Squibb Co (NYSE:BMY) a large American pharmaceutical giant. Its prescription drug portfolio includes treatments for a wide variety of ailments, including HIV, cancer, diabetes, cardiovascular disease, and psychiatric disorders.

It grew through a series of acquisitions over the years to be a prominent drug company, even before the pandemic.

You may buy its drugs, but is Bristol-Myers Squibb stock a Buy?

Although it has an impressive portfolio, the government’s Operation Warp Speed coronavirus vaccine program overlooked BMY.

Its CEO attached the company to OWS through auxiliary programs, but it didn’t receive the billion-dollar research grants its contemporaries did.

Still, it took it on the chin and continued pushing to involve itself in the accompanying research and development.

 

Bristol-Myers Squibb Is A Top 100 Company

Bristol-Myers Squibb was founded in 1887 and is a component of both the S&P 100 and S&P 500 indices. It was one of the first companies to focus on high-quality drugs with a high level of purity and pushed for many of the regulations we have today.

Over the years, it grew through a series of mergers and acquisitions of smaller companies involved in therapeutics, biosciences, and other related markets.

Today, it’s one of the 100 largest corporations in the United States, with over 30,000 employees. The company has a broad pipeline of pharmaceuticals and biologic products.

BMY products include Plavix (for cardiovascular disease), Glucophage (for diabetes), Atripla (for HIV), Kenalob-10 (for inflammatory disorders), and Abilify (for psychiatric disorders). It also once owned brands like Buffering, Excedrin, and Ban deodorant, but it has since divested itself of them.

The company has a strong marketing machine and global distribution partnerships. Many of its drugs are billion-dollar blockbusters, and it has a broad pipeline in clinical research. The company even attracted the attention of Berkshire Hathaway, which loaded up on the stock.

Is it too late for the retail investor or a good investment still?

Is Bristol-Myers Squibb Stock A Buy?

The average analyst estimated share price for Bristol-Myers Squibb is $74.89. Trading at a considerable discount to that level is likely what attracted Buffett.

The skew between Buy/Hold ratings is in favor of the bulls. 9 of the 16 analysts covering the company rate it a Buy.

For income investors, the company pays an annual dividend yield of 2.91 percent, or $1.96 per year. This is based on the $0.49 quarterly cash dividend declared December 10, 2020. That’s a raise of $0.04 from the previous dividend of $0.45.

BMY has a solid dividend payout history that has increased every year over the past decade by an average of 12.89 percent. However, it underperformed the S&P 500’s growth in four of the past five years.

Its third quarter 2020 earnings report showed $10.5 billion in revenues for the quarter, equating to GAAP-adjusted earnings per share (EPS) of $0.82. This shows the strong earnings from the company’s existing pipeline.

CEO and board Chair Giovanni Caforio, M.D. promised continued success in its clinical trial pipeline through 2021. Some bullish analysts believe he will fulfill his promise and generate up to 20 percent growth through the first half of the decade.

However, the path to rapid annual expansion is not without hurdles.

BMY Revenues Face Patent Expiration Hurdles

Much of Bristol-Myers Squibb’s revenue comes from exclusive rights to certain treatments. Once clinically approved by the FDA, drugs carry a patent that temporarily gives them the sole right to sell the approved treatment.

Several of Bristol-Myers Squibb’s patents expired over the past decade, including Plavix, the company’s popular and highly profitable blood thinning drug.

And the company is often the target of lawsuits. Plavix was the target of its most recent class action suit that targets BMY and its distribution partner McKesson Corporation (MCK). It peaked at sales of $7 billion in the U.S. in 2011, making it the country’s top selling drug.

However, this and other lawsuits piled up in the late 2010s, causing BMY share price to go haywire in 2019. It barely recovered when other stocks bounced back with a vengeance.

It’s one of few pharmaceutical giants not receiving free money from OWS, making it the odd duck out. The company may need to buy a vaccine company to remain relevant in the coming decade, and it’s already behind the curve on the COVID-19 outbreak.

Now, it could find itself losing investor interest as major institutional and retail investors focus on recovery stocks. It’s a problem that may affect both BMY and its competitors.

Bristol-Myers Squibb Vs JNJ & Pfizer

Being a pharmaceutical giant, Bristol-Myers Squibb is in an elite class with few competitors. Those it does have are huge industry giants though, like Johnson & Johnson (JNJ), Merck (MCK), Pfizer (PFE), and Astrazeneca (AZN).

These companies have a love-hate relationship with each other, as they often contract manufacturing, distribution, and other rights among themselves. BMY partnered with several companies on products, like Gilead Sciences (GILD) for its HIV treatment.

However, nobody included BMY in a candidate coronavirus vaccine treatment, leaving the company empty handed. It came off as the little kid nobody picked for basketball.

While the company gets an A for effort, it didn’t secure the massive OWS grants that could have accelerated its revenue growth in the future.

Is Bristol-Myers Squibb Stock A Buy? The Bottom Line

Bristol-Myers Squibb is one of the country’s oldest and most successful drug companies. It began in the 1800s and is still running today, with exclusive treatments covering a broad range of ailments. It has a strong global presence and is both vertically and horizontally integrated to compete with industry giants.

It could have a banner year in 2021 with plenty of treatments in clinical trials. However, it also risks losing shine as investors focus on so-called “recovery stocks” over the coming few years.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.