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BMY Buoyed by Recent Regulatory Updates: How to Play the Stock?
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Last week, Bristol Myers (BMY - Free Report) obtained FDA approval for a label expansion of its blockbuster immuno oncology drug Opdivo (nivolumab).
The FDA approved Opdivo as a perioperative treatment regimen for adults with non-small cell lung cancer (NSCLC).
FDA Nod for Perioperative Treatment Using Opdivo
The FDA approved Opdivo for the treatment of adult patients with resectable (tumors ≥4 cm or node positive) NSCLC and no known epidermal growth factor receptor (EGFR) mutations or anaplastic lymphoma kinase (ALK) rearrangements for neoadjuvant treatment (before surgery), in combination with platinum-doublet chemotherapy, followed by single-agent Opdivo as adjuvant treatment after surgery.
This is known as perioperative therapy, used before and after surgery.
Per BMY, Opdivo is now the only PD-1 inhibitor to demonstrate statistically significant and clinically meaningful benefits in this disease versus chemotherapy in both a neoadjuvant-only regimen and as part of a perioperative regimen.
While there are multiple treatments available for NSCLC, there is still a need for options that can be administered before and after surgery that may target micrometastasis, help reduce the risk of cancer returning and improve the chance of successful surgical treatment.
Opdivo, a key growth driver for BMY, is already approved for various oncology indications, and label expansion of this drug should fuel sales. Opdivo raked in sales of $4.5 billion in the first half of 2024.
BMY’s Augments New Product Portfolio With Schizophrenia Drug
On Sept. 26, BMY won FDA approval for xanomeline and trospium chloride (formerly KarXT), an oral medication for the treatment of schizophrenia, in adults. The drug was approved under the brand name Cobenfy.
Cobenfy represents the first new pharmacological approach to treating schizophrenia in decades. The drug boasts a mechanism of action that’s different from current therapies. It targets schizophrenia by selectively targeting M 1 and M 4 receptors in the brain without blocking D 2 receptors.
Cobenfy has no atypical antipsychotic class warning and precaution. Also, it does not have a boxed warning.
The approval of Cobenfy for schizophrenia broadens BMY’s diverse portfolio and validates the acquisition of Karuna Therapeutics. Shares of the company gained on the news.
The drug’s differentiated profile gives it an edge over currently available antipsychotic treatments.
We note that BMY is banking on newer drugs like Opdualag, Reblozyl and Breyanzi to stabilize its revenue base in the face of generic competition for Revlimid. Opdualag’s robust sales have fueled the company’s top line. BMY has other promising candidates in its pipeline as well.
Thalassemia drug Reblozyl, for which BMY has a collaboration agreement with Merck (MRK - Free Report) , has put up a stellar performance since its approval.
Let us discuss these factors in detail to gain a better understanding of the stock’s performance.
Challenges for Older BMY Drugs
While the new drugs drive growth, one of BMY’s top drugs, Revlimid (indicated for multiple myeloma), is facing generic competition, which has adversely impacted its top line.
Blood thinner medicine Eliquis, for which BMY has a worldwide co-development and co-commercialization agreement with pharma giant Pfizer (PFE - Free Report) , is the biggest contributor to the top line. An upside in Eliquis sales in the second quarter helped BMY beat on revenues in the second quarter.
However, Eliquis is slated to face generic competition later in the decade, and Opdivo might face a slowdown as core indications mature.
A major chunk of the company’s revenues comes from these three drugs. In the first half of 2024, Eliquis, Opdivo and Revlimid contributed nearly 61% to BMY’s total sales of $24.1 billion.
BMY Strengthens Pipeline With Acquisitions
Bristol Myers recently acquired Mirati Therapeutics for $4.8 billion. The acquisition added Mirati’s lung cancer drug Krazati (adagrasib) to its strong oncology portfolio.
The company also has access to early-stage candidate MRTX1719, a potential first-in-class MTA-cooperative PRMT5 inhibitor. Other promising pipeline candidates in Mirati’s pipeline are MRTX1133 and MRTX0902.
The acquisition of RayzeBio added its proprietary radiopharmaceutical platform, along with its innovative pipeline of potentially first-in-class and best-in-class actinium-based radiopharmaceutical therapeutics, to Bristol Myers’ oncology portfolio. BMY is looking forward to utilizing RayzeBio’s distinguished radiopharmaceutical platform to develop several additional therapeutic candidates in the future.
These acquisitions have strengthened its pipeline.
High Debt Ratio Worrisome
While BMY’s strategy of acquiring companies with promising drugs/candidates like other pharma/biotech giants is encouraging, the company has undertaken colossal debt to finance these acquisitions. As of June 30, 2024, Bristol Myers’ total debt-to-total capital ratio was a staggering 75.4%. This is concerning. The company had cash and equivalents of $7 billion and a long-term debt of $48.8 billion as of the aforementioned date.BMY’s Price
Performance
Shares of BMY have risen 2.3% in the year so far against the industry’s decline of 3.9%. A recent spate of positive updates has helped the stock recover from the lows touched earlier in the year.
However, the stock has outperformed the sector and the S&P 500 during this time frame.
Going by the price/sales ratio, BMY’s shares currently trade at 2.28x forward sales, lower than its mean of 2.89x and the large-cap pharma industry’s 7.13x.
Image Source: Zacks Investment Research
Estimate Movement
Over the past 90 days, the Zacks Consensus Estimate for 2024 earnings per share (EPS) has increased to $0.77 from $0.75.
Image Source: Zacks Investment Research
It’s worth noting that the annual earnings estimate has taken a massive hit due to acquisition-related expenses in 2024.
Conclusion
While large biotech companies are considered safe havens for investors interested in this sector, we would advise them to wait a bit before turning optimistic on BMY. Although the recent rally raises hope of a turnaround, BMY still has an uphill task at hand, and it remains to be seen if this rebound is sustainable.
Newer drugs pave the way for growth, but these drugs will take some time to fill the gap caused by generic competition for legacy drugs.
Given the stock's current trading levels, staying invested would be prudent for investors already owning the stock. BMY has been consistently paying out and increasing dividends. The current yield of 4.87% is quite attractive. BMY currently carries a Zacks Rank #3 (Hold).
Image: Shutterstock
BMY Buoyed by Recent Regulatory Updates: How to Play the Stock?
Last week, Bristol Myers (BMY - Free Report) obtained FDA approval for a label expansion of its blockbuster immuno oncology drug Opdivo (nivolumab).
The FDA approved Opdivo as a perioperative treatment regimen for adults with non-small cell lung cancer (NSCLC).
FDA Nod for Perioperative Treatment Using Opdivo
The FDA approved Opdivo for the treatment of adult patients with resectable (tumors ≥4 cm or node positive) NSCLC and no known epidermal growth factor receptor (EGFR) mutations or anaplastic lymphoma kinase (ALK) rearrangements for neoadjuvant treatment (before surgery), in combination with platinum-doublet chemotherapy, followed by single-agent Opdivo as adjuvant treatment after surgery.
This is known as perioperative therapy, used before and after surgery.
Per BMY, Opdivo is now the only PD-1 inhibitor to demonstrate statistically significant and clinically meaningful benefits in this disease versus chemotherapy in both a neoadjuvant-only regimen and as part of a perioperative regimen.
While there are multiple treatments available for NSCLC, there is still a need for options that can be administered before and after surgery that may target micrometastasis, help reduce the risk of cancer returning and improve the chance of successful surgical treatment.
Opdivo, a key growth driver for BMY, is already approved for various oncology indications, and label expansion of this drug should fuel sales. Opdivo raked in sales of $4.5 billion in the first half of 2024.
BMY’s Augments New Product Portfolio With Schizophrenia Drug
On Sept. 26, BMY won FDA approval for xanomeline and trospium chloride (formerly KarXT), an oral medication for the treatment of schizophrenia, in adults. The drug was approved under the brand name Cobenfy.
Cobenfy represents the first new pharmacological approach to treating schizophrenia in decades. The drug boasts a mechanism of action that’s different from current therapies. It targets schizophrenia by selectively targeting M 1 and M 4 receptors in the brain without blocking D 2 receptors.
Cobenfy has no atypical antipsychotic class warning and precaution. Also, it does not have a boxed warning.
The approval of Cobenfy for schizophrenia broadens BMY’s diverse portfolio and validates the acquisition of Karuna Therapeutics. Shares of the company gained on the news.
The drug’s differentiated profile gives it an edge over currently available antipsychotic treatments.
We note that BMY is banking on newer drugs like Opdualag, Reblozyl and Breyanzi to stabilize its revenue base in the face of generic competition for Revlimid. Opdualag’s robust sales have fueled the company’s top line. BMY has other promising candidates in its pipeline as well.
Thalassemia drug Reblozyl, for which BMY has a collaboration agreement with Merck (MRK - Free Report) , has put up a stellar performance since its approval.
Let us discuss these factors in detail to gain a better understanding of the stock’s performance.
Challenges for Older BMY Drugs
While the new drugs drive growth, one of BMY’s top drugs, Revlimid (indicated for multiple myeloma), is facing generic competition, which has adversely impacted its top line.
Blood thinner medicine Eliquis, for which BMY has a worldwide co-development and co-commercialization agreement with pharma giant Pfizer (PFE - Free Report) , is the biggest contributor to the top line. An upside in Eliquis sales in the second quarter helped BMY beat on revenues in the second quarter.
However, Eliquis is slated to face generic competition later in the decade, and Opdivo might face a slowdown as core indications mature.
A major chunk of the company’s revenues comes from these three drugs. In the first half of 2024, Eliquis, Opdivo and Revlimid contributed nearly 61% to BMY’s total sales of $24.1 billion.
BMY Strengthens Pipeline With Acquisitions
Bristol Myers recently acquired Mirati Therapeutics for $4.8 billion. The acquisition added Mirati’s lung cancer drug Krazati (adagrasib) to its strong oncology portfolio.
The company also has access to early-stage candidate MRTX1719, a potential first-in-class MTA-cooperative PRMT5 inhibitor. Other promising pipeline candidates in Mirati’s pipeline are MRTX1133 and MRTX0902.
The acquisition of RayzeBio added its proprietary radiopharmaceutical platform, along with its innovative pipeline of potentially first-in-class and best-in-class actinium-based radiopharmaceutical therapeutics, to Bristol Myers’ oncology portfolio. BMY is looking forward to utilizing RayzeBio’s distinguished radiopharmaceutical platform to develop several additional therapeutic candidates in the future.
These acquisitions have strengthened its pipeline.
High Debt Ratio Worrisome
While BMY’s strategy of acquiring companies with promising drugs/candidates like other pharma/biotech giants is encouraging, the company has undertaken colossal debt to finance these acquisitions. As of June 30, 2024, Bristol Myers’ total debt-to-total capital ratio was a staggering 75.4%. This is concerning. The company had cash and equivalents of $7 billion and a long-term debt of $48.8 billion as of the aforementioned date.BMY’s Price
Performance
Shares of BMY have risen 2.3% in the year so far against the industry’s decline of 3.9%. A recent spate of positive updates has helped the stock recover from the lows touched earlier in the year.
However, the stock has outperformed the sector and the S&P 500 during this time frame.
BMY Outperforms Industry, Underperforms Sector & S&P 500
Image Source: Zacks Investment Research
Valuation & Estimates
Going by the price/sales ratio, BMY’s shares currently trade at 2.28x forward sales, lower than its mean of 2.89x and the large-cap pharma industry’s 7.13x.
Image Source: Zacks Investment Research
Estimate Movement
Over the past 90 days, the Zacks Consensus Estimate for 2024 earnings per share (EPS) has increased to $0.77 from $0.75.
Image Source: Zacks Investment Research
It’s worth noting that the annual earnings estimate has taken a massive hit due to acquisition-related expenses in 2024.
Conclusion
While large biotech companies are considered safe havens for investors interested in this sector, we would advise them to wait a bit before turning optimistic on BMY. Although the recent rally raises hope of a turnaround, BMY still has an uphill task at hand, and it remains to be seen if this rebound is sustainable.
Newer drugs pave the way for growth, but these drugs will take some time to fill the gap caused by generic competition for legacy drugs.
Given the stock's current trading levels, staying invested would be prudent for investors already owning the stock. BMY has been consistently paying out and increasing dividends. The current yield of 4.87% is quite attractive. BMY currently carries a Zacks Rank #3 (Hold).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.