Is Bristol-Myers Squibb a Buy? – The Motley Idiot

Could the significant pharma stock’s quick-time period pain change into prolonged-phrase gain for patient investors?

Keith Speights

Bristol-Myers Squibb (NYSE:BMY) isn’t really acquiring a great calendar year. The large pharma stock has expended most of 2019 in adverse territory. A lot of buyers weren’t delighted with the selection to acquire Celgene (NASDAQ:CELG). And BMS has knowledgeable some clinical-analyze disappointments for its blockbuster cancer drug, Opdivo.

But is Bristol-Myers Squibb still a good pick for extensive-expression traders? Let us glance at the factors to contemplate buying the inventory and the causes to prevent it.

Female scientists in a lab

Image supply: Getty Illustrations or photos.

Why look at shopping for BMS

Expansion and income. Those people are the two motives you need to feel about shopping for BMS inventory. The profits part is less complicated to address. Bristol-Myers Squibb’s dividend presently yields north of 3.four%. The drugmaker utilizes only 43% of its earnings to fund the dividend software, so people dividends should preserve on flowing. 

Do not undervalue the worth of the dividend. In excess of the last 10 years, the major pharma’s share price tag has risen shut to 120%. But its overall return through that time period was more than 200% many thanks to its dividends.

Bristol-Myers Squibb definitely has the firepower to supply stable advancement in the future. Market researcher EvaluatePharma rated the drugs that it thinks will be the major blockbusters of 2024 BMS claimed two of the top 5 places, with Eliquis at No. three and Opdivo at No. four.

In addition, BMS has a number of other medicines in its lineup with strong sales momentum. Autoimmune disorder drug Orencia and most cancers immunotherapy Yervoy go on to produce powerful gross sales development. The firm’s brightest increasing star correct now is a number of myeloma drug Empliciti.

Acquiring Celgene genuinely changes the growth dynamics for BMS. Celgene’s Revlimid currently stands as just one of the best-selling medicines in the environment, and product sales are continue to climbing. Many myeloma drug Pomalyst and cancer drug Abraxane are two other massive winners for Celgene correct now.

But it truly is Celgene’s pipeline that produced the biotech so beautiful for BMS. Celgene could have five new blockbusters that possibly have been a short while ago accredited or have a very good shot at successful acceptance in the in the vicinity of future: fedratinib, ozanimod, liso-cel, bb2121, and luspatercept. 

Why continue to be away

Investing in pharmaceutical shares comes with a number of pitfalls, but none are higher than the probable for clinical and regulatory setbacks and the threats presented by rivals. These big dangers are the key good reasons why you may well want to stay absent from Bristol-Myers Squibb.

As pointed out previously, BMS has presently had scientific setbacks in 2019. The company introduced in July that section 2 of its Checkmate-227 late-phase medical study assessing Opdivo in mix with chemotherapy as a first-line treatment method for non-squamous non-small-mobile lung most cancers (NSCLC) didn’t fulfill its endpoint. A lot of the company’s fortunes hinge on success for Opdivo in medical trials. 

The acquisition of Celgene will increase Bristol-Myers Squibb’s pipeline chance. Final year, EvaluatePharma rated Celgene as the riskiest major biotech on the industry based on its dependence on pipeline candidates to make progress. If any of Celgene’s promising drugs fail to earn regulatory acceptance, it would be a large blow to BMS.

Acquiring Celgene also could make BMS much more prone to threats from competition. Revlimid faces generic levels of competition in constrained volumes starting in 2023. The drug at this time would make up above 60% of Celgene’s whole revenue.

Bristol-Myers Squibb has lots of competition for its top item, way too. Merck‘s Keytruda has eclipsed Opdivo among the cancer immunotherapies. Other new most cancers medicine could threaten to seize some of Opdivo’s industry share as very well. 

To buy or not to get?

So is Bristol-Myers Squibb a inventory to buy or a inventory to keep away from? My see is that it truly is a great pick for traders with a prolonged-phrase standpoint.

I like the prospective buyers for acceptance for the medicine that BMS will obtain with its acquisition of Celgene. I anticipate that Revlimid will go on to create strong revenue perfectly into the next ten years even with competitors from generic versions of the drug.

With Opdivo, Eliquis, and the contribution from Celgene’s medications, I consider that BMS could produce earnings advancement in the superior-single-digit percentages. Incorporate in the powerful dividend and BMS really should be capable to give an beautiful overall return to buyers above the prolonged run.


Keith Speights owns shares of Celgene. The Motley Fool owns shares of and recommends Celgene. The Motley Fool has a disclosure policy.

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