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Bristol-Myers Squibb Smashes Earnings Predictions Following Celgene Acquisition

2019 marked a pivotal turning point for the pharmaceutical giant

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Margaret Moran
Feb 06, 2020
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Before the market opened on Feb. 6, Bristol-Myers Squibb (

BMY, Financial) reported earnings for the fourth quarter and full-year 2019.

For the quarter, the company reported revenue of $7.9 billion, non-GAAP earnings per share of $1.22 and GAAP losses per share of 55 cents, beating analyst expectations of $7.1 billion in revenue and $0.88 in non-GAAP earnings per share. Net loss attributable to shareholders came in at $1.05 billion, compared to net income of $1.16 billion for the prior-year quarter.

The full year brought in revenue of $26.1 billion, net income of $3.43 billion and non-GAAP earnings of $1.22 per share, compared to $5.7 billion, $4.92 billion and 94 cents in 2018, respectively.

As of Feb. 6, Bristol-Myers shares traded around $67.17 for a market cap of $157.27 billion. The company has a price-earnings ratio of 19.35, a cash-debt ratio of 1.3 and a return on capital of 141.94%. GuruFocus has assigned it a financial strength score of 6 out of 10 and a profitability score of 9 out of 10. Revenue has grown at an average rate of 11.8% per year over the past three years.


Contributors to growth

On Nov. 20, 2019, Bristol-Myers completed its acquisition of Celgene, which develops medications for cancer and inflammatory disorders. Celgene’s portfolio of biopharmaceuticals further diversifies Bristol-Myers’ existing franchises in oncology, hematology, immunology and cardiovascular disease.

In total, Bristol-Myers estimates that its 33% increase in revenue year over year was mostly due to the Celgene acquisition. When counting in potential synergy savings of $2.5 billion between the acquisition and 2022, Celgene is predicted to contribute $15 billion per year in revenue.

“By all measures, 2019 was a transformative year for Bristol-Myers Squibb as we progressed our strategy through the acquisition of Celgene, delivered strong operational and financial performance and continued to drive important science for patients,” Chairman and CEO Giovanni Caforio, M.D., said in the fourth-quarter earnings call.

The $74 billion deal was paid for by issuing $50 in cash, one share of the combined company and one tradable Contingent Value Right (CVR) for each share of Celgene. Each CVR will be worth $9 in cash if the company achieves certain regulatory milestones. Despite the dilution, the value of shares increased sharply after the acquisition due to investor optimism, bringing the price in line with the fair value according to the Peter Lynch chart.


Bristol-Myers saw sales growth in all of its key franchises for the full year and all but one over the fourth quarter, indicating that demand for its products remains strong. For many products, international growth was stronger than U.S. growth.

In the near term, the company expects growth to be driven by its robust late-stage pipeline, which is one of the strongest in the industry. It has eight near-term potential launch opportunities, six of which it is seeking regulatory approval for.

2020 guidance

The company has issued optimistic guidance for full-year 2020, anticipating net sales of $40.5 billion to $42.5 billion, GAAP earnings of 75 cents to 95 cents per share and non-GAAP earnings of $6 to $6.20.

In terms of capital allocation, it plans to take a balanced approach, which includes reducing debt and achieve a debt-to-Ebitda ratio of 1.5 or less by 2023 (compared to the current ratio of 3.24) and setting aside $5 billion for share repurchases. Bristol-Myers also plans to increase the dividend following a 10% increase in December 2019, though this is subject to board approval.

Disclosure: Author owns no shares in any of the stocks mentioned.

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