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Barry Cohen
Barry Cohen
Articles (279) 

Bristol-Myers Freeing Up Cash for Additional Acquisitions

Company cutting debt to increase ability to make deals and boost shareholder return

January 14, 2021 | About:

With plenty of cash squirreled away, Bristol-Myers Squibb Co. (NYSE:BMY) is looking to make more acquisitions, CEO Giovanni Caforio, M.D., said at the annual J.P. Morgan Healthcare Conference on Jan. 11.

FierceBiotech reported that Caforia called business development a "top priority" at the New York-based pharma giant.

"We will continue to look for midsize bolt-on deals that further strengthen our object to grow the company into the second half of the decade," he said. As of the third quarter, Bristol Myers had about $22 billion in cash and expects to have $45 billion to $50 billion in free cash flow around 2021 to 2023.

Bristol has been anything but shy about opening its wallet lately. In November 2019, the company completed a blockbuster deal, shelling out $74 billion to acquire Celgene. The purchase gave the combined companies more than nine products with over $1 billion in annual sales. Among them is the former Celgene drug Revlimid, which generated more than $3 billion in sales in the third quarter, a 10% gain over the same period a year earlier. The company just increased its cost-cutting goal as a result of the buyout to $3 billion from the previous $2.5 billion.

And at the end of last year, Bristol spent over $13 billion to add heart drug company MyoKardia to the fold. The centerpiece of that deal is MyoKardia's mavacamten, which is a potential first-in-class cardiovascular medicine to treat obstructive hypertrophic cardiomyopathy. Based on study data, the new drug application for mavacamten to treat symptomatic obstructive HCM is expected to be submitted to the Food and Drug Administration in the first quarter. Bristol thinks the drug should start generating sales soon after approval. The size of the treatment's market could be much higher if the company is successful at expanding mavacamten's use to additional indications.

Caforio said to fund more deals and increase shareholder return, Bristol is intent on reducing debt as it strengthens its balance sheet by moving up repayment of $4 billion in liabilities into 2021.

Who else might Bristol be eyeing? I previously speculated that a logical target might be Bluebird Bio Inc. (NASDAQ:BLUE) given the two already have an agreement on a cancer drug, which Bristol obtained as part of the Celgene deal. The agreement was later modified when Bristol gave Bluebird $200 million to beef up its manufacturing in exchange for squelching future payments related to the drug outside the U.S.

Cambridge, Massachusetts-based Bluebird has a market cap of about $3.4 billion. The stock trades at about $51, well off its 52-week high of nearly $100. Bristol may soon have to choose which Bluebird piques its interest. The company recently announced it was splitting into two separate entities by the end of the year. One will concentrate on rare diseases and the other on cancer.

Bristol stock is trading near its 52-week high of just more than $66. Its dividend yields more than 3%.

Disclosure: The author has a position in Bristol-Myers Squibb.

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About the author:

Barry Cohen
Barry Cohen has nearly 40 years experience in communications and marketing, the majority in senior positions at large international health care companies, including Abbott Laboratories and Bayer Inc.

He has contributed to a number of financial websites, writing primarily about the stocks of health care companies.

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