Strong Results for Bristol, Buoyed by COVID-19 Stocking

Bristol-Myers BMY reported solid first-quarter results ahead of both our and S&P CapIQ consensus expectations, but the majority of the outperformance (5% of sales) was driven by coronavirus stocking that we expect to reverse later in the year, so we don’t expect any major changes to our fair value estimate. We continue to view Bristol-Myers as fairly valued, with the market appropriately appreciating the heavy patent losses over the next five years (including oncology drugs Revlimid, Abraxane, and Pomalyst) offset by a strong pipeline and an entrenched drug portfolio, which also supports our wide-moat rating.

In the quarter, Bristol posted sales growth of 13% (excluding the impact of the Celgene acquisition). The acquired multiple myeloma drugs Revlimid (up 14%) and Pomalyst (up 29%) continue to make gains as duration of patient treatment expands, showing the strong efficacy of the drugs and a seamless transition to Bristol. These leading drugs look well positioned until generics emerge, but we expect other drugs to offset these generic pressures. Cardiovascular drug Eliquis (up 37%) looks well positioned based on a superior efficacy and side effect profile to continue to gain market share from older drug warfarin. While sales from cancer drug Opdivo fell 2%, as the important lung cancer market continues to change over to competing drugs in the first-line setting away from Opdivo in the second-line setting, we expect Opdivo to return to growth in 2021. The likely approvals of Opdivo with cancer drug Yervoy (May 2020) and with chemotherapy (August 2020) in the first-line lung cancer setting along with the likely approval in renal cancer with cabozantinib (late 2020) should help return Opdivo to growth. Further adding overall support, the recent approvals of Zeposia (multiple sclerosis) and Reblozyl (blood disorders) along with filings of blood cancer drugs liso-cel, bb2121, and CC-486 should set the firm up well to manage through the patent losses on older drugs.

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