Bristol-Myers Squibb Company Fundamental Analysis
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Bristol-Myers Squibb Company
Last Updated: 9 May 2023
NYSE: BMY
GICS Sector: Healthcare
Sub-Industry: Drug Manufacturers — General

Table of Contents
You can download a summary of Bristol-Myers Squibb's fundamental analysis in PDF here.
Management
CEO: Giovanni Caforio
Tenure: 8yrs
Bristol-Myers Squibb's management team has an average tenure of 3.7 years. It is considered experienced.
Source of Revenue
Bristol-Myers Squibb Company operates in one segment engaged in the discovery, development, licensing, manufacturing, marketing, distribution, and sale of biopharmaceutical products on a global basis.
The company focus on offering medicines for patients facing serious diseases in these areas: oncology, haematology, immunology, cardiovascular and neuroscience.
Products, Intellectual Property and Product Exclusivity
The pharmaceutical products include chemically synthesised or small molecule drugs, products produced from biological processes, called “biologics” and chimeric antigen receptor (CAR) T-cell therapies.
Small molecule drugs are typically administered orally in the form of a tablet or capsule, although other drug delivery mechanisms are used as well. Biologics are typically administered to patients through injections or by intravenous infusion. CAR-T therapies are administered to patients by intravenous infusion.
In the pharmaceutical industry, most of the product’s commercial value is usually realised during the period in which the product has market exclusivity. A product’s market exclusivity is generally determined by two forms of intellectual property: patent rights held by the innovator company and any regulatory forms of exclusivity to which the innovative drug is entitled.
Patents are important for market exclusivity in the pharmaceutical industry, giving the innovator the right to exclude others from using the invention related to the medicine. Patents cover various aspects such as active ingredients, drug delivery mechanisms, and manufacturing processes. The protection period varies depending on the expiration dates of patents in different countries and depends on the type of patent, its scope of coverage, and the availability of legal remedies in the country.
Regulatory data protection (RDP) exclusivity rights can also influence market exclusivity. Developed countries provide non-patent incentives, such as RDP exclusivity, for the development of medicines, particularly orphan drugs, and pediatric treatments. RDP exclusivity can extend the market exclusivity period beyond the patent term.
As there are 18 significant products with different indications and market exclusivity, I have decided to summarise them into a downloadable PDF for free. For more information, always refer to the Bristol-Myers Squibb Company website.

Bristol-Myers Squibb Company Product Revenue FY2022

Bristol-Myers Squibb Company Revenue Geographic Breakdown FY2022
Research and Development
R&D is a critical focus for the long-term competitiveness of the company, with efforts concentrated on disease areas with significant unmet medical needs. The R&D pipeline includes various types of potential medicines, including small and large molecules, degraders, engagers, millamolecules, conjugates, cellular and gene therapies. Bristol-Myers Squibb Company also seeks to expand the value of existing products through new indications and formulations. The clinical development process for new drugs involves preclinical testing and controlled clinical evaluation through Phase I, II, and III clinical studies to support regulatory approval for a particular indication.
Phase I involves a small number of volunteers to test safety and dosage, while Phase II involves a larger patient population to investigate side effects and efficacy. Phase III involves a significantly larger patient population to confirm Phase II results and provide conclusive data regarding safety and efficacy. While regulatory approval is typically based on Phase III results, approval can sometimes be granted based on data from earlier studies.
Drug development is a long, expensive, and risky process that typically takes around 14 years from target identification to major market approval. Drug candidates can fail at any stage, and there is a high risk of failure in each stage of development. According to the KMR Group, the failure rates for small molecules and biologics are very high, with approximately 89% of small molecules in Phase I failing to achieve regulatory approval, and approximately 87% of biologics in Phase I also failing to achieve approval. The failure rates decrease in later stages of development, but there is still a high risk of failure.
Alliances
Bristol-Myers Squibb Company enters into alliances with third parties for the development and commercialisation of products. These alliances involve upfront payments, milestones, royalties, and equity investments. Alliances reduce investment risk but may reduce profitability due to profit sharing. The company may terminate alliances for material breaches, bankruptcy, or product safety concerns. The company typically does not retain any rights to the other party's product or intellectual property after an alliance terminates. The loss of rights to marketed products could have a material impact on the company's financial condition and liquidity. Profit-sharing payments have no expiration date, while royalty payments cease upon loss of market exclusivity.
The company products are sold principally to wholesalers, speciality distributors, speciality pharmacies, and to a lesser extent, directly to distributors, retailers, hospitals, clinics, and government agencies.
Bristol-Myers Squibb Company Economic Moat

Bristol-Myers Squibb Company Economic Moat
Economic Moat: Narrow
There are many ways to identify Bristol-Myers Squibb Company’s economic moat, but I focus on the above 5 types. The rating is purely subjective and based on my in-depth understanding and analysis of Bristol-Myers Squibb Company. Please check my summary to understand more about the economic moat.
Performance Checklist
Is Bristol-Myers Squibb Company’s revenue growing YoY for the past 5 years consistently? Yes.
Is the net income growing YoY for the past 5 years consistently? No.
Is the cash flow from operating activities growing YoY for the past 5 years consistently? Inconsistent.
Is the free cash flow positive for the past 5 years? Yes.
Is the gross margin % consistent/ growing for the past 5 years? Yes.
Is the EPS growing for the past 5 years? No.

Bristol-Myers Squibb Company Revenue, Net Income, Operating Cash Flow, and FCF (USD Million)
Is the free cash flow per share growing for the past 5 years? Yes.

Bristol-Myers Squibb Company FCF per Share
Management Effectiveness
Is Bristol-Myers Squibb Company’s ROE consistently at 12%-15% YoY for the past 5 years? Inconsistent.

Bristol-Myers Squibb Company Return on Equity
Is the ROIC consistently at 12%-15% YoY for the past 5 years? No.

Bristol-Myers Squibb Company Return on Invested Capital vs Weighted Average Cost of Capital
The trendline for the number of shares outstanding is increasing, which is something that an investor would not be pleased to see.

Bristol-Myers Squibb Company Shares Outstanding (Million Shares)
Bristol-Myers Squibb Company Financial Health

Bristol-Myers Squibb Company Financial Health (USD Million)
Current Ratio: 1.4 (pass my requirement of >1.0)
Debt-to-EBITDA: 1.9 (pass my requirement of <3.0)
Interest Coverage: 7.4 (pass my requirement of >3.0)
Debt Servicing Ratio: 9.4% (pass my requirement of <30.0%)
Dividend
Current Dividend yield: 3.3%
Have the dividend payments been stable for the past 5 years? Yes.
Have the dividend payments been growing for the past 5 years? Yes.
Bristol-Myers Squibb Company’s dividend payments are reasonably covered by its earnings and its cash flows.
Bristol-Myers Squibb Company Stock Performance
The following graph compares the cumulative total stockholders’ returns of the company’s common shares with the cumulative total stockholders’ returns of the companies listed in the S&P 500 Index and a composite peer group of major pharmaceutical companies comprised of AbbVie, Amgen, AstraZeneca, Biogen, Gilead, GlaxoSmithKline, Johnson & Johnson, Lilly, Merck, Novartis, Pfizer, Roche and Sanofi.
The graph assumes a $100 investment on 31 December 2017 in each of Bristol-Myers Squibb Company’s common shares, the S&P 500 Index and the stock of our peer group companies, including reinvestment of dividends, for the years ended 31 December 2018, 2019, 2020, 2021 and 2022. The stock price performance on the following graph is not necessarily indicative of future stock price performance.

Bristol-Myers Squibb Company Stock Performance
Bristol-Myers Squibb Company Intrinsic Valuation
Estimated intrinsic value: $105.46
Value is calculated using discounted cash flow method (taking into account their cash and debt) and scenario planning.
Average free cash flow used: USD$12,000M
Projected growth rate: 5% - 6%
Beta: 0.43
Discount rate: 5.0%
Margin of safety: 40% (Uncertainty: High)
Price range after the margin of safety: <$63.00
Date of calculation: 9 May 2023

Free cash flow used is a weighted average that is rounded to the nearest tens. In some instances, I used a more realistic number to represent the free cash flow.
Total debt and cash and short-term investments are last quarter figures that are rounded to the nearest tens. In some instances, I used more realistic numbers to represent them.

Bristol-Myers Squibb Company Intrinsic Valuation
Bristol-Myers Squibb Company Relative Valuation

Bristol-Myers Squibb Company EV-to-EBITDA vs its peers
