What's Really Driving Bristol-Myers Squibb's Valuation?
The Cardiovascular segment
Bristol-Myers Squibb’s (BMY) Cardiovascular segment includes the key drug Eliquis. The segment contributed nearly 16.7% of total revenues for 1Q16.
Eliquis is an oral inhibitor that targets stroke prevention in non-valvular atrial fibrillation and the prevention and treatment of venous thromboembolism disorders. Eliquis is part of BMY’s alliance with Pfizer (PFE).
Eliquis is a new blockbuster drug, with sales that improved by over 200% to $734 million in 1Q16, as compared to $355 million for 1Q16. However, Eliquis is less profitable, and thus had a negative impact on the segment’s gross margins. Overall, Eliquis’s 1Q16 sales were driven by its broad label or uses as well as increased prescriptions from medical practitioners. Its operating expenses increased due to increased investments for drugs like Eliquis to support continued growth.
Bristol-Myers Squibb expects Eliquis and its oncology drug Opdivo to be major growth drivers for the company over the next five years. Notably, Eliquis competes with drugs like Xarelto from Johnson & Johnson (JNJ) and Pradaxa from Boehringer Ingelheim.
Other research and developments
The company’s cardiovascular research is focused on ongoing and significant unmet medical needs such as arrhythmia, atrial fibrillation, atherosclerosis, thrombosis, and heart failure. The company is also focused on the relationship between diabetes and heart disease and is developing a diabetes drug with cardiovascular benefits.
To divest risk, investors might consider the iShares US Healthcare ETF (IHE), which holds 7.0% of its total assets in Bristol-Myers Squibb. IHE holds 9.8% in Johnson & Johnson (JNJ), 5.8% in Eli Lilly (LLY), and 8.6% in Pfizer (PFE).
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