Tuesday, December 27, 2016 10:07:25 AM
Dec. 27, 2016 4:52 AM ET|13 comments | About: Bristol-Myers Squibb Company (BMY), Includes: AMGN, GILD, LLY, MJN, MRK, PFE, XLV
Alexander J. Poulos Alexander J. PoulosPremium Research »Follow(4,285 followers)
Summary
Bristol-Myers has managed to frustrate numerous investors this year.
Expectations were running ahead of themselves as BMY was poised to garner a first line monotherapy designation for Opdivo in NSCLC.
The stock price collapsed upon a notable clinical failure.
As detailed below, BMY offers a compelling value in the pharma/biotech space.
omitted
As 2016 draws to a close, the year will go down a rousing success for many investors. Multiple industries have posted stellar gains, yet I have often found last year's laggards often become the next year's winners. The article below will update my bullish stance on Bristol-Myers Squibb (NYSE:BMY) as the calendar flips to 2017.
The Year to Forget
BMY started the year off with a bang as its lead oncology compound seemed poised to dominate the oncology space. Bullish pieces flowed like water as analysts tripped over themselves to issue higher and higher buy prices centered around the continued clinical progress registered by Opdivo.
The second leg down occurred when results came in from the Checkmate-026 trial for the use of Opdivo as first-line monotherapy for Non-small Cell Lung Cancer, one of the largest oncology markets. Opdivo did not meet its statistical endpoint shocking most and leading to heavy selling pressure. It remains my belief from the onset that first-line therapy would revolve around the use of multiple agents to yield optimal results. Unfortunately for BMY bulls, Merck (NYSE:MRK) Keytruda now owns the first line monotherapy market. Undaunted, BMY has multiple shots at its goal with its in-house combo of Yervoy in addition to licensing deals with other players in the field.
omitted
Source
The optimal configuration for BMY would be for superior results to come from in-house controlled Opdivo/Yervoy yet BMY has wisely hedged its bets with partnerships.
2017 Guidance
omitted
BMY's initial 2017 guidance masks the real power of its Oncology franchise as BMY awaits further data to power revenue growth. True earnings power is hidden by BMY's high R&D spend as they are funding multiple clinical trials to ensure the broadest label possible for its Oncology franchise. As the products mature, the need for a heightened level of R&D will diminish thus providing higher profits to the bottom line via a reduction in spending. The key here is sustained revenue growth, with BMY possessing the most favorable revenue growth profile for the next five years of the major pharma players.
Role of the Dividend
BMY is often associated with a dividend growth entity, yet the profile of the company has changed as they have spun-off their non-core products such as Mead Johnson (NYSE:MJN). BMY has morphed more into a biotech outfit and should be viewed through a similar lens as Gilead Sciences (NASDAQ:GILD) and Amgen (NASDAQ:AMGN) instead of more diversified entities such as Eli Lilly (NYSE:LLY) and Pfizer (NYSE:PFE).
BMY does pay a dividend of 39 cents per quarter of a yield north of 2.5% yet dividend growth the next few years will remain anemic as BMY priority remains building out its oncology offerings. BMY should be viewed as a growth play with an income component versus a dividend growth play.
Management indicated their intention to return an additional $3 billion to shareholders via share repurchases. I have no doubt this is in response to the steep fall in the stock price; I subscribe to management's view that the oncology pipeline in its entirety offers significant value.
Technical Overview
[color=red](omitted)[/color]
The share price has recovered from the violent sell-off in October after the full details of the failed Checkmate trial were released. I posted a recent article on BMY discussing the merits of the company's stock only to be blindsided with a violent sell-off as the full results of the failed trial were revealed. Fortunately, for the BMY longs patience has been rewarded as the stock has come back closing the downward gap formed in early October. In hindsight, the sell-off in October reeks of capitulation selling as funds headed for the exits with the US presidential election looming.
The entire sector received a "Trump Bounce," yet unlike its pharma/biotech brethren BMY continues its elongated basing pattern as it steadily pushed higher. BMY has closed notably above the level witnessed post-election indicating that the move has nothing to do with short covering and is more indicative of value players gaining exposure for a leg up heading into 2017.
Source
I would not be at all surprised if the most notable laggard for 2016, the healthcare sector, led the charge in 2017 as investors rediscover the virtues of the industry. Healthcare underperformance is 2016 is quite unusual, yet by adopting a longer term view illustrates the staying power of the sector. The sector has returned 10% annualized based on the performance of the Health Care SPDR (NYSEARCA:XLV). I am using the XLV as a proxy. The only sectors that have performed better are the Consumer Discretionary at 10.28% and Consumer Staples at 10.55%. A bit of mean reversion is in order here: the XLV's dreadful underperformance in 2016 bodes well for a snap back in 2017.
Conclusion
As the calendar flips to 2017, I suspect the healthcare sector as a whole will begin to recoup the ground lost in 2016. At its current quote, the healthcare space is now undervalued with multiple names trading at below market multiples in this typically defensive sector. I would not be at all surprised if "hot money" leaves some of the areas that have experienced a huge run in 2016 and reverts to those that have underperformed. BMY exhibits the classic signs of an equity in an unloved sector that seems poised to break out substantially higher; I would not be at all surprised if BMY tested the open gap at roughly $64 early in 2017 especially if it can break above the resistance of its 200 day moving average at $62.92. I would like to thank you for reading; I look forward to your comments.
Investors are always reminded that before making any investment, you should do your proper due diligence on any name directly or indirectly mentioned in this article. Investors should also consider seeking advice from a broker or financial adviser before making any investment decisions. Any material in this article should be regarded as general information, and not relied on as a formal investment recommendation.
Disclosure: I am/we are long BMY, GILD, PFE.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: Long BMY via puts and calls.
http://seekingalpha.com/article/4032799-bristol-myers-poised-break-2017?app=1&auth_param=udil:1c64eek:a798e01ec50ad0ad79536eb606d10540&uprof=46
__________________________________________
Many charts/graphs not included.
BMY
Recent BMY News
- New Long-Term Zeposia (ozanimod) Data Demonstrate Durable Efficacy and Consistent Safety in Relapsing Forms of Multiple Sclerosis • Business Wire • 09/18/2024 10:59:00 AM
- Bristol Myers Squibb Presents Landmark 10-Year Follow-Up Data from CheckMate -067 Which Showed Continued Durable Long-Term Survival Benefit with Opdivo® plus Yervoy® in Advanced Melanoma • Business Wire • 09/15/2024 12:55:00 PM
- Bristol Myers Squibb to Report Results for Third Quarter 2024 on October 31, 2024 • Business Wire • 09/12/2024 10:59:00 AM
- Bristol Myers Squibb Announces Dividend • Business Wire • 09/10/2024 09:45:00 PM
- Bristol Myers Squibb to Present Data at ESMO Demonstrating Ongoing Leadership in Immuno-Oncology and Progression of Assets from Its Differentiated Research Platforms • Business Wire • 09/09/2024 10:59:00 AM
- Bristol Myers Squibb Employees to Relay Nearly 3,000 Miles Cross-Country Aspiring to Raise Over $1 Million for the V Foundation for Cancer Research • Business Wire • 09/06/2024 11:00:00 AM
- Long-Term Follow-Up Data from Phase 3 Study of CAMZYOS® (mavacamten) Underscores Established Efficacy and Safety Profile in Patients with Symptomatic Obstructive Hypertrophic Cardiomyopathy (oHCM) • Business Wire • 09/01/2024 07:33:00 AM
- Bristol Myers Squibb to Participate in Upcoming Investor Conferences • Business Wire • 08/27/2024 10:59:00 AM
- Bristol Myers Squibb to Present Data Across Cardiovascular Portfolio at the European Society of Cardiology Congress 2024 • Business Wire • 08/26/2024 10:59:00 AM
- Cruise and Uber Join Forces for Robotaxis, Alibaba Shifts Primary Listing to Hong Kong, Altria Hikes Dividend 4.1% • IH Market News • 08/23/2024 12:20:26 PM
- Bristol Myers Squibb Receives U.S. Food and Drug Administration sBLA Acceptance for First-Line Treatment of Unresectable Hepatocellular Carcinoma • Business Wire • 08/21/2024 10:59:00 AM
- European Medicines Agency Validates Bristol Myers Squibb’s Application for CAR T Cell Therapy Breyanzi for Relapsed or Refractory Follicular Lymphoma • Business Wire • 08/19/2024 10:59:00 AM
- Toyota Reports Another Global Production Decline, Delta Sues CrowdStrike, Meta Launches AI Studio for Custom Chatbots • IH Market News • 07/30/2024 10:00:51 AM
- Bristol Myers Squibb Reports Second Quarter Financial Results for 2024 • Business Wire • 07/26/2024 10:59:00 AM
- U.S. Index Futures Point to Higher Open, Oil Prices Down • IH Market News • 07/26/2024 10:08:50 AM
- Dexcom Shares Drop 37% on Weak Revenue and Forecast; Coursera Rises 24% After Beating Q2 Revenue Estimates • IH Market News • 07/26/2024 09:57:38 AM
- Bristol Myers Squibb Receives European Medicines Agency Validation of Application for Opdivo (nivolumab) plus Yervoy (ipilimumab) for First-Line Treatment of Unresectable or Advanced Hepatocellular Carcinoma • Business Wire • 07/19/2024 10:59:00 AM
- Bristol Myers Squibb to Participate in UBS Virtual Targeted Protein Degradation Day • Business Wire • 07/08/2024 10:59:00 AM
- Bristol Myers Squibb Announces U.S. FDA Accelerated Approval of KRAZATI® (adagrasib) in Combination with Cetuximab for Adult Patients with Previously Treated KRAS G12C-Mutated Locally Advanced or Metastatic Colorectal Cancer (CRC) • Business Wire • 06/21/2024 11:30:00 PM
- European Medicines Agency Validates Bristol Myers Squibb’s Application for Subcutaneous Nivolumab • Business Wire • 06/21/2024 10:59:00 AM
- Bristol Myers Squibb to Report Results for Second Quarter 2024 on July 26, 2024 • Business Wire • 06/20/2024 10:59:00 AM
- Bristol Myers Squibb Elects Michael R. McMullen to Board of Directors • Business Wire • 06/18/2024 08:16:00 PM
- Bristol Myers Squibb Announces Dividend • Business Wire • 06/18/2024 10:59:00 AM
- U.S. Food and Drug Administration Approves Augtyro™ (repotrectinib), a Next-Generation Tyrosine Kinase Inhibitor (TKI), for the Treatment of Patients with NTRK-Positive Locally Advanced or Metastatic Solid Tumors • Business Wire • 06/13/2024 08:46:00 PM
- Bristol Myers Squibb Announces Opdivo (nivolumab) Plus Yervoy (ipilimumab) Significantly Improved Overall Survival Compared to Lenvatinib or Sorafenib as First-Line Treatment for Patients with Advanced Hepatocellular Carcinoma in CheckMate -9DW Trial • Business Wire • 06/04/2024 12:00:00 PM
VHAI - Vocodia Partners with Leading Political Super PACs to Revolutionize Fundraising Efforts • VHAI • Sep 19, 2024 11:48 AM
Dear Cashmere Group Holding Co. AKA Swifty Global Signs Binding Letter of Intent to be Acquired by Signing Day Sports • DRCR • Sep 19, 2024 10:26 AM
HealthLynked Launches Virtual Urgent Care Through Partnership with Lyric Health. • HLYK • Sep 19, 2024 8:00 AM
Element79 Gold Corp. Appoints Kevin Arias as Advisor to the Board of Directors, Strengthening Strategic Leadership • ELMGF • Sep 18, 2024 10:29 AM
Mawson Finland Limited Further Expands the Known Mineralized Zones at Rajapalot: Palokas step-out drills 7 metres @ 9.1 g/t gold & 706 ppm cobalt • MFL • Sep 17, 2024 9:02 AM
PickleJar Announces Integration With OptCulture to Deliver Holistic Fan Experiences at Venue Point of Sale • PKLE • Sep 17, 2024 8:00 AM