Biotech Values

[DewDiligence]

Answer to BMY quiz:

Q: BMY has considerably more liquidity than its balance sheet indicates. Why?

A (by genisi):

BMY has a $1.75B payment coming from a debt refinancing by Mead Johnson Nutrition.

That’s correct. Moreover, BMY owns 170M shares of MJN; at yesterday’s closing price of 45.25, these shares are worth about $7.7B.* BMY does not show these MJN shares as an asset on its balance sheet because, as a majority owner of MJN, BMY consolidates MJN’s financials.

The relevance of all this is that BMY is in better shape to do relatively expensive deals with biotech companies than one would think from a cursory inspection of BMY’s financial statements.

*If BMY were to sell these shares, the after-tax proceeds would be about $5B.