Bristol Myers Squibb Company — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Unaudited U.S. GAAP results; dollar amounts are in millions unless stated otherwise. BMS operates as one global biopharmaceutical segment.
Financial results
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Total revenue | $11,887 | $11,703 | $23,535 | $22,776 |
| Earnings attributable to BMS | $1,421 | $1,055 | $2,699 | $3,076 |
| Diluted GAAP EPS | $0.66 | $0.47 | $1.25 | $1.36 |
| Diluted non-GAAP EPS | $1.93 | $1.63 | $3.89 | $3.38 |
| Operating cash flow | Not presented separately | Not presented separately | $6,073 | $6,884 |
Revenue increased 2% in Q2 and 3% year to date. GAAP net margin attributable to BMS, calculated as attributable earnings divided by revenue, was approximately 12.0% in Q2 versus 9.0% a year earlier, and 11.5% year to date versus 13.5%. Non-GAAP measures exclude specified items and are not substitutes for GAAP results.
Six-month cash flow from investing activities was a $194 million use; financing activities used $9,173 million. Cash, cash equivalents and marketable debt securities totaled $13,228 million at June 30, 2022. Short-term debt was $4,953 million and long-term debt was $37,107 million; reported net debt was $28,832 million, up from $27,587 million at year-end 2021. BMS reported $30,186 million of current assets and $20,915 million of current liabilities. No commercial paper or revolving-credit borrowings were outstanding.
Material changes and drivers
- Q2 net product sales rose 1% to $11,485 million; six-month sales rose 3% to $22,793 million. U.S. revenue grew 12% in Q2 and 11% year to date, while international revenue declined 17% and 11%, respectively, including foreign-exchange headwinds.
- Growth in Eliquis and Opdivo and the newer-product portfolio was partly offset by loss-of-exclusivity erosion, principally Revlimid. Q2 Revlimid sales fell 22% to $2,501 million; six-month sales fell 14% to $5,298 million. Abraxane sales also declined.
- Six-month GAAP earnings attributable to BMS fell 12%, despite higher revenue. Other expense included $952 million of equity-investment losses and a $266 million debt-redemption loss; the prior-year period included a $510 million contingent-consideration gain and $749 million of equity-investment gains. Divestiture gains and lower impairment charges partly offset these items.
- Six-month operating cash flow declined $811 million, primarily due to approximately $900 million of higher tax payments, including effects of U.S. tax treatment of R&D costs. BMS repurchased $5.0 billion of stock and paid $2.3 billion in dividends during the period.
Outlook, commentary and notable items
- Management expects global Revlimid revenue to decline to approximately $9.0–$9.5 billion in 2022, with a material decline in the second half as generic competition expands. Abraxane revenue is expected to decline approximately 25%–30% in 2022.
- BMS expects U.S. income-tax payments to increase by nearly $2.0 billion versus 2021 absent a change in law. Annual capital expenditures are expected to be approximately $1.2 billion in each of 2022 and 2023. The filing does not provide a clear full-year total-revenue or EPS guidance figure.
- Management said existing liquidity, operating cash generation and potential commercial-paper issuance should cover anticipated needs for at least the next few years. It expects approximately $13.4 billion of debt maturities through 2026. A new $5.0 billion revolving facility, expiring in 2027, provides backup liquidity.
- The $4.1 billion all-cash Turning Point acquisition was subject to tender-offer and regulatory conditions and was expected to close in Q3 2022; BMS expected to fund it with cash on hand. The Syracuse manufacturing-site sale for approximately $170 million was expected to close by year-end 2022; a $43 million impairment was recorded in Q2.
- Product developments included FDA approvals for Opdualag and Camzyos and an expanded second-line indication for Breyanzi. BMS and Nektar discontinued the bempegaldesleukin-plus-Opdivo development program after late-stage trial analyses. BMS also withdrew a Reblozyl application for non-transfusion-dependent beta thalassemia after it could not address FDA questions with the available data.
- Risks include pricing and reimbursement pressure, generic competition and patent challenges, foreign exchange, COVID-19-related disruption, tax uncertainty and litigation. BMS disclosed a $417 million share of penalties imposed in a Plavix state case, which it is appealing and for which it said no reserve was warranted. A CVR trustee’s lawsuit alleges potential obligations tied to Breyanzi of up to $6.4 billion; BMS disputes the allegations, and the court denied its motion to dismiss. BMS stated that it could not estimate possible losses for many proceedings. Estimated CERCLA environmental costs were $88 million.
Investor verification points
- Track Revlimid and Abraxane erosion, the pace of generic entry, and whether replacement-product growth offsets lost sales.
- Review the composition and timing of volatile investment fair-value movements and other specified items when assessing GAAP versus non-GAAP earnings.
- Monitor operating cash flow, higher tax payments, debt maturities, net debt and the cash impact of the Turning Point acquisition and shareholder returns.
- Follow outcomes of the Breyanzi CVR litigation, Plavix appeal, Eliquis European patent proceedings and other material legal matters; potential losses are uncertain.
- Assess whether new-product launches and clinical/pipeline results convert into durable revenue, particularly given the discontinued Nektar program and the Reblozyl application withdrawal.