Bristol Myers Squibb Company — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual report, not a standalone fourth-quarter report. BMS is a global biopharmaceutical company operating as one segment.
Financial performance and liquidity
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Total revenue | $45.006 billion | $46.159 billion | Down 2% |
| Net product sales | $43.778 billion | $44.671 billion | Down 2% |
| Earnings before income taxes | $8.440 billion | $7.713 billion | Up |
| Net earnings attributable to BMS | $8.025 billion | $6.327 billion | Up |
| Diluted EPS, GAAP | $3.86 | $2.95 | Up $0.91 |
| Diluted EPS, non-GAAP | $7.51 | $7.70 | Down $0.19 |
| Operating cash flow | $13.860 billion | $13.066 billion | Up $794 million |
Cost of products sold was $10.693 billion, approximately 23.8% of revenue, implying a gross margin of approximately 76.2% on this basis. BMS reported total expenses of $36.566 billion. The 2023 effective tax rate was 4.7%, versus 17.7% in 2022; excluding specified items, it was 14.7% versus 15.3%.
At year-end, cash and cash equivalents were $11.464 billion and marketable debt securities totaled $1.180 billion. Short-term debt was $3.119 billion and long-term debt was $36.653 billion. BMS reported net debt of $27.128 billion, down $2.9 billion year over year. Current assets were $31.770 billion and current liabilities were $22.262 billion. Capital expenditures were $1.209 billion.
Material changes versus 2022
- Revenue pressure was led by Revlimid: sales fell 39% to $6.097 billion, amid generic erosion and increased free-drug assistance. BMS expects global Revlimid sales to decline by approximately $1.5 billion to $2.0 billion in 2024.
- Growth in the newer portfolio partly offset erosion: new-product portfolio revenue rose 77% to $3.585 billion; Opdivo revenue increased 9% to $9.009 billion and Eliquis increased 4% to $12.206 billion.
- Gross product sales increased 6%, but gross-to-net adjustments rose 20% to $29.901 billion. Their share of gross product sales increased to 40% from 36%, reflecting higher government channel mix and pricing pressure.
- GAAP EPS improved partly because of specified items, including a $656 million deferred tax benefit and favorable litigation and settlement items. Non-GAAP EPS declined, primarily due to lower revenue and product mix.
- Operating cash flow rose 6%; cash used in financing activities decreased, including lower share repurchases. BMS repurchased approximately 87 million shares for $5.2 billion and paid $4.7 billion in dividends.
Outlook, strategy, risks and unusual items
- Strategy and pipeline: Management prioritizes portfolio renewal, pipeline advancement and disciplined business development across oncology, hematology, immunology, cardiovascular disease and neuroscience. It aims to expand registrational assets from six to as many as twelve. These are strategic objectives, not financial guidance.
- Acquisitions and financing: BMS completed its Mirati acquisition in January 2024 for $4.8 billion gross consideration, net of estimated acquired cash of $4.1 billion, plus a contingent value right of up to approximately $1.0 billion. Planned Karuna and RayzeBio acquisitions were expected to close in the first half of 2024 for approximately $14.0 billion and $4.1 billion, respectively. A $10 billion delayed-draw term loan facility was arranged as potential bridge financing; no amount was outstanding as of February 13, 2024.
- Spending and debt: Capital expenditures are expected to be approximately $1.4 billion in each of 2024 and 2025. Management said existing liquidity and expected operating cash generation should cover anticipated needs for at least the next few years. S&P downgraded BMS’s long-term rating to A from A+ after the announced acquisitions; Moody’s affirmed A2 with a negative outlook.
- Pricing and exclusivity: Eliquis was selected for U.S. Medicare price setting beginning in 2026 under the Inflation Reduction Act. Generic competition is already affecting Revlimid and certain international Eliquis markets; BMS also identifies upcoming or contested exclusivity for products including Sprycel and Pomalyst. Keytruda royalty rates declined from 6.5% to 2.5% beginning January 2024 and are scheduled to end in 2026; other significant royalty streams also have stated end dates.
- Unusual items: Other income/expense included $384 million of income tied to an AstraZeneca settlement and $400 million of income from a Nimbus change-of-control provision, partly offset by a $322 million BeiGene settlement expense. The low GAAP tax rate reflected a $656 million deferred tax benefit and other specified tax items. A restructuring plan commenced in 2023, with approximately $1.0 billion of charges expected through 2025.
- Contingencies and operating risks: BMS faces extensive patent, antitrust, product-liability, securities, tax and other proceedings. Its Eliquis patent disputes in Europe have produced mixed outcomes, with generic sales in some countries. The company also highlights pricing and reimbursement pressure, product concentration, clinical-development uncertainty, supply-chain and manufacturing risks, and acquisition integration and leverage risks. Environmental remediation liabilities were estimated at $80 million.
Important facts for investors to verify
- Whether newer-product growth and pipeline launches can offset Revlimid erosion and other approaching loss-of-exclusivity impacts.
- The final Medicare-negotiated Eliquis price, its expected effect on revenue, and the outcome of BMS’s challenge to the IRA program.
- Closing, financing, integration and commercial progress for Karuna and RayzeBio, in addition to the completed Mirati acquisition.
- Whether cash generation, debt reduction and credit ratings remain consistent with management’s liquidity and investment-grade objectives.
- Developments in major patent and legal matters, including Eliquis disputes in Europe and pending Revlimid-related litigation.
- The sustainability of reported GAAP earnings relative to adjusted earnings, given the significant tax, settlement, royalty and amortization items.