BRISTOL MYERS SQUIBB CO quarterly report, Q3 FY2022

Bristol Myers Squibb Company — Form 10-Q Summary

Reporting period: Quarter and nine months ended September 30, 2022. Unaudited results are compared with the corresponding 2021 periods. BMS reports as one global biopharmaceutical segment.

Financial performance

Metric	Q3 2022	Q3 2021	Nine months 2022	Nine months 2021
Total revenue	$11.218 billion	$11.624 billion	$34.753 billion	$34.400 billion
Net earnings attributable to BMS	$1.606 billion	$1.546 billion	$4.305 billion	$4.622 billion
Diluted GAAP EPS	$0.75	$0.69	$2.00	$2.05
Operating cash flow	Not separately provided for the quarter	Not separately provided for the quarter	$9.760 billion	$12.150 billion

Q3 revenue declined 3%, while BMS-attributable earnings rose 4%. For the nine months, revenue increased 1%, but attributable earnings fell 7%. Approximate pretax margin was 19.7% in Q3 (18.6% in 2021) and 16.8% year to date (18.1% in 2021); these figures are calculated from reported pretax earnings and revenue. Non-GAAP diluted EPS was $1.99 for Q3 and $5.88 year to date, versus $1.93 and $5.31, respectively; BMS’s adjustments exclude significant specified items.

Revenue trends and material changes

• Q3 U.S. revenue grew 9% to $7.941 billion, while international revenue fell 24% to $3.062 billion; BMS attributed the international decline largely to foreign exchange and lower Revlimid demand. For the nine months, U.S. revenue rose 10% and international revenue declined 15%.
• Growth in Eliquis and Opdivo and the newer-product portfolio partly offset erosion in products facing loss of exclusivity. Q3 Eliquis revenue increased 10% to $2.655 billion and Opdivo increased 7% to $2.047 billion.
• Revlimid revenue decreased 28% in Q3 to $2.420 billion, primarily reflecting generic erosion; international Revlimid revenue fell 76%. Abraxane revenue declined 33% to $177 million.
• Newer products grew: Q3 revenue was $553 million, up from $344 million, led by Reblozyl ($190 million) and Abecma ($107 million). Opdualag, Camzyos and Sotyktu had recently launched.
• Gross-to-net adjustments increased 12% in Q3 to $6.793 billion; the adjustment rate rose to 38% of gross product sales from 35%, with higher government-channel mix cited as a factor.

Cash flow, debt and liquidity

• Nine-month operating cash flow was $9.760 billion, down $2.390 billion year over year. BMS cited higher tax payments, acquisition-related payments and timing of ordinary-course collections and payments.
• Cash and cash equivalents were $7.734 billion at September 30, 2022, versus $13.979 billion at year-end 2021. Current assets were $26.796 billion and current liabilities $18.930 billion, a current ratio of approximately 1.42.
• Gross debt was approximately $39.098 billion, comprising $2.132 billion short-term and $36.966 billion long-term debt. BMS reported net debt of $30.071 billion, up from $27.587 billion at December 31, 2021.
• Financing cash outflow was $13.716 billion, including $5.585 billion in share repurchases and $3.489 billion in dividends. BMS also repaid $11.431 billion of long-term debt and issued $5.926 billion of long-term debt. A $5.0 billion accelerated share repurchase was completed during the year.
• BMS said cash, investments, operating cash generation and potential commercial paper issuance should cover anticipated needs for at least the next few years. It had no outstanding borrowings under revolving credit facilities or its commercial paper program at quarter-end and had a $5 billion revolving facility.

Outlook, management commentary and notable items

• BMS expected 2022 global Revlimid revenue of approximately $9.0–$9.5 billion and a 2022 Abraxane revenue decline of approximately 25%–30%. Capital expenditures were expected to be approximately $1.1 billion in 2022 and $1.2 billion in 2023. The filing does not provide a clear consolidated revenue or EPS guidance figure.
• Management emphasized renewing and diversifying the portfolio through launches, pipeline investment and disciplined business development. BMS reported 17 approvals for new medicines, indications or formulations in major markets during 2022 through the filing’s stated update date.
• BMS acquired Turning Point Therapeutics in August for $4.1 billion cash ($3.3 billion net of acquired cash); $2.8 billion of acquired intangible assets related to repotrectinib. The acquisition was not material to reported operating results for the period.
• Other year-to-date items included $966 million of equity-investment losses, a $266 million loss on debt redemptions, $211 million in divestiture gains, and $763 million of acquired IPRD charges. Q3 included a $58 million IPRD impairment after BMS discontinued an investigational program.
• BMS cited potential effects from U.S. pricing and reimbursement changes under the Inflation Reduction Act, including Medicare price negotiation and inflation rebates; the company was still evaluating the impact. Required capitalization and amortization of U.S. R&D costs for tax purposes was expected to increase 2022 U.S. income tax payments by nearly $2 billion versus 2021.
• Other risks include continuing generic erosion and patent challenges, foreign-exchange exposure, pricing pressure, legal proceedings and uncertain clinical outcomes. BMS reported generic Eliquis sales in the UK and Netherlands following adverse patent decisions, and warned that generics could enter additional European markets.
• Material contingencies include litigation concerning Celgene contingent value rights tied to Breyanzi, a Hawaii Plavix matter with $417 million attributed to BMS that BMS is appealing and has not reserved for, and other patent, product-liability, antitrust and commercial disputes. BMS estimated its share of environmental remediation costs at $87 million.

Key facts for investors to verify

• Whether growth in Eliquis, Opdivo and newer products can offset Revlimid and other loss-of-exclusivity declines, particularly as European generic competition expands.
• The assumptions and exclusions behind non-GAAP EPS, including recurring amortization and other items BMS classifies as specified.
• Cash-generation trends, debt reduction and liquidity after the Turning Point acquisition, debt transactions, dividends and repurchases.
• Potential effects of the Inflation Reduction Act, higher U.S. tax payments and changing gross-to-net deductions on pricing, margins and cash flow.
• Developments in significant legal matters, including the Celgene CVR litigation and Eliquis patent actions, and any resulting financial exposure.
• Clinical, regulatory and commercial progress for recently launched products and pipeline candidates; the filing notes that outcomes and future results remain uncertain.