Bristol Myers Squibb Company — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; unaudited consolidated results. BMS reports one operating segment. Financial figures are in millions of dollars except per-share data.
Financial performance
| Metric | Q1 2021 | Q1 2020 | Change / context |
|---|---|---|---|
| Total revenue | $11,073 | $10,781 | Up 3%; net product sales rose 2% |
| Operating expenses | $8,543 | $11,085 | Down 23%, primarily reflecting lower inventory fair-value adjustment costs and favorable fair-value changes |
| Net earnings/(loss) attributable to BMS | $2,021 | $(775) | Returned to profitability |
| Diluted EPS, GAAP | $0.89 | $(0.34) | Improved $1.23 |
| Diluted EPS, non-GAAP | $1.74 | $1.72 | Up $0.02; excludes specified items |
| Cash flow from operations | $3,824 | $3,937 | Down $113 |
| Cash, cash equivalents and marketable debt securities | $13,218 | $16,264 at Dec. 31, 2020 | Quarter-end balance |
| Total debt | $46,282 | $50,676 at Dec. 31, 2020 | Short-term plus long-term debt |
| Net debt | $33,064 | $34,412 at Dec. 31, 2020 | Improved by $1,348 |
GAAP net margin was approximately 18.3%, compared with a loss margin of approximately 7.2% in Q1 2020. Cost of products sold was $2,841 million, or about 25.7% of revenue, versus $3,662 million, or about 34.0%; this comparison is affected by purchase-accounting inventory charges. Amortization of acquired intangibles was separately reported at $2,513 million.
Revenue trends and changes
- Growth reflected Eliquis, recently launched products and favorable foreign exchange, partly offset by lower demand for established brands. BMS said COVID-related purchasing patterns added about $500 million to Q1 2020 revenue, complicating the comparison.
- Key product results: Eliquis $2,886 million, up 9%; Revlimid $2,944 million, up 1%; Opdivo $1,720 million, down 3%; Pomalyst/Imnovid $773 million, up 8%; and Sprycel $470 million, down 10%. U.S. revenue rose 4%; Europe declined 1% and rest-of-world revenue rose 1%.
- Gross-to-net deductions increased 15% to $4,761 million; deductions were 30% of gross product sales versus 28% a year earlier. The filing attributes the increase primarily to channel and payer mix, including higher U.S. government-channel mix.
- GAAP earnings swung substantially year over year partly because of contingent consideration and equity-investment fair-value changes. Other income/expense was income of $702 million, versus expense of $1,163 million in Q1 2020. Non-GAAP EPS provides a different view: $1.74 versus $1.72.
Cash, debt and liquidity
- Operating cash flow was $3,824 million. Investing activities used $143 million, while financing activities used $7,295 million, including $4,522 million of long-term debt repayments, $1,775 million of share repurchases and $1,108 million of dividends paid.
- Cash and cash equivalents declined to $10,982 million from $14,546 million at year-end; current assets were $27,111 million and current liabilities $17,330 million. BMS reported no commercial-paper or revolving-credit borrowings and had $6.0 billion of revolving facilities available.
- BMS repurchased about 28 million shares for $1.8 billion and declared dividends of $0.49 per share. It expects 2021 capital expenditures of approximately $1.3 billion and 2022 expenditures of approximately $1.2 billion.
- Management said existing cash and marketable securities, operating cash generation and potential commercial-paper issuance should cover anticipated needs for at least the next few years, including approximately $13.0 billion of debt maturities through 2024.
Outlook, developments and risks
- The filing provides no clear full-year revenue or EPS guidance. Management said it remained on track to achieve approximately $3.0 billion of annualized pre-tax cost savings from the Celgene acquisition through 2022. Cumulative plan charges were approximately $2.1 billion, with approximately $3.0 billion expected through 2022.
- Portfolio developments included U.S. approvals of Breyanzi and Abecma, and FDA acceptance of the mavacamten application with a January 28, 2022 target action date. Management also cited positive Phase III results for deucravacitinib and positive progression-free-survival results for relatlimab plus Opdivo.
- BMS said COVID-19 had not significantly affected results to date but continued to weigh on patient visits and new patient starts and could create supply-chain constraints. The company said it had not experienced pandemic-related disruption to clinical or commercial supply.
- Pricing and reimbursement measures, generic competition, patent challenges, clinical and regulatory outcomes, and integration and pipeline execution remain important business risks. The filing reports no material change to the risk factors in the 2020 Form 10-K.
- Legal matters include a Hawaii Plavix decision imposing $417 million in penalties attributed to BMS, which BMS is appealing and for which it recorded no reserve; an adverse CAR-T patent judgment appealed by Kite; and ongoing patent challenges involving major products. BMS also disclosed $77 million of estimated environmental remediation costs and paid $75 million plus interest to resolve a federal average-manufacturer-price matter, with state agreements still to be negotiated.
- A $315 million Inrebic-related intangible-asset impairment was recorded after a regulatory milestone increased the asset’s carrying value. BMS also recorded a $281 million loss on early debt redemptions.
Investor verification priorities
- Reconcile GAAP and non-GAAP earnings, focusing on the large fair-value effects and recurring exclusions such as acquired-intangible amortization and restructuring costs.
- Assess the durability of revenue growth by product and region, the impact of COVID-related comparisons, gross-to-net deductions and emerging generic competition.
- Monitor cash generation, debt maturities, capital spending, dividends and repurchases against management’s liquidity assessment.
- Track pipeline approvals and launches, including mavacamten, and the commercial contribution of Breyanzi, Abecma and other newer products.
- Follow material litigation, patent decisions, tax examinations and pricing or reimbursement policy changes for potential financial effects.