Bristol Myers Squibb Company — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021. Unaudited results; amounts below are in U.S. dollars unless noted.
Business context
BMS is a global biopharmaceutical company operating as one reportable segment. Its portfolio spans oncology, immunology, cardiovascular disease and fibrosis. The filing describes 2021 approvals and launches, including the company’s first approved cell therapies, Breyanzi and Abecma.
Financial performance
| Metric | Q3 2021 | Q3 2020 | 9M 2021 | 9M 2020 |
|---|---|---|---|---|
| Total revenue | $11.624bn | $10.540bn | $34.400bn | $31.450bn |
| Net earnings attributable to BMS | $1.546bn | $1.872bn | $4.622bn | $1.012bn |
| Diluted GAAP EPS | $0.69 | $0.82 | $2.05 | $0.44 |
| Diluted non-GAAP EPS | $2.00 | $1.63 | $5.67 | $4.98 |
- Revenue increased 10% in Q3 and 9% year to date. Growth reflected Eliquis, Revlimid, the immuno-oncology and newer-product portfolios, and foreign exchange; established brands were a partial offset.
- Q3 GAAP earnings and EPS fell year over year, while nine-month GAAP earnings rose substantially. Comparisons are affected by large non-operating and tax items in both periods; non-GAAP results rose in both comparisons.
- Calculated net margin was approximately 13.3% in Q3 2021 versus 17.8% in Q3 2020, and 13.4% for 9M 2021 versus 3.2% for 9M 2020. These are net earnings attributable to BMS divided by total revenue.
- Leading 9M product revenues included Revlimid $9.493bn (+8%), Eliquis $8.091bn (+17%), and Opdivo $5.535bn (+6%). Abraxane revenue declined 8% to $876m, including manufacturing-related weakness.
Cash flow, debt and liquidity
- For 9M 2021, operating cash flow was $12.150bn, investing cash outflow was $939m, and financing cash outflow was $12.257bn. Operating cash flow increased from $10.697bn; management cited lower tax payments and timing of collections and payments.
- Operating cash flow less capital expenditures was approximately $11.497bn for 9M 2021, a simple calculation rather than a company-reported free-cash-flow measure. Capital expenditures were $653m.
- At September 30, cash and cash equivalents were $13.540bn and marketable debt securities totaled $2.169bn. Short-term debt was $5.065bn and long-term debt $39.677bn; reported net debt was $29.033bn, compared with $34.412bn at year-end 2020.
- Current assets were $31.443bn and current liabilities $21.460bn. BMS reported $6bn of revolving credit facilities, with no borrowings outstanding; it also had no commercial paper borrowings outstanding.
- Financing outflows included $6.022bn of long-term debt repayments, $3.536bn of share repurchases and $3.297bn of dividends. BMS repurchased approximately 54 million shares during the nine months.
Material changes and unusual items
- Q3 research and development expense rose 30% to $3.251bn, including a $610m impairment of an acquired investigational hematology asset and a $200m Agenus license payment. Nine-month R&D also included a $230m impairment and a $650m Eisai collaboration fee.
- Other income included equity investment gains of $1.214bn for 9M 2021 and royalty/licensing income. The prior-year comparisons included a $988m Q3 contingent-consideration gain; the Celgene contingent value rights payment obligation terminated in January 2021 after the liso-cel milestone was not achieved by the contractual date.
- Cost of products sold fell 14% for 9M, primarily due to lower unwinding of Celgene inventory fair-value adjustments; the company also recorded a $315m Inrebic-related impairment in that expense line. Nine-month 2021 included a $281m loss on debt redemption.
- The effective tax rate was 25.6% for 9M 2021 versus 71.2% in 2020. The 2020 rate included an $853m deferred tax charge and a $266m GILTI tax charge; BMS noted that rates may change with earnings mix, tax reserves and tax-law developments.
Outlook, management commentary and risks
- The filing gives no explicit full-year revenue or EPS guidance. Management expects cash and securities, operating cash flow and potential commercial paper issuance to cover anticipated needs for at least the next few years, including dividends, investments and debt maturities.
- Expected capital expenditures are approximately $1.0bn in 2021 and $1.2bn in 2022. The Celgene integration plan targets approximately $3bn of annualized cost synergies through 2022; cumulative charges were approximately $2.4bn, with approximately $3bn expected through 2022.
- COVID-19 continued to affect revenue through lower new-patient starts and visits, but had not significantly affected results overall or disrupted clinical or commercial supply, according to management. Abraxane manufacturing delays were expected to continue into Q4 2021.
- Management highlighted expected Revlimid revenue declines beginning in 2022 as volume-limited generic licenses take effect, and expected U.S. Abraxane declines beginning in 2022. Eliquis patent litigation remains important; the company reported the U.S. appellate ruling upheld relevant patents, with generic entry no earlier than April 1, 2028, subject to further challenges.
- Material contingencies include a disputed Celgene CVR trustee claim alleging breach related to a potential $6.4bn milestone; BMS disputes the claim. BMS also reported a $417m share of a Hawaii Plavix judgment under appeal and stated that it had not recorded a reserve. The filing estimates its share of environmental remediation costs at $79m.
- Pipeline risks include the withdrawal of two Opdivo indications after confirmatory-trial results and a Phase II deucravacitinib ulcerative colitis study that did not meet its primary endpoint. BMS said it would continue evaluating the latter program in another trial.
Key facts for investors to verify
- Underlying product growth and the extent to which changing gross-to-net deductions, payer mix and U.S. rebates affect reported net sales.
- How much reported earnings and cash generation depend on non-GAAP adjustments, fair-value gains, acquisition accounting and prior-period tax effects.
- Execution of the $3bn synergy plan, launch and manufacturing capacity for newer products, and the outlook for Abraxane supply.
- Revlimid and Abraxane generic-entry timing, Eliquis patent outcomes, and the ultimate resolution and financial exposure of the CVR and other material litigation.
- Debt maturities, capital allocation and liquidity as BMS funds R&D, dividends, share repurchases and planned capital expenditures.