Bristol Myers Squibb Company — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; compared with Q1 2023 unless otherwise noted. BMS is a global biopharmaceutical company reporting as one operating segment.
Financial performance
| Metric | Q1 2024 | Q1 2023 | Change / context |
|---|---|---|---|
| Total revenue | $11.865 billion | $11.337 billion | Up 5% |
| Net product sales | $11.559 billion | $11.048 billion | Up 5% |
| Net earnings attributable to BMS | $(11.911) billion | $2.262 billion | Large loss primarily reflects acquisition-related IPRD expense |
| Diluted EPS, GAAP | $(5.89) | $1.07 | Decline of $6.96 |
| Diluted EPS, non-GAAP | $(4.40) | $2.05 | Decline of $6.45; non-GAAP also reflects a loss |
| Operating cash flow | $2.834 billion | $2.970 billion | Down $136 million |
| Cash and cash equivalents | $9.330 billion | $11.464 billion at Dec. 31, 2023 | Quarter-end balance |
| Total debt | $55.677 billion | $39.772 billion at Dec. 31, 2023 | Short- and long-term debt combined |
| Net debt | $45.640 billion | $27.128 billion at Dec. 31, 2023 | Increased $18.5 billion during the quarter |
Acquired IPRD expense was $12.949 billion, versus $75 million a year earlier, including $12.122 billion for Karuna and an $800 million SystImmune collaboration upfront fee. Interest expense rose to $425 million from $288 million. Cash used in investing activities was $19.618 billion, including $20.053 billion of acquisition and other payments; financing provided $14.644 billion, principally reflecting new debt. Dividends paid were $1.212 billion.
Revenue trends and material changes
- Growth Portfolio revenue rose 8% to $4.792 billion; Legacy Portfolio revenue rose 2% to $7.073 billion. U.S. revenue increased 7% to $8.476 billion, while international revenue decreased 1% to $3.190 billion.
- Growth included Reblozyl up 72% to $354 million, Opdualag up 76% to $206 million, and Yervoy up 15% to $583 million. Eliquis increased 9% to $3.720 billion.
- Opdivo declined 6% to $2.078 billion, with lower U.S. sales partly attributed to channel inventory and customer-order timing. Revlimid declined 5% to $1.669 billion; Sprycel declined 13% to $374 million, including generic erosion internationally. Abecma declined 44% to $82 million, attributed to increased competition.
- Gross-to-net adjustments rose 24% to $7.736 billion; the adjustment rate increased to 40% of gross product sales from 36%, primarily reflecting product mix and higher U.S. government-channel rebates.
- Q1 revenue growth was offset at the earnings level by acquisition-related IPRD, higher operating and interest expense, and lower litigation and settlement income compared with the prior-year period, which included a $400 million Nimbus change-of-control gain.
Liquidity, capital allocation and outlook
- BMS issued $13.0 billion principal amount of senior notes in February, with $12.9 billion net proceeds, primarily to help fund the Karuna and RayzeBio acquisitions. Commercial paper outstanding was $3.0 billion at quarter-end; $2.7 billion was repaid in April. No revolving-credit-facility borrowings were outstanding at March 31.
- Management says existing cash, expected operating cash flow and borrowing access are sufficient for anticipated cash needs. It also states a commitment to maintain a strong investment-grade credit rating, grow the dividend and reduce additional debt incurred for recent transactions.
- Annual capital expenditures are expected to be approximately $1.4 billion in both 2024 and 2025. The 2023 restructuring plan is expected to incur approximately $1.5 billion of costs through 2026. BMS targets approximately $1.5 billion in annual savings by the end of 2025, with most expected to be reinvested in innovation and growth.
- The filing provides no general full-year revenue or EPS guidance. It says 2024 global Revlimid revenue is expected to be $4.5 billion to $5.0 billion. Revlimid product-right amortization is expected to end in Q4 2024, reducing annual amortization expense by approximately $5.5 billion in 2025.
Acquisitions, pipeline and unusual items
- BMS completed the Karuna acquisition for total consideration of approximately $14.0 billion, RayzeBio for approximately $4.1 billion, and Mirati for approximately $4.8 billion. KarXT, Karuna’s lead asset, was under FDA review for adult schizophrenia with a PDUFA date of September 26, 2024. RayzeBio brought a radiopharmaceutical platform and a Phase III lead program; Mirati added Krazati and clinical-stage assets.
- Other developments included U.S. approvals for Breyanzi in CLL/SLL and Opdivo in first-line unresectable or metastatic urothelial carcinoma; Abecma was approved in the U.S. and EU for use after two or more prior myeloma treatment lines. BMS also reported that a Phase III Zeposia Crohn’s disease induction study did not meet its primary endpoint.
- Restructuring charges totaled $312 million in Q1 versus $135 million a year earlier. BMS expects an additional approximately $100 million pension settlement charge in Q3 2024 related to termination of its Puerto Rico pension plan.
- The reported effective tax rate was negative 3.4%, materially affected by the non-deductible Karuna IPRD charge. BMS says unrecognized tax benefits could decrease by approximately $700 million to $740 million over the next 12 months; tax audit outcomes remain uncertain.
Principal risks and contingencies
- Pricing and reimbursement pressure, including Inflation Reduction Act provisions, could affect sales and margins. Eliquis was selected for Medicare price negotiation beginning in 2026; BMS is challenging the program in court.
- Patent challenges and generic competition threaten important products. Generic Eliquis is marketed in the UK and Portugal, with litigation pending in multiple European countries; Revlimid faces generic erosion, and U.S. generic Sprycel launches may begin in September 2024 or earlier under settlements.
- The filing describes material litigation and regulatory matters, including Celgene CVR-related disputes, Revlimid and Thalomid antitrust cases, and a Hawaii Plavix matter awaiting a new penalty determination. Outcomes and potential losses are generally not estimable from the filing text.
- BMS estimates its share of environmental remediation costs at $79 million. It states that legal and other contingency outcomes are inherently uncertain.
- Acquisition execution, pipeline development and commercialization, product competition, foreign exchange, tax matters and the increased debt burden are additional areas for investor monitoring. The company reported no material changes to its 2023 Form 10-K risk factors.
Most important facts for investors to verify
- Whether underlying revenue growth and newer-product launches can offset declines and expected generic erosion in established brands.
- The timing and commercial prospects of KarXT, RayzeBio programs and other acquired assets, alongside integration and restructuring costs.
- Debt reduction progress, interest costs, cash generation and the repayment or refinancing of short-term borrowings.
- The realized impact of higher gross-to-net deductions, government pricing measures and Eliquis patent outcomes.
- Progress toward the $1.5 billion annual savings target and the expected 2025 reduction in Revlimid amortization expense.
- Developments in significant tax audits, litigation and other contingencies, for which final outcomes or loss ranges are not clear in the filing.