Bristol Myers Squibb Company — Q3 2023 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2023. BMS is a global biopharmaceutical company reporting as one operating segment. Amounts are in U.S. dollars; financial statement amounts are in millions unless noted. The filing was signed October 26, 2023.
Financial performance and position
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Total revenue | $10,966 | $11,218 | $33,529 | $34,753 |
| Earnings attributable to BMS | $1,928 | $1,606 | $6,263 | $4,305 |
| Diluted GAAP EPS | $0.93 | $0.75 | $2.99 | $2.00 |
| Diluted non-GAAP EPS | $2.00 | $1.99 | $5.80 | $5.88 |
| Operating cash flow | Not separately presented | Not separately presented | $9,608 | $9,760 |
- Revenue declined 2% in Q3 and 4% year to date. Net product sales were $10,645 million for Q3 and $32,610 million for the nine months.
- Q3 pretax earnings were $2,137 million and income tax expense was $203 million; the effective tax rate was 9.5%. For the nine months, pretax earnings were $6,766 million, tax expense was $488 million, and the effective rate was 7.2%. The filing does not provide a headline gross or operating margin.
- At September 30, cash and cash equivalents were $7,514 million; current and long-term debt were $5,467 million and $32,137 million. BMS reported net debt of $29,594 million, versus $30,067 million at year-end 2022. Total liabilities were $62,201 million and total assets were $91,263 million.
- Nine-month investing cash use was $949 million and financing cash use was $10,383 million. Cash, cash equivalents and restricted cash decreased $1,757 million to $7,568 million. Financing included $5,155 million of share repurchases and $3,584 million of dividends.
- BMS said existing cash, operating cash generation and borrowing access should meet anticipated needs. It had no borrowings under its $5.0 billion revolving credit facility at quarter-end.
Material changes versus comparable periods
- Revlimid revenue fell 41% in Q3 and 40% year to date, primarily from generic erosion and increased free-drug provision. Total recent loss-of-exclusivity product revenue declined 35% year to date.
- Growth in the newer portfolio partly offset erosion: new-product revenue rose 68% in Q3 and 81% year to date. Opdivo revenue increased 11% and 10%, respectively; Eliquis rose 2% and 3%.
- Gross-to-net adjustments rose 18% in Q3 and 19% year to date; as a share of gross product sales, they increased to 43% from 38% in Q3 and 40% from 35% year to date. BMS cited product mix and higher government-channel rebates.
- GAAP earnings increased while nine-month non-GAAP EPS decreased. BMS attributed much of the GAAP improvement to lower equity investment losses, reduced intangible amortization, settlement income and a deferred tax benefit. Non-GAAP EPS was lower primarily due to reduced revenue, partly offset by lower acquired IPRD charges, interest expense, tax rate and diluted share count.
- Nine-month operating cash flow was $152 million lower than in 2022, primarily reflecting lower collections, partly offset by lower non-refundable R&D advance payments. Net debt decreased by $473 million.
Outlook, management commentary and notable items
- BMS described priorities of renewing and diversifying its portfolio, advancing its pipeline, investing in priority therapeutic areas and maintaining an investment-grade credit rating. It did not provide a consolidated revenue or EPS forecast in the supplied filing text.
- Management expected global Revlimid revenue of approximately $6.0 billion in 2023. Annual capital expenditures were expected to be approximately $1.1 billion in 2023 and $1.4 billion in 2024.
- A 2023 restructuring plan is expected to generate approximately $1.0 billion in charges through 2025. Separate Celgene and other acquisition-related plans anticipate approximately $3.8 billion of total charges; about $3.5 billion had been recognized to date.
- In October 2023, BMS agreed to acquire Mirati for $58 per share in cash, approximately $4.8 billion total consideration, plus contingent value rights potentially worth about $1.0 billion. Closing was expected in the first half of 2024, subject to conditions; BMS expected to use cash and debt. BMS also reacquired certain Asian mavacamten rights for $350 million in October.
- Q3 other income included the present value of BMS’s share of an AstraZeneca settlement ($384 million); this was partly offset by a $322 million expense from the BeiGene settlement. Nine-month other income also included $400 million from the Nimbus change-of-control provision. The nine-month tax result included a $656 million deferred tax benefit related to a non-U.S. tax ruling; Q3 tax expense also reflected revised Section 174 guidance and a roughly $240 million reduction in previously estimated 2022 taxes.
- BMS identified pricing and reimbursement pressure, IRA implementation, foreign exchange, product competition and loss of exclusivity as business risks. BMS challenged the IRA drug-pricing program in court; Eliquis was selected for the program. Eliquis patent disputes and generic launches in parts of Europe, including the UK and Portugal, remain relevant to future sales.
- The filing describes multiple other legal and regulatory matters, including antitrust, product-liability, securities and patent litigation. BMS estimated its share of environmental remediation costs at $81 million. Management said most matters were not expected to materially affect financial position or liquidity, while emphasizing that outcomes are uncertain; certain tax disputes could have a material impact.
Most important facts for investors to verify
- Whether growth in the new-product portfolio can offset continued Revlimid erosion and other product or regional declines.
- How gross-to-net deductions, patient assistance, payer rebates and pricing pressures affect net sales and margins.
- Whether the Mirati acquisition closes on expected terms and timing, and its financing, contingent-value-right exposure and subsequent financial impact.
- How the IRA program and ongoing Eliquis patent litigation or generic competition affect future sales and pricing.
- The sustainability of reported GAAP earnings given tax benefits, settlements, investment valuation changes, restructuring charges and other specified items; review the non-GAAP reconciliation alongside GAAP results.
- Cash generation and capital allocation after dividends, repurchases, debt maturities, planned capital spending and restructuring or acquisition commitments.