BRISTOL MYERS SQUIBB CO quarterly report, Q2 FY2023

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Bristol Myers Squibb Company — Form 10-Q Summary

Reporting period: Quarter and six months ended June 30, 2023; filed July 27, 2023. BMS is a global pharmaceutical company operating as one reportable segment.

Financial performance and position

MetricQ2 2023Q2 2022Six months 2023Six months 2022
Total revenue$11.226B$11.887B$22.563B$23.535B
Net earnings attributable to BMS$2.073B$1.421B$4.335B$2.699B
Diluted GAAP EPS$0.99$0.66$2.06$1.25
Diluted non-GAAP EPS$1.75$1.93$3.80$3.89
  • Q2 revenue declined 6%; first-half revenue declined 4%. First-half operating cash flow was $4.857B, down from $6.073B.
  • First-half cash flows: investing activities used $539M and financing activities used $5.223B. Cash, cash equivalents and restricted cash ended at $8.425B.
  • At June 30, cash and marketable debt securities totaled $8.730B; short- and long-term debt totaled $37.676B. BMS reported net debt of $28.946B, improved from $30.067B at year-end 2022. The $5B revolving facility had no borrowings outstanding.
  • Current assets were $28.074B and current liabilities were $20.150B. The filing does not provide a headline operating-margin measure.
  • First-half dividends were $2.393B and share repurchases were $1.155B. BMS announced a $4B accelerated share repurchase in July, expected to be executed in Q3.

Material changes and business drivers

  • Revlimid sales fell 41% in Q2 and 39% for the first half, mainly due to generic erosion; BMS also cited increased free-drug provision through its patient assistance foundation. Management expects global Revlimid revenue of approximately $5.5B in 2023.
  • Growth in the new product portfolio partly offset the decline: portfolio revenue rose 79% in Q2 and 91% year to date. First-half Opdivo sales increased 9%, while Eliquis increased 3% overall; international Eliquis revenue declined amid generic erosion and pricing pressure.
  • First-half U.S. revenue was approximately flat, while international revenue declined 12%. Gross-to-net adjustments rose to 38% of gross product sales for the first half from 33% a year earlier, primarily reflecting higher discounts and rebates.
  • GAAP earnings increased despite lower revenue, while non-GAAP EPS declined. BMS attributed the GAAP improvement in part to lower equity investment losses, lower acquired IPRD charges and a tax benefit; non-GAAP EPS excludes specified items and declined $0.09 year over year for the first half.

Outlook, commentary, risks and unusual items

  • Management said existing liquidity, operating cash generation and borrowing access should meet anticipated needs. Annual capital expenditure expectations were approximately $1.2B for 2023 and $1.5B for 2024.
  • A new 2023 restructuring plan is expected to generate about $1.0B of charges through 2025, primarily employee termination costs and site exits. Separate Celgene and other acquisition plans have about $3.8B of expected charges in total; about $3.4B had been recognized to date.
  • Q2 tax expense included a $656M deferred tax benefit following a non-U.S. tax ruling; the six-month effective tax rate was 6.2%, versus 25.6% in 2022. The lower GAAP tax rate materially benefited reported earnings.
  • First-half other income included $400M from the change-of-control provision relating to Nimbus’s TYK2 program. In July 2023, after quarter-end, BMS agreed to settle AstraZeneca-related patent litigation for $560M in aggregate; BMS’s estimated share is about $418M, with income expected in Q3.
  • Key risks include continued Revlimid erosion, potential generic competition for Eliquis in Europe, pricing and reimbursement pressure, foreign exchange, and the uncertain impact of the Inflation Reduction Act. BMS challenged the IRA’s constitutionality in June 2023.
  • Legal matters include patent and product-related disputes, Celgene securities and CVR litigation, and tax examinations. BMS estimated its share of environmental remediation costs at $84M. The filing says it generally cannot estimate potential losses for many proceedings; outcomes remain uncertain.
  • Pipeline developments were mixed: BMS reported multiple product approvals and application reviews, but discontinued the Phase III Opdivo prostate-cancer study after it failed to meet its primary endpoints.

Investor verification checklist

  • Track Revlimid erosion and whether new-product growth offsets losses; verify the approximately $5.5B 2023 Revlimid revenue expectation.
  • Assess the sustainability of earnings by separating recurring operations from the $656M tax benefit, Nimbus income and other adjusted items; compare GAAP with non-GAAP results.
  • Monitor operating cash flow, debt reduction, shareholder distributions and the announced $4B accelerated repurchase.
  • Follow Eliquis generic litigation and market entry, as well as exposure to government pricing changes under the IRA.
  • Verify restructuring costs and progress, major legal and tax outcomes, and the timing and final BMS share of the AstraZeneca settlement.