BRISTOL MYERS SQUIBB CO quarterly report, Q2 FY2021

Bristol Myers Squibb (BMS) — Q2 2021 Form 10-Q

Reporting period: Three and six months ended June 30, 2021. BMS is a global biopharmaceutical company operating as one reportable segment. Financial figures below are in U.S. dollars; dollar amounts are millions unless stated otherwise.

Financial performance and position

Metric	Q2 2021	Q2 2020	Six months 2021	Six months 2020
Total revenue	$11,703	$10,129	$22,776	$20,910
Net earnings/(loss) attributable to BMS	$1,055	$(85)	$3,076	$(860)
Diluted GAAP EPS	$0.47	$(0.04)	$1.36	$(0.38)
Non-GAAP diluted EPS	$1.93	$1.63	$3.67	$3.35
Operating cash flow	Not provided for quarter	Not provided for quarter	$6,884	$8,430

• Q2 revenue grew 16%; first-half revenue grew 9%. Net product sales rose 16% in Q2 and 9% year to date. Growth reflected Eliquis, Revlimid, the immuno-oncology and new-product portfolios, and foreign exchange.
• Q2 net margin was approximately 9.0% (net earnings attributable to BMS divided by revenue); first-half net margin was approximately 13.5%. The prior-year periods reported net losses, including significant tax charges in 2020.
• Q2 operating expenses were $10,150, up 19%; first-half expenses were $18,693, down 5%. R&D increased 30% in Q2, including licensing and asset-acquisition charges and a pipeline impairment. First-half cost of products sold fell 17%, primarily due to lower unwinding of acquired inventory fair-value adjustments.
• At June 30, cash and cash equivalents were $11,024 and marketable debt securities totaled $2,089. Current assets were $29,161 versus current liabilities of $18,991. Net debt was $32,045, down from $34,412 at year-end 2020; total debt carrying value was $45,158, including short-term obligations.
• First-half investing cash flow was $37; financing cash outflow was $10,477. Financing included $5,522 of long-term debt repayments, $3,011 of share repurchases and $2,207 of dividends. Cash, cash equivalents and restricted cash ended the period at $11,397.

Material changes and notable items

• Revenue rose across major regions: U.S. revenue increased 9% year to date, Europe 11%, and Rest of World 4%. Key first-half product growth included Eliquis (+18%), Yervoy (+26%), and Pomalyst/Imnovid (+12%); established brands and some products faced generic or demand-related declines.
• Gross-to-net adjustments increased to 31% of gross product sales for the first half, from 28% a year earlier, primarily reflecting higher U.S. government-channel mix. Prior-period estimate revisions reduced provisions by $302 in the first half of 2021.
• GAAP results include substantial specified items. First-half 2021 included $780 of licensing and asset-acquisition charges, a $230 R&D impairment, a $315 Inrebic intangible-asset impairment, and a $281 loss on debt redemption. Other income benefited from contingent-consideration and equity-investment fair-value changes. Non-GAAP EPS excludes specified items and is not a substitute for GAAP results.
• The Celgene contingent value rights obligation terminated in January 2021 after liso-cel did not receive FDA approval by the contractual deadline. Separately, a CVR trustee sued in June 2021, alleging breach and seeking damages tied to a potential $6.4 billion obligation; BMS disputes the allegations.
• BMS repurchased approximately 47 million shares for $3.0 billion in the first half and declared dividends of $0.98 per share. Remaining repurchase capacity was approximately $3.4 billion at June 30.

Outlook, management commentary and risks

• No specific full-year revenue or EPS guidance is provided in the supplied filing text. Management said it expects cash and available funding, together with operating cash generation, to meet anticipated needs for at least the next few years, including dividends, investment, milestones, restructuring and debt maturities.
• Management estimated capital expenditures of approximately $1.1 billion in 2021 and $1.2 billion in 2022. It expects approximately $3.0 billion in annualized pre-tax Celgene cost savings through 2022.
• COVID-19 had not significantly affected results overall, but lower patient visits and new patient starts remained a risk; management said the pandemic’s future effect was difficult to predict. No commercial or clinical supply-chain disruption from COVID-19 had been reported.
• Abraxane international sales were affected by supply delays, which management expected to continue into Q3 or Q4 2021. Eliquis faces generic challenges in Europe following expiration of regulatory exclusivity; U.S. and European patent litigation is ongoing.
• Other material uncertainties include drug-pricing and healthcare regulation, product competition and patent challenges, clinical and regulatory outcomes, and legal proceedings. A Hawaii court imposed $417 in penalties on BMS in a Plavix matter; BMS is appealing and said it had not recorded a reserve. BMS estimated its share of future CERCLA environmental costs at $75.
• First-half effective tax rate was 24.3%, versus 163.9% in 2020, when large discrete tax charges affected results. BMS disclosed ongoing tax examinations and said unrecognized tax benefits could decrease by approximately $430–$480 over the next 12 months, subject to outcomes and potential tax payments or benefits.

Most important facts for investors to verify

• How much revenue growth reflects durable demand versus comparison effects from 2020 COVID-related inventory reductions, foreign exchange and product mix.
• The sustainability and cash impact of rising gross-to-net deductions, R&D investment, acquisition-related expenses and intangible amortization.
• Progress on launches and pipeline milestones, particularly cell therapies, and the effects of clinical or regulatory setbacks and withdrawals of Opdivo indications.
• Exposure to patent challenges and generic entry for Eliquis, Revlimid, Pomalyst and other major products, including the status and potential financial impact of litigation.
• Debt repayment plans, liquidity, capital returns and the assumptions behind management’s cash sufficiency and cost-savings expectations.