BRISTOL MYERS SQUIBB CO quarterly report, Q1 FY2023

Bristol Myers Squibb Company — Q1 2023 Form 10-Q

Reporting period: Three months ended March 31, 2023; unaudited. Amounts are in U.S. dollars. BMS reports as a single segment.

Financial performance

MetricQ1 2023Q1 2022Change
Total revenue$11.337 billion$11.648 billionDown 3%
Net earnings attributable to BMS$2.262 billion$1.278 billionUp 77%
Diluted GAAP EPS$1.07$0.59Up $0.48
Diluted non-GAAP EPS$2.05$1.96Up $0.09
Cash from operations$2.970 billion$3.812 billionDown $842 million

GAAP net margin was approximately 20%, versus 11% a year earlier; the comparison was materially affected by items in other income/expense. Non-GAAP measures exclude specified items and are not substitutes for GAAP results.

  • Revenue drivers: U.S. revenue rose 4% to $8.033 billion, while international revenue fell 16% to $3.149 billion, including a 5% foreign-exchange impact. Net product sales declined 2%; gross-to-net adjustments increased to 36% of gross product sales from 32%.
  • Product mix: Eliquis revenue rose 7% to $3.423 billion and Opdivo rose 15% to $2.202 billion. The new-product portfolio grew to $723 million from $350 million. Revlimid fell 37% to $1.750 billion, reflecting generic erosion.
  • Expenses and earnings: Total expenses were $8.567 billion, down 14%. Other income, net, was $413 million, compared with other expense, net, of $649 million in Q1 2022. Equity investment losses decreased to $155 million from $644 million; 2022 also included a $275 million debt-redemption loss.
  • Cash flow: Investing activities used $210 million; financing activities used $3.050 billion. Approximate free cash flow, calculated as operating cash flow less capital expenditures, was $2.692 billion versus $3.559 billion. Management attributed lower operating cash flow mainly to working-capital timing.

Financial position and capital allocation

  • At March 31, cash and cash equivalents were $8.995 billion and current marketable debt securities were $274 million. Current assets totaled $27.086 billion; current liabilities were $19.085 billion.
  • Short-term debt was $2.752 billion and long-term debt was $35.078 billion. BMS reported net debt of $28.561 billion, down from $30.067 billion at year-end 2022. It had no borrowings under its $5.0 billion revolving credit facility.
  • Q1 debt repayments totaled $1.640 billion. BMS paid $1.196 billion in dividends, declared $0.57 per share, and repurchased $250 million of stock. Remaining repurchase authorization was approximately $6.9 billion.
  • Management said existing liquidity, operating cash generation and borrowing access should meet anticipated needs. Annual capital expenditures are expected to be approximately $1.2 billion in 2023 and $1.4 billion in 2024.

Changes, outlook and material items

  • Management attributed the revenue decline chiefly to Revlimid generic erosion and foreign exchange, partly offset by growth in in-line products—especially Opdivo and Eliquis—and newer products. BMS expects global Revlimid revenue to decline to approximately $6.5 billion in 2023.
  • Q1 GAAP EPS benefited from lower equity investment losses, higher litigation and settlement income, and the absence of the prior-year debt-redemption charge. A $400 million income item related to Takeda’s acquisition of Nimbus’s TYK2 program was recorded in Q1 and was expected to be received in Q2 2023.
  • Approvals during the quarter included Sotyktu for plaque psoriasis and Reblozyl for non-transfusion-dependent beta thalassemia in the EU, and Opdivo plus chemotherapy for neoadjuvant NSCLC in Japan. BMS also reported late-stage pipeline and regulatory developments for Opdivo, Abecma, Breyanzi, Camzyos and investigational milvexian.
  • Restructuring charges were $135 million in Q1. The Celgene acquisition plan is expected to incur approximately $3.5 billion in total charges, with remaining charges primarily for IT integration through 2024. Other restructuring actions are expected to incur approximately $250 million through 2023.
  • Management highlighted pricing and reimbursement pressure, U.S. Inflation Reduction Act implementation, tax-law changes, foreign exchange, product exclusivity losses, and legal and regulatory matters as risks. The filing reports no material changes to the risk factors in the 2022 Form 10-K and no material changes to critical accounting policies.

Contingencies and matters to monitor

  • Generic Eliquis products had entered the UK and Netherlands following adverse patent decisions; BMS described additional European challenges and U.S. generic applications and litigation. Outcomes could affect a significant product franchise.
  • A contingent value rights trustee alleges BMS failed to use diligent efforts to obtain timely FDA approval of Breyanzi and seeks damages tied to an alleged $6.4 billion potential obligation. BMS disputes the allegations; the filing does not provide a clear estimate of potential loss.
  • BMS estimated its share of environmental remediation costs at $89 million. Tax-authority examinations, including disputed IRS transfer-pricing matters for 2008–2012, remain unresolved and could materially affect results. BMS said final timing and outcomes are uncertain.
  • The filing describes numerous other patent, product-liability, antitrust and securities proceedings. BMS generally said outcomes are unpredictable and, for many matters, it could not estimate a possible loss or range.

Investor verification checklist

  • Track Revlimid erosion and the pace of growth in Eliquis, Opdivo and the new-product portfolio, including the effect of higher gross-to-net deductions.
  • Reconcile GAAP earnings and EPS to non-GAAP results, focusing on the $400 million Nimbus-related income, investment valuation changes and litigation/settlement items.
  • Monitor operating cash conversion, working-capital movements, debt maturities, capital spending and continued dividends and repurchases.
  • Follow Eliquis patent and generic developments, the Breyanzi CVR litigation, tax disputes and other material legal contingencies.
  • Assess the impact of pricing-policy changes, including the Inflation Reduction Act, and the timing and commercial contribution of pipeline approvals.