Bristol-Myers Squibb Company's Quarterly Report (Form 10-Q)
Bristol-Myers Squibb Company reported its quarterly financial results for the period ended June 30, 2024. The company’s revenue increased by 4% to $11.4 billion, driven by strong sales of its oncology and immunology products. Net earnings were $2.1 billion, or $1.04 per diluted share, compared to $1.9 billion, or $0.93 per diluted share, in the same period last year. The company’s cash and investments increased to $24.4 billion, and its debt decreased to $14.4 billion. Bristol-Myers Squibb also reported a significant increase in research and development expenses, driven by its ongoing investment in new product development and clinical trials. The company’s management discussed its financial performance and outlook in its quarterly earnings release and conference call, highlighting its commitment to delivering long-term value to shareholders.
Financial Performance Overview
Bristol Myers Squibb, a leading biopharmaceutical company, has reported its financial results for the second quarter and first half of 2024. The company saw strong revenue growth, driven by its Growth Portfolio of newer products, but also faced some challenges, including the impact of government pricing policies and higher expenses related to recent acquisitions.
Total revenues increased by 9% in the second quarter and 7% year-to-date, reaching $12.2 billion and $24.1 billion, respectively. This was primarily due to higher demand for products in the Growth Portfolio, such as Opdivo, Orencia, Yervoy, and Reblozyl, which offset declines in the Legacy Portfolio, including Revlimid and Sprycel.
However, the company’s GAAP earnings per share (EPS) decreased by $0.16 in the second quarter and $7.11 year-to-date. This was mainly due to the impact of certain specified items, including intangible asset impairments and higher interest expense from recent acquisitions, as well as a significant one-time charge related to the Karuna asset acquisition.
After adjusting for these specified items, the company’s non-GAAP EPS increased by $0.32 in the second quarter but decreased by $6.13 year-to-date. The year-to-date decline was primarily driven by the Karuna acquisition charge, higher interest expense, and lower royalty income, partially offset by higher revenues.
Regulatory and Pricing Pressures
Bristol Myers Squibb’s products continue to face increasing pricing and market access challenges, both in the U.S. and internationally. The Inflation Reduction Act (IRA) in the U.S. is expected to have a significant impact, as it will allow the federal government to “negotiate” prices for certain high-cost Medicare drugs, including Eliquis, starting in 2026. This could accelerate revenue erosion for these products prior to the expiration of their intellectual property protections.
Additionally, various state-level actions, such as the establishment of prescription drug affordability boards and manufacturer pricing mandates, are adding further uncertainty and potential for disruption to the company’s business. The impact of these measures on access, coverage, and pricing of Bristol Myers Squibb’s products is still unclear, but the company expects them to have a material impact on its revenues and results of operations.
Product and Pipeline Developments
Despite the regulatory and pricing challenges, Bristol Myers Squibb has continued to make progress with its product portfolio and pipeline. The company received several significant approvals in 2024, including:
- Krazati for the treatment of KRAS G12C-mutated colorectal cancer
- Augtyro for the treatment of solid tumors with NTRK gene fusions
- Opdivo in combination with chemotherapy for the first-line treatment of urothelial carcinoma
- Breyanzi for the treatment of relapsed or refractory mantle cell lymphoma and follicular lymphoma
The company also reported positive data from its late-stage pipeline, including the cendakimab program for eosinophilic esophagitis and the Camzyos program for obstructive hypertrophic cardiomyopathy.
These approvals and pipeline advancements are crucial for Bristol Myers Squibb as it navigates the evolving regulatory and pricing landscape and seeks to maintain its position as a leader in the biopharmaceutical industry.
Regional Performance
The company’s performance varied across different regions:
- United States: Revenues increased 13% in the second quarter and 10% year-to-date, driven by higher demand for the Growth and Legacy Portfolios, partially offset by declines in Abecma and Revlimid.
- International: Revenues decreased 1% in both the second quarter and year-to-date, due to foreign exchange impacts and lower demand for the Legacy Portfolio, partially offset by higher demand for the Growth Portfolio.
The negative foreign exchange impact was primarily attributed to the devaluation of the Argentine peso, which was mostly offset by inflation-related local currency price increases.
Expenses and Profitability
Bristol Myers Squibb’s expenses increased significantly in the first half of 2024, primarily due to the impact of recent acquisitions and collaborations.
- Cost of products sold increased by 14% in both the second quarter and year-to-date, driven by an impairment charge related to Inrebic, higher profit sharing and royalty expenses, and increased sales volume.
- Marketing, selling, and administrative expenses were flat in the second quarter but increased by 16% year-to-date, mainly due to the impact of recent acquisitions, including the cash settlement of unvested stock awards and other related expenses.
- Research and development expenses increased by 28% in the second quarter and 22% year-to-date, primarily due to an impairment charge related to the alnuctamab program and the impact of recent acquisitions.
- Acquired in-process R&D (IPRD) charges were $13.1 billion year-to-date, primarily driven by the Karuna asset acquisition and the SystImmune collaboration.
The company’s GAAP effective tax rate was impacted by the Karuna acquisition charge and the resolution of certain tax audits, while the non-GAAP effective tax rate decreased from 16.9% to 14.1% in the second quarter, primarily due to the resolution of the Celgene audit.
Outlook and Challenges
Bristol Myers Squibb faces a challenging environment, with increasing pricing and regulatory pressures, particularly in the U.S. market. The implementation of the IRA and various state-level actions are expected to have a significant impact on the company’s revenues and profitability.
To navigate these challenges, the company will need to continue to invest in its pipeline and seek approvals for new products that can offset the revenue declines in its Legacy Portfolio. The successful integration and performance of its recent acquisitions, such as Karuna and RayzeBio, will also be crucial for the company’s long-term growth.
Additionally, Bristol Myers Squibb will need to closely monitor and manage its expenses, particularly in the areas of research and development and marketing, to maintain profitability and cash flow generation. The company’s ability to adapt to the evolving regulatory and pricing landscape will be a key determinant of its future success.
Overall, Bristol Myers Squibb’s financial performance in the first half of 2024 reflects the challenges facing the biopharmaceutical industry, but the company’s diversified product portfolio, robust pipeline, and strategic initiatives provide a foundation for navigating these obstacles and delivering value to shareholders in the long term.
