Bristol-Myers Squibb Company's Quarterly Report (Form 10-Q)

Financial Highlights for Bristol-Myers Squibb

Bristol-Myers Squibb, a leading biopharmaceutical company, has reported its financial results for the third quarter and first nine months of 2024. The company has remained committed to strategic resource allocation and investing in areas that maximize value and drive sustainable growth.

Revenue Growth Bristol-Myers Squibb’s total revenues increased by 8% during the third quarter of 2024 and 7% year-to-date. This growth was driven by strong performance in the company’s Growth Portfolio, particularly products like Opdivo, Orencia, Yervoy, Reblozyl, Opdualag, Abecma, Zeposia, Breyanzi, and Camzyos. These products offset declines in the Legacy Portfolio, including Sprycel due to generic erosion and Revlimid.

Earnings Performance The company’s GAAP earnings per share (EPS) decreased by $0.33 in the third quarter of 2024 and $7.44 year-to-date. This was primarily due to higher interest expense, a lower effective income tax rate in 2023, and significant one-time charges related to acquired in-process R&D (IPRD) and intangible asset impairments.

After adjusting for these specified items, the company’s non-GAAP EPS decreased by $0.20 in the third quarter and $6.33 year-to-date. The year-to-date decline was mainly driven by the IPRD charges, partially offset by higher revenues.

Economic and Market Factors Bristol-Myers Squibb continues to face increased pressures on its products due to legislative and policy changes, including price controls, market access restrictions, and changes to reimbursement laws in the U.S., EU, and other regions. These pressures have resulted in lower prices, lower reimbursement rates, and smaller patient populations, negatively impacting the company’s results of operations, cash flow, and financial flexibility.

The Inflation Reduction Act (IRA) in the U.S. will require the federal government to “negotiate” prices for select high-cost Medicare drugs, manufacturers to pay rebates for price increases faster than inflation, and a redesign of the Medicare Part D program. The company is evaluating the potential impact of these changes, which could accelerate revenue erosion prior to patent expiries.

Additionally, the Biden Administration has proposed a framework that could allow the government to exercise “march-in rights” and license certain drugs to third parties based on pricing considerations. Several states have also passed or are considering legislation to regulate drug pricing and reimbursement, which could further impact the company’s business.

Significant Product and Pipeline Approvals During 2024, Bristol-Myers Squibb received several significant product approvals, including:

• Opdivo for the treatment of certain non-small cell lung cancer (NSCLC) patients
• Cobenfy (xanomeline and trospium chloride) for the treatment of schizophrenia in adults
• Augtyro for the treatment of ROS1 fusion-positive NSCLC and certain solid tumors with NTRK gene fusions
• Breyanzi for the treatment of relapsed or refractory follicular lymphoma, chronic lymphocytic leukemia/small lymphocytic lymphoma, and mantle cell lymphoma
• Krazati in combination with cetuximab for the treatment of KRAS G12C-mutated colorectal cancer

These approvals expand the company’s portfolio and provide new treatment options for patients.

Regional Revenue Performance Bristol-Myers Squibb’s U.S. revenues increased by 9% during the third quarter of 2024 and year-to-date, driven by higher demand for the Growth Portfolio and Eliquis, partially offset by lower Sprycel sales due to generic competition.

International revenues increased by 5% in the third quarter and 1% year-to-date, driven by higher demand for the Growth Portfolio, partially offset by lower demand for the Legacy Portfolio and negative foreign exchange impacts, primarily from the devaluation of the Argentine peso.

Expenses and Profitability The company’s cost of products sold increased by 18% in the third quarter and 15% year-to-date, primarily due to higher profit-sharing, royalty expenses, and a $280 million impairment charge related to Inrebic.

Marketing, selling, and administrative expenses decreased by 1% in the third quarter but increased by 10% year-to-date, mainly due to the impact of recent acquisitions, including cash settlement of unvested stock awards.

Research and development expenses increased by 6% in the third quarter and 17% year-to-date, primarily due to IPRD impairment charges and the impact of recent acquisitions.

The company’s GAAP effective tax rate was 27.5% in the third quarter and -5.3% year-to-date, while the non-GAAP effective tax rate was 18.5% and 188.4%, respectively. The year-to-date GAAP and non-GAAP rates were significantly impacted by the non-tax deductible Karuna acquisition charge and the release of income tax reserves related to the resolution of Celgene’s IRS audits.

Non-GAAP Financial Measures Bristol-Myers Squibb provides non-GAAP financial measures, such as non-GAAP earnings and related EPS information, which exclude certain costs, expenses, gains, and losses that are evaluated on an individual basis. These adjustments are made to provide investors with a better understanding of the company’s underlying business performance and to facilitate comparisons of results across periods.

The key adjustments include amortization of acquired intangible assets, inventory purchase price accounting adjustments, acquisition and integration expenses, restructuring costs, impairment charges, and certain significant tax items, among others.

Financial Position, Liquidity, and Capital Resources As of September 30, 2024, Bristol-Myers Squibb had a net debt position of $41.3 billion, which increased by $14.2 billion during the first nine months of the year. This was primarily driven by payments for acquisitions, collaborations, and milestones, as well as dividend payments, partially offset by cash provided by operations.

The company issued $13.0 billion in new senior unsecured notes during the first nine months of 2024 to partially fund the acquisitions of RayzeBio and Karuna. It also repaid $2.9 billion in maturing debt during this period.

Bristol-Myers Squibb’s cash flow from operating activities increased by $1.1 billion compared to the prior year, primarily due to higher customer collections and lower income tax payments, partially offset by acquisition-related expenses and higher interest payments.

The company’s investing activities used $21.2 billion more cash than the prior year, mainly due to higher acquisition-related expenses. Financing activities provided $17.2 billion more cash, primarily from net debt borrowings to fund acquisitions, compared to net debt repayments and common stock repurchases in the prior year.

Product and Pipeline Developments Bristol-Myers Squibb continues to advance its research and development pipeline, with several key developments in its marketed products and late-stage pipeline since the start of the third quarter of 2024:

• Abecma: Discontinued enrollment in a Phase 3 study in newly diagnosed multiple myeloma
• Augtyro: Approved in Japan for the treatment of ROS1 fusion-positive NSCLC
• Breyanzi: Approved in Japan for the treatment of relapsed or refractory follicular lymphoma
• Camzyos: Announced new long-term follow-up data demonstrating sustained improvements in patients with obstructive hypertrophic cardiomyopathy
• Cobenfy: Approved by the FDA for the treatment of schizophrenia in adults
• Opdivo: Received FDA approval for the treatment of certain resectable NSCLC patients and had positive results in a Phase 3 trial for microsatellite instability-high or mismatch repair deficient metastatic colorectal cancer
• Zeposia: Announced data from the Phase 3 DAYBREAK trial demonstrating sustained decreases in brain volume loss for patients with relapsing forms of multiple sclerosis

These developments showcase the company’s continued progress in expanding the use of its key products and advancing its pipeline to address unmet medical needs.

Outlook and Conclusion Bristol-Myers Squibb remains committed to the strategic allocation of resources and investing in areas that maximize value and drive sustainable growth. The company is focused on executing a strategic productivity initiative that is expected to deliver $1.5 billion in annual cost savings by the end of 2025, the majority of which will be reinvested to fund innovation and drive growth.

Despite the challenges posed by increased pricing pressures and policy changes, Bristol-Myers Squibb has demonstrated its ability to navigate the evolving market landscape and deliver solid financial and operational performance. The company’s diverse portfolio of innovative products, robust pipeline, and strategic investments position it well for continued success in the years ahead.