Stronger Than Expected Earnings from Bristol
We continue to view the stock as undervalued after total sales matched expectations.
In Bristol-Myers Squibb's (BMY) fourth-quarter results, total sales matched our and consensus' expectations while earnings were stronger than expected, but we don't anticipate any major changes to our fair value estimate based on the results. The earnings beat was partly based on lower-than-expected research and development spending. 2019 guidance was largely in line with our expectations. We continue to view the stock as undervalued, with the Celgene deal creating value from strong Revlimid cash flows and by expanding Bristol's pipeline, a core pillar in our wide moat rating.
In the quarter, Bristol's largest drug, Opdivo (30% of sales), posted strong year-over-year growth of 33%, but sequential growth slowed to almost flat, which is probably representative of the drug's growth for 2019. While management is guiding Opdivo to growth in 2019, we expect the drug will post largely flat growth with strength in renal cell cancer and melanoma offsetting declining sales in second-line lung cancer. Beyond 2019, we expect Opdivo to return to growth with continued market share gains in renal cancer and melanoma as well as expanded indications in lung, brain, liver, and gastric cancers. Importantly, Bristol withdrew its first-line lung cancer application with the Food and Drug Administration, as it needs more data to support the filing. We expect supportive lung data from three studies--CheckMate-227 Part 1a in the first half of 2019 (survival data for PDL1+ patients), CheckMate-227 Part 2 in mid-2019 (survival data for all patients), and CheckMate 9LA in 2020 (survival data for all patients)--but strong data from Merck's Keytruda is likely to limit Opdivo's lung cancer share to close to 15% by 2022.
|Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.|
Damien Conover does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.