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Bristol-Myers Squibb Co.

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Msg  584 of 3793  at  6/14/2019 2:42:37 PM  by


Model Update

From J.P. Morgan....
BMY: Expecting Flattening 2020 Opdivo Sales Followed by a 2021+
For Bristol, while the company is clearly playing catch-
up in NSCLC, we see the erosion of Opdivo in 2L NSCLC as
manageable with healthy growth over time based on opportunities for
Opdivo in non-lung indications. Our Opdivo estimates reflect a near-
term slowdown due to Opdivo in 2L lung erosion with sales of $7.1bn in
2019, increasing to $7.4bn/$8.1bn in 2020/2021 respectively and to
$10.5bn by 2024.

On Opdivo catalysts, we are not particularly excited about near-term
Opdivo CM-227 readouts but this appears to be well reflected in BMY
shares. However, as we look beyond CM-227, we see longer-term news
flow on Opdivo improving with updates including the 9LA study (which
we see as BMY’s most significant opportunity to dislodge 1L NSCLC
share), metastatic updates outside of lung (1L RCC – TKI combo, etc) as
well as further adjuvant readouts in 2020 (melanoma combo, bladder,

Investment Thesis, Valuation and Risks
Bristol-Myers Squibb Company (Overweight; Price Target: $62.00)
Investment Thesis
While BMY's proposed acquisition of CELG has been controversial, we see the
combined company generating 2020 earnings of $6.50/share and ~3% sales/~6%
EPS growth off of this base through 2025. And although the company faces a
challenging 2026+ LOE cycle, this appears more than reflected with shares trading at
~7.2x 2020E EPS. Further, we see far more paths to upside (solid pipeline launch
performance, better than expected Revlimid settlement terms, synergy/EPS upside)
than downside (further Opdivo or pipeline setbacks). Along these lines we see an
attractive risk/reward in shares at current levels.
Dec 2019 price target of $62/share. Our price target is based on a DCF
methodology as we believe this best captures the overall value of these businesses.
For our Bristol DCF, we take the present value of cash flows within our forecast
window and thereafter wind down the existing-products business while including
risk-adjusted contributions from pipeline assets. We use a 0% sector terminal growth

rate and a WACC of 9.0% (above recent norms based on a higher equity risk
premium given the litany of issues facing the sector over the next few years)
Risks to Rating and Price Target
Risks to our Overweight rating and price target include lower than expected
Revlimid sales due to earlier than expected and/or more severe than expected generic
competition or loss of patent protection, lower than expected Opdivo sales (e.g.,
lower market share in key non-lung indications, faster than expected 2L+ non-lung
business erosion), failure to complete milestones or our sales estimates for Celgene’s
late-stage Phase 3 assets, failure of Bristol’s other key ongoing I/O studies, lower
than expected sales for the proforma company’s other newly approved products, and
lower than expected operating margins (eg failure to achieve synergy targets, SG&A
and R&D spend move higher than expected).


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Msg # Subject Author Recs Date Posted
585 Re: Model Update tocentsworth 1 6/14/2019 3:09:20 PM

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