From Cowen 06/17/2019....
Price Target: $54.00
THE COWEN INSIGHT
We took another look at our BMY model as we near the end of Q2. A summary of model
revisions and our views of the stock are depicted below.
BMY's total return/PE is the highest in the group, Eliquis is growing robustly, and BMY
is still a formidable player in IO. The Celgene (CELG, $96.51, Market Perform, covered by
Yaron Werber) acquisition brings opportunities, but also risks. We await greater visibility
on Opdivo's data readouts/competitive position, Revlimid patent situation, progress on
Celgene intergration, and/or better read on novel IO combos.
Proforma BMY+CELG EPS Estimates Raised, Growth Well Above Average
Our EPS estimate was raised by $0.15 to $4.35 (+9%; vs. BMY alone guidance of $4.10-4.20
and consensus of $4.18) in 2019, by $0.10 to $6.40 (+47%; vs. BMY alone consensus of
$4.44) in 2020, and by $0.50 to $9.35 in 2024. The 2018-24 projected EPS CAGR was raised
1pp to 15%. BMY’s projected EPS growth is about 2x the 8% industry average. During
2020-24, BMY EPS growth is forecast to compound at 10%, vs a 7% industry average. Our
models assume that the CELG acquisition closes on October 1st.
Sales Estimates Also Increased During 2019-24
Our BMY sales estimate was raised by $845MM to $27.9B (+24%; vs. BMY alone guidance
of 'increase mid single digit' and consensus of $24.1B) in 2019, by $655MM to $43.6B
(+56%; vs. BMY alone consensus of $25B) in 2020, and by $1.8B to $54.8B in 2024. Higher
forecasts for Eliquis contributed more than half of each year's increase. The 2018-24
projected sales CAGR was raised 1pp to 16%. BMY's estimated sales growth is more than 2x
the 6% industry average.
Opdivo Sales Forecasts Roughly Intact, Total $12.6B In 2024, Implying 30% PD-1/PD-L1
Our Opdivo (nivolumab) sales estimates were raised by $400MM to $6.71B (flat, versus
guidance of 'growth') in 2019, roughly unchanged at $7.3B (+8%) in 2020, and raised by
$500MM to $12.6B in 2024. In 2024, BMY's WW melanoma penetration rates were raised
along with share of this indication (+$590MM) based on Opdivo performance. In RCC, we
expect BMY to lose substantial share to MRK in the next couple years prior to a rebound
as we anticipate long-term survival could favor Opdivo+Yervoy over Keytruda+Inlyta.
BMY's 2024 WW PD-1/PD-L-1 share estimate was increased to 30% (from 29%). Upcoming
Catalysts: CM-9ER (H1:20) 1L RCC; CM-227 (summer 2019) Opdivo+Yervoy, Opdivo+chemo
OS 1L NSCLC; CM-459 (H1:19) 1L HCC.
Operating Margin Assumptions Raised Modestly; Peak At 45% In 2024
Our operating margin estimate was raised by 0.1pp to 31.3% in 2019, by 0.1pp to 43.5% in
2020, and by 0.3pp to 45.4% in 2024. During 2018-24 and driven by the merger with CELG,
we project that GPM will expand by 760bp, R&D will grow by 15%, and SG&A will compound
at 5%. We forecast 1700bp of operating margin expansion in 2018-24. During 2020-24,
the trajectories change considerably: we forecast that GPM will contract by 300bp, R&D
will grow by 5%, and SG&A will decline by 2%. We forecast 200bp of operating margin
expansion in 2020-24.