Bristol Myers Squibb (BMY) is poised for double-digit growth in 2020, thanks to its acquisition of Celgene. And, BMY stock is now trading at a five-year high.
This comes on the heels of a disappointment for former Celgene shareholders. As part of the deal, Bristol promised to make a payout if it gained Food and Drug Administration approval for three key drugs by specific deadlines. But it failed to gain one approval — so the payout is now null.
Despite this, BMY stock is trading at its highest point since mid-2016. The company recently said its board authorized an up to $2 billion incremental share repurchase. That news sent BMY stock up 4% on Jan. 11.
The battle rages between Bristol and Merck (MRK) — makers of blockbuster cancer drugs called Opdivo and Keytruda, respectively. Even as Opdivo sales have sloughed off, the first and second quarters featured Bristol's best total sales increases in years, due to Celgene.
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In October, Bristol announced the $13.1 billion takeover of MyoKardia (MYOK), a heart-disease company.
So, is now the right time to buy BMY stock?
Bristol Myers Expands Its Drugs Wheelhouse
After buying Celgene, the pharmaceutical company's biggest products are cancer treatments known as Revlimid and Opdivo, and a blood thinner called Eliquis.
But Opdivo sales have declined for four consecutive quarters. In the third quarter, sales fell 2% to $1.78 billion. During the same period, Merck's Keytruda rocketed 21% in constant currency to $3.72 billion. So, Keytruda sales are both bigger than and outgrowing Opdivo sales.
More bullishly, Bristol's total revenue soared 75% and earnings jumped 39% in the third quarter. The results easily topped expectations. But the strong growth was due, in part, to the addition of Celgene. Without Celgene's contribution, sales of prioritized legacy Bristol Myers products grew 5%.
It will be key to watch earnings results in late 2020 and first-quarter 2021 to see if BMY stock comes in line with CAN SLIM rules for investing. Investors are advised to seek companies with recent quarterly sales and earnings growth of 20%-25%.
For the fourth quarter, analysts polled by FactSet expect Bristol Myers earnings to pop 16% to $1.41 a share. Analysts also call for $10.7 billion in sales, up 35% thanks to the Celgene acquisition.
What Do Annual Metrics Say About BMY Stock?
Shares of BMY stock ended 2020 with a 3.4% decline. As of midday trading on Jan. 22, BMY stock had climbed 3.5% this year.
Last year, sales rose 16% to $26.15 billion after only benefiting from about a month of Celgene drug sales. That was better than fellow pharmaceutical companies Merck and Pfizer (PFE). In 2019, Merck revenue grew 11% and Pfizer's sales tumbled 4%.
For 2020, analysts call for Bristol to earn $6.39 per share, up 36%. They see sales growing 61% to $42.2 billion. In the future, however, analysts are watching for generic versions of cancer drug Revlimid. Teva Pharmaceutical (TEVA) is set to launch a generic in 2022.
BMY Stock Technical Analysis: Shares Consolidate
Shares of BMY stock are engaged in a lengthy consolidation with a buy point at 68.44. BMY stock closed in on that buy point on Jan. 19, but had lost some ground by midday trading on Jan. 22.
The CR measures a stock's key technical and fundamental metrics. That CR puts BMY stock in the top 32% of all stocks. The RS Rating tracks the stock's 12-month performance vs. all other stocks on a 1-99 scale. Market-leading stocks have an RS Rating of 80 or higher.
BMY stock ranks first among the 35 pharmaceutical companies in the Medical-Ethical Drugs industry group based on CR. The group itself is lowly ranked, however. It ranks No. 170 out of 197 industry groups tracked by Investor's Business Daily.
Recent News From The Pharma Company
As part of the Celgene buyout, Bristol Myers promised to pay $9 per Contingent Value Right owned by former Celgene shareholders. However, the FDA failed to approve cancer drug liso-cel by a year-end 2020 deadline. That killed the payout for Celgene shareholders.
But Bristol Myers remains sunny on other opportunities.
This quarter, the company plans to ask for FDA approval of MyoKardia's heart drug mavacamten. Bristol calls it a potential first-in-class cardiovascular medicine for the treatment of obstructive hypertrophic cardiomyopathy, a chronic and potentially fatal heart disease.
And, in mid-January, Bristol Myers said the FDA accepted two applications for approval of Opdivo in forms of stomach and esophageal cancer.
During the summer, Bristol Myers said the FDA approved its Acceleron Pharma (XLRN)-partnered anemia drug, luspatercept. Now called Reblozyl, the drug can treat patients with transfusion-dependent myelodysplastic syndromes or beta thalassemia.
Bristol Myers launched Zeposia as a multiple sclerosis treatment in early June. The drug also gained European approval in late May. Zeposia is the first in its drug class that doesn't require observation for side effects following the first dose.
So, Is BMY Stock A Buy Right Now?
No, BMY stock is not a buy right now.
The pharmaceutical company has yet to top a buy point out of a long-term consolidation. It's best to add shares after a stock has surpassed a buy point and is within the 5% chase zone.
Although sales and earnings grew in the third quarter, the addition of Celgene is largely to credit. It will be key to watch for an apples-to-apples comparison in late 2020 or early 2021.